V-I-C-T-O-R-Y for the Fashion Industry: SCOTUS Establishes Uniform Test for Protection of Artistic Works Applied to Apparel

The overall design (such as the shape and cut) of a garment, bag or shoe is not protectable under current U.S. Copyright law because such items are considered “useful articles.” However, Section 101 of the Copyright Act provides protection for the “pictorial, graphic or sculptural features [of a useful article] that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the [useful] article.”[1]

In the fashion world, this provision of the Copyright Act allows companies to protect original pictorial, graphic or sculptural features that are applied to garments, bags and other accessories.  Examples include: fabric designs like a floral pattern; graphic art like an artistic rendition of a snake or tiger; and sculptural 3-D hardware adornments like belt buckles or buttons.  Copyright protection only covers the artwork itself, not the overall configuration of the garment or other product to which it is applied.[2]

For decades, courts and commentators have struggled to fashion a suitable test to determine when a pictorial, graphic or sculptural feature of a useful article (such as a garment) is protectable under § 101 of the U.S. Copyright Act.  On March 22, 2017, in a 6-2 decision written by Justice Thomas, the Supreme Court provided long-awaited clarificationMuch to the relief of the fashion industry, the Court adopted a test that preserves copyright protection for applied art to apparel and fashion accessories.

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Court Dismisses Website Accessibility Suit Over Lack of Connection to Store

As we noted earlier this week, a handful of law firms have filed hundreds of lawsuits – and sent many hundreds of letters threatening lawsuits – over website accessibility issues. This has been a lucrative business for these firms. Many of these suits and letters are essentially cut-and-paste jobs, and the recipients often decide to quickly settle, rather than face the uncertainties and costs of litigation. But a new decision in Florida may give defendants something to think about.

A plaintiff filed a lawsuit against Bang and Olufsen in Florida, alleging that the retailer violated the ADA because its website is not compatible with screen reader software. The sole issue before the court was whether the website was a place of public accommodation, subject to the ADA.

The court concluded that “a website that is wholly unconnected to a physical location is generally not a place of public ADA Keyboardaccommodation under the ADA.” In order to survive a motion to dismiss, a plaintiff must generally establish that there is some nexus between a website and a physical location, and demonstrate that the website’s inaccessibility impedes his access to that location.

Importantly, the court held that the “ADA does not require places of public accommodations to create full-service websites for disabled persons. In fact, the ADA does not require a place of public accommodation to have a website at all. All the ADA requires is that, if a retailer chooses to have a website, the website cannot impede a disabled person’s full use and enjoyment of the brick-and-mortar store.”

As we noted in our previous post, it’s too early to predict how this decision will affect the wave of lawsuits in this area. Other courts have come to different conclusions on this issue, so a company’s chances of winning with this type of argument may depend on where the suit is filed. But this case may still be welcome precedent for companies thinking about litigating one of these cases.

For more information, you can attend our webinar on March 30.

Court Relies on Due Process Argument to Dismiss Website Accessibility Suit

Over the past few years, a handful of law firms have filed hundreds of lawsuits – and sent many hundreds of letters threatening lawsuits – over website accessibility issues. This has been a lucrative business for these firms. Many of these suits and letters are essentially cut-and-paste jobs, and the recipients often decide to quickly settle, rather than face the uncertainties and costs of litigation. But a new decision in California may give defendants something to think about.

Last year, a plaintiff filed a lawsuit against Domino’s complaining that he could not order pizza from the ADA Keyboardcompany’s website using his screen reader. Domino’s argued that websites are not places of public accommodation under the ADA, but the court didn’t agree. Nevertheless, Domino’s argued that the court should dismiss or stay the action because the Department of Justice has not promulgated concrete guidance regarding the accessibility standards.

As we’ve noted before, the DOJ issued a Notice of Proposed Rulemaking in 2010 regarding regulations on website accessibility. In the Notice, the DOJ acknowledged that “clear guidance on what is required under the ADA does not exist.” Dominos argued that, in the absence of clear guidance, the plaintiff’s “request to impose liability under the ADA for Defendant’s alleged failure to abide by certain accessibility standards would violate Defendant’s constitutional right to due process.” The court agreed, and dismissed the action without prejudice.

Although the DOJ has issued several “Statements of Interest” and has entered into settlements obligating companies to abide by certain standards, the court held that those statements and settlements still do not provide companies with concrete guidance regarding their requirements. Moreover, the Statements of Interest “even suggest that Domino’s provision of a telephone number for disabled customers satisfies its obligations under the ADA.”

It’s too early to predict how this decision will affect the wave of lawsuits in this area, but the decision does suggest at least two things. First, if your company’s site isn’t fully compatible with a screen reader, you should at least consider an alternate method – such as a toll-free telephone number – through which you can enable people with visual impairments to enjoy the benefits of what is on your website. Second, if you are considering fighting a threatened lawsuit, you may want to consider a due process argument.

For more information, you can attend our webinar on March 30.

Oregon Attorney General Announces $545,000 Settlement with Retailer

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The Oregon AG recently announced a $545,000 settlement with the Vitamin Shoppe over allegations that the store violated Oregon state law by selling dietary supplements containing ingredients that FDA has deemed unsafe or unlawful. The new settlement agreement places significant burdens on the Vitamin Shoppe to monitor developments on ingredient status. The burdens are the same regardless of whether the Vitamin Shoppe sells a product under one of its own brands – or if it sells a product that was manufactured, labeled, and sold to it by a third party vendor.

Under the terms of the agreement, if the Vitamin Shoppe “receives or learns of” a “written notice” from FDA that an ingredient may be unsafe or unlawful, it must “take immediate action to suspend the sale of such products or products known to contain the ingredients.” If the Vitamin Shoppe becomes aware of any other “public announcement, warning, alert, publication, notice, or report” suggesting that the U.S. government, Australia, Canada, Britain, or the EU might consider a dietary ingredient unsafe or unlawful under the FDCA, then the Vitamin Shoppe must conduct a “reasonable due diligence review,” which may result in a decision not to sell any products containing the ingredient.

This settlement is notable for at least two reasons:

  1. It identifies FDA warning letters sent to the Vitamin Shoppe or anyone else as “written notice” that FDA has deemed an ingredient unsafe or unlawful.  Warning letters, however, state only allegations and are not considered “guidance” under FDA’s rule on “good guidance practices.”  Well after a warning letter is issued, the lawfulness of a particular dietary ingredient can be the subject of much ongoing debate, and even the FDA’s official guidance document on ingredient status remains in flux after years of debate.
  2. The settlement represents an aggressive stance by Oregon on a retailer’s liability for product formulation and labeling by third parties.  As we’ve discussed before, there isn’t a whole lot of precedent for regulators going after the retailer, rather than the product seller.

The Oregon Attorney General is currently in litigation against another retailer over similar allegations related to the legal status and safety of a dietary ingredient.

Kelley Drye Ad Law publishes News & Views: Dietary Supplement Advertising, which covers developments ranging from FTC and FDA regulation, class actions, Customs developments, and Prop 65. Subscribe to future issues by filling out your information and checking the Dietary Supplements Practice Group box here.

New Mexico Set to Become 48th State To Enact Data Breach and Safeguards Law

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Last week, the New Mexico Legislature passed The Data Breach Notification Act (“Act”). Once the Act is signed by Governor Susana Martinez, New Mexico will join 47 other U.S. states (along with D.C., Guam, Puerto Rico, and the Virgin Islands) who have enacted a data breach notification law, leaving South Dakota and Alabama as the two hold-out states without a breach notification law.

In most material respects, this legislation tracks the common provisions of other states’ breach notification laws.  A few notable points:  notification of a data breach would be required, within 45 days of discovery, to New Mexico residents if their personal information is breached. Personal information is defined as an individual’s first name or first initial and last name, in combination with their social security number, driver’s license number, government issued identification number, unique biometric data, or financial account information and the required access code/password. If more than 1,000 residents are affected, the data holder must also notify the New Mexico Office of the Attorney General within this same timeframe. Notice is not required if the data holder determines the breach does not give rise to a significant risk of identity theft or fraud.  The law provides for civil penalties for knowing or reckless violations.

Other notable provisions:

  • Disposal of Records Containing PII Requirement. Data holders must arrange for secure disposal of records containing personal identifying information (“PII”) when records are no longer needed for business purposes.
  • Security Measures for Storage of PII Requirement. Data holders must implement and maintain reasonable security procedures and practices to protect PII from unauthorized access, destruction, use, modification or disclosure.
  • Service Provider Security Measures Agreed to by Contract Requirement.  Service provider data processing contracts concerning PII must have provisions requiring service providers to:
    • implement and maintain reasonable security procedures and practices and
    • protect PII from unauthorized access, destruction, use, modification or disclosure.

The legislation exempts data holders subject to the Health Insurance Portability and Accountability Act or the Gramm-Leach-Bliley Act.

New Lawsuit Highlights Risks of Using User-Generated Content

In 2014, Anheuser-Busch ran a contest on Facebook in which consumers were invited to submit photos of themselves “acting natural.” The contest rules stated that entrants could only submit their original works, and that the photos could not infringe anyone else’s copyrights, privacy rights, publicity rights, or other rights. Moreover, the rules stated that entrants granted Anheuser-Busch a broad license to use their photos in any media. After the contest ended, the company started using some of the photos on materials for its “Every Natty Has a Story” campaign, including coasters and posters that were distributed in bars.

So far, this story is fairly typical, and could represent any number of contests that are run in the US every year. What makes this story different, Kayla Kraft Photothough, is that the owner of one of the photos Anheuser-Busch used filed a lawsuit against the company for copyright infringement, invasion of privacy, and violation of her right of publicity. Kayla Kraft argues that she owns the copyrights to a photo of her drinking beer while wearing a fake mustache that Anheuser-Busch used in its campaign, and that the company used the photo without her consent. She is seeking unspecified damages.

It’s difficult to piece together what may have happened. According to press reports, Anheuser-Busch says that Kraft’s picture was submitted as a contest entry. The company hasn’t answered the complaint yet, though, and the complaint doesn’t specifically mention the contest, so we don’t have a lot of details. Obviously, the case is going to turn on facts that we don’t have, including who submitted the picture. But although it’s too early to draw clear lessons from the case, the suit still highlights some important issues related to the use of user-generated content (otherwise known as “UGC”).

Companies can – and should – put provisions in rules that (among other things) tell people what they can and can’t submit, specify what rights the company has to submissions, and release the company from any liability. Keep in mind, though, that not everyone will read the rules, and that submitters may not even have the authority to grant the necessary rights. There are some things companies can do to address these risk. For example, it might make sense to highlight key provisions outside of the rules. And although you may be able to rely on online releases for some things, there are instances – such as when you want to use content offline – in which an offline written release make more sense.

Almost every campaign that includes UGC involves a careful balancing of risks. Because a “perfect” solution may be cumbersome in many cases, most companies will accept some level of uncertainty. But lawsuits like this serve as good reminders of what can go wrong.

NAD Director Andrea Levine Retiring After 20 years

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ASRC President & CEO Lee Peeler has announced the retirement of Andrea C. Levine, Director of the National Advertising Division (NAD). During her 20-year tenure, the NAD published more than 2,600 case decisions and built what has been described as the largest body of advertising precedent in the United States.

In announcing the retirement, Mr. Peeler stated that Ms. Levine will be remembered for her transformative leadership, promotion of the competitor challenge process, and development of the NAD Annual Conference.

A search for her successor has begun and a position description will soon be posted on the CBBB website.   Ms. Levine will remain in her role as Director until a successor has been hired.  Expectations are that a new Director could be in place as early as this summer. 

 

Keeping Up with the Consumer Product Safety Commission: Update on Recent CPSC Developments – 3/29/2017

Register Now for Keeping Up with the Consumer Product Safety Commission: Update on Recent CPSC Developments, the latest in our 2017 Advertising and Privacy Law Webinar Series

Keeping Up with the CPSCWith the complexity of today’s product safety regulatory environment and the civil penalty amounts for failure to report safety hazards, it is more important than ever for manufacturers and retailers to identify and resolve potential liability issues confidentially before they draw scrutiny from regulators and negative publicity.

Please join chair of Kelley Drye’s Advertising and Marketing and Consumer Product Safety practice Christie Grymes Thompson for an update on consumer product safety. The webinar will cover hot button legal issues and summarize significant developments in consumer product safety and at the Consumer Product Safety Commission.

Kelley Drye Speakers:

Christie Grymes Thompson, Partner

To register, please click here.

CLE Information:

Kelley Drye is an accredited provider of NY, IL & CA CLE. This non-transitional continuing legal education program has been approved for 1.0 NY Professional Practice credit, 1.0 Illinois credit, and 1.0 CA General credit. We will apply for CLE credit in other jurisdictions, upon request, but cannot guarantee approval. If you are interested in applying to receive CLE credit, please include your desired jurisdiction and your bar registration number when you register.

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More Regulators Focus on Price Comparisons

Yesterday, the Virginia Attorney General announced that it reached a settlement with Hobby Lobby over the retailer’s price comparisons. According to the press release, Hobby Lobby advertised discounts compared to “other sellers,” but failed to disclose the basis of comparison, thus making it difficult for consumers to determine whether they were getting a good deal.

The Attorney General stated that “comparison price advertising only works if businesses are clear about their prices and how they compare to competitors.” As part of the settlement, Hobby Lobby is required to more clearly disclose the basis of its price comparisons, in accordance with Virginia’s Comparison Price Advertising Act. In addition, the company must pay $8,000.

Regulators in other countries are also focusing on these issues. For example, earlier this year, Canada’s Competition Bureau announced that Amazon had agreed to pay $1.1 Million to resolve an investigation into the company’s use of “list” prices. Amazon would frequently advertise a list price with a line through it, followed by the selling price and a savings claim. For example:

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The Bureau picked a sample of 12 products and investigated the prices at which those products were sold by Amazon and its competitors over a two-year period. According to the Bureau, those items were rarely sold at the advertised list price. Amazon stated that it required its suppliers to provide accurate price information, and had relied on this information, without independently verifying it.

The Bureau noted that Amazon had initiated various changes to its pricing practices, including (a) suppressing the list prices of certain products, (b) adopting policies and procedures to ensure compliance with the requirements the Competition Act, and (c) including the requirement that list prices be set in good faith for all products offered for sale by Amazon for Amazon Retail.

Based on recent trends, we expect to see more of these types of investigations in 2017. Retailers need to pay close attention to these developments and pricing laws, particularly when they advertise discounts, sales, or other price reductions.

 

 

How Not to Get Burned by “First” Claims

When a company comes up with a new product or feature, it will usually want to advertise the benefits of that product or feature. If the company believes that it is also the first or only company to have that product or feature, it may also want to tout its status as an innovator. For example, the company may advertise that it is the “first” company to introduce something, that it is the “only company” to offer it, or that it is “exclusive” to them. As with all objective claims, these claims require substantiation. In other words, the company must take steps to ensure that they are true. Sometimes, this can become a difficult exercise of trying to prove a negative, but there are good places to start.

SnappyScreen sells an automatic sunscreen application vending machine into which a person can walk in pale, and walk out nicely-bronzed ten seconds later. The SnappyScreencompany touted this benefit to prospective customers, and it advertised that its machine was “the World’s First Touchless Sunscreen Application System.” All is not sunny in the world of sunscreen machines, though, and SnappyScreen was sued by a competitor who argues that this claim is false. Sunscreen Mist Holdings argues that it has sold and promoted similar products since 2006, and that those products are protected by a patent. The company is suing for patent infringement and false advertising.

It’s too early to predict how this case will turn out, but it’s not too early to identify a key lesson here. If you want to advertise that you are the first or only company to have a product or feature, it’s often a good idea to commission a search by a patent attorney.  A good patent attorney will look for issued patents and other pre-existing products and public disclosures that can help you identify whether you are, in fact, the “first and only.” The results can help you figure out whether you can support the claim you want to make or, if not, whether there are ways to narrow it down.  For example, if you can’t claim that your company was the first to come up with a certain type of product, maybe you can focus on the uniqueness of a certain feature.

Aside from providing advertising guidance, the search can also be used for other purposes, such as determining whether there are patents your product might be infringing (and how to design around them), and whether it makes sense to explore patent protection for your product or any of its unique features.

The analysis may require additional steps, but if you skip this first one, you might find yourself getting burned later.

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