Blog / Internet
What You Should Know before Launching a Website or App
December 4, 2019 / by Anat Even-Chen
December 4, 2019 / by Anat Even-Chen
When a company is looking to start operating on-line via a website or an app, it must ensure its relationship with its users is defined not only from a marketing point of view but also from a legal perspective. Watch the video to learn more.
Considering an M&A Transaction? Don’t Forget to Conduct Privacy Due Diligence
September 11, 2019 / by Karin Kashi
September 11, 2019 / by Karin Kashi
In light of heightened privacy enforcement in Israel and around the world, companies entering into merger and acquisition transactions should include privacy aspects in their due diligence.
More and more people have begun filing claims on the grounds of violations of the “Spam Law.” Israeli courts, for their part, are conveying an encouraging message to consumers in their latest rulings: they are awarding significant compensation and are certifying class actions against advertising companies and also against officers.
February 25, 2019 / by Karin Kashi
February 25, 2019 / by Karin Kashi
It is not common knowledge that officers of companies who customarily disseminate advertising messages in a manner that constitutes a violation of the Israeli Anti-Spam Law are personally exposed to lawsuits, even to class actions at millions of shekels.
Recently, the Ministry of Communications ordered Bezeq to begin implementing a “wholesale market” and selling its competitors access to telephony infrastructure at a regulated price. The objective of this directive is to expand competition in the fixed-line telephone market and to establish a separation between the infrastructure market and the communications services being purchased by consumers.
GDPR – Why Should We Care about It?
May 28, 2018 / by Barnea
May 28, 2018 / by Barnea
The EU’s General Data Protection Regulation is designed to help individuals better control their personal data. As this regulation applies also to those that offer products or services in the EU, major websites have begun updating their privacy policies to comply. Doing so is important for a number of reasons.
Imposing Regulations on Online Technology Giants
April 23, 2018 / by Barnea
April 23, 2018 / by Barnea
Governments around the world say they are being pushed into creating regulatory frameworks to force tech giants to comply with laws. A regulatory net is closing in. And the types and effectiveness of these regulations and controls are set to evolve over the coming years.
Net Neutrality and Why It Should Matter to You
April 9, 2018 / by Barnea
April 9, 2018 / by Barnea
Net Neutrality represents the way that the internet has worked thus far. It is the principle that the internet service providers, such as Verizon, Comcast, and AT&T, cannot discriminate or charge different amounts according to users, content, platform, application, equipment used, or methods of communication.
Sports Tech – When Sports Join Up with Technological Innovation
December 24, 2017 / by Barnea
December 24, 2017 / by Barnea
In recent years, tremendous progress has been made in introducing know-how and technology into sports – despite this being a conservative world concerned that the introduction of new powers might compromise the ethos of sportsmanship.
Adv. Anat Even-Chen lectures on the accessibility of online services. She discusses for whom the regulations apply, the guidelines and what is required to be accessible, who is liable legally, the sanctions prescribed in the regulations, and the most important ones to implement.
Glossary for Beginners in the World of Digital Currency
November 30, 2017 / by Karin Kashi
November 30, 2017 / by Karin Kashi
Do you keep hearing people talk about blockchain, bitcoins, and ICOs with no idea what they mean? - Here’s a short glossary to help you understand what the fuss is all about. Decentralized coins/digital coins These coins are basically digital money that is secured through encryption technology (cryptocurrency). Digital currencies are not issued or managed by any country or central bank. Thus, their value is not under their control, but rather is determined by the agreement of and according to the demand among the network of users. Bitcoin The bitcoin is the first digital currency used, and the first and most famous application of blockchain technology. Digital wallet A digital wallet is software that is linked to the digital currency network. It enables the user to hold, transfer, and receive digital currencies. Every digital wallet has two “keys”-a public key and a private key. The public key corresponds to the bank account number, i.e. the address to which the money is transferred. The private key is the key to the safe. Only its owner can perform transactions with the digital currency in the wallet. Blockchain Blockchain is a technological concept that enables secure activity on the internet without needing a central management entity. Blockchain serves as a digital ledger of all the transactions performed on it since it began. The information maintained in blockchain is stored in cells called blocks, which are linked together in chronological order (in a "chain of blocks"). Upon completing any transaction in blockchain, it is documented and automatically stored in the devices of all users of the system. The structure of blockchain technology and its decentralized nature provide the structural security of the blockchain. The chaining of the blocks does not enable information stored in blockchain to be altered without changing the definitions of all subsequent blocks in the system, which is practically impossible. Moreover, the decentralized nature of blockchain does not allow for the system to be compromised without taking control of the majority of the devices connected to blockchain, which, due to the number of users of the bitcoin blockchain, is practically impossible as well. Blocks Blocks are storage units in which all information maintained in blockchain is stored. So, if blockchain is likened to an accounting ledger, then the blocks are pages in the ledger. The blocks that comprise blockchain are linked to each other using a complex mathematical puzzle, making it nearly impossible to alter information saved in blockchain. Bitcoin mining Bitcoin mining is the process by which bitcoin transactions are verified and documented in the bitcoin’s blockchain. The mining process is performed by a particular type of users of the bitcoin system, known as “miners”. The mining process basically involves solving a mathematical puzzle. The miner who solves it first creates the next block. The first miner who succeeds in solving the puzzle is rewarded for his successful mining with bitcoins and sometimes also with transaction fees. Virtual coin offerings or Initial Coin Offerings (ICO) An ICO is a crowdfunding channel. An ICO is a process where entrepreneurs who are developing platforms or projects raise money in exchange for digital coins. The digital coins give the projects' investors the right to use the platforms developed in projects funded by the ICO. Additionally, the digital coins provide liquidity to investors in ICO projects, since they are tradable assets in the secondary market. Smart contracts Smart contracts are considered the most dramatic application of blockchain technology. They represent a promise to change the way traditional processes are carried out, characterized typically by a dependence on middlemen. A smart contract is a computer protocol that enables two strangers on the internet to conduct business in a way that is secure and reliable. Since smart contracts are based on blockchain technology, they can reliably and securely complete operations on the internet without involving middlemen. Source: barlaw.co.il
Fintech combines for the first time the worlds of financial services and technology, as banks and insurance companies serve as fintech’s main playing fields. As such, both sectors must become more efficient and acquire the technological solutions that will help them fulfill their roles. Fintech promises to bring innovation to existing players, but also threatens to disrupt conservative industries and replace them with new models and players. The connection between the two components of fintech has proved challenging, in light of the fundamental differences in the characters of these two components. Technological solutions are provided by startup companies that, by nature, are small organizations driven by the need to work quickly and efficiently, due to the short time-to-market and the requirement to sell and recruit capital. On the other hand, the MVPs in the financial services sector are large, hierarchic organizations characterized by sluggish bureaucracy that negates rapid decision-making and agility in implementing innovative solutions. Regulation and Fintech Fintech companies operate in a regulation-intensive environment, and this is the first main challenge, because regulations essentially define their ventures and their feasibility. On the other hand, in most of the technological fields that startup companies engage in, the challenges are innovation, competition, and the business model. Regulation is less of a challenge, if one at all. The dominant role of regulation in the fintech sector is unique. Therefore, gaining in-depth knowledge of the synergies between regulation and fintech is critical during any analysis of a fintech venture’s prospects. And the venture must know how to maintain compliance with the various regulations in order to succeed. By their very nature, financial services are subject to a wide range of meticulous regulations. The types of regulations that affect fintech include banking regulations, insurance regulations, and the prevention of money laundering, as well as privacy, consumer, and securities regulations. The various regulatory categories in the financial services sector follow and are adapted to the structure of the traditional market, with each sector being closely governed and controlled by its own set of regulations and regulatory authority. In many instances, fintech strives to resolve the problems created by existing regulations, but it also must keep in mind that its operations are subject to those same regulatory systems. Already at the stage of defining the product and service a fintech venture wishes to launch on the market, it must familiarize itself with the relevant regulations. It then must find solutions that comply with the regulatory conditions, as well as that enable it to obtain approval from the relevant regulatory authority. There are numerous dimensions to gaining familiarity with the regulations. First of all, similarly to every startup company, fintech ventures are also striving to go multinational and operate in a variety of countries. The problem is that regulations in one country are different and sometimes contradict the regulations in another country. The differences are in language, laws, and even approach. This means that the learning and compliance process is multi-dimensional and, in essence, an unending task. If this were not enough, another problem is that regulations are drafted based on the structure of the conservative market—banking regulations for banks, insurance regulations for insurance companies, and so forth. On the other hand, in many instances, fintech ventures disrupt the structure of the traditional market. This disruption, by its very nature, creates new connections and approaches. As a result, fintech companies find themselves in a minefield of differing, overlapping, and contradictory regulations. However, the regulatory challenge is not just difficult, but also a main foundation for creating value. Any fintech venture that has already become well-versed in the subject, and has adjusted its solution to the various regulations, creates a real advantage over existing and new competitors. The entry barrier to this sector is not only the development stage, but rather the strength of the regulatory solution. In essence, regulatory knowledge actually becomes intellectual property. For example, the banking sector is characterized as a regulation-intensive sector. The banking supervisor’s regulations relate to various aspects of banking corporations’ operations, including licensing, corporate governance, various regulations relating to capital adequacy and banks’ capacity to assume various risks, consumer regulations relating to banks’ relations with their customers, the prohibition of money laundering, and more. Any fintech venture seeking to interface with the banking system, to provide it services or replace some of the banks’ roles, must be well-versed in the relevant local regulations and ensure its compliance with them. Clearly, the greater the challenge, the greater the potential. Privacy and Fintech During the coming year, new and enhanced privacy-protection and information-security regulation systems are expected to come into effect throughout the world. These are headed by the European GDPR, which deals with privacy protection and will take effect in May 2018. As a result of these processes, the issues of privacy and database protection against cyber risks will have an impact and a presence on the technological agenda in the coming years. Fintech ventures create solutions that make use of sensitive personal information. As such, the ventures are engaging in fields that are exposed to privacy and database issues. Basically, all financial services involve the collection and saving of sensitive personal information. Electronic mail addresses, phone numbers, personal details, financial information, marital status, special identifying details, workplace, family members, and more are collected as part of the process of getting to know the customer in order to provide him with services, advice, and an identity. All this sensitive information has been collected, saved, stored, processed, and transferred within the companies' technological systems. But these systems are also exposed to attacks and challenges from all sides. The exposures, in instances of intrusions, are not limited to sanctions that may be imposed on a company by the regulatory authorities, but also include a potential mortal blow to the company’s reputation and civil suits being filed by individuals on the grounds of infringement of privacy. In light of this, the fintech sector must adopt high standards of privacy protection and security. Fintech companies are required to create privacy-protection and information-security regulations for the enormous volume of information they collect, at standards on par with the customary international practices. Source: barlaw.co.il
EU Privacy – Which Jurisdiction Applies?
November 5, 2017 / by Barnea
November 5, 2017 / by Barnea
In an opinion issued to the European Court of Justice, the Advocate General of the Court stated that according to current legislation, any data protection authority in the European Union can take action against a breach of the privacy legislation enforced by that authority, even if the entity alleged to have contravened the legislation is located in another Member State. The opinion was given in connection with a dispute about Facebook's alleged breach of German privacy legislation. Facebook argued that since its headquarters in Ireland are responsible for its data processing activities in the European Union, Germany's privacy authorities lack jurisdiction over its actions and only the Irish data protection authorities have the power to review its activities. While the opinions of the General Counsel are not binding on the European Court of Justice, the Court tends to follow them in the majority of cases. This opinion, if indeed followed by the European Court of Justice, is of significant importance, as it could lead to a barrage of enforcement measures against Facebook and similar structured internet multinationals. However, it should be noted, Europe's new General Data Protection Regulation (GDPR) has instituted the concept of the lead supervisory authority in the jurisdiction of the data controller or data processor's main establishment, in an attempt to limit the need to deal with such a multitude of data protection authorities across the European Union; although it should be noted that the GDPR does not block entirely the other authorities. Source: barlaw.co.il
It is nearly impossible to keep track of the developments in the cryptocurrency and ICO arena, with new digital currencies being launched and new ICOs records frequently being broken. Recently, the record was broken once again, when Filecoin’s ICO raised about USD 200 million in one hour (!), after having raised about USD 52 million from investment funds and private investors in the presale ahead of the ICO. So what is an ICO? ICO is the abbreviation of Initial Coin Offering, a term inspired by the capital market term IPO (Initial Public Offering). This is when a company recruits debt or capital by publishing a prospectus offering of its securities to the public for the first time. A prospectus is a profound legal and accounting document that furnishes information about the company, its management, its businesses, and its financial position. Once a company’s securities are held by the public, it becomes a public company. In an ICO, companies that are developing a technology or an innovative venture, which, for the most part, is based on blockchain technology, recruit capital through the issuing of digital coins. The hope is that the coins' value will appreciate when the venture succeeds and will maximize profits for the coin buyers in the ICO. To date, digital coins and ICOs are unregulated in most countries. However, the US Securities Exchange Commission (SEC), the Central Bank of Singapore (MAS), the Canadian Securities Authority (CSA), and the Israel Securities Authority (ISA) have all already announced they are considering applying in some cases the existing securities regulations also to digital coins and ICOs (such regulations include restrictions in public offerings, prospectus and reporting requirements, etc.) Despite the lack of regulation, as well as the lack of uniformity with regard to the quality of the information being disclosed, the practice is that when launching a new token or actual digital coin and an ICO, the company publishes a document on the ICO’s website that furnishes information about the venture or the technology, pertinent financial data, and information about the offering itself. This document is called a ‘Whitepaper’. It is reasonable to assume that once leading countries enact regulations for digital currencies, including a binding standard for whitepapers, this market will become more regulated. Following are some helpful tips for new ventures still in the pre-ICO stage and who want to make their whitepapers accessible to potential investors. Mode of presentation of the information When an investor considers whether it is worthwhile to participate in an ICO, he wants to know why purchasing coins in the ICO will be a golden opportunity for him and what his resulting profit will be. Unfortunately, companies tend to focus on presenting the technology or the venture in their whitepapers, and they do not attribute enough importance to presenting the financial-economic data. But such data are equally important to potential investors, especially since financial data demonstrate the venture’s potential market value. It may will add value if the whitepaper will include financial data about the company, information about the new coin (or token) to be issued, and information about the technology. Such information should be substantiated by data from reliable sources. It is also advisable and helpful to use infographics—graphs, simulations, and comparative data—that encapsulate the highlights of the ICO clearly and succinctly. Structure of an ICO An ICO whitepaper should explain how and when investors can participate in the ICO, and in which currencies the investor can purchase the company’s new token (if only through digital coins, so which digital coins; and whether it is also possible to use FIAT money. Notwithstanding the regulatory uncertainty surrounding digital currencies, nearly every developed country imposes anti-money-laundering laws and KYC (know your client) provisions. Therefore, the whitepaper should also inform investors about the identification processes they will have to undergo during the ICO and the required mode of payment. Legal aspects As stated, most countries have not yet enacted digital currencies regulations that also regulate the mode of performance of an ICO. Consequently, purchasing digital coins and participating in an ICO are still highly risky and thus are not suitable for everyone. Therefore, it is critical to ensure the whitepaper accurately presents the venture and the structure of the ICO. It is recommended that the whitepaper disclose the risk factors unique to the market in which the company operates (in addition to the risks inherent in the digital currencies arena, the lack of regulations, and the absence of any promise that the venture’s success will lead to a rise in the value of the issued coin). In light of the above, and bearing in mind today’s regulatory uncertainty, ventures considering fundraising through digital currencies should act with all due care so that they do not find themselves in violation of securities laws in countries where the ICO is being launched. The applicable law in the territories relevant to the ICO should be meticulously examined. Source: barlaw.co.il
How Blockchain will Revolutionize a Paper World
February 26, 2017 / by Barnea
February 26, 2017 / by Barnea
In many ways, electronic communications dominate the world as we know it. We "talk" through email, text, and social media, to the point that the written letter is almost an anachronism. Still, some areas still thrive on paper. Real estate, for example, depends on paper deeds and documentation to confirm authenticity. Similarly, many corporations depend on paper records to demonstrate regulatory compliance. But blockchain is helping to change all of that. The technology that made Bitcoin work is expanding, in Israel and beyond, to help secure online processes and chains of custody in ways that can help shift paper-dominated fields into the 21st century. Smart Contracts When contracts determine payments or other actions, they operate inefficiently. Before you move funds, you have to confirm conditions have been met, organize your information, and perform accordingly. Smart contracts use blockchain technology to change this. Once information is entered, you move through the conditions required and the contract auto-updates. You can even update a smart will without creating a new will for every change. You complete everything more efficiently, using a cryptography-secured function that prevents problems the paper processes cannot. Paper Bureaucracies Similarly, bureaucracies exist to create layers that protect information and ensure fairness and accuracy through process. Blockchain saves time and money by building this in electronically. Imagine a system that once required 12 forms, signed in triplicate to allow a decision to become implemented. Blockchain technology creates a mechanism by which this process plays out online, all through secured processes. You need not worry about tracking down every person in the chain when something has to be done quickly. Rather, you move forward quickly and efficiently without losing any of the fail-safes in place. Real Estate In Israel, you must move through the Land Registry Department, or Tabu, to purchase and register real estate. The property world remains a bastion of paper processes in an electronic world. But the legal functions that have long necessitated paper documentation can adapt to blockchain technology. It creates the security that paper has always done, but with a process that is efficient, transparent, and public. To sell or purchase property, this option can vastly improve on the time currently required. Blockchain technology is exploding in Israel, with new startups and applications emerging constantly. To learn the ways in which you can navigate the legal landscape in the face of all this change, contact Barnea & Co. Source: barlaw.co.il
Taxation Factors for Operations Over the Internet
February 6, 2017 / by Barnea
February 6, 2017 / by Barnea
The explosion of e-commerce in the last 15 years has made it easier than ever to manage the logistics of doing business in multiple countries. The global reach it creates, though, has spawned a litany of tax questions. You need to determine which jurisdictions have the authority to tax you and your business activity and what taxes apply. Your physical location and your end-customer locations can impact what you pay to whom, but other factors might also apply. Managing this process is critical to your continued e-commerce operations. Where to Tax Income The issue of the jurisdiction to tax e-commerce is a complicated one, which many countries have yet to resolve. In 2016, the Israeli tax authority laid down guidelines on taxation for companies involved in e-commerce business in Israel. A company will owe taxes to Israel for e-commerce income if it either has a physical presence or a significant economic / digital presence in Israel. Thus, even if you do not have a physical presence within Israel, Israeli tax liability may still be triggered on account of various non-physical factors, which usually are not common in determining tax liability. Value-Added Tax for E-Commerce Value-added tax (VAT) presents its own concerns. Do you pay this tax to the location where the customer is located, or where you have your base or a physical presence? Part of this depends on what you are selling. In the EU, for example, payment of VAT on physical goods goes to the seller's location. Electronic services, on the other hand, are charged VAT where the end consumer is located. In Israel, Section 60 of the VAT Act requires foreign companies that have business or activities in Israel to register a representative in the country within 30 days of beginning to operate in Israel. This registration helps ensure that sales completed in Israel allow for identification and collection of VAT liability. Here, too, the guidelines issued by the Israeli tax authority allow for creating VAT liability solely on the basis of a significant economic presence in Israel. How to Collect Taxes on E-Commerce Your business can collect these taxes much more effectively by building multinational tax rates into its e-commerce platform. Applications that identify recipients by IP address or other indicators of the customers' locations can connect to current VAT tables to identify what to charge. Similarly, income taxes can be calculated by sorting where sales occur and where the economic impact falls. Barnea has experienced attorneys adept at helping clients manage the intricacies of multinational tax issues that arise through e-commerce. Contact us for help piecing your taxation puzzle together. Source: barlaw.co.il
Navigating Anti-Spam Legislation
January 25, 2017 / by Barnea
January 25, 2017 / by Barnea
Spam consists of unsolicited text messages, email messages, faxes or auto-dial calls that are sent for commercial purposes. Due to the ease and low cost in which e-mails can be sent, e-mails are the main focus of any discussion concerning spam. In Israel and around the world, preventing unsolicited e-mails has gained attention as creating serious privacy concerns – in connection with the sending of unsolicited e-mails as well as in connection with the manner in which the e-mail addresses are gathered for the purpose of sending the e-mails. In order to tackle these issues, laws against spam were enacted across the world. In Israel, 2016 brought the first amendment to the country's anti-spam legislation, which created a special regulatory regime for political propaganda and donations for non-profit organizations. Opt-In vs. Opt-Out Generally, Israel's anti-spam legislation requires a person to opt-in, by way of an advance explicit written consent, in order to allow sending that person advertising materials. This is opposed to an opt-out mechanism, in which advertising materials can be sent to a person unless that person states affirmatively that he/she does not want to receive them. There are exceptions, of course. If you have a prior business relationship with someone, you may send advertising materials without an opt-in, under certain conditions. Similarly, under the new amendments, a non-profit organization or public benefit company can send unsolicited materials seeking donations without an opt-in from the addressee. Importance of Securing Approval Running afoul of the legislation allows the person receiving the unsolicited correspondence to seek damages in the amount of about $250 for each unsolicited communication, without the need to prove any damages incurred. The legislation also provides for criminal penalties, fines as well as managerial legal obligations and liabilities. The right legal advice can go a long way toward helping you stay compliant with Israel's anti-spam legislation. The lawyers at Barnea can help you navigate the pitfalls of sending advertising communications. Contact us today so we can help you follow a path toward compliant advertising. Source: barlaw.co.il
Create Effective Website Terms and Conditions
December 18, 2016 / by Barnea
December 18, 2016 / by Barnea
Your website exists to help your clients and customers find and interact with you. You may include e-commerce capabilities, or you may primarily seek to inform people about your company and your products and services. Whatever your goals are, though, you must be on guard; people naturally seek to rely on what they see online. This can be a good thing, but you need to create parameters around what they can and cannot rely on your site to do. The means you have to protect yourself in this regard are your terms and conditions. When you give your customers a clear description of what they can and cannot expect to receive and depend on, you provide yourself with another layer of protection from potential liability. Visibility For terms and conditions to help you, your customers must be able to find them. This can be a display on your homepage or a link to the page that provides them. Sometimes you may also seek to require the persons using your website to positively confirm their acceptance of your terms and conditions. Clarity Similarly, you must use language your customers can understand. If you use vague or complicated language, you will not receive any benefit of doubt from a court. In clear, concise verbiage, your terms and conditions must lay out what your site viewers need to know. Compliance Finally, you need to ensure your terms and conditions do not run afoul of any laws or regulations in your industry and in the applicable jurisdictions. This can be complicated; people can access websites from all over the world, and different countries have different laws that pertain both to your industry and to online communications and privacy rights. With all of the concerns you face in drafting terms and conditions, you are likely not prepared to craft effective and compliant terms without legal assistance. Barnea can assist you in identifying the laws and regulations that apply to the terms and conditions on your website, and in adapting those according to the purposes your website serve. Contact our professionals today to give your site and your business the liability protection you need. Source: barlaw.co.il
Three Technological Predictions for the Next 5 Years
December 8, 2016 / by Yuval Lazi
December 8, 2016 / by Yuval Lazi
The world around us is changing. In labs and living rooms around the world, people are creating new technologies and finding new applications for existing and emerging technologies. The products and services available to everyone thus expand exponentially every year. In the next five years, then, you can expect massive growth in what we can do. Three areas in particular will provide important developments. 1. Augmented Reality Will ExplodeTechnology mavens have talked for years about virtual reality and the applications available. Augmented reality is related, but allows us to lay the virtual world over the real world. Games like Pokemon Go provide examples of how this works; you use technology to "see" virtual creatures and items in real spaces. Beyond fun and games, this technology provides a wealth of planning potential. You can drive your car, and arrows will appear on your road, guiding you to the right path. You can create visual representations of organizing tasks, building endeavors, and almost anything else that you want to see before you start working. Manuals will virtually overlay real items to be joined together – everyone will actually be able to construct an Ikea bed. The technology is here; ways to use it are just beginning to emerge. 2. Mobile Apps Will DeclineAt the same time, the ubiquitous world of mobile apps will begin to slip back. The ways in which we connect to the world often require us to work through a smartphone or tablet. The mobile app ties us to devices; you have no doubt seen rooms full of people who never make eye contact, only staring at small screens. The cost of developing sophisticated apps and the marketing efforts needed to place your App on the most expensive “real estate” in the world, does not always give a return on investment. 3. The Internet of Things Will Grow ExponentiallyAvailability and affordability of connected devices grow each year. We connect massive data networks to our homes, vehicles, and personal health monitors already. The ability to connect more devices, appliances, and objects to these networks means companies will know more about those they serve than ever before. Almost any device with electronic components can be configured for the IoT, and in the next five years, more will. All of these developments will require you to examine closely not only what is possible, but how privacy laws, intellectual property issues and the corporate ecosystems interact with those possibilities. Barnea has a wealth of experience in helping companies avoid problems and get the most from their developing technologies. Contact us today to get on the right path for you. Source: barlaw.co.il
Israel’s Leadership in the Internet of Things
August 9, 2016 / by Barnea
August 9, 2016 / by Barnea
The Internet of Things (IoT) has emerged as a popular technology buzzword in the last decade. As with many such phrases, it has garnered widespread usage with little understanding of what it actually signifies. Far from meaningless terminology, though, IoT already pervades the consumer marketplace, and growth opportunities abound. Israel's sophisticated tech sector provides fertile ground for continued expansion in IoT investment and development. What is the Internet of Things? In simple terms, IoT consists of objects with the ability to collect, process, and share data across the Internet. Items like the Fitbit and home security monitoring systems are examples. Currently, software and apps hold almost 80 percent of this market. This leaves room for hardware and platforms to explode in the coming years, particularly in areas like healthcare, consumer electronics, and security. Israel's Emergence in IoT Technology Further technology development in many sectors focuses on ways to further connect you to the world in which you live. Emerging trends in this area must balance people's interest in privacy with their desire to participate in the growing connectedness of the world. Health information, for instance, now moves online among providers and patients to monitor biometrics, prescription schedules, and a myriad of other markers to track healthcare. The technology opens doors, but also must prevent those doors from opening to anyone but those for whom the information is intended. This delicate balance makes Israel a logical world leader in the IoT arena. The country has long been a leader in both general technology and online security innovation. Its national demands for security, and its intense investment in technology development training, as well as the inherent inclination of Israeli entrepreneurs to seek the next big thing, have been a boon for local startups and foreign investors seeking paths for sensible growth. To take advantage of the sophistication Israel offers in IoT development, you need experience and knowledge in the legal, regulatory, and geopolitical landscape for doing business in the country. Contact Barnea to learn how we can guide your Israel IoT development strategy.
4 Things to Know About the Sharing Economy
June 1, 2016 / by Barnea
June 1, 2016 / by Barnea
It is possible to believe the innovations of the Sharing Economy are due to a collective and empowering business model that places the emphasis on the individual and that this is a revolutionary outgrowth of information accessibility. However, one would be dismissing the very economic fundamentals that are the foundation for future growth and prosperity of the larger global economy. There are four important things to know about the Sharing Economy. Solution Driven The sharing economy is driven by solutions to needs that are not necessarily addressed by traditional businesses. In some cases, these solutions can coexist with existing traditional businesses e.g. Uber or AirBnb. There is no suggestion that traditional hospitality and transportation businesses under serve consumers, only that specific need situations fall outside of the traditional need and are thus better served by the sharing economic model. Failure Is Unforgiving In reference to the sharing economy, failure in the public eye is impactful to a much more significant degree than it is on traditional corporate structures and models. The fact that the businesses operating in the sharing economy rest on the trust of the customers, as well as the buzz relating to such businesses, makes them that more susceptible to suffering blows where they act, or fail to act, in a manner which is conceived by the public as problematic. Therefore, such businesses must be able to handle any crisis in a far more efficient manner than "regular" businesses. For instance, if a person using a transportation platform suffers from a crime committed by the driver providing the transportation services, then – from the perspective of the business operating the platform – things could deteriorate quickly to a mass exodus of users of the platform on account of what could be conceived as a failure of that platform; this is especially true where there are several competitors vying for such customers. Unclear Regulatory Concerns Either by design or oversight, sharing economy concerns are commonly running afoul of existing regulatory emplacements. In 2014, the Harvard Business Review expressed the concern that sharing economy actors are often seen as exploiting the regulatory loopholes and are, therefore, creating a negative perception of said actors. Further still, since the exact regulatory structure for the sharing economy is in a dynamic state, the risks for regulations that prohibit company growth are real and potentially devastating. Many regulatory concerns are focused on the specific aspects of the company, the relationship between the company and the customers and service providers providing services via the company's platform, as well as the nature of the company's business; and the applicability of existing regulations as per traditional businesses in a similar sector. However, in absence of traditional regulatory authority, the sharing economy presents a question of what regulations if any are needed to address regulatory concerns or future issues. Taxation Concerns One area of specific concern is taxation and responsibility for said taxation. Much of this revolves around the employee/employer designations. Should taxes be the responsibility of the independent contractor or should the company be responsible for taxation? This is a critical component and one that is still being evaluated by various entities. The collective consumption foundation of the sharing economy has generalized potential and it certainly functions well in a regional or localized setting. However, for long-term corporate viability, the issue of growth sustainability is still in doubt. At present there is plenty of room for both positive and negative considerations. Thus, it's important that your voice as both a consumer and business owner is clearly heard, so that the sharing economy can be shaped into a sustainable, beneficial and continually growing part of the global economy. Source: barlaw.co.il
5 Steps to Increase Sales for Commerce Sites
April 20, 2016 / by Barnea
April 20, 2016 / by Barnea
E-Commerce sites of both B2C and B2B oriented businesses still remain a positive growth vector across many industries and concerns. This will continue as more and more locations are provided with access to the Internet and as the bandwidth available correspondingly increases. However, the rising traffic is only one small factor in increasing overall e-commerce sales. A comprehensive approach to sales generation and lead transition is necessary to produce a sustainable increase in both the number of new transactions and the number of older or repeat consumers. Centered around the five steps listed below, a properly implemented strategy could significantly improve sales for your business. The Five Key Steps For Increasing Sales At Commerce Sites Importantly, it is the combination or varied combination of these steps that are capable of producing results. It is also conceivable that your business currently employs one or more of these steps. However, an overall analysis could potentially identify which of the other steps could be used or combined with existing implementations in order to achieve significant results. The five key steps are: Improved Automation Levels Proper Inventory Management Procedures Dynamic Pricing Customer/Consumer Value Creation Improved Customer Service Response Inventory Control With the exception of customer/consumer value creation and improved customer service response, the rest are invisible to the site traffic. However, they play a critical role in increasing sales. Automation levels are a component of both the proper management procedures and dynamic pricing. If the automation levels are insufficient and reliance on manual pricing changes is the norm, the customer will not derive the price changes that can affect their buying decision in sufficient time. For example, some marketing research has mentioned that it is possible that companies such as Walmart and Amazon will adjust pricing up to every ten minutes. This is referred to as dynamic pricing, one of the key steps. Value and Service Response Traditional methodology such as discounts account for increased consumer value creation. Importantly, this should correspond to inventory levels to become part of your inventory management procedures. This is facilitated by the dynamic pricing. Of course, Improved Customer Service Response should be obvious, however, it should be organic to your company as to the specific implementation and practices required to present the consumer with a flexible and responsive customer service. Altogether, these five steps can help improve your commerce site sales. However, it is up to you and your company to ensure proper implementation in order to achieve the desired objective of a sales increase at your commerce sites.
Israel is brimming with high tech ideas and you want to be part of the action, one way to do so is by providing a start-up with early seed money. But you need to protect your investment. The Target. Choose a start-up in a field that you understand, it will help you evaluate its chances of success. Remember founders can be picky too, they prefer angels who bring something to the table other than just money - contacts, distribution channels, expertise etc. Investment Deck. Ask for an investment deck and check it addresses the following questions to your satisfaction: What is the market need? How does the proposed product fill this need? What are competitors doing? How is the proposed product better? What is the proposed business model and budget? MOU. This should be a non-binding document that does not commit you to invest, but includes the material terms of the transaction. This is signed even before the material due diligence is conducted to ensure that everyone is on the same page and to avoid wasting valuable time and resources. When drafting the MOU you should consider: 1. Lump sum v Installments. You do not need to part with your hard earned cash in one go. You can be more conservative and condition your investment on the company meeting certain milestones. 2. Equity v Convertible Loan. You do not need to commit now. You can invest by way of a convertible loan. This may be less risky as (i) you can ask for repayment if you are not happy with the company’s performance, or (ii) you can convert into equity at the next investment round, on the same terms as the round and at a discount. 3. Company Valuation. At this stage the number will almost always be subjective. The founders will not want the valuation to be too low, because they do not want to give away too much of the pie. On the other hand you do not want it to be too high as: (i) you want a nice piece of the pie and (ii) you do not want a down round in the future (where the valuation drops), as this will dilute your holdings and may also deter future investors as it will reflect poorly on the company. 4. Anti-dilution. Whether full ratchet, broad based weighted average or narrow based weighted average, these anti-dilution protections will preserve your percentage holdings in a down round, or mitigate their dilution. 5. You want the target to have an employee share option pool and plan. You want the target to incentivize its employees and to attract the best talent. What you do not want is that the pool is created at your expense (i.e. by diluting your holdings). So ask that the company allocates a pool prior to your investment. 6. Do you want a seat on the board, to be an observer or would you be happy with information rights? Remember board members have duties as well as rights. If you are on the board, make sure the company agrees to indemnify you for your actions and purchases sufficient Director and Officers insurance. 7. General Terms. Most angels are minority shareholders, so make sure you include restrictive provisions preventing the company from taking certain actions without your consent - for example, changing the business of the company or selling the IP. You are taking a high risk at this stage so you want to guarantee a high reward, you could ask for dividend preference and liquidation preference. However, remember that your terms will set a precedent for the next investment round and the founders will be reluctant to give away too much. 8. Founders. Part of your decision to invest will inevitably be based on the identity of the founders, so make sure they will be around for the foreseeable future. Request a no sale undertaking, whereby they agree not to sell their holdings in the company for a certain period. Demand a co-sale right, so if the founders have a nice exit, you can benefit from it as well. Most importantly make sure the founders are dedicated, that they are engaged by the company on a full time basis and that this is not simply their hobby. You can also ask that if the founders cease working for the company within a certain period, the company will have the right to repurchase their shares. 9. No shop/Exclusivity. Despite the non binding nature of the rest of the MOU, the founders and company should undertake not to negotiate with other potential angels for a fixed period, buying you enough time to perform your due diligence and negotiate the definitive investment agreements without being undercut. Due Diligence. It might be that there is not much to review at this stage but performing due diligence (legal, financial and commercial) will put you in a much better position to gauge whether the start up will succeed. Is there a real market for the product? Does the company actually own the underlying intellectual property? What are the company’s current debts? Remember this is the start of a relationship, not an exit. No one likes to be bulldozed and the founders will be protective of their baby and may take flight if you are too demanding. Tread carefully but protect your money.
Building a startup company takes vision and great ideas. But before you can get up and running, it also requires legal understanding and planning. Startups need to go through steps to protect the owners and the organization. Before you start doing business, make sure you have worked through these preliminary steps. Create a Legal Entity When you set up a business, you should create a separate legal entity under which you will operate, typically a corporation or an LLC. Identify the place you want to incorporate and set up to legally operate in all of the places you want to do business. You also need to set up your finances to ensure the assets of your company remain separate from your personal assets and file all the relevant paperwork to set up. This keeps someone from being able to attack your personal assets over a dispute with your business. Agreements and Contracts Besides protecting yourself from outside risks, you need to make sure inside disputes cannot derail you. Any agreements you have with co-owners or investors need to be in writing and should contain terms which you are comfortable with. You should include a vesting schedule within your agreements in order to prevent someone from getting cold feet and leaving early with his or her ownership interest. You also want to set rules for bringing in new or replacement owners. In addition to setting up, startups need to anticipate and plan for ending operations. What criteria need to be in place for the business to sell? How will owners divest their interests if you choose to part ways or close down? Startups eventually end operations, and you need to plan before the moment arrives. Protect Your Intellectual Property When you plan your company, you do so with ideas in place. Before you begin operating, you need to develop patent, trademark, and/or copyright protection for the products or methods that will come from your ideas. This ensures no one else can steal and run with them before you are able to build up your business. Ensure Legal Compliance Finally, you need to understand the laws and regulations that govern your operations. If you are non-compliant, whether in corporate, tax, or securities law, you can lose the business and more. Barnea has extensive expertise in helping startups begin with the right legal footing. Contact us today to help turn your ideas into a solid business.
Most people who think about leading global players in online security concerns think big: the United States, China, and Russia. Quietly, though, Israel has emerged as a world leader in this area. Known as “Start-up Nation” since the release of Dan Senor and Saul Singer’s 2009 book of the same title, Israel has created a culture of technological development and growth. It promotes learning and understanding in technology, both culturally and through its recruitment of top minds in service to the Israel Defense Forces (IDF), resulting in a country continually pushing the technological curve forward. Service and Training Israel requires that all citizens over the age of 18 enlist in the IDF. The compulsory service requirement opens a large pool of candidates for high-level training. From this group, Israel’s 8200 intelligence unit has the opportunity to choose the best among them to train and serve in cyber intelligence. In turn, many of the best of these develop into the online security leaders for the government and private companies. Invention From Necessity Israel’s focus on cyber security is no accident. Uniquely situated among nations often hostile to its interests, Israel must remain vigilant against the threat of attacks from military operations and computer operations. Its culture of innovation led to its myriad start-up successes, but the IDF focus comes from a nationwide focus on security, a focus that has led inexorably to the current mantle of the cyber security nation. Growth Potential Several successful, high-profile intrusion events concerning various corporate and government networks clearly illustrate the burgeoning market for cyber security solutions. According to a recent January 2016 article on the leading Israeli business site, Globes, there were over 430 cyber security oriented enterprises, with 19 post IPO. The oldest Israeli cyber security company is Check Point Software Technologies (Nasdaq: CHKP), who (again according to Globes) has a market cap of over 15 billion. Since 1993, Check Point Software Technologies Ltd. has expanded to the degree that they operate in hundreds of countries with technology partners such as IBM, Microsoft and others. Check Point is not the only cyber security company that has seen growth, as all the other companies, including Cyber Ark Software Inc. (Nasdaq:CYBR) have also experienced considerable growth. Israel’s national focus has led to a surge in online security development and expertise. The world continues to require more focus in these areas, and Israel is leading the way. Source: barlaw.co.il
Shaming on the Internet and Social Networks – the Business Aspect
January 17, 2016 / by Barnea
January 17, 2016 / by Barnea
You have tirelessly invested time, money and significant efforts in order to create a business and to grow it, and you finally see the fruits of your labor and maybe even begin to profit. Yet all of this can disappear with the stroke of a pen (or a tap on the “enter” key). One unsatisfied customer uploads a hostile post about your business to a forum or a social network, and it goes viral and spreads throughout the internet like wildfire. Such a post can cause the near immediate collapse of a business. These posts can include a broad variety of claims - the service/product was deficient, prices are too high, opinions of the business owner are to the right/left of the political spectrum, the business owner promotes liberal/conservative legislation, the business employs someone who was (allegedly) convicted in the past of a crime, etc. Unfortunately what often underlies these claims and this phenomenon (let us call it of business shaming) is competitors seeking to harm their competition. So, how can business shaming be dealt with? What should you do with a harmful post published about your business? It is important to be prepared in advance in order to deal with business shaming - both in a practical and a legal sense. In practical terms it is important to invest the time and effort required to locate the source of the incriminating post before it spreads across the internet, and to thwart it. Once the shaming appears on countless websites, the ability to deal with it practically is nil. Therefore it is crucial that you continuously employ someone to follow and monitor internet websites and social networks in order to locate a shaming post immediately after it is uploaded. Once a shaming post is identified, you must immediately present counter claims or proof to counterbalance the shaming. It is not necessary at this stage to present the entirety of your defense, but rather to present that one point, precisely and briefly, that has the capacity to convince internet or social network users that the shaming has no basis. From a legal aspect, it is possible to engage with the website or social network on which the business shaming was published, and request that they remove the harmful post as soon as possible. You should clarify that you are speaking of a libelous publication (assuming this is the case) and that such post has devastating potential for your business, which could cause significant damages and create a cause of legal action. At the same time, you should attempt to try to locate the author of the harmful content and consider submitting a libel action against him personally. However, it is important to note that currently there is no law that can be used to compel internet service providers and website owners / operators to furnish you the details of the author of such post. The best remedy for business shaming is a quick and decisive response intended to block or prevent the continued spread of the harmful post. A delayed reaction, after the virtual horse has left the stables and is galloping across the internet, will not rectify the damage done. Time is, as always, of the essence.
Israeli Online Gaming Sector – Q&A
November 17, 2015 / by Barnea
November 17, 2015 / by Barnea
Q: You work extensively with companies operating in the online gaming sector – what are the legal and regulatory challenges faced by firms operating in this sphere? A: The main legal and regulatory challenges which face online gambling operators is the worldwide shift from what is known as the .com situation to the .country environment. This relates mainly to the changes facing online gambling operators that are required, due to legislative changes, to obtain online gambling licenses in numerous jurisdictions across the world in order to continue their operation in those jurisdictions. Such jurisdictions include, by way of example only, the UK, Spain, Italy, Denmark and Belgium. The most recent and substantial change has occurred in the UK where online gambling operators that wish to provide their products and services in this jurisdiction will be required to obtain an online gambling license from the local Gambling Commission. Online gambling operators can now be subject to regulatory regimes maintained by several gambling regulators, each one of them with different sets of requirements – in connection with the license application, but mainly with the ongoing operation, relating to issues such as player protection, responsible gambling, software testing etc. All of the above requires the online gambling operators to allocate substantial personnel, time and allocation of funds. Adding to that is the fact that usually, with the obtaining of local online gambling license, the tax man cometh; that is, the online gambling operators, that have (or at least most of them) became accustomed to a very low tax liability in their home jurisdictions, are now required to pay substantial taxes to the jurisdiction from which they have obtained an online gambling license. Such taxes have the risk of turning their online gambling activities in that jurisdiction to unprofitable, which, in turn, could lead such online gambling operators to forfeit their licenses and exit these markets. Q: What role does regulation play for online gaming companies operating across multiple jurisdictions? What do you recommend to companies to be aware of? A: Online gambling operators should be aware of the fact that, in the long run, it will become very difficult for them to operate in a jurisdiction with an online gambling licensing regime, without obtaining a license from the local regulator. The reasons for this conclusion include, inter alia, the preference of local customers to wager via a locally licensed operator, the difficulties and costs associated with operating without a license (e.g., higher fees and commissions paid to third party intermediaries such as payment processors and affiliates), the increased enforcement activities taken by the local regulators and the understanding that an operation without a local license carries with it a lower value to its owners / shareholders – compared to a similar operation with a local license. It follows that the online gambling operators must get accustomed to a situation in which, in respect of a jurisdiction that offers an online gambling licensing regime, they need to decide whether to apply for a license or exit the relevant market. Q: How are most companies structured in the online gaming sector? What are the problems for companies wishing to set up tax efficient structures? A: Setting up a structure that is tax and regulatory efficient, which can provide value to the owners / shareholders, depends on the specific facts of each case including, by way of example, the main target jurisdictions, the offering of products and services in grey markets, adherence to incorporation requirements of licensing jurisdictions, what licenses are obtained, payment processing etc. Due to the numerous issues and considerations to be taken into account as well as the intricacies of the regulatory and tax considerations, it is vital that the structuring will be handled together with legal and tax counsels. Q: Why to operate out of Israel? A: Israel is considered a major power house in the online gambling industry, on the basis of, inter alia, the tech savvy Israelis that provide online gambling operators with state of the art software development and marketing strategies. This has led several online gambling operators to set up shop in Israel (although most of them avoid placing their main operational units in Israel for the reasons described in 5 below). Q: What are the legal implications if online gaming and e-commerce companies do not comply with government regulator in Israel? A: In Israel, there is no liberal licensing regime for online gambling activities. Only the sports betting monopoly is authorized to offer online sports betting and horserace wagering, and any other online gambling activity is not licensable in Israel. The current stance of the Israeli authorities is that given this legal situation, any online gambling offering made available to Israelis, even if provided from outside of Israel and on the basis of a foreign regulatory license, is illegal; as such, the Israeli authorities take quite a harsh position in respect of such activities and use a multitude of enforcement activities, such as financial payment blocking, ISP blocking (although this attempt was struck down by the Israeli Supreme Court due to lack of clear legal authority), arrests, seizing of funds and equipment, indictments etc. For the objective of combating online gambling, a special task force was created; such task force includes the Police, the Ministry of Justice, the Anti-Money Laundering Authority, the Central Bank and the Tax Authority.
Gambling via Mobile Device – Constraints and Opportunities
December 7, 2015 / by
December 7, 2015 / by
The online gambling industry generates billions of dollars annually and is one of the burgeoning industries on the internet today. The growth of this industry spurred online gambling operators to search for additional operating channels, besides PCs and laptops, such as applications customized for mobile phones and handheld devices that may be used on membership-based websites (such as online casinos). Thus, the mobile channel is becoming a primary channel in the online gambling industry. Considering the heightened use of mobile phones in general, online gambling operators are also seeking to offer their products via this channel – similarly to any other electronic commerce. Additionally, the opportunity being given to online gamblers to continue gambling when they shift from their PC platform to their mobile phone platform while using that same operator and a single electronic wallet (which is synchronized with the operator’s internet version and mobile version), increases customer loyalty to a particular gambling operator and to its brand. Furthermore, the expansion of access to gambling products also via the mobile channel lures customers to spend more time gambling, thus enabling online gambling operators to generate revenues from customers at a faster pace (than prior to the advent of the mobile application) and increases the “value” of these customers and the revenues generated from them. A similar channel exists in handheld devices, which enable customers who are visiting real casinos to continue gambling during their stay at the casino, even when they are outside of the casino halls, but still on the grounds of the casino complex (such as in the casino’s hotel rooms and public spaces, for example, at the pool, in one of the restaurants, etc.). This possibility, which is available in some casinos in the United States, also offers casinos potential growth in revenues and profits by providing access to gambling outside of the actual casino halls, while avoiding regulatory constraints and capital expenditures on physical expansions of their casino halls. That being the case, the use of the mobile channel undoubtedly offers significant potential for the online gambling industry. However, concurrently, this channel also poses significant constraints, mainly in terms of regulations. Firstly, the fact that this is a virtual channel raises the question of the law and regulatory regime applicable to online gambling via the mobile channel – whether the particular regime permits or prohibits online gambling. For example, let us assume that a Spanish citizen and resident, who has a gambling account with a Spanish licensed gambling operator, wants to use the said operator’s mobile application while he is staying in Holland. Will Spanish law, Dutch law or some other law apply in this case? Prima facie, the Spanish customer is “carrying” his gambling account with the Spanish operator in his mobile device, but, on the other hand, he is seeking to gamble while he is in Holland (which bans online gambling), using the Dutch communications network. These issues also exist generally in the general online gambling industry, but the mobile channels highlight the salience of the aforesaid regulatory issue, mainly because it has become a far more widespread issue. The more extensive the use of mobile channels in the online gambling industry, the closer the world gets to the point where it will become essential to find a satisfactory solution to this issue. Furthermore, the expansion of the online gambling industry into mobile channels could serve as ammunition for the most ardent opponents of this industry. One of the strongest arguments being made in the battle against online gambling is that the evolution of this industry will turn every computer into a casino in a way that substantially facilitates access to gambling, since mobile phones are ubiquitous among the general population. – and thus serves to promote an inconceivable increase in gambling addicts (one extreme scenario that is repeatedly mentioned is that of teenagers – who, as minors, are banned from entering physical casinos – who become rampant secret gamblers via online gambling websites up in their attics). Considering the incessant battle between the opponents to the online gambling industry due to the inherent phenomena involved (or at the very least, due to the phenomena that online gambling opponents claim are inherent in this industry) and proponents of online gambling, who are seeking to regulate the industry through legislation, any development, even merely of a technological nature, could impact the regulatory regime that will eventually be instituted. Even in the United States, where gambling is firmly established, there is a persistent battle at the federal level over whether or not all kinds of online gambling should be prohibited by law. Considering the Republicans’ control over the U.S. Congress, and the support of legislation banning online gambling by the casino magnate, Sheldon Adelson, one cannot rule out the possibility that the expansion of the online gambling industry to mobile channels might, in the final analysis, be the last straw that leads to its downfall.