The due diligence process in the purchase and sale of a business can seem daunting and cumbersome. Any attorney or financial professional worth his or her salt will tell you that conducting adequate diligence is paramount and, despite what will almost certainly feel like an unnecessarily lengthy and intrusive process, serves to mitigate risks for buyers and sellers alike.
This post is meant to provide a very basic framework of the due diligence process in asset deals to assist buyers and sellers in understanding (a) what they are looking at, (b) what they should be looking for, and (c) setting expectations about how the process looks, and where it can go awry. This post should not be relied on as legal advice, and you should always engage counsel and other financial and tax professionals if you are considering buying or selling a business.
Seeing the Stars in the Universe
So, you’ve signed a letter of intent or term sheet outlining the basic terms of the purchase and sale of a business. The excitement of acquiring new assets or selling a business you’ve built from the ground up is quickly tempered when documents start pouring into the virtual data room (a secure, shared drive where diligence documents are housed for review by the parties to the transaction and their advisors). In an instant, you feel like a child looking through a telescope at a cluster of stars for the first time – how can there be so many?
What Am I Looking At?
First, it is important to understand what you’re looking at. Ideally, there is a variety of documents organized by category into separate folders in the data room that include, company financials and tax returns, privileged licenses the business must hold to operate (including any administrative or disciplinary history), land use permits, commercial lease(s) for the location(s) used to operate the business, any contracts with vendors that serve the business (think utilities, phone/internet, waste disposal, etc.), employee lists with wage and hour information, along with disclosure of any employment claims, and MANY OTHER THINGS. Even more ideal, and perhaps aspirational, these documents are accurate, complete, and easy for your counsel and advisors to read and analyze.
What Should I be Looking For?
Once you and your professional team have a handle on what documents and data you have, you can begin to narrow the universe of information to find what you should be looking for. Remember that part of the diligence process for buyers AND sellers should include a reasonable opportunity to ask questions and have them answered. If you feel like your questions are not being answered, or you are unsatisfied with the responses, you should consult with your professional team to determine next steps.
Below are examples of what you should be looking for in various diligence documents by category. The list below is by no means exhaustive and is meant only as a starting point. Remember to always consult with your professional team regarding general scope of diligence and specific matters to investigate or disclose by category.
- Work with your CPA or financial and tax professionals to ensure the company financials appear accurate, complete, and prepared in accordance with Generally Accepted Accounting Principles.
- Are there out of the ordinary expenses?
- Is there significant debt? Remember, even in an asset deal where a buyer is not acquiring liabilities, loans frequently give rise to liens that may attach to the assets you are purchasing or selling.
- Are there significant discrepancies between the company financials and tax returns?
- Real Estate – (Most transactions involve commercial leasing, which is the focus of this section. If a land/building purchase is involved, other items will be disclosed and reviewed.)
- Review the lease in its entirety and never assume the lease is on “standard terms”. Assume that most landlords, if they are willing to permit an assignment of the lease to buyers (see next bullet point below), will likely be averse to modifying many legal and business terms, meaning you should be prepared to accept the lease on the terms as written. While there is room for negotiation, be prepared to offer something in exchange for new and favorable lease terms post-closing.
- Most commercial leases contain a no-assignment clause, meaning you will almost always need consent of the landlord to assign the lease to buyer, or buyer and landlord will need to enter into a new lease. Either way, engaging in discussion with landlords early in the process is essential to staying on track for closing, as the process of assignment or negotiating a new lease can be lengthy. Assume this process may take anywhere between 1-6 months at a minimum.
- Work with your CPA or financial/tax professional to ensure the company tax returns (a) are accurate and reflective of the company financials, (b) were filed timely, and (c) were paid in full. Although different jurisdictions have different laws regarding attachment of tax liabilities to buyers in asset deals, exposures like tax liens being attached to the assets being purchased and sold, or violations for non-payment of taxes against a privileged license being transferred can arise, even if a buyer does not assume prior tax liabilities by contract or statute.
- Are the licenses used to operate the business transferrable, or must the buyer apply for new licenses?
- Are all necessary licenses to operate the business after closing in good standing?
- Is there any negative licensing history, such as regulatory violations or other stipulated agreements with the licensing authority that limits the exercise of the privileges granted by the license or makes the license probationary?
- Land Use
- Is the parcel of land on which the business is located properly zoned to operate the business as presently operated? Are any modifications or additional permits necessary for planned future operations after closing? Remember, zoning is often very specific to a particular type of use. Additionally, many zone use violations go unnoticed or are not enforced by relevant authorities. Do not assume that your planned future use is “close enough” to the current use permitted by the zoning code, or that a long history of prior use by a seller in violation of local zoning ordinance will not result in an enforcement action after closing.
- Assumed Contracts
- What services or vendors does the business need to operate? Does the buyer intend to assume these contracts, or will the seller terminate those agreements on closing?
- Vendor contracts, like leases, can contain no-assignment provisions, so it is important to work with your counsel to understand whether a particular service or vendor contract may be assigned to the buyer on closing.
- Employment matters are complex and should not be overlooked. There are many moving parts in the employment realm within an asset transaction. Above all else, work closely with your counsel and professional team and remember, whether you are a buyer or seller, to err on the side of more disclosure.
Depending on the type of transaction and others context, what you should be looking for by category and within certain categories is very likely far more expansive than described above.
What Should I Expect?
If you are like most of buyers and sellers, you are already likely feeling overwhelmed, even based on the drastically abridged version of due diligence above. We understand that you likely are embarking on the journey of an acquisition or sale for the first time, and it is ok to feel like you are floating aimlessly among the stars. The most important thing to understand is that throughout the diligence process and the various transaction phases, you will be tired. You will likely get fed up. You may even want to quit. In those moments, remember, we do this all the time and are here to help you get through it. Conducting diligence in the right way, despite leaving you tired, fed up and possibly wanting to quit, will be worth it in retrospect. Most importantly, this process will drastically reduce the risk of latent exposures associated with cutting corners in diligence, or not conducting diligence at all.
Remember, it will be rewarding in the end if we do it right. We look forward to sharing a beer after closing and looking up at the stars together with the sense of pride that comes only after accomplishment through perseverance.
ABOUT THE AUTHOR
Colin joined Milgrom & Daskam in March 2022 and focuses on a variety of business matters including regulated cannabis, pet care, financing, real estate, formation/governance, M&A, commercial transactions, business licensing, regulatory compliance, and general corporate.
Recent Crypto Enforcement Actions and the Brewing Battle Between Regulators for Jurisdiction Over Digital Assets
Readers of my last, irresistibly juicy blog post, “First-Ever Court Ruling Means Your Utility Token May Be an Unregistered Security,” know that the Securities and Exchange Commission (“SEC”) recently landed a blow against blockchain-based media company LBRY when a district court in New Hampshire held that LBRY’s native “utility token,” LBC, was an unregistered security.
Entity Selection: How QSBS Could Save You Millions in Taxes
I often work with entrepreneurs starting new ventures. While there are multiple considerations for new businesses, the first important item to address is entity formation, governance, and finance/ownership. This is the starting point to get your venture headed in the right direction.
Do Colorado Courts Still Enforce Liquidated Damages Provisions?
Do Colorado courts still enforce liquidated damages provisions? When are such provisions enforceable? As a litigator, I notice this is a frequent topic of conversation among my transactional attorney friends when they are drafting contracts with no real consensus. So, what does Colorado law say?
Running a Business – Remotely
Running a Business – Remotely
About three years ago, I spent a year living and working remotely from Europe. My experience was unique and interesting enough that I was featured in a series called Digital Nomad Life in Croatia. Of course, many people had been working remotely for years, but it hadn’t really become mainstream. Then came the major disrupter of all life as we knew it – Covid-19. Almost immediately, everyone the world over got a taste of working remotely, or at least of realizing that the world of work could look very different from how we always thought it had to be.
As the pandemic begins to wind down (fingers crossed!) many companies are still offering some variation of work-from-home opportunities for their workers, whether it is to allow for more social distancing within the office space, or to accommodate workers who have proven that their work can be done just as efficiently from home. Some companies have taken advantage of a smaller workforce or flexible scheduling and downsized their physical locations. Once again, I find myself in a somewhat unique situation as my entire law firm has opted to operate fully remotely. At this moment, we have no plans to work from a single brick and mortar location. Possibly ever.
There are some downsides to this arrangement. The first that comes to mind for most people is isolation. We are social beings, and there can be creative synergy or mentorship that comes from popping by your officemate’s desk for a quick question or document review. Many sticky problems can be resolved over a spontaneous lunch with a boss or a peer. Despite the remote nature of many jobs, somebody must still store the unused equipment or file cabinets for things that still need paper documentation. Sometimes our homes are not big enough or quiet enough to serve the dual purpose of also functioning as productive workspaces. Some people simply do not work well unless they get out of their relaxed home space, dress up, and go to another place where they are expected to be efficient.
Some of these hurdles have been challenges for us, too, and maybe we’re just lucky that everyone on our team has been willing to find a way to make it work in exchange for the benefits of no commute, more daily flexibility, and the enormous cost savings which can be passed back to employees. Nevertheless, as we continue to navigate a world that has embraced remote or hybrid work models, it is wise to identify practices that have best helped businesses thrive during this notable shift. Here’s how we’ve found ways to handle these unusual circumstances and cut inefficiencies:
- We use the Microsoft suite of products that allows for easy chatting, video conferencing, and shared, live document storage. A quick question via Teams is no more –in fact, often less—intrusive than dropping by someone’s office in person. Less time is wasted starting a Teams meeting than waiting for everyone to gather in one conference room and getting back to work after the meeting isn’t delayed by a trip past the water cooler. If a key person does happen to be late, the rest of us can continue working while we’re waiting.
- Personal Interactions. We may not get together one on one as often as we did when working in the same space, but we have committed to frequent social gatherings, whether virtual or in person, to play games, do volunteer work, chat, have a beer, whatever. I feel I spend more quality time with my coworkers now than I ever have in my past jobs.
- Home Offices. Some of our workers have had to be more creative than others with designing a productive workspace in their homes, but libraries, shared offices, and coworking spaces are also options, especially for in-person conferences. Also, there is nothing that says you have to spend your days at home in sweatpants and slippers if you believe you need to dress up to feel professional and productive.
- We have rented a UPS box as our mailing address. UPS will also accept packages and hand deliveries on our behalf, and they will send our mail to us as often as we request. Some mailbox companies will email pictures of incoming mail, so customers always know what is sitting in their box. We have keys to access our mailbox at any time, day or night, if there is something that can’t wait for delivery. All-important client mail is scanned, emailed, and stored in the appropriate client folders online.
- Everyone has the same equipment at home that they would have in an office, except for maybe a printer/scanner. Since we have no hybrid model where some people want to work at home and in an office, we have no need for duplicate equipment in two locations.
- We have two administrative employees who have printers and one of those can also write checks, so if something needs to be printed and mailed, say certified mail or with a check, that is emailed to the person who can handle that task. Receipts and document copies are scanned and stored online. One scanned copy can be efficiently filed electronically and accessible to everyone without any paper printing, copying, delivering, or filing. Signatures are all handled through the same e-signature platform that we use with our clients.
The landscape for where most of us can perform our jobs has changed dramatically. For me, working from home is not as exotic as working from Europe was, but generally, workers are happier when work fits nicely into the flexible lives they want to live. Businesses are more profitable when productivity is not affected by things like traffic, weather, or commute time, and the operating budget is not dented with office space rental or the costs of printing and copying, stocking the company kitchen, and paying utilities.
ABOUT THE AUTHOR
Chris’s life has meandered far from her degrees in sociology and elementary education from the University of Colorado but has now come full circle with the many years she put in as an administrator in the legal field. After being a stay-at-home mom for 10 years and many subsequent years volunteering and working within the Boulder Valley School District, Chris operated a successful freelance office services business for a variety of clients, including Milgrom & Daskam. Chris is happy to have now joined Milgrom & Daskam officially as the firm’s Legal Administrator.
The Importance of Morality Clauses in Contracts with Public Figures
In the age of social media and the 24-hour news cycle, opportunities for public figures to be called to the mat and canceled over their statements and behavior are plentiful. Whether looking at Kanye West, aka Ye, with his antisemitic statements on Twitter, “White Lives Matter” t-shirt at Paris Fashion Week, and a myriad of other public offenses, T.J. Holmes and Amy Robach’s affair, or Try Guys’ Ned Fulmer’s affair with an employee, when the transgressions become public, so do the calls from the public for the brands and companies they work with to cut them loose.
U.S. Supreme Court Hears Oral Arguments on Colorado Business’s First Amendment Speech Rights
The U.S. Supreme Court heard oral arguments last month in a case challenging the Colorado Anti-Discrimination Act (CADA) in a scenario similar to the Masterpiece Cakeshop decision of 2018. 303 Creative LLC, a Colorado based graphic design service is seeking to provide wedding website design services but only for opposite-sex weddings due to the owner’s religious beliefs that preclude her from providing the same services for same-sex couples.
First-Ever Court Ruling Means Your Utility Token May Be an Unregistered Security
Last month a federal judge in New Hampshire ruled that LBRY’s utility token was an unregistered security. Which could be bad news for you. Here’s what happened and why you should care.
The Diverging Paths of AI Regulation
The Google Pixel 6 launched recently. Among its many most anticipated features are new artificial intelligence and machine learning features (“AI”), including its speech translation and recognition, and its AI photo editing software. Indeed, although the phone has significant hardware advancements, most commentators recognized that AI advancements were the driving factor behind its success.
This focus on the benefits of AI follows a longer societal trend where there is increasing recognition that AI has countless untapped benefits. Whether it was Alphazero demonstrating new playing styles in chess, dramatically improving efficiency in insurance writing and claims processing, or countries using facial recognition to monitor their citizens, AI is and will continue to fundamentally change the world.
However, countries’ recognition and reaction to AI has not been consistent. Europe, as expected because of its strong stance on individual data rights and privacy, has launched the most aggressive and restrictive stance against the use of AI. Back in 2018, the European Economic Area passed the General Data Protection Regulation, restricting the use of some automated decision making. Additionally, in April 21, 2021, the European Union released a draft of the EU Artificial Intelligence Act, which further attempted to regulate AI through harmonized rules within the European Union. The breadth of the proposed rules is broad – it applies to those outside of the EU that market or provide AI systems to the EU – and the definition of AI is broadly defined, encompassing processes which could reasonably be considered AI.
The proposed rules separate AI into three different tiers of risk: unacceptable risk AI systems, high risk systems, and limited and minimal risk AI systems. Unacceptable risk AI systems such as social scoring or real time remote biometric identification systems are fully banned under the proposed laws. High risk AI systems, including systems that evaluate a consumer’s creditworthiness or use biometric identification in non-public spaces require company oversight, including conducting audits that are similar to Data Protection Impact Assessments to ensure that the systems perform as intended and are secured. Low risk systems continue to have little oversight as the authorities are less concerned about potential abuses with this AI.
On the other end of the spectrum, China has fully embraced the use of AI. Instead of worrying about any negative privacy implications, China has leaned on AI as a tool to build its society and government. Among the uses getting most coverage are China’s use of facial recognition and other AI methods to keep tabs on its citizens, such as the use of AI emotion-detection software on Uyghurs. More generally however, China has woven AI into its social fabric by using it for everyday operations including its social credit system which monitors its citizens and rewards them or punishes them for things they do, its payment and communications systems, or even its defense systems. This general acceptance for AI has been backed by formal legislation such as the ”Made in China 2025” plan or “Next Generation Artificial Intelligence Development Plan”. The effect has been a boom in the research, use, and acceptance of AI (e.g., where as China previously lagged behind in AI research, China has now become the frontrunner.)
Meanwhile, the United States stands in the middle of these two extremes. Like the EU, the United States has agreed that AI should be used in ways that are “based on shared democratic values, including respect for human rights”. Significantly, the U.S. and EU agreed that AI should not be used for social credit scoring. However, the U.S. does not seem to share the EU’s concern over the other potentially invasive and threatening ways that AI could be used and has not publicly committed to a robust federal framework that addresses these AI issues. Instead, the U.S. appears to be concerned over the strategic and geopolitical issues that advanced AI will present, especially if other actors like China become world leaders.
Thus, because of the significant developments in AI and what those developments mean, all countries have been forced reckon with AI regulation. However, geopolitical, historical, and other regulatory forces have created responses that dramatically differ throughout the world. These responses have not only changed the trajectory of AI development in various parts of the world but also increasingly left out the possibility of harmonious AI regulation.
For additional information, please contact us.
Should I Consider an Ethical Will?
A Last Will and Testament seems to be on most people’s radar, especially individuals with young children, individuals who have lost a loved one, or just individuals who consider themselves to be “Type A” planners. But what about an ethical will? What is an ethical will and why might you consider executing one as part of your legacy planning?
Navigating and Complying with Colorado’s New Consumer Privacy Act
On July, 7, 2021, Colorado Governor Jared Polis signed the Colorado Privacy Act (CPA or “the Act”) into law. With that pen stroke, Colorado joined California and Virginia as the third state to enact comprehensive consumer privacy legislation. While the law does not take effect until July 1, 2023, Colorado businesses would do well to study up on the new law to ensure compliance when it does become active.
The Small Business Reorganization Act and Its Prolonged Adoption Through June of 2024
Chapter 11 bankruptcy code generally provides businesses with avenues and protections to reorganize and restructure obligations. This form of bankruptcy is very often more favorable than chapter 7 bankruptcy because it allows business owners to stay in the driver’s seat while attempting to negotiate a plan that complies with the bankruptcy code. In contrast, filing a chapter 7 petition results in full relinquishment of control of the business and the appointment of a third-party trustee whose primary obligation to is to liquidate estate assets for the benefit of unsecured creditors.
Homelessness in Colorado: Denver Ballot Issue 303
Just a few weeks ago, Denver residents were asked to vote on Denver Ballot Issue 303. A YES vote on the ballot measure would have required the city to perform enforcement sweeps of unauthorized camping sites within 72 hours of a complaint being filed, while also creating a process for individuals to bring a civil action against the city if they failed to do so. The ordinance would also have limited camping on public property to four designated areas which the city would have been responsible for servicing with utilities.
While Denver residents ultimately voted NO on Ballot Issue 303, even if it had succeeded at the polls, the 72-hour requirement would have violated a federal order issued this past January, which requires seven days’ notice prior to performing a sweep of camping sites within the city.
Regardless of the political motivations and ultimate outcome of Ballot Issue 303, Denver, along with many cities within the United States, is facing a severe homelessness crisis. Every year, the Metro Denver Homeless Initiative (the “MDHI”) conducts a “Point in Time Count” to estimate how many individuals are experiencing homelessness within the city. The 2021 data shows a 40% increase in the number of individuals staying in a shelter on a single night, while the number of people experiencing homelessness for the first time doubled. According to the Denver Rescue Mission, more than 1,561 individuals are unsheltered, living on the streets or camping in open areas.
Finding an effective solution for reducing homelessness has proven to be a complicated and enduring issue. Over the past decade, Denver has seen rent and home values rise while the number of people moving to the city continues to increase. This has led to a dramatic decrease in the availability of affordable housing within Denver, and Colorado as a whole. According to the National Low Income Housing Coalition, for every 100 of Colorado’s lowest income households, there are only 30 affordable rental units available.
One promising solution the city has implemented has been the construction of Safe Outdoor Spaces, which consist of authorized camping sites serving around 50 people. The sites feature heated tents, staff members, and utilities such as hot water, laundry, and trash removal. While many residents support the city-run sites, conversations often turn on where the sites should be placed, and who should qualify for the program. Many of these conversations are difficult and uncomfortable, as people attempt to balance an empathetic response with an effective and long-lasting solution.
Despite the challenges, these difficult conversations must continue if we are to reduce the number of people experiencing homelessness within Denver. While we may not all agree on the best solutions, there is no question that homelessness is a heartbreaking condition that we must all work together to alleviate. More funding will likely be needed for healthcare services, particularly in respect to mental health, and ensuring that residents have access to affordable housing will continue to be a paramount issue moving forward. While the Safe Outdoor Spaces may be one potential option, constructing a few sites that can hold 50 people each won’t be enough to dramatically decrease the number of people experiencing homelessness. Together, we can work towards a pragmatic and compassionate response to ensure that the most vulnerable members of our community are provided with a chance to succeed.
For additional information, please contact us.
Beneficial Ownership Disclosure: New Reporting Requirements for Small Businesses￼
On September 30, 2022, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) issued its highly anticipated Final Rule establishing a beneficial ownership information (BOI) reporting requirement under the Corporate Transparency Act (CTA) of 2019. These rules significantly change the obligations of business entities to disclose previously private information regarding the ownership and control of these entities. The primary purpose of the CTA, enacted as part of the Anti-Money Laundering Act of 2020 is to protect the US financial system from being used for illicit purposes, including preventing corrupt actors, terrorists, and criminals from hiding assets in anonymous shell companies. Background for this rule was addressed in prior blog posts including The Corporate Transparency Act (1/31/22) and FinCEN and Real Estate (8/2/22).
When Shares are Not Cares
As attorneys representing startups, Milgrom & Daskam knows that early-stage businesses often have many needs and not much capital to meet them. This often results in startups bartering for services using whatever currency they have. Sometimes this results in interesting exchanges (two hundred pounds of Valencia oranges in exchange for a logo design being our personal benchmark); more often it results in founders giving away the most freely available form of credit they have—equity in their company.
1031 Exchange: Tax Deferral in Commercial Real Estate Transactions￼
For commercial real estate owners, selling assets which have been fully depreciated, fully stabilized or held long term, can be an attractive option given certain market conditions or over-saturation of the given asset type within an investor’s portfolio.
What COVID-19 Shows About Facebook’s Oversight Board
As the COVID-19 Delta variant has increased infection rates worldwide and has threatened to triple the death toll related to COVID, Facebook has again been put in the crosshairs for health misinformation on its platform. Multiple commenters and reports have noted the prevalence of COVID-19 and vaccination misinformation on Facebook and the high rate at which this misinformation has been viewed. This recently culminated in a dispute with the White House where President Biden accused Facebook of “killing people” with its COVID-19 misinformation. While President Biden eventually clarified that his statements were more directly aimed at those posting misinformation on Facebook than Facebook itself, the whole affair has again underscored the difficulty that Facebook has had monitoring controversial speech, especially speech that could affect the general health and welfare of its users.
Non-profits, politicians, and policy advocates have often argued for amended moderation standards for Facebook. Republicans and conservative non-profits have often stated that Facebook’s moderation of content, especially conservative content, amounts to censorship, whereas Democrats have often asked for significantly more content moderation. In fact, Democrats have now discussed removing Facebook’s Section 230 safe harbor if Facebook refuses to enact significant protections against health misinformation.
In an effort to help mitigate these controversies and make difficult decisions, Facebook created an independent Oversight Board in 2020 which was made up of independent members who had the authority to review cases and make final decisions on content moderation. Originally met with significant fanfare, commentators argued that the Oversight Board offers an independent redress system which will provide due process and fair judgement on difficult speech issues.
In January 2021, the Oversight Board announced its first six decisions based off of cases recommended to the Oversight Board by Facebook. One of the decisions included an October 2020 case in which Facebook removed a post which advocated that the French government permit the prescription of hydroxychloroquine combined with azithromycin to be used against COVID-19. In its reversal, the Oversight Board noted that the post did not rise to the level of imminent harm required by its Community Standards of Facebook and that the decision did not comply with international human rights standards on limiting freedom of expression. The Oversight Board recommended that Facebook adopt less intrusive means of enforcing its health misinformation policies where the content does not reach Facebook’s threshold of imminent physical harm. The Oversight Board also recommended that Facebook increase the transparency around how it moderates health misinformation, including by publishing a transparency report on how Community Standards are enforced.
However, the COVID-19 case is emblematic of the difficulties that arise when introducing quasi-legal processes into the corporate context. First and foremost, like any legal system, cases introduced to the Oversight Board take time to adjudicate. In the case above, the incident occurred in October of 2020 and a decision was not rendered until January 2021. With important life altering decisions like this, three or four months is a significant time that could theoretically affect the life of many users (especially in light of reports that people have died for ingestion of hydroxychloroquine). If the situation had been reversed, and Facebook had left dangerous content up where it should have been taken down, one could hypothesize the great harm that could have been caused. Whereas private companies usually have the flexibility to be nimble and quickly respond to new policy and regulatory challenges they face, introducing a quasi-legal system will slow the ability for Facebook to timely finalize its decisions.
Secondly, and perhaps most important to Facebook’s PR perspective, the quasi-judicial system has not inoculated Facebook from criticism. It is telling that Facebook has not used the Oversight Board as a shield in responding to criticism over its regulation of misinformation – especially because the Oversight Board actually recommended less content moderation in certain situations — because such an explanation would likely be unpalatable to most of its critics. In fact, Facebook specifically noted in its response to the Oversight Board’s recommendations that it publicly disagreed with the recommendation that it adopt less intrusive means, and would continue to remove misinformation based on consultation with the CDC and WHO. Therefore, Facebook had to push back against its own Oversight Board to defend itself from further public criticism.
Finally, and most importantly for those who care about COVID-19 and the safety of the community, it is not clear that the Oversight Board’s decision was the right one. While hindsight is 20/20, the influence of misinformation on Facebook’s platform, the reluctance of some people to take COVID-19 precautions such as masks and vaccines, and the increasing prevalence of the COVID-19 Delta variant highlight how important appropriately dealing with this problem is. For example, a popular theory propagated on Facebook alleges that the COVID-19 vaccine is being used by the U.S. government to microchip the population. In a recent YouGov poll, one in five Americans said they believe that theory.
As Facebook and the public are finding out, making a process more independent does not guarantee that the process will achieve the correct answer. The Supreme Court is littered with decisions that have been shown to be inherently problematic (e.g., Plessy v. Ferguson, Citizens United v. FEC, Korematsu v. United States). Similarly, just because the Oversight Board is stocked with global experts in a variety of different fields does not prevent it from codifying decisions that may incorrectly weigh harms versus freedoms. The Oversight Board’s recommendation that misinformation content be corrected instead of removed looks foolhardy during the current deteriorating situation. It’s other recommendation that misinformation guidelines be clarified may also prove unworkable. Much like Justice Potter Stewart’s infamous quote regarding obscenity, misinformation is hard to define but easy to recognize – providing clear regulation on what counts as misinformation is difficult to define and implement. Moreover, it’s not clear if the Oversight Board will revisit the health information issue or what, if any, appetite they have to reverse their own opinions. Therefore, it is quite possible that this decision will stand and influence further Facebook decisions as the pandemic gets worse.
In sum, while the Oversight Board once held significant promise, and while it still might prove itself to be a useful tool that forever changes policy implementation for private companies, the COVID-19 situation has shown it may not be the panacea it was heralded to be.
For additional information, please contact us.
Should You Seek Foreign Intellectual Property Protection?
If you plan to conduct business abroad or have an online business that reaches customers abroad, you should consider seeking international intellectual property protection. Intellectual property protection is often limited to the country where you conduct business and/or where you file for protection with the respective foreign intellectual property office. For example, a U.S. trademark registration will not protect you against trademark disputes that arise in other countries. As another example, a U.S. patent prevents others from making, using, selling, offering for sale, and importing your patented invention in the U.S., but does not prevent others from doing the same in other countries.
Colorado Secure Savings Program: Colorado’s New Retirement Program for Everyone￼
Colorado’s new, but not yet implemented, government-sponsored retirement program is causing employers consternation. Although the state has not promulgated the formal rules have yet, let’s dive into what we know so far.
Workplace Accommodations for Nursing Mothers
Many women choose to breastfeed their newborns, as the benefits of nursing are well-established. However, returning to work can present challenges to nursing mothers. Currently, twenty-eight states have laws related to supporting nursing women at work, and Colorado is among them.