Major Ambiguities Remain, but Health Care Vendors Should Focus on California Consumer Privacy Act Preparedness
Are you a health care vendor that does business in California? If so—and keep in mind that the concept of “doing business” in California may be broader than you expect—there are new, expansive data privacy requirements that might start keeping you awake at night. California created waves in the information privacy space with its enactment of the California Consumer Privacy Act of 2018 (the “Act”) last summer. The Act, which will be operative beginning January 1, 2020, was hurriedly enacted to prevent a proposed ballot initiative from going to voters in November 2018. That process created a number of significant ambiguities, which remain present in the Act. There are significant questions regarding what types of businesses will be subject to the broad-reaching obligations of the statute and forthcoming regulations. Businesses that have, thus far, managed to avoid the application of the similar EU General Data Protection Regulation (the “GDPR”) may nonetheless fall within the scope of the Act and confront new and expanded compliance obligations similar to those imposed by the GDPR. Based on the current wording of the statute, a “business” subject to the Act’s requirements includes a for-profit entity that (i) collects the personal information of California residents, (ii) determines the purposes and means of processing that information, (iii) does business in California and, among other potential triggers, (iv) has annual gross revenues in excess of an inflation-adjusted amount of $25 million. It remains to be seen whether the forthcoming regulations will define the scope of revenue (which, at present, does not appear to be limited to a business’s California revenue), the meaning of information “processing,” and other related concepts. With respect to applicability, the statute also contains a carve-out for commercial conduct that takes place “wholly outside of California. The present definition of this concept contains somewhat contradictory language, and it is not yet clear what any amended or clarified language will look like. Businesses potentially subject to the Act should also be wary of the way that the Act ambiguously defines “personal information.” The Act does not apply to medical information governed by HIPAA, which will provide some relief to many health care vendors. However, the Act does apply to other categories of personal information, including IP addresses and other information concerning consumers’ (including patients’) interaction with a business’s website. Even more significantly, the Act appears to apply to (i) employee personal information contained in employment records and (ii) the personal information of client officers and employees that a business gathers in providing services to, and interacting with, its clients (i.e., not traditional “consumer” interactions). Absent some clarification to the contrary in any further statutory amendments or in the forthcoming regulations, health care vendors should prepare to comply with the Act in connection with these particular categories of information. Due to the current broad scope of the Act, the potential applicability to information collected or disclosed in 2019, and the fact that the Act has significant “teeth” from an enforcement standpoint, health care vendors should not wait for these concepts to be fully refined. Rather, they should prepare now to comply with the Act’s core requirements by taking the following actions, among others: Determine what personal information the business collects, how it collects it, where it stores it, and how it manages, uses, and discloses the information, as well as any service providers that collect or receive information on its behalf (including determining whether any disclosures of information could be deemed the “sale” of information under the Act) Provide appropriate mechanisms through which consumers can make permitted requests of the business Prepare to...
Read MoreTop 10 Takeaways from “Little Town, Layered Ecosystem: A Case Study of Chattanooga”
Our Chambliss Startup Group thrives on supporting entrepreneurs and not just with legal counsel. Our team believes in the entrepreneurial movement happening in Chattanooga, and we’re making a point to be a part of it, whether it’s by offering networking opportunities, developing a sense of community, or being a resource. But we’re not the only ones. There are a handful of solid supporters that have played a key role in this movement, and people are noticing. For example, this billion-dollar private, nonpartisan foundation recently put us on their map. The Ewing Marion Kauffman Foundation recently released the report “Little Town, Layered Ecosystem: A Case Study of Chattanooga,” which details the entrepreneurial support system in our hometown. The Kauffman Foundation is based in Kansas City, Missouri. The report is just one part of the Kauffman Foundation Research Series on City, Metro, and Regional Entrepreneurship. Other cities featured include Kansas City, St. Louis, and Indianapolis. If you haven’t read the report, it’s definitely worth taking a look. For those of you crunched for time, here are our top 10 takeaways: TOP 10 TAKEAWAYS FROM “LITTLE TOWN, LAYERED ECOSYSTEM: A CASE STUDY OF CHATTANOOGA” 1. The Chattanooga entrepreneurial ecosystem has 3 layers: philanthropic foundations direct entrepreneurship support organizations organizations in the public sector, including Mayor Berke’s office 2. Gig – the big spark. The Gig – Chattanooga’s (first in the nation) one-gigabit fiber internet service provided by EPB – got things moving and shaking among city leaders, entrepreneurs, and support organizations. “Now everybody says, ‘We have to stay first, we have to do something’…” 3. Two local foundations are major players in not just the entrepreneurial ecosystem, but also in Chattanooga’s general development: Lyndhurst Foundation and Benwood Foundation. 4. The 5 main entrepreneurial support organizations are: The CO.LAB Us! Chambliss Startup Group Lamp Post Group LAUNCH Launch Tennessee 5. Let’s not forget EPB. “Since the launch of the Gig, EPB estimates that ninety-one companies have been founded in Chattanooga, with approximately $50 million in venture capital provided from six firms.” 6. Where’s the best place in the ecosystem? The Innovation District. Shout out to the Enterprise Center located in the Edney Building at the heart of the district. 7. Mayor Berke played a huge role in bringing the right people together. He not only exercises “his support through his official powers,” but he is also one of the biggest “cheerleaders” for the entrepreneurial community. 8. It doesn’t hurt that Chattanooga is an “attractive and affordable place to live.” Entrepreneurs migrating to our town enjoy it! 9. Chattanooga is just one example of how local assets can be utilized for the “betterment of a city ecosystem.” “There are untapped and perhaps unexpected sources of entrepreneurship in every place.” 10. If you’re still not getting the ecosystem concept, a picture’s worth a thousand words. This is just a tiny snapshot of the report, and we encourage you to take a look. It’s inspiring to see all the different organizations, firms, entities, individuals, and believers involved in making our hometown entrepreneurial ecosystem work for the betterment of the...
Read MoreUpdate!—New TN Law Concerning Patent Infringement Allegations
In recent years, state legislatures have attempted to pass legislation regarding patent law – an area that the U.S. Constitution states is exclusively governed by federal law. The stated goal behind many of these laws is to protect businesses from costs associated with defending “bad faith” patent infringement allegations (i.e. to protect from alleged “patent trolls”). Some argue that these laws are constitutional because they are more akin to consumer protection act legislation and do not necessarily overlap or interfere with federal law. In Tennessee, the legislature recently passed such a bill to protect small businesses from costs associated with defending “bad faith” assertions of patent infringement. Public Chapter 879 went into effect May 1 of this year, and states that a person or company cannot send a written or electronic demand letter stating that another person or company is infringing upon their patent when: (i) the threat is made in conjunction with continual past threats where no litigation was filed; (ii) the letter falsely claims that litigation was filed; or (iii) the claims in the letter “lack a reasonable basis in fact or law.” Certain organizations and claims are exempted from the statute; but ultimately, if you are seeking to enforce a patent or are receiving letters claiming that you are infringing upon a patent, you may want to consult with an attorney about this new law (codified at T.C.A. § 29-40-101 through 104). The consequences of ignoring the new law – which include the possibility of attorneys’ fee and punitive damage awards – could be...
Read MoreUpdate! — Fee Changes at Patent and Trademark Office
The U.S. Patent and Trademark Office recently implemented a number of fee changes that will affect patent applicants and patent owners. Filing fees for patent applications have significantly increased, as have certain other patent prosecution fees. Issue fees, on the other hand, have been slightly decreased. Another change was eliminating the separate fee paid for publication of certain patent applications. U.S. patent applications for which a corresponding application is filed in another country are always published, but applications for which there is no corresponding foreign application are published at the option of the applicant. Publication does provide a limited benefit to applicants whose patents are subsequently issued with claims substantially the same as those published; however, until recently, there was a significant fee charged for publication. Patent owners whose applications have been published with issued claims substantially the same as those published, are entitled to recover a reasonable royalty from infringers who begin infringing prior to the issue of the patent, for the period from commencement of the infringement after publication until the patent issues. Such patent owners are also entitled to recover at least a reasonable royalty from infringers for infringement occurring after the patent issues. Some courts have held, however, that in order to recover a reasonable royalty from an infringer whose infringement began after publication but before issue of the patent, the patent owner had to prove that the infringer possessed a copy of the published application. Because this requirement, along with the requirement that the issued claims substantially mirror the published claims, limits the availability of the remedy for pre-issue infringement, some patent owners have elected to avoid publication of their U.S. application when no foreign application was filed, in order to avoid paying the publication fee. Now, with the publication fee having been eliminated, the only reason to choose not to publish your U.S. patent application is if you believe that the invention can be maintained as a trade secret if the patent application is not allowed. Because inventions directed to machines and other devices cannot be kept secret once the invention is placed on the market, there is no longer any downside to publishing U.S. patent applications directed to such inventions. Please contact any attorney should you have any further questions or if you are wondering how or whether to patent your...
Read MoreUpdate! New JOBS Act Regulations
Several of our discussions have mentioned the SEC’s delay in adopting final implementing regulations under the JOBS Act of 2012, however, on September 23, 2013 a few new JOBS Act regulations will become effective to implement a lift on the ban on general solicitations or general advertising for certain private offerings. 1) The final rules adopt amendment to Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933 and implement Section 201(a) of the JOBS Act, which permits an issuer to engage in general solicitation or general advertising in offering and selling securities under Rules 506–as long all purchasers of the securities are accredited investors and the issuer takes reasonable steps to verify that the purchasers are accredited investors. 2) The amendment to Rule 506 also includes a non-exclusive list of the measures which issuers may take to verify the accredited investor status of purchasers who are natural persons. 3) The amendment to Rule 144A provides that securities may be offered under Rule 144A to persons other than qualified institutional buyers as long as the securities are sold only to persons that the seller (and any person acting on behalf of the seller) reasonably believes are qualified institutional buyers. 4) In addition to these amendments, the SEC revised Form D to require issuers to indicate whether they are relying on the provisions permitting general solicitations or general advertising in a Rule 506 offering. 5) The SEC also adopted rules under the Dodd-Frank Act to disqualify felons and other “bad actors” from participating in certain securities offerings. If you have any questions concerning the JOBS Act or are considering a private offering, please contact an...
Read MoreUPDATE!
The Revised Tennessee Business Corporation Act (“TCBA”): NOTICES IN ENGLISH The TCBA sets forth laws governing for-profit corporations in the State of Tennessee. In order to ensure that the TCBA was up-to-date in terms of its applicability to modern business conduct and operations, revisions to the TCBA went into effect on January 1, 2013. One change that may affect how corporations in Tennessee conduct business pertains to general notices which, according to the TCBA, corporations and shareholders must provide under certain circumstances. As of January 1, 2013, all notices and other communications must be in English unless agreed upon by the sender and the recipient. (TCA 48-11-202). Given the influx of non-native English speakers into the State of Tennessee, as well as the increasing presence of foreign-owned and affiliated corporations, this language requirement could end up affecting more businesses than one would otherwise suspect—especially those closely held corporations which are owned or managed by individuals for whom English is a second language. Therefore, when drafting corporate documents or when communicating in writing, it is important for corporations (including their shareholders, managers and directors) to communicate in English if they have not clearly established in writing, whether in the communication itself or in the corporation’s bylaws, that another language is...
Read More