Spotlight on Key Business Legal Issues for 2012

February 2012

It’s a new year and with it comes change. With the upcoming presidential election and evolving technological advancements, there will be plenty of challenges ahead. Here are eight issues that might result in legal issues for businesses during 2012:1. Online piracy of intellectual property. Debate is heating up about the protection of intellectual property on the Internet. After much protest, Congress has delayed hearings about two proposed laws, the Stop Online Piracy Act (SOPA) in the House and the Protect IP Act (PIPA) in the Senate. SOPA and PIPA would criminalize certain Internet behavior such as streaming copyrighted content and enabling the sale of counterfeit goods. The laws have vehement supporters (including entertainment companies, media businesses and the U.S. Chamber of Commerce) who argue that more policing the Internet is necessary to protect intellectual property, jobs, consumers and more. There are also plenty of fervent opponents (Google, Facebook, YouTube and other tech companies) who argue that passage of such laws will thwart entrepreneurs and stop the growth of the Internet. That, in turn, will hurt the economy and result in fewer jobs.The Obama Administration announced that it opposes key elements of SOPA and PIPA, although it believes that “online piracy is a real problem.” The announcement called for “sound legislation this year that provides prosecutors and rights holders new legal tools to combat online piracy originating beyond U.S. borders…” while maintaining the innovation and creativity of the Internet.White House opposition of SOPA and PIPA makes passage in their current form improbable. Whether there will be new or revised laws introduced remains to be seen, but during 2012, you can count on more discussion of online piracy and Internet free speech as well as what constitutes fair use and parody. 2. Taxes will be an overriding theme in the upcoming election. The uncertain federal tax law will be in the news and on the minds of business owners and executives. Many favorable tax provisions expired last year and Congress will have to vote to reinstate them. (The two percent payroll tax cut was only extended through February so lawmakers will soon decide whether to allow it for the rest of the year.) Taxes will be heavily debated by presidential candidates and the outcome of the election will set the stage for 2013 when major tax hikes will kick in – unless Congress acts. Among the changes: Capital gains and dividend taxes are scheduled to go up. The estate tax exemption is scheduled to go down with the maximum estate tax rate going up. In addition, individual tax rates are set to go from 10, 15, 25, 33 and 35 percent to 15, 28, 31, 36 and 39.6 percent.3. Privacy concerns will grow. As we’ve learned in recent years, more technology leads to less privacy. Companies will continue to be challenged by complying with privacy laws and minimizing security risks. Data breaches of financial, heath and intellectual property information can be devastating for businesses, as well as their customers, clients, members, patients, etc. 4. Social media will continue to evolve. The popularity of social networking sites is soaring with people posting a vast amount of personal information, images, videos and opinions. Businesses routinely use Facebook, Twitter and YouTube sites to market their products and services. Not-for-profit organizations use them to help spread their missions. The vast social media world has connected people like never before but it has also resulted in negative implications. Trade secrets and private memos are leaked. Employees badmouth their bosses. Embarrassing photos are posted. In many lawsuits, opposing attorneys increasingly seek discovery of Facebook, Twitter and other social media accounts (although some courts have ruled there must be a reason to believe the information is relevant before it is divulged). Businesses must continue to navigate the opportunities and the liabilities that social media creates.5. More businesses will migrate more critical information to cloud computing platforms. Unfortunately, while this can reduce a company’s IT costs, it can also inject considerable operational risk that may not be fully understood by business owners and executives. For example, how will your organization respond if a third party or employee steals data or another type of data breach occurs? Do you have a backup in place in the event the cloud data center fails?This year, we are likely to see companies attempting to gain more control over information stored in the cloud.Keep in mind that moving to a cloud platform complicates the e-discovery process. Electronically stored information is routinely requested in civil and criminal proceedings. Before migrating data, there must be a clear understanding of the processes that the cloud computing company has in place to respond to e-discovery requests. In the event your company is required to produce information, the cloud company should provide data in a timely manner that creates no doubt that it is complete and accurate. 6. Mobile devices — and the risks they create for businesses — will be everywhere. Today’s smart phones and tablet computers store massive quantities of data and can access corporate servers with ease. In fact, many of today’s phones and tablets are able to store more information than earlier generation laptops. This increased capability brings increased risks. Information from phones and tablets, or the actual devices, can be stolen. While many companies collect, store, and transmit information on smart phones and tablets, they don’t always take adequate steps to secure the devices or institute precautions when employees use their own devices for job-related functions.In 2012, businesses will increase their awareness of mobile risks. More businesses may install security software on smart phones and tablets and require company-issued devices to be monitored in the same way they monitor desktop computers in the office. 7. Lawmakers will focus on the regulation of “crowd funding.” One way for start-ups to raise seed money online is to go to certain Web sites to seek investors. They describe their ventures and solicit money. The problem: Technically, businesses engaging in crowd funding have to comply with SEC regulations or qualify for an exemption. This year, Congress is expected to resume discussion of laws that could allow entrepreneurs to use crowd funding to raise a small amount of money without violating securities laws. You will hear more debate in 2012 over the question: Should entrepreneurs be allowed to informally seek financing without taking the legal steps required to protect investors from potential fraudulent behavior? 8. Lawsuits and government actions against employers are likely to keep going up. For the last several years, the number of employees initiating illegal EEOC discrimination and harassment actions against their employers has been increasing. This trend is likely to continue in 2012. Today’s employees are more aware of their rights and willing to file charges. In addition, the definition of disability was expanded in 2009 and the aging workforce means there are more employees able to file age discrimination claims. On top of these claims, employers may face Labor Department claims and lawsuits charging they are not in compliance with overtime and other wage laws.These eight items are only some of the legal issues you will hear about in 2012. Businesses must comply with a myriad of complex, ever-changing laws and navigate an evolving technological landscape. Legal claims from customers, employees, vendors, competitors and the government can result in costly losses and harm your company’s reputation. Becoming aware of potential legal dangers can help you effectively manage them.