In another installment of “Google does WHAT?!?,” the Supreme Court on June 30 rejected the Silicon Valley giant’s bid to stop a lawsuit accusing the search company of wiretapping. You read that right. Wiretapping.

You know those cool Google Street View cars that drive around taking pictures that allow you to look at your house on Google Maps? Well, it turns out that those Street View cars weren’t only looking at your house, they were also looking into your house, or, more specifically, the information available over your home Wi-Fi network. Google’s argument that it was simply listening to your home radio station fell flat in the Ninth Circuit, and the Supreme Court has now refused to grant certiorari to review the appeals court’s decision.

How Street View Collected Data

The Google wiretapping suit focuses on the Street View cars’ previous practice of collecting information from unprotected Wi-Fi networks as they drove by snapping photographs for Google Maps. As they were rolling through a neighborhood, the cars would record the GPS coordinates of wireless routers and save data transmitted over any network it detected that was not password-protected. The connections only lasted for a split-second each, but that is enough time to download around 25 or more emails and/or other data, including passwords, images, and other personal information. Moreover, if you happened to be transmitting data from a password-protected site as the Street View-mobile drove by, the information from that site, too, would potentially be recorded, unless the site was encrypted. In sum, if you needed another reason to password protect your home Wi-Fi network, here it is.

For Google’s part, it claims that the Street View data mining described above was the result of a rogue programmer (though this assertion has been challenged by regulators in the U.S. and abroad) and that the company never put the information obtained to commercial use.

Google’s Legal Argument:  It’s Just a Radio!

When consumers first filed their class action suit against Google, the company moved to dismiss the lawsuit, claiming that its conduct did not constitute wiretapping. Citing a statute applicable to radio communications, Google claimed that the Wi-Fi communications that it recorded were “electronic communications” that were “readily accessible to the general public.” District Court Judge James Ware, Chief Judge of the Northern District of California, denied Google’s motion in June of 2011.

Last September, the Ninth Circuit Court of Appeals unanimously affirmed Judge Ware’s decision in a strongly-worded opinion. Discussing the term “radio communication,” the Court stated that “Google’s proposed definition is in tension with how Congress — and virtually everyone else — uses the phrase.” A “radio communication,” said the court, does not include “sending an e-mail or viewing a bank statement while connected to a Wi-Fi network.”

Following the Ninth Circuit’s ruling, Google petitioned the Supreme Court for a writ of certiorari. On Monday, the Court denied Google’s petition without comment (as is the Court’s usual practice in denying such petitions).

Data Privacy in the Supreme Court

Despite the absence of any comment from the Supreme Court, its decision to leave the Ninth Circuit’s ruling undisturbed is significant, particularly in light of the Court’s unanimous decision last week Riley v. California, which held that the police must obtain warrants before searching the cell phones of individuals whom they arrest. The Riley decision reveals a surprising sensitivity from the Court regarding the data privacy concerns raised by modern technology.

In Riley, the Court rejected the government’s analogizing the search of a cell phone’s contents to the warrantless search of the contents of a cigarette pack found on an arrestee’s person, which the Court condoned in United States v. Robinson. The Court reasoned that “Cell phones differ in both a quantitative and a qualitative sense from other objects that might be kept on an arrestee’s person. . . Before cell phones, a search of a person was limited by physical realities and tended as a general matter to constitute only a narrow intrusion on privacy. . . But the possible intrusion on privacy is not physically limited in the same way when it comes to cell phones.” Both the aggregation of different types of media and the sheer storage capacity of modern cell phones set the devices apart from a privacy perspective. “The sum of an individual’s private life can be reconstructed through a thousand photographs labeled with dates, locations, and descriptions; the same cannot be said of a photograph or two of loved ones tucked into a wallet.” An individual’s interests, medical condition, and travel history, among other things, can be traced through a search of their phone’s contents, said the Court.

Given the Court’s refusal in Riley to fall back on arcane pre-digital conceptions of Fourth Amendment privacy rights, its decision to allow the Google wiretapping case to proceed is unsurprising. Lending any credence whatsoever to the argument that mining data from private home Wi-Fi networks is akin to listening to “radio communications” would be entirely discordant from a Court that acknowledges that “the sum of an individual’s private life” can be contained in a single application on your cell phone.

The attorneys of Wendel Rosen’s Technology Practice Group have compiled this list of 10 common mistakes they’ve seen in the trenches. Smart companies will take the time to address these issues early in formation to prevent a future situation that could turn into a company killer.

1. Choosing the Wrong Type of Entity
A big decision prospective company founders face is determining the type of entity formation their company should take – a “C” corporation, an “S” corporation or a limited liability company (LLC). In a nutshell, LLCs and “S” corporations have significant tax advantages. However, “S” corps can offer only a single class of common stock. That eliminates them as an alternative for most fast-growing tech companies, since investors typically want a different class of stock than those desired by company founders and employees. LLCs can offer different classes of ownership interests. However, some investors dislike LLCs, because the company’s income and loss will be reported on the owners’ personal tax returns.  Many outside investors prefer “C” corporations. Therefore, the discussion generally starts with forming a “C” corporation and then explores whether the tax benefits of LLCs or “S” corps outweigh the presumption in favor of the “C” corporation. California companies with a social or environmental mission now have the option to become Benefit Corporations. While companies organized under the State’s general corporate law must consider solely the interests of shareholders in the profits of the business, Benefit Corporations must consider impacts on society, employees and the environment, as well as the interests of shareholders in profits, and may prioritize these at their discretion. For further reading on this type of entity, please visit http://bcorporation.net/publicpolicy.

2. Not Planning for Early Exits
What happens when one of a company’s founders decides to leave or the other founders decide they’ve had enough? The founder leaves (either willingly or unwillingly) while the other founders work 24/7 to make the company successful. And what happens to the founder’s stock?

Often, people don’t think about that scenario when they are launching their next great idea.
They think about it only when someone’s walking out the door. The remaining founders may resent the fact that while they are working hard, the person who left is still benefiting from their labor. Founders should discuss the possibility of an early split in the beginning. Clear shareholder agreements provide for various exit scenarios, including the remaining founders’ reserving an option to buy all or a portion of the original founder’s shares.

3. Not Documenting Stock and Equity Promises
Sometimes, company founders make vague promises to employees that they will receive a certain number of shares of stock or that they will get a “percentage” (e.g. 2%) of the company as an equity incentive. These promises are typically verbal or contained in an email without being very specific. The founder and the employee plan to work out the details in “paperwork” later.

“Doing the paperwork later” is a common source of problems in fast-growing tech companies. People are so busy that they postpone so-called nonessential paperwork. However, doing it later opens the door to disagreements over what was intended at the time the promise was made. If an employee was offered a set number of shares, what happens if many more shares are offered to investors in the interim? Should the employee’s number of shares be increased to the same percentage as would have existed at the earlier date? And, if the employee was offered a percentage of the company, is the number of shares calculated based on the number of shares outstanding when the offer was made or when the shares are ultimately issued? Moreover, if the value of the company has increased, then the price of the shares needs to reflect that increased
value. The shares can’t be offered at the original low bargain price without unfavorable tax
effects. For these reasons and others, when a young, fast-growing company wants to offer equity, it should have a written equity incentive plan and related contracts in place first.

4. Failing to Lock Up Trade Secrets
All too often, a business realizes it has trade secrets only after a former employee or potential investor starts using or disclosing the business’s proprietary information. By then, it may be too late. To protect its trade secrets, a business needs to develop, disclose and, most importantly, consistently execute policies to protect its trade secrets. To prevail in court, a business must prove that the alleged trade secrets are not readily available to others and that it took reasonable steps to protect the information. The courts look at what is reasonable under the circumstances.

For example, a court will require a greater effort by Apple regarding its marketing strategy for its next “i” product than it would for a venture capital company’s list of investors. Customer and prospect lists frequently spark trade secret disputes, because they are the lifeblood of almost every business. The simplest way to evaluate whether you have trade secrets that need protection is to ask yourself, “If some of our key employees left today and joined a competitor, is there any information they could take that would hurt my business?”

5. Carrying Inadequate (or No!) Insurance
Business is inherently unpredictable and risky. For example, it’s not unusual (although highly frustrating) to be sued – sometimes for a frivolous and baseless claim. You don’t want the first time you read the fine print of your insurance policy to be after you’ve been served with a notice of a pending lawsuit, only to find out that the claim is not covered.
Every company needs to assess its potential risks to make sure the more likely ones are covered. There are insurance policies for nearly every imaginably risk (although some of them may be cost-prohibitive), from your standard Commercial General Liability policy, Error & Omissions policy, Employment Practices Liability policy, and property insurance policies to policies for intellectual property claims, privacy claims, and loss of electronic data. And, of course, the amount of your coverage should be sufficient to allow you to carry on with continued operations.

6. Using Outdated Privacy Policies
Online privacy is an ever-shifting area. New laws are being proposed in both the U.S. and
abroad. The European Union is in the process of overhauling its privacy regulations, and Latin American countries are expected to follow. Scholars and policymakers are in dispute over the fundamental theoretical framework for the regulation of online privacy issues. Emerging technology changes the way companies collect and use data, with new uses cropping up constantly – both online and through mobile apps. Against this backdrop, does your company have an adequate – and updated – privacy policy and privacy notice? Transparent and detailed notices and policies should be the starting point for all businesses that handle and collect private data.

7. Not Getting Written Assignments of Intellectual Property Rights
Intellectual property rights are the key assets for most new technology companies, but often young companies fail to secure rights in IP.  An assignment of copyright or patent rights must be in writing, not an oral agreement. Work product, such as software code created by an independent contractor, may not qualify as a “work for hire” under the federal Copyright Act. Assignments of trademarks must also include an assignment of the goodwill associated with the mark. In addition, company founders or early employees often register domain names, blogs and social media accounts in their own names; these should be transferred to the company.

8. Failing to Register Patents, Trademarks and Copyrights
Along the same lines, emerging companies often put off or delay applying for registrations for patents, trademarks, and copyrights in order to save a bit of money. For patents, this can be fatal due to the “one-year bar” requiring an application be filed within one year of public use, sale, offer to sell, or description of the invention in a published document. For copyrights, failure to register may prevent one from obtaining certain remedies in court, like statutory damages and fees. For trademarks, one advantage of registration is that it establishes nationwide constructive notice of the mark, even if a company has not yet used its mark in every state.

9. Treating Social Media as the Wild West
Social media sites, such as Facebook, LinkedIn and Google+, present new challenges to
companies in terms of marketing issues, intellectual property protection, and employee confidentiality and privacy. Too often, however, companies have few guidelines for monitoring use of their intellectual property on such sites or employee usage of social media. These issues confront both established and emerging companies, but emerging companies need to be particularly mindful of such issues, as they may not have the resources to litigate disputes. It’s a good practice to establish and follow a formal social media policy.

10. Mismanaging an International Launch
Today, emerging companies are often ready to immediately offer goods and service to foreign markets. Too often, however, they are not ready or have not researched how to deal with the laws and regulations of foreign countries. For example, as noted above, European privacy and data protection laws differ markedly from U.S. laws and are continually evolving. An emerging company that collects certain consumer information from consumers living abroad must be mindful of these differences.

As you can see, there are a number of challenges companies need to anticipate. With a little forethought and preparation, you can make sure your company avoids some of these costly ones.