Ad Law Access : Washington D.C. Advertising Lawyer & Attorney : Kelley Drye & Warren Law Firm : New York, Chicago, Connecticut, New Jersey, Brussels

Effective March 15, 2010, the Council of Better Business Bureaus will increase the fee it charges for CBBB Corporate Partners to file an NAD challenge from $2,500 to $3,500.  This is the first increase in the Corporate Partner filing fee since 2005.  Non-partners must pay between $6,000 and $20,000, depending on the gross annual revenue of the company.  A copy of the CBBB's announcement is available on the NAD website.

Despite this increase, the cost of bringing a challenge before the NAD is still significantly less than the cost of bringing a lawsuit under § 43(a) of the Lanham Act. Click here for an article that provides a detailed analysis of the options available to a company that wants to challenge a competitor’s claims.

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In 2007, Quiznos launched the “Quiznos v. Subway TV Ad Challenge” and invited consumers to create videos demonstrating why Quiznos is better than Subway. To encourage submissions, Quiznos posted four sample videos on the contest site. After the contest, Subway sued Quiznos arguing, in part, that some of the videos submitted by consumers included false claims. Quiznos countered by arguing that it was immune from challenge under § 230 of the Communications Decency Act, a law that essentially provides that certain websites may not be held liable for content provided by third parties. A site may lose immunity, however, if it is responsible for creating or developing that content.

A federal court recently denied Quiznos’ motion for summary judgment. The court stated that the critical inquiry with respect to immunity is “whether the Defendants merely published information provided by third parties or instead were actively responsible for the creation and development of disparaging representations about Subway contained in the contestant videos.” The court noted a few factors that could destroy immunity: (a) Quiznos invited contestants to submit videos demonstrating why Quiznos is better than Subway; (b) the domain name for the Contest (meatnomeat.com) implies that Subway sandwiches have no meat; and (c) the sample videos may contain false claims. The court determined a jury should decide whether Quiznos is entitled to immunity.

This decision interprets CDA immunity more narrowly than other recent decisions in this area and serves as a reminder that there are circumstances in which companies may be held liable for content created by consumers. In a presentation this week, David J. Ervin and Gonzalo E. Mon will discuss strategies that companies can employ to help guard against liability.

Update:  Quiznos and Subway agreed to settle the case.

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Late last night, the Senate unanimously confirmed Edith Ramirez and Julie Brill to fill the two vacant seats on the Federal Trade Commission (FTC).1 Ms. Ramirez will replace Republican Deborah Majoras, who stepped down from the Commission in March 2008, and Ms. Brill will replace Independent Pamela Jones Harbour, whose term ended in September 2009. Their positions start immediately upon confirmation. A brief background on each new Commissioner is provided below.

Julie Brill

Since February 2009, Ms. Brill has been a Senior Deputy Attorney General and Chief of the Consumer Protection and Antitrust Division for the North Carolina Department of Justice. Prior to joining North Carolina’s Department of Justice, Ms. Brill served as an Assistant Attorney General for the Vermont Attorney General’s Consumer Protection and Antitrust Divisions for over 20 years. Ms. Brill’s experience at the Vermont Attorney General’s office included a wide-variety of consumer protection litigation, legislative, and regulatory matters in the fields of privacy, credit reporting, financial services, tobacco, food, drugs and other health-related industries. As an Assistant Attorney General for the state of Vermont, Ms. Brill also testified before Congress regarding data security breach legislation and consumer privacy issues.

Ms. Brill has served as a Vice-Chair of the Consumer Protection Committee of the American Bar Association Antitrust Section since 2004 – the ABA committee chaired by John Villafranco (2002 to 2005) and August Horvath (2005-2009) of Kelley Drye. She has received several honors for her consumer protection and privacy work, including the National Association of Attorneys General Privacy Subcommittee Award in 2001 for drafting proposed privacy principles, Privacy International’s 2001 Brandies award for work on state and federal privacy issues, and the National Association of Attorneys General Marvin Award in 1995 for her “outstanding leadership, expertise, and achievement in advancing the goals of the association.” Additionally, she is also a Lecturer-in-Law at Columbia Law School.

Before beginning her career in law enforcement, Ms. Brill was an associate at Paul, Weiss, Rifkind, Wharton & Garrison in New York and she clerked for Vermont Federal District Court Judge Franklin S. Billings Jr. Ms. Brill is a graduate of New York University School of Law, where she received a Root-Tilden Scholarship for her commitment to public service. She received her bachelor’s degree from Princeton University.

Edith Ramirez

Ms. Ramirez is currently a partner in the Los Angeles office of Quinn Emanuel Urquhart Oliver & Hedges, LLP where she specializes in intellectual property and complex business litigation matters. She has represented a diverse range of clients in actions involving copyright and trademark infringement, antitrust and unfair competition claims, business tort, and other general business litigation cases. Notable litigation includes Hathaway Dinwiddie Construction Co. v. United Air Lines, Inc., where Ms. Ramirez successfully represented Hathaway Dinwiddie Construction on breach of contract claims, and Christian v. Mattel, Inc., where Ms. Ramirez helped obtain a $500,000 sanction against Mattel’s opposing counsel pursuant to Federal Rule of Civil Procedure 11 for filing a frivolous copyright infringement action against Mattel. Ms. Ramirez has also represented American Broadcasting Companies, The Walt Disney Company, The Scotts Company, and Northrop Grumman in a variety of intellectual property, antitrust, and contract litigation matters.

Ms. Ramirez is also involved with a number of community outreach activities. She has served as the Vice President on the Board of Commissioners for the Los Angeles Department of Water and Power, a member of the Board of Directors for Volunteers of America, and the California Deputy Political Director and Director of Latino Outreach for Obama for America.

Previously, Ms. Ramirez served as a law clerk to the Honorable Alfred T. Goodwin, United States Court of Appeals for the Ninth Circuit. She also worked as an associate at Gibson, Dunn & Crutcher, LLP. Ms. Ramirez attended Harvard Law School, where she was an editor for the Harvard Law Review, and she received her bachelor’s degree from Harvard-Radcliffe College.

1  http://senatus.wordpress.com/2010/03/03/nominations-confirmed-march-3/

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On March 10, Kelley Drye will host an encore presentation of the seminar, "A New Legal Frontier for Social Media," at our New York office.

The legal landscape for social media and user-generated content is changing. Make sure you understand the risks and rewards. Companies engaged in blogs, social networking, and other types of interactive marketing campaigns face increased scrutiny in light of recent cases and sweeping changes to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising. These developments have increased the scope of activities and content for which advertisers may be liable.

Join the Association of Corporate Counsel and Kelley Drye for a discussion about the important legal issues and best practices for leveraging social media. Topics will include:

• Ways that companies are using social media in the form of sweepstakes, contests, blogs, wikis, and other promotions involving user-generated content;
• Legal risks and the impact of recent cases and the FTC Guides on your advertising and marketing campaigns; and
• Practical advice on how to minimize legal liability associated with social media websites and campaigns with user-generated content.

SPEAKERS:

David J. Ervin
Partner, Kelley Drye & Warren LLP
Advertising and Marketing Practice

Gonzalo E. Mon
Associate, Kelley Drye & Warren LLP
Advertising and Marketing Practice

Josephine Belli-Marinos
Associate General Counsel & Litigation Counsel
Combe Inc.

Reginald M. Rasch
General Counsel
LinkShare

WHEN:  March 10, 2010, from 3:00 - 5:00 PM

WHERE:  Kelley Drye, 101 Park Avenue, 27th floor, New York, NY, 10178

REGISTER:  email admin@accgny.com
 

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RegHardware reports that Apple recently changed the terms of its iPhone Software Development Kit ("SDK") to allow companies to offer certain promotional games on apps. Although some reports circulating online suggest that Apple is allowing companies to run "lotteries" on the iPhone, that is not exactly right.

Section 3.3.17 of the SDK states: "Your Application may include promotional sweepstakes or contest functionality provided that You are the sole sponsor of the promotion and that You and Your Application comply with any applicable laws." In addition, developers must "clearly state in binding official rules for each promotion that Apple is not a sponsor of, or responsible for conducting, the promotion."  (As we discussed in a previous post, Facebook included a similar requirement in its Promotions Guidelines.)

Keep in mind that laws in the United States -- and laws in most foreign jurisdictions -- prohibit private parties from running lotteries. In general, a lottery includes the following three elements: (1) a prize; (2) awarded on the basis of chance; (3) to people who were required to pay consideration. Therefore, you can't require people to pay money to enter a chance-based promotion.

Although Apple's SDK does give developers more flexibility, it doesn't permit them to violate laws.

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On February 24, 2010, an Italian court convicted three Google executives for violation of Italy's privacy laws resulting from a video that was posted to Google Video showing a group of teenagers bullying another teenager with disabilities. Judge Oscar Magi sentenced Google Global Privacy Counsel Peter Fleischer, Chief Legal Officer David Drummond, and former Google CFO and board member George Reyes to six-month suspended jail sentences and fines. The executives were acquitted of criminal defamation charges. This appears to be one of the first cases in which a privacy executive is held personally liable for the actions of a site's users

The prosecutors alleged that the executives did not take sufficient actions to keep the video off of Google's site, despite the fact that Google received only two complaints about the video, and it was taken down less than 24 hours after being posted.  Prosecutors stated that Google should have obtained consent from each party involved before permitting the video to be posted.  European law provides a safe harbor for ISPs and does not hold them liable for third party content, provided the ISP takes down any content that someone complains about and is considered offensive.

Members of the technology and privacy communities have described the decision as "terrible," "astonishing," and "troubling."  One commenter stated: "It is like prosecuting the post office for hate mail that is sent in the post."

If upheld on appeal, this decision could dramatically affect internet freedom.  It appears to continue Italy's strong consumer protection stance and attempted regulation of social media. In a previous post, we noted the recent draft decree issued by the Italian government that would require social media sites to screen all posted content that may be harmful to minors.

Although the Google executives will appeal the conviction, the case demonstrates that the Internet makes it easy to take actions globally, but what is permitted in the U.S. does not always work everywhere.

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This post was written by Dana B. Rosenfeld and Christopher M. Loeffler.

On February 22, 2010, the Federal Trade Commission (“FTC”) announced that it notified nearly 100 organizations that personal information about the organizations’ customers or employees is available on peer-to-peer (“P2P”) file sharing networks. [1] Most recently, it notified nearly 100 businesses and governmental entities through an Internet-wide sweep, the FTC discovered that sensitive data such as health-related information, financial records, drivers’ license numbers, and Social Security numbers have been shared from organizations’ computer networks and are susceptible to those who may use the data for illegal practices such as fraud or identity theft. The Commission has not publicly identified which organizations were notified, but it stated that letters were sent to large and small private and public entities including schools and local governments.

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This week, the New York Attorney General announced a settlement with PlasmaNet, the owner of FreeLotto.com, for using deceptive and misleading advertisements. Consumers can enter sweepstakes on FreeLotto.com for free if they agree to receive e-mails from PlasmaNet and visit the site every day. Consumers do not have to visit the site daily if they purchase the “FreeLotto Automatic Subscription Ticket” (“F.A.S.T.”) service, for $14.99 per month. With the F.A.S.T. service, consumers can program PlasmaNet to automatically enter the sweepstakes for them.

The Attorney General alleged that PlasmaNet sent misleading e-mails to FreeLotto.com players notifying them of “pending” prizes and directing them to claim their winnings. The players had not actually won these prizes -- instead, they were unwittingly led to purchase the “F.A.S.T.” service. The Attorney General also alleged that PlasmaNet ran banner ads that falsely stated that a consumer had already won a prize. PlasmaNet did not, however, disclose that the consumer had to register with FreeLotto.com and agree to receive advertising from PlasmaNet in order to collect it.

Under the agreement, PlasmaNet will pay $1.5 million in penalties, costs, and fees and will make refunds available to eligible consumers over the next six months. PlasmaNet must also significantly reform its advertising practices.

This settlement serves as a good reminder that companies need to clearly and conspicuously disclose the material terms and conditions of their offers and that they cannot hide costs in the fine print. Also remember that consumers cannot be required to pay money to enter sweepstakes and that it is unlawful to give any advantage to people who enter by making a payment.
 

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This post was written by Gonzalo E. Mon and David J. Ervin.

In a previous post and article, we discussed how the FTC's new Guides Concerning the Use of Endorsements and Testimonials in Advertising include various provisions that apply to messages in social media, such as blogs, word-of-mouth marketing, and other promotions in which companies encourage consumers to speak on their behalf. Among other things, bloggers and other endorsers are required to disclose whether they have any materials connection to the company whose products they are writing about, including whether the company has given them any free products or samples. In some cases, however, that may be easier said than done.

In an attempt to provide some guidelines about how to make the required disclosures, this week, the Word of Mouth Marketing Association ("WOMMA") released a Guide to Disclosure in Social Media Marketing. The WOMMA Guide provides sample disclosures for a variety of contexts, including messages on blogs, online discussions, microblogs (such as Twitter), and status updates on social networks. The WOMMA Guide should not be used as a replacement for an individualized company social media policy, but it does provides good examples that companies may want to incorporate into their policies.
 

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