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

In December 2012, the California Attorney General filed a lawsuit against Delta Airlines, Inc. (“Delta”) alleging that Delta violated California’s Online Privacy Protection Act by failing to post a privacy policy within its Fly Delta mobile app.  It was the first mobile app enforcement action brought by the California Attorney General and closely followed the Attorney General’s warning campaign in which it sent out letters to approximately 100 app developers and companies notifying them that they were not in compliance with California’s law.  Our previous coverage of the complaint is here.

Yesterday, the California Superior Court dismissed the claim, holding that the state action is pre-empted by the federal Airline Deregulation Act, which prohibits states from applying regulations on airlines related to price, routes, or services.  Judge Miller stated: “In this instances it’s services. . . . I think that this case is, in effect, an attempt to apply a state law designed to prevent unfair competition, which regulates an airline’s communications with consumers, and I think it’s pre-empted.”  Press coverage is available here.

This is an interesting result for the first Attorney General app enforcement action and it’s too soon to tell whether the Attorney General will appeal the decision.  Unfortunately, the ruling doesn’t provide any substantive guidance, or give much comfort, to companies that can’t make similar federal pre-emption arguments.  Companies with mobile apps will want to keep their seatbacks and tray tables in their upright and locked positions as we watch for the Attorney General’s next activities in the mobile privacy space.

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Most marketers know they are legally required to get permission before sending text messages to consumers. Despite this, the number of lawsuits involving (allegedly) unsolicited text messages keeps growing, as does the cost of settling these suits. Although the first cases in this area involved practices that were clearly unlawful — such as sending text messages to people who hadn’t signed up — now, companies are getting sued over much less. Fortunately, many courts have taken a common sense approach to these cases.

During a Lakers game last year, the team invited fans to text a message for a chance to have it appear on the scoreboard. A fan texted a message, and received the following confirmation from the Lakers in return: “Thnx! Txt as many times as u like. Not all msgs go on screen. Txt ALERTS for Lakers News alerts Msg&Data Rates May Apply. Txt STOP to quit. Txt INFO for info.” Shortly thereafter, the plaintiff filed a lawsuit against the Lakers arguing that the team had sent that message without consent, in violation of the Telephone Consumer Protection Act.

Applying a “common sense” reading of the TCPA, a California court determined that, by sending his original message, the plaintiff “expressly consented” to receiving a confirmatory text message from the Lakers. Indeed, the court noted that when the plaintiff sought to display his message on the scoreboard, “it is difficult to imagine how he could have been certain that the Lakers received his message without a confirmative response.” Accordingly, the court granted the Laker’s motion to dismiss the case.

There are still a number of legal risks associated with text message campaigns, but this decision — as well as other recent developments — suggests that companies now have a better shot at prevailing in these types of nuisance suits.

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The use of mobile apps for health purposes has created new questions for users, developers, and regulators regarding the balance between convenience, expanded health care, and public safety. The line between apps that are useful tools for accessing health information and those that are considered medical devices can be unclear but is very important for developers and marketers of these products.

On April 24, 2013, associate Kristi L. Wolff will present a Thompson Interactive webinar, “There's an App for That: Regulating Mobile Medical Devices” regarding these issues. Ms. Wolff will discuss the regulatory status surrounding health-related and medical device mobile applications, or MMAs. The presentation will cover topics including FTC’s enforcement and recent statements regarding health-related mobile applications, design considerations key to application development, such as privacy, and FDA’s position regarding MMAs as explained in the draft guidance, the recent Congressional hearings on the issue. Participants will also have the chance to ask questions during the live Q&A portion of the webinar.

To register, please click here.

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On Tuesday, the Federal Trade Commission announced final revisions to the guidance it gives to advertisers on how to keep endorsement, testimonial, and other digital ads in compliance with the FTC Act, ".com Disclosures, How to Make Effective Disclosures in Digital Advertising." The Revised Guide expands on the initial version released in 2000 by providing important insight into how advertisers should address the likelihood that different mediums may be used to view the same ad, and the increasing prevalence of space-constrained ads such as banner ads and tweets.

For instance, the Revised Guide explains that advertisers must account for the anticipated use of smartphones and tablets by either creating a mobile-optimized version that the ad will default to or designing the ad such that disclosures are clear and conspicuous regardless of how they are viewed. Additionally, the Revised Guide sets forth new considerations for advertisers using space-constrained ads, including the capacity to use short form disclosures such as “Ad:” and the possibility of republication by consumers.

For more information, see the Kelley Drye client advisory.
 

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On February 7, 2013, the Network Advertising Initiative (“NAI”) released its 2012 Annual Compliance Report addressing member organizations’ adherence to the NAI Code. The NAI Code is one of the leading industry self-regulatory codes of conduct governing online behavioral advertising (“OBA”) for third party digital advertising companies (such as advertising networks).

The 2012 Compliance Report indicates that the NAI and its members:

• Educate consumers about OBA and their choices
  
• Provide notice about each member’s OBA practices on the member’s site and on the sites where data is collected for OBA purposes
  
• Disclose the collection of health-related information
  
• Maintain opt-out mechanisms so users can elect not to receive OBA
  
• Require opt-in consent mechanisms for the use of sensitive consumer information
  
• Deliver OBA without the use of individuals’ personally identifiable information (“PII”)
  
• Do not specifically target OBA to children under age 13
  
• Use collected data only for marketing purposes
  
• Implement standards and restrictions on data retention, security, and transfer

The NAI also indicated that it will develop guidelines on the collection and use of data on mobile devices and use of mobile tracking technologies.

Online behavioral advertising continues to receive attention from regulators such as the Federal Trade Commission. Companies that engage in OBA should continue to ensure that they work with partners that comply with appropriate self-regulatory programs.

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On December 10, the FTC issued the staff report, “Mobile Apps for Kids: Disclosures Still Not Making the Grade.” The report describes the results of a recent survey by FTC staff that examined the privacy disclosures and practices associated with 400 mobile apps targeted to children. The report follows up on a similar FTC staff report issued in February 2012, which noted that, based on an initial survey of child-focused apps, very few mobile app developers or app stores provide privacy policies, disclosures, or other information that enable parents to determine what data is collected from their children and how that information is used or shared with third parties.

According to the Commission, the latest staff survey reveals that “little or no progress has been made” by the mobile app industry on increasing transparency in the mobile marketplace during the past year. In response, the Commission is urging app developers and app store operators to implement privacy best practices, such as those outlined in the FTC’s March 2012 privacy report. In addition, the report notes that FTC staff has launched multiple non-public investigations to determine whether certain entities in the mobile app ecosystem are violating the Children’s Online Privacy Protection Act (“COPPA”) or engaging in unfair or deceptive practices in violation of Section 5 of the FTC Act.

This Kelley Drye client advisory summarizes key results from the survey and provides recommendations for stakeholders in the mobile app ecosystem in light of the report.

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When consumers sign up to receive text messages and later request to opt-out, companies typically send a final message to confirm they've honored the request. Although that confirmation is a good practice and required by the Mobile Marketing Association, several plaintiffs’ attorneys have filed lawsuits arguing that the confirmation messages violate the Telephone Consumer Protection Act. (Click here and here, for example.)

In a ruling that should make companies breathe easier, last week, the FCC determined that such messages do not violate the TCPA. You can read more about the ruling on the Telecom Law Monitor. 

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In the past year, augmented reality (AR) has moved beyond a sci-fi novelty to a credible marketing tool for brands and retailers. While part of a niche industry, AR applications are being championed by tech players like Google and Nokia, and a host of mobile app developers have launched AR apps for the growing number of smartphones and portable computing devices.

The power of AR, particularly for marketers, is its ability to overlay highly relevant, timely, and interactive data about specific products or services within a user’s live physical environment. If you’re considering whether to add an AR app to your marketing mix, however, be aware that traditional consumer protection rules still apply.

Our article posted on Mashable, Navigating the Legal Pitfalls of Augmented Reality, highlights several key advertising law and consumer privacy principles that companies should consider when entering this emerging space.

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Mobile marketing, sweepstakes and services, including location-based services, are governed by an alphabet soup of statutes and regulations: TCPA, COPPA, CAN-SPAM, CPNI, etc. To complicate compliance even further, numerous class action lawsuits in state and federal courts have addressed issues and nuances that the Federal Communications Commission, Federal Trade Commission, and state regulatory agencies or legislatures have not.

On November 16th, Kelley Drye held a webinar which discussed the new rules of the road for mobile communications, marketing, and sweepstakes, and offered suggestions for reaching consumers while mitigating the legal risks.

Click here to download the slides from the webinar and click here to watch the recording.

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Plaintiffs filed a class action lawsuit against Papa John’s, arguing that a text message campaign conducted by the company’s franchises violated the Telephone Consumer Protection Act. According to the complaint, the franchisees sent text messages to customers without their consent, in violation of the TCPA. Under the law, a plaintiff can recover between $500 to $1,500 for each message sent without consent, depending on whether the violation is willful.

As we’ve noted in previous posts, the number of lawsuits involving text message campaigns has increased dramatically in recent years. Part of the increase is because many companies aren’t paying attention to legal requirements. But the increase is also largely because class action attorneys have come to see these cases as an easy way to make money. For example, a recent case involving text messages sent by Jiffy Lube settled for $47 million. These attorneys will seize on any violation -- no matter how minor -- as an opportunity to force a settlement.

Most of the recent lawsuits could have been avoided if the text message campaigns if the campaigns had been carefully reviewed prior to launch. Sometimes, there's a tendency to try to skip that step in order to cut costs and launch quickly, but the recent string of multi-million dollar settlements demonstrates that’s a very short-sighted approach. It will cost exponentially less time and money to do things right from the start. If you're planning a new campaign, get your legal team involved early in the process. 

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Yesterday, the California Attorney General announced that it has started sending notices of non-compliance to numerous mobile app developers, notifying them that their mobile apps were not compliant with California’s Online Privacy Protection Act, Cal. Bus. & Prof. Code §§ 22575-22579. The law requires operators of online sites and services that collect personal information about California residents to post a privacy policy that complies with specified requirements, including for the privacy policy to be posted conspicuously and reasonably accessible. The Attorney General’s letters explained that, to satisfy the law, at a minimum, a link to the app’s privacy policy needed to be conspicuous and “reasonably accessible” to the user within the app. The Attorney General notices are prompting the app developers to make necessary changes within 30 days. The state law provides for penalties of up to $2,500, which the Attorney General notices asserted could apply each time a non-compliant mobile app is downloaded.

This latest development follows the agreements reached earlier in the year between the Attorney General’s Office and Facebook, Amazon, Apple, Google, Hewlett-Packard, Microsoft, and Research In Motion, to improve privacy protections on mobile apps. The agreement included efforts to provide a way for privacy policies to be posted in a consistent location for apps, for the privacy policy to be reviewed prior to download, and for app users to report apps that do not comply with laws or the applicable terms of service.

A copy of the letter that the California Attorney General’s Office sent to mobile app developers can also be found here.

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Yesterday, the FTC published a guide designed to help mobile app developers comply with advertising and privacy laws when marketing mobile apps. The guide doesn’t include new requirements — instead, it synthesizes many of the things the FTC has said about mobile apps in previous settlements, workshops, and policy documents. The guide focuses on two key areas: (1) advertising; and (2) privacy.

Companies are required to ensure their ads are truthful and substantiated. Although some marketers equate the word “ad” with a multi-million dollar TV campaign, the FTC clarifies that an ad can be pretty much anything a company says about what a product can do. Marketers need to ensure they can support these claims. The FTC also discusses the importance of making disclosures in a “clear and conspicuous” manner.

Marketers should think about privacy in the early stages of developing an app. Among other things, the FTC encourages marketers to only collect the information they need, to be transparent about data collection practices, to get consent before collecting sensitive information, and to keep user data secure. In addition, the FTC reminds marketers that they may be subject to the Children’s Online Privacy Protection Act if they collect personal information from children under 13.

The FTC’s guide addresses many of the issues that have gotten app developers in trouble over recent years. Therefore, it provides valuable insights for companies about what they need to do in order to stay out of trouble. Although it may cost more to run an app through a legal review prior to launch, it costs a lot less than having to deal with an FTC investigation later.

For a more detailed analysis of the FTC's guide, click here. And for more tips on developing a mobile app, click here, here, and here. 

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Over the past few years, there has been an increase in the number of lawsuits involving text message campaigns. Although the first lawsuits typically involved unsolicited messages, now plaintiffs’ lawyers are also targeting legitimate campaigns. For example, as we posted last year, a consumer filed a lawsuit when a company sent him a message confirming they had processed his opt-out request. Similar suits followed. Fortunately, a federal court in California recently held that a text message confirming a consumer’s opt-out request is not unlawful.

In this case, the plaintiff agreed to receive text messages from Taco Bell, and later opted-out. Taco Bell then sent the plaintiff a text message confirming his request. The plaintiff argued that the confirmation was sent without his consent and, therefore, in violation of the Telephone Consumer Protection Act. The court disagreed, noting: “Defendant’s sending a single, confirmatory text message in response to an opt-out request from Plaintiff, who voluntarily provided his phone number by sending the initial text message, does not appear to demonstrate an invasion of privacy contemplated by Congress in enacting the TCPA.” A contrary holding “would contravene public policy and the spirit of the statute.”

The court gave plaintiff 30 days to file an amended complaint, but it’s hard to imagine how the plaintiff will be able to overcome the court’s objections on this issue. This decision is good news for all mobile marketers, especially because the Mobile Marketing Association’s Consumer Best Practices Guidelines specifically require companies to send a confirmation message when consumers opt-out.  

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A consumer recently filed a class action lawsuit against the Pittsburgh Penguins alleging that the team’s text message campaign violates federal law. The consumer claims that when he signed up to receive text messages, the terms and conditions governing the promotion stated: “By subscribing, you consent to receiving, from time to time, further text messages from us which may include offers from us, our affiliates, and partners. Available on participating carriers. Maximum of 3 messages a week.”

Although the terms stated that subscribers would receive a maximum of three messages per week, the consumer claims he received five messages in the week between March 11 and March 17, 2012, and four messages in the week between March 18 and March 24, 2012. The consumer argues that the two additional messages he received during the first week and the one additional message he received during the second week were sent without consent and, thus, in violation of the Telephone Consumer Protection Act.

Companies need to ensure they carefully draft the terms for their text message campaigns and that their campaigns are run in a manner that conforms with those terms. This case demonstrates that even a small deviation can result in a lawsuit.

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Last week the Federal Trade Commission (FTC) held an information gathering workshop titled “In Short: Advertising and Privacy Disclosures in a Digital World”. The purpose of the workshop was to discuss the need for updated guidance for web and mobile advertisers regarding disclosures and privacy practices. FTC issued the current guidance, known as the “Dot Com Disclosures,” in 2000. Topics discussed included:

“Universal and Cross-Platform Advertising Disclosures”

“Social Media Advertising Disclosures”

“Mobile Advertising Disclosures”

“Usability Research” and “Mobile Privacy Disclosures”

The comment period is open through July 11, 2012. The Commission is targeting this Fall for issuance of updated guidance.

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Professor Paul Ohm, Associate Professor at the University of Colorado Law School, will be joining the FTC as a senior policy adviser for consumer protection and competition issues in the Internet and mobile market space this August. Ohm's legal career has focused on information privacy and cyberlaw matters. He is the author of numerous law review articles and essays on computer science, privacy and law, and a frequent contributor to FTC roundtables and discussions on privacy and technology. His article, Broken Promises of Privacy: Responding to the Surprising Failure of Anonymization, 57 UCLA Law Review 1701 (2010) has been often cited in the debate on privacy standards.

Ohm previously served as a federal prosecutor for the U.S. Department of Justice's Computer Crime and Intellectual Property Section. Before his legal career, Ohm earned undergraduate degrees in computer science and electrical engineering and worked as a programmer, network administrator and IT specialist.

FTC Chairman Jon Leibowitz released a statement on Ohm's appointment: "Paul's keen insights on how the law applies to technology and privacy issues will be invaluable to the FTC's work in these areas. We have been fortunate in bringing in a series [of] top-notch experts to advise us on cutting-edge issues and enhance our in-house expertise. We look forward to having Paul on board."

Additional coverage is available here, here, and here. A full press release is available here.

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On April 26, 2012, the Federal Trade Commission (FTC) held a public workshop entitled "Paper, Plastic . . . or Mobile?" to examine the use of mobile payments in the marketplace and the impact of emerging technologies on consumers. Three consumer issues surrounding mobile payments were highlighted: (1) the lack of clear consumer redress and dispute resolution processes, (2) data security, and (3) consumer privacy.

A Keley Drye client advisory, "Insights from the FTC's Mobile Payments Workshop: Potential Roadmap for Industry Best Practices," summarizes the FTC's workshop and the discussion on these three issues. For industry participants that are involved in the mobile payments ecosystem – or wish to be – having a clear understanding of these components and emerging best practices makes good business sense, and can help keep a company from becoming an enforcement or litigation target.

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If you work with mobile apps, you may already know that privacy is a hot issue. Regulators are pushing companies to improve their privacy practices, Congress is contemplating new laws, and class action lawyers are suing companies that don’t clearly disclose their practices. In the past few weeks, this focus on privacy intensified as the FTC, the California Attorney General, and even the White House weighed in with new announcements.

Two things are clear from this recent burst of activity. First, regulators are putting pressure on everyone in the mobile app ecosystem to improve their practices, so you can’t just assume that it’s your partner’s responsibility to comply. And with the number of regulators focusing on these issues, it’s going to be a lot harder for companies to hide. No matter what role you play in the mobile app ecosystem, you should pay attention to these developments. Gonzalo Mon and John Heitmann summarize what you need to know in a new article published by Mashable, "Mobile Privacy: 5 Legal Concerns for Developers."
 

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In the wake of the White House's February 23, 2012 release of Consumer Data Privacy in a Networked World: A Framework for Protecting and Promoting Innovation in a Global Digital Economy ("Framework"), the Commerce Department's National Telecommunications and Information Administration (NTIA) published in today's Federal Register a request for public comments from all interested stakeholders on consumer data privacy issues to be addressed through enforceable voluntary codes of conduct. Comments are due on March 26, 2012.

Although any topic is fair game, NTIA opens the process by signaling that implementation of the Framework's transparency principle in privacy notices for mobile applications is among the agency's highest priorities. Also listed as a specific topic on which NTIA seeks comment are other issues associated with mobile apps, including location based services. Cloud computing, online services directed toward teens and children, trusted identity systems, and the use of multiple technologies such as browser-based cookies to collect personal data also are highlighted as areas for comment.

NTIA also seeks comment on how the multistakeholder process should be conducted so as to best ensure openness, transparency, and consensus building. These comments are the first part of this process aimed at developing voluntary industry codes of conduct that eventually be enforced by the Federal Trade Commission.

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On February 23, 2012, the White House released its long-awaited consumer data privacy framework that establishes clear consumer privacy “ground rules” intended to govern how commercial entities collect and use consumers’ personal information in an evolving technological landscape that includes the Internet and other networked technologies.

The framework, entitled Consumer Data Privacy In a Networked World: A Framework for Protecting Privacy and Promoting Innovation in the Global Digital Economy, includes a series of consumer privacy principles that would form the basis for voluntary but enforceable codes of conduct, positions the Federal Trade Commission (“FTC”) as the lead enforcer on consumer privacy issues, and encourages greater international cross-border collaboration. The framework builds on the consumer privacy recommendations issued in December 2010 by the Department of Commerce Internet Policy Task Force.

This Kelley Drye client advisory outlines the four primary elements of the framework and discusses how it aligns with other federal and state initiatives that will have significant implications for businesses that collect consumer personal information online.

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On February 16, 2012, Kelley Drye & Warren LLP hosted the seminar and audiocast, “Privacy in 2012: What to Watch Regarding COPPA, Mobile Apps, and Evolving Law Enforcement and Public Policy Trends.” The seminar highlighted regulatory and legislative developments in privacy and information security during the past year, with an emphasis on children's online privacy and mobile applications.

Peter Swire, a professor at The Ohio State University Michael E. Moritz College of Law and a Senior Fellow with the Center for American Progress, opened the seminar with a keynote address that gave historical context to the most recent regulatory efforts addressing consumer privacy. Professor Swire’s remarks were followed by two panel sessions that included six experts representing key industry representatives and the federal agencies integral to recent privacy initiatives. The first panel discussed children's online privacy and the Federal Trade Commission’s proposed revisions to the Children's Online Privacy Protection Rule. The second panel discussed various consumer privacy enforcement and regulatory initiatives relating to mobile apps.

For more on the seminar, including a synopsis of key takeaways, see the Kelley Drye client advisory. An audio recording of the full program is also available.

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This morning, the FTC issued a report showing the results of a survey of mobile apps for children. These apps can automatically collect a broad range of information, including a user's location, phone number, contacts, call logs, and unique identifiers. However, the report notes that neither the app stores nor app developers provide the information parents need to determine what data is collected from children or how it is shared.

FTC Chairman Jon Leibowitz asked companies to “step up to the plate and provide easily accessible, basic information, so that parents can make informed decisions about the apps their kids use.” Specifically, the report recommends that:

• All members of the "kids app ecosystem" should play an active role in providing key information to parents.
• App developers should provide information about their privacy practices in simple and short disclosures. They also should disclose whether the app connects with social media and whether it contains ads. Third parties that collect data also should disclose their privacy practices.
• App stores also should take responsibility for ensuring parents have basic information. The report notes that the stores provide architecture for sharing pricing and category data, and should be able to provide a way for developers to provide privacy information.

Later this year, the FTC will host a public workshop in connection with its efforts to update the "Dot Com Disclosure" guide about how to provide effective online disclosures. "One of the topics that will be addressed is mobile privacy disclosures, including how they can be short, effective, and accessible to consumers on small screens." We will discuss similar topics in our 4th Annual Privacy Law Seminar this afternoon.

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The way companies collect information through mobile apps has been the focus of several FTC actions, Congressional hearings, proposed legislation, and at least a dozen class action lawsuits. In response to the confusion over how app developers should deal with privacy issues, the Mobile Marketing Association recently released its Final Privacy Policy Guidelines for Mobile Apps.

The proposed policy addresses several key areas, including: (a) what information is collected, and how it’s used; (b) whether the app collects location-based information; (c) whether third parties have access to any information; (d) whether consumers can opt-out of information collection or sharing; (e) how long information is retained; and (f) how that information is safeguarded. The MMA notes that additional provisions will be required if an app is directed to children under 13.

The MMA states that the guidance is intended to provide a starting point for companies that develop apps, but that it should not be considered an ending point. For more helpful advice, read about 5 Privacy Tips for Location-Based Services.
 

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The year 2012 is certain to reflect U.S. consumers’ continued love affair with sophisticated smartphones and tablets. One of the driving forces in the popularity of these devices is their ability to run mobile apps using wireless location-based services (LBS). Among other benefits, LBS allow access to real-time and historical location information online – whether to facilitate a social interaction or event, play games, house-hunt or engage in many other activities.

However, with these benefits also come privacy risks. And it is not uncommon for some popular LBS-enabled tools to lack clear disclosure about personal information collection, how that data is used, and the process for consumer consent.

Our article posted recently on Mashable, "5 Privacy Tips for Location-Based Services," discusses several privacy "do's and don'ts" for designing mobile apps.

For a more in-depth discussion of these issues, plus other privacy law trends, join us on February 16 for Kelley Drye’s seminar and teleconference, “Privacy in 2012: What to Watch Regarding COPPA, Mobile Apps, and Evolving Law Enforcement and Public Policy Trends.”

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Changes to privacy regulations, such as proposed revisions to the Children's Online Privacy Protection Act (COPPA), and continuously evolving technologies, including mobile apps with location-based services, can make it difficult for businesses to ensure their privacy practices are up to par.

On February 16, Kelley Drye will gather government leaders from the FTC and FCC, and thought leaders in the industry, for a discussion about new regulations, enforcement trends, and best practices to avoid consumer privacy risks. Please join us for "Privacy in 2012: What to Watch Regarding COPPA, Mobile Apps, and Evolving Law Enforcement and Public Policy Trends."

Email dcevents@kelleydrye.com to register for the live seminar or teleconference.

KEYNOTE SPEAKER

Peter Swire, Professor of Law, Ohio State University; former Clinton Administration Chief Counselor for Privacy, U.S. Office of Management and Budget

PANEL 1:  COPING WITH COPPA: CHILDREN'S PRIVACY AND PROPOSED REVISIONS TO THE COPPA RULE

Ellen Blackler, Vice President - Global Public Policy, The Walt Disney Company

Mamie Kresses, Senior Attorney, Division of Advertising Practices, Federal Trade Commission

Saira Nayak, Director of Policy, TRUSTe

Moderated by partners Dana Rosenfeld and Alysa Hutnik of Kelley Drye & Warren LLP

PANEL 2:  MOBILE APPS: A PRIVACY AND CONSUMER PROTECTION HOT SPOT

Michael Altschul, Senior Vice President and General Counsel, CTIA

Jessica Rich, Associate Director, Division of Financial Practices, Federal Trade Commission

Jennifer Tatel, Associate General Counsel, Federal Communications Commission (invited)

Moderated by partners John Heitmann and Gonzalo Mon of Kelley Drye & Warren LLP

When:
February 16, 2012,  2:30 PM - 5:30 PM EST

Location:
Kelley Drye & Warren LLP
3050 K Street, NW, Suite 400
Washington, DC 20007-5108

And via audio webcast

RSVP:
Email dcevents@kelleydrye.com or contact Cassidy Russell at 202.342.8400.

This seminar is free of charge, but space is limited. Reserve your place today.

CLE and CPE credit may be available in certain jurisdictions.

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As we’ve noted in previous posts and a recent webinar, the way companies collect information through mobile apps has been the focus of several FTC actions, Congressional hearings, proposed legislation, and at least ten class action lawsuits. In response to the confusion over how app developers should deal with privacy issues, the Mobile Marketing Association recently released guidance in the form of a proposed annotated privacy policy.

The proposed policy addresses several key areas, including: (a) what information is collected, and how it’s used; (b) whether the app collects location-based information; (c) whether third parties have access to any information; (d) whether the app works with third parties to deliver targeted ads; (e) whether consumers can opt-out of information collection or sharing; (f) how long information is retained; and (g) how that information is safeguarded. The MMA notes that additional provisions will be required if an app is directed to children under 13. Notably, the MMA does not discuss how the privacy policy should be disclosed.

The MMA states that the guidance is intended to provide a starting point for companies that develop apps, but that it should not be considered an ending point. Given the number of variables in this area, companies are strongly encouraged to consult an attorney before developing an app or drafting a privacy policy. The MMA is seeking public comment on the guidance until November 18, 2011. 

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Yesterday, the Federal Trade Commission (“FTC”) approved a final settlement with marketers of the “Acne Pwner” and “AcneApp” mobile applications (“apps”). This is the first FTC settlement targeting health claims by mobile app developers/marketers, but one of several FTC mobile app enforcement actions.

In the AcneApp case, the defendants claimed that their apps could treat acne with colored lights emitted from a mobile device. To support the claim, the AcneApp marketers relied on a study published by the British Journal of Dermatology, claiming that the study showed blue and red light treatments eliminated p-bacteria (a major cause of acne) and reduced skin blemishes. The FTC determined that AcneApp falsely claimed that the British Journal of Dermatology study proves that red and blue light therapy is an effective acne treatment.

The FTC order prohibits Acne Pwner and AcneApp “from making acne-treatment claims about their mobile apps and other medical devices” without at least two adequate and well controlled human clinical studies. The requirement for two clinical studies is the same standard that the FTC applied in recent settlements with a dietary supplement manufacturer over weight loss claims for its dietary supplements, and with a food marketer over its claims that one of its products reduced the duration of acute diarrhea and reduced school absences. In another recent settlement, FTC ordered Reebok to provide one clinical study to substantiate fitness claims for its toning shoes.

The marketers of Acne Pwner and AcneApp were also ordered to pay the FTC $1,700 and $14,294, respectively.

This blog post was written by Bridget Richardson, Alysa Hutnik and Sarah Roller.
 

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On October 11, 2011, the FTC announced a settlement with Frostwire LLC, a peer-to-peer (“P2P”) file-sharing application (“app”) developer, and its Principal, over charges that the company publicly exposed its app users’ personal information without the users’ authorization, and misled users about the extent to which downloaded files would be shared with a P2P file-sharing network. The FTC claimed that Frostwire’s alleged actions were unfair and deceptive and violated the FTC Act. The 20-year settlement bars Frostwire and its Principal from making material misrepresentations about the file-sharing features of its apps, and from configuring its apps to cause inadvertent public sharing of users’ files. The settlement also requires that Frostwire provide users with clear and prominent disclosures that include information on how to disable the apps’ file-sharing features. Going forward, a violation of the settlement could expose the company and its Principal to up to $16,000 per violation.

Frostwire offers two free P2P file-sharing applications, including Frostwire Desktop for desktop and laptop computers, and Frostwire for Android for mobile devices that use Google’s Android operating system. Both apps enable users to share files ― including photos, videos, documents, and music ― with other users of the Gnutella P2P file-sharing network. According to the FTC Complaint, Frostwire configured the default settings on its Frostwire for the Android app so that, immediately upon installation, the app would publicly share personal files that were stored on the app users’ mobile device. The Commission also alleged that consumers who installed certain versions of the Frostwire Desktop app onto their computer were led to believe that files downloaded from the Gnutella network would not be shared unknowingly with other users of the P2P network.

This case marks the FTC’s third action against a mobile app developer in the past 60 days. In August 2011, the FTC announced a settlement with W3 Innovations over alleged violations of the Children’s Online Privacy Protection Act (“COPPA”), and, in September, the FTC announced a settlement with a marketer that claimed its mobile apps treated acne. These settlements reinforce statements made by the FTC earlier this year concerning its scrutiny of marketing and privacy practices associated with mobile apps. This latest settlement also further underscores that the FTC will hold app developers accountable when the app does not incorporate “privacy-by-design” features, and instead uses default settings that enable the app to share personal data with third parties without the consumer’s informed consent.

Matthew P. Sullivan contributed to this post.

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In 2007, several companies offered text-to-win sweepstakes in conjunction with the American Idol, The Apprentice, Deal or No Deal, and 1 vs. 100 television shows. Soon thereafter, plaintiffs filed class action lawsuits arguing that the sweepstakes violated gambling laws in Georgia and lottery laws in California. The Georgia case was decided favorably in 2008, when the Georgia Supreme Court determined that the sweepstakes did not constitute gambling. The California case had been pending until the parties announced a settlement last week.

Although the defendants deny that the sweepstakes were unlawful, they agreed to settle the cases. As part of the settlement, the defendants agreed to refund all premium text messages fees paid by members of the class, to pay more than $5 million in fees and costs, and to consent to a five-year injunction barring them from offering any sweepstakes in which people who enter by paying premium text message charges do not receive something of comparable value to charges in addition to the entry.

Because the case settled, we don’t have a definitive court ruling that examines whether or not the sweepstakes were lawful. Nevertheless, the lawsuit and settlement highlight that there are a number of risks associated with text-to-win sweepstakes. To reduce the risks of challenge, companies that offer text-to-win sweepstakes with premium fees should consult with their legal teams early in the planning process. At a minimum, each sweepstakes should include a free method of entry and consumers who pay premium fees should get something of value for those fees.
 

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On August 15, 2011, the FTC announced a settlement with W3 Innovations, LLC (“W3”) and its President over charges that the company violated the Children’s Online Privacy Protection Act (“COPPA”) when W3 allegedly collected and disclosed personal information from tens of thousands of children without their parents’ consent. The settlement requires W3 and its president to pay $50,000, and they must delete all personal information collected in violation of COPPA. The case marks the FTC’s first action against a mobile applications (“apps”) developer.

W3 Innovations, which does business as Broken Thumbs Apps, develops and distributes apps including Emily’s Girl World and Emily’s Runway High Fashion (the “Emily Apps”), which are sold through the “Games-Kids” section of Apple, Inc.’s App Store. According to the FTC Complaint, the Emily Apps encouraged children to submit emails, including messages to friends and requests for advice, that were then posted as publicly-available blog entries to the “Emily’s blog” feature available on all Emily Apps sites. Children also could submit comments in response to the blog entries using a standard comment form that required users to provide their name and email address.

The FTC’s COPPA Rule (16 C.F.R. Part 312) is triggered when companies collect online personal information about children under the age of 13. The Rule requires website operators to notify parents and obtain their express consent before they collect, use, or disclose such children’s personal information. The Rule also requires website operators to post a clear and conspicuous privacy policy at each area of an online site that collects personal information from children. The FTC alleged that W3 violated COPPA when it did not obtain parental consent before it (1) collected and maintained at least 30,000 email addresses from children who participated in the “Emily’s blog” feature; and (2) allowed children to publicly post information, including personal information, to the blog and comments section of the app.

As this case demonstrates, the FTC is following through on statements that it made earlier this year that it was actively investigating a number of privacy issues associated with mobile devices, including features targeting children. Given the FTC’s interest in this area, companies seeking to enter the mobile app market or engage a younger audience using games or other online features should be aware of the key considerations and best practices (see here and here) that can help reduce risks resulting from increased legal and regulatory scrutiny.

This post was written by Alysa Z. Hutnik and Matthew P. Sullivan.

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Earlier this week, a California plaintiff filed a class action lawsuit against NASCAR alleging that the company violated the Telephone Consumer Protection Act (the "TCPA") by sending unsolicited text messages. The plaintiff argues that although she never asked to receive text messages from NASCAR, the company sent her a message advertising a mobile app that would enable her to watch races on her phone.  The plaintiff seeks up to $1,500 in damages for each message in violation of the TCPA, which, when aggregated among a proposed class numbering tens of thousands, exceeds $5 million.

As we’ve noted before, courts have repeatedly held that companies must obtain express consent before they send text messages to consumers. Although it’s too early to tell whether NASCAR did anything wrong, this case serves as a reminder that failure to get consent is likely to lead to lawsuits. And once a company finds itself in one of these lawsuits, it can be very expensive to get out.
 

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The rise of smartphones, wifi hotspots, and high-speed data networks has spurred new technology-based business models and the exponential growth of consumer information online. Chief among new technologies, the use of mobile applications—“apps”—has exploded in the past few years. From near-constant posts on Facebook to attacking the green pigs on Angry Birds, consumers have opened their hearts and wallets to mobile apps. While the upside is great, companies and developers considering a mobile app should also be mindful of the legal and business pitfalls of mobile apps and implement a process to sidestep common challenges.

A new article from E-Commerce Law & Policy, “Avoiding Trouble When Adding an App to the Business Model,” outlines several of these potential pitfalls and the best practices to avoid them.

For more information about this uncharted legal territory and emerging "rules for the road" for developing and marketing mobile apps, click here to view and listen to a recording of the Kelley Drye webinar, “Mobile Applications: Privacy and Data Security Considerations.”

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Recently, one of Twitter’s business partners announced that it had been contacted by the Federal Trade Commission (“FTC”) and planned to comply with the agency’s request for information. The company, UberMedia, develops software which helps users access and organize Twitter content through smart phones and desktop computers. While the FTC has not disclosed the scope of its inquiry, sources familiar with the investigation say that the FTC suspects Twitter of pressuring UberMedia and other partners which have developed features Twitter wants to offer itself, in a way that harms competition. Over time, Twitter has purchased some developers, and the company recently asked its existing developers to refrain from imitating Twitter’s own mobile device applications and web interface, in the interest of standardizing the user experience.

Although the nature of the investigation remains to be seen, marketers should be aware that a company’s business relationship with an app developer may not merely be a contract issue between the two parties; in some cases, it can give rise to concern from a regulatory agency about whether consumer choice is being impacted.

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A plaintiff recently filed a class action lawsuit against Google and its subsidiary, Slide, alleging that the companies violated the Telephone Consumer Protection Act by sending text messages to consumers without their consent.

Google and Slide recently released Disco, a “group texting” service that allows consumers to send text messages to up to 99 people at the same time. Message recipients can also respond via text to all members of the group simultaneously by sending a single message. Messages can quickly accumulate, and the named plaintiff alleges he received more than 100 text messages in a single day. According to the complaint, members of a group do not provide consent to be part of the group or receive messages; instead, group members must opt-out if they want to stop receiving group messages.

As we’ve noted before, various courts have generally held that companies must obtain express consent before they can send text messages to consumers. In this case, the defendants are likely to argue that they did not send the messages themselves, but that argument has yet to be tested. Companies should check with their counsel before sending text messages or implementing any promotion that allows consumers to send text messages to determine what consents may be necessary.

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June has seen a flood of activity on Capitol Hill seeking to protect consumer geolocational privacy. Within a few days of one another, three bills were introduced that, if enacted, would require consumer consent before geolocation information attained through mobile devices can be collected, used or disclosed to third parties. On June 14, 2011, Rep. Jason Chaffetz (R-UT) and Rep. Robert Goodlatte (R-VA) introduced the Geolocational Privacy and Surveillance Act (GPS Act) (H.R. 2168) in the House and, on June 15, 2011, Sen. Ron Wyden (D-OR) introduced companion legislation in the Senate (S. 1212).  Similarly, on June 16, 2011, Sen. Al Franken (D-MN) and Sen. Richard Blumenthal (D-CT) introduced geolocational privacy legislation of their own – the Location Privacy Protection Act of 2011 (S. 1223).

Notably, both the GPS Act and Franken-Blumenthal bill prohibit the collection, use or disclosure of consumer geolocation data without consumer consent subject to certain exceptions. The GPS Act is broader in scope than the Franken-Blumenthal bill, applying to federal and state government entities as well as commercial service providers while the Franken-Blumenthal bill is limited to commercial service providers. Both bills would impose criminal and civil penalties for unlawful collection, use and disclosure of geolocation data and empower the states and Federal government to enforce consumer data protection. These bills build on the growing legislative activity on privacy and data security potentially impacting any entities that utilize consumer geolocation data.

Communications service providers, mobile application developers and device-makers that utilize geolocation data need to be aware of these developments and the potential implications for their business models and data flow processes. Click here for more on the key provisions of the GPS Act and Franken-Blumenthal bill.

Christopher S. Koves contributed to this post.

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Kelley Drye partner Alysa Hutnik and associate Christopher Loeffler's article, “4 Legal Considerations for Building a Mobile App,” was recently featured on Mashable.com, a top source for news in social and digital media, technology and web culture. The Mobile Apps article explores the mobile app business and provides practical considerations for app developers (or for those partnering with app developers) to keep in mind to help reduce legal risk in this area.

For more information about this uncharted legal territory and emerging "rules for the road" for developing and marketing mobile apps, click here to view and listen to a recording of the Kelley Drye webinar, “Mobile Applications: Privacy and Data Security Considerations.”

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In an article published today in Mobile Marketer (@MobileMktrDaily), I was asked about the top legal challenges that mobile marketers face. The first on my list was the challenge of making effective disclosures in the context of a mobile campaign. Shortly after the article was published, the FTC announced that they planning to update their “Dot Com Disclosures” guidance document, and hinted that the update could address this very issue.

The FTC first published the Dot Com Disclosures in 2000 in an attempt to advise online marketers about how to disclose material terms in a “clear and conspicuous” manner. In today’s press release, the FTC notes that the online world has changed dramatically since 2000 and that the FTC is seeking input about how the guidelines should be changed to address changes in technology. Among other things, the FTC asks about how the guidance should be modified to address mobile marketing and the limitations of mobile screens. Public comments are due by July 11, 2011.

This isn’t the first time regulators have struggled with the issue mobile disclosures. For example, recent settlements between the Florida Attorney General and some wireless providers included requirements about how price information has to be disclosed. We can expect the FTC to take a broader approach and consider disclosures of all types of material terms. Thus, the revised Dot Com Disclosures will likely have an impact on a broad range of mobile campaigns, not just those that require a payment.

While we wait for the FTC to issue new guidance, marketers should work closely with their legal team to ensure that they make disclosures in a way that is likely to survive regulatory scrutiny. 

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On May 16, 2011, Kelley Drye’s Privacy and Information Security practice hosted the webinar Mobile Applications: Privacy and Data Security Considerations, which is part of the practice group’s Cutting Edge Technology Series. More than 80 participants joined Kelley Drye partners Dana Rosenfeld, John Heitmann, and Alysa Hutnik to review key privacy and legal principles applicable to companies that develop, market, sell, or deliver mobile applications (“apps”).

The mobile apps market, which is projected to reach nearly $4 billion in 2011, is attracting increased legislative and regulatory scrutiny, along with substantial litigation exposure, due, in part, to recent high-profile investigative news stories highlighting consumer privacy and data protection issues and omissions in consumer disclosures. During the webinar, the Kelley Drye partners reviewed the mobile app ecosystem and the current legal landscape. The partners then discussed emerging best practices and due diligence measures that can be used by all entities in the mobile app delivery chain to help minimize their legal risks. The plan encourages ongoing collaboration between a company’s legal, business, and technical stakeholders, and offers practical considerations relating to app design, the consumer experience, and contractual protections.

Please contact any of the partners noted above with questions concerning the privacy and data security principles applicable to the mobile apps space.
 

Click here to view and listen to a recording of the webinar.

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On May 10, 2011, the U.S. Senate Judiciary Subcommittee on Privacy, Technology and the Law held a hearing to examine industry practices concerning the collection, retention, and use of consumer mobile device location information. The hearing, “Protecting Mobile Privacy: Your Smartphones, Tablets, Cell Phones and Your Privacy,” was spurred by recent investigative news reports that Apple and Google have been secretly collecting and storing users’ mobile device location information. Two panels of witnesses, including representatives from the FTC, Department of Justice, Apple, and Google, briefed subcommittee members on the legal, enforcement, and technological aspects of the mobile location data issue.

The Senate hearing is the latest event during a particularly active period for consumer privacy and data security-related Congressional activity. In addition to hearings, a growing number of federal bills have been introduced in response to privacy and data security concerns.

Click here for a summary of the hearing, as well as a chart summarizing the various federal bills on point.

If this topic is of interest, don't miss the Kelley Drye & Warren LLP webinar, "Mobile Applications: Privacy and Data Security Considerations," on May 16 at 12:00pm Eastern.

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Do you know what kind of data your smartphone apps are collecting?

Understanding the flow of data, how it is shared, and whether your apps collect sensitive information such as mobile payments or location-based data is critical to avoiding regulatory scrutiny and litigation risks.

Join Kelley Drye on May 16 from 12 noon – 1:00pm EST for a webinar exploring this uncharted legal territory, “Mobile Applications: Privacy and Data Security Considerations.” Topics of discussion will include:

• The mobile ecosystem, including data flows and parties involved.
• Privacy and security considerations, including unintended data uses.
• Current issues in the legal landscape, including media coverage; inquiries and actions from Congress, the FTC, and FCC; litigation risks; and industry activity.
• Emerging “rules for the road” for developing and marketing mobile apps.

This webinar will address the privacy and information security questions that are top of mind for anyone involved in developing, marketing, selling, or serving mobile apps.

Kelley Drye Speakers:

Dana B. Rosenfeld
Chair, Privacy & Information Security Practice and Partner, Advertising & Marketing Practice

Alysa Z. Hutnik
Partner, Privacy & Information Security and Advertising & Marketing Practices

John J. Heitmann
Partner, Telecommunications and Privacy & Information Security Practices

Email dcevents@kelleydrye.com to register.

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Two men recently filed a class action lawsuit against Twitter, alleging that Twitter engaged in unlawful conduct by sending messages to their mobile phones without consent, in violation of the Telephone Consumer Protection Act.

In the past few years, there have been a number of cases in which companies sent unsolicited text messages to consumers, and courts have ruled that those messages violated the TCPA. The twist in this case is that the plaintiffs actually opted-in to receive messages from Twitter. Later, the plaintiffs opted-out of receiving messages, and Twitter sent them one final message to confirm the opt-out request had been processed. According to the plaintiffs, this confirmation message violates the TCPA.

This lawsuit impacts virtually all SMS campaigns. Most agreements in the mobile space require companies to comply with the Mobile Marketing Association’s Consumer Best Practices Guidelines. Those Guidelines state, in part: “When STOP, or any of the opt-out keywords above, is sent to a program, the program must respond with a [mobile terminated] message, whether or not the subscriber is subscribed to the program.” In other words, the Guidelines require companies to send a confirmation message.

Although companies can usually assume that complying with industry standard guidelines, such as the MMA Guidelines, means they will also be in compliance with the law, this lawsuit demonstrates that doing things right isn’t always a guarantee that plaintiffs’ attorneys won’t file a lawsuit in an attempt to force a settlement and payments. Companies should check with their counsel to determine whether they need to modify their practices in response to this lawsuit.
 

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This week, Verizon Wireless announced that it had filed a lawsuit against defendants who are running deceptive SMS campaigns. Like other carriers, Verizon allows subscribers to purchase content -- such as ring tones, wall paper, and news alerts -- from third parties. Verizon requires that content providers follow the MMA’s Best Practice Guidelines and clearly disclose the costs of their offers. Before approving a premium campaign, Verizon reviews the campaign to ensure it complies with the Guidelines.

Verizon alleges that the defendants conspired to defraud Verizon and deceptively marketed their content to subscribers. Among other things, Verizon argues that the defendants: (a) activated dozens of short code campaigns using false names and addresses; (b) used deceptive web pages that differed from the ones they submitted to Verizon; (c) failed to clearly disclose the costs of their offers; and (d) failed to get adequate consent from consumers.

Verizon alleges that the defendants’ conduct violates various civil and criminal laws. The carrier is seeking unspecified damages and has asked the court for an injunction to put an end to the scheme. As with other lawsuits in this area, the key lesson for marketers is that they need to clearly disclose the material terms of their offers, including the prices associated with those offers. Marketers should consult the MMA’s Best Practice Guidelines for tips on how to do this.

Click here for an article in Mobile Marketer in which I discuss the case in more detail.

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In recent years, companies have gotten in trouble for failing to get consent before sending text messages to consumers. In a series of lawsuits, courts have determined that many text message campaigns are subject to the Telephone Consumer Protection Act, and that the law requires companies to get consent before sending text messages. Many companies have also gotten in trouble for failing clearly disclose offer terms. For example, the Florida AG has challenged companies that buried the price of their services in the fine print. The costs of getting these things wrong can be high, with settlements costing many millions of dollars.

Although these types of cases are likely to continue, in 2011, mobile marketers are likely to see a greater focus on privacy issues. Indeed, when the FTC issued a preliminary staff report on privacy last year, the Commission cited various potential privacy issues in the mobile space. Last week, Mobile Commerce Daily published an article I wrote that outlines some of the key privacy issues in the mobile space. The article appears on page 22 of Mobile Commerce Outlook 2011.

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Yesterday, our colleagues at the Telecom Law Monitor posted that the FCC had announced a $25 million settlement with Verizon Wireless over unauthorized billing of wireless data charges. The so-called "mystery fees" investigation stemmed from allegations that Verizon Wireless was charging customers $1.99 per megabyte usage charges for data sessions that consumers did not initiate or were not aware of. Click here to read the post. 

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A group of mobile content providers has agreed to settle class action lawsuits involving claims that they charged wireless subscribers for mobile content without authorization. Over the past few years, various companies have faced similar complaints. In the typical scenario, consumers are enticed by ads that prominently offer free content, but costs associated with that content are relegated to the fine print.

In recent years, the Florida Attorney General has been particularly aggressive in challenging companies that failed to adequately disclose the costs associated with “free” offers. These companies have each had to pay at least $1 million to settle the investigations. In the most recent settlement, the AG even set forth specific guidelines about how disclosures must be made.

Marketers need to clearly and conspicuously disclose costs so that consumers know what they are obligated to pay. If a consumer is surprised about a bill, he is likely to complain, and those complaints often lead to lawsuits or investigations. Marketers should look to the MMA Guidelines and the settlements in Florida for tips on how to make the required disclosures.

Although the subject of the current case isn’t new, the price tag is. The content providers will reportedly have to establish a $9 million fund to pay all claims of settlement members, and pay attorney’s fees of up to $1.85 million. This demonstrates that there can be a high cost associated with failing to comply with legal requirements and best practice guidelines.

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This week, the Mobile Marketing Association released the latest version of its U.S. Consumer Best Practices Guidelines for Cross-Carrier Mobile Content Services. The guidelines are the industry standard for cross-carrier mobile content services such as text messaging (SMS), multimedia messaging (MMS), shortcode programs, Interactive Voice Response (IVR), and mobile Web.

Major updates and additions include: (a) new guidelines for affiliate marketing for premium rate programs, with examples; (b) new guidelines to ensure STOP and HELP keywords work in each program’s native language; and (c) updated guidelines to ensure clarity for all members of the mobile marketing ecosystem. According to the MMA's press release, the new version of the Guidelines also features a new format for faster navigation, using tiered sections such as General Guidelines, Standard Rate, Premium Rate, and Free to End User Programs. 

As we've advised in previous posts (click here, for example), mobile marketers should consult the MMA's Guidelines when developing and executing their mobile campaigns. Failure to follow the Guidelines can lead to regulatory investigations and lawsuits.

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In a post last month, we noted that a Chicago court had held that SMS messages that are sent to a consumer without the consumer’s consent could violate the Telephone Consumer Protection Act (the “TCPA”). Since then, another court has come to the same conclusion. In the most recent case, Twentieth Century Fox sent text messages to various consumers to advertising the release of its Robots movie on DVD. A consumer who received the text messages without having signed up for them filed a lawsuit alleging that that text message campaign was unlawful.

The TCPA applies to certain types of “calls.” Although the term “call” is not defined, the FCC has opined that the statue covers both voice calls and “text calls” using SMS. The court found this interpretation to be reasonable and, therefore, held that the text message campaign was subject to the TCPA. The court also rejected the notion that the TCPA only prohibits calls that result in a charge to the recipient.

The TCPA generally prohibits the use of an automatic telephone dialing system (“ATDS”) to place calls to a mobile number without the “prior express consent” of the recipient. An ATDS is equipment that has “the capacity to store or produce telephone numbers to be called, using a random or sequential number generator and to dial such numbers.” The court held that it is not necessary to prove that the sender actually used the equipment’s automatic capacity, only that the equipment had that capacity.

Once again, the lesson is clear: mobile marketers must get consent before sending text messages to consumers. Without consent, lawsuits are sure to follow and, as the recent decisions suggest, an argument that text messages aren't subject to the TCPA is likely to fail.

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A federal district court in Chicago recently held that SMS messages that are sent to a consumer without the consumer’s consent could violate the Telephone Consumer Protection Act (the “TCPA”). The decision echoes many of the conclusions in a previous Ninth Circuit opinion and underscores the importance of getting express consent from consumers before sending SMS messages.

The TCPA applies to certain types of “calls.” Although the term “call” is not defined, the FCC has opined that the statue covers both voice calls and “text calls” using SMS. The court found this interpretation to be reasonable and, therefore, held that the text message campaign was subject to the TCPA. The court also rejected the notion that the TCPA only prohibits calls that result in a charge to the recipient.

The TCPA generally prohibits the use of an automatic telephone dialing system (“ATDS”) to place calls to a mobile number without the “prior express consent” of the recipient. An ATDS is equipment that has “the capacity to store or produce telephone numbers to be called, using a random or sequential number generator and to dial such numbers.” The court held that the plaintiff was not required to prove that the sender actually used the equipment’s automatic capacity, only that the equipment had that capacity.

Mobile marketers would be well-advised to get express consent before sending text messages to consumers. Unless they get consent, marketers are likely to face complaints, lawsuits, and significant settlement costs. To avoid becoming a target of these types of lawsuits, marketers should consult with their legal counsel and review the Mobile Marketing Association Consumer Best Practices Guidelines for tips on getting consent.
 

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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
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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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As more companies engaged in mobile marketing last year, many struggled to figure out how laws written before mobile phones existed apply in the wireless world. Consequently, 2009 saw some significant legal challenges against mobile campaigns. The biggest problems had to do with failure to disclose offer terms or get consent, and two cases, in particular, will have a significant effect on campaigns in 2010.

An article written by Gonzalo Mon on page 37 of Mobile Marketer’s Mobile Outlook 2010 discusses some of the top legal issues in 2009 and provides tips to help marketers avoid those problems in 2010.
 

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On February 9, Kelley Drye will host 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: February 9, 2010, from 3:00 - 5:00 PM

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

REGISTER: email nycle@kelleydrye.com

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Two New Jersey legislators recently introduced a bill that would regulate text messages.  Under the bill, no one may send a text message advertisement to a recipient in NJ if the recipient will incur a charge or a usage allocation deduction unless the sender has obtained prior permission from the recipient.  Prior permission must include the number to which the text message advertisement may be sent.  In addition to regulating the sending of text messages, the bill provides that no telecommunications company may sell text messaging services to customers in NJ unless the company offers an option to block all incoming and outgoing text messages.  Companies that violate the law could have to pay up to $10,000 for the first offense, up to $20,000 for subsequent offenses, and additional payments of up to $30,000 if the violator knew or should have known the recipient is a senior citizen or person with a disability.

It’s too early to tell whether the New Jersey bill will pass, but its introduction demonstrates that regulators are paying close attention to mobile marketing.  Regardless of whether or not the bill passes, however, mobile marketers would be well-advised to get express consent before sending text messages to consumers.  Unless they get consent, marketers are likely to face complaints, lawsuits, and significant settlement costs.  In recent years, consumers have filed a number of lawsuits against companies that failed to get consent from consumers before sending them text messages.  For example, one company agreed to pay $7 million to settle accusations of sending unsolicited text messages.   To avoid becoming a target of these types of lawsuits, marketers should consult with their legal counsel and review the Mobile Marketing Association Consumer Best Practices Guidelines for instructions on getting consent.
 

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