Cyber-Law

Aggressive Driving

Techno Transfer

Borrow Now

EDA Loans

Corrections or additions?

These stories by Peter J. Mladineo and Barbara Fox

were published in U.S. 1 Newspaper on April 22, 1998. All rights reserved.

Survival Guide

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Cyber-Law

<B>Albert Stark, one of the Princeton’s legal visionaries,

has his sights set on what could become the newest barrister’s bonanza:

the Internet. One immediate example of the strategy: A Stark & Stark

conference "Don’t Get Caught in the Web: protect your company

and yourself from the dangers and risks of cyberspace," on Wednesday,

April 29, at 9 a.m. at the Hyatt.

Speakers include Robert J. Levering, a Washington D.C.-area

attorney who is a direct marketing expert and will discuss online

taxes; Matthew Mandell, of Melmar Multimedia, who will discuss

cyber-contracts; and panelists from Stark & Stark, Craig S. Hilliard,

Thomas B. Lewis, John E. MacDonald, Thomas J. Pryor,

and Rachel M. Stark. Call 609-895-7307 for more information.

Levering warns of the possibility that the states will insist on making

online sellers liable for collecting out-of-state taxes on retail

purchases. "What the governors are really afraid of is that much

of the retail purchasing environment, which is a taxed environment,

will migrate to the ‘Net, and in that realm they will still be subject

to a sales and use tax," he says. "But if you buy from a company

out of state, your state doesn’t get any tax because that company

doesn’t have the obligation to remit it. Usually it’s the seller that

remits the tax."

This prospect could severely discourage many merchants from selling

online, he says.

As it now stands, taxation in cyberspace will probably adhere to the

rules of catalog selling, which adheres mostly to the rules governing

direct mail. Levering, 51, has a law degree from Georgetown University,

and spent most of his career working on legal issues within the direct

marketing industry. For 13 years he was senior vice president for

catalog issues with the Direct Marketing Association.

Currently, slightly more than a dozen states (including New Jersey)

try to collect use taxes from out-of-state purchases. While New Jersey

has a line on its state income tax form asking taxpayers to report

all out-of-state purchases, most efforts like these are fairly halfhearted,

says Levering. Maine has a new wrinkle in its state income tax forms.

If you don’t specify that you made zero out-of-state purchases, then

the state figures in its own tax.

Currently the Internet is safe from taxation and Levering hopes it

will stay that way. But a new bill in Congress, named the Internet

Tax Freedom Act, could be the instrument that brings about changes

unfavorable to the small business. While the bill’s initial intention

was to protect small businesses on the Internet, Levering explains,

an amendment made by one of its sponsors could create a "universal

collection responsibility" within a couple of years. "If you’re

a retailer you have to market to other states and you have to collect

their taxes and their local taxes too," he says. "In Texas

there are 1,400 different taxes. They grow ’em down there." If

a small retailer had to collect taxes for that many jurisdictions

it might not be worth it to get on the ‘Net.

An extrapolation of Stark & Stark’s message may be to get on the World

Wide Web now while it is still truly wide open. Because if companies

heed John MacDonald’s message, it’s only a matter of time before PC

monitoring software will be installed everywhere. "You might feel

like Big Brother, but we don’t exactly live in a non-litigious society,"

says MacDonald, 31, to employers considering how closely they need

to monitor employees’ cyber-habits.

"Let’s say an employee makes a sexually charged comment against

another employee and it goes out over an intranet. There’s a record

of this thing. That can be found and used in a sexual discrimination

suit or as proof of a hostile work environment. Companies have to

monitor these things."

MacDonald further cautions employers on the need to protect its information,

confidentiality, and intellectual property in an environment as trademark-blind

and anarchic as the Web. The intrusion could come from all directions,

he adds. "That could be from outsiders hacking into your intranet,

or your employees stealing information from other companies or negligently

sending out attachments to E-mail messages info that should not leave

the company."

The plain fact is, the balance of power is still tilted towards the

cyber-criminal. So far, MacDonald explains, the only criminal codes

that could be applied to cyber-theft are the Electronic Communications

Privacy Act of 1986 and the wiretap statutes. "If company A rips

off information from company B, it’s difficult to realize that it’s

gone," he says. "It’s difficult to prosecute, and the penalties

are not very steep."

For the employee, MacDonald’s advice is terse: Your E-mail, no matter

how private, is still company property. The courts have "also

put in some language along the lines that you do not have a reasonable

expectation of privacy," he adds.

So what does Albert Stark see on the cyber-horizon for business law?

The importance of good contracts will loom larger for businesses on

the Web. "People are getting fleeced by website developers,"

says Stark. Often, businesses getting on the Web don’t know what language

to insert into a contract to ensure that a good-quality website is

delivered. Second, many website developers are just out to make a

quick buck and don’t deliver performance guarantees. He likens this

current caveat emptor to the warnings given to people hiring

siding contractors years ago. "It’s a new industry so a lot of

people are going to be fly-by-nights," he says.

With his night goggles on, Stark sees cyber-torts hovering large in

the distance. While the laws and precedents are still largely amorphous,

Stark feels that this area will experience as much attention as did

matrimonial torts, when Robert Durst, a Stark & Stark attorney,

took the famous Brennan case to the Supreme Court.

"When Beth Baldinger (another Stark & Stark attorney) started

victim’s rights, everyone thought she was crazy, now she’s a leader,"

says Stark. "We hope the same thing will occur with our firm in

the area of cyber-law."

— Peter J. Mladineo

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Aggressive Driving

There’s a few ways you can tell that the New Jersey

State Police has moved its anti-aggressive driving campaign to Route

1. One, you can listen to the stentorian growl emitted by New Jersey’s

perpetually outraged Attorney General, Peter Verniero, when

he decries the need to get tough with aggressive drivers. ("Aggressive

driving is a growing menace on our highways and requires strong deterrence,"

he says. "We knew we had to take steps — strong steps —

and send the message that driving is a cooperative venture, not a

competitive sport.")

Two, tailgate one of the state troopers out patrolling Route 1. If

he doesn’t stop you, pass him on a shoulder. If he still doesn’t,

run the red light he just went through.

Police officers of the 10 municipalities dotting the Route 1 corridor

between Trenton and Woodbridge are now teaming with state troopers

to put the kabosh on road rage. "We are going to be out there

on selected mornings and afternoons at commuter time," says Frank

Cox, chief of police in West Windsor. "We’re zeroing in on

specific intersections and areas of Route 1 for selective enforcement."

Cox says he recently got a call from a commuter from Woodbridge, who

was complaining about the proliferation of police cars waiting at

traffic lights all the way down Route 1. Cox informed the driver of

the police intentions: Drivers are significantly less likely to blow

through yellows and reds or to engage in "aggressive driving"

when they know they are being watched by police.

The ultimate goal, says Cox, is to decrease the number of motor vehicle

accidents and fewer road-related injuries. "A lot of our accidents

are people who are trying to blow the amber light or the red light,"

says Cox.

"The aggressive driver, he’s just out there going from the fast

lane to the middle lane to the third lane to the shoulder, running

the amber light, or following too closely," says Cox. Or, as happened

to a woman driving on Windsor Road recently, the aggressive driver

was the one shattering her windshield because he felt she was following

him too close before they got to the stop light.

Other moves the police might construe as aggressive driving:

Riding the shoulders. A traffic-beater’s favorite in a

state famous for sometimes having more shoulder space than lanes on

its highways, Cox says cops are especially happy to ticket these impatient

drivers.

Parking in a fire lane. The police are even less likely

to be sympathetic when the parking lot is empty, Cox reports. This

one is more characteristic of the aggressive driver’s imperious driving

habits. "It’s the same thing — people just do whatever they

want to do when they get behind the wheel," he says.

One reason road rage has become such a big issue in New Jersey

is that the state has such a high density of cars on the road. But

will issuing yet more tickets do anything to curb New Jersey of its

road raging woes? Cox maintains that these new traffic measures are

not attached to interests in revenues (unlike the state’s new plan

to defray the cost of E-Z Pass by hitting up the toll violators).

"We’re hoping that the people driving on Route 1 know that we’re

out there for their safety," says Cox. "This is not harassment.

This is not trying to make income for the state or any such thing."

— Peter J. Mladineo

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Techno Transfer

The catalog verges on the surreal. In describing federal

programs, there are color snapshots of mailmen in spacesuits, mountaineers

in day-glo red thermal suits, a child spinning on a life-sized gyroscope,

and a group of men in orange shades surrounding a high-tech vacuum

cleaner fan. There are plugs for Lactaid and soybeans.

But this is not a retro-minded spoof on the ’50s. That mailman in

a spacesuit is sporting new "soft" body armor developed by

the Army that would be ideal for, let’s say, opening packages from

the Unabomber. The material is also now being used to make boat sails.

The day-glo suits are made out of Primaloft, a synthetic alternative

to down that was developed for the U.S. Army by Albany International

Research Co., and is now used by major clothing manufacturers like

L.L. Bean, Liz Claiborne, and Land’s End. The vacuum fan was initially

developed by NASA but is now used for Kirby vacuum cleaners.

What these products all have in common — even the hundreds of

soybean products and lactose — is that they are commercialized

versions of technologies developed by the government. The brochure

is from the Federal Laboratory Consortium for Technology Transfer,

promoting innovations developed for the government that have good

commercial potential in the private sector.

Technology transfer is the subject of a New Jersey Technology Council

meeting with John Preston, president and CEO of Quantum Energy

Technologies Corp, formerly MIT’s director of technology development,

who speaks on "The State of the State of Technology Transfer,"

on Thursday, April 23, at 7:30 a.m. at Princeton University’s POEM

Center. Call 609-452-1010.

Sponsors include Ernst & Young, NJEN, Princeton Venture Research,

Smith Stratton Wise Heher & Brennan, and the Technology Help Desk

and Incubator/NJSBDC. Seminars cover working with large companies,

opportunities with colleges and universities and federal laboratories,

and new funding and successful business strategies for technology

transfer. Participants include six state universities plus the FAA,

Picatinny Arsenal, and the Princeton Plasma Physics Lab.

Preston’s message includes anecdotes showing a rather Cassandran history

of technology transfer. Napoleon kicked Robert Fulton out of his office

when Fulton tried to sell him his designs for a steamboat. Western

Union rejected Alexander Bell’s plans to commercialize the telephone,

claiming that the phone would never be more than a curiosity with

no business potential.

Preston suggests that just about every important technology arrived

via technology transfer. "Even PCs and software for voice mail

represent discoveries that have been transferred to society for commercial

use," he says. "The most important thing that it leads to

is new products that improve our quality of life. The only way to

benefit from funding research is to see that research commercialized."

The most effective form of technology transfer, he reports, is not

products, the transfer of people from academe to industry. The second

most effective transfer is publications — ideas committed to theory

on paper before somebody bright snaps them up and cashes in.

Preston, a senior lecturer at MIT is a co-director of the school’s

entrepreneurship section. He downplays the important of his Quantum

Technologies, a venture capital fund that invests in technologies

that lower energy consumption and the pollution caused by energy consumption,

to this conference. "I’m not coming there to tout a company,"

he says.

Top Of Page
Borrow Now

If you need to borrow, borrow now, says Mitchell

Held. Held is the co-chief economist at Salomon Smith Barney and

he predicts a rise in interest rates by early next year.

Held will discuss national trends and how they might affect small

and mid-sized New Jersey businesses at the first annual business networking

conference staged by the New Jersey Economic Development Authority.

Set for Monday, April 27, at 8:30 a.m., at the Hyatt, the conference

costs $25 including a lunch with Michael Bloomberg as keynote speaker.

Call 609-292-0359 to register.

Bloomberg will discuss how the growth and success of Bloomberg Financial

Markets can offer useful insights to New Jersey businesses making

expansion plans. A graduate of Johns Hopkins University and the Harvard

Business School, Bloomberg’s first worked on Wall Street and was a

partner with Salomon Brothers. He founded Bloomberg Financial Markets,

which since 1981 has grown to be a major business and financial news

service with 80 global news bureaus, a radio station, a magazine,

a book publishing house, and its data collection headquarters on Route

518.

Anthony Coscia, chairman of the EDA, will moderate a panel titled

"Business Outlook for New Jersey" with opinions from Ronald

Corwin, executive vice president of the American Stock Exchange,

Rae Rosen, senior economist of the Federal Reserve Bank of New

York, and Samuel Schreiber of the South Jersey Division of First

Union National Bank.

Caren Franzini will preside on a panel entitled "NJEDA’s

Capital Opportunities," on how the EDA helps business obtain financing.

Franzini is executive director of the EDA, which has the mission to

build business and create jobs in the state and has provided more

than $12 billion in financing assistance since it was founded in 1974.

She has lined up these panelists: Thomas A. Bracken, president,

New Jersey Market, CoreStates Bank; William H. Turner, president

& CEO of PNC Bank NJ; Irving Friedman, president of Delta Plastics

Corp.; and Thomas J. Drury Jr., president and CEO of Sensar

Inc.

Business owners are not the usual audience for Held, who is speaking

at the behest of Peggy Krieger, a vice president at Salomon

Smith Barney and a board member at EDA. He went to George Washington,

Class of 1976, and has his master’s degree in economics from New York

University. He has been with the firm (starting with the Smith Barney

entity) for nearly 17 years. And no, he is not familiar with the views

of his opposite number at Merrill Lynch, "I don’t pay a lot of

attention to competitors, out of fear that subconsciously I will adopt

their views as my own."

His view: that problems in Asia will continue to influence the United

States and thus the New Jersey economy. "My focus is a story we

have been telling for a while," says Held. What will be left after

the Asian crisis "is a fairly strong economy with tight labor

markets that probably will require a higher interest rate to slow

down. In the next year we will probably see a modest rise in short-term

interest rates, a rise in long term interest rates, and probably weaker

equity markets as well."

He believes these rises will occur later in the year or early next

year. "Prepare for some slowing down of economic activity next

year," says Held. "Don’t be fooled into thinking that the

strong growth will continue. If you need to borrow, borrow now or

try to refinance existing loans."

Held admonishes everyone not to focus only on what has gone on recently.

"Frankly we think good markets will continue in the near term,

but it is always a mistake to focus on the short run, a mistake to

think that markets will only go up. They will also go down."

Will the slowdown turn into a recession? "We don’t think it will

be as bad as ’89," says Held. In ’89 the Fed’s job was much more

daunting. They had a much bigger job to slow things down."

Top Of Page
EDA Loans

Consider banks and venture capitalists your worst enemies,"

admonishes Michael Bloomberg in his autobiography "Bloomberg on

Bloomberg" published by John Wiley & Sons. "They create doubt

in entrepreneurs’ minds with their insistence on detailed game plans

before they lend. Worst of all, they think an originator will be helped

by their oh-so-insightful views on how he or she should run the new

business."

Bloomberg may carry a different tune when he speaks at the EDA networking

meeting (see story above). It is being convened for the sole purpose

of acquainting entrepreneurs with financing alternatives. But no matter

what Bloomberg’s message, after he is finished, lending officers of

the EDA will meet with business owners to discuss specific financing

needs. Among the two dozen programs they can offer:

Statewide loan pool for business. EDA will provide up

to 25 percent of loans and may guarantee up to 25 percent of bank

monies for loans of from $50,000 to $1 million for fixed assets and

up to $500,000 for working capital. The interest rate ranges from

five percent to one percent below prime rate.

Loan guarantees for creditworthy businesses that are job

intensive, will create or maintain tax ratables, are located in an

economically distressed area, or represent an important economic sector

of the state. Guarantees can be for conventional loans of up to $1

million for working capital or for conventional loans or bond issues

for fixed assets of up to $1.5 million. Generally they are limited

to 30 to 50 percent of the loan amount.

For both of these programs, non-refundable EDA fees total $1,250 plus

a closing fee of .5 percent of the EDA guarantee times the number

of years the guarantee is in effect.

Direct loans are for up to $500,000 for fixed assets and

up to $250,000 for working capital for up to 10 years. The interest

rate would be no less than five percent or the Federal Discount Rate,

and no more than one percent below the highest prime rate. Fees would

amount to $1,500 or $500 plus one percent of the loan, whichever is

greater.

Call Adam Mukerji, director of the commercial lending division,

at 609-292-0187, cld@njeda.com">>cld@njeda.com, or Lawrence G. Cier,

director of investment banking division/municipal funding, at 609-292-0192,

ibd@njeda.com">>ibd@njeda.com.

Consulting assistance for manufacturers impacted by imports is provided

by John F. Walsh, director, trade adjustment assistance center,

609-292-0360. A real estate development program is available through

Michael B. Francois, managing director of the real estate development

division (609-292-0369).

Copies of "The Power to Help New Jersey Business Grow: a guide

to financing and other services" will be available.


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