When Pressing Suits, Judges Tell Jurors Neither Social Nor Media is OK

A few months ago, Legal Bytes reported some important developments and judicial rulings concerning social media and freedom of the press in the United States (see, Freedom of the Press = Freedom to Tweet). But lest you be lulled into a false sense of security, freedom of the press only applies to the ‘press’ and not to jurors.

You have all seen the motion picture and television courtroom scenes played out numerous times. Evidence is admitted or not admissible. The jury is admonished to disregard certain remarks or testimony as inadmissible or irrelevant. Jurors are told they must reach a verdict on only the evidence that is allowable during the trial - nothing else. Now decades ago, a jury was told not to watch accounts of a case on television, or to listen to such on the radio, or to read newspaper articles about the case. Juries could be sequestered - squirreled away out of sight and, theoretically, out of harmful evidence’s way - until the verdict was rendered and justice done.

But today, with a mobile phone, PDA or any one of literally hundreds of devices – some no larger than a credit card – one can ‘tweet’ (www.Twitter.com), one can post to your or someone else’s wall (www.Facebook.com), one can upload photos (www.flickr.com) or videos (www.YouTube.com) or post to one’s own blog (www.LegalBytes.com). All from the convenience of the palm of your hand, purse or jacket pocket. One can also surf, search, ask and obtain answers across the web, almost instantaneously, with the press of a few buttons or the wave of one’s fingers across a touch screen. The interactive two-way communication and searches for independent information is at odds with our jury system that limits the juror’s knowledge base for decision-making purposes to what’s in her or his head when they walk in along with the evidence that is presented and deemed admissible by the court. Everything else is off limits – at least for administering justice. Although not the subject of this two-part blog posting, Legal Bytes has also covered the growing issue of whether a mindless application of disqualification criteria makes sense simply because you have a ‘friend’ or someone is ‘following’ you among the other thousands or millions of individuals on some social media platform (See, Florida Judges Can't Have Friends).

But now back to our story. Just this past December, the Judicial Conference Committee on Court Administration and Case Management issued its “Proposed Model Jury Instructions - The Use of Electronic Technology to Conduct Research on or Communicate about a Case”. I know this will surprise you, but the basic do’s and don’ts they proposed are:

  • Thou shalt not undertake any independent research, use any outside reference works, dictionaries, surf the web, or use any digital or other means to try and get information about the case or anything related to the case.
  • Thou shalt not communicate with anyone about the case – anyone - not even other jurors. No mobile phones, email, Blackberry, iPhone, SMS text messaging, tweets, blogging, chat rooms or social media platforms. None, nada, zilch, zero, null, never. Period.
  • Thou shalt decide the case solely on the admissible evidence presented in the courtroom.

Sound familiar? While many of us recognize there are sophisticated rules and regulations established to ensure evidence is presented in a fair manner, consistent with the system of justice - protecting the rights of the accused and the accuser, the plaintiff and the defendant - jurors often are curious – curious about questions that aren’t asked or answered during the course of a trial. In motion pictures or television, we get to go behind the scenes. We can often see what the jury cannot. But real juries may not appreciate, under the constraints of a particular case, why some information is simply not available to them, some questions not permissible, some witnesses never called and some answers never provided. It’s far too tempting to try and find out and with today’s digital technology – well, it’s not that hard to do so – sometimes even believing one can escape detection when doing so.

So stay tuned. In the next installment of this post, Legal Bytes will take you on a brief tour of some court decisions over the last few years, starting from simple emails and online surfing by jurors, to jurors who post blogs in the middle of jury deliberations, to tweets before, during and after multimillion dollar civil trials. Yes, we even have jurors communicating to each other on Facebook during a trial. You just can’t make this up.

While the next installment is pending, if you need to know more – how social media can help or hurt your company in litigation – remember that Reed Smith has teams of litigators who not only know digital (e-)discovery, forensic evidence, security and other technology applicable to legal proceedings, but also know social media – increasingly relevant, for good or bad, in dispute proceedings. Need us to press your suit and avoid being taken to the cleaners? Contact me, Joseph I. Rosenbaum or any Reed Smith attorney with whom you regularly work and stay tuned for Part II – Jurors Behave, or We’ll Throw the Facebook at You!

Online Endorsements, Testimonials and Reviews Fake? Really?

Online ratings got you perplexed? Seems like someone forgot to put "user ratings" on the list of reality shows. Well maybe, just maybe, those user ratings aren’t really "user" or "ratings" at all. What should you consider?

Well, on October 23, 2009, Joe Rosenbaum was interviewed by Sally Herships for Marketplace Money, a regular feature of Public Radio. If you missed it on the air, you can now listen to the audio, read a transcript of the interview, download an MP3, or subscribe to the podcast, by checking out the interview at: "Don't let online reviews fake you out."

Legal implications abound—for website operators and ratings' services that enable users to post reviews and content, as well as for anyone posting fake reviews or failing to disclose a material connection to the advertiser, its brands or products. So go listen and then come back if and when you need legal support. Contact Joe Rosenbaum, or the Reed Smith attorney with whom you regularly work.

Déjà vu All Over Again: Online Behavioral Advertising

Just catching up with continuing efforts to educate the legal community on the implications of digital behavioral advertising and the importance of the industry self-regulatory efforts, as well as the dangers of legislation and regulation arising from insufficient or inaccurate information. In November of last year, Cyberspace Lawyer [Volume 14, Issue 10; November 2009], published "Advertising Industry Collaboration Releases Self-Regulatory Online Behavioral Advertising Principles," written by Joseph I. Rosenbaum.

The article follows the release, by the major advertising industry associations, of Self-Regulatory Principles for Online Behavioral Advertising, and Legal Bytes had numerous blog postings summarizing the individual principles, as well as an overview (see Self-Regulatory Online Behavioral Advertising Principle No. 7: Accountability that will link you to the others; or simply search "social media" in the keyword search box in the navigation column on the left side of the web page). The Cyberspace Lawyer article consolidates and integrates these summaries into a single article that you can read in that issue, or you can download the article here: "Advertising Industry Collaboration Releases Self-Regulatory Online Behavioral Advertising Principles" [PDF].

Joe Rosenbaum, who edits and publishes Legal Bytes, is general counsel of the Interactive Advertising Bureau (IAB), one of the major industry associations that participated in the development and release of the actual principles. Behavioral advertising can be viewed as another aspect of the social media phenomenon sweeping the digital world, and if you want (or need) to know more, you should know that Reed Smith's Advertising Technology & Media Law Group can help with integrated experience and legal skills, both nationally and internationally. Let us know if we can help you.

Isn't Technology Supposed to Help Us? Help Us Work Smarter?

If you have been reading Legal Bytes regularly, you know that Lois Thomson here at Reed Smith has been one of the primary people supporting my efforts to transform "legal-ese" into understandable English – no trivial task for those of you who are interacting or have ever interacted with lawyers. So it is with great joy that I was not only able to have her write a post for Legal Bytes, but that I also finally got to edit her article. Hopefully she will smile and agree it's been helpful. So, Lois, thank you, and here is your relevant and very timely note for all the world to see:

"I looked at an email I received from my friend, Robert, and wondered why the subject line was a reply regarding an issue of Legal Bytes that I had proofread for Joe Rosenbaum. 'Are you aware that you have been sending these to me?' Robert's message read. 'It seems like that might have been a mistake.'

"Ouch! A mistake indeed! You see, when Joe sends his documents to me to review, I proof them and make my suggested changes. I then simply hit the forward button to return them to him. Now as many of you email-program (e.g., Outlook) users already know, to make life easier (that's ostensibly what technology is supposed to do), once I start to type in "ro," Rosenbaum, Joseph I.'s name should automatically populate the 'To' field. Oops. Not this time. Instead, my friend Robert's name came up, and without looking – as I'm guessing so many of us routinely do – I hit enter and sent it off, pleased I had been so timely and responsive. Unfortunately, I was responding to my friend Robert, who may happily read Legal Bytes, but not, I suspect, the artist's proof!

"Fortunately, Joe and Robert were gracious about the whole thing and in this case, both felt no harm was done. But what if the message had been from your lawyer or doctor or a rabbi or priest, or was some other communication that was not ultimately meant for public consumption. It was a simple but powerful reminder to me (and one that Joe felt was important enough to ask me to pass it on to you), that while automated tools can make routine tasks like 'field completion' simpler, they can also lead to problems if we rely on them without thinking. Hmmmm, now why can't I remember phone numbers anymore – is it because they are all programmed into every device I own, so that I no longer have to think?"

A helpful reminder that while automated tools are great, they are just that – tools. If we aren't careful, the tools can work against us and not for us, and can create embarrassment at best, liability at worst. Thank you Lois (and Robert).

Need to know more? Contact me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work. Need proofreading skills? If you don't work for Reed Smith, don't call Lois. She's busy helping us every day. Thanks again, Lois.

Social Media Risks and Rewards

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.

Social Media Could Get You Fired? Really? Well, Yes. Really.

If you aren’t careful, social media can hurt in the workplace, too. While recruiters, college and university admissions counselors, and many others have used profiles, postings, YouTube videos, and other social media platforms to gather information about candidates and prospects—corporations that are now increasingly monitoring their own presence, mentions, and brands in social media are discovering that employees—at work and outside the workplace—can be outstanding goodwill ambassadors, or may be saying a bit too much. In an interview with Laurie Sullivan, reporting in MediaPost News, Online Media Daily describes how Twitter And Facebook Could Get You Fired—because the same rules apply online as offline, but online are magnified by technology. Read the article, and when your company needs to develop a policy or understand how to optimize the benefits and minimize the legal risks, call me, Joe Rosenbaum; or Douglas J. Wood or Stacy Marcus, key lawyers in our Social Media Task Force; or any of the Reed Smith lawyers with whom you regularly work.

Social Media Risks and Rewards

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? 

FINRA Issues Guidance in New Social Media Websites Notice

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.

Freedom of the Press = Freedom to Tweet

Twitter keeps hitting the newswires—in this instance, in a matter involving freedom of the press. You might have heard from time to time, especially in high-profile or emotionally charged cases, about judges who have used their power to control proceedings by restricting the use of certain communications equipment and mechanisms from within their courtrooms (e.g., use of mobile phones, video recording equipment, etc.).

From Pennsylvania comes an order from a Dauphin County judge refusing to bar reporters from sending Tweets during the course of a public and high-profile trial. In response to a motion by the defendants counsel, Judge Lewis, in a brief order, noted that ". . . to impose the proposed restriction would be premature and that the restriction itself is overly broad."

In this particular case, the defendants were concerned that reporters, using Twitter inside the courtroom, would broadcast witnesses testimony, which could then be read or seen by other witnesses who were yet to testify. While refusing to ban Twitter to reporters, the judge did order the witnesses to avoid reading or listening to reports concerning the trial.

As icing on the cake, our own Reed Smith lawyers, Tom McGough, Mark Tamburri and Tom Pohl, won the order on behalf of the Associated Press and Pittsburgh Post-Gazette. Yes, Virginia, there is a place for social media in jurisprudence.

If you remember, Twitter was also the subject of some controversy in Pittsburgh during the G20 Summit last year. In that case, involving freedom of speech, police in Pittsburgh arrested a man who was using Twitter to send messages about the movements of police officers as protests were unfolding. Although the police sought to charge the man with aiding an illegal protest, the man was broadcasting what was easily visible in plain sight.

While commercial cases often involve money or intellectual property rights, or rights of publicity or privacy, cases are emerging that involve fundamental Constitutional rights. The law will need to move quickly into the digital and social media age in order to keep up. Some courts and judges are doing just that! 

Need to know more? Contact me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work.

Court Rules Twitter Libel is Stale, and Neither Ripe Nor Moldy

Back in July, Legal Bytes posted a report (Landlord Can't Let Tweet sMOLDer) about a Twitter "tweet" posted by Amanda Bonnen, that contained the following statement: "Who said sleeping in a moldy apartment was bad for you? Horizon realty thinks it's OK."

Back then we told you that Horizon Group Management, the landlord of the apartment building involved, filed suit in a Cook County Illinois Court for libel, alleging that it was a "malicious and defamatory" tweet about the state of her apartment. 

Well this past Wednesday (Jan. 20, 2010), Cook County Circuit Court Judge Diane J. Larsen dismissed the suit, and Ms. Bonnen's attorney indicated the judge described the posting as too vague to constitute libel under the legal tests applicable to such a claim.

To support a claim of libel, Horizon would have had to show that Ms. Bonnen wasn't merely offering her opinion, that the statement must be reasonably understood by everyone to refer to the specific entity—in this case, this particular Horizon realty company—and that there was actual harm that can be proved, flowing from the statement. The fact that the statement was made on Twitter, and consequently widely available across the Internet, doesn't change the standard one must meet to prove libel, and the judge dismissed the case. 

As you can guess, these aren't the only cases involving defamation in the context of social media. For example, the action against Courtney Love, wife of the late Kurt Cobain, is alive and well. You might recall that case arose when a fashion designer claimed Ms. Love tweeted that the designer was a drug addict, a prostitute and called her a "lying hosebag thief." As we reported in Legal Bytes this past August (Court Orders Google to Turn Over Blogger Identity Information), cases of defamation become even more complex when the identity of the actual "tweeter" is hidden behind a pseudonym.

These cases all hinge upon the friction created by social interaction. Defamation is not a new concept, and whether broadcast over radio waves or propagated across the web, it should come as no surprise that when human beings populate the borderless universe of cyberspace, these interactions can give rise to legal actions. The laws that apply to publicity, privacy, libel, deceptive advertising, unfair competition and intellectual property may need to be applied or viewed differently, but they don’t disappear simply because the content is digital. Need to know more? Contact me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work.

2010 ANA Advertising Law & Public Policy Conference

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.

Happy New Year Wishes for 2010

Wishing you health, happiness, prosperity and peace in 2010

In a tradition that started almost 4,000 years ago by the ancient Babylonians – although they celebrated the new year upon seeing the first new moon after the vernal equinox – please enjoy a very happy, safe and joyous new year celebration.  Those of you who look forward to Useless But Compelling Facts can read more about the history of new year celebrations, or how the new year’s festivities, now televised around the world, began in New York’s Times Square.

New Year's Greetings
 
This is the first year we have published in a blog format, and with your feedback – mostly positive and always constructive – and more than 17,000 visitors in slightly less than 11 months, I am grateful and appreciative for your support.  Thank you for reading Legal Bytes.

Joe Rosenbaum

Looking Ahead to 2010: To Boldly Go . . . .

Each year, at the end of the year, I create a Legal Bytes piece intended to be more thoughtful and philosophical than the articles posted during the year. Thank you, in advance, for reading and allowing me to attempt to provide some insight and thoughtfulness to your day, in what I hope is an enlightening and entertaining manner. While my normal postings are designed to bring you news, updates and thoughts about timely events, this is one is longer – and arguably less exciting – and asks you to indulge me in a bit of philosophy, or what passes for an attempt at philosophy about the year past and the year ahead.

This article will contain no hypertext links to distract you; it will not have citations to offer more information about a snippet; nor will it dazzle you with factoids or intrigue you with today's news. It's just me philosophizing, my one chance during the year to ramble about where we've been and where I think we might be headed – without any credentials, qualifications or expertise to do so. 

So loyal Legal Bytes' readers, you don't have to buckle up or fasten any seat belts. Just pull up an easy chair, open your Blackberry, your Kindle, your Droid, your iPhone, PC, Laptop, Netbook, Web-TV, PDA, or whatever your favorite Legal Bytes' reading device might be; pour a glass of tea (or whatever your liquid of choice might be), sit back and enjoy . . . and again, thank you. So here goes.

*****

I'm a Star Trek fan. I've watched all of the television episodes, starting from the day Captain Pike, bound to a wheelchair resulting from his own heroism, is taken to the very first virtual world I can recall being displayed in mass media. I've watched all of the Star Trek movies. I confess to being a victim of an "even number" preference, culminating so far in this last Star Trek – certainly among, if not the favorite of all of them. 

Computers that can search for anything and everything. Touch screens and voice commands. Warp speed and instant communication across multiple languages and without regard to geography or time zones. All that with a bit of humor, a bit of clever philosophy and a social network (crew) that have hugely diverse (one might say inter-planetary) ethnic, cultural and racial characteristics, and at the same time work seamlessly together as a team. More than science fiction, Star Trek is really science within fiction, and a fiction that might just be reality if we close our eyes long enough and hard enough. Most of all, to boldly go where most of us have never gone before isn't really referring to space as the "final frontier," is it?

Now I know not everyone is a Trekkie, and I confess that while I am a big fan, I'm not really obsessed. I don't go to conventions or wear uniforms, nor do I run around screaming "Beam me up," although I do confess to a feeble attempt at a Scottish accent when I respond "I can't do it, Captain." So what is it that makes me able to watch over and over again and relish each scene and each episode, and look forward to each new motion picture? It's not simply because I like science fiction. Nor is it solely because of an ensemble cast, made up of some extraordinarily fine individual actors who work extraordinarily well with each other and with scripts that combine serious science fiction with some tongue-in-cheek individualism, not always in human form.

Let me digress to a personal, but relevant anecdote. Many years ago I had the pleasure of actually meeting Leonard Nimoy. I won't go into detail, but on behalf of a client, I had contacted Phil Gersh, the gentleman (a true gentleman) who represented Mr. Nimoy at the time, and Mr. Gersh must have relayed our conversation to Mr. Nimoy, resulting in a meeting in New York. It was over lunch, very relaxed and informal, but I admit to feeling an amazing sense of excitement, good fortune and privilege at being able to actually sit down and talk with someone I had long admired as an actor, writer, director and producer.

Continue Reading...

Florida Judges Can't Have Friends

Just last month, the Judicial Ethics Advisory Committee in Florida issued an Opinion that Florida judges may not have social media "friends" if they are lawyers who may appear before them in court. While the average person may question what being a "friend" on any media platform really means in terms of the level or relationship outside the virtual world of web-based interaction – how many of you are "friends" with people you have never met and don't even know? – the Judicial Ethics Advisory Committee indicated that their main issue is not fact, but perception.

The Committee expressed concern that the "friend" identifier could create the impression or the appearance in a publicly available forum, that the lawyer might be in a position to influence the judge.

Influence the judge? Hmmm. So, let's see. If I'm a government official or a corporate procurement officer, or perhaps I'm just campaigning for public office, I really can't befriend anyone on any social media platform or network – unless I'm prepared to face potential charges of bribery, accepting bribes, improperly influencing a public official, or being improperly influenced in procurement and purchasing decisions. Can you think of other situations in which acknowledging another individual as a "friend" on a social media platform or social networking site might be considered a violation of some code of conduct? Have you read your employer's code of conduct lately?

Not to worry, that's just the tip of the iceberg. Have you checked those "fan" pages recently? Are you a journalist? Celebrity endorser? Blogger? Check the revised FTC Endorsement Guides carefully. Perhaps you need to disclose your material connection when you became a fan! Oh, and you corporate employees and investment advisors (and journalists) better think twice before becoming a friend or a fan. After all, do you have to disclose to your clients or the Securities and Exchange Commission that you are a fan of "INSERT YOUR FAVORITE BRAND HERE"?

Now I don't want to worry anyone needlessly, so here's a tip for all of you Legal Bytes readers, whether you are a judge (are judges allowed to read Legal Bytes?), a lawyer or simply a normal person: If you wish to recuse yourself from a case, change the venue or forum for a trial, or simply avoid being picked for jury duty, I have a recommendation. Befriend the defendant, become a fan of the company, send a Facebook friend request to as many police officers (or, depending on your preference, inmates) as you can, and become a Twitter "follower" of as many products, services, public officials and political parties as you can.

Much to my regret, I have now been permanently removed from the White House guest list because I have become a fan of the Presidential Portuguese water dog "Bo" - the "First Dog." While it had never occurred to me that being thoroughly engaged by this adorable puppy would get me into trouble, the fact that the dog is "Portuguese" appears to have created the perception that there could be a conflict between my loyalties to our government and Portugal – although I confess to being partial to the food and the Algarve as an occasional vacation spot.

That said, I don't feel alone any more since, even though the pup is officially registered with the American Kennel Club as "Amigo's New Hope," I believe that the President and First Lady Obama, as well as their daughters Malia and Sasha, for whom Bo was an election day promise, are also under investigation for possible ethics violations in connection with their love for Bo. Strange, brave new world.

So keep your web browser tuned (or bookmarked) to www.LegalBytes.com for breaking news. The social media fun is just beginning, and if you haven't checked your company policy lately (or revised it), or if you need help making sense of social media and the legal implications, you've come to the right place. Feel free to contact me—Joe Rosenbaum—or any of the lawyers at Reed Smith you work with. We are happy to help.

Legal Predictions for 2010 - Ad Age Book Of Tens

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.

H.R. 4173 = CFPA = Amend FTC Act. Why Should You Care?

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.

Anti-Social? I'll Still Share Our Social Media Presentations

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.

Now, Web-Birds of a Feather Can Actually Flock Together

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.

FTC (Revised) Endorsement Guides Go Into Effect

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.

Join Us for Cookies - It's the Social (Media) Thing to Do

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.

Joe Rosenbaum - A Busy Week (Lexblog & American Banker)

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'".

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

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.

Friday the 13th - No Need To Worry. It's Your Lucky Day.

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?

Collection and Use of Consumer Information - Congress is Listening

Congress is listening—why do you think they are called "hearings"? But will your voice be heard? The U.S. House of Representatives' Subcommittee on Commerce, Trade and Consumer Protection, and the Subcommittee on Communications, Technology and the Internet, will hold a joint hearing on "Exploring the Offline and Online Collection and Use of Consumer Information" Thursday, Nov. 19, 2009. If you or your representatives aren't in the room, you can't be part of the conversation and you won't be heard. If you can't make it, but you want to listen, or be heard, or both—let me (Joe Rosenbaum), or any Reed Smith attorney with whom you regularly work, know.

Because That's Where the Money Is

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.

Regulators Poised to Give Financial Institutions a Slap in the Facebook

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.

Rosenbaum Quoted in American Banker

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".

Did You Miss our Legal Seminar for Publishers? No Worries.

Even if you missed the educational webinar—held Oct. 23, 2009; sponsored by the Long Tail Alliance Program of the Interactive Advertising Bureau (IAB); and presented by Joseph I. (“Joe”) Rosenbaum, partner at Reed Smith and general counsel of the IAB, and Adam Snukal, senior associate at Reed Smith—you're in luck. A PDF copy of the seminar, which covered many current legal issues in advertising compliance, privacy, and social media, can be downloaded right here: What Me Worry? Legal Best Practices for Small Publishers.

We’ve been told the Interactive Advertising Bureau will be posting a video recording of the webinar, so you can watch a replay of the entire broadcast, if you like, at your convenience. We will provide details once we receive them.

IAB Long Tail Alliance: Join The Legal Briefing from Reed Smith

Just a reminder that this coming Friday, October 23, 2009, from 12 – 1 p.m. (Eastern US Time), Joseph I. (“Joe”) Rosenbaum, partner at Reed Smith and general counsel of the IAB, assisted by Adam Snukal, senior associate at Reed Smith, will be presenting an educational webinar, sponsored by the Long Tail Alliance Program of the Interactive Advertising Bureau (IAB). The title is: What, Me Worry? Legal Best Practices for Small Publishers

The webinar will provide an overview of the legal issues and suggested best practices in the following areas:

Advertising Compliance ** Privacy ** Social Media

There will be a Q&A session as time permits at the end of the session, and a .PDF copy will be available on Legal Bytes after the seminar is over.

The webinar is open not only to IAB members and Reed Smith clients, but also to anyone who is interested - on a first-come, first-served basis. So register now. You can get more information and register right here for What, Me Worry? Legal Best Practices for Small Publishers. 

About the Long Tail Alliance Program

The IAB formed the Long Tail Alliance program in summer 2008 to encourage involvement with individuals and small business who, powered by interactive advertising, have turned their interests and passions into a media revolution. The Alliance is the beginning of something the IAB envisions as a much larger portrait of American entrepreneurs who are pursuing and achieving the American dream, even as they row hard against strong economic currents. The IAB hopes to expand its Long Tail Membership in order to encourage advocacy, training, and a coming-together of smaller publishers across America as their businesses grow, all while the dynamic of technology and media continues to change.

For more information, click here: http://iamthelongtail.com/707346

About the IAB

The Interactive Advertising Bureau is comprised of more than 375 leading media and technology companies who are responsible for selling 86 percent of online advertising in the United States. On behalf of its members, the IAB is dedicated to the growth of the interactive advertising marketplace, of interactive's share of total marketing spend, and of its members' share of total marketing spend. The IAB educates marketers, agencies, media companies and the wider business community about the value of interactive advertising. Working with its member companies, the IAB evaluates and recommends standards and practices, and fields critical research on interactive advertising. Founded in 1996, the IAB is headquartered in New York City, with a Public Policy office in Washington, D.C.

About Reed Smith

Reed Smith is a global, full-service law firm with nearly 1600 lawyers in 23 offices around the world. Joseph I. (“Joe”) Rosenbaum, a partner in the New York office, chairs the firm’s global Advertising Technology & Media law practice, is the editor and publisher of Legal Bytes, is Corporate Secretary & General Counsel to the IAB, and is an ex-officio member of the IAB Board. Adam Snukal is a senior associate who works with Joe in the Advertising Technology & Media law group and is editor of Adlaw by Request, the gold standard in advertising legal publications in the industry.

Join us for this exciting and timely IAB Long Tail Alliance webinar presented by Reed Smith. We look forward to your participation.

Maine Recommends Repeal of Controversial Privacy Law

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.

Congressional Hammer Poised to Strike at Financial Advertising

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?

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Buzz Over Behavioral Advertising - Listen, Do You Want to Know a Secret?

This post was written by Stacy Marcus and Joe Rosenbaum.

The buzz over online behavioral advertising in the United States has been building since the 2008 hearings in Congress over deep packet inspection. The first class-action lawsuit targeting behavioral advertising, Valentine v. NebuAd (N.D. Cal., No. 3:08-cv-05113), was filed in November 2008, followed soon thereafter by Simon v. Adzilla (N.D. Cal., No. 3:09-c-00879) in February 2009.

In the first case, NebuAd and six other ISPs were accused of violating the Electronic Communications Privacy Act, the California Computer Crime Law, the California Invasion of Privacy Act, and the Computer Fraud and Abuse Act, by using deep packet inspection technology. Specifically, the NebuAd complaint alleged that customers were unaware their online activity was being monitored for marketing purposes; that either no notice or consent was provided; that any notice that may have been attempted was insufficient or misleading; and that their technology intentionally sought to negate customers’ efforts to remove tracking cookies. For their part, the defendants vigorously deny having violated customers’ privacy rights, noting that they did not collect personally identifiable information, and that the data collected was anonymized to protect the identities of customers.

Since its filing in November 2008, all of the defendants in the NebuAd case have moved to dismiss the action on various grounds, including lack of personal jurisdiction and failure to state a claim. Just a few days ago (Oct. 6, 2009), the court granted the motions in respect of five of the defendants, to dismiss for lack of personal jurisdictions, citing the fact that the ISPs that were not based in California did not provide a sufficient and constitutionally reasonable basis for a California court to assert jurisdiction. However, the ruling leaves NebuAd as the last defendant standing in the action. But wait. There’s more. In May 2009, NebuAd liquidated its assets and went out of business. In fact, on the day the court dismissed the action against the other five defendants, the court also granted NebuAd’s counsel’s motion to withdraw from the case. That said, the court refused the additional request to stay the proceedings against NebuAd until new counsel could be retained. Stay tuned . . . we’ll track this for you!

Now in the second case, Adzilla (whose website is currently “under construction”) and three other defendants were parties to a joint venture that created a technology called the “ZILLAcaster.” According to the press release of Adzilla partner NetLogix, “[t]he ZILLAcaster technology resides within the service provider's network, the closest point to the subscriber, and utilizes network data in combination with contextual and behavioral targeting to make decisions regarding the delivery of the most relevant ad content for network users. Content can be delivered down to individuals without the use of any desktop, software, or adware.” The plaintiffs claim that this ZILLAcaster oversees, inspects, copies, transmits and actually permits the alteration of the user’s Internet communications – all without any notice to the user. Although there is no allegation that any actual ads were served to Simon (the plaintiff) as a result of this ZILLAcaster, the plaintiffs argue that simply tracking them in this manner violates the Electronic Communications Privacy Act, the California Computer Crime Law, the California Invasion of Privacy Act, and the Computer Fraud and Abuse Act through the use of deep packet inspection. Adzilla has denied plaintiffs’ allegations and asserted numerous defenses. 

Less than two months ago (Aug. 18, 2009), Continental Broadband was dismissed from the action, and on Oct. 2, 2009, a filing in the case seeks to voluntarily dismiss Core Communications d/b/a CoreTel as a defendant in the lawsuit. If the filing is granted, only Adzilla and its parent company, Conducive Corporation, will remain as defendants.

So why should you care? Because given the settlement of Facebook’s class action lawsuit over its Beacon technology, these two lawsuits are the only major ones we are aware of that are pending, that concern online behavioral advertising AND that could potentially yield decisions and opinions. Given Congress’ and the FTC’s interest in consumer privacy in general, and online behavioral advertising in particular, a decision in either of these two cases could set the stage for government regulation and policy – confirming with or reactive to these decisions – and may well set precedent for future online behavioral advertising cases in the months and years ahead. While it’s too soon to tell, we will keep you posted as they unfold. As always, you can contact the authors, Stacy Marcus and Joe Rosenbaum, or any Reed Smith attorney with whom you regularly work, for more information or assistance.

Reed Smith Analysis of the New FTC Endorsement and Testimonial Guidelines

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.

What Me Worry? Don't Get Mad, Get Informed!

On Friday, October 23, 2009, from 12 – 1 p.m. (Eastern U.S. Time), Joseph I. (“Joe”) Rosenbaum, Partner at Reed Smith and General Counsel of the IAB, assisted by Adam Snukal, Senior Associate at Reed Smith, will be presenting an educational webinar, sponsored by the Long Tail Alliance Program of the Interactive Advertising Bureau (IAB), entitled: What Me Worry? Legal Best Practices for Small Publishers.

The webinar will provide an overview of the legal issues and suggested best practices in the following areas:

Trademarks: Buying someone else’s key words? Displaying advertising? Sponsoring or hosting contests, sweepstakes, co-branded promotions? Using social media or virtual worlds? Trademarks are everywhere. When should you worry?

Compliance: What’s new at the FTC and FCC? Industry groups want self-regulation. Privacy and consumer advocacy groups want more regulation. Congress is poised to “do something.” What you need to know about marketing to children, adults, compliance with sectoral advertising regulations, from finance and health care to product safety.

Privacy: Behavioral targeting has everyone up in arms. What should a small publisher do if she feels her privacy policy has been violated?

Social Media: Blogs, splogs and vlogs. Virtual worlds, avatars and pseudonyms. Profiles and networks, friends and fans. Testimonials and endorsements – from celebrities to consumers, paid and unpaid. Buzz, viral and word of mouth. Defamation, libel, copyright and personalized URLs. Sound confusing? It is. But ignorance won’t insulate you from liability. Don’t want to become a regulatory target? What you should know.

Q&A: IAB and Reed Smith to answer questions from participants.

The webinar is open to IAB members, to Reed Smith clients, and to the general public on a first-come, first-served basis. Register now. You can get more information and register right here for What Me Worry? Legal Best Practices for Small Publishers.

About the Long Tail Alliance Program

The IAB formed the Long Tail Alliance program in summer 2008 to encourage involvement with individuals and small businesses who, powered by interactive advertising, have turned their interests and passions into a media revolution. The Alliance is the beginning of something the IAB envisions as a much larger portrait of American entrepreneurs who are pursuing and achieving the American dream, even as they row hard against strong economic currents. The IAB hopes to expand its Long Tail Membership in order to encourage advocacy, training, and a coming-together of smaller publishers across America as their businesses grow, all while the dynamic of technology and media continues to change.

For more information, click here.

About the IAB

The Interactive Advertising Bureau is comprised of more than 375 leading media and technology companies that are responsible for selling 86 percent of online advertising in the United States. On behalf of its members, the IAB is dedicated to the growth of the interactive advertising marketplace, of interactive's share of total marketing spend, and of its members' share of total marketing spend. The IAB educates marketers, agencies, media companies and the wider business community about the value of interactive advertising. Working with its member companies, the IAB evaluates and recommends standards and practices, and fields critical research on interactive advertising. Founded in 1996, the IAB is headquartered in New York City, with a Public Policy office in Washington, D.C.

About Reed Smith

Reed Smith is a global, full service law firm with nearly 1600 lawyers in 23 offices around the world. Joseph I. (“Joe”) Rosenbaum, a partner in the New York office, chairs the firm’s global Advertising Technology & Media law practice; is the editor and publisher of Legal Bytes; is Corporate Secretary & General Counsel to the IAB; and is an ex-officio member of the IAB Board. Adam Snukal is a Senior Associate who works with Joe in the Advertising Technology & Media law group, and is editor of Adlaw by Request, the gold standard in advertising legal publications in the industry.

Join us for this exciting and timely IAB Long Tail Alliance webinar presented by Reed Smith. We look forward to your participation.

FTC Releases Updated Endorsement & Testimonial Guidelines

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.

British High Court is for the Birds? Actually, for Twitter!

Again in the category of "you can’t really make this up," yesterday the High Court in Britain ordered an injunction served through Twitter – the social networking site.

Donal Blaney, a lawyer, runs a blog called Blaney's Blarney. Another account, named blaneysbarney, was impersonating Blaney, a politically conservative blogger. Inspired by a case in Australia, where Facebook was used to serve a court order, Blaney asked the court to allow him to serve the anonymous Twitter-user with a court order using the very social network the imposter was using – Twitter! As a practical matter, the court order will only actually be served (i.e., the writ received) when that account owner logs in and accesses his or her account on Twitter.

Since access to British courts appeared much more facile than heading to California in the hopes that a U.S. court will deal with the issue and with Twitter in the United States, he opted to petition the High Court in Britain to allow him to serve the order using Twitter. In the United Kingdom, the law permits an injunction to be delivered through electronic means (e.g., telecopy or even email), so in principle, no new law has actually been created, although this is certainly a novel twist to the existing law – especially since the identity of the imposter account owner was not known to Blaney.

The British High Court agreed, noting that issuing the writ using the Tweeting facility appeared to be the best way to get to the individual behind the anonymous tweeting. As has been noted in Legal Bytes previously, obtaining the identity of anonymous account holders on social media networks can be difficult, with favorable results far from a certainty in all jurisdiction and legal venues.

In the Australian case reported last year, which did not involve impersonation, a couple in Australia defaulted on their mortgage with MKM Capital, but were successfully able to avoid being served with papers in person. They ignored emails and never showed up in court. So, a Supreme Court judge in Australia’s Capital Territory agreed to let MKM Capital serve papers over the Internet. Facebook profiles (you know, those great facts and tidbits you share with everyone in your social media network and the public) had birth dates, email addresses and all the information necessary to satisfy the judge that they could indeed communicate and contact the defendants using Facebook.

Getting back to the recent UK order, online impersonation of sports figures and entertainment celebrities has become an increasing problem and nuisance on social media networks, and Twitter has even reacted to the problem by allowing celebrity "Tweeters" to have their authenticity certified with an icon (similar to a "seal") that is attached to their real profile pages.

The ability to serve legal papers and court orders using digital means through social media – imagine serving my avatar in a virtual world – may have wide-ranging implications for bringing legal actions against those who seek to use anonymity or pseudonymity to insulate themselves from detection when engaging in inappropriate or illegal activities. That said, if the actual account owner is anonymous, how will we know who they are even after they are "served," unless the host or ISP is somehow bound by the service of process.

Stay tuned. Social media is turning the legal world upside down, too . . . let us know if we can help keep you upright. Contact me if you have questions about this or any other matters.

Are You Behaving Badly? Redux

If you missed our teleseminar “Global Regulation of Behavioral Marketing in an Age of Privacy & Data Protection,” presented by Reed Smith partners Douglas J. Wood and Joseph I. Rosenbaum from New York and Gregor Pryor from London, I am pleased to make a copy of the “Are You Behaving Badly” presentation available to our Legal Bytes’ readers. The industry gave us “New Hope.” Privacy and consumer advocacy groups responded, and the “Empire Strikes Back.” Just recently, Congress commended the self-regulatory efforts of the industry, but noted a perceived need for additional legislation. “The Phantom Menace” persists.

The intergalactic battles continue, battle lines remain drawn, tensions remain high and the balance unclear – perhaps because changing technology, social media norms and advertising models keep rewriting the rules of engagement. If you listened in, thank you. If you missed it, here is the presentation. In either case, don’t hesitate to contact any of us with questions.

Online Behavioral Advertising - Congress Poised to Act

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.

Self-Regulatory Online Behavioral Advertising Principles: What's Déjà New?

In a speech in November 1942, Sir Winston Churchill remarked, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

So, if you have been following along with the original announcement and each of the following “principle summaries” posted on Legal Bytes:

. . . and, if you have read the actual report, then you will appreciate that “Self-Regulatory Principles for Online Behavioral Advertising”, consistent with the Federal Trade Commission’s support of industry self-regulation, are patterned after the highly successful record of the Council of Better Business Bureaus in regulating the traditional advertising industry for more than 30 years. A record that includes industry collaboration, self-regulatory principles and monitoring, and close collaboration with the Federal Trade Commission over the years, as the industry and advertising models evolved.

While one is always careful to ensure that at some point governmental intervention may be necessary to protect consumers from those who abuse the system or violate the law, the question to ask is whether and to what extent new or different regulation is required. That is certainly a question being asked (and being answered) by a coalition of 10 consumer advocacy and privacy groups in its recently released report, “Online Behavioral Tracking and Targeting Concerns and Solutions”, in response to the industry principles. More importantly, one may ask whether a concretized and codified piece of legislation is likely to remain relevant or even defensible in the face of innovation and technology that could not have been predicted five years ago and, I believe, will remain relatively unpredictable in the future.

That said, some aspects of advertising are predictable. Development, display and distribution mechanism will evolve dynamically as technology and innovation continue. Notions of consumer privacy and data protection will continue to evolve and be difficult to harmonize across nations, across cultural and local boundaries, and—because privacy is and has always been context specific—in time and space. What might have been considered private in 16th century France is very different from the concept of privacy that permeates the hearts and minds of citizens of Japan or Brazil today. Indeed, even the role of government in protecting one’s right to privacy and the use of information about oneself, is an ever-changing one. Advertising models and economics will continue to change, with metrics and quantification methodologies being sparred and argued over, recognizing that even the roles of advertisers, agencies, media buyers, and broadcast and publishing networks, as well as ISPs, search engine, browser and web hosting companies—the technology players—are and will continue to change. Wireless and mobile devices will continue to expand the domain of advertising and challenge our ability to capture consumers’ interest on tiny mobile screens, while the opposite is taking place in our living rooms—with the separation of desktop or laptop computing and home television and entertainment centers being increasingly irrelevant (and screens becoming larger). Oh, and did we forget to mention how online gaming and the interplay between gaming console, entertainment and product placement, virtual worlds and display advertising, are all blurring (pardon the pun) right before our eyes?

So if you have ever attempted to change a tire on a moving automobile, you have a vision of what the “industry” is and will look like in the future. Under these circumstances, traditional regulation as we knew it, may not make sense. What might make sense is a more dynamic system of regulation. One that is more flexible, more adaptable and more capable of interacting and reacting to changing circumstances, mechanisms, technology and the environment. Perhaps allowing the industry and the Federal Trade Commission, in conjunction with other agencies already tasked with the mission of protecting consumers within their particular areas of authority (e.g., FDA, FCC, FAA, and the list goes on) to develop self-regulatory enforcement mechanisms, referral mechanisms, and a track record, may be the best way to determine what, where and when regulation may be needed.

In the meantime, you may want to ask yourself if you are misbehaving as an advertiser or marketing professional, and register and listen in to our “Are You Behaving Badly” Teleseminar Sept. 30, which will tackle current issues in global regulation of behavioral advertising.

As always, I and my colleagues in the Advertising Technology & Media law practice at Reed Smith are ready to assist in guiding, advising and providing legal support where and when you need it. We’ve been changing tires for more than a century!

Privacy: FTC Announces the First in a Series of Public Roundtables

Earlier today the Federal Trade Commission announced details of the first of a series of Public Roundtables being held to deal with continuing efforts to examine, evaluate and determine if, and to what extent, regulation may be needed in connection with consumer privacy. In its announcement, the FTC specifically cites its intention to review privacy practices related to social networking, cloud computing, online behavioral advertising, mobile marketing, and the collection and use of information by retailers, data brokers and third-party applications.

The FTC’s announcement acknowledges the beneficial uses of information and technological innovation, while seeking to balance those against the need to protect consumer privacy. The first full-day session will be held Monday, December 7, 2009, at the FTC Conference Center at 601 New Jersey Avenue, N.W., Washington, D.C., and no registration is required. Those who cannot attend in person are welcome to go to FTC.gov and will be able to view the proceedings as a webcast.

The FTC has invited individuals and organizations to participate and/or to suggest topics. To participate, your request can be submitted directly to the FTC by email sent to privacyroundtable@ftc.gov on or before October 30th, and comments surrounding the issues to be discussed can be submitted on or before November 6th. The FTC has prepared a list of specific questions it intends to use in opening the dialog at this first in its series of public roundtable discussions and has invited written comments, as well as research submissions. Details can be found at the Privacy Roundtable Workshop page of the FTC’s website. Comments can be mailed to the FTC, or you can check the FTC website for instructions as to submitting comments electronically. Of course, Reed Smith stands ready to assist clients in preparing comments or providing representation, and if we can be of assistance, don’t hesitate to contact us. If you need to know more, please feel free to call me or the Reed Smith attorney with whom you regularly work.

Self-Regulatory Online Behavioral Advertising Principle No. 7: Accountability

This post was written by Adam Snukal and Joseph Rosenbaum.

Well, here it is. A summary of the last of the seven principles contained in the Self-Regulatory Online Behavioral Advertising Principles released by 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. The seven principles are:

The Accountability principle is the one concerned with the “effect,” rather than the “cause” and calls upon the industry to establish and implement programs to monitor its online behavioral advertising activities and take steps to ensure compliance with the principles within a self-regulatory framework. In the context of the self-regulatory principles, Accountability means – monitoring, transparency, reporting and compliance.

  • Monitoring: Both random and systematic, depending on the circumstances;
  • Transparency: Widely available, easy to use communication tools and channels so that the public, competitors and government agencies can file complaints when the Principles are violated;
  • Reporting: Violators will be publicly reported, including the reason for a finding of violation, a description of the violation, and the actions taken in response to, and to correct, the non-compliance; and
  • Compliance: The establishment of mechanisms and procedures to bring any publicly-reported entity into compliance with the principles, or, if necessary, to refer the violation to the appropriate government agency.  

The Accountability principle also notes the importance of coordination and consistency among programs to promote efficiencies in implementation, so as to avoid multiple enforcement actions against the same entity for the same violation. 

While the blueprint for the specifics surrounding the proposed monitoring, transparency, reporting and compliance initiatives under this principle are yet to be drawn, the Direct Marketing Association (“DMA”) and National Advertising Review Council of the Council of Better Business Bureaus (“CBBB”), have agreed to cooperate and collaborate, with the stated goal of having something in place by early 2010. Both the DMA and the CBBB were called upon to provide leadership in this area because of their widely respected existing self-regulatory accountability programs. The DMA also has agreed to integrate the principles into its longstanding DMA Self-Regulatory and Compliance Tools.

If you would like to read the entire “Self-Regulatory Principles for Online Behavioral Advertising” report now, in its entirety, just follow the link, but stay tuned for next week, when we will post a short consolidated summary of all seven principles and you can always read the entire “Self-Regulatory Principles for Online Behavioral Advertising” report here. So now, as always, if you have any questions or need help, please feel free to contact Adam Snukal or me, or any of the Reed Smith attorneys with whom you regularly work.

Are You Behaving Badly? Global Regulation of Behavioral Marketing

On Wednesday, September 30, 2009, from 12 noon – 1 p.m. (U.S. EDT), Reed Smith will be hosting a teleseminar as part of its “Doing Business Globally” series. Entitled Global Regulation of Behavioral Marketing, this seminar will be presented by Reed Smith partners Douglas J. Wood and Joseph I. Rosenbaum from New York, and Gregor Pryor from London. The seminar will explore the legal implications to advertisers, marketing professionals and brands associated with the labyrinth of global regulation increasingly applicable, or newly enacted, in connection with the targeting of consumers — on and off the web — through behavioral marketing.

Privacy and consumer groups object to such sophisticated techniques, fearful it further erodes what little privacy protection remains. Regulators are concerned such practices may violate privacy and data protection laws, or worse, are simply not covered by existing law and regulation. Marketers respond that such advances allow for a far more efficient, consumer-friendly marketplace, and that self-regulation has been a successful model in the advertising industry for more than 30 years. In this interconnected, networked age of social networking and global communication, understanding the implications and the legal and regulatory landscape is critical for every advertising professional and marketer, and the brands they represent. The camps remain far apart. Advertising industry associations call for self-regulation, recently releasing a report entitled Self-Regulatory Principles for Online Behavioral Advertising. Only about two months later, as previously reported in Legal Bytes, a coalition of 10 consumer advocacy and privacy groups released a fresh call for new regulation in a report referred to as a Legislative Primer, entitled Online Behavioral Tracking and Targeting Concerns and Solutions. The dividing lines remain drawn, tensions remain high, and the balance unclear – perhaps because the technology environment keeps rewriting the rules of engagement. Want to know more? Don’t miss this informative presentation.

Join us for this exciting and timely Reed Smith Teleseminar. You can view the Invitation to obtain more information, or go right to the Registration page. We look forward to your participation. 

Self-Regulatory Online Behavioral Advertising Principle No. 6: Sensitive Data

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

Almost down to the wire, here is the next installment summarizing the sixth of the seven principles contained in the Self-Regulatory Online Behavioral Advertising Principles released by 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. For reference, the seven enumerated principles are:

The Sensitive Data principle segments sensitive data into two basic categories - personal information of children under the age of 13, and financial and health-related information, regardless of the age of the individual.

The Sensitive Data principle segments sensitive data into two basic categories - personal information of children under the age of 13, and financial and health-related information, regardless of the age of the individual.

With respect to the collection and use of data for online behavioral marketing purposes, if you have actual knowledge that any of the information being collected is from individuals under the age of 13, or if your website is targeted at children under the age of 13, the Sensitive Data principle states you should not be collecting any personal information from or be engaged in any online behavioral advertising with regard to that individual, unless you comply with the Children's Online Privacy Protection Act (COPPA), and then, only to the extent specifically allowed by COPPA.

In case you’ve forgotten, COPPA requires you to have "verifiable parental consent" prior to collecting any personal data from children under the age of 13. The Federal Trade Commission routinely enforces COPPA, and violations may carry fines in excess of $1 million, in addition to the damage to goodwill and public image that can result. Compliance with the provisions of COPPA is tricky. While this post will not belabor the ambiguities that have already been reported about what constitutes "verifiable parental consent", suffice it to say that when dealing with children under the age of 13, it is best to exercise considerable caution in connection with online marketing efforts – behavioral or otherwise – and to always consult an attorney well-versed in guiding you through the compliance maze.

With respect to personal information related to an individual’s financial or health status, age is not relevant to this sixth principle. What is relevant is the requirement that you obtain the consent of the individual if you are collecting the information online and you intend to use it. Prudent practice would indicate you should affirmatively obtain the individual’s consent in advance – whether during the process of registration, through formal acceptance of terms of use that clearly solicit consent, or through any other means. Clearly, if you plan to share this information with third parties in connection with online behavioral marketing efforts, you should indicate that to the individual. In all cases, the principle notes that you should always provide the individual with the right and an option, at any time, to opt-out of the use of his or her information for such purposes.

As mentioned, this is the sixth of the seven principles being highlighted, but if you would like to read the entire “Self-Regulatory Principles for Online Behavioral Advertising” report now, in its entirety, just follow the link. Legal Bytes will be bringing you a summary of the remaining principle next week. And now, as always, if you have any questions or need help, please feel free to contact Anthony S. Traymore or me, or any of the Reed Smith attorneys with whom you regularly work.

Privacy and Consumer Groups Want More Than Just Self-Regulation

This post was written by Adam Snukal and Joseph Rosenbaum.

As previously reported in Legal Bytes, it seems that not everyone is satisfied with the Self-Regulatory Principles for Online Behavioral Advertising recently promulgated by several leading advertising associations. A group of 10 consumer and privacy advocacy organizations (i.e., Center for Digital Democracy, Consumer Federation of America, Consumers Union, Consumer Watchdog, Electronic Frontier Foundation, Privacy Lives, Privacy Rights Clearinghouse, Privacy Times, U.S. Public Interest Research Group and The World Privacy Forum called on Congress earlier this week to enact legislation in response to what they feel are genuine threats to privacy arising from online behavioral tracking and targeting.

The guiding principles the coalition wants Congress to follow in its enactment of privacy legislation are substantively contained in the following Fair Information Practices (“FIP”), which the coalition claims has been the foundation of U.S. privacy policies for decades: collection limitations, data quality, purpose specification/communication, use limitation, security safeguards, appropriate openness, individual participation and knowledge rights, accountability, and redress. FIP was coined by a U.S. government advisory committee in 1973 in response to the use of automated data systems that contained information about individuals. The U.S. Privacy Act of 1974 established a code of fair information practices, and the FTC refers to these practices in a report entitled, Privacy Online: Fair Information Practices in the Electronic Marketplace (May 2000).

A sample of the principles contained in the coalition’s Legislative Primer, entitled Online Behavioral Tracking and Targeting Concerns and Solutions, includes:

  • A definition of “sensitive information,” along with guidelines as to the kinds of data that should not be collected or used for behavioral tracking/targeting
  • A prohibition on the collection or use of data from anyone under the age of 18
  • The right of an individual to obtain access to his/her personal or behavioral data
  • Personal and behavioral data collected must be relevant for the purposes for which they are to be used
  • A private right of action given to each individual whose data is collected and tracked, along with liquidated damages and appropriate federal/state regulation and oversight

Given the July release of self-regulatory principles, crafted and widely embraced by the advertising industry, with explicit support for self-regulation from the FTC itself, and three decades of successful self-regulation in the advertising industry (guided by the Council of Better Business Bureaus), it is not clear why a spokesperson for the Privacy Rights Clearinghouse would take the position that “The record is clear: self-regulation doesn’t work. It is time for Congress to step in and codify the principles into law.” Or why a spokesperson for Consumer Watchdog commented: “We’ve seen in industry after industry what happens when the fox is left to guard the chicken coop – consumers lose.”

With Congressman Boucher (D-Va.), Chairman of the Subcommittee on Communications, Technology and the Internet, indicating that his Subcommittee intends to visit this issue in the fall, it is not clear whether Congress will allow the industry and the FTC an opportunity to give self-regulation time to work, or if a perceived need to “do something” and change the status quo remains. One thing has not changed: the positions of the industry and consumer and privacy advocacy groups.

Legal Bytes will keep you posted on developments in this area as they evolve, but if you need help or want further information, feel free to contact Adam Snukal, me, or any of the Reed Smith attorneys with whom you regularly work.

Self-Regulatory Online Behavioral Advertising Principle No. 5: Material Changes

Here is the fifth in our installments of summarizing the seven principles contained in the Self-Regulatory Online Behavioral Advertising Principles released by 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, For reference, the seven enumerated principles are:

The Material Changes principle requires an organization engaged in behavioral advertising to obtain consent before applying any material changes to its existing online behavioral advertising policies and practices – specifically, to the data collection-and-use policies and practices that apply to data collected prior to the effective date of any material change to these policies and practices.

This principle also makes it clear that a change in policy or practice that would result in less data collection or more restrictive use of the data (i.e., less or more restrictive use of the data than existing usage) is NOT a material change that would require prior consent. This makes sense considering that the purpose of the principle, when coupled with Transparency and Consumer Control, is not to merely give consumers an absolute right to consent or to reject any and all changes, but only those that would broaden, deepen or alter in an expansive or materially different manner, the existing collection-and-use practices of the organization. If a change would result in less data being collected or more constrained use of the data being collected, a consumer would likely be notified of the change, but consent would not be required.

Legal Bytes will be bringing you a summary of the remaining two principles in the next week. And now, as always, if you have any questions or need help, please feel free to contact me or any of the Reed Smith attorneys with whom you regularly work.

Self-Regulatory Online Behavioral Advertising Principle No. 4: Data Security

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, recently released its Self-Regulatory Online Behavioral Advertising Principles. When we announced these principles, we also promised to provide you with a bit more detail regarding each of these principles, which are listed below; so here is a brief summary of the fourth – Data Security. For reference, the seven enumerated principles are:

The Data Security principle requires entities to provide reasonable security for, and limited retention of, data collected and used for online behavioral advertising purposes. Consistent with the FTC standard, entities must maintain appropriate physical, electronic and administrative safeguards based upon the sensitivity of the data. Further, data collected and used may not be retained any longer than necessary to fulfill a legitimate business need (e.g., testing and auditing) or as required by law. In addition, the principle sets forth the steps that service providers (e.g., entities that provide Internet service, toolbars, web browsers or comparable desktop applications) must take in connection with data collection and use, including alteration, anonymization or randomization (e.g., hashing) of personally identifiable information; enhanced notice and disclosure at the time the data is collected; and the protection of the non-identifiable nature of data shared with non-affiliates. Under the Data Security principle, service providers will be held accountable for compliance with these principles in connection with their collection and use of data for online behavioral advertising purposes. Thanks to Stacy Marcus for her analysis.

We can now also report to you that yesterday a coalition of 10 consumer and privacy advocacy groups (i.e., Center for Digital DemocracyConsumer Federation of America, Consumers UnionConsumer WatchdogElectronic Frontier FoundationPrivacy LivesPrivacy Rights ClearinghousePrivacy Times, U.S. Public Interest Research Group, and The World Privacy Forum, has released a draft of their own principles, in the form of a Legislative Primer, entitled Online Behavioral Tracking and Targeting Concerns and SolutionsLegal Bytes will have a more detailed report for you on this new development in the next day or two, and in the meantime – or any time – feel free to contact me, Stacy Marcus, or any of the Reed Smith attorneys with whom you regularly work.

Self-Regulatory Online Behavioral Advertising Principle No. 3: Consumer Control

Last month we promised to provide you with a bit more detail regarding each of the self-regulatory principles that form the basis of the Self-Regulatory Online Behavioral Advertising Principles, announced by 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. The principles are intended to provide a framework for industry participants to adopt, implement and adhere to standards of conduct applicable to their online behavioral advertising practices. Seven basic principles are contained in the report, and Legal Bytes is briefly summarizing each one, although we urge you to read the full report. 

We previously reported on the Education and Transparency principles; those links in the outline below will take you to the summaries, or you can read the overview posted when we reported on the initial release of the Self-Regulatory Online Behavioral Advertising Principles.

For reference, here are the seven enumerated principles:

Today, Keri S. Bruce highlights the Consumer Control principle that relates to the practice recommended by the report of providing consumers with additional control over whether data is collected about them and whether it is shared with others. The principle applies to third parties that collect or use behavioral advertising data and the websites from which the data is collected. The principle also applies to “service providers” (i.e., parties that provide Internet access services, toolbars, Internet browsers or comparable services, and who are engaged in online behavioral advertising). Through notices that are described under the Transparency principle, with respect to third parties and websites, consumers should be able to control the use and collection of their personally identifiable information by opting-out of having data collected or shared with non-affiliate websites. With respect to service providers, because they potentially can, by the nature of the services they provide, gain access to all or substantially all online behavioral data of a particular user when that user is online with or through the service provider, the Consumer Control principle requires industry participants to follow practices that require consumers to opt-in to data collection for online behavioral advertising purposes by the service provider. Further, even after consent is given, service providers must provide a means for the consumer to withdraw her or his consent. 

Thanks to Keri S. Bruce for her analysis. For further information, you can also call me or the Reed Smith attorney you regularly work with. Stay tuned for summaries of the remaining principles.

Self-Regulatory Online Behavioral Advertising Principle No. 2: Transparency

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.” 

We promised to provide you with a bit more detail regarding each of these principles. We previously reported on Education, and today we summarize Transparency. As we go through each one, we’ll use the outline below to enable you to link to all the prior principles covered in Legal Bytes, while highlighting the one covered today. The seven enumerated principles are:

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

The Transparency principle seeks clear and accessible consumer disclosures regarding the type of data collected and how the data will be used to conduct behavioral advertising. Because behavioral advertising is often conducted by third-party advertising networks that lease space on a website, the principle applies to both third-party entities collecting and/or using the data, and the websites from which such data is being collected. Under this principle, these parties would provide “enhanced notice” on the page where data is collected through links embedded in or around advertisements, or on the web page itself. Customers will have the ability to read these notices and use the information to enable themselves to take control over the use of their personal information, choosing whether they would like to permit their information to be used for online behavioral advertising purposes.

Thanks to Amy S. Mushahwar for her analysis. Stay tuned for summaries of each of the remaining principles.

Court Orders Google to Turn Over Blogger Identity Information

Earlier this week, New York State Supreme Court Judge Joan Madden ordered Google to turn over account information about an anonymous blogger to model Liskula Cohen in order to enable her to pursue a claim of defamation. The blogger had used Google’s blogging service to create a blog entitled “Skanks in NYC,” and had posted pictures and references to the model that were anything but flattering, and which, she claimed, lost potential opportunities for her. When Ms. Cohen originally sought to find out who had posted the content, predictably Google resisted, maintaining that its privacy policy does not permit the disclosure of the blogger’s account information.

To put this in perspective, the protection of free speech—especially anonymous speech—is a concept in American jurisprudence and history that traces its roots to Thomas Payne’s pamphlet, Common Sense. First published in 1776, it anonymously challenged the authority of Great Britain in the New World and is widely regarded as the first work to openly ask for independence for the Colonies from Britain.

Since then, state courts have varied on just how wide those rights go and for what purposes protection is appropriate. Although I am hardly a First Amendment lawyer or a Constitutional scholar, the legal issue still seems simple. If the speaker—anonymous or not—is expressing ideas or an opinion or belief, he or she is more likely to enjoy protection. While there are limitations on freedom of expression (e.g., yelling “fire” in a crowded theater), political expression has typically enjoyed greater protection than “commercial” speech—one being fundamental to a society’s encouragement of the free flow of ideas, the other designed to promote a product, service or brand in a free market economy. On the other side of the spectrum and generally not protected, would be public expressions that are clearly and solely intended to hurt someone, where actual harm can be shown from intentional or malicious public expression or, as was determined by the New York court here, where an illegal act was or was likely to have been committed—in this case, defamation.

While it is difficult to pinpoint a single factor that will always favor protection, anonymity is a strong legal shield U.S. jurisprudence holds dear to protect individuals from the potential swords of those in power, or from anyone who might seek to stifle dissent or ideas that might be unpopular. For example, in 2005, a blogger who ranted against a politician, accusing him of “obvious mental deterioration,” was ultimately protected by the Delaware Supreme Court expressing concern over the potential “chilling effect” on anonymous speech. The blogger in this case was referring to a politician, and the court ruled that in order to justify revealing the identity of an anonymous blogger, the plaintiff must provide evidence sufficient to all the elements of the claim if the case were to go to trial. Because the court concluded no reasonable person would believe the blogger’s statements to be factual, no action for defamation could be sustained, and the court dismissed the case. You can read the Delaware Supreme Court’s decision in full right here, but clearly for bloggers, this represented a significant landmark and affirmation of the substantial protection afforded anonymous posting.

In a subsequent 2008 case, a Maryland Court of Appeals decision (Independent Newspapers, Inc. v. Zebulon J. Brodie) similarly concluded that anonymous posts should be protected, and set out an approach first detailed in a New Jersey case (Dendrite Int'l, Inc. v. John Doe No. 3) describing the steps judges should take in deciding whether to compel disclosure of anonymous online speakers in cases that come along in the future.

Unlike the previous cases, and potentially distinguishing this case, is the fact that the blogger here targeted Ms. Cohen intentionally, exclusively, and individually; and while the defendant argued the postings were just “trash talk” and only opinion, Judge Madden noted that if Ms. Cohen could prove the blogger’s statements were factually inaccurate, it would refute the argument that the posts were merely opinion and would support a legal claim of defamation.

As we have previously noted in Legal Bytes in articles describing the FTC’s efforts to regulate the blogosphere, and in presentations we have made, it is clear that online speech is coming under increased scrutiny, and that regulators and courts appear to nibbling away at the virtually complete immunity anonymous bloggers once seemed to enjoy, seeking to define the contours of what is or is not permissible conduct on the web. Does anyone remember the term “netiquette”?

For more information, or for assistance with issues like these or any social media, online, digital content, gaming or matters that meet at the crossroads of advertising, technology & media, look up Joseph I. Rosenbaum, send me an email, or contact the Reed Smith attorney with whom you regularly work. We are happy to help.

Self-Regulatory Online Behavioral Advertising Principle No. 1: Education

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.

Landlord Can't Let Tweet sMOLDer

If you have been wondering what happened to the third grade line “there’s a fungus among us,” we have the answer. It seems a “tweet” made available May 12, 2009 on Twitter contained the following statement: ". . . Who said sleeping in a moldy apartment was bad for you? Horizon realty thinks it's OK." Since the tweet is alleged to be available publicly for the world to see on Twitter, that didn’t seem particularly humorous to the management of the apartment building in which the Tweeter lives.

So non-humorous in fact, that Horizon Group Management, landlord of the apartment building in question, has filed suit in a Cook County Illinois Court for libel, alleging this was a "malicious and defamatory" tweet about the state of her apartment. The complaint further contends that because the "statement damaged the plaintiff's reputation in its business, the statement is libel per se." Horizon is seeking a minimum of $50,000 in damages and that isn’t birdseed. You can read a copy of the complaint right here.

Facebook Flap Over Ad Photos (Déjà vu All Over Again)

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.

Advertising Industry Collaboration Releases Self-Regulatory Online Behavioral Advertising Principles

A group of the nation's largest media and marketing trade associations today released self-regulatory principles to protect consumer privacy in ad-supported interactive media that will require advertisers and websites to clearly inform consumers about data collection practices, and enable them to exercise control over that information.

In an extraordinary show of industry cooperation and collaboration, the American Association of Advertising Agencies, the Association of National Advertisers, the Direct Marketing Association, and the Interactive Advertising Bureau last week released a series of self-regulatory principles, intended to be implemented by 2010 and designed to protect consumer privacy in advertising-supported interactive media. As part of the announcement, the Council of Better Business Bureaus along with the DMA, has agreed to implement accountability programs relative to these principles.

These self-regulatory guidelines come on the heels of a recently released study commissioned by the IAB entitled “Economic Value of the Advertising-Supported Internet Ecosystem,” which reported that the advertising-supported Internet represents 2.1 percent of the total U.S. gross domestic product (GDP), contributing $300 billion to the economy, and has created 3.1 million U.S. jobs.

“Guided by the seven Principles we have announced today, the advertising community is developing one of the most comprehensive self-regulatory programs ever undertaken by the business community. The fast-changing online marketing environment is best addressed by a self-regulatory framework that is transparent, flexible and accountable to consumers' needs and concerns. On behalf of our 360 members, who collectively invest more than $200 billion annually in marketing communications, we look forward to jointly developing a comprehensive business system that respects and honors these Principles,” said Bob Liodice, President and CEO, (ANA).

“This historic collaboration represents businesses and trade associations working together to advance the public interest,” said Randall Rothenberg, President and CEO, IAB. “Although consumers have registered few if any complaints about Internet privacy, surveys show they are concerned about their privacy. We are acting early and aggressively on their concerns, to reinforce their trust in this vital medium that contributes so significantly to the U.S. economy.”

The seven Principles designed to address consumer concerns about use of personal information without wreaking havoc to advertising that subsidizes and supports the vast array of free online content relate to:

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

We will be highlighting each of these principles separately in Legal Bytes over the weeks ahead, but if you would like to read the “Self-Regulatory Principles for Online Behavioral Advertising” report now, in its entirety, just follow the link.

Did You Miss Our Seminar: "Facebook Personalized URLs: Titanic Brand Opportunity or Tip of an Iceberg?"

As we reported previously, Facebook announced the availability of a personalized Facebook URLs, raising serious issues — yet another example of technology colliding with traditional intellectual property laws. In this case, laws intended to protect trademarks and brand names. If you followed the news, the promotional momentum created by Facebook's offer has made every astute brand owner ponder the implications! While you, of course, should look at my previous Legal Bytes post on Personalized URLs, if you missed the informative one-hour seminar on the subject presented by Douglas J. Wood and myself, Co-Chairs of the Reed Smith Advertising Technology & Media Law Group, you can find it here: “Facebook Personalized URLs: Titanic Brand Opportunity or Tip of an Iceberg?

Whatz Gnu? Reed Smith Teleseminar: Facebook Personalized URLs: Titanic Brand Opportunity or Tip of an Iceberg?

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.

Facebook Adds Personalization & a (Brand) New Dimension?

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.

Continue Reading...

Employees Off-Work, But Online

This post was written by E. David Krulewicz and Cindy Schmitt Minniti.

Facebook, MySpace and Twitter have become household names, a ubiquitous part of the daily lives of many and often a tool for keeping in touch with friends and family. These websites are increasingly being used by individuals to document their daily lives and activities, voice their concerns and post their opinions for the world to read and to respond. The business community has also turned to these “social media” websites as means for marketing their brands and, in some instances, for obtaining information about current employees and prospective job applicants. A series of recent cases reminds us there are significant risks related to the posting and/or use of information discovered on “social media” websites.

For example, in Pietrylo and Marino v. Hillstone Restaurant Group, a case pending in the Unites States District Court for the District of New Jersey, two individuals sued their former employer after they were terminated for posting complaints about their workplace on an invitation-only discussion forum on MySpace.com. Much to the employees’ surprise, managers from Hillstone Restaurant Group were able to access this discussion board (although the parties dispute whether the managers had a right to do so) and were less than pleased with what they read. The employees were quickly terminated and a lawsuit followed. 

In their complaint, the former employees assert their employer not only violated state and federal Wiretap and Stored Communications Acts by accessing the invitation-only forum, but wrongfully terminated them in violation of New Jersey’s public policy favoring free expression and privacy as embodied in the U.S. and the New Jersey Constitutions. Their employer has denied the claims and asserts the plaintiffs were “at-will” employees who could be terminated for any reason or no reason at all.

Ultimately, the question of liability may hinge upon whether the employees had a right to privacy for statements made online and whether the employer has a right to make disciplinary decisions based on an employee’s off-duty conduct.

Although legal commentators and privacy advocates debate how the trial will unfold when the case goes to trial later this summer, they all agree the case highlights real- world issues that can follow an individual’s seemingly innocent decision to post his or her thoughts on a social networking website. This is far from an isolated incident – indeed, the sports media recently reported a similar incident involving the Philadelphia Eagles’ termination of a long-time employee for disparaging the team’s management and its decision to release a prominent player on his Facebook page.  

While it is unclear if any of the companies in the cases above had a policy or provided instruction to their employees on these issues, it should not surprise you that increasingly business employers are finding they must do so. Clearly, before making decisions or taking action against employees for online, but off-duty conduct, employers should seek legal counsel from lawyers who understand these issues and can guide you in this dynamically evolving environment – where federal and state (and sometimes municipal or local) law may apply and little, if any, precedent currently exists. Worried? Need help? Need to understand more? Contact E. David Krulewicz or Cindy Schmitt Minniti or the Reed Smith lawyer with whom you work. 

Update:  Today, May 20th, after this story was posted, the U.S. House of Representatives also approved the bill regulating some common credit card and gift card industry practices. It is likely President Obama will sign the bill once it arrives on his desk.

Better to Lose Face Than Facebook

Facebook, the very informal and ostensibly open social network, hinting at an apology for what its CEO acknowledged were “overly formal and protective” Terms of Service, did an abrupt about-face recently, retracting them and reverting to its old Terms of Service—presumably reacting to a sea of complaints from just about everyone. Complaints? Over legal terms—does anyone still read them? Well, they do, and they didn’t like what they read—particularly the part that claimed unrestricted, perpetual ownership of your personal data, even if you decide to delete your entire account and go away. 

While we respect Facebook’s right to better manage, control, and disclose to consumers how and for what purpose it treats and handles personal data, it highlights a number of things the online world continues to teach us. First, don’t assume those innocuous changes buried somewhere in terms of service, terms of use, privacy policies, codes of conduct, rules of the road, or whatever you choose to call them, aren’t being scrutinized—by consumers, by your customers, by the media and, lest we forget, by regulators and legislators. While Facebook has not admitted it was caught a bit red-faced, it is taking your feedback in a “Facebook Bill of Rights and Responsibilities” group to which you can contribute your thoughts. For those in the know, Facebook’s population has grown to more than 175 million users—does that make it the sixth-largest country in the world? Hmm, I wonder if that country has a growing budget deficit too; we’ll have to wait for the State of the Reunion speech, when results are posted, to find out.

Dazed & Confused, Not Shock and Awe

For 2009, here are my predictions:

The economy and strife, regulation and surveillance will dominate the agenda, with the burden of paying for everything from wars to bailouts right in the crosshairs: watch those advertising budgets boys and girls, the taxman cometh.

Privacy and advertising, long separated by passive print, television and radio, will continue to collide—Congress will either pass ineffective and inappropriate legislation because it’s too busy to pay attention, or will defer legislation another year because it’s too busy to pay attention.

Wireless and mobile technology will continue to make us say “wow” and will continue to miniaturize our lives, putting not just communication, but also our wallets, calendars, purchasing, entertainment and working tool kits in our hands, not our laps.

The use of wireless and additional licenses, spectrum and bandwidth will bring the FCC and the FTC colliding in their zeal to regulate, and they will either cooperate because they are too busy to fight or fight because they are too busy to cooperate. In either case, regulation, re-regulation and self-regulation will continue to increase, unregulated.

Marketing, promotions, new media, digital content and distribution platforms will transform gaming and interactive play into entertainment, education and information—giving us more choices, but continuing to blur the lines between advertising, entertainment and information.

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Red Faced or Saving Face. Facebook Faces the Music!

Facebook has built a highly popular business, but it turns out making that popularity profitable appears to depend, in large measure, on advertising. Sound familiar? So Facebook announced a new program, Beacon, an online tracking tool. No, online tracking certainly isn’t new: companies track where your browser has been and your online activity, and routinely serve up ads based on “preferences”—where you have been, what you look for, and what you purchase. But that takes place behind the scenes—you just see the results: relevant, targeted advertising.

Facebook has taken online tracking one step farther: Beacon sends messages telling your Facebook buddies what you are buying and, in some cases, what you are doing. So don’t plan that surprise trip to Puerto Rico just yet—buying a ticket might ruin the surprise. In fact, don’t come back from the trip and rate the hotel—your friends who weren’t invited will know you’ve been there.

Facebook faced criticism last year when its “News Feed” function came under fire. Media and industry pundits and Facebook executives note often schizophrenic and hypocritical marketplace attitudes. Indeed, there is some irony to be considered when the generation that posts profiles, adding everything from drinking, sexual preferences, and religious affiliations, to family videos, in blatantly public web-spaces, complains about privacy. But consumers still distinguish between their choice to share, and allowing a host to decide what, when, where and how to share information about them, or whether to characterize activities as some form of an “endorsement without consent” to their friends.

As usual, privacy and consumer advocacy groups were poised to file complaints with the FTC, right on the heels of investigations already launched by several Attorneys General into Facebook’s privacy practices. The New York Attorney General has issued a subpoena to Facebook for copies of complaints about “inappropriate solicitation of underage users and inappropriate content on the site.” As innovators have learned, success shines a spotlight that creates a glow—and discloses warts; let’s see if they can keep Facebook blemish-free.

Content is King, but the Medium Is Still the Message

Recently lawyers have begun to debate the question of just how much control advertisers can exert when paying for product placements or branded entertainment before the line between First Amendment expression by the creative staff putting together the program and the financial subsidies from advertisers is crossed. Now, the Ninth Circuit has dealt with a similar question relating to the immunity that interactive computer service providers have typically enjoyed under the Communications Decency Act (the “CDA”). The CDA insulates service providers from liability so long as the service provider remains a publisher of information and content of others (there are exceptions, so the immunity is not blanket and you should always consult legal advice for specifics that apply to your situation). That said, a company that operates an online web service that specializes in matching roommates based on their preferences has been held in violation of the Fair Housing Act because a questionnaire put together by the company asks for certain demographic information that, when posted on the website, could be used by users and site visitors to discriminate against others. The company, Roommates.com, asked users to disclose information, among other things, about roommate preferences such as age, sex, children, etc. The Ninth Circuit held that although Roommates.com was immune as long as it was simply enabling the distribution or display of information provided by its members, when it became an information content provider, it lost immunity with respect to that activity and information. And by putting together the questionnaires and soliciting their preferences in response, Roommates.com was not simply posting content authored by users, but rather was eliciting specfic information that could be abused and that might or might not have been voluntarily posted or disclosed absent the questionnaires.

Hmmmm…user profiles, play lists, segmented marketing, asking consumers to participate in promotions…this is an interesting test of the limitations of the CDA to protect and insulate interactive online service providers from liability. As social networks, virtual worlds and other digital arenas that don’t simply enable but also solicit or encourage certain information to be provided, and as web services become more targeted, focused and segmented to match consumer preferences, the immunity is likely to be tested further. Stay tuned.

User-Generated Content

User-generated content (“UGC”) on the Web is serious business and becoming more so by the day. While many know UGC as a challenge to IP rights, eMarketer is predicting advertising spending on social networking, photo sharing, gaming and amateur video websites to reach $4.3 billion by 2011—compared with the $450 million in advertising revenue they reported in 2006. That means companies are going to have to figure out how to differentiate themselves and maintain positioning in the face of increased competition. The ease of creation, coupled with technology—whether embedded players, gadgets and widgets, or more sophisticated interactive game sites—means that millions of users can create, post and “snag” user-generated content, and the trend shows no sign of diminishing. Social networking companies are significant sources of advertising revenue and are growing targets for investors seeking to build market share or obtain a piece of the transactional pie. Increasingly, mobile marketing and messaging companies are building the wireless and global brands, and are increasingly monetizing their social networking and messaging capabilities.

Legislators and regulators are noticing the exuberant success and popularity these services enjoy and, with a demographic skewed to a younger portion of the population, there is no question these services, the advertising they carry, and the content available on their sites, will continue to draw scrutiny in the months and years ahead. Reed Smith represents social networking companies, advertising agencies, and advertisers and media companies around the world. When you think of legal issues surrounding user-generated content—standards, copyright protection, digital rights management, filtering, viral or buzz marketing and so much more—please think of our Advertising Technology & Media Law practice group.

Parallel Universe Spawns Parallel Legal Woes

You knew it had to happen, but are still surprised when it does. In what may be a first-ever, a lawsuit has been filed against a defendant that doesn’t really exist, over a non-existent furniture line. Yes, you guessed it, a bed with special embedded animations that allow participants in Second Life, the virtual reality world established by Linden Labs, to essentially recreate an adult film with their virtual persona—avatars.

For the past few years, Second Life’s approach to IP protection has been to allow players to keep rights to programs, animations and objects they create—although many of the tools (programming scripts, etc.) are Linden’s and are provided to enable players to build things in this virtual world. Much like user-generated content in the world of multimedia audio-visual works, creativity and innovation is creating virtual content by the boatload and creating virtual objects and businesses is not simply a recreational pastime, but also a source of entrepreneurial glee and money for many. Clothing, real estate, automobiles, virtually (pardon the pun) anything, becomes the object of virtual purchases, sales and licensing.

Well, the law has caught up with reality. One player, whose avatar is selling virtual items under the brand “SexGen” bed, is suing another avatar for selling fakes for less—undermining the business. Since you have no obligation to disclose your true identity in Second Life, who do you sue? Well, first you try to get information from Linden, presumably because their computers house the underlying registration and information that would disclose who is behind the knock-offs. But, if the alleged infringer has not registered a real name, credit card or other “real world” items to enable identification, you might only get an IP address.

So we’ll keep you posted on developments, but who knows where this will go. Will a court entertain the case? Will they discover the identity of the alleged infringer? Will copyright infringement principles apply in a virtual world? Perhaps the plaintiff will try to enjoin Linden from allowing or enabling the fake products, or send them a virtual Digital Millennium Copyright Act (“DMCA”) “take-down” notice.

Don't Like Pop-Ups or Banners? Try a Widget

Studies now show that marketing professionals looking to attract today’s generation of social networking, mobile messaging, interactive gaming young people might well experiment with more digital features that one can play and interact with on the Internet. If you responded to last month’s Legal Bytes “Useless But Compelling Facts” (or you peeked at the answer below), you know that a widget refers to a computer program that allows Web pages to be sophisticated and interactive—using graphics, animation, audio-visual effects and user-generated content. While advertisers lose control over where these little widgets are placed (e.g., next to a competitor’s widget), giving consumers—especially young people (another issue for marketing to children?)—a premium or incentive is more likely to get them to put advertising content on their pages. It appears, at least according to one study, that when kids are given a choice of what they want to appear on their pages, especially when some “goodie” is part of the offering (a game, free download, coupon, etc.), they are more likely to choose to use advertisers’ content, than if it is “pushed” to them.

Although using widgets as a promotional tool doesn’t guarantee a successful advertising campaign, especially if the product or service isn’t up to par, widgets represent another arrow in the quiver of advertising and marketing professionals to personalize and target audiences. Some social networking sites block users from putting up widgets, or selectively enable widgets based on endorsements or the protection of intellectual property rights. Widgets also represent another challenge to traditional advertising economics. Since users choose when and where to post the widget applications, the widget creator—generally a hosting, server or similar technology or digital graphics firm—is the only entity getting paid, and beyond that, advertising (and thus advertising revenue) is not tracked.

COPPA - Xanga Settles

Based on a complaint that Xanga knew it was collecting (and sharing) personal information from children under the age of 13 (they asked for and were given the birth dates from registrants), the FTC reached a settlement agreement in which Xanga.com agreed to pay a civil penalty of $1 million. The complaint also alleged that Xanga didn’t notify children’s parents, nor did they give parents access to or control over their children’s information.

The Children’s Online Privacy Protection Act (“COPPA”) mandates that commercial web sites give parents notice and get consent before collecting personal information from children they know to be younger than 13 years old. The order which is part of the settlement with the FTC forces Xanga to erase any personal information collected and stored that violates the Act. Xanga also will have to put up hypertext links for the next five years to FTC-designated consumer educational materials.

Social networking has been in the news recently for many reasons. Recently, Facebook was faced with controversy when it started serving automated alerts about users’ friends and classmates. Facebook has less than 10 million users, compared with MySpace—which is now owned by News Corp.—which has in excess of 100 million users.

Virtual Worlds--Not Really Virtual, Not Virtually Real

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?

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