The second phase pertains to the years following the wars of independence against the Spanish and also the invasion of Cuba by the US. It is marked by the sweeping powers of intervention obtained by the US in 1902, with the Cuban economy being controlled by the growing investment of the US citizens in the sugar plantations of Cuba. Now, again, money and profits from the sugar plantation, sugar refineries and subsidiary sugar products such as rum went to the many American investors and a few Cuban elite. The other major industries also included tourism, tobacco, transportation, mining and the communication industry.

The third phase begins with the Cuban revolution and the beginning of Fidel Castro’s rule in the year 1959. All plantations that were more than 400 hectares became state owned and all industries including the petroleum and the telephones became nationalized. This lead to the US trade embargo towards Cuba. Cuba lost its traditional international market. However, Cuba found a trade and political ally in the USSR when the Cuban-sugar for Russian-oil package worked well. Cuba reoriented itself to the Russian and pro-Russian market and did over 80% of its international trade with them. The next 30 years saw tremendous improvement in health care, education and social welfare. Cuba boasts of a 97% literacy rate and the life expectancy increased to 76%. There was an egalitarian distribution of income and Cuba’s income inequality index became the lowest in the world.

All was well until 1989 when it became clear to Cuba that sooner or later Cuba would have to learn to do without any subsidies or trade relations with the USSR and the eastern European countries. The fourth phase begins here with the government dubbing it as the ’Special Period in Peacetime’. The economic reforms include:

(i) the opening and gearing up of tourism as an industry
(ii) diversification of the agricultural sector by producing fruits and vegetables and rice along with live stock for local consumption that include the visiting tourists.
(iii) production of more of citrus food and less of sugar
(iv) focusing on that sector of fisheries which sent its fleets to nearby seas and exporting spiny lobsters to Japan
(v) State-owned lands have been converted to agricultural cooperatives that are managed to a certain degree by the workers. Retail outlets at a small scale have been allowed for the food market. In the field of food production, allowing the sale of excess production (which is above the state-fixed production quota) in the free market has brought down black markets, in addition to enhancing production
(vi) Foreign investments in various industries such as tourism, mining, telecommunication, construction and manufacturing sectors have been allowed
(vii) Self employment has been legalized for around 150 occupations.

Investment into biotechnology and pharmaceuticals during the third phase reaped returns when products of this industry were available for export now at the fourth phase.

The other Cuban industries include cement, steel, agricultural machinery and construction.

Fisheries, nickel and ore production, growing agricultural products such as fruits, tobacco are some areas that have shown growth in the export sector. Cuba now exports to European countries (50%), Canada and Latin America (20%), and Asia (20%).

Spain, France, and United Kingdom have invested in the tobacco and cigar production. Spain and Canada have invested in the exploration of oil off the shores of Cuba. Mexico, Canada, Australia, South-Africa, Netherlands, Brazil, and Chile are the other major countries that have invested in the various industries of Cuba.

Cuba has entered into an agreement with Venezuela whereby thousands of Cubans who are doctors, teachers and sports trainers, and engineers would move in to Venezuela to assist their development program in return for 53,000 barrels of oil per day being shipped to Cuba for the next five years.

"Energy revolution" where apart form changing the entire system of power generation and distribution, energy conservation is also aimed at, has been in vogue in Cuba for the last two years. The quality of life of the Cubans are improving with the volunteers of the government replacing on a door-to-door campaign, the existing electric stoves and lights with the ones that are more efficient and less energy consuming. Energy efficient refrigerators and television sets have been distributed and would be installed in all the thousands of housing units that the government is building. Energy efficient buses from China would soon be available for the Cuban public transport. It is just a matter of some time when power generation would take place at hundreds of units that are well synchronized, thus avoiding wastage of power while distributing it through very long distances. Generation of natural gas while exploring for oil at oil rigs is also considered.

Cuba has also legalized the US dollars. Further, the Venezuelan inputs for domestic oil production and upgradation of existing power stations have raised the level of optimism. Cuba is also hoping to find oil off its shores. Apart from the sugar industry and its related products, there are various industries such as tourism (also called the lung of the Cuban economy), fisheries, nickel and ore production, production of tobacco, Cuban cigar, citrus fruits, pharmaceuticals, coffee, besides basic manufacturing industries which have earned Cuba foreign exchange. Cuba has learned to manage its post-USSR economic condition and is steering towards a more prosperous economy.

In order to increase a company’s value and achieve a successful sale, sellers should be mindful of these considerations:

1. Organize Corporate Records: sellers must anticipate that the buyer will be interested in the company’s corporate records. Due diligence disclosures that are anticipated must be updated and reviewed. These records should include key corporate, financial, accounting and operational records as well as all legal documents.

2. Show Company Growth: sellers must be able to confirm the historical as well as projected company growth, both for the short-term and long-term. This can be done by preparing a financial model that covers acquisition opportunities displayed on a time-line basis.

3. Explain Company Performance: sellers must be prepared to defend the financial performance of the company, explaining in detail any fluctuations in profit, operational expenses, selling costs and other overhead expenses including salaries and material.

4. Describe Return on Investment: sellers must help the buyer confirm its company valuation by showing detailed reports on return on investments for every item classified as capital expenditure, together with an anticipated time frame.

5. Highlight the Management Team: if the buyer is considering making an investment in the existing management team, sellers must make sure that they will highlight the manager’s experience and contribution to the company. Also, providing the buyer with a detailed assessment of the low-level managers who can be considered assets should also be performed.

6. Operate the Company: although the sales process will consume much of the senior managers’ time and efforts, operations must never be disrupted. The senior management should not forget to continue to meet their business goals and targets during this period.

7. Enter Into a Confidentiality/Non-Disclosure Agreement: sellers must not forget to enter into a non-disclosure and confidentiality agreement with all potential buyers in order to protect the proprietary company information which may be shared during the course of sales negotiations.

8. Negotiate the Terms of a Letter of Intent: sellers should negotiate the terms of the sales and make sure that they are properly reflected in the Letter of Intent. This should include ancillary provisions, material economic terms, payment arrangements, limitations or restrictions on the indemnification obligations, extent and nature of warranties and representations and the period for the buyer’s right to perform. By preparing a detailed Letter of Intent, sellers and buyers can be assured that they both agree on important business points, respective obligations and legal terms before finalizing the sales documents. This will help them avoid delays and additional sales transaction costs.

9. Employee Incentives: the awareness of an impending sale might result in making the employees anxious. In order to avoid any negative effects on day-to-day operations and potential harm to the planned sales transaction, it is important that sellers give their employees incentives. These incentives can be in the form of bonuses, benefits, and perhaps even equity participation.

10. Select an Investment Banker: the services provided by an experienced investment banker might come in handy for sellers. These services include identifying financial and strategic buyers, gathering realistic information pertaining to the valuation of the company and obtaining data on market intelligence. Sellers should consider factors such as experience, reputation and professionalism when looking for an investment banker.

11. Obtain Accounting, Financial and Tax Advisors: sellers should have accounting and tax advisors that will review and analyze all considerations during the sales transactions in order to foresee possible problems and eliminate them as early as possible.

12. Obtain Sarbanes-Oxley Act Counsel: sellers must seek counsel who are expert in the Sarbanes-Oxley Act. Also known as the Public Company Accounting Reform and Investor Protection Act of 2002, this legislation covers requirements that may be important to the acquisition of the company. If the seller targets compliancy to this Act, company valuation will improve.

Employee blogging can involve the disclosure of confidential business information, disparagement or criticism of other employees or of the company itself, and display interests that are in conflict with the company contracts and policies. The trend these days show the court’s support for employers who decided to terminate a particular employee who was found to be engaging in behavior that is in conflict with the company’s best interest.

It has actually been established that employees who damage their employer via blogging are violating their obligation to be loyal to the company. This duty of loyalty encompasses duties of confidentiality and obedience. On the other hand, this duty of loyalty is violated in cases of disparagement of the managers, criticism of the company, harmful speech and insubordination. One example of an employee blogging that became a problem for the employer involved a flight attendant who posted provocative photos of herself wearing her airline uniform. Another employee, hired by Google, posted his criticism and other impressions of his employer. A Microsoft employee also took photos of several Apple computers as they were delivered and posted them on his personal blog. All these employees, in this case, were terminated on the basis of their personal blog content.

The blog monitoring being conducted by these employers is being considered by many employees as a violation of their "right to free speech." This right to free speech, however, as indicated in the First Amendment, only covers the government’s restrictions on individuals or groups. But in "employment-at-will" states, existing law allows employers to terminate employees who were found to be disloyal to the company. Even so, employers should be very careful when involved in situations involving employee blogging. If they are not careful, they could damage their reputation in the business community especially if they were seen as being too intrusive to their employee’s personal activities.

In order to avoid these concerns, employers should implement general employee blogging policies, which will cover blogging agreements and procedures to be followed for employee blogging. These policies should also cover the use of electronic resources as well as rules on harassment, discrimination and non-disclosure. The agreement between employers and employees must also include in detail policies and guidelines involving the removal and use of confidential company information and rules for the use of company-sponsored blogs. In case the employer has not yet created guidelines for internet usage, the company should immediately come up with one. The employer should then advise their employees that they will be monitoring personal internet use especially during work hours. Lastly, employers must check the present condition of their internet security in order to know if they are at risk for data mismanagement including internet sites and archived emails. The general policies covering such internet usage and blogging should guarantee that the employees will not be able to disparage or criticize their employers and should promote confidentiality and professionalism.

While employee blogging guidelines may result in communication limitations, employers should be careful not to impede on labor laws, whistleblower statutes and other employment-at will policies. The employers should be aware that there are states that consider it illegal to terminate employees for off-site or private activities unrelated to their employment. There are also cases where termination is deemed illegal when the employee posted the company’s illegal activities on their blog. In connection, employees should be allowed to post statements related to union organizing and other similar activities. In other words, employee blogging policies should be drafted based upon these considerations.

It is recommended that employers assign an individual to do the blog monitoring. There are actually public corporations that are obligated to monitor employee communications as part of state or federal regulation. On the other hand, private corporations are allowed to monitor communications to make sure that their employees are not involved in improper conduct such as disclosure of confidential company information. More importantly, a company should create an employee blogging policy that adheres to the guidelines set by the National Labor Relations Act, where blogging activities are protected. Employers should make sure that their monitoring does not violate any NLRA policies on blogging. Informing employees of any revisions to the existing policies or changes in implementing guidelines is equally important.

History has recorded that Cuba was originally called Cubanascnan. Christopher Columbus called it Juana. Colonization was credited to a Spanish soldier Diego Velazquez who established Baracoa in the year 1511. With his success he went on to establish Santiago de Cuba in 1514 and Havana in 1515. Thus began the era of the Spanish rule. The 1830s sparked the independence movement, which gained momentum after 1886 when slavery was abolished. Cuba’s history has seen several phases. Some of great success and some of great loss. It has traveled many roads but has never lost focus on its final destination. This desire to triumph past persecution and revolt has succeeded in Cuba being a free country today.

The spirit of Cuba is well reflected in its anthem. The phrase "do not fear a glorious death, because to die for the country is to live" portrays the fierce loyalty the people have for its island. The Cuban national flower is the butterfly jasmine, Trogon is its national bird, and the royal palm is its national tree.

Think of a land with 6700 species of plants, 14,000 species of invertebrates and 650 species of vertebrates. Think Cuba. Hidden within its enchanting forests, arid mountains and lush plains there is a plethora of wildlife unique to this part of the world. It is a hikers dream come true, as the winding trails reveal over 350 species of birds. Cuba has four mountain ranges and Turquino (1,974 meters) is the country’s highest peak.

Comfortable cotton is recommended for Cuba’s warm climate. Although the average temperature hovers around 25.5 degress centigrade, the average relative humidity is 78%. Depending upon the season, a raincoat and an umbrella may come in handy too! Cuba is full of must-see places. From the plantations of Cuba’s Pinar del Rio province to the Varadero beach, from the Great Natural Park of Montemar to Cienfuegos- The Southern pearl, the country is brimming in tourist attractions.

Of course, this all could have been a coincidence. Nonetheless, in this day and age, a more likely possibility may be that another entity actually tracked your search for a particular domain name and intentionally registered that name itself. Those entities that are now engaging in this insidious practice are said to be domain name spying. In fact, there now appear to be operations that solely engage in this practice.

The reality is that there is nothing new about operators interfering with a bona fide business’s attempts to register a domain name. Cybersquatting involves registering a name confusingly similar to a trademark and then offering to sell that name to the trademark’s actual owner for a greatly inflated price. There are other practices that interfere with legitimate attempts to register domain names, including tasting and kiting.

Domain name tasting is a process that takes advantage of the Internet Corporation for Assigned Names and Numbers (ICANN) policy that allows a five day grace period in which a domain name can be returned. A taster registers numerous names in order to generate advertising income from short term ownership to determine which names might be most profitable over the long haul. If the registrant finds that certain names don’t meet his or her goals, it is simply returned.

Domain kiting actually takes the tasting concept a step further. Through kiting the ICANN grace period is abused. As with tasting, the registrant will return a name at the end of the ICANN five day grace period. The difference between kiting and tasting is that when the registrant returns the domain name, the registrant will then quickly reacquire the same name all over again. Essentially, a registrant engaging in kiting will retain ownership of the name in question over an extended period of time and will never pay for that ownership.

By understanding tasting and kiting, a reader can appreciate how domain name spying is an outgrowth of these practices. The difference rests in the fact that spying is intended to target those names that someone else or another business enterprise has a specific interest in owning. At this juncture, it is not specifically known how a domain name spy gathers information relating to another business checking on the availability of a name.

Some victims of domain name spies may have at least some recourse through trademark and cybersquatting laws. However, if a domain name spy does not violate these laws, a business actually may have no remedy at this juncture.

If you find that you have been victimized while checking the availability of a name, you probably will end up with two choices:

1. select another domain name
2. pay the spy a premium for the name you actually want

The best way to avoid becoming a victim of domain name spying is to purchase immediately any name that you may have an interest in. Remember, if you elect not to use a certain name, you have five days to return that domain name with no charge to you.

FCPA risk assessment is challenging in M&A deals due to the extensive FCPA reach. Identification and of FCPA-related exposures and evaluation of the risk should be an requirement of any due diligence in a multinational M&A deal–there will be severe consequences of exposures that arise from receiving or selling assets that will cause a benefit from corrupt practices, and a private equity sponsor should make evaluation of this risk paramount.

Statute History

In the 1970s, many U.S. companies (which included many Fortune 500 companies), disclosed the practice of making large and substantial “questionable payments” to foreign officials. These officials included politicians, parties, and more. Amendments to the U.S. securities laws that prohibited bribing non-U.S. officials, required U.S. issuer’s records show accurate details of of the company’s asset disposition, and required accounting methods with controls built in to thwart bribery and other corrupt practices was enacted by the U.S. Congress.

FCPA Anti-Bribery Provisions

To offer payment or benefits to a non-U.S. government official in exchange for business advantages or other favors is a crime under the FCPA. The standard is “knowing,” and avoiding information that would alert a responsible person to think that there is bribery indicates liability. This applies to the activity of employees and subsidiaries, as well as brokers, agents, distributors, partners, and intermediaries like travel agents and law firms.

A person covered under FCPA who avoids the knowledge that an intermediary such as a distributor ahs paid or will pay a bribe to a non-U.S. official is subject to the same kind of prosecution as a company that avoids knowledge of employees who make those payments and promises.

A foreign official, according to the statute, is anyone who is employed by a non-U.S. government entity full time or part time. This includes employees of corporations owned by a state, civil servants, municipal governments, provincial governments, and educational entities owned by a government. The term also includes any candidates for public office, employees of some international organizations (including the EU, UN, and OAS), political parties and their officials, African development banks, Asian development banks, the International Committee of the Red Cross, and the WHO.

Any benefit conferred may be viewed as a trigger for the statute’s provisions by U.S. regulators, according the FCPA. Payments to relatives are included in these triggers, including travel benefits for an official’s family members, contributions to officials’ charities, etc.

The requirements and provisions for the statute apply to anyone who ussues a registered security, including ADRs on a stock exchange. They also apply to corporations that reside in the U.S. or have a principal office and place of business in the U.S., a U.S. citizen or resident including holders of green cards serving anyplace in the world, and any others performing acts that will touch U.S. concerns. Almost anything that is concerned with the U.S. can set off jurisdiction by the U.S.

Provisions for Internal Controls

FCPA’s record keeping provisions and accounting guidelines were written to deal with the SEC-registered corporations’ ways of disguising and hiding payments and bribes, such as listing those bribes as consulting expenses or travel costs of non-U.S. officials.

There are two regulations the FCPA rules impose on books and record keeping.

1. Any company with registered U.S. securities must make and maintain records, books, and accounts that accurately and reasonably reflect the details of all transactions and disposition of the property and assets of the company.

2. The company must also create and maintain internal accounting systems that have sufficient controls to assure officials that all transactions are within the authorization of management, and that recording is done within “generally accepted accounting principles.” Although there are no penalties for violations that are technical, inadvertent, or insignificant, willful concealment of any form of misconduct by altering the books and records is a violation of FCPA.

An interesting feature of these provisions is that in the case of a civil liability, the parent company does not need to have any knowledge or suspicion specifically that the books or records contain misleading information. The appearance of the innocence of the bribery alone is enough to bring FCPA regulations to bear even if the parent company has no knowledge of the actions. The parent company is also liable for any failures of its subsidiaries for internal control.

The FCPA does not have a threshold of “materiality” for record keeping, books, and internal controls. Even though the records and books only need to be “reasonable,” Section 404 of the Sarbanes-Oxley Act doesn’t apply so the resulting inaccuracies from less diligent control can bring the regulations to bear, especially if there is bribery involved.

FCPA Enforcement

Many U.S. and foreign companies are becoming aware of the results of not complying with the FCPA. These are serious and have a huge impact on these companies, thereby raising the alert systems of businesses that may be affected by FCPA actions. The DOJ imposes fines and orders of disgoregement that sometimes exceed tens of millions of U.S. dollars, and can also include fines for criminal activity. Recently the Titan Corporation paid more than $28 million as a punishment for corrupt payments that surfaced during its merger with Lockheed. Three of Vetco’s subsidiaries plead guilty to and a fourth entered a deferred prosecution agreement; the fines were $26 million and was the largest in the history of the FCPA.

The investing public will view criminal convictions of a U.S. registered corporation negatively, and there could be a host of side effects of the convictions as well, such as loss of U.S. government contract eligibility, benefit programs, and licenses. They may also suffer increased liability for taxes and face other lawsuits related to the conviction, such as those arising from provisions of the Racketeer-Influenced and Corrupt Organizations Act. There may also be proceedings to void any agreements procured during the period of the corrupt activities.

Companies that are suppliers for the U.S. government or are regulated by or closely related to it (such as defense, pharmaceuticals, financial services, etc.) will feel huge ripples of a criminal FCPA conviction. It could affect their participation in U.S. funded medical insurance programs (Medicare, Medicaid, etc.), and could lose the opportunity to bid on defense contracts and other government contracts. Financial firms can also lose the opportunity to serve as pension fund advisors or broker-dealers, and may be required to forfeit licenses to sell insurance in this country.

Consequences limited to U.S. soil may be only the tip of the iceberg as well. Businesses in the countries that signed the OECD anti-bribery convention may find they are subject to criminal proceedings as well as civil proceedings in the U.S. as well as their own country of origin, not to mention the other jurisdictions where they may be guilty of corrupt acts. PE buyers will also find that the impact of these proceedings will affect management teams, and individuals involved in the acts or conspiracies can suffer many years of imprisonment and fines on both the civil and criminal levels. There may also be numerous collateral results that will affect the business negatively for many years.

M&A Deals and Risk Allocation Considerations

The wide scope and breadth of FCPA when coupled with lack of testing judicially, has created quite a few unusual challenges for sellers and buyers who could end up exposed to corrupt practices of their own or another’s business. For one, these sellers and buyers must identify potential risks and exposures, and evaluate those risks–however, this may be difficult to do for many reasons. Sellers and buyers have to negotiate these risks like they would any other business liability, and where there is a stock and merger agreement in progress these risks will determine much of the shape the distribution of risk will take.

However, even where the buyer can negotiate a good position with regard to FCPA exposure, there is still the collateral legal and financial risk associated with being part of any recorded business deal where fault may lie with a seller. Even if all the risk of FCPA liability is assumed by a seller, U.S. regulators may still charge both the seller and buyer of the corrupt business practice, especially if the buyer has a history of FCPA violations. Once a scheme for bribery or corrupt business is exposed, all benefits and commercial goods may be lost or at least significantly deteriorate. Truly, the best protection for a buyer may simply be to pay a lower price for the business.

Due Diligence and FCPA Regulations

PE, as other buyers, are interested in identifying and eliminating FCPA problems and other anti-corruption issues before the finalization of any purchase price or financial terms. The parties must create a due diligence plan and review it carefully to determine potential risks, as with any other potentially problematic deal.

Here are some things an effective FCPA plan for due diligences must account for:

1. The definitions of non-U.S. officials and benefits covered.
2. How FCPA applies to these officials and agents.
3. How the FCPA affecst acquisitions and mergers.
4. The liability and want of standards applicable to a parent company’s violation of bookkeeping and records requirements.
5. The increased exposure of the Internet and the resulting limits of protection by anti-bribery provisions.

Steps a PE sponsor should take as part of any due diligence program include:

1. Assessing the risk of FPCA violations in countries where the target business or subsidiaries reside or operate.
2. Analyzing the particular industry for possible disproportionate violations of FCPA regulations, such as defense contractors, natural resources, or pharmaceuticals.
3. Evaluating the risk of any people who are associated with the target company, such as unethical managers.
4. Carefully reviewing the internal audit reports and other investinations conducted, including by security, legal departments, and any other documents by other legal counsel of the target.
5. Identifying all senior officials elected in the country of the target company, and comparing those names with a list of people the company has paid money to.
6. Interviewing all managers and employees of the seller or target company that may have had any contact with influential officials.
7. Reviewing all reports, records, and analyses of audits prepared eternally, such as by accounting firms.
8. Hiring an investigation firm to review all risks and ways that the target company may have paid bribes.

Although these steps are designed to reveal any potential FCPA-related risks, the most important thing a buyer can do is inspect the target’s own FCPA compliance program. Even though a thorough and tough-minded program of compliance is the best way to fend off liability, they can reduce significantly the risk of financial liability arising from the activities of individuals within a normally-compliant company that may be paying corrupt monies to officials in other countries. In other words, the most effective and important thing for a buyer in assessing the target company is to review how seriously the target took its own FCPA-related risks and exposures before the M&A transaction talks by inspecting the target’s FCPA compliance program.

Accredited Investor

The Release suggested new standards for individuals that may invest in certain funds privately offered as an enhanced definition of “accredited investor.” These funds are exempt from the Investment Company Act of 1940, as amended (the “1940 Act”) by provisions of Section 3(c)(1). New standards would require “accredited investors” to fulfill the previous standards plus not own investments totalling less than US$2.5 million as a qualified purchaser under the Section 3(c)(1) exemptions. Under Regulation D of the Securities Act of 1933, as amended, require a net worth of over $1 million (individual or joint net worth with spouse), or have an income over $200K each year over the past two years (or joint income with a spouse of over $300K in each of those two years plus an expectation to stay at the income level for the current year).

Anti-fraud Regulations

Section 206(4) of the Advisers Act has a new proposed anti-fraud rule that would prohibit investment advisers from making statements to investors in pooled investments it manages that would be misleading or false, regardless of whether the investment is registered or unregistered (including hedge funds). The management company also many not participate in fraudulent, manipulative, or other deceptive behavior.

The rule would allow the investors to be viewed through the fund, and reverses one of the effects of the U.S. Court of Appeals decision in Phillip Goldstein, et al, v. SEC. In this case, the SEC’s 2004 requirement for hedge fund advisers to count investors in that particular fund to determine if registration is neceaary was overturned. The new rule is meant to assure that the anit-fraud provisions apply to future and prospective investors and not just to the current pool.

The Release also stated that the new rule was made intentionally broad to outline “the making of materially false or misleading statements as a fraudulent, deceptive or manipulative practice, and to prohibit other practices that defraud or deceive pool investors, rather than designed to prohibit a specific practice.” It would regulate practices and statements made to current and prospective investment clients, and would provide for, among other things, representations made in account statements and memoranda.

Investment advisers to pooled investment vehicles as well as advisers that are not required to be registered under the Advisers Act, are covered in this new rule as well. The SEC stated in the Release that “it is critical that we continue to be in a position to bring actions against unregistered advisers that manage pools and that defraud investors in those pools.”

The FTC has concluded in this advisory opinion that these specific actions may constitute deceptive business practices in violation of the Federal Trade Commission Act. The Federal Trade Commission Act defines a deceptive business practice as sets forth below:

1. a practice that represents or omits material information that likely would mislead reasonable consumers under the circumstances; and,

2. a practice that involves a representation or omission that is of material importance to consumers

The Commission continually and regularly has found that a seller’s failure to disclose a relationship that would materially effect a consumer’s opinion is deceptive.

In the case of the advisory opinion, the specific concern was the weight that a consumer will naturally give to a sponsored endorser. The Federal Trade Commission Endorsement Guides set forth:

“(W)hen there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement . . . such connection must be fully disclosed.”

A connection is deemed to exist in most instances when the endorser (here, a blogger) is paid by the company responsible for providing the product or service or when an endorser has a close business association (or has a relative with such an association) with such a company. Without a doubt, according to the Commission, employees of a business have such a close business association and their connection must be made public when they make any endorsement.

The bottom line is that it appears that companies and businesses have a duty to pro-actively monitor their employees blogging habits and warn them about the perils of making endorsements through blogging when their connection to that business enterprise is not made public. In a similar vein, if the employee is making negative statements about a competitor, his or her association with his or her employer must be made public to avoid violating FTC regulations.

Pursuant to the standard registration agreements associated with domain names that include .com, .org, .net, .info, and .biz suffixes provide for the resolution of domain name related disputes under the provisions of the Uniform Dispute Resolution Policy (”UDRP”). Due to the fact that all domain name registrations have agreed to the UDRP as a part of their actual registration agreement, the UDRP is available no matter the residence of the domain name registrant or of the trademark owner who may have issues with the registration or the registrant. In the end, this fact does provide what must be considered to be a significant advantage of the UDRP over heading to court when the trademark owner resides in one country and the domain name registrant resides somewhere else.

Another benefit of a UDRP proceeding is the fact that such a proceeding is fast and inexpensive. This particularly is the case (so to speak) when compared to litigation in court. A UDRP proceeding is initiated with the filing of a complaint together with the payment of a filing fee. The filing fee for a dispute involving one domain name to be decided by a single panelist is as little as $1500. The fee will be higher if one of the parties then requests to have the matter decided by three panelists. The fee is somewhat higher if the dispute involves multiple domain names as opposed to a dispute involving only one domain name.

Another advantage of this system is found in the fact that the complaint is filed electronically. Once the initial complaint is filed, an answer is due within 20 days. The answer also is filed electronically.

Generally speaking, the complaint and the answer are the only documents that the panel will consider and review. Unlike in a court, there is no discovery and there is no actual live hearing or trial. Normally, a panel will deliver its decision in about three months. The decision will be sent to the parties via email. The panel has the power to order that the domain name be canceled or transferred. However, the panel is unable to award damages or attorney fees which are available in a court of law in some instances. Within about three months, the panel usually delivers its decision.

In order to be successful in a UDRP proceeding, a trademark owner who is challenging a domain registrant must prove three items to the panel:

1. The trademark owner must show a legal interest in the trademark in the first instance.
2. The trademark owner must show that the domain registrant has no rights or legitimate interest in regard to the domain name itself. The trademark owner only has to demonstrate that there is no legitimate interest. If the domain registrant fails to demonstrate any legitimate interest in the domain name, the trademark should prevail.
3. Finally, the trademark owner must demonstrate that the domain name initially was registered and then was utilized in bad faith. Pursuant to the UDRP, there are four circumstances in which bad faith can be demonstrated:

-An attempt to sell the domain name registration for an amount that is in excess of the registrant’s out of pocket expenses.
-A pattern of registering domain names to prevent trademark or service mark owners from being able to utilize that trade or service mark in a domain name.
-Registration of a domain name with the primary intent of disrupting the business of a competitor.
-Using the domain name to intentionally attract Internet users for a commercial purpose by creating confusion in regard to the ownership or endorsement of a particular website venue that is in fact not actually associated with the trade or service mark owner.

These circumstances in fact are only examples and other evidence of bad faith can also be demonstrated in a complaint.

After considering the matter as presented, if the panel agrees with the trademark or service mark owner, the panel will order the transfer of the domain name to that individual or entity. In the alternative, the domain name may be canceled.

Even though the panel cannot order attorney fees, a complaining party can pursue those independently in a court of law in some instances.

If you are interested in keeping abreast of the latest developments in the worlds of business, finance and the internet, you can easily subscribe to the alerts and legal updates that we provide with regularity. If you have any questions or concerns about domain names, cybersquatting, the UDRP or any other issues affecting your website or online business, feel free to contact us for a consultation either by telephone or via email.