Incredimail 2011 Annual Report Download - page 31

On December 1, 2008, Amendment No. 40 to the Israeli Communications Law (Transmissions and Broadcasting) 5742-1982 (the “Israeli Anti-Spam Law”
)
came into effect. The Israeli Anti-Spam Law prohibits dissemination of commercial e-
mail advertisements, as well as other forms of electronic advertisements,
without the recipient’s prior express consent. The Israeli Anti-
Spam Law applies equally to entities themselves offering goods or services, and entities distributing
electronic advertisements on their behalf. Consent may be obtained in writing, by electronic message or recorded conversation. Advertisers may make a single
contact with business recipients in order to solicit such consent; such initial contact will not be considered a violation of the Israeli Anti-
Spam Law. Recipients may
revoke their consent at any time, either in writing or in the same medium used to transmit the advertisement. It is permitted to distribute commercial promotional
electronic advertisements without prior recipient consent where all of the following conditions are met: (i) the recipient provided his contact information to the
advertiser in the course of purchasing goods or services or negotiations for the purchase of goods or services, and the advertiser provided notice that the details so
provided would be used for purposes of disseminating such advertisements; (ii) the advertiser provided the recipient the opportunity to refuse to receive such
advertisements, either generally or of a particular type, and the recipient did not do so; and (iii) the advertisement relates to goods or services similar to those
described in (i) above. In addition to the consent requirements described above, the Israeli Anti-
Spam Law requires that all electronic advertisements include a clear,
conspicuous notice containing (i) identification of the message as an advertisement (for email communications, the word “advertisement”
must appear in the email
subject line; in all other electronic advertisements, such identification must appear in the beginning of the advertisement; (ii) the advertiser’
s identity and contact
information; and (iii) notification of the recipient’
s right to opt out of receiving such advertisements and means for opting out (including an email address for email
advertisements). Violations of the Israeli Anti-
Spam Law may carry criminal and civil penalties. Advertisers who disseminate advertisements in violation of the law
are subject to a fine of approximately NIS 202,000 (approximately US $54,000). Failure to comply with the mandatory notice provisions carries a fine of
approximately NIS 67,300 (approximately US $18,000). Managers and individuals working for the advertiser who are responsible for marketing or promotions and
who do not take sufficient measures to ensure compliance with the law may be personally liable for violations of the law and may be subject to a fine of approximately
NIS 67,300 (approximately US $18,000). There is a statutory presumption that any illegal spam that was sent, was sent knowingly, unless proven otherwise. This
statutory presumption of knowingly delivering illegal spam cannot even be challenged under certain instances (such as repeat offenses or distribution to a randomly
selected list of addresses). The Israeli Anti-
Spam Law also creates a private right of action for violations; in addition to other compensation to which recipients may be
entitled, the court is authorized to award recipients statutory damages of approximately NIS 1,000 (approximately US $ 300) per email received in knowing violation
of the law. There are also provisions for punitive damages as well as civil tort liabilities. In addition, the Israeli Anti-
Spam Law provides for certifying claims against
advertisers who violate the Israeli Anti-Spam Law as class-
action lawsuits. In light of the fact that we are headquartered out of Israel and have Israeli customers, we
are challenged by these rules with respect to our email campaigns, and non-
compliance would expose us to potential fines and sanction, civil tort claims, as well as
potential reputational damage.
United States
The CAN-SPAM Act of 2003 is intended to regulate spam and create criminal penalties for unmarked and unsolicited email advertisements, sexually-
oriented
material and emails containing fraudulent headers. The USA Patriot Act is intended to give the government greater ability to conduct surveillance on the Internet by
allowing it in certain cases to intercept communications regarding terrorism and compromises to national security. The Digital Millennium Copyright Act ("DMCA")
is intended to reduce or shield the liability of online service providers for displaying content posted and created by third parties that contain copyright infringing
materials, if the provider complies with certain policies, registers a DMCA agent with the U.S Copyright Office and adopts a "take-
down" policy that is enforced. We
do not presently offer such online provider services. The Children’s Online Protection Act, the Children’
s Online Privacy Protection Act, and the Prosecutorial
Remedies and Other Tools to End Exploitation of Children Today Act of 2003 (“COPPA”),
are intended to restrict the distribution of certain materials deemed
harmful to children and impose additional restrictions on the ability of online services to collect user information from minors without verifiable parental or
guardianship consent. In September of 2011, the Federal Trade Commission proposed significant regulations under COPPA. Among other changes, the proposal
provided for updated requirements for parental notice, expanded definitions of “personal information” and “collection”.
The rules could regulate tracking cookies,
device serial numbers and IP addresses of children under 13. Because of the nature of our business includes, among other things, the placement of cartoon “emoticons”
in emails, we anticipate that our services could attract a significant number of users who would fall into the regulated class. Accordingly, depending on the exact
regulations adopted, our business could be affected by the new rules. In addition, the Protection of Children from Sexual Predators Act of 1998 requires electronic
communication service and remote computing service providers to report to law enforcement agencies any knowledge of facts or circumstances from which a violation
of specified offenses involving child pornography is apparent. Because our services enable users to upload photographs to the internet and share them with others, we
could be subject to liability unless our procedures adequately identify and report such violations of the law. Almost all the states in the United States have data security
breach laws that impose various requirements on service providers to report to state attorneys general and send notices to affected consumers in the event of a breach
of security of network and computer systems that compromise a user’
s personal financial and other information, such as social security numbers and financial
information. A national data breach notification bill is pending before the U.S. Congress, which if enacted into law, would likely supersede the numerous state
notification laws.
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