Legal Bytes : Advertising & Media Lawyer & Attorney : Reed Smith Law Firm : Marketing & Intellectual Property : Legal Bytes Law Blog

Just more than a year ago, a Legal Bytes post entitled "Gift Cards: The Chart is Free. It's Our Experience You Pay For." gave our readers and visitors a handy chart that listed and briefly summarized the key legal requirements applicable to Gift Cards - those payment instruments that are increasingly blurred with prepaid debit cards, stored value cards, smart or chip-cards, reward cards, discount certificates, and traditional credit, charge and debit cards. Now those of you with gift card programs - or who are thinking about gift card programs - already know there are various state laws and regulations that require certain disclosures, and impose certain restrictions on expiration dates and on the imposition of inactivity fees, not to mention the applicability of escheat and abandoned property laws that may apply on a state-by-state basis.

If you have been coming back to Legal Bytes to keep up with this and other developments in the law of Advertising Technology & Media ("ATM"), you also know that Keri Bruce in Reed Smith's ATM practice group posted a report entitled Gift Cards Tag Along with Credit Card Legislation, noting that federal legislative and regulatory requirements will soon apply to gift cards.

Well, with one legislative delay granted by Congress with respect to certain requirements that apply to gift cards issued before April 1, 2010, the law and corresponding regulations have just now gone into effect.  Time to update the chart for you loyal readers and to entice new visitors to subscribe via email or RSS Feed to keep up-to-date. As before, the US Gift Card Statutory Chart (Updated) is provided at no cost or obligation. As we have said previously, it's our experience and skill you pay for, not our ongoing research services in areas where we already remain current for a wide variety of clients.

First, the obligatory disclaimers. No chart can be comprehensive or substitute for actually knowing the statutes and regulations. It is a guide, not an authority, and you should not rely on it for anything other than as a roadmap to proper and thorough legal counsel based on the source material itself. That said, I do not wish to trivialize or minimize its value - it represents the distillation of years and hours of work and effort - a special thanks to Keri Bruce for helping to update it.  

We point out, as we did previously, that the chart (with one new and notable exception - keep reading) doesn't cover state escheat, abandoned or unclaimed property laws that may apply to the "breakage" remaining on unused gift cards. It also does not cover the various requirements and obligations applicable to money transmitters under state law. But it does cover disclosure requirements and expiration date restrictions, as well as various exclusions and exemptions; and, of course, it provides citations to the relevant laws in each jurisdiction. Now about that new and notable exception: the chart does make reference to a recent law enacted in New Jersey and applicable to abandoned property (escheat), which effectively alters the tenor and scope of the New Jersey gift card law. Because of the complexity, Legal Bytes has created a separate post that describes that law in greater detail (see, Gift Cards in New Jersey: It's Complicated). 

The chart provides a handy citation and reference tool for the various gift card and gift certificate laws in the 50 states in the United States and the District of Columbia, and now includes a description of the new federal U.S. requirements that have just gone into effect as a result of the Credit Card Act of 2009. In addition, if you have an interest in this area, you really should go back and read (or re-read) the prior Legal Bytes' posting since it provides valuable context as online loyalty and promotional programs have proliferated, and as gift and payment instruments are increasingly being scrutinized by regulators and legislators and dealt with by the courts. As this update evidences, the law is dynamically changing, evolving and being re-configured to reflect our inter-connected, digital information age. Whether online or offline, this is a sophisticated regulated category of financial payment services and products; in a complex retail, promotional, loyalty-reward consumer environment; with a large number of possible variations; offered and used across multiple jurisdictions; governed by an even larger number of evolving state (and now federal) laws and regulations - and we haven't even scratched the surface internationally.

So if you are wondering why we give the chart away for free - don't wonder too long. If you are in this business and you need help from lawyers who know this area and can provide experienced, practical counsel, contact Joseph I. ("Joe") Rosenbaum or Keri Bruce, or your favorite Reed Smith lawyer, all of whom will be happy to help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As we mention in our post entitled Gift Cards: The Updated Chart is Still Free, a  New Jersey Bill (A3002), effective July 1, 2010, has now amended and expanded New Jersey's Unclaimed Property Act (the "Act") to apply to stored value cards.  But don't be lulled into a false sense of security. The Act, as amended, defines "stored value card" as any "record that evidences a promise, made for monetary or other consideration, by the issuer or seller of the record that the owner of the record will be provided, solely or a combination of, merchandise, services, or cash in the value shown in the record, which is pre-funded and the value of which is reduced upon each redemption.  The term 'stored value card' includes, but is not limited to the following items: paper gift certificates, records that contain a microprocessor chip, magnetic stripe or other means for the storage of information, gift cards, electronic gift cards, rebate cards, stored-value cards or certificates, store cards, and similar records or cards."

As it relates to unclaimed property and as amended, the Act includes a presumption of abandonment after two years of inactivity and a presumption that if the issuer does not have the address of the purchaser, the address is deemed to be New Jersey, if the card was purchased in New Jersey.  We leave to your assessment and future court battles whether this violates the Supreme Court's decision in Texas v. New Jersey, 379 U.S. 674 (1965), which rejected a transactional priority rule for reporting unclaimed property.

What is curious about the amended Act is that, although it is an "unclaimed property" statute, it now contains significant stored value card (e.g., gift card) provisions.  The Act prohibits imposition of dormancy fees and, presented here in simplified summary form, exempts stored value cards issued: (i) under a promotional, loyalty or charitable program for which no monetary or other consideration has been tendered; (ii) by an issuer (or "family" of issuers) that sold stored value cards with an aggregate face value in the previous year of $250,000 or less; and (iii) any business or class of businesses that the State Treasurer decides to exempt (see section 5(f) of AB 3002).

But what is most perplexing about the amended Act is that it cross-references New Jersey's current Gift Card Law (see New Jersey Attorney General - Gift Cards & Gift Certificates), and provides that only a stored value card that is exempt from the Unclaimed Property Act shall be considered a gift card or gift certificate for purposes of the Gift Card Law.  Now if you want the analysis of what the original Gift Card Act covers and how the "exemption" essentially neuters much of that definition, replacing it with the new "stored value" reference - well you are going to have to call Keri Bruce or me.  Bottom line, the amended Act effectively and significantly alters the definition of a gift card and gift certificate under New Jersey law.

More significantly, this inter-relationship between New Jersey's amended Unclaimed Property Act and its Gift Card Law demonstrates the complexity of developing a legally compliant gift card and gift certificate program.  Now, in the United States at least, an issuer (and sometimes the seller) must comply with the U.S. Federal Credit Card Act of 2009; the gift card and gift certificate laws on the state level; the applicable escheat, abandoned or unclaimed property laws; and an increasingly complex and often perplexing overlap between one or more of these statutes, sometimes, as is the case in New Jersey, including complexities within the same state.

Need help?  Feel free to contact Keri Bruce or Joseph I. ("Joe") Rosenbaum, or the Reed Smith lawyer with whom you regularly work.  We are all happy to help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On September 8, 2010, from 12 p.m. to 2 p.m. (ET), Joseph I. ("Joe") Rosenbaum will be presenting on social media for a web cast entitled "What Every Litigant Should Know About Social Media Channels: Their Impact on Discovery and at Trial." 

This program will address social media channels from several key perspectives for litigants: (1) understanding what social media channels are and what information they contain; (2) how social media channels figure in the discovery process, as to the preservation, collection and production of the information they contain; (3) what courts have held regarding the admissibility of evidence from social media sites at trial; and (4) what types of policies and procedures organizations should adopt around social media tools. As part of the overall presentation, Joe's discussion will center around understanding the distinctions that online social media present, looking at the issues of social media in the judicial process (e.g., can judges have "friends"?), and corporate policies designed to guide employees and prevent litigation disasters before they occur.

The Knowledge Congress is producing the event and Reed Smith has secured a special discount of $50 off the registration fee for this program. Click to Register and enter code mith6874 for your discount.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Following up on the April 30th Legal Bytes posting Product Placement in the UK, our Reed Smith sister publication, ReACTS, has posted a note entitled Product Placement Ofcom Consultation regarding today’s opening, by Ofcom, of two consultations regarding changes to the Ofcom Broadcasting Code (one for television and one for radio) to allow for product placement in UK television programming.

Should you wish more information or need assistance in providing comments in response to the consultations – which close September 17, 2010 – just follow the link to the article above, and help is an email or phone contact away. Of course, any Reed Smith attorney with whom you work or I stand ready to assist or make the necessary introductions at any time. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Joseph I. (“Joe”) Rosenbaum was quoted in a recent article in the online version of Financier Worldwide entitled, "US Entertainment & Media Sector – Moving With The Times". This article will also be published in the forthcoming hard-copy issue of Financier Worldwide magazine. Financier Worldwide is a leading publisher of news and analysis on the global corporate finance marketplace, recognized as a leading source of intelligence to the corporate deal-making community.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Christopher Hackford, Marina Palomba, and Huw Morris.

The Audiovisual Media Services (Product Placement) Regulations came into effect in the UK 16 April 2010. Under the Regulations, product placement will now be permitted in television programmes made in the UK, although those featuring product placement will not be permitted until Ofcom has amended the Broadcasting Code, which may not be until sometime in autumn 2010.

“Product placement” is defined in the UK Regulations as the inclusion in a programme of, or the reference to, a product, service or trademark, where the inclusion is for a commercial purpose, has been paid for (by way of cash or other valuable consideration), and does not amount to prop placement (i.e., inclusion of a product that has no significant value and that was not included because of a payment or valuable consideration).

There are four types of programmes in which product placement is permitted: (i) films made for cinema; (ii) films or series made for television or on-demand services; (iii) sports programmes; and (iv) light entertainment programmes. No children’s programmes may carry product placements—programmes primarily aimed at viewers under 16. News programmes fall outside these permitted types, and UK-made religious, consumer affairs or current affairs programmes are not permitted to include product placement. There is also some catch-all wording to prevent programmes for which product placement is “unsuitable”—an undefined term. As for the BBC, it is still bound by its Royal Agreement and is prohibited from making or commissioning programmes that carry product placement, but programmes acquired from third parties and those made by BBC Worldwide will be subject to the new rules.

The new Regulations prohibit product placements of cigarettes, tobacco products or prescription-only medicines, as well as alcoholic drinks, if the programme is aimed at an under-18 demographic or encourages immoderate drinking. Not content, the UK government has expanded the list where the programmes are UK-produced or commissioned-television, or on-demand programmes (excluding films made for cinema), to also include smokeless cigarettes and smoking accessories; medicines (i.e., over-the-counter as well as prescription); any alcoholic drinks; infant and follow-on formula; food or drink high in fat, salt or sugar (HFSS); and gambling services. These were prohibited by the UK government to protect the health and welfare of viewers, especially children, but the result of this is that a vast swathe of potential advertisers who may have considered paying to place their products in programmes are now unable to do so.

The Regulations also fail to deal with the difference between product placement and brand placement. Can McDonalds, for instance, pay to have its name referred to (e.g., “Let’s all go to McDonald’s”) or would this be regarded as a promotion of an HFSS product.

There are also significant conditions that apply under the regulations. For example, the product placement must not influence content or scheduling to affect editorial independence; there must be no direct encouragement to purchase or rent the products; the programme must not give undue influence to the products; no subliminal advertising techniques can be used; and the way the product is included in the programme is not socially irresponsible and does not harm children. The point about “socially irresponsible” means it cannot “prejudice human dignity,” promote discrimination, encourage behaviour prejudicial to health, safety or protection of the environment, cause physical or moral detriment to children under 18, exploit children’s trust in parents, or show children in a dangerous situations.

As you may appreciate if you're watching the advertising marketplace in the UK, there is no indication that advertisers will increase marketing budgets to take advantage of new rules, rather than changing their priorities within existing budgets. In addition, parties cannot enter into contracts stating how, how often, when or whether the product is even placed into a programme, because this is contrary to the requirements for editorial independence. The consequence may well be that advertisers may be reluctant to part with their funds if they have absolutely no control or influence over the way their product is portrayed or used in a programme, or indeed, whether it ends up being used at all.

If you want to keep updated on product placement developments in the UK, or if you need help in understanding how the new UK product-placement regulations may affect you, contact Christopher Hackford directly or, of course, you can always call me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A few days ago (April 21, 2010), Joe Rosenbaum made a presentation to the Entertainment & Media Law Committee of the eMIPS Section of the New York County Lawyers Association. The presentation described the legal issues and implications arising from the tension between consumer privacy and online and digital behavioral marketing—a hot topic and an area that continues to spark debate and continues to evolve, as technology persists in being an enabler of greater functionality. You can view or download a .PDF of the presentation right here: Privacy Issues in Online & Wireless Advertising & Entertainment: Brave New World or 1984?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

An article, written by Marina Palomba, former Legal Director of the Institute of Practitioners in Advertising, and now a partner in the London office of Reed Smith focusing on advertising law and regulation, has just been published and makes both informative and great reading. First published in Media Lawyer April 13, 2010, the article reviews just how far political ads can go. Read the entire article entitled, Political Advertising – Legal, Decent, Honest and Truthful?, and if you need legal guidance or representation, don’t hesitate to contact Marina Palomba in our London office.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Over five years ago, in early 2004, luxury fashion designer Louis Vuitton sued Google in connection with the sale of search-related advertising.  You will recall the company behind the Louis Vuitton brands and many others (LVMH Moët Hennessy • Louis Vuitton S.A., usually shortened to LVMH) has been very aggressive in policing and protecting its marks on eBay and other Internet sites.  The Paris District Court held that Google was engaged in trademark infringement, unfair competition and misleading advertising.  The Paris Court of Appeals subsequently ordered Google (and its French subsidiary) to pay €300,000 in damages. When those rulings were announced, a spokesperson for Louis Vuitton, praising the Court’s decision, said, "It was absolutely unthinkable that a company like Google be authorized, in the scope of its advertising business, to sell the Louis Vuitton trademark to third parties, specifically to Web sites selling counterfeits."  The remarks went on to state, "This milestone ruling grants protection for the first time to both consumers and brand owners” adding that Louis Vuitton believed the Court’s finding meant that Google's services were “misleading advertising services."  

Google appealed, and today the European Court of Justice (ECJ) released its ruling on appeal of that decision.  For you purists in the audience, procedurally within the ECJ, the decision is one in respect of the Joined Cases C-236/08 to C-238/08, in the proceedings captioned Google France SARL, Google Inc. v. Louis Vuitton Malletier SA (C-236/08), Google France SARL v. Viaticum SA, Luteciel SARL (C-237/08), and Google France SARL v. Centre national de recherche en relations humaines (CNRRH) SARL, Pierre-Alexis Thonet, Bruno Raboin, Tiger SARL (C-238/08).

The case essentially asks whether Internet search providers can be liable for trademark infringement when selling ‘keywords’ that are based upon the trademarks of another.  The ECJ ruling doesn’t completely immunize or exonerate Google, nor does it leave advertisers defenseless either, but it does in effect give the green light to Google and other search providers to continue to offer keywords to bidders; there had been concern in Europe that a negative judgment from the ECJ would have brought all such services to a halt.  The decision takes a now familiar, “let’s examine if you do more than just sell the trademark as a keyword at the request of the advertiser” approach.

So, if all an Internet search company such as Google is doing is selling keywords, the decision appears to allow Google to do so, despite a showing of confusion by consumers.  But – as those of you advertisers and marketing professionals who are tuned in to AdWords’ algorithmically driven ‘suggestions’ will know – Google’s program actually suggests keywords derived from previous selections. So Google’s AdWords code might suggest “British Airways” as related to “Virgin Atlantic” or “Ryanair” or, as in this case, "imitation” or “fake” coupled with “handbags” as a keyword related to "Louis Vuitton.” Not merely passively selling an existing word or mark and more actively engaging in the ‘suggestion’ process, in the Court’s view, consequently attaches liability.

By analogy, one can rationalize such a decision with similar rulings in the United States under the Digital Millennium Copyright Act (DMCA) or more directly under Section 230 of the Communications Decency Act (CDA).  In the case of the DMCA, if one has no notice of infringement and innocently publishes infringing content, until knowledge is shown – by ‘take down’ notice or otherwise – a passive distributor would generally not be held liable for intellectual property infringement.  Similarly, the CDA distinguishes between those who participate in the content creation process and those who merely distribute (the traditional news media distinction between editor/publishers and newsstand/distributors).

Under the instant ruling by the ECJ, although simply purchasing a keyword would not seem to constitute a per se legal violation in the EU, some rather arcane wording by the ECJ seems to suggest that advertisers (not necessarily the search provider) could now be held liable for trademark infringement resulting from their keyword purchase if their advertising can be shown to be confusing to consumers.  Thus, courts in the EU will now be examining both the appearance of the advertising and its demonstrable or likely effect on consumers.  One of our Associates, Drew Boortz, who follows these developments, notes that we are not aware of any U.S. case that has delved this deeply into keyword sales.  While there are trademark and advertising cases that deal with “use in commerce,” the eight or nine recent cases against Google directly involving keywords are yet to come up for trial (e.g., Rosetta Stone Ltd. v. Google, Inc., U.S. federal complaint filed on July 10, 2009 in the Eastern District of Virginia; scheduled for trial in May).

Chris Hackford in our London office notes that trademark owners will no doubt be a little disgruntled after this ECJ judgment, as they will have to continue to bid on their own registered trademarks in order to ensure that they remain at the top of the listings.

If you want to form your own view of the ECJ decision, you can read it right here: Louis Vuitton v. Google; or you can call Reed Smith for help.  Our offices in Paris, as well as London, Munich and Piraeus in the EU, stand ready to assist; and, of course, you can contact me, Joe Rosenbaum, in New York; Chris Hackford in London; Drew Boortz in our Washington, D.C. office; or the Reed Smith attorney with whom you regularly work.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Christopher Hackford.

After an extensive year-long review, on March 16, 2010, the Committee of Advertising Practice in the United Kingdom announced the launch of new Advertising Codes for both broadcast and non-broadcast media, covering television standards, television scheduling, radio and text services.

Much remains nearly the same, but there are some notable new rules, including rules intended to offer greater protection for children, rules to prevent exaggerated environmental claims, and a new section dedicated to lotteries and promotions.

That said, here are two examples of some rules that have actually been relaxed. One: charities are now allowed to make comparisons with each other (competitive advertising fighting for your British Pound Sterling). Two: advertisers in the UK are now permitted to advertise condoms on television before 10:00 pm on television. Some of this may reflect the increasing contention among advertisers for share of wallet from consumers.

The new Codes did not deal with some contentious areas of British advertising, but to find out more, you will either have to plod through the Advertising Code yourself, or you could read the Reed Smith Advertising Technology & Media Alert, New Advertising Codes Launched, written by our ATM colleagues in the UK.

So, if you need help understanding the new Advertising Codes, or you want to hear from the authors of the alert and experts in this area, feel free to contact Marina Palomba, Christopher Hackford or Huw Morris directly. Of course, you can always contact me, Joe Rosenbaum, or the Reed Smith attorney with whom you regularly work.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Todd Davis, the CEO of LifeLock is not the first CEO to appear in advertising, but was probably the first to prominently display his U.S. Social Security Number in full-page ads in major newspapers and billboards across the country. Although these ads disappeared a while ago, the action brought by the Federal Trade Commission and the Attorneys General of 35 states of the United States, has now resulted in a settlement valued at $11 million. FYI, the states involved were: Alaska, Arizona, California, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Missouri, Mississippi, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington, and West Virginia. The settlement resolves claims that LifeLock’s advertising was deceptive and misleading and misrepresented the types of services consumers could expect if they become victims of identity theft and their personal information was compromised.

While LifeLock does provide some measure of identity-theft protection, it was apparently not as robust and comprehensive as the advertising might lead a consumer to believe (personal information would be “useless to a criminal”). As a result of the action, not only has LifeLock promised to make changes (or has already made changes) to address the FTC complaint - in its business practices as well as its advertising - but the complaint also named CEO Davis and his co-founder Robert J. Maynard, Jr., who both will be barred from making the same misrepresentations as LifeLock. The $11 million received from LifeLock will provide refunds to consumers who signed up for the service. Information about eligibility and how the redress program will work can be obtained directly from the FTC - LifeLock Redress Program.

FTC Chairman Leibowitz stated: “Consumers received far less protection than they were promised," noting further that LifeLock’s service was ineffective against identity theft involving existing credit cards or bank accounts. Despite the advertised claims, according to the FTC, LifeLock often did not encrypt data in storage or transmission, didn’t install any antivirus protection software on computers used by employees, and failed to even require strong password protection for employees’ access to systems and files.

The documents were filed by the FTC in the U.S. District Court for the District of Arizona, and you can obtain a full copy of the original Complaint and the Stipulated Final Judgments against LifeLock, Davis and Maynard, right here: Federal Trade Commission v. LifeLock.

The Advertising Technology & Media law practice has lawyers and the resources of Reed Smith’s litigation and regulatory enforcement team to help clients seeking to prevent legal and regulatory problems and, if necessary, defend you if they arise. We have a team of data security and identity-theft lawyers with hands-on experience who know how to respond if a data breach occurs and can counsel you in complying with federal and state requirements. Need to know more? Call Joe Rosenbaum, or any of the lawyers at Reed Smith with whom you work - and, by the way, don’t give out your Social Security Number.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On March 26, 2010, the Center for Law, Science and Innovation at the Sandra Day O'Connor College of Law at Arizona State University and World2Worlds, Inc., will present “Governance of Virtual Worlds,” a conference held live in the Great Hall at the Sandra Day O'Connor College of Law at Arizona State University and in Second Life™.  For many, an opportunity to save on travel time, cost and carbon emissions.  Audience participation will be facilitated virtually within Second Life, live in the Great Hall at ASU and via a chat-bridge. So you can attend in person and live at The Great Hall of the Sandra Day O'Connor College of Law at Arizona State University, on the web via video and interactive text-chat, or by avatar in the immersive virtual world of Second Life.

Joseph I. (“Joe”) Rosenbaum, Reed Smith partner and Chair of its Advertising Technology & Media Law practice and an Advisory Board Member of the College of Law, is among the panelists participating. The conference will bring together, physically and virtually, a program of experts from academia, legal practice, corporations, governments, and online communities, to present a broad panorama of the state of governance of virtual worlds. 

National and international participation is encouraged and the conference will begin at ASU at 8:00 a.m. PDT (11:00 a.m. EDT), but for those brave virtual warriors there will be a reception starting at 7:00 a.m. Mountain Standard (Phoenix) Time – one hour before the formal conference begins.  If you wish to attend and/or share this invitation with others, here is a:

• link to the invitation and agenda; and
• a link to the registration page.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Chapter Authors

United States

Douglas J. Wood, Partner – dwood@reedsmith.com
Stacy K. Marcus, Associate – smarcus@reedsmith.com
Anthony S. Traymore, Associate – atraymore@reedsmith.com

United Kingdom

Marina Palomba, Partner – mpalomba@reedsmith.com

Germany

Stephan K. Rippert, Partner – srippert@reedsmith.com
Katharina Weimer, Associate – kweimer@reedsmith.com

Introduction

This chapter looks at the relationship between social media and advertising and marketing practices, and how to protect brands.

As an emerging technology with nearly limitless boundaries and possibilities, social media gives consumers unprecedented engagement with a brand. Consumers are empowered. However, this brings with it risks as well as gains. Consumers aren’t just buying a product or service online, they are discussing, reviewing, endorsing, lampooning, comparing and parodying companies and their brands. They aren’t simply being targeted for advertising; in many cases, they are participants in the creation and distribution of advertising. Companies can better enable, influence, monitor, react to and, hopefully, monetise the consumer conversations taking place in social media, and can better engage and interact with the consumer directly with their brands—but it’s critical to understand and navigate the legal minefields that are both dynamic and evolving as the media evolves.

Why are advertisers and marketing professionals drawn to social media? Because more than 1.8 billion people use the Internet every day[1], and, according to Nielsen, consumer activity on social networking and blogging sites accounted for 17 percent of all time on the Internet in August 2009, up from 6 percent the previous year.[2] The Internet audience is larger than any media audience in history, and it is growing every day. It’s those eyeballs that marketers want.

In the UK alone, spending on online advertising grew by almost 5 percent in the first six months of 2009, while television spending fell by 16 percent (see IAB UK News, “Internet advertising spend grows by 4.6 per cent”). It was also reported that UK online advertising spend overtook TV advertising spend for the first time.[3] Almost two-thirds of businesses say they intend to spend more on onsite social media, while 64 percent are looking to boost search engine optimisation efforts and 56 percent want to invest more in mobile marketing. Looking forward, new global research by Econsultancy and ExactTarget has revealed that 66 percent of company marketers in the UK intend to spend more on Internet advertising this year compared with 2009. Total Internet advertising spending will surpass £3.5 billion in the UK this year, according to a forecast from eMarketer.

Morgan Stewart, director of research and strategy at ExactTarget, comments: “The shift from offline to online is in full swing as marketers look to measure direct increases in top line sales, site traffic and improve overall marketing return on investment.”

In the United States, Nielsen estimates that ad spending on social networking and blogging sites grew 119 percent, from an estimated $49 million in August 2008 to $108 million in August 2009.[4] Expressed as a percentage of total U.S. online ad spend, ad expenditures on social networking sites climbed from 7 percent in August 2008 to 15 percent in September 2009.[5] In February 2010, the COO of Kellogg’s confirmed that since 2007, the company had tripled its social media spending.[6] Where are companies spending these dollars? The possibilities are numerous.

National authors begin by examining the use of social media and the risks and gains involved. Branded channels, gadgets, widgets, promotions such as sweepstakes and contests within and even across social media platforms, are a few of the ways companies are using social media to increase brand awareness. Even companies that are not actively using social media platforms to engage consumers must monitor social media outlets for comments made about the company or its brands. Social media cannot be ignored, and this section explores the legal implications of marketing in this manner.

Next, we look at the use of social media to foster brand engagement and interaction. Many companies are moving beyond simply having a page on Facebook, MySpace or YouTube, and are encouraging consumers to interact with their brand. Companies are using social media to provide customer service and get product reviews. Marketers seek to engage the consumer in developing user-generated content (“UGC”) around their brands for advertising, and actively solicit their social networks to create buzz, viral and word-of-mouth advertising campaigns. Some even employ “street teams” of teenagers who plug and promote a brand, movie or music artist in return for relatively small rewards. Who controls and retains liability for the statements made and content provided in the social media universe? Who owns the content? Will brand owners lose control of their brands?

Finally, we explore the impact of social media on talent rights and compensation. As discussed above, increasingly, ad spend is moving online. Along with this shift, the line between “content” and “advertising” has become blurred. Celluloid is being replaced by digital files and projectors by flat screens and monitors. What once aired only on television is now being moved over to the Internet by content owners and advertisers, or is going viral thanks almost entirely to consumers with a little encouragement from advertisers. We will examine how this shift impacts talent compensation and will discuss its application to the Screen Actors Guild (“SAG”) and American Federation of Television and Radio Artists (“AFTRA”) commercials contracts.

In our review, we have covered advertising regulation in the United States, the UK and Germany. Note that the UK has a largely self-regulatory environment. This self-regulation comes in the form of codes of practice that are designed to protect consumers and create a level playing field for advertisers. The codes are the responsibility of two industry committees—the Committee of Advertising Practice (CAP) and the Broadcast Committee of Advertising Practice (BCAP), and are independently administered by the Advertising Standards Authority (ASA). Online advertising, including via social networking and the techniques referred to in this chapter, fall under the remit of the CAP Code (which is explained in more detail in Chapter 2).

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On February 18, 2010, the International Law Office (ILO) published an article authored by Gregor Pryor and Sachin Premnath in the London office of Reed Smith, and Joe Rosenbaum in New York. It discusses the benefits and pitfalls of social media, and raises issues and concerns applicable to global companies—not just those on either side of the pond!

The article was derived from one published in Legal Week, and you can download your own PDF copy of “Commercial risks and rewards of the social media phenomenon” right here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In the wake of our release and distribution of the Reed Smith Social Media Task Force’s groundbreaking white paper entitled “Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon,” Practical Law Publishing has published a summary, prepared by The Social Media Task Force at Reed Smith, available here and entitled, Social Media Risks and Rewards. The published article represents a condensation of the entire white paper, previously announced in Legal Bytes, and which you can still download in its entirety.

As we mentioned, we will be adding, supplementing and updating these materials with even more chapters and new information, and we will soon be launching a special web page dedicated to the evolving social media legal landscape. If you need help navigating this environment, bear in mind that Reed Smith has a Social Media Task Force – a team of lawyers who have experience, and can advise and guide you as the medium and media evolves. Contact me, Joe Rosenbaum, or Douglas J. Wood, Stacy Marcus, or any of the Reed Smith lawyers with whom you regularly work. How can we help you? 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Joe Rosenbaum was featured on CNNMoney.com in the Small Business section in connection with a question about an individual cardholder’s liability for business-related charges on a business/corporate card issued while the individual was an employee.

For the answer, you’ll have to read the entire blog post on CNNMoney Small Business Q&A. Of course you can always contact Joe for the answer.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As far back as May 2005, Legal Bytes reported that Europe was becoming a major outsourcing hub for a variety of reasons (Outsourcing Statistics). Well just this week, the law started catching up.

In what is certainly a major ruling and quite possibly the beginning of emboldened plaintiff-customers seeking greater accountability from outsourcing providers, Electronic Data Systems (EDS) has lost a case initiated by British Sky Broadcasting Plc (BSkyB) back in 2004, alleging that EDS, one of the leading outsourcing providers in the world, had misled BSkyB about its capabilities and expertise. For those of you who are legal research hounds, the case is cited as HT-06-311, British Sky Broadcasting v. Electronic Data Systems, although I don’t believe it has been fully published yet. The dispute arose over a services contract that was entered into by EDS and BSkyB in 2000, well before EDS was purchased in 2008 by its current owner, Hewlett-Packard (HP), for slightly more than US$13 billion.

To give you the background, BSkyB selected EDS to develop a new customer relationship management (CRM) system for its call centers in Scotland. After almost two years and failure by EDS to deliver, by March 2002, BSkyB ended the contract and took over the project itself – the frustration and events ultimately leading to the legal proceedings filed in 2004 that alleged EDS lied about its ability to undertake and complete the project. On the other side of the case, in its own court documents, EDS alleged that BSkyB simply “did not know what it wanted,” and wanted the lowest cost possible to accomplish “it.” To highlight the disconnect further, the contract with EDS was for £48 million, but according to court documents filed in the case, with all of the delays, budget over-runs, EDS’ failure to deliver, and BSkyB taking over and completing the project itself, costs had mounted to £265 million.

Justice Ramsey, writing for the British High Court, ruled that EDS misled BSkyB in making false and fraudulent misrepresentations in pitching and marketing its capabilities to BSkyB, giving rise to a claim for damages. Further, the court concluded, to the extent these representations were fraudulent, the limitation of liability clause in the contract that would have otherwise limited EDS’ liability for damages should be set aside and does not apply. While damages have not yet been fixed, in theory, if one includes the differential in costs, lost profits and other damages that are now fair game, EDS could be liable to BSkyB for well in excess of £200 million – that’s more than US$315 million at current exchange rates.

This is a major decision not only in the UK, but also for outsourcing deals around the globe, and if the beginning of a precedential trend, it could signal a radical shift in the way outsourcing deals are bid, negotiated and consummated. There is no question that anyone involved in outsourcing knows that the customer does not always have its specifications and detailed requirements buttoned up when discussions begin. Indeed, outsourcing often presents a singularity at which time enhancements, efficiencies and improvements that might have been difficult or impossible internally, can be effected by moving the operations to a third-party provider. The provider, eager to win a lucrative bid, may over-promise or over-represent its experience and capabilities. Smart negotiators know that forcing both sides to diligently and meticulously work through the "devil in the detail," and making sure expectations, resources and capabilities are clearly set out and unambiguous, is the single most important contribution to be made in avoiding disputes, potential litigation and problems as the work and services unfold. Those of you in marketing know all too well that there is often a fine line between an actual claim and puffery. The former represents actionable representations, the latter . . . well, “you’ve tried the rest, now try the best” on every pizza box in the world.

Are you contemplating a major outsourcing initiative? Are you considering any outsourcing project, even a small one, involving critical operations – customer services, supply chain management, operations, transaction processing? Outsourcing is complicated. Need help? We wrote the book. No really, you can see for yourself: Outsourcing Agreements Line by Line: A Detailed Look at Outsourcing Agreements & How to Change Them to Fit Your Needs, written by none other than yours truly, Joseph I. Rosenbaum. Whether you check out the book or not, if you do need help, our Advertising Technology & Media law team here at Reed Smith has the help you need to make sure that, even if you are right, you can avoid the costly consequences and angst inherent in any legal proceedings between customers and providers. How can we help you? Call me, Joe Rosenbaum, or the Reed Smith attorney with whom you regularly work.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In November, Legal Bytes reported (Regulators Poised to Give Financial Institutions a Slap in the Facebook) that Richard Ketchum, Chief Executive of the Financial Industry Regulatory Authority (FINRA), acknowledged Wall Street is eager to use social media to interact with customers. In the course of his remarks at a recent meeting of the Securities Industry and Financial Markets Association (SIFMA), he noted, "We continue to witness the advent of technologies that will challenge your ability to ensure compliance with regulatory requirements,” and “Social networking is one such innovation." 

Now, supplementing existing FINRA Rules, FINRA has released a notice concerning online media rules (you can download and read a copy of the notice below) whose key components include requirements that securities firms:

• Must develop policies and require its employees to comply with the new regulatory requirements
• Must retain records of communications (a compliance requirement of the Securities Exchange Act of 1934) when social media is used to communicate
• Must ensure that recommendations made through social media are suitable to all investors to whom the recommendation is made (e.g., by limiting or filtering access based on investor/consumer qualifications)

FINRA’s notice takes the position that securities firms must adapt existing rules to social media and essentially mirror the 2003 FINRA definition of “public appearance.” This definition noted that chat room postings were no different than if a firm representative was in a room making statements to a room filled with investors. FINRA’s current notice indicates that information posted or content placed online (static information) is subject to these same rules and must be approved by a firm principal – presumably, even information about individuals in the firm that may be part of an individual’s profile on the firm’s website or in social media platforms. But online interactions that are occurring on the fly (e.g., in real time), while subject to supervisory requirements (e.g., they must be supervised, perhaps even monitored), do not require such approvals.

You can read or download the FINRA Regulatory Notice 10-06 (Social Media Web Sites) [PDF] here.

As mentioned in the Legal Bytes November post, SEC disclosure rules apply to Tweets, blog postings, wall postings and other communication platforms provided by social media sites, and other regulatory agencies are seeking to address the use of social media sites by the entities they regulate (e.g., the FCC, the New York State Insurance Department). So if any of this is of interest and if you need to know more or need help, please contact me, Joseph I. Rosenbaum, or the Reed Smith attorney with whom you regularly work. We are happy to help.

Update:  Reed Smith lawyers Christopher P. Bennet, Amy J. Greer, Jacob Thride and Kevin Xu have prepared a Client Alert on the subject which you can read by going to: FINRA Issues Notice for Financial Firms Using Social Media.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Laura Hicks and Joseph I. Rosenbaum.

Last week, Gerry Sutcliffe, Minister for Sport in the United Kingdom, announced proposals to make significant changes to the existing legislative framework under which remote gambling is regulated. Following a review of the system of online gambling regulation in Great Britain by the Department for Culture, Media and Sport, a consultation is being launched with a view to introducing laws requiring all online operators to apply for a license from the Gambling Commission in order to either advertise or provide gambling services to British consumers. According to the Minister for Sport, the proposed changes were "necessary to ensure the protections in the Gambling Act – to keep gambling crime free, to ensure gambling is fair and open, and to ensure that children and vulnerable people are protected from harm – continue to be afforded to British consumers."

Under the proposals, a license will be required even if the gambling services are offered to British consumers using remote gambling equipment from outside Great Britain. Currently, only operators based and licensed in the UK are allowed to advertise in the UK, unless the country in which they are based is either a member state of the EEA or on the government's "whitelist." More information on the "whitelist" is available on the Department for Culture, Media and Sport website, but to give you some insight, territories currently on the list are Antigua and Barbuda, Tasmania, the States of Alderney and the Isle of Man. "Whitelisting" is the process used by the UK Ministry to assess the regulatory framework for gambling in any jurisdictions outside the EEA that apply for permission to advertise their services within the UK. 

As well as being obliged to share information about suspicious betting patterns with the UK's sports governing bodies and the Gambling Commission, foreign operators would also have to comply with British license requirements concerning the protection of children and vulnerable people, and contribute to the research, education and treatment of problem gambling in the UK.

This appears to be a move by the UK government to close a loophole in the laws that protect online gamblers in the UK, and that more closely mirror the more protectionist regime in the United States. If this extension of the licensing regime is introduced into legislation, it will be interesting to see how the regulator intends to enforce the license scheme against gambling companies with no UK presence. In the United States, enforcement has involved a variety of "indirect" mechanisms, from the Department of Justice's use of the Interstate Wire Act of 1951, which applies to sports betting to assert jurisdiction over online gaming – even though the Fifth Circuit ruled in 2002 that the Wire Act only applies to sports betting – to seizing advertising payments made to broadcast networks by advertisers seeking to promote online gambling considered illegal by the United States. Since 2006, with the enactment of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), the United States has sought to seize assets in financial institutions tied to online gambling, based on what it considers illegal activity, money laundering and a variety of other offenses (see, for example, a recent Huffington Post article). It is noteworthy that UIGEA does not make online gambling illegal per se, but rather prohibits any transfer of funds from a financial institution (as defined in the legislation) to an illegal Internet gambling site.

Once you read the UK Sports Ministry's announcement, if you need more information, contact Laura Hicks, an associate in the Media and Technology team, in our London office. Of course, you can always contact me, Joseph I. ("Joe") Rosenbaum in New York, or Gregor Pryor in London, or the Reed Smith attorney with whom you regularly work, if you need legal advice, information or support on this subject.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Join top legal professionals and government regulators March 17-18, 2010 in Washington, D.C., at the 2010 Annual ANA Advertising Law & Public Policy Conference, where you will hear from Jon Leibowitz, Chairman of the FTC and Doug Gansler, Maryland attorney general, as well as leading legal experts both from law firms and client-side marketers.

Connect with key industry leaders and policymakers as we discuss the most volatile and fast-moving legal and political environment for advertising and marketing in decades. Learn about the new regulations, legislation and major court cases that are fundamentally changing the business environment, and how you can keep up!

For the full agenda and to register, go to http://www.ana.net/adlaw2010.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

[The following article, authored by Michael Skrein and Tom Webley, who are both resident in our London office, reviews the current (and future) state of the UK’s libel multiple publication rule. It was first published as “In Focus. Libel Tourism,” in Legal Strategy Review, Issue 5 (Winter 2009/10), and Legal Bytes gratefully acknowledges and appreciates their permission to re-publish it.]

Media organisations, publishers, journalists and human rights lawyers have, for many years, argued that the UK’s libel multiple publication rule is incompatible with free speech in the modern digital age. This ancient rule renders each publication of defamatory material liable to be sued on as a separate cause of action. That means, for example, that if material remains available online in archives or live websites, the threat of proceedings being issued will hang over the head of the publisher indefinitely. 

The limitation periods in England and Wales for defamation is one year from publication. However, under the multiple publication rule, each ‘hit’ on a website is treated as a new publication and can lead to a claim being brought within that time frame. The rule dates back to a case in 1849 which arose when the Duke of Brunswick purchased a copy of a newspaper published 17 years previously. He then sued for defamation over its contents. The new purchase was ruled to equate to a new publication, thereby allowing him to sue. The rule has been applied to defamation cases in England and Wales ever since. 

A Time For Change?

Unsurprisingly, many lawyers in England and Wales have been arguing that the rule is completely inappropriate and a dangerous anachronism. Many overseas lawyers greet the existence of the rule with disbelief. Nearly 100 years after the Duke of Brunswick case, in 1948, the New York appellate court decided that the multiple publication rule had no place in an American society with mass publication and nationwide distribution, and it replaced the rule with a single publication regime. 

The UK Ministry of Justice has recently published a consultation paper on the topic. It agrees that the multiple publication rule has failed to keep pace with the digital age, conceding that defending a claim becomes increasingly difficult as time passes. 

However, it says that this difficulty must be balanced against the need for a claimant to be given suitable redress for damage to reputation. The paper suggests implementing a single publication rule in which the limitation period runs from the date on which the claimant discovers the defamatory material (if this is within 10 years of initial publication) and/or to have a defence of qualified privilege for archived material (this defence would be defeated if the defendant failed to remove the material having received a reasonable request to do so). 

Implementing a single publication rule in England and Wales would be good news for publishers operating in those countries, and others worldwide would also breathe a sigh of relief as it would reduce the incidence of ‘libel tourism’ in the jurisdictions. For many years, overseas claimants have flocked to the courts to bring defamation actions. As there is no equivalent to the U.S. First Amendment, defendants face several additional legal hurdles, and they may have to pay damages and huge legal fees if they lose. 

The consultation closed on 16 December 2009 and the Ministry of Justice will now consider the responses. Perhaps soon English law will finally lay to rest the spirit of the Duke of Brunswick. 

If you need to know, you need to contact Michael Skrein, a partner, and Tom Webley, an associate, both in our London office. Of course, you can always contact me, Joseph I. (“Joe”) Rosenbaum - or your favorite Reed Smith attorney - who will be more than happy to help or coordinate getting your legal needs taken care of.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As it does every year at this time, Advertising Age has again published its Book of Tens. For as long as I can recall, that has included an amazingly prescient set of legal prediction ‘Tens’ from my partner, Douglas J. Wood, and this year is no different.

Go. Look. Read. Recall last year’s. Save this one for December 2010. It’s amazing how good his track record is . . . but then, if you know him, that shouldn’t surprise you. But some of his predictions this year, just might: Book of Tens: Legal Predictions for 2010.

You can contact Douglas J. Wood directly to tell him how ‘on target’ he is, or you can contact me, Joseph I. Rosenbaum, or any of the Reed Smith attorneys with whom you regularly work if you need more information or help in areas related to advertising, media, technology and entertainment. We are here to help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Today, the U.S. House of Representatives is scheduled to vote (and likely pass) H.R. 4173. H.R. 4173, entitled the Wall Street Reform and Consumer Protection Act of 2009, but commonly referred to as the CFPA (Consumer Financial Protection Act), has been blogged about on Legal Bytes before (see Congressional Hammer Poised to Strike at Financial Advertising). The provisions to which advertisers might wish to pay particular attention are those that would amend the Federal Trade Commission Act.

Rather than summarizing industry concerns over this legislation, I’ve posted a copy of the Industry Letter, signed and sent to members of Congress on behalf of at least these twenty two (22) U.S. associations and coalitions: American Advertising Federation, American Association of Advertising Agencies, American Escrow Association, American Financial Services Association, American Herbal Products Association, Association of National Advertisers, Consumer Data Industry Association, Consumer Electronics Association, Direct Marketing Association, Direct Selling Association, Electronic Retailing Association, Financial Services Institute, Inc., Financial Services Roundtable, Interactive Advertising Bureau, International Franchise Association, Internet Commerce Coalition, National Association of Manufacturers, National Association of Professional Background Screeners, National Business Coalition on E-Commerce and Privacy, National Retail Federation, Natural Products Association, U.S. Chamber of Commerce.

If you need more information, or if you believe you should have a voice in this process and don’t already have one, Reed Smith is here to help. You can contact me (Joseph I. Rosenbaum) or, of course, any Reed Smith attorney with whom you regularly work.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In case you weren’t able to attend any of our three seminars on Social Media, we’ll still let you get a glimpse of what you missed. First, you missed Joe Rosenbaum and Anthony Traymore in San Francisco and Palo Alto, and in Century City (L.A.), where we were joined by Kate O’Brien, where we presented: "Social Media: It’s 10:00 p.m. Do You Know Where Your Brand Is?"

If that alone didn’t make you sad, you also missed all the substantive insights and experiences that were shared, the audio-visual effects, the examples and live experience of our presenters and local hosts, as well as the hospitality of three of Reed Smith’s West Coast offices.

What you don’t have to miss is a copy (in PDF form) of the presentations – each of which had slight variations. You can see and download each by selecting the live link on each city below.

While the base presentations were much the same in all three places, in San Francisco we focused a bit more on social media in financial services and corporate securities law. In Silicon Valley (Palo Alto), we did a somewhat deeper dive into the implications of social media in online gaming and entertainment, and in Century City, we focused on user-generated content, open-forum platforms and competitive advertising.

While the results are still being tabulated, we do know that a significant number of our clients and guests received continuing legal education credit (CLE) for attending, in addition to a meal – worth the price of free admission anywhere. We haven’t looked at all the evaluations yet either, but no one fell asleep, everyone stayed through the closing credits and a rousing rendition of the Social Media Blues, and many of our attendees stayed for follow-up questions.

We also received a number of inquiries about the possibility of individual companies or groups hosting a Social Media seminar presented by Reed Smith, and we are happy to do so for yours – we are an accredited CLE provider in most jurisdictions, if that is important to the legal folks – but many have asked about presenting to senior executives, business development, marketing, media and other professionals as well.

Not only can we tailor a seminar to your particular company, your brands and/or your industry, but we have developed, and will continue to develop, modules and focused presentation materials regarding online gaming and virtual worlds; promotions (e.g., sweepstakes, contests, product placements, branded entertainment); advertising and marketing (e.g., testimonials, endorsements, buzz, viral and word-of-mouth); labor and employment; corporate policy, public relations and crisis management; financial services; media and entertainment, including motion pictures and machinima; pharmaceutical, health and life sciences; technology and e-commerce; digital rights management (e.g., user-generated content, hybrid media); privacy, data protection and security; target marketing, location-based and behavioral advertising; regulatory requirements – both government and SRO (e.g., FTC, FCC, CSPC, FDA, PCI compliance, FACTA, GLB, HIPAA); cloud computing, and so much more – and we haven’t even mentioned our international or global experience, expertise or resources in other jurisdictions around the world.

If you are interested, please contact me (Joseph I. Rosenbaum) and we can work with you to help you engage us in your social media conversation with topics that are relevant to you. We will also be updating the research work already released in our Social Media White Paper with some of the materials and further work we continue to do in this area. Stay tuned – social media is not a fad.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Well, it seems like almost yesterday (actually a little more than a month ago), that a subsidiary of Mixx, the popular social voting site, launched TweetMixx, a new service that enables companies, brands, politicians, and celebrities collect and aggregate all the mentions about them on Twitter on a single page. “TweetMixx Channels,” as the service is branded, enables you to create a branded page, tailored to you – from your own Twitter Tweets and RSS Feeds to comments from customers, reviewers, fans or pretty much anything you like. We’ll use “you” generically to mean any label that fits – people, brands, goods, services, you name it.

Ever see those vanity license plates on cars? Now you can have your own vanity Twitter Mixx channel, and the service uses “Tabs” to allow a variety of features and functions. There’s one that uses search terms to find links and tweets about you on Twitter, in apparent deference to the new Federal Trade Commission Endorsement Guides (see our post FTC (Revised) Endorsement Guides Go Into Effect earlier today; there’s an “Insiders” tab that identifies anyone with a material connection or that is associated with you (e.g., employees, agents, paid endorsers); and other tabs that enable you to customize and populate the channel. In addition, since the service appears to act both as an aggregation and a search tool for content about you, consumers can find all the Twitter traffic and channel information about you in one place, and at the same time, you can use the service to track and monitor conversations and references to you on Twitter. Right for consumers; right for you – clever.

Remember Facebook’s personalized URLs just a few months ago (Legal Bytes blog post Facebook Adds Personalization & a (Brand) New Dimension)? This is not simply another social media fad. Already companies are getting on the bandwagon (or should we say birdwagon). Today, the National Hockey League (www.nhl.com) will be among the first few enterprises launching its TweetMixx Channel – its own private label branded distribution platform using the TweetMixx service. TweetMixx even provides you with a widget that can be embedded on other websites (think bloggers, profile pages, etc.). The NHL’s “Chatter” tab on TweetMixx, for example, will provide streaming tweets from hockey fans, while a “Links” tab will keep track of the tweets that are retweeted most often, and will rank these favorites by putting them at the top of the TweetMixx Channel web page.

So for advertisers, brand managers, marketing professionals and agencies, this new tool is the beginning of enabling a clearer strategic use of Tweets. Just as branded pages and channels, enabling two-way conversations, have emerged on YouTube and Facebook, allowing brands and celebrities to engage with consumers and fans, TweetMixx seeks to provide an ecosystem for Twitter traffic. Chris McGill, founder and CEO of Mixx, noted that each TweetMixx Channel can be analogized to a “tree.” You have TweetMixx plant a customized tree of your choice, then you are given the tools to nurture it, to prune it and to watch it grow. Do it right and you have branches where Twitter users can “flock, sit and sing” about you – the people, products, services and things they care about. TweetMixx owns the forest!

Can you or your brand afford to stay out of the social media arena? Are you afraid of the new risk-reward paradigm and uncertain what to do? Do you know you have to do something, but are suffering from analysis paralysis? Have traditional models got you stuck in the mire? Call us. Our Advertising Technology & Media law practice group and our newly formed Social Media Task Force already have unparalleled depth, experience and bench-strength in understanding, working with, and advising clients in this brave new world. From developing policies to monitoring compliance; from protecting and enforcing your rights to developing relationships and partnerships with others to engage in the conversation. To win it, you have to be in it. If you need help, contact me, Joseph I. (“Joe”) Rosenbaum, or the Reed Smith attorney with whom you regularly work. We are happy to help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by John P. Feldman. 

Yesterday, Dec. 1, 2009, the revised "Guides Concerning the Use of Endorsements and Testimonials in Advertising" released by the Federal Trade Commission came into effect. If you are a loyal Legal Bytes' reader, you know we have been following this as early as November 2008, when we posted Endorsements & Testimonials - FTC Broom Proposes Some Sweeping Changes. Numerous updates and informational pieces have graced these pages since then (now when we say "pages," we mean web pages), and you can refer back to any or all of them, or you can check out any you may have missed right here: FTC Testimonial and Endorsement Guides Stimulate Industry Comment (March 2009); a presentation given at the University of Limerick on the subject entitled "Trust Me, I'm a Satisfied Customer: Testimonials & Endorsements in the United States," which you can download (If You Didn't Make It to Ireland ...); Ghostwriters: Medical Research or Paid Endorsers (and are they mutually exclusive?) and Rights of Publicity - Wake Up and Smell the Coffee! (both in August 2009); and FTC Releases Updated Endorsement & Testimonial Guidelines and Reed Smith Analysis of the New FTC Endorsement and Testimonial Guidelines (both in October 2009).

Yesterday, John P. Feldman, an authority in these types of advertising regulations and compliance and who is based in Washington, D.C., put together some thoughts concerning the implications of these Guides upon coming into effect, continuing his thoughtful and practical analysis. While we will maintain bringing you news and information about the Guides, John's analysis is timely and helpful, and outlines some considerations every advertiser – online, in social media and off-line – and every blogger, viral marketer, celebrity endorser or consumer making a testimonial, should take into account. John's analysis, which you can download and read in its entirety by selecting the link below, asks and answers the following questions about these Guides:

• What does this mean for advertisers?
• What is the most dramatic shift in enforcement policy?
• What will this mean for advertisers that use celebrity endorsers?
• How much control should sponsoring advertisers exercise over endorsers in new mediachannels?
• What impact will the FTC's new approach to clinical trials have on the OTC, cosmetic, and pharmaceutical industry?
• Is there a role for self-regulation and what do you make of the proposed "best practices" recently announced by the Word of Mouth Marketing Association (WOMMA)?

You can download your own copy of John's analysis or you can read it online right here: "FTC Endorsement Guides (Revised) - Some Thoughts As They Become Effective". You won't be disappointed. In addition, if you want to know more about these issues or have questions about your particular circumstances, please do contact John P. Feldman directly, or you can call Joseph I. Rosenbaum or Douglas. J. Wood or, of course, any Reed Smith attorney with whom you regularly work.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Just a reminder that space is filling up, so if you want to join us for any of the three West Coast social media law seminars please use the registration link below to sign up. Joseph I. (“Joe”) Rosenbaum and Anthony Traymore from the Advertising Technology & Media Group in New York and local Reed Smith lawyers in each office will present: "Social Media: It’s 10:00 p.m. Do You Know Where Your Brand Is?"

Can’t attend?  If you are a client, we can do a customized in-house seminar for your legal department, executive management, marketing or other professionals. Not a client, perhaps you should be.  Interested? Contact Joe Rosenbaum.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Joseph I. ("Joe") Rosenbaum had a busy week. In an interview with the editors of Lexblog, Joe tells Lexblog why blogging on Legal Bytes is both fun and informative. You can read the entire interview on the Lexblog page "Real Lawyers Have Blogs".

Joe was also quoted in an article by Maria Aspan in the American Banker, about the announcement by American Express that it was acquiring Revolution Money - part of Amex' efforts to continue to evolve and provide a broader (and increasingly relevant online and digital) range of payment options for consumers and merchants. If you are interested, feel free to read Maria’s entire story, "Amex Tries to Buy a 'Revolution'".

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Did you miss our New York seminar on Social Media? Well now you can catch us in California. Three of Reed Smith's offices in California will be hosting a seminar on social media, where Joseph I. ("Joe") Rosenbaum and Anthony Traymore from the Advertising Technology & Media Group in New York, and local Reed Smith lawyers in each office, will present:

"Social Media: It's 10 p.m. Do You Know Where Your Brand Is?"

Tweets, profiles, avatars, blogs, chats, friend requests, user-generated content, personalized pages, customized URLs—keeping up with social media is daunting. Social media continues to change the rules of engagement, and for companies, brands, marketing professionals and their legal advisors, engagement is now the rule. Just as economic and advertising models for whole industries are changing to take advantage of social media, industries must confront new and unprecedented legal risks in this brave new world of engagement—a world where lawmakers, regulators and courts are struggling to figure it out. Legal risks and challenges abound; so does opportunity—for brands who know before they go!

Reed Smith LLP is a State Bar of California-approved MCLE provider, and this course qualifies for 1.5 general MCLE Credit. The presentations will highlight:

• Best practices for corporate engagement in social media
• How to approach workplace policies
• The current and potential legal landscape evolving around social media platforms
• Case studies—social media successes and failures
• Highlights of our "white paper": A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon, recently released by the Reed Smith Social Media Task Force
• And much more

Because of the high level interest received, we will be conducting the seminar in three of our California offices.

1.  Reed Smith's San Francisco Office

Tuesday, December 8, 2009

Registration & Breakfast: 8:30 a.m.; Program: 9:00 – 10:30 a.m.

2.  Reed Smith's Silicon Valley (Palo Alto) Office

Tuesday, December 8, 2009

Registration & Lunch: 12:30 p.m.; Program: 1:00 – 2:30 p.m.

3.  Reed Smith's Century City (Los Angeles) Office

Wednesday, December 9, 2009

Registration & Breakfast: 8:30 a.m.; Program: 9:00 – 10:30 a.m.

We hope you will attend, and we encourage you to share this invitation with others. For your convenience, here is a link to the invitation & registration page for these sessions.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Remember when Legal Bytes posted that little note about gift cards now being part of the Credit Card Accountability Responsibility and Disclosure Act of 2009, for the first time formally bringing gift cards under federal regulation? Remember we told you that as part of the process, “by July 2010, the Federal Reserve Board is to have crafted and approved new rules covering consumer disclosures (i.e., advertising, application forms, etc.)”?

Well today, the Federal Reserve Board announced proposed rules that would restrict gift card fees, limit expiration dates to a minimum of five years (after issuance or the last time funds were loaded), and prohibit dormancy, inactivity, and service fees, unless it was limited to once per month, the consumer was notified, and the inactivity has lasted for at least one year.

The FRB has been busy around Regulation E (EFT). Last week, the FRB announced its Final Rule surrounding ATM and one-time debit card overdrafts (See “The Fed Notices an Overdraft – Decides to Close the ATM Window”, posted on Legal Bytes earlier today). These regulations are also promulgated under Regulation E, and although the proposed rules have not yet been published in the Federal Register (expected soon), you can download a copy here: Federal Register – Gift Card Rulemaking Notice.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Roberta G. Torian and Joseph I. Rosenbaum.

On Nov. 12, the Federal Reserve Board released its final rule on overdrafts for ATM and one-time debit card transactions (the “Final Rule”), which amends Regulation E. Although it hasn’t been published in the Federal Register yet, Legal Bytes thought you might like a little heads-up as to what is in the new Final Rule.

To start, a financial institution will have to obtain a consumer's consent – in advance – to assess a fee for paying an overdraft in an ATM or one-time debit card transaction. To get consent, the financial institution must provide a description, give the consumer an opportunity to opt-in; and if consent is given (which can be revoked at any time), give the consumer written or electronic confirmation. While existing customers who haven’t opted in to the overdraft program by then can’t be charged a fee for these overdrafts after Aug. 15, 2010, for everyone else, compliance is required by July 1, 2010.

Here’s one you might not have considered. What if the system in place with the financial institution doesn’t distinguish between various types of overdrafts (e.g., one-time debit card versus recurring debit card transactions)? Well there is a safe harbor, but you’ll have to call Roberta G. Torian (or read the Final Rule yourself).

Now, the Final Rule doesn’t mean a financial institution is required to pay overdrafts, whether or not a consumer has consented, and it still allows them to maintain policies on overdraft limits, frequency, and other factors that would restrict the customer’s overdraft privileges. In other words, it doesn’t change an institution’s right to manage its overdraft program or risk – only the situations where it can charge a fee to the consumer.

The Final Rule does, however, delve a bit more deeply into the marketing and cross-selling considerations financial institutions must comply with. For example, the Final Rule prohibits conditioning other account services on opting in to the overdraft service. Furthermore, the consumer must be offered the same account terms, conditions and features, whether or not they opt-in to the overdraft program.

The Federal Reserve Board has created a model form for use by financial institutions (one that can be modified to fit the individual programs available) to obtain the consumer’s opt-in consent, and that highlight the disclosures required by the Final Rule. The form was developed because the Final Rule also prohibits including this new overdraft "consent" as part of the basic account agreement when a consumer opens an account. In other words, you need to give the consumer a meaningful opportunity to decide whether to opt-in, and not simply bury the "consent" in a string of clauses and terms.

Although the rule has not yet been published in the Federal Register, you can download a copy of the Final Rule right here. But if you really want to know the (opt) ins and (opt) outs of Regulation E, contact Roberta G. Torian, Joe Rosenbaum or any of the lawyers at Reed Smith with whom you work. Reed Smith has a full service Financial Institutions Group that can help virtually any financial institution with legal support, service, and representation, whenever and wherever the need arises. Call us, we are happy to help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Yesterday evening, Reed Smith and Boyden Executive Search Agencies co-sponsored a seminar in which Douglas J. Wood, head of Reed Smith’s Media & Entertainment Industry Group, joined by Sarah Needleman from The Wall Street Journal, and Kathy Ewing, assistant general counsel at Benjamin Moore, discussed the legal, social and economic implications of the social media and social networking revolution.

Friday the 13th notwithstanding – it’s the third one this year and, for you Useless-But-Compelling-Facts fans, the most any single year can have – today is your lucky day. Even if you missed it, the seminar can be downloaded right here: “Making Sense of Social Media.” And, in keeping with our triskaidekaphobic theme, Legal Bytes is proud to present a double whammy.

Simultaneously with this first-in-a-series of seminars, we have released a groundbreaking white paper entitled Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon. The white paper, which you can also download by clicking the linked title above, was compiled by Stacy Marcus and edited by Douglas J. Wood (head of Reed Smith’s Media & Entertainment Industry Group) and Joseph I. Rosenbaum, Chair of Reed Smith’s global Advertising Technology & Media Law Practice). The white paper includes contributions from our social media task force – numerous Reed Smith lawyers across many disciplines affected by or involved in the social media revolution.

We will be adding, supplementing and updating these materials with even more chapters and new information as this exciting area continues to dynamically unfold. Whether you are an active participant in the commercial world of social media or are confused by it, this is a must read.

Oh, and if you want to actually be social and sociable Joseph I. Rosenbaum and Anthony S. Traymore will be presenting MCLE accredited and customized variations of these Social Media Seminars in our offices in San Francisco, the morning of December 8th, in Palo Alto at mid-day the same day and in Century City the morning of December 9th – so be social and if you are on the West Coast and your schedule permits, mark your calendar and watch the Whatz Gnu? section of Legal Bytes over the next week for further information and links to an invitation and registration.

If you or your brand advertising and marketing professionals think social media is a fad, you need to GWI or start waving goodbye. The train is leaving the station without you. But, if you recognize that digital and web-based technology, coupled with new interactive social platforms and applications are changing the way we interact, communicate, work, play, learn and entertain; are changing the legal and socio-economic landscape; and, indeed, are changing how brands and companies engage with their customers, their employees, their suppliers and yes, their investors and shareholders: well, then OMG, you totally get it.

But even if you do, navigating the waters as legislators, regulators and courts struggle to enact or apply a legal framework originally intended for a world with easily defined borders and tangible products, can be daunting. That’s why Reed Smith has a core and virtual team of lawyers who have experience and can advise you and guide you through the uncertainties. Contact me, Joe Rosenbaum, or Douglas J. Wood, Stacy Marcus, or Anthony Traymore, or any of the Reed Smith lawyers with whom you regularly work. How can we help you?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Presumably, that's why Willie Sutton robbed banks. So I ask you, somewhat rhetorically, why would anyone defraud advertisers on the Internet. Well, if you don't know, please refer to the title—that's what this note is about.

Remember click fraud? That's the name for illicit activity in which someone or something (a computer executing macros, automated scripts, etc.) emulates the click-selection process on a web advertisement. Why is that fraud? Well for one thing, if you are counting the number of times visitors "select" your advertising, click fraud makes it seem like lots of browsers out there are attracted to your advertising. But it ain't necessarily so. Even worse, if an advertiser is paying each time a visitor browses the ad—pay per click—that advertiser can pay a significant amount of money for eyeballs that simply aren't there. While you might think some clever computer hackers or scammers were engaging in this activity for kick (something like a teenager joyriding with the family car), when you find out your competitors are retaining the services of others to engage in that activity, making your advertising seem exceedingly successful and driving up your cost of sales while they are merrily trimming their costs—well that's why they call it fraud after all.

Solid investigative work, pattern detection, programs designed to sniff out repetitive or rapid clicks and Internet protocol and address tracking—1000 clicks per second from the same address—can't completely prevent click fraud, but they can make it more difficult, make the insertion companies, publishers and networks more accountable for accurate metrics and payment mechanisms, and can sometimes even lead to prosecutions.

More recently, even more sophisticated schemes have arisen, including fake advertisements, appearing to be for a legitimate company, but that are actually a launching pad for malicious code—capable of phishing or denial of service attacks, or penetrating corporate firewalls to access company networks and systems.

Now this is not a particularly new problem. After Hyundai was victimized, earlier this year, Initiative, the Agency of Record for Hyundai, sent out letters to its business partners, presumably to its publishing and advertising network partners, stating “someone allegedly working for Hyundai, or working at other agencies, has contacted various sites requesting proposals, and have even run a short campaign,” and requesting that they be notified immediately if contact is made “from an e-mail domain address of 'Hyundai-inc.com'.”

Publicis, one of the world's largest advertising holding companies and the largest global network within the Publicis Groupe, headquartered in France, has also been warning publishing networks about these fake ads. This past Oct. 5, Digitas, Optimedia, MediaVest, Zenith, and Spark (each of them Publicis companies) sent letters to their media partners [link to PDF] alerting them to: "rogue software and malicious advertising that is being placed on websites by individuals pretending to represent legitimate insertion requests."

A recent article in The Wall Street Journal noted yet another scam in web-based advertising: invisible ads. Agencies and media buyers are generally unable to audit banner campaigns when bought through ad networks and purchased on a CPM basis. Now imagine you are paying for ads based on web pages loaded, not clicks. Well, according to the article, Ben Edelman, an assistant professor at Harvard Business School who has been studying Internet advertising, has discovered that these "invisible" ads use computer programming code to make it appear as if the ads are where they are supposed to be. But when you point your browser to the web page where the ad is supposed to be, NOTHING IS VISIBLE. Notice I didn't say that nothing was there. I said it wasn't visible. BUT, if you are reading this, pay attention.  Take your cursor and highlight the entire blank space above right after the words "ad is supposed to be," all the way through to "Notice I didn't say," the previously hidden text becomes visible.  You see, the letters are there, but they are in the same color as the background, so they appear invisible to the reader. A fairly old trick. Now imagine there's a web-based advertisement on an invisible web page. The browser "sees" the page and acts as if that page is loaded and open—only you can't see it.

The Wall Street Journal article notes that security experts at Symantec and McAfee, as well as at online verification and audit companies DoubleVerify and Anchor Intelligence, have confirmed the programming code used to create the invisible ads. Code that ultimately causes advertisers, including some major companies and brands, to pay for advertising that is "there," but not to the user. Just like the text color coded to appear invisible against the background here, these programming codes—normally used to tell the computer how to display a web page when a browser loads the page—make the display (referred to as an "iframe") invisible, so the user won't actually see anything within that iframe. Because you can't see any of the contents, scammers can create multiple invisible iframes, even on the same page. Mr. Edelman reported that he "opened a series of invisible pages on the visitor's computer with as many as 46 ads"—none of which could be seen.

I suspect that when Congress and regulators refer to targeted advertising, they aren't thinking about criminals who target legitimate advertisers and publishing networks and ultimately cost them (and you) money. But here at Legal Bytes, and among the lawyers at Reed Smith, we are! Need to know more about digital advertising, publishing networks, media and marketing online? Call Joe Rosenbaum, or any of the lawyers at Reed Smith you work with. We are happy to help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Anthony S. Traymore and Joseph I. Rosenbaum.

A few weeks ago, Legal Bytes reported that, buried in the new financial services "reform" legislation, is the establishment of a brand new regulatory agency – the Consumer Financial Protection Agency (see Congressional Hammer Poised to Strike at Financial Advertising). Guess what. Not to be outdone, the regulators are in the act – pardon the pun – already. Witness recent statements by Richard Ketchum, Chief Executive of the Financial Industry Regulatory Authority (FINRA). In recent statements, Ketchum acknowledged that Wall Street is eager to use social media like Facebook, Twitter and Linked In to interact with customers and, that to a large extent, the growth of the use of these sites is inevitable. But at a recent Securities Industry and Financial Markets Association (SIFMA) meeting, he noted, "We continue to witness the advent of technologies that will challenge your ability to ensure compliance with regulatory requirements," and "Social networking is one such innovation."

At that same meeting, Ketchum raised the issue that retention functionality available on social media services may not be sufficient to ensure a financial service firm's compliance with applicable regulations, including the FINRA Rules. If you aren’t a broker-dealer, don't read the next sentence. But if you are: Imagine how social media services used by brokers to communicate with clients could impact FINRA Rules concerning Communications and Disclosures (see, Section 2200). FINRA has now set up a taskforce comprised of industry professionals to explore how firms may utilize social media to better communicate with their customers without "compromising investor protection."   

Such studies and evolutionary (or revolutionary) regulation are increasingly common these days. As our loyal readers already know, Legal Bytes reported previously (FTC Releases Updated Endorsement & Testimonial Guidelines and Reed Smith Analysis of the New FTC Endorsement and Testimonial Guidelines), that the FTC’s revised Guides Concerning the Use of Endorsements and Testimonials in Advertising will become effective Dec. 1, 2009. These revised guidelines represent updates to the prior guides, and acknowledge the proliferation of false claims, phony testimonials, and spurious endorsements (or negative comments) by consumers, experts, organizations and celebrities, through the use of blogs and other "word of mouth" marketing tools. As described in a recent Wall Street Journal article, the SEC disclosure rules apply to Tweets, blog postings, wall postings and other communication platforms provided by social media sites. Other regulatory agencies are similarly seeking to address the use of social media sites by the entities they regulate (e.g., the FCC, the New York State Insurance Department).

Do you have a social media policy?  The complexities are enormous. Internal (during work) and external (non-working hours). Employees, agents, contractors and suppliers. Domain names, URLs and trademarks (which include service marks, for you purists in the audience). Approved content or ad hoc comments. Official presence or not – condoned or not. Today, activities outside the scope of employment are often considered not attributable back to the company absent special circumstances or relationships. Will social media break down those barriers further? If so, what can companies do to reach their customers while continuing to protect their most valuable assets – their employees and their brands? Does a company have the right to regulate conduct outside the workplace, even if it involves reference to the company? Oh, and by the way, you do know that social media, enabled by the borderless web, doesn’t really pay attention to national boundaries, AND that means it's not just U.S. law you may need to worry about – even if you are a U.S. company. If you are an international, multinational or global company . . . good luck. No, not good luck. Call us. Our Advertising Technology & Media Law group has unparalleled breadth and depth in understanding, working with, and advising clients in this brave new world. 

So if any of this is of passing interest, stay tuned. If it is or becomes a pressing need, please contact Joseph I. Rosenbaum or Anthony S. Traymore, and let us help you avoid being anti-social. Of course, if you are already a Reed Smith client, feel free to contact the Reed Smith attorney with whom you regularly work, and he or she will be happy to coordinate your legal needs with us.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was contributed by John Feldman, edited by Joseph I. Rosenbaum.

Puerto Rico Sweepstakes Regulation Revised

Earlier this week, Luis G. Rivera Marín, Secretary of the Department of Consumer Affairs (DACO) of the Commonwealth of Puerto Rico, announced the enactment of the country’s revised Sweepstakes and Games of Chance Regulation, effective Nov. 27, 2009. The new rules remove legal barriers that previously forced advertisers and other promoters to void sales promotions in Puerto Rico and to limit participation in many product and service sweepstakes to only residents of the 50 United States and the District of Columbia. When it becomes effective, the regulation will provide the 3.9 million residents of Puerto Rico with an array of opportunities to participate in the “chance to win” promotional marketplace more generally available within the U.S. market.

“I am pleased to announce that the many practical complications U.S. advertisers previously experienced conducting sweepstakes in Puerto Rico, which routinely led to excluding our residents from participation in their promotions, are now behind us,” Mr. Rivera said. “For many years our laws made it impossible for companies to conduct national sweepstakes here, and consequently we have been excluded from the opportunity to take part in these potentially valuable promotions. We enter a new chapter now whereby our law adequately protects consumers without locking ourselves out of perfectly legitimate sweepstakes.”

Changes in Puerto Rico’s Sweepstakes and Games of Chance Regulation align the Commonwealth’s rules and definitions with regulations in the United States promulgated by the U.S. Postal Service, the U.S. Federal Trade Commission and individual states. Highlights of the new regulation include:

• The definition of "consideration" contains some of the best language for SMS and other technology-based sweepstakes in the United States
• The requirement that the rules be certified by a notary is GONE
• The vague prior reference to having to deliver prizes within three months is GONE
• An express provision defining "abbreviated rules" has been added and the regulation provides for the use of abbreviated rules in advertising, so long as they point to where the full rules are published
• Although rules still need to be "published," you can now satisfy that requirement by putting them on a website
• The requirement that rules be published, disseminated and spread in Spanish is GONE. The new regulations allow you to publish them in the language of the advertisement.
• Complicated “odds of winning” statements have been simplified
• Complicated publication dates for different types of promotions are GONE
• The requirement that the drawing procedures be certified by a notary is GONE
• Notarized certification of game piece security codes is GONE
• Tax liability, which was previously placed on the promoter, is now on the entrant 
• A requirement that full rules appear in print ad covering more than two-thirds of the page is GONE
• Regulations concerning unavailability of prizes based on "foreseeability" of circumstances is GONE
• Penalty for not awarding prizes if the circumstances were foreseeable is GONE
• Although changes to rules still need to be approved by the Secretary, if no action is taken after 10 business days, the default is approval
• The complex prize awarding regulations (e.g., within three months; quality advertised) has been simplified—now requiring that prizes be awarded as advertised
• The requirement that alternate winners be chosen is tempered by the caveat that some prizes, because of their nature, cannot be awarded to an alternate winner
• Any distinction between games originating inside or outside of Puerto Rico is GONE

“DACO is grateful for the assistance of John Feldman, a partner in the Washington, D.C. office of Reed Smith LLP, an international law firm, and Gabe Karp, Executive Vice President and General Counsel of ePrize LLC, the worldwide leader in interactive promotions, who both provided the Department with a great deal of information and significant input and suggestions in redrafting the sweepstakes regulations,” Mr. Rivera said. “Without Mr. Feldman’s and Mr. Karp’s able consultation and guidance over the past several months, the opening of a vibrant Puerto Rican sweepstakes market for U.S. advertisers and our people would not have been possible.

“Both Reed Smith and ePrize are cutting edge in the area of promotions, particularly in the cross border aspects of this advertising specialty,” Mr. Rivera continued. “They provide aggressive and creative thinking, as John and Gabe did in helping us solve our longstanding issue with sweepstakes barriers.”

Legal Bytes congratulates John Feldman in our D.C. office, who is not only an authority in sweepstakes, contests and a wide variety of promotions, but is also well-regarded by peers and by regulators who, as in this case, call upon John for his insight and who respect his reasoned and experienced views. Nice work. You can download the text of the revised Sweepstakes and Games of Chance Regulation right here.

If you are a client, you can get the benefit of his experience by contacting John Feldman directly; or me or Douglas J. Wood any of our Advertising Technology & Media law team; or the Reed Smith attorney with whom you regularly work. If you aren’t a client and you advertise, engage in promotions or marketing – why aren’t you?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Joseph I. (“Joe”) Rosenbaum was recently interviewed by American Banker reporter Maria Aspan in connection with advertising and marketing consumer credit cards, and certain legal implications in brand marketing and advertising, including some of the more subtle viral and social media campaigns. Joe’s quotes appear in an article by Ms. Aspan entitled, "Barclaycard U.S. Taking Baby Steps in the Public Eye".

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Under mounting pressure that "An Act To Prevent Predatory Marketing Practices against Minors"—which was recently enacted and which became effective last month—was unconstitutional (both on free speech grounds and because it unduly restricted intestate commerce), a Maine legislative committee recommended that the new privacy law be repealed. The law would have placed restrictions on the collection and use of data of minors—effectively extending many provisions of COPPA to teens age 13 to 18—and requiring parental consent for the collection of any personal information. While concern still remains over sensitive data (e.g., medical- and health-related information), Maine appears to be poised to modify the original law to limit its applicability to health- and medical-related information of minors. 

Without belaboring the Constitutional arguments (preemption by federal law, unlawful restriction on interstate commerce beyond a state’s interest in protecting its citizens) the Act, if enforced, would have even restricted the rights of teenagers to receive certain information or to participate in social media and social networking activities. Opposition was unusually diverse—with the Center for Democracy & Technology. a civil liberties-focused organization, and the Maine Independent Colleges Association, joining the marketing-oriented Motion Picture Association of America and the Association of National Advertisers in objecting to the legislation.

Apparently in deference to the court cases that had been filed in opposition and the arguments made, Maine’s attorney general previously indicated she would not enforce the Act.

Privacy? Children’s Advertising? State vs. federal law? We can help sort out the confusion. Call me, Joseph I. Rosenbaum, or John Feldman or Douglas J. Wood, or the Reed Smith attorney with whom you regularly work.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The late Will Rogers, that wonderful American humorist from Oklahoma, once said: "This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer." Presumably, the image conjured up by that remark relates to just how much damage can be done before someone takes the hammer away! Well, in those days, Mr. Rogers lauded then-President Franklin D. Roosevelt for taking the hammer away from Congress before they did too much damage. If the strong response the newest Administration/Congressional initiative has evoked from the banking, advertising and media industries is any indication, one might conclude that President Obama has been providing too many hammers these days. This may be a little longer than my usual blog post, but read on . . . you won’t be disappointed.  

To provide a little context for the consternation, a few months ago, gift cards were inserted (for the first time) into federal legislation, ostensibly targeted at the practices of financial institutions applicable to credit cards. Where previously state legislation reigned supreme, the promotion of gift cards, disclosures regarding dormancy or inactivity fees, expiration dates, among other things, became part of U.S. federal law under the new Credit Card Act of 2009.. The legislation was intended to prevent abuses in the credit card industry and protect consumers, and in that spirit, a section covering gift cards seemed like a nice idea. But when it came to gift cards, it was unclear what problems had arisen that were not already (or couldn't be) dealt with by state law – what was broken that needed to be fixed by federal regulators. Is concentrating regulatory power and discretionary rulemaking in the hands of federal agencies, simply for the sake of control, always a good thing?

So in case you haven’t heard, let’s talk about the newly proposed Consumer Finance Protection Agency (the “CFPA”). The CFPA is part of the Administration’s regulatory reform proposal submitted to Congress a few months ago, intended to provide a new regulatory framework for the financial services industry and, among other things, prevent practices and problems that led to the current crisis in the financial industry. Well, if you are a banker, broker-dealer, insurer or a financial officer, you probably already know the government is considering such major reforms and a restructuring of the current regulatory scheme.

BUT, have the finance folks told the marketing and advertising professionals to start worrying too? Perhaps now would be a good time to do so! In referring to the CFPA, Edward L. Yingling, President of the American Bankers Association, has said, “This agency would have broad powers that go beyond every consumer law that has ever been enacted.” You see, the newly proposed Consumer Financial Protection Agency Act of 2009, now fast-tracking its way through the U.S. House of Representatives, would restructure the Federal Trade Commission and give much of its current responsibility for regulating financial services-related advertising and marketing to a brand new regulatory agency - the newly proposed CFPA. I direct your attention to Subtitle C – Specific Authorities (Sections 131 - 139) of the Act, which would give the new CFPA the authority to review not only consumer lending practices, but also fraud and deceptive advertising, to determine and establish rules governing whether or not marketing practices and advertising are misleading, or if consumer financial products and services are being advertised and marketed fairly to consumers. By the way, the CFPA would also be empowered to interpret and enforce the new Credit Card Act of 2009 noted above. Would it surprise you that the Association of National Advertisers and the U.S. Chamber of Commerce would worry about what a new and potentially confusing and overlapping regulatory scheme, and a completely new regulatory agency, will mean for the advertising, agency and media industries?

If you thought all you had to worry about were things like privacy, behavioral advertising, free speech, blogger liability for claims, ‘Net neutrality, cloud computing, celebrity endorsements and social media - tweet, tweet – think again. Just yesterday, Advertising Age reported that some media industry professionals fear certain aspects of the new legislation will hold media liable for simply running advertisements related to financial services and products that the newly created CFPA believes are misleading. That would effectively push media into the role of de facto censors of advertising content. In other words, it would be a "safer" path (read less legal liability) to simply refuse to accept or run advertising that it determines might be too risky. One section of the proposed bill would empower the CFPA to create standards regarding what is or is not lawful in financial services advertising. Another section could be construed to extend liability to anyone in the chain of development, insertion, creation, displaying or broadcasting an unlawful advertisement. Could that be you?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A few days ago, Legal Bytes alerted you to the fact that the Federal Trade Commission has issued revised "Guides Concerning the Use of Endorsements and Testimonials in Advertising". These revisions update the FTC’s Guides, last modified in 1980, that provide direction to advertisers and agencies regarding compliance with the FTC Act.

John P. Feldman, a partner in our Washington, D.C. office and a key member of our Advertising Technology & Media law team, has prepared (and you can view and download) an Analysis of the New Guides. Of course, no memorandum prepared for general information or a summary of this type can provide legal advice, and you should be careful not to rely on it since everyone’s circumstances and the facts of each situation will differ – at a minimum, based on the type of product or service, the target audience, and the advertising media, among other things. That said, the summary will give you a good overview of what is in the Guides and what is different or updated from the prior Guides.

Of course, if you need specific guidance or need to know more about the FTC Guides, or the implications to social media advertising and marketing or traditional advertising, feel free to contact John P. Feldman, Douglas J. Wood or Joseph I. Rosenbaum, or the Reed Smith attorney with whom you regularly work.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Although it will be published in the Federal Register shortly, you can download and read the text of the Federal Trade Commission’s  revised "Guides Concerning the Use of Endorsements and Testimonials in Advertising" issued earlier today, right on Legal Bytes now. As reported previously in Legal Bytes, the final revisions are intended to update the FTC’s guidance, last revised in 1980, that provide advice to advertisers and agencies regarding compliance with the FTC Act.

While the prior guidelines allowed advertisers to use a “results not typical” disclaimer, that is no longer a safe haven from liability, and advertisers will be required to disclose what a consumer should generally expect when purchasing or using the product. Furthermore, any connection that a consumer might not reasonably know between an advertiser and an endorser needs to be disclosed. In recent years, comments by bloggers, through word of mouth, buzz or viral marketing were never addressed in the Guides. The updated version now deals with and provides examples of when these rise to a level of connection requiring disclosure.. For example, if a blogger receives any consideration in cash or in kind (e.g., free gaming console to try) to review products or services, that would now be considered an endorsement that requires disclosure – even if the review remains unbiased. 

The fact that a consumer should be informed about a material connection between the advertiser and the maker of the statements is now firmly embedded in the FTC Guides, even though these cases were always subject to review on a case-by-case basis. Of course, what constitutes a “material” connection will still be subject to a factual determination, but if a company, for example, sponsors research about its products or services (or potentially about the products or services of a competitor, if the results will be used in a comparative ad), then the company must disclose its sponsorship in the ad. Similarly, although consumers may expect celebrities to be paid for appearing in commercials, if an endorsement is made outside that context – for example, on a talk show, at a book signing, at a motion picture premiere, or on Facebook, Twitter or other social media - any material relationships must be disclosed.

The proposed new guidelines were the subject of a seminar, "Trust Me, I'm a Satisfied Customer: Testimonials & Endorsements in the United States", presented by Joseph I. Rosenbaum, at the University of Limerick in July. You can go to the previous Legal Bytes blog post and download a copy of the presentation at any time.  "

Want to know more about the FTC Guides, or the implications to social media advertising and marketing, or traditional advertising? Feel free to contact me or the Reed Smith attorney with whom you regularly work.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

Late last week, Rep. Rick Boucher (D-Va.), who chairs the Subcommittee on Communications, Technology and the Internet, released a statement indicating that despite industry collaboration and efforts at self-regulation, his belief is that government regulation remains necessary. Rep. Boucher intends to introduce legislation, regulating online behavioral advertising. His statement notes that the intention would be “to assure Internet users a high degree of privacy protection, including transparency about the collection, use and sharing of information about them and to give them control over that collection, use and sharing,” and that the advertising industry’s self-regulatory principles, “while proactive . . . . do not go far enough.”

In deference to the industry, however, Rep. Boucher’s statement also acknowledges that “online advertising supports much of the commercial content, applications and services that are available to Internet users today without charge,” and mentions that the intention of any legislation is not to disrupt well-established business models. The announcement asserts the legislation will have bipartisan support, and although it notes that actual draft legislation is not yet ready for prime time, it will be targeted primarily at privacy concerns, seeking to establish baseline standards relating to the disclosure, collection and use of consumer information, and safe harbors for advertisers that adhere to certain online practices in connection with these issues. In addition, the Federal Trade Commission will be given the authority to enforce the principles in the legislation and define the specific policies and practices that would allow advertisers to take advantage of the proposed safe harbor protections.

You can read all of Rep. Boucher’s statement right here. Fittingly, there is still time to register for tomorrow’s teleseminar “Are You Behaving Badly”, sponsored by the Advertising Technology & Media law practice at Reed Smith.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A few months ago, Legal Bytes noted the progress of the Credit Card Act of 2009 (the “Act”), and when it was signed into law, we updated that blog post with a note about the inclusion, for the first time in federal law, of coverage of gift cards.

Today, some of the credit card protections the Act affords consumers go into effect. First, credit card bills must be mailed to the consumer at least 21 days before payment is due. Second, significant changes to the rates or fees that apply to credit cards can’t be implemented unless consumers are given at least 45 days’ notice. In both cases, this represents an elongation of the prior regulations (14 days and 15 days, respectively). 

Provisions of the Act also in effect now prohibit credit card issuers from raising their fees and interest rates without any notice if a credit card account holder fails to make a payment on time or goes over their credit limit. In most cases, such a charge would have required approval from the issuing institution anyway.

Most of the other significant provisions of the Act come into effect next February (e.g., restrictions on increases in interest rates for existing credit card balances), and by July 2010, the Federal Reserve Board is to have crafted and approved new rules covering consumer disclosures (i.e., advertising, application forms, etc.).

If you need to know more about compliance and credit cards—offline or online—contact me (Joseph I. Rosenbaum) or the Reed Smith attorney with whom you regularly work. We are happy to help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last month, Legal Bytes reported to you that the Association of Advertising Agencies, the Association of National Advertisers, the Direct Marketing Association, and the Interactive Advertising Bureau, in concert with the Council of Better Business Bureaus, released its Self-Regulatory Online Behavioral Advertising Principles. As reported, the major participants in the online advertising industry have proposed to apply these principles to their practices related to online behavioral advertising: “the collection of data from a particular computer or device regarding Web viewing behaviors over time and across non-Affiliate Web sites for the purpose of using such data to predict user preferences or interests to deliver advertising to that computer or device based on the preferences or interests inferred from such Web viewing behaviors.” 

Since we promised to provide you with a bit more detail regarding each of these principles, which are listed below, here is our first installment in fulfilling that commitment. The seven enumerated principles are:

• Education
• Transparency
• Consumer Control
• Data Security
• Material Changes
• Sensitive Data
• Accountability

The Education principle requires everyone in the online behavioral environment to participate in meaningful efforts to educate consumers and businesses about behavioral advertising, the purpose of the Self-Regulatory Online Behavioral Advertising Principles, and the potential benefits and consumer choices that are available when these principles are followed, and to explain to consumers the means and implications of exercising their rights and the choices they may have. While the specifics of all of the proposed educational outreach are yet to be established within the framework of the industry groups that have formulated these principles, the one thing that was agreed on as a tangible, quantitative objective is that through industry-developed website(s) and a major online education campaign, the initial educational outreach would be developed to achieve at least 500,000,000 (yes, that’s five hundred million) impressions over the next 18 months. Thanks to Keri Bruce for her input. Stay tuned for highlights of the six other principles.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last month, Legal Bytes posted Online Gaming Laws Survey – Free (Yes, You Read Correctly), which also included a link that would allow readers to download a copy of a chart summarizing the U.S. laws that apply to online gaming (Survey of U.S. Federal and State Gaming Laws & Regulations). In that posting, I asked "Why would a law firm be giving away such valuable research for free online, on the web, for everyone to see?" The answer, my friend, is . . . (you were expecting a Bob Dylan line, weren’t you) . . .

The answer is simple. We know that many lawyers and firms can do research! While it may come as a shock to some, it comes as no surprise to us that Reed Smith may not be the only, or even the first, law firm that has done 50-state surveys of various laws and regulations. However—and it’s a big HOWEVER—Legal Bytes may be among the few lawyer-driven blogs that actually gives research away to any visitor to our blog—for nothing. You don’t even have to be a client, but you may want to be. It’s free. Yours for the taking.

It’s free because in this age of information and social media, we believe it’s not the research that distinguishes lawyers or law firms. Oh, of course we must do research and, of course, we need to be good at it. We are. But clients want lawyers who can wisely and effectively apply and use the research; lawyers who know how to use years of hands-on experience gained from working with clients, and apply it to real-world, real-life and real-time situations. We give research away because our sustainable competitive advantage is based on relationships, and the depth and wealth of experience that enables us to bring value to clients when they call.

So, just as with online gaming, we turn today to gift cards and gift certificates, online and offline, and the wealth of experience our Advertising Technology & Media law group has developed and applies regularly for clients. The experience that lets us give valuable research away for free. So enough philosophy, show us the money.

In connection with the work we do for many clients, we have found it useful to develop and maintain a database, which we update periodically, relating to Gift Cards, payment instruments that are increasingly blurred with prepaid debit cards, stored value cards, smart or chip-cards, reward cards, discount certificates, and traditional credit, charge and debit cards. If you are in this market, you already know there are regulations that require certain disclosures, certain restrictions on expiration dates and on the imposition of inactivity fees, as well as escheat and abandoned property laws that may apply on a state-by-state basis. You also know that for the first time, the Credit Card Act of 2009 will impose federal legislative and regulatory requirements on gift cards.

So with pleasure to all of our current (and future) Legal Bytes readers and subscribers, here is a link to our publicly available chart covering Federal and State Gift Card Laws. The chart provides a handy citation and reference tool for the various gift card and gift certificate laws in the 50 United States and the District of Columbia, and includes a description of the newly enacted Credit Card Act of 2009, which provides certain consumer protections applicable to gift cards under U.S. federal law.

Now the disclaimers. First, no chart can be as comprehensive or as up-to-date or clear as actually reading and knowing the statutes and regulations themselves. It is a guide, not an authority, and you should not rely on it for anything other than as a roadmap to proper and thorough legal counsel based on the source material itself. That said, let’s not minimize its value either: it represents the distillation of years, and of hours of work and effort. A special thanks to Keri Bruce and Stacy Marcus for helping to consolidate and refine it so that it is ready for prime time.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

When Merck was busy battling lawsuits emanating from the pain medication Vioxx, the Wall Street Journal, among other news organizations that were reporting on the proceedings, also reported on the practice of "ghostwriting," alleging that five out of the six authors of a study published in the Journal of the American Medical Association were paid consultants to Vioxx lawyers! An editorial accompanying the studies in JAMA opined that manipulation of publications in the promotion of drugs by paid ghostwriters might not be such an uncommon occurrence. The Washington Post even went so far as to report that the JAMA studies essentially “accuse” the drug manufacturer of “scientific fraud.” 

Merck responded to the Wall Street Journal article expressing disappointment at reports that trial lawyers might have made payments to authors whose work found their way into medical journals. While a majority, if not all, of the Vioxx cases have been settled, inquiries into the practice of ghostwriting—payments by pharmaceutical manufacturers for articles frequently extolling the virtues of one drug or another and appearing in medical journals—seems to be a continuing, and problematic, means of promoting pharmaceuticals.

As they say, timing is often everything. A few weeks ago, I had prepared a presentation for an international gathering of lawyers at Limerick University in Ireland, describing the use of testimonials and endorsements in advertising. You can read my previous post and obtain a .PDF copy of the presentation. In briefing the assembled professionals—mainly from the United States and Europe—my presentation and their interest focused heavily on the Federal Trade Commission’s proposed updates and revisions to its Guides that were last revised in 1980.

One of the items clearly on the FTC’s agenda is DISCLOSURE—specifically, disclosure of material connections between those who promote and endorse products and services, and the advertisers and companies that create, manufacture, distribute and sell these products and services. Indeed, the FTC is considering extending liability to endorsers themselves who promote goods and services, if the claims being made are found to be false, deceptive, or misleading, or if they represent unfair competition. While much of the discussion surrounding these revisions has focused heavily on new social media and digital distribution—buzz, viral and word-of-mouth marketing, social networks, bloggers, vloggers, sploggers and virtual worlds—and both traditional and revised Guides (as well as specific advertising guidelines for regulated pharmaceuticals), all focus on the potential for misleading consumers as to the credibility of the speaker or writer, where a material connection to the sponsor is not clearly disclosed. Whether a physician who reads an article that is authored by a paid ghostwriter and that appears in a medical journal, would be considered a "consumer" under these circumstances; or whether an independently peer-reviewed article would be considered advertising or promotional activity, are separate questions. But clearly these are topics that have created "buzz."

Well, here we go again. Just recently, the ABAjournal.com reported that Wyeth paid ghostwriters for articles published in medical journals—in this case promoting certain replacement hormone therapy in menopausal women. You can read the full article here. While proponents (or should we say "defenders") of payments made to authors assert that if the medical professional is qualified; if the content is subject to rigorous peer-review by independent experts; and if the authors retain complete editorial control over the content and the views that are expressed; it should not be a problem and should be considered perfectly fine.

Assuming, as both the pharmaceutical companies and the individual authors assert, that the content of these articles is scientifically accurate, many questions arise. For example, is disclosure even necessary under these circumstances? Could failure to disclose these payments be construed as deceptive or misleading—always, or only under specific circumstances, and if so, what circumstances? What criteria will be used to determine if a payment is "material," and if disclosing (or not disclosing) that fact that would affect the reader’s perception of the credibility or impartiality of the authors? Is this even a "consumer" regulatory issue or does this belong to the FDA or another regulatory body relevant to the medical profession, since this isn’t really "consumer" advertising? These are questions perhaps that that FTC and David C. Vladeck, its new Director of the Bureau of Consumer Protection, may well decide to focus upon.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last week, rumors started spreading that Facebook had changed its policy and was now allowing third-party advertisers to use your photos (i.e., images users post onto Facebook) without permission. The flap over the use of Facebook user-profile photos in advertising came into the limelight when a man, using a third-party application, saw an advertisement displayed for an online dating website, and much to his surprise—it happened to include a picture of his wife. There’s Good, Bad & Ugly.

Good news: His wife wasn’t out looking for a date. Bad news: The photo emanated from a Facebook profile photo available to companies that use the Facebook platform ad network. Ugly news: You could be next!

So here’s the scoop:

Facebook has not changed its policy and does not allow the use of your photo(s) without permission. Facebook had previously suspended two ad networks from the Facebook platform for deceptive practices and user complaints. Those ad networks were said to be using third-party applications in which these photos were embedded and, according to Facebook, that violates Facebook’s privacy policy; and the ads were misleading since they made it look as if someone’s Facebook friend had taken action when they really had not. Facebook itself issued a statement noting, “We are as concerned as many of you are about any potential threat to your experience on Facebook and the protection of your privacy. That’s why we prohibit ads on Facebook Platform that cause a bad user experience, are misleading, or otherwise violate our policies.” 

Although some Facebook users might not know it, Facebook has been running ads from its own ad system for more than a year—it lets your Facebook friends know of any direct connections you have with products and services. So if you become a "fan" of a Facebook Page, your Facebook friends might see an advertisement showing both the action you took (becoming a fan) and your profile photo along with the ad. According to Facebook, it will only do this when a Facebook user has taken some affirmative action indicating a connection with the product or service being advertised. Facebook also claims no data is shared with third parties in this process.

The best we can determine, Facebook technically only allows any user content to display in or with third-party advertising if the content isn’t being cached. While Facebook likely tries to control these networks, some obviously are not adhering to this policy, with photos then appearing not only on third-party ad networks within Facebook when they haven’t been authorized, but also in some cases outside the Facebook domain itself.

If you are a Facebook user and have actually read (and understood) its Terms and Privacy Policy, which is part of the Facebook Principles, you might know that Facebook ad networks can use these user photos in ads—they just can’t do so in violation of their privacy policy or in a deceptive manner. While clearly Facebook has an interest in keeping users comfortable with the online social media environment it has created, it will likely either do a better job of disclosing and explaining the potential uses that may be made of user information (including images, connections, and the like), or it will need to monitor and control the use of its advertising platform by third-party advertising networks that are allowed to use the platform.

Every user on Facebook is opted-in to allowing the use of their photos as described above, by default, when they sign up. Perhaps part of the flap is the fact that many users may simply have not known this. Or perhaps there's a disclosure or communication problem within the community. Facebook might also provide more visible or multiple ways of enabling users to opt-out of this feature or create more refined privacy settings so that users are given more options and more information that allows them to control the use of their photos (and other information), certainly outside and potentially inside the Facebook social media community. Most users simply may have had no clue this was the default or that this was happening. Even when they realize this is occurring, many can’t figure out how to change the settings. Currently, the only way to fix the problem is to have users change the privacy settings that are found under “Settings,” “Privacy Settings,” “Newsfeeds and Wall”; looking for the tab that says “Facebook Ads”; and re-setting your “Appearance in Facebook Ads” preference to “No One.”

HOWEVER, just so everyone is clear—this still may not opt you out of Facebook ads displayed to your friends with your photo when you expressly take action within Facebook (e.g., becoming a "fan"), but it will opt you out of third-party network ads. That said, it remains to be seen how Facebook will deal with the delicate reality of handling third-party ad networks that aren’t Facebook affiliates, since these represent a significant source of revenue for creators of Facebook applications. 

To put it more simply, if you provide a third-party application with the right to access your information (which you generally need to do in order to use the application), then technically the advertising networks can access that information, too. That’s why users should pay attention to the applications they add, and get rid of applications they are no longer using. You can do this through the “Settings” menu as well. Head for the “Application Settings” page, and if you see a menu that says “Recently Used,” change it to “Authorized” and you will see the applications you have approved with an “X.” Just click to remove those you no longer wish to have authorization. That way, you won’t wind up as a poster child for some product or service that you did not and would not ever intend to endorse.* 

If you need to know more, please contact Joseph I. Rosenbaum at jrosenbaum@reedsmith.com, or you can view his bio at reedsmith.com. Of course, you can always contact your favorite Reed Smith attorney, who will be more than happy to help you. 

* Speaking of endorsements, Joseph I. Rosenbaum was actually speaking of Endorsements (and Testimonials) at a recent CLE Conference in Ireland, sponsored and hosted by the School of Law at Limerick University and previously featured in Legal Bytes. A copy of Joe’s presentation (without the embedded videos) has been posted in .PDF format in an update to the previous posting.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Adam Snukal.

Kathleen Sebelius, Secretary of the Department of Health and Human Services (“HHS”), hadn’t been on the job even two months when she found herself a defendant in a class-action lawsuit brought in the Southern District of New York. A registered nurse had brought the action against Ms. Sebelius, as well as the White House Office of Health Reform Director and the Administrator of the Centers for Medicare & Medicaid Services, alleging that certain provisions of the American Recovery and Reinvestment Act (“ARRA”) violate privacy rules central to the Health Insurance Portability and Accountability Act (“HIPAA”) and the federal Privacy Act.

The suit claims that pursuant to the ARRA, the development and implementation of a new health care information technology system that will create an electronic medical records database by 2014 will include Americans who are not covered by either Medicare or Medicaid (according to the lawsuit, Medicare and Medicaid only cover approximately 23 percent of the American population). This system, according to the complaint, poses a major threat to individual privacy, placing individuals’ personal health information “just a mouse click away from being accessible to an intruder.”

The action takes issue with ARRA’s provision allowing HHS to determine what constitutes the “minimum necessary” amount of personal health information allowed to be disclosed under HIPAA. According to the suit, "This technology will be used to deprive the Plaintiff and others of their fundamental right to privacy by requiring that their medical records be released by their health care providers and upon entry into the Health Information Technology maintained under the supervision of the Secretary will be made available without the permission of the Plaintiff to an unknown and potentially unlimited number of persons.” The action seeks an injunction to prevent distribution of payments for the purchasing of the electronic health care systems.

The standard of “minimum necessary” is a central tenet of the HIPAA laws, which require that when a health care provider uses or discloses personal health information, or requests personal health information from others, the provider must undertake reasonable efforts to limit itself to “the minimum necessary amount of PHI to accomplish the intended purpose of the use, disclosure, or request.” Under this standard, providers must develop policies and procedures that limit information uses, disclosures and requests to those necessary to carry out the organization's work. That includes identification of those within the provider’s workforce that need access to carry out their duties, and reasonable efforts to limit access accordingly. HHS has been clear that the minimum necessary standard that health care providers are required to follow calls for the employment of a "reasonableness" analysis, so that a provider’s functions are not unduly restricted.

Few elements of HIPAA have generated more controversy than this standard, but if this court elects to embrace that standard, the likelihood of the success of this action on its merits may seem remote. HIPAA places a heavy emphasis on maintaining the privacy of an individual’s personal health information, and if the ARRA regulations applicable to the manner by which health information electronic systems are permitted to collect and share personal health information are consistent with HIPAA’s standard of reasonableness, there will be a substantial burden of proof for the plaintiffs to overcome.

If you need to know, you need to contact Adam Snukal at asnukal@reedsmith.com —or you can always contact your favorite Reed Smith attorney who will be more than happy to help you. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

“Advertising Law in the United States and Europe: The Challenges Ahead” is the subject of a CLE Conference organized and sponsored by the University of Limerick Law School and the Franklin Pierce Law School that is being held July 24 and 25 in Limerick, Ireland (Limerick is 20 minutes from Shannon). Douglas J. Wood and Joseph I. Rosenbaum, Co-Chairs of Reed Smith’s global Advertising Technology & Media Law Group, are among the distinguished faculty, which includes some of our clients, as well as scholars and government leaders from both sides of the Atlantic.

What’s more, these institutions have graciously agreed to allow us to invite our clients to attend at no charge. Yes, you read correctly. Free! Now you must be a client to take advantage of this promotional offer, and although you will have to pay your own way to join us and stay for the two-day course, what better time and excuse to visit Ireland? Yes, it’s short notice, but airfares are favorable, and if you are in Europe you literally have no excuse not to get away and take advantage of this great opportunity. Just click to learn more about the Agenda, the Faculty, the University of Limerick Law School, where the conference will be held; or nearby accommodations. Being a client does have its privileges, so if you are interested, email either Doug Wood or Joe Rosenbaum as soon as possible to take advantage of this opportunity. And start making your travel arrangements now!

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Last week, Facebook announced the availability of a personalized Facebook URLs. This latest offering from Facebook raises serious issues—issues that are typically encountered when technology collides with traditional intellectual property laws intended to protect trademarks and brand names. Much like the confusion and abuse that proliferated when cybersquatting became rampant over the ownership and administration of domain names, we now have social networks and service providers allowing users to generate content and offering customized URLs within their domains in a digital and borderless world. Significantly, the promotional momentum created by Facebook's offer has caused every astute brand and trademark owner to ponder whether they should be in a rush to register their personalized URL on Facebook, or let it ride and deal with potential infringements when—and if—they occur! You need practical guidance and insightful approaches to these problems.

The Media & Entertainment Industry Team and the Advertising Technology & Media Law Group at Reed Smith have put together an informative one-hour teleseminar entitled “Facebook Personalized URLs: Titanic Brand Opportunity or Tip of an Iceberg?” airing on Tuesday, June 23 at 12 p.m. EDT with partners Doug Wood and Joe Rosenbaum, to help you understand the issues, formulate an approach and make informed decisions and you are invited to participate. Participation is free, although long-distance telephone charges apply outside of the United States, the UK, France, and Germany, where 800 numbers are used. Don’t miss this call!

Call-in ports are limited, so please click here to register or contact Anna Kazachkov at akazachkov@reedsmith.com no later than Monday, June 22, to receive a dial-in number and a passcode. If you require additional information, you can contact Anna by telephone directly at +1.212.702.1399.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On Tuesday, June 9, the popular social networking website, Facebook, announced that on Saturday, June 13 at 12:01 a.m. U.S. EDT, it will allow its registered users, subject to certain criteria and qualifications, to create personalized URLs for profiles and pages on Facebook (e.g., http://www.Facebook.com/insertyournamehere.   Currently, a user’s Facebook URL consists of the Facebook.com URL followed by numbers (e.g., http://www.facebook.com/profiles.Php?349485).

Allowing users to register personalized names on the web raises, among other things, infringement issues under federal and state trademark and related intellectual property laws, particularly for owners of well-known brands. Any registration process creates fears of cyber squatting and other attempts to hijack trademarks and brand names. Sometimes these fears are well founded; other times they are not. You may have already received bulletins from law firms and bloggers eager to alert you to the fact that Facebook has also announced it has created an online submission form that allows owners of registered trademarks to notify them of their IP rights. Ostensibly, Facebook intends to use the information submitted to preclude others from attempting to use registered marks in personalizing their URLs on Facebook.

While we applaud advising clients and friends of this development, we believe the matter is considerably more complicated than previous briefs and hasty reports may indicate. As is so often the case, the devil is in the detail, and the information below will give you a deeper look at the issues before racing to submit notifications of your IP rights to Facebook.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

We previously reported its progress in Legal Bytes and last week, President Obama signed into law the Credit Card Act of 2009. Although the bulk of the Act (and the bulk of the publicity surrounding its enactment and passage) deals with credit cards, it also amends the Electronic Funds Transfer Act and implements federal regulation of general use pre-paid cards, gift certificates and store (retail) gift cards. The new law is scheduled to take effect Aug. 21, 2010, and substantively deals with dormancy fees (so-called “inactivity” or service fees) and expiration dates. 

In the area of dormancy or inactivity fees, the new law prohibits them unless there has been no activity for 12 months. In addition, in order to impose any such fees, certain disclosures must be made to the consumer prior to purchase. The new law also prohibits expiration dates of less than five years, and requires clear and conspicuous disclosure of the expiration date, if any. In addition, gift certificates issued as part of an award, loyalty or promotional program (i.e., no money or other consideration is given) are, as is the case with many state laws, excluded. And speaking of state laws, the Act specifically does not pre-empt state laws that provide greater consumer protection. 

What else should you know. First, plastic cards and payment code devices used solely for telephone services or that are reloadable, are not marketed or labeled as gift cards or certificates, not marketed to the general public, and issued in paper form only (including those that apply to tickets and events), are not covered by the requirements of the new Act.  Second, the law authorizes the Board of Governors of the Federal Reserve, in consultation with the FTC, to develop requirements concerning the amount of dormancy fees that can be charged (only once each month), and to more carefully seek to define which provisions of the Electronic Fund Transfer Act and Regulation E apply in this context. 

So, for states that have had no, or lesser, consumer protections, the Act clearly establishes a minimum federal threshold for the imposition of dormancy fees and the prohibition of expiration dates earlier than five years. For states that already have or may yet impose more stringent requirements, those requirements are specifically permitted under the Act, so you will still have to keep track of state requirements in this area. 

If you need to know, you need to contact Keri Bruce or Joseph Rosenbaum – or your favorite Reed Smith attorney – who will be more than happy to help you.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

Although consumer credit regulation is hardly new – Regulation E, the Fair Credit Reporting Act, Regulation Z and laws regulating disclosures, debt collection practices, billing statements and the like have been around for decades – for the first time in U.S. history, Federal legislation is tackling pricing, rate modifications, advertising disclosures and fees, and adding a gift card angle as well. 

While the House has not yet passed this or any other version of the legislation, those in the know believe a similar, if not identical, bill will be approved by the House of Representatives and that the President is likely to sign it. 

Are you a bank, payment card association, credit union or financial institution that issues credit cards or gift cards? Here are highlights of the bill that passed the Senate:

• When marketing, a card issuer would not be permitted to increase any advertised ‘teaser’ rates for at least a year after a new account was opened for the consumer, and promotional rates advertised to consumers must remain in effect for at least six month;
• Unless the credit-issuing institution can get proof that anyone under 21 can actually repay their credit card debt, credit cards can only be issued to individuals under the age of 21 if a parent, legal guardian or guarantor agrees in writing to be responsible for the debts;
• If a consumer pays more than the minimum balance due, the excess must be applied to the balance with the highest interest rate;
• Card issuers will not be allowed to change rates retroactively on existing balances (there is an exception where the consumer is past due by 60 days – which, I guess, presumes that when a consumer can’t afford to pay their balance within 60 days, it’s ok to raise their rates since they probably won’t be able to afford to pay a higher rate either);
• Bills for balances due must be sent at least three weeks (21 days) before their due date;
• Card issuers will no longer be able to charge additional fees to consumers for alternate payment mechanisms (e.g., by mail, telephone, online, electronic, wire transfers), unless the consumer requests and the issuer offers some type of ‘expedited’ service;
• Consumers must be asked if they want to allow ‘over-limit’ credit transactions and if they do not affirmatively consent, the card issuer will not be permitted to charge a fee if the issuer still authorizes the transaction (e.g., your credit limit is $1,000 and you charge something for $1,001 and the authorization system approves the transaction anyway);
• Changes in the terms and conditions that apply to consumer cardholders will require at least 45 days’ notice; and
• The minimum amount of time a gift card must remain valid for use will be 5 years. First, it is likely this will apply to gift cards that are consumer-oriented and where full value is paid, and not to discounted, bulk sales, non-consumer, incentive, employer or promotional gift cards – but then the legislation isn’t final yet, is it? Furthermore, the Federal legislation is not likely to preempt more consumer-friendly State law (e.g., California prohibits any expiration date on such gift cards), but it will place a minimum level of consumer protection against earlier expiration, even in States that have no applicable regulation.

There is also consideration being given to removing any current legal and contractual restrictions on merchants that would allow them to differentially price their products and services based on the incremental costs (or savings) of accepting different forms of payment. When credit and debit cards were scarce and cash was king (cash, as in ‘currency’), regulation and industry groups frowned upon differential pricing, arguing that allowing a merchant to charge more for the use of a credit card was discriminatory to the consumer – even though the cost of accepting such payment instruments was higher (the merchant pays a fee (discount rate) to the card-issuing enterprise for the privilege of accepting the particular brand of card). Furthermore, the growth of corporate and purchasing cards and the use of payment instruments in B2B transactions has resulted in situations where a manufacturer accepts a purchasing card (procurement-based credit card) in payment of sales to distributors, wholesalers and retailers – a fee is charged to the manufacturer for the card transaction. This chain continues until a consumer makes a retail purchase, and if any or all of these transactions involve branded payment instruments and not cash, travelers’ checks, bearer bonds or two goats and a chicken, today, a fee would most likely accrue on each payment-card transaction at each step of the way . . . significantly raising the cost to everyone and ultimately the consumer. Stay tuned.

So: Consumer Credit? Co-branded promotions? Loyalty Rewards Programs? Gift Cards? Premiums and Incentives? Retail Promotions? Payment Card Industry (PCI) Data Security Standards? Privacy & Data Protection? Identity Theft? Data Breach? Pre-Screening? Online Digital Payment Systems? Corporate Cards? Purchasing Cards? E-Commerce? Regulation E? Regulation Z? Statement Insert Advertising; Credit/Demographic Market Segmentation? Free? APR? Limited Time Offer?

Any of these sound familiar? It’s what we do? Our Advertising Technology & Media Law Group; our Financial Institutions Group; our Data Security and Identity Theft Group . . . need we say more . . . If you need help (or you are just over stimulated by the flurry of legislation, regulation and excitement), call us or email me at jrosenbaum@reedsmith.com. We can help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Earlier today, the FTC staff issued a report concerning consumer protection issues arising in the mobile commerce marketplace. A copy of the full report, Beyond Voice, Mapping the Mobile Marketplace is available by clicking the link. The key findings in the report:

• Cost disclosures about mobile services continue to generate consumer complaints. The FTC staff intends to monitor cost disclosures, bring law enforcement actions, and work with industry to improve self-regulatory enforcement
• The FTC and its law enforcement partners should continue to monitor the impact on consumers of unwanted mobile text messages, malware and spyware, and take law enforcement action if and as needed
• Although spyware and malware are not yet significant problems on mobile devices, the FTC is encouraging development of strategies to prevent or minimize their spread, since the issue is likely to magnify as consumers increasingly use mobile devices for a wider range of applications, including Internet access
• Increasing use of smart phones to access the mobile Web presents unique privacy challenges, especially regarding children. The FTC will expedite regulatory review of the Children’s Online Privacy Protection Rule to determine whether the rule should be modified to address changes in the mobile marketplace. This review was originally set for 2015, and will now begin in 2010 instead.

Given the numbers of wireless and mobile devices in the hands of individuals under the age of 18 (and 13), and the increasing proliferation of mobile devices, this will become a hotter topic in the months and years ahead. As if this point needed to be emphasized, it has been reported that as of January 2007—two years ago—there were approximately 800 million cars, 850 million personal computers, 1.5 billion television sets, but already 2.7 billion (yes, billion) wireless and mobile devices in use around the globe, with more than 800 million e-mail and 1.8 billion SMS text-messaging users.

The sheer numbers are staggering, and we are on top of this issue big time. Contact Joe Rosenbaum, John Feldman or Douglas Wood if you need more information or assistance.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Valuable insight in an insightful land.

Political leadership throughout the world is changing, nowhere more so than in the United States. With that will come major changes in regulation, at the local and federal levels or through voluntary compliance with industry standards. Member states in the EU find themselves struggling to respond to local concerns while maximizing their combined market strength. Globalized media and interactive technology are providing consumers worldwide with greater control and choice in what they experience. Local markets are now boundary-less - confounding attempts at local regulation. What are today’s rules? How should advertisers and their counsel respond to the merged but dissonant marketplace and how can they balance competing attempts at regulation in the United States and Europe?

If you are a lawyer looking for high quality CLE or an advertiser hoping to get a glimpse (or make sense) of the law – or if you just want to hear where rhyming is an art and a science, then come join some of the most experienced corporate counsel and outside practitioners in Limerick, Ireland for Advertising Law in the United States and Europe -- The Challenges Ahead sponsored by the Franklin Pierce Law Center and the University of Limerick. The course, being held at the end of July on the campus of the University of Limerick, a short distance from Shannon, Ireland will be as exciting and vibrant as the countryside. 

Faculty is comprised of professors, practitioners and government leaders from both sides of the Atlantic, including Douglas Wood of Reed Smith LLP. To register, go to piercelaw.edu. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In a report entitled “Targeted Online Advertising” (La Publicité Ciblée en Ligne), presented in February and recently released publicly, the French data protection regulatory authority (CNIL) has expressed concern that targeted online advertising could be a conduit for the merchandising of personally identifiable information about online users. 

The CNIL has been examining context-sensitive, behavioral marketing and targeted advertising mechanisms online, and is concerned about privacy implications. The report notes that analyzing online user data for the purpose of serving more relevant advertising involves the collection of Internet protocol addresses, what websites a user arrived from or subsequently visited, and even key words entered by the user. In case you haven’t thought about it, definitions are hardly uniform in laws and regulations around the world, i.e., an IP address is considered personal data in the EU, but is not personally identifiable information in the United States. 

The report raises an alarm over what could be a means of “systematic profiling” and examines what it believes are growing risks to privacy in this context. In France, and many jurisdictions, targeted advertising must comply with the same data protection rules that apply to the use of personal data online. The French authorities have consistently maintained that users should be specifically informed about how their data will be used, and should be given the opportunity to opt out of these uses—even if it means they can no longer use the services available on the site.

The report also specifically notes that many free services on the Internet are actually subsidized by advertising. While “free” is an accurate financial description in a literal sense, consumers often don’t appreciate they are actually paying a “price”—the value of personal information provided in exchange for “free” services they receive online. 

While the report does not attempt to cover mobile or wireless advertising broadly, it does note that adding information about a user’s location through GPS and other technology, adds tracking capability that the CNIL fears will allow for even greater intrusion and profiling of individual behavior. You can read the entire CNIL report in French on their website at “La publicité ciblée en ligne” (Targeted Online Advertising).

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Early on the morning of April 1, 2009, the Joint Policy Committee of the major advertising industry groups reached a tentative agreement on new contracts that will govern the compensation provided to actors represented by the Screen Actors Guild and the American Federation of Television and Radio Artists, through March 31, 2012. The agreements still need to be approved by the union boards and members, with voting expected by the middle of May. Leading the team representing the Joint Policy Committee was Reed Smith Partner Douglas J. Wood.

The basic terms call for an increase of about 5.1 percent in actors’ compensation over the next three years, and higher advertiser contributions to the unions’ health and retirement funds. However, over time, a limit on the contributions advertisers need to make to the unions’ pension and health benefits—up to the first $1 million of salary—will also go into effect.

The tentative accords include a slight increase in fees for commercials that run in new-media formats, but specifically set aside funds for a two-year study focused on examining and restructuring the compensation formulation for actors in commercials to a model whereby they would be paid based on number of viewers (i.e., ratings), and not merely on how many times the commercial airs. 

You can’t get any closer to the action than by talking to lawyers at Reed Smith. If you are an advertiser, an advertising agency, media executive, or anyone involved in commercial production, you need to talk to us. Call us now. We don’t just have the news – we are the news!

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Rumor has it that Google will be launching its much-publicized "interest-based advertising" in April, allowing advertisers to serve ads based on a user's prior interactions (e.g., browsing the advertisers' websites, tracking interests). Google will track categories of web pages that users visit in Google's content network and if, for example, a user visits motion picture and film pages, Google may add them to a corresponding interest category that might be labeled "motion picture aficionado." As we understand it, Google will enable use of the DoubleClick DART cookie in advertising served on websites with AdSense for content advertising. Thus, when a user browses an AdSense publishers' site and views or clicks an ad, the user's browser may have a cookie added.

For you loyal Legal Bytes readers, that means you should review your online terms of use, terms of service, privacy policies and online disclosures to be sure they cover this activity if it applies to your web presence, advertising and marketing activities. If you will need to and you don't already take third-party ad servers into account, you may have to amend these to do so. 

As you know, Legal Bytes cannot provide legal advice (you have to be a client for that). Nor could we possibly advise without knowing the specifics about you, your situation, your jurisdiction(s), or the facts that apply. But consider the following sample (which assumes only non-personally identifiable information is collected) that illustrates the type of language one might consider:

We or our advertisers use third parties to serve advertising on our website and web pages when you visit or browse, and some of them use cookies or other technology to collect information about your visit. This information may be used to improve the operation of our website and enhance your experience as a visitor and user, and also to serve advertising about goods and services that might be of interest to you. No personally identifiable information (e.g., name, address, email or phone number) is collected this way or in this process.

Of course, you can add links or contact information for those who want more information, and you may even direct them to the applicable Google web page,or any other third-party ad-serving network’s corresponding page to either get more information, or learn how to opt out of or disable cookies.

Now go call the Reed Smith lawyer you normally deal with for help or contact me (Joseph I. Rosenbaum). We put together and advise companies in connection with their terms of service, privacy policies, and disclosures, and their online, wireless and web presence, all the time. How can we help you?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A U.S. Circuit Court in the District of Columbia has upheld the FCC's rule that requires telecommunications carriers to obtain prior "opt-in" consent from customers before disclosing their personal information to joint venture partners or independent contractors for marketing purposes. The rule, which was adopted in 2007, covers all Customer Proprietary Network Information (CPNI) and also applies to service providers offering VoIP (Voice Over IP) services to customers. For those who don’t stay updated on what the FCC rules mean by CPNI, it includes information such as the phone numbers called by a consumer, the frequency, duration, and timing of the calls and any additional services the consumer is receiving (e.g., call waiting). Our telecommunications experts expect the FCC to enforce this rule aggressively. If you want to read the case yourself, go to National Cable & Telecommunications Association v. FCC , but if you really want to understand what it means to you, contact Robert H. Jackson or Judith L. Harris in our Washington, DC Office.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On March 3, 2009, the Federal Communications Commission (“FCC”) released a Notice of Inquiry to implement the Child Safe Viewing Act of 2007 (“CSVA”), which directs the FCC to examine advanced parental control technologies that would be compatible with various communications devices and platforms.

Click here to read the full alert, written by Amy S. Mushahwar, Judith L. Harris, and John P. Feldman.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Reed Smith acts as counsel to many of the advertising industry’s leading trade and membership associations – The Association of National Advertisers, The Word of Mouth Marketing Association, the Interactive Advertising Bureau, to name only a few. As you may have notices, a recent Legal Bytes blog post noted that just last month the FTC supplemented its December 2007 “Self-Regulatory Principles for Online Behavioral Advertising” report. 

Well the FTC has been busy in re-examining it’s policies regarding testimonials and endorsements in this digital age. As previously reported in Legal Bytes, the FTC indicated it was revising it’s Testimonial and Endorsement Guides (the first time since the 1980s). Well comments have now been submitted and we strongly recommend that anyone in the advertising and marketing business take a look at some of them. In fact, to help you, Legal Bytes has a couple you can look at right now – Comments for The Association of National Advertisers and Comments for The Word of Mouth Marketing Association – and when you finish reading them ask yourself:

• Now that public comments are in, what do we think will happen?
• What is in front of the FTC that might affect its decision making?
• How would self-regulation differ from the way the FTC has been operating?
• What does the new FTC Chairman think about self-regulation?
• Do we expect the new administration to shift direction? If so, which way?
• How is all this likely to affect advertising and marketing using product placements, branded entertainment, blogs, consumer generated content, buzz, viral and word of mouth marketing?

If you need to know, you need to contact John Feldman, Douglas Wood or Joseph Rosenbaum - or your favorite Reed Smith attorney - who will be more than happy to help you.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

FTC Releases Revised Ad Guidelines: Are New Marketing Practices in Your Wallet?

On February 12, 2009, the FTC supplemented its December 2007 “Self-Regulatory Principles for Online Behavioral Advertising” report, highlighting the FTC’s voluntary best practices for the behavioral advertising industry. While continuing to support self-regulation, that should not be taken as a vote of confidence for continuing the status quo. Change is in the air and you may well need to:

• develop more consumer education concerning behavioral advertising;
• develop internal privacy protections for anonymous data profiles;
• create opt-in notice mechanisms for collection of sensitive information; and
• create opt-in notice mechanisms for retroactive changes to privacy practices.

. . . and if you think your privacy policies are ok, as is, think again. The FTC has taken a broad brush to paint a picture of what it considers personally identifiable information (PII) and what ‘sharing’ of that information may require. Our experts Amy S. Mushahwar and John P. Feldman have written an alert that describes what you need to know in more detail. To read the full alert, with links to the FTC releases, click here.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

Who would have thought that would refer to our financial system, real estate markets, building developers, technology providers and, lest we forget, automobile manufacturers. This was a year of challenge and change. America elected its first Afro-American President, who inherits a country involved in wars, economic turmoil of unprecedented proportions and a government tab increased by $1 trillion in the past 90 days. The NY Giants won the Super Bowl (and may do it again). The price of gasoline went from $2 a gallon to more than $4 a gallon to less than $1.50 a gallon this year, and the stock market experienced unprecedented swings, some days approaching 1,000 points; and fluctuations of anywhere from 200 to 600 points stopped being unusual—sometimes in the same day! No laughing matter, the Federal Reserve was doling out discount coupons for the purchase of investment banks, banks were buying brokerage houses, and non-banks were lining up to become regulated banks, just so they could share in the bail out fund. Indeed, the term “bail out,” once the domain of skydivers and sinking rowboats, became the most over-used word in the news (and in Congress). Speaking of domains, ICANN turned the world of domain names on its ear with its proposed Draft Applicant Guidebook (Legal Bytes; November 2008). Cyberwarfare no longer remained the domain of motion pictures like “War Games,” “Terminator” and “Matrix” when Georgian websites were under attack while Russians soldiers invaded the real Georgian sites. And speaking of Georgia, a court in the other state of Georgia upheld the validity of promotions held via SMS text messaging. Virtual worlds were in the news: divorces, theft of intellectual property, defamation, performance rights, even the murder of an avatar resulted in an arrest. “Green,” behavioral and children’s marketing, blogs, word of mouth and viral marketing occupied much of the discussion at the FTC; identity theft and data breaches continue to create privacy concerns; ad-blocking technology mounted an assault on interactive advertising; testimonials and endorsements created buzz, as did publicity rights, led by the estate of Marilyn Monroe (Legal Bytes; May 2008); a New York court decided that emails could amend a contract because they are “writings”; and the online, interactive video gaming industry, wireless advertising and content distribution, and the rise of processing platforms that serve as home computers, entertainment centers, Internet access and gaming portals—oh, and some are handheld and wireless. The fact that 2008 marked the 40th anniversary of the conception of the x86 device and the beginning of what we now know as personal computing—spawned by the obsession of a San Antonio engineer named Austin O. “Gus” Roche—and the 10th anniversary of the publication of my law journal article “Privacy on the Internet: Whose Information Is It Anyway?” went pretty much unnoticed.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Move over “Dot Com” and other “dots” you have come to know and adore. Soon you may be able to purchase a top-level domain corresponding to almost any word or phrase, including your name or brand. ICANN, which administers domain names, is accepting comments on its new Draft Applicant Guidebook; but if you really want expert guidance and advice on what this means to you and why you should prepare yourself for the changes, read our bulletin Branded Dot Com Internet Domain Names, and then contact John Hines, our resident authority Advertising Technology & Media Law partner, by email or by phone at +1 312 207 3876. Dot’s nice!

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The NFL Players Association was recently ordered to pay $7 million in compensatory damages and $21 million in punitive damages to retired football players who claimed they were excluded from lucrative marketing deals. The class action claimed the “Madden” interactive football games, and deals involving sports card and sponsorships, intentionally scrambled images of retired players to avoid paying royalties. Active players received royalties for their images, but retired players’ images were scrambled. Now normally that might be a key question of fact to be determined by a jury. Unfortunately, there was a smoking gun! Someone at NFLPA wrote to Electronic Arts, publisher of the popular Madden games, explaining that unless they scrambled the retired players’ images, payments would be required. Oops.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The FTC is seeking comments to its proposed revisions to the Guides Concerning the Use of Endorsements and Testimonials in Advertising, last updated in 1980, and which define endorsements and testimonials: advertising messages reflecting opinions, beliefs, findings or experiences of someone other than the advertiser, and which consumers are likely to believe. The revisions propose changes to the way the FTC will interpret (and enforce) the Act:

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A new provision of the Italian data protection law (Loyalty Cards, issued Feb. 24, 2005), is getting a workout. The Data Protection Authority fined a well-known supermarket chain €54,000 for not giving customers adequate ino theformation regarding use of personal data. The retailer issued loyalty cards—for shoppers to obtain discounts and rewards—and gathered customer names, email and cell phone numbers (personally identifiable information) and behavioral marketing information (spending habits and locations). Customer profiles were then evaluated and used to create targeted ad campaigns. The retailer didn’t ask customers for consent for all of these uses—a violation of the data protection law.

In Italy, if customer information is not used solely for operating the loyalty program, but for customer profiling and advertising, the consumer must be told and must give consent. While consent is not needed to carry out contract obligations needed to fulfill the loyalty reward program itself, collecting more information than needed for that purpose or using information for other purposes requires specific consent. Is this true elsewhere? In Europe? The United States? Canada? Latin America? Asia? New Zealand? Call me and find out, or read my bio.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The U.S. Congress appears determined to investigate online advertising. Early this month, the House Energy and Commerce Committee issued a letter to more than 30 companies, and what began as an inquiry into how Internet service providers use network data to target advertising, has morphed into a fishing expedition into all kinds of interactive advertising. Most notably, and despite urging by the FTC to allow self-regulation to take hold, the Committee does not differentiate between personally identifiable information and non-identifying, anonymous data used for traffic metrics, ad insertion and other common advertising purposes. Lumping different kinds of information together could needlessly undermine marketing as it has been practiced for decades. The “tailoring” of advertising, in the Committee’s words, based on consumers’ behavior and media consumption patterns, has been at the heart of marketing for as long as marketing has been around.

More disturbing are presumptions that “privacy” rights are being violated by any and all forms of behavioral or targeted marketing. Advocacy groups opposed to commercial communication seek to promote an implicit, yet fundamental redefinition of personal privacy—i.e., anything that derives from peoples’ activities, no matter how distanced or anonymous. Taken to logical conclusion, any academic, commercial or journalistic observation of consumer activity could fall under regulatory restrictions under such a framework. Not surprisingly, the FTC—with its long history of regulation of advertising practices—has argued before Congress that self-regulation is likely to be an effective means of protecting consumers’ real privacy interests. According to testimony by FTC Consumer Protection Bureau Director Lydia Parnes before the Senate Committee on Commerce, Science, and Transportation this July, the FTC is “cautiously optimistic that the privacy concerns raised by behavioral advertising can be addressed by industry self-regulation.” Nevertheless, in the letter released this month and in three previous inquiries over the past few months, both the House and the Senate seem to be searching for a rationale to regulate. Stay tuned.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The Children’s Advertising Review Unit recently held that screening for age to avoid collecting personal information from children under 13 was not enough. In Bandai America (the website is Bandai’s Wireless.com site), CARU found that although Bandai’s website had a screening mechanism that asked for a date of birth, there was no tracking once a child put in a birth date. Thus, anyone under 13 could come back and enter a different (inaccurate) date of birth to get by the screen. CARU’s COPPA compliance guidelines require that not only must interactive sites have an age screening mechanism, but there also must be some reasonably effective means of tracking so children can’t get around the screening process. Forewarned is forearmed.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

When Coors asked, football fans chose to receive text-message alerts about the NFL football draft, each one containing a blurb about Coors Light; and mobile devices can also send messages, not just receive them. They can be interactive! While messaging technology allows only 40 characters for an ad (the other 120 are for content), simple tag lines are the current vogue.

Coors is not alone. Marriott has sponsored a campaign combining print and cellphone ads with free sports alerts from USA Today’s website. Verizon Wireless is sponsoring an ad campaign in which Screenvision, a company that boasts an ad network of thousands of screens in thousands of motion picture theaters, will ask theater audiences to vote by text messaging, with results calculated and displayed on-screen. The advertising campaign will feature branded popcorn containers and a short film directed by Spike Lee entitled “VCast Street.”

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As of May 26, brands that spread their positive messages in the UK without clearly identifying the origin will be subject to criminal prosecution—yes, you heard correctly. The consumer protection legislation, which includes fines and prison sentences, makes it an offense to blog, use brand representatives or viral ads “falsely representing oneself as a consumer.” Bloggers who write about products and accept money without disclosing it are also subject to criminal prosecution.

Legislation in Europe may be a response to some well-publicized buzz that unfortunately did not publicize the source. The founder of Whole Foods, using an alias, began criticizing competitors through online forums. Guess who sponsored a road trip called “Wal-Marting Across America” without attribution. And Sony apologized when consumers discovered that an “All I Want for Christmas is a PSP” amateur video and blog appearing to be written by a friend of someone in the video, was a viral ad campaign engineered by Sony and its ad agency.

In the United States, the advertising industry has a successful model of self-regulation and industry leaders believe such a model can be extended to word-of-mouth marketing. Stay tuned.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A study released in April by BlogHer & Compass Partners indicates more than 36 million women actively participate in the blogsophere each week, and that half of the participants felt blogs were a reliable source of information and advice. The study found women were so passionate about blogging that 55 percent would give up alcohol, 42 percent would give up their iPods—but only 20 percent would give up chocolate!

• Email This
• Print
• Comments
• Trackbacks
• Share Link

When NBC Universal broadcasts “Deal or No Deal,” viewers are invited to play a “Lucky Case Game.” The game allows viewers to pick one of six cases and submit their entry via premium text message ($.99) or online. If you pick the right case, you are entered in a random drawing for a prize of up to $100,000. Well, wouldn’t you know. Someone lost and sued NBC under Georgia’s gambling laws, which make gambling contracts void and states that any “money paid…upon a gambling consideration may be recovered from the winner by the loser” (Hardin v. NBC Universal). There are also actions pending before the California courts. Just a few weeks ago, the Georgia Supreme Court held that the $.99 was not a bet or wager, and there was no “gambling contract” between the plaintiffs and NBC. For now, and at least in Georgia, a premium text message game is permissible.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last fall, a California court held that CMG, assignee of rights under Marilyn Monroe’s estate to exploit her image and likeness, had no rights because at the time of her death, there were no laws in either California or New York recognizing rights of publicity. Enter California’s legislature—amending its law to retroactively enact rights of publicity (See Legal Bytes, October 2007) to “remedy” this unfortunate state of affairs. Whoops. Not so fast. A judge in the U.S. District Court for the Central District of California has just ruled Marilyn Monroe was a New York resident at the time of her death in 1962, and pulled the plug on the recently amended California Right of Publicity law.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The FTC issued its Final Rule concerning certain aspects of the CAN-SPAM Act May 12, 2008. The Final Rule: (a) allows multiple marketers to designate an otherwise legally qualified entity as the single “sender” for purposes of compliance. The sender still must comply with the opt out, identification and other requirements of the Act, but no longer must be the entity that controls all the content or determines all the email addresses to which the message will be sent. In practice, this means only the designated sender (not the other marketers) needs to honor opt-out requests, and only the designated sender needs to have a physical address in the message; (b) prohibits conditioning an opt-out request on paying a fee or providing some personal information other than an email address; (c) allows senders to use a P.O. Box as the physical address if they have accurately registered the P.O. Box with the United States Postal Service; and (d) defines the word “person” to include business entities. As part of its ruling, the FTC also refused to change the amount of time (10 business days) a sender has to comply with an opt out request from an email recipient, and also rejected putting any time limits on how long an opt-out request from a recipient would remain valid and in effect.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Most of us know the law tends to lag behind the marketplace. It is in the nature of most legal systems to try and balance statutory and regulatory authority—which makes rules based on experience or potential issues that will apply to future conduct—with judicial and regulatory decisions—cases that are adjudicated, create precedent and help shape the contours and boundaries of what is or is not permissible behavior within the statutory authorities.

In such a framework, we are often asked to counsel clients as to what is or is not acceptable when there may be little law, few regulations and sometimes no precedent. What to do? Well, as you may imagine, there is no simple answer. But there are some guideposts. A key guidepost is to consider common sense, best practices and some lessons learned from analogous legal precedent.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

According to a report in Media Week, advertising spending for advertising in videogames will reach about $1 billion by 2012. Advertising in video games can take a number of forms: in-game advertising, which is preformatted ads that appear within the game itself; advergames, which are games constructed around a particular brand or product in order to highlight and promote that product or brand; context-sensitive or dynamic advertising, which is similar to in-game advertising, but rather than static advertisements, can be contextually modified in a number of ways depending on when, where and how the in-game scene is viewed. Most of that growth is projected in the casual, online, web game world catering to a broader audience than hard core console gamers. The logic is that people are more willing to accept advertising in return for free game playing on the web; and absent a dynamic Internet connection with more user acceptance than is evidenced to date, console gaming provides fewer opportunities for placing context sensitive or behavioral advertising.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

To settle FTC charges of deceptive advertising, ValueClick (and its subsidiaries—we’ll just use ValueClick, for short) agreed to pay $2.9 million. In addition to the civil penalty, among other things, ValueClick agreed to conspicuously disclose costs and obligations associated with “free” products. ValueClick is also precluded from making any deceptive claims about the security of a consumer’s information collected by its websites. The FTC charged that ValueClick attracted web traffic using deceptive e-mails, online banner ads and pop-ups claiming individuals were eligible for “free” gifts, but instead were required to plow through and participate in tiresome and potentially expensive third-party offers in order to receive the “free” products. With respect to the security of consumer information, ValueClick’s privacy policies represented that customer information was encrypted—but that either there was no encryption, or a non-standard, insecure form of encryption was used. The proposed order would require ValueClick have a comprehensive security program and obtain independent thirdparty assessments of their programs for 20 years. This is not the first time the FTC has brought an enforcement action against “lead generating” companies, and certainly among a string of cases relating to the data security and information security practices of companies handling non-public consumer information.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In the 1960s, Stanley Milgrim, then a psychologist at Yale University, conducted a controversial experiment. In an obviously controlled setting for the study, Milgrim and his associates directed their subjects to give ever-increasing electrical shocks to strangers whenever they gave the wrong answer to questions in a test of memory. The strangers were really actors pretending to experience pain and did not actually receive any jolts of electricity. The study, intended to measure how compliant people would be to obey authority figures, even to the point of inflicting pain on otherwise innocent individuals, was disturbing, to say the least. The subjects, despite some discomfort at first, continued to “shock” the test-taking actors. The experiment raised ethical concerns about subject study methodologies, among other things.

However, recently, Mel Slater, a computer scientist at University College London in England (with a joint appointment to the Universitat Politecnica de Catalunya in Barcelona), reproduced this experiment without running afoul of the ethical concerns that the original study raised. Mr. Slater conducted his experiment in a virtual world where test-taking “victims” were avatars whose expressions changed from happy to pained in response to the actions of participants in the study—much the same way the real-life actors did more than 40 years ago. Not only were the results astonishingly similar, but to the surprise of many, the real-life participants experienced increased heart rates and described feelings of regret or feeling badly about delivering electrical shocks—even though they knew the strangers on the other side of the screens were avatars and not real people!

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The FTC is expected to release a Report on how violence is being used to market to children—in movies, music and video games. Some insiders fear the FTC will suggest the entertainment industry has violated or outgrown its voluntary standards—can you say “regulation.” Both the FTC and the FCC have targeted children’s advertising, programming and products. Want to know more? Contact John P. Feldman in our Washington, D.C. office; me or Douglas J. Wood in our New York office; or Stephen Edwards, Michael Skrein or Carolyn Pepper in our London office. Please also visit our www.KidAdLaw.com web pages. If you market or advertise to children or if you are a company that carries advertising which is or could be targeted to children, why would you look anywhere else for legal counsel.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This article was provided by Felix Hofer, partner in the Italian law firm of Hofer Lösch Torricelli and member of GALA. If you need more information, contact Felix.

Advertising targeted at children and minors has become the focus of legislators and watchdogs throughout the world. In the United States, the Mobile Marketing Association (“MMA”) released stricter industry guidelines directed to wireless carriers, aggregators and content providers, to increase protection of children in marketing practices. In the U.K., Ofcom (the regulatory authority) has required an end to “junk-food” advertising to children under 16. The Greek Ministry for Education has established a mobile phone ban for teachers and pupils at school that also regulates how students may carry cell phones onto school premises.

The issue has become a topic of intense debate in Italy and on Nov. 15, 2006, the local Communications Regulatory Authority (“Agcom”) required communication providers offering audiovisual and multimedia services available through mobile devices, to include technical means to prevent minors from accessing harmful content. Services with adult-oriented content must provide a control mode—allowing parents to block access. Providers should provide notice about these controls and users must confirm, in writing, receipt of the notices. A few days later, the same Agcom issued additional rulings to protect minors in the context of entertainment programming, requiring television and radio broadcasters to ensure that content directed at—or likely to attract—children complies with requirements as to language and behavior, and avoids unjustified violence, vulgarity, bad language and sexual innuendo.

Almost at the same time, the National Journalists’ Association released a new version of its rules (the so-called Carta di Treviso) with a specific section (no. 7) dedicated to protection of minors. The rules require that, with few exceptions, journalists refrain from publishing personal or identifiable data of minors; these rules have been approved by the local Privacy Commissioner as an ethical self-regulatory code. This updated version of the ethical rules now applies to on-line, multimedia and any kind of journalistic communication—even bloggers will have to take into account the Carta’s prescriptions.

Food advertising to children is being targeted by the authorities in Italy. For example, a company producing a lollipop popular among young consumers, ran into trouble in a recent television advertising campaign. The commercial depicted three young girls in a bedroom sucking lollipops. The narrative comments “New XX lollipop with fruit cream, really excellent!” One of the girls picks up her skates and says, “Well now we’ll have to do some exercise.” The other girls reply “Exercise? Why? XX contains 0% fat! Didn’t you know?” The commercial closes with the statement “XX: new ultra-juicy flavours and zero percent fat.”

The complaint filed with the Italian Authority for Market and Fair Competition argued the advertisement was targeted at children and the lollipop was presented as a food product that didn’t increase weight because it didn’t contain fat—thus exercise wasn’t needed, suggesting a “dietetic” effect for children and specifically young girls concerned about their weight. In its defense, the company argued the lollipop did not, in fact, contain any fat, and might actually be considered a dietetic product.

The Authority held that the ads were likely to reach an audience of children, considering the time the commercials were aired; and that stating there was no fat in the lollipop was irrelevant because it contained sugar, and the ads suggested exercise was unnecessary. Consequently, the commercial resulted in a misleading message and a fine was imposed.

In Italy, as elsewhere, the promotional message, as well as the presentation, in advertising directed to children requires a high level of attention—even more so with regard to food products, given the particular attention the obesity problem has raised among regulators.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

New York’s Attorney General has just settled actions against Priceline, Travelocity and Cingular Wireless for promoting products and services using “adware”—the first time a law enforcement agency has held an advertiser responsible for ads displayed through adware.

These settlements require the advertisers (and affiliates—presumably sales agents and promotional partners) to give consumers full disclosure of any adware (including adware bundled in other software); ensure advertising has a conspicuous, identifiable brand; obtain consent from the consumer to download and allow the adware to operate on the computer; and make it reasonably simple for a consumer to actually remove the adware from his or her computer. The settlements require these three companies to investigate how their online advertising is being distributed; and if the delivery mechanism violates the terms of the settlement (or the law), the advertisers must take immediate stops to cease use of the offending adware programs. Priceline, Travelocity, and Cingular have also agreed to pay penalties and investigatory costs to the State of New York.

To those of you familiar with the old saying “Caveat emptor,” we can now add “Let the Advertisers Beware.”
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

With file sizes growing, you would think computers that can rapidly process large files and storage capability would be all the rage. For compliance officers, record managers and lawyers, it’s retrieving the information that is the hot issue and hardly a trivial one. New Federal rules relating to civil litigation took effect at the end of last year, requiring companies involved in federal litigation to produce electronically stored information as part of the pre-trial discovery process. The new rules apply to employee e-mails, instant messages and other electronic, digitally stored information. In the event the companies are sued, legal experts say, companies will need to start worrying about everything in electronic form—from digital photos on employee cell phones to text (“SMS”) messages.

Companies need to have sound record retention and destruction of records policies to ensure compliance with regulatory record-keeping requirements and to avoid potentially massive costs of searching and retrieving information that could and should have been purged. Absent actual or an expectation of specific litigation or a subpoena requiring production of data, companies can purge their systems of information that may no longer be relevant or necessary to their business operations. As the cost of storage has come down, however, companies routinely store information and don’t bother to delete unnecessary information—because it’s easy and affordable to simply keep everything!

The opposite is also an issue. Communication between lawyers and technology folks is less than perfect. A lawsuit arrives, but no one tells data management or systems. Tapes and disks continue to be routinely erased or written-over, with corresponding loss of data. Lots of companies don’t have policies and don’t know what information they have, where it is stored, and who may have, have kept or destroyed copies of information in electronic form. Lack of information is a weakness for lawyers. If you remember the adage, “never ask a question you don’t already know the answer to,” imagine how a litigator for the company will feel blindsided by records she was unaware of or cited by a court for destroying records he didn’t know his client had.

Why pay attention? Because by exercising preventive care, you can avoid potentially huge legal and operational expenses. By crafting and enforcing compliant and well-thought-out record retention and destruction policies, you can avoid high-priced lawyers sorting through email messages about the staff luncheon, and the pitfalls associated with a “smoking gun” needlessly showing up in that pesky lawsuit. Call us. The ATM Legal Team can help!

• Email This
• Print
• Comments
• Trackbacks
• Share Link

How Exciting Was 2006!

That introduction is not a question—it’s an exclamation! Buzz and viral marketing, branded entertainment, social networking, MMOG (that’s online, interactive, web-based gaming for those looking to impress their neighbors or their teenagers), and Internet gambling all made increasingly bigger news in 2006. Then came data protection, identity theft, data breach disclosure legislation, payment card industry data security standards, and gift cards on the top-10 list of technology related issues in 2006. Oh, did we mention virtual reality, digital music, DMCA (that’s Digital Millennium Copyright Act) take-down notices, streaming wireless video, user-generated content, and context sensitive advertising and product placements?

Some things won’t surprise you today, but if you thought about it only a few years ago—indeed, in some cases at the beginning of this year—it was an amazing year. The world’s largest licensor of personal computer operating systems delayed the launch of its new Windows Vista operating system—the traditional core of its business—but entered the digital music business. Some huge un-named search engine technology-driven company (that happens to derive its primary revenue from advertising), just bought a young company that made no profit but virtually created the buzz over user-generated content—YouTube—for more than $1.6 billion. Social networking companies were considered social and anti-social, depending on who you ask—kids, parents, regulators.

Laws and regulations took greater cognizance of the evolving interplay between advertising, technology and media. Identity theft and the compromise of data security became the basis for legislation in state after state in the United States. Obesity and the advertising and marketing of food to children became the soup du jour for regulators on both sides of the Atlantic, and potentially the world. Advertising regulators and marketing associations increasingly noticed the world was changing. Digital technology was not simply an enabler, an automation tool or business productivity tool—it invaded our schoolrooms, our playrooms, our automobiles (now I don’t have to stop and ask for directions) and our living rooms. New business models, new social models and new economic models. It’s just exhausting.

This has been an exciting year, one filled with change and challenge (did you know the Chinese word for “crisis” consists of two characters—one means danger and the other means opportunity). We hope you have enjoyed our year of Legal Bytes as much as we have taken joy in bringing it to you and highlighting some of these exciting developments. So let’s look at what’s ahead.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

You have heard the term “convergence” and perhaps you thought about “The Perfect Storm.” Well we are talking about Advertising Technology & Media—our new ATM law group. Have you seen the ads? Product placements in the movies? In banks and on computer monitors? Watch the UGC, unauthorized digitally distributed version, the podcast, advercast, interstitial ad, webcast, streaming video, CGI, buzz and viral version—even the version playing in an embedded video player on my personal web page.

I’m not particularly great at predictions, but like everyone else, I’ll go ahead anyway and make some for 2007. Wireless applications will go through the roof. School children, workers, people at play and people on the go will carry their games, their assignments, their work and toolkit with them digitally and wirelessly--the toolbox of the 21st Century. Applications and content on demand—web apps gone wild! Why load up and clutter up your computers and devices with applications (and content) when you can order them “to go.” And speaking of orders to go, “Would you like fries broccoli with that…?” may be regulated into existence. Worried about the homeless? Advertisements have been feeling lonely on TV lately. Don’t worry—put them on vehicles, beam them wirelessly from your satellite to your car. Move them to the Internet—buffer and stream them before, in between and after news clips and someone else’s dumbest home videos. Better yet, put them in a virtual world and watch the real world virtually go by. Virtual reality will get real. Part play-acting, part gaming, part behavioral therapy and part social networking, virtual worlds will start making money, making waves and making a difference. Go look—start to notice real brands and real people playing in the virtual sandbox. Media will start to take digital seriously (again). Digital effects, digital distribution—did we say digital yet? Intellectual property will need to stop being so intellectual and figure out what to do with all of this “stuff.” The old rules still apply, but are being challenged. So where are the new rules? If content is king, user-generated content is queen, jack and possibly the Duke of Earl. I’m exhausted already.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Those name brands appearing in hit shows. Those logos on the motion picture screen. The characters at the breakfast table with a favorite cereal. The star driving around in a particular automobile. The airline shown flying the lead character off to an exotic destination. Reality? Coincidence? Hardly. They are the result of contracts between the entertainment company or producers and the advertisers, and they represent a growing and important trend in marketing to consumers, along with the Internet, as reaching market segments through traditional radio and television advertising becomes increasingly difficult in our on-demand, fast-forward world.

In some cases, such “branded” entertainment is subtle—inserting itself into a scene or a sequence quite seamlessly and, not necessarily inconsistent with, reality. In other cases—“Harold and Khumar Go to White Castle”—yes, this really was the name of a movie, as was “Akeelah and the Bee,” which Starbucks helped finance and promote. In case you didn’t know, the FCC (and the FTC) regulate advertising on television—the FCC’s regulations concerning disclosure arose primarily from the quiz show scandals in the 1950s. When does creative control over programming yield to paid sponsorship and financing dollars or Euros (or British Pound Sterling). At what point does a program or movie become an infomercial or advercast? Are there vulnerable groups (e.g., children) that might not distinguish so readily between advertising and programming and at what point is that deceptive? What does SAG say about their actors being de facto appearing to endorse a product or brand inserted into their scenes and programs? If an actress is under contract with a cosmetic brand exclusively and a movie scene requires her to use a different brand—actionable? When the trailer with that clip airs on broadcast television—problem? Witness the following quote from Jonathan Adelstein, FCC Commissioner: “Now, products have even seeped into plot lines. Soap operas have woven cosmetic lines into their tales of who-did-what-with-who, while “The Apprentice” sounds more and more like an hour-long infomercial for the latest corporate sponsors.”

Trademark issues, endorsement and competitive/ambush marketing issues, free speech, freedom of expression, adequacy of disclosures, misleading or deceptive advertising—the list of potential issues is growing as the balance between creative control and commercial reality infect the entertainment industry. At one extreme is the traditional product placement in which an advertiser pays a fee for the hopes that the scene with its product doesn’t get cut and wind up on the editing room floor. At the other extreme is a placement fee and promotional campaign that is so integrally tied with the plot and the program that the two are indistinguishable—think “The Apprentice” or “Home Makeover.”

The deals are becoming more complex, and more fraught with potential legal and regulatory issues, and the stakes are higher. Need help? Contact Doug Wood or me—we would be happy to help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I was having an interesting discussion with a lawyer friend whose views about promotions and marketing I respect greatly. We started out talking about virtual worlds and avatars and the new proliferation of non-reality based entertainment—virtual Laguna Beach, for example. Now, I seem to have enough trouble juggling the demands of life in the real word. I have had my fill of reality shows—which never seem to be quite real—and I was just beginning to get the hang of fantasy sports leagues and interactive game playing. Now along come virtual worlds, where fantasy, role-playing, game-playing and interactive social networking collide. I remember playing Kings Quest and Police Quest and Space Quest and chuckling, with my kids, about the funny lines and the clever clues as we searched kingdoms, busy streets and outer galaxies to solve the puzzle. My daughter just recently reminded me of Ecoquest—a game I can’t find anymore that taught us all a little bit about saving the environment. Then came MMOGs and MMPORGs (that’s “Massively Multiple Player Online Role-Playing Games”—for the uninitiated). In virtual worlds, I get to act out a combination of real and fantasy activities with virtual characters called “avatars” which are created within parameters defined by the computer code, but which are otherwise open to my unique interpretation of the characters and roles I choose to play. I read a report about a man in South Korea who died of heart failure last year. Apparently stopping only for bathroom breaks and short catnaps, he played an online simulated war game for 50 hours and, ostensibly because of exhaustion, his heart gave out. I recently read several reports that made me realize this was no longer just child’s play. The first was about a woman who was able to quit her job because, through buying, selling and creating properties and providing services in a virtual world, she was able to “earn” more than $150,000 per year. Although I don’t know exactly what she did, I know you can convert your digital earnings into real money at websites such as www.gamingopenmarket.com. These sites not only enable you to convert digital-virtual money into U.S. cash at exchange rates that are established much the same way monetary exchanges do around the world, but they also enable folks like you and me to dabble in arbitrage trading in virtual currency. Will I someday be able to take my virtual company public in an IPO or solicit venture capital investments from qualified avatars? Is the SEC far behind?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The FTC recently held that Rambus, a developer of computer memory technology, violated Section 5 of the FTC Act, engaging in monopolistic practices—abusing the process for setting industry standards for memory chips (DRAM). Rambus participated in the standard setting, but didn’t reveal it applied for and obtained patents that included technology incorporated into the very standards Rambus helped to craft. The FTC held that as a result of Rambus’ deceptive conduct, it engaged in anticompetitive conduct. The FTC found Rambus had intentionally and willfully engaged in deceptive conduct and misled others in the standards-setting organization—clearly to its detriment.

The Commission determined that Rambus’ conduct enabled it to acquire patent monopoly power in a number of relevant and related markets, while its deceptive behavior within the standards-setting organization led to the adoption of standards by the industry group that unwittingly incorporated Rambus’ patent rights. At least one FTC Commissioner went even farther and wrote that the abuse and deception within the standards-setting process was not only in violation of antitrust laws, but also constituted an unfair method of competition in violation of the broad scope of the FTC Act.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In a decision of potentially far-reaching consequences, on Aug. 1, 2006, a U.S. District Court in New Hampshire ruled the sale of Simon Giftcards—prepaid electronic stored value cards—sold by the company that owns and operates shopping malls, are not subject to certain provisions of the New Hampshire consumer protection laws and are preempted by federal law. Simon cards look like ordinary plastic credit cards and operate on the Visa network. Simon became subject to action by the Attorney General in New Hampshire because each card had an expiration date and fees were imposed that reduced their value, violating provisions in New Hampshire’s Consumer Protection Act.

Simon cards are issued by U.S. Bank (formed under the National Bank Act) and MetaBank (a federal savings association under the Home Owners’ Loan Act). Simon had agreements under which each bank owns and issues the cards, manages the “account” relationship with the consumer, and sets the fees and terms that apply. Simon is responsible for advertising, marketing, promoting and selling the cards. Simon has no right to define or change the terms of the contract between the bank and consumer. Simon sells a Giftcard to a consumer and collects payment. The amount of purchase, minus an initial fee, is loaded onto the card, and Simon gives the consumer a copy of the card agreement along with the card. Simon deposits the funds into the bank’s account and the bank pays Simon a sales commission. When the consumer uses the Giftcard, the bank sends the money to the merchant through the Visa network, and all further deductions or fees charged are bank charges.

New Hampshire sought to stop the sale of these cards—asserting that Simon sells these Giftcards as an agent for the banks; and since Simon is not a bank, New Hampshire laws can be applied against Simon. Because the Giftcard is sold by Simon—a non-bank—the state claimed federal laws don’t preempt any limitations New Hampshire law impose to protect its citizens.

In deciding the case, the court notes that state regulations are preempted whenever they conflict with federal regulations, or when state law impedes the accomplishment of federal law objectives. Clearly, state regulation cannot limit fees charged or impose restrictions on the contract between these banks and the purchaser—thus state regulation is preempted. But what about Simon?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A court has held an individual personally liable to the tune of $17 million for deceptive mail solicitations because of his exercise of control over companies that mailed solicitations, his review of some of these solicitations, and his personal knowledge of customer complaints. If a person is directly involved in the act, has the authority to control them, knew of material misrepresentations or was recklessly indifferent to the truth, or knew there was a high probability of fraud and intentionally avoided the truth, that person can be held personally liable under Section 5 of the FTC Act.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A proposed new “Truth in Video Game Rating Act” (H.R. 5912), would require the Federal Trade Commission to promulgate rules prohibiting unfair and deceptive acts or practices by video game marketers, and would require ratings to be based on video or computer game content as a whole. It would also be a violation if any producer or maker of these games hid or grossly mischaracterized the content of the game. Joysticks ready?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

For the record, privacy, data protection, information security and international law have officially converged with management, compliance and marketing. More than 30 U.S. states have now passed legislation in one form or another that requires businesses to notify consumers if an actual or potential breach of data security may lead to the compromise of personally identifiable information. This comes on the heels of several years of the government tightening its own policies regarding data security breaches and instances of compromised security.

Recently, the Office of Management & Budget, which oversees U.S. federal agencies, announced a tougher policy for government, requiring agencies to follow the security procedures checklist prepared by the National Institute of Standards and Technology (“NIST”) to protect data. An internal OMB memo recommends that data on mobile computers and devices carrying agency data be encrypted, and suggests two-factor authentication (one being separated from the actual computer obtaining access to the data).

As noted in prior issues of Legal Bytes, requirements and compliance obligations for commercial enterprises doing business across state lines and national boundaries vary, although many have common themes. If you are concerned—and you should be—contact us. We can help you sort out your current compliance obligations and help you keep track of the changing privacy and data protection landscape, both domestically and internationally. Even if you choose not to inject your views into the regulatory process, you must keep abreast of developments or risk action by consumers and regulators.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In November 2005, Legal Bytes told you about how branded entertainment and product placement was one of the forces shaking up the world of advertising and marketing. We add to these forces even more creative innovations that are challenging the advertising and marketing world, as well as the legal and regulatory experts. “Buzz” or “viral” marketing is word-of-mouth advertising that promotes a product without disclosing any direct connection between the advertiser and the message. If you are a marketing professional, of course you want to identify people who will be interested in a particular message, and deliver the message in a way that makes it enjoyable and encourages them to share it with more people—you remember the hair color commercial on TV that ends with something like “she tells two friends and they tell two more friends and so on and so on….”

Now clearly, if an individual makes deceptive or misleading statements that weren’t induced, authorized or controlled by the advertiser, it’s hard to hold that advertiser responsible. But now advertisers are paying buzz “agents” to relay messages and encourage further word-of-mouth advertising. Thus, if the advertiser pays, it is hard to argue the advertiser is not liable for the truthfulness of authorized statements. But what happens if the buzzer’s unscripted message (i.e., their own message in their own words) is deceptive? Are their words similar to testimonials, regulated by the Federal Trade Commission, or a form of social spam, requiring disclosure like that mandated in the CAN SPAM Act? False testimonials have been the subject of state and federal actions for years. In some cases, actors in commercials looked so real, some Attorneys General required them to superimpose the words “dramatization” as a disclaimer on the TV screen. Years ago, a motion picture studio had billboards and commercials praising their movies. Unfortunately, the quotes and the purported journalist were invented by marketing staff at the studio.

These cases clearly establish that an advertiser is responsible for deceptive or misleading net impressions created by its advertising. Similarly, the FTC’s Guides Concerning Use of Endorsements and Testimonials in Advertising provides that, “When there exists a connection between the endorser and the seller of the advertised product which might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience) such connection must be fully disclosed.” There is no reason to believe these same standards do not apply to buzz marketing.

If an otherwise ordinary consumer becomes a buzz agent and is paid or given free products or other consideration in exchange for creating “buzz,” appropriate disclosure is likely to be required. Keep in mind, that to prevail in an action alleging a violation, the FTC must still show the activity was deceptive or misleading under Section 5 of the FTC Act—recall from November’s issue, that to make advertising actionable under Section 5 of the FTC Act depends on whether there is a representation or omission likely to mislead the consumer, viewed from the perspective of a reasonable consumer in the situation involved, and the representation or omission must be “material.” As noted in that issue, “if the consumer knew or was told the truth, is it likely to affect a consumer’s behavior in connection with the product.”

The FTC has proposed rules under the CAN-SPAM Act, in which an advertiser is not subject to the Act’s technical requirements if the “send this to a friend” forwarding or sending feature on the website or in the e-mail is not “procured” by the advertiser. In other words, the advertiser hasn’t paid or provided other consideration or induced anyone to initiate the message on behalf of the advertiser—otherwise, the advertiser must comply with all of the CAN-SPAM Act requirements, including disclosing that the message is an advertisement.

While traditional advertising law principles apply, in fact there has been very little actual regulation of viral or buzz marketing. Don’t feel complacent. We should expect the lack of enforcement activity to change reasonably quickly as more advertisers turn to non-traditional avenues to get their message across. New approaches to buzz or viral marketing and, as mentioned in prior issues, product placement, serve to only increase legislative concerns and pressure from consumer advocacy, protection and other groups. As these marketing techniques become more sophisticated and advertisers become more involved in the creative surrounding the medium and the message, the risks increase. Are consumers deceived by information that appears to reflect independent views, when the relayers are actually being compensated for delivering an advertiser’s message? The law appears quite clear that lack of disclosure could violate state and federal law, depending upon the materiality of the statement to a reasonable consumer and corresponding consumer harm.

Psssssst—pass it on.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A recent California Supreme Court decision (Grafton Partners v. Pricewaterhouse Coopers) held that the California Constitution prohibits pre-dispute waiver agreements when it comes to jury trials. In other words, jury trial waiver provisions in many commercial and consumer contracts may now be unenforceable in California. The decision indicates that a party may not be able to contractually waive its rights to a jury trial because the California Code of Civil Procedure limited enforceability of jury waiver agreements to only those agreements that were entered into after the filing of a lawsuit, not in advance. This is likely to be appealed. We will keep you posted.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Just last month (June was a busy month), Utah and Michigan laws came into force which prohibit sending commercial e-mail to children for products a minor can’t legally own there—but the children must be signed up in the newly created Child Protection registries to be covered by the protection. That means not just gambling or alcohol, but tobacco, prescription drugs and a host of other items which children are not permitted to own in those states. Michigan and Utah will both impose fines for violations , and in Utah, sending a message or a web link could also land you in jail for up to three years. And you thought CAN-SPAM was tough—in both states, the penalties apply even if a parent requested the e-mail. Although likely to be challenged, at this point, if you are using e-mail or web-based links to market in these states, the time to worry about doing a merge-purge against the registries before you e-mail is now.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

According to Technology Partners International as reported in CIO magazine, Europe has now overtaken the United States in major outsourcing deals (i.e., deals valued in excess of about $50mm). In 2004, out of $76 billion in contract value, Europe garnered 49 percent beating the United States and Asia. One of the most important statistics behind those numbers is the fact that more and more outsourcing companies are becoming major players and the competition is heating up. The article lists the big-six outsourcing companies (you’ll have to call me to find out who they said they are) and notes that in 2003 these companies accounted for about 70 percent of the outsourcing contracts, but in 2004 their share dropped to just over 40 percent—a big drop in one year. What that means is that if 26 providers shared the 100 best deals in 2003, 36 shared them in 2004, and only time will tell if the outsourcing market is saturated or if more providers will jump to the front lines in 2005. One trend we are seeing is the segmentation of outsourcing arrangements by sophisticated end-user customers. Not just seeking competitive bidding among providers as in days past, these customers are actually segmenting their outsourcing requirements by function, business activity and operational needs, and seeking niche-based outsourcing providers who are best in the class in those areas.

It seems that the tempting idea of putting all one outsourcing eggs in one basket in order to make it “easier” to manage the relationship has not proved to be very smart after all. It appears that retaining the expertise necessary to manage outsourcing relationships in-house and being sure you have the right outsourcing provider with the right contractual relationship for each function or activity is the wiser course. Speaking of contractual relationships—Reed Smith has a team of international lawyers experienced in outsourcing. You might want to call us if your thoughts turn to outsourcing; we can and are happy to help. You might also go get a copy of the new book, Outsourcing Agreements Line by Line, written by me and published by Aspatore Publishing—it’s available online (an unabashed plug for both the book and our ability to assist with your legal needs).

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On April 28, 2005, New York’s Attorney General sued Intermix Media—a major Internet marketer based in Los Angeles, claiming “spyware” and “adware” were secretly installed, which, among other things, can redirect browsers to unwanted websites, can add toolbar functions and icons, and distribute ads that pop up on your monitor. The suit alleges violation of New York State General Business Law provisions against false advertising and deceptive business practices, and also alleges trespass under New York common law. Intermix’ software would download, install and then direct advertising to computers based on user activity—often without notice and without an uninstall application—when a user visited a website, played a game or downloaded a screen saver. The Attorney General’s office claims that the lengthy licensing agreement purporting to seek permission, even when used, is misleading or inaccurate.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Marketing and promotional experts already know that with rare exceptions (e.g., the government), lotteries are illegal. An illegal lottery is a game or contest in which the outcome is determined by chance, the entry requires some form of consideration, and the winner is awarded a prize. Over the years, these three elements have been the subject of scrutiny, regulatory opinion and judicial decision. Although interpretive rules are not cast in concrete, a prize can be nominal in value; consideration can take the form of visiting a store or filling out a lengthy customer survey; and, if chance plays a material factor in determining the outcome, no amount of skill in any of the other elements of the promotion will save the day.

Marketing and promotional experts use “no purchase necessary” or “free alternate means of entry” as tools to avoid consideration—in general, promotions with a freely available alternate means to enter may be based on chance and may have a prize. Some promotions involve skill—eliminating chance. Shooting a hole in one at golf or solving a mathematical puzzle are examples of skill-based contests. Of course, the skill must be bona fide—guessing the number of beans in a jar is not a real skill, no matter how good one becomes at guessing.

Against this backdrop, advertisers, eager to get their message in front of consumers, are finding life increasingly difficult. Have you noticed increased advertising in movie theatres, outdoor signage or on uniforms of your favorite sports figures? Distribution technology and storage and recording media have given us the ability to fast-forward or avoid viewing messages that previously required you to physically leave the room or change the channel! Hmmm…so people are spending more time on the Internet—browsing, surfing—how about advertising there?

Well things seemed to be looking up for advertisers—cookies, pop-up ads, banners, above and below the fold advertising, mass commercial e-mail. Seemed like technology was coming to the rescue. But, enter their legal and technical counterparts—cookie disablers, pop-up blockers, spy-ware and ad-ware detection programs, SPAM and other filters, coupled with legislation and regulation over intrusive technologies or programs that invade privacy or transmit information without consent. Getting the message across is still getting tougher.

One approach is the increased use of “product placement”—insertion of branded products into actual programming “content.” Branded products become part of the action—someone is drinking a beverage, driving a car, using a computer—all branded. One of the most interesting developments in the world of product place ment is taking place in interactive gaming. Interactive games require players to sit, often for hours, staring at a screen, paying close attention to the game. Background, backdrop, even music, contribute to making games realistic and become music to the ears of advertisers targeting a captive audience.

Can interactive, Internet-based games require a participant to pay to enter and participate—online “pay-to-play” games—and provide the winner cash or prizes? Here’s how such a game is typically structured: the participant downloads licensed programming for installation on his or her computer—the platform from which instructions and controls are transmitted. When combined with instructions and controls from team members or opposing players, the programming allows the game to be played. To enhance the gaming experience (and also to bolster the argument these are predominantly skill-based, not based on chance) many gaming platforms have sophisticated mechanisms to rate players and provide “matches” of comparable skill. Assuming games are skill-based, many (but not all) jurisdictions permit the payment of cash to play and the award of a prize. In some jurisdictions (but not all), the prize can even be derived from the number of players and the amounts paid by the participants. Check with Reed Smith before making any assumptions.

Regulation of Internet contests in the United States falls into four broad legal categories: (a) regulation of sweepstakes, contests and prizes; (b) regulation of unfair and deceptive trade practices; (c) regulation of gambling; and (d) consumer protection. We will turn to a more comprehensive legal review in next month’s issue, but we will tell you that if your game attracts children, you had better ensure there are mechanisms enabling you to comply with special regulations that apply. These are not limited to issues involving the age of majority and the ability of participants to legally enter into binding contracts (e.g., Alabama and Nebraska = 19; Mississippi and Puerto Rico = 21). Compliance with the Children’s Online Privacy Protection Act (“COPPA,” not to be confused with COPA or Copacabana—anyone still reading?), considerations of parental consent, propriety of content and a host of other regulations and legal considerations, come to mind.

Stay tuned for next month’s issue to find out more about these legal issues.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A little more than a year ago, Taco Bell was ordered to pay $30.1 million to two men who convinced a court they conceived the talking Chihuahua. Lest you think this is an aberration or that these men were opportunists trying to make a quick buck, you would be wrong on both counts. Outside suggestions are a source of potential ideas and potential liability. Companies would be well-served to learn a lesson from these cases.

Smart marketing companies have policies—even outside suggestion “units”—to handle those suggestions company strategists, executives and marketing professionals all say they welcome to better understand what customers want. This is not the place to belabor legal distinctions between market research, focus groups, customer satisfaction surveys and unsolicited outside suggestions, but these distinctions highlight the need to pay attention to potentially dangerous legal landmines at the intersection of intellectual property law and product development.

Imagine that a customer of a bank suggests to the branch manager that the bank issue travelers checks with dual signatures (they exist, so don’t you get any bright ideas) so vacationing couples can use them interchangeably. Now fast forward six months—the bank proudly launches its latest new product, the dual-signature travelers check. Guess the rest. Lawyers, letters, demands, assertions of ownership, misappropriated proprietary information—the suggestion was not an “idea” but a specific product development concept with specific implementation details. Talking Chihuahuas anyone?

Of course, if the company can prove its product was independently developed or in development before the suggestion came in, or that the branch manager threw the suggestion in the trash without telling anyone, showing it to anyone or keeping a copy—yes, the company may win the lawsuit. But do you really want to risk all those lawsuits and the cost of litigation to prove you are right? Settle or fight: each can be costly.

Dealing with outside suggestions should be a part of a company’s product development, brand management and marketing risk management strategy—optimizing the company’s ability to gather meaningful information while minimizing potential exposure to litigation liability and damages. Reed Smith has lawyers who have developed and managed these functions, counseled clients, conducted seminars, and drafted policies and procedures to do just that. Contact me at jrosenbaum@reedsmith.com. We are happy to help.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last month, New York’s Attorney General announced a settlement against OptInRealBig.com, a bulk e-mail marketing company based in Colorado. Although much of the settlement focused on clearly deceptive spamming practices (e.g., using forged “sender” names and addresses to hide the source of the e-mail, using names of well-known companies without permission), it also prohibits false or misleading information in the subject line—so called “teaser” lines. As someone who receives lots of unsolicited email, trying to get me to open and read a particular message from someone I don’t know (or don’t think I know) is an increasing challenge to marketers. Using context or other snappy text in the subject line to get me to read these messages, when they cross over the line, may be considered false and misleading and a deceptive trade practice. Trying to induce me to read an e-mail by implying it is personal (i.e., from someone who knows me) or is part of the subject matter of messages I have sent to others, could be deceptive—especially if there is no readily apparent way of determining that it actually is unsolicited commercial e-mail.

The lawyers in Reed Smith’s Advertising & Marketing Group (yes, I am a member of that one too) are experts on counseling you and guiding you through the maze of laws and regulations so that you stay on the correct side of these lines. Not only are our litigators armed with first-hand experience in dealing with and defending these issues, but Reed Smith’s transactional and business lawyers are also widely regarded as among the most skilled and knowledgeable in the world. Whether counseling you about e-mail, web policies, “Spam Settlement Restricts E-mail Marketing in New York” privacy on the Internet, e-commerce, web-based sweepstakes, or simply helping protect one of your most valuable assets—your brand—Reed Smith has the capability and happy-to-help attitude you need. Try us, you’ll like us. Want to know more? Visit us at www.reedsmith.com—or, better yet, check out our other resources at www.adlawbyrequest.com.

Think brands, teasers and tag-lines are unimportant? Think again. Few people may remember who Al Dvorin was—but everyone remembers his tag line!

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Federal Commercial E-Mail Legislation Takes Effect A major change in the law that affects privacy and commercial e-mail on the Internet took effect on January 1, 2004. The CAN-SPAM Act of 2003 doesn’t simply establish an “opt-out” framework for commercial e-mail, it completely pre-empts state law. Although an individual consumer doesn’t have the right to sue an offender under the Act, the Federal Trade Commission, along with the Attorneys General of each state, do. So what should you know?

First, the Act only applies to commercial e-mail—an e-mail whose primary purpose is promoting a commercial product or service. Although the FTC has not yet promulgated any regulations under the Act, simply because an e-mail has a URL link to a commercial website or refers to product or service doesn’t make it commercial e-mail. There are, of course, certain obvious exemptions built into the law. Product safety recall information or e-mails notifying you about changes or important notices concerning your subscriptions, memberships, purchase confirmations, accounts or e-mail related to your employment—all of these are so-called “transactional relationship messages” where the main purpose is communication related to a commercial transaction, rather than promotion or advertising.

Second, what does the law require. Starting January 1, 2004, all commercial e-mail (even if an existing business relationship exists and whether or not the e-mail was solicited or not) must contain a clear and conspicuous notice that a consumer can opt out of future e-mails and provide a web-based means to do so. A consumer’s request to opt out must be honored within 10 business days and marketers can’t sell or share the e-mail addresses of those who have opted out. The e-mail must also clearly identify itself as an advertisement—unless a consumer has specifically asked to receive commercial e-mail from a particular commercial entity. Third, the e-mail must contain a postal, physical address of the sender. Although it is not yet clear if a post office box is enough, the less-risky approach is to have a street address.

The Act has a number of other requirements related to labeling—for example, the subject (header) must accurately reflect the body or content of the message and the sender (the sponsor of the promotion) must be identified. Although the Act preempts state commercial e-mail laws, beware of the fact that state fraud, trespass and certain consumer protection laws can still apply.

Violations of the CAN-SPAM Act are criminal offenses and involve both fines and potential jail time upon conviction. As with most Federal crimes, aggravating factors increase the penalties and implementing good faith and reasonable measures to attempt to comply with the Act can lessen them. These penalties can be serious—jail-time of up to five years, $250 per e-mail up to $2 million in fines (which can be tripled up to $6 million if aggravating factors are present) and all computers and software used in the commission of the crime can be forfeit.

Although the primary purpose of Legal Bytes is to enlighten and inform you, it obviously does promote Reed Smith and encourages you to call us when you need legal support. Accordingly we will always give you the opportunity to opt out of receiving our publication by email and when we send you an e-mail, it will be clear as to what it is and who is sending it. This is not just the law, it’s good practice.

• Email This
• Print
• Comments
• Trackbacks
• Share Link