Regulatory Developments

The U.S. Copyright Office has imposed new requirements on service providers in order to maintain safe harbor protection under the Digital Millennium Copyright Act (“DMCA”).  Service providers who don’t meet these requirements will lose the safe harbor protections afforded by the DMCA.  The deadline to comply with these requirements is December 31, 2017.

DMCA and the Safe Harbor

The DMCA was enacted by U.S. Congress in October 1998 with the purpose of addressing certain intellectual property issues in the wake of the Internet.  Among the DMCA’s key provisions is “safe harbor” protection, designed to shield companies from liability for infringement due to content posted by a user on the company’s website, provided that the company qualifies as a “service provider.
Continue Reading Regulatory Changes Affecting All “Service Providers” – 12/31/17 Deadline

Last week, the Senate voted 51 to 50 (with Vice President Pence casting the tiebreaking vote) to override the Consumer Financial Protection Bureau’s Arbitration Rule, which was finalized earlier this year in July.  As previously discussed here and here, the Arbitration Rule would have prohibited providers of covered consumer financial products and services from using pre-dispute arbitration agreements to compel consumers to participate in arbitration to resolve disputes about those products and services.  Shortly after the vote, the White House released a statement applauding the override vote and indicating that President Trump intended to enact it, effectively confirming that the Arbitration Rule will not come into effect.

The override occurred pursuant to the Congressional Review Act (CRA), which was enacted in 1996 to provide an easier mechanism for Congress to undo agency regulations without enacting wholly new legislation.  Under the CRA, both the House and Senate can use streamlined procedures that limit debate and the amendment process and allow Congress to overturn agency regulations with a simple majority in each chamber.  The CRA also prohibits agencies from issuing regulations that are “substantially the same” as the overturned regulation unless authorized by a subsequent law, meaning that the CFPB will be unable to simply pass a substantially similar rule in the next session of Congress.  The meaning of “substantially the same” under the CRA has yet to be litigated, so it’s at least possible that the CFPB could try to reissue another arbitration rule down the road even without subsequent legislation.

While the battle over the Arbitration Rule appears to be over for now, proponents of the rule vowed to continue to push related reforms and encouraged the CFPB to use existing authority to review and take action against unfair, deceptive, or abusive arbitration provisions.  The CFPB remains authorized to use its supervisory and enforcement authorities under the Dodd-Frank Act to regulate arbitration provisions.  While the repeal of the Rule means the CFPB can’t prohibit arbitration clauses in the aggregate via rule, it could still allege that particular arbitration provisions are unfair, deceptive or abusive on a case-by-case basis.  Providers of financial products and services, therefore, should remain cognizant of the CFPB’s regulatory and enforcement authority and evaluate consumer arbitration provisions in light of relevant court precedent and guidance to minimize the likelihood that such provisions are invalidated and/or garner CFPB interest.

As part of the FTC’s ongoing review of the needs, costs, and benefits of regulations, the agency recently announced it is reviewing the following rules:

  • The Picture Tube Rule requires manufacturers to base screen size measurements on the horizontal measure of the viewable area, unless the alternative method of measurement is clearly disclosed. This rule was originally intended to help consumers compare products, but with the changes in television technology. In determining whether the rule is still needed, relevant concerns include changes in television technology such as the incorporation of plasma, LED, OLED, and other similar materials in flat display screens. The full list of questions the FTC hopes to address can be found on the Notice of Public Rulemaking here. Comments are due August 31.
  • The FTC is also seeking comment on a proposal to eliminate the “housemark” provisions of the Textile Rules. The housemark provisions require marketers who want to use a “housemark” (a distinctive mark used to identify all a firm’s products) on a textile’s tag in lieu of their business name only if they first register their housemark with the Commission. It is the agency’s position that that provision, imposed in 1959, is no longer necessary because trademark owners can easily be identified by searching online or via the U.S. Patent and Trademark Office website. Therefore, the FTC believes that removing these requirements will reduce compliance costs and increase firms’ flexibility. Comments are due by July 31.
  • The FTC is seeking public comment on its CAN-SPAM Rule, which requires a commercial email to contain accurate header and subject lines, identify itself as an ad, include a valid physical address, and offer recipients a way to opt out of future messages. The FTC is seeking comment on whether consumers have benefitted from the Rule, whether it should be modified, the costs of compliance, whether it should be amended to account for technological or economic changes, among other things. Comments are due by August 31.
  • The Energy Labeling Rule is also being edited to eliminate burdens on the industry and account for new products. The Energy Labeling Rule requires yellow EnergyGuide labels on certain appliances to help consumers compare similar models using estimated operating cost and energy consumption ratings. The comments period for this change has ended. The FTC sought public comment on these changes in September 2016. The accepted changes eliminate obsolete marking requirements for plumbing products, exempt certain ceiling fans from labeling requirements, and update the labels to cover electric instantaneous water heaters.

Overall, this announcement is consistent with the FTC’s recent systematic review of rules and guides. We will continue to track the comments and provide updates on any important developments.

 

Summer Associate Carmen Tracy contributed to this post. Ms. Tracy is not a practicing attorney and is practicing under the supervision of principals of the firm who are members of the D.C. Bar.

On Monday, the FTC submitted comments to the draft National Telecommunications and Information Administration (NTIA) guidance intended to improve Internet of Things (IoT) device security and increase consumer transparency. While recognizing the benefits (and proliferation) of IoT devices, the Commission’s comments caution that such benefits can only be realized when device manufacturers both incorporate – and adequately inform consumers of – reasonable security measures.

The comments begin by highlighting several “lessons learned” from FTC enforcement actions involving IoT devices such as home security cameras, baby monitors, and smart TVs. Specifically, the Commission explains that such actions emphasize the need for manufacturers to take reasonable security measures and to continuously manage security risks. The comments, in addition, note the several policy initiatives, consumer and business educational materials, and company-specific guidance (in lieu of enforcement) intended to assist IoT manufacturers with device security.

The Commission also recommends several changes to the NTIA guidance’s “Elements of Updatability”:

  • Edits to “Key Elements” Prior to Purchase – The Elements of Updatability recommend three pre-sale “key elements”: (1) disclosure of whether the device can receive security upgrades, (2) disclosure of how the device receives such upgrades, and (3) the anticipated timeline for the end of security support. The FTC recommends that manufacturers disclose the minimum support period, rather than an anticipated timeline, as well as disclose if the device will lose functionality or become highly vulnerable when security support ends.
  • Edits to “Additional Elements” Before or After Purchase – The FTC adds several “additional elements” that manufacturers should consider conveying to consumers, either before or after purchase. Such additional elements include (1) adopting a uniform notification method to, for example, notify consumers of updates (if updates are not automatic); (2) enabling consumers to sign-up for affirmative security support notifications that are separate from marketing communications; and (3) providing real-time notifications when support is about to end.
  • Omission of One “Additional Element” – The FTC also advises omission of the “additional element” describing the update process, explaining that such description imposes costs on manufacturers with little benefit to consumers who can “feel overburdened by choice and ignore critical information.”

Last month, the Indiana Governor signed into law House Bill No. 1444, which amends Indiana’s “do not call” statute and extends liability beyond the telephone solicitor, to individuals or entities that “directly or indirectly control” the telephone solicitor. The amendments take effect July 1, 2017 and affect entities that target Indiana consumers via telephone solicitation, regardless of the location of the entity.

Additional Disclosure Requirements. Currently, telephone solicitors must provide Indiana consumers with two types of information: (1) the solicitor’s first and last name, and (2) the name of the business on whose behalf the solicitor is calling. Under the amended law, solicitors must also immediately disclose their employer’s name or the entity with which they have contracted.

Vicarious Liability. The amendment also extends vicarious liability to individuals and entities that have direct or indirect control of the telephone solicitor, regardless of where such persons or entities are located or domiciled. Civil penalties, however, will not apply if the individual or entity can establish that they did not know and, with reasonable care, could not have known of the violation.

House Bill No. 1444 also amends the definition of “caller” under Indiana’s Regulation of Automatic Dialing Machines, to include officers of a corporation or LLC that are involved in or have notice of prohibited conduct and fail to take reasonable steps to prevent it.

Enforcement and Penalties. Failure to comply with Indiana’s telemarketing law is a deceptive act, for which the Indiana Attorney General may seek a $10,000 civil penalty for the first violation, and $25,000 for each violation thereafter. By expanding liability to principals with direct or indirect control, the Indiana Attorney General now has a wider net to cast in prosecutions for “do not call” violations.

For businesses placing telemarketing calls to Indiana consumers, it would be wise to review current calling practices and make appropriate adjustments as necessary, including with respect to managing risk associated with third parties who arguably may be calling on the business’s behalf.

 

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

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

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

Kelley Drye Speakers:

Christie Grymes Thompson, Partner

To register, please click here.

CLE Information:

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

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Did you know Kelley Drye’s Advertising Law practice produces a newsletter, Ad Law News and Views, every two weeks to help you stay current on ad law and privacy matters? Click here to access our Publication Sign Up and select Advertising and Marketing to subscribe. Find contents from the latest issue below:

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Recent News

Chairman Kaye Steps Down as CPSC Chair; Republican Buerkle Assumes Role of Acting Chair

CFSAN Director Anticipates “Tweaks,” Not Rollbacks Despite Administration’s De-Regulation Emphasis

Smart TV Manufacturer “Smarting” after $2.2 Million Privacy Enforcement

FTC Announces Changes at the Helm of the Bureau of Consumer Protection; Thomas Pahl to Take Over as Acting Bureau Director Following Jessica Rich’s Departure

Not a Passing Grade: FTC Settles with Company Over Alleged False Advertising for High School Diploma Program

EU Data Protection Authority Issues GDPR Action Plan, Swiss Sign Privacy Deal with U.S.

New FTC Acting Chair Maureen Ohlhausen Offers Insight into Consumer Protection Priorities

CIT Adds New Requirements for ‘Assembled in USA’ Claims Analysis

FTC Cries Foul On Breathometer Accuracy Claims

Spotlight On Our New Texas Offices

Kelley Drye & Warren LLP recently merged with Jackson Gilmour & Dobbs, P.C., a highly respected Texas law firm best known for success in environmental litigation matters. The team also brings substantial experience in sophisticated regulatory and commercial litigation matters. The merger strengthens Kelley Drye’s litigation and environmental practices, as well as extends our national presence.

The collective environmental practices broaden Kelley Drye’s nationwide capabilities in site remediation, cost recovery, natural resource damages, and related insurance litigation, creating a powerhouse firm for businesses contemplating sales and acquisitions, debt and equity financings, and real estate development and construction where environmental issues may be present.

Please read more about our Environmental Law and Environmental Litigation capabilities, as well as our new offices in Houston and Austin

Analysis 

Marketing in a Multi-Device World: Update on Cross Device Tracking

On January 25, Kelley Drye hosted a webinar on maintaining transparency and respecting consumer choice while achieving marketing objectives. Megan Cox, Attorney at the Federal Trade Commission, J. Jurgen Van Staden, Vice President, Policy & Technology at the Network Advertising Initiative, and partner Dana Rosenfeld discussed recent law enforcement activity, such as the FTC’s recent settlement with Turn Inc., as well as self-regulatory guidance and enforcement issues surrounding cross device information tracking and uses. For a copy of the slide deck, please click here.

Our next webinar will be on “Litigation is Inevitable: Update on Recent Advertising Class Actions” February 22. Please click here for more information and to register.

To sign up to receive future webinar invitations, please click here and sign up to receive communications from the Advertising and Marketing practice group.

Suing over Empty Space: Why Lawsuits over Slack Fill in Packaging Are Growing

Partner Kristi Wolff co-authored the Nutritional Outlook article “Suing over Empty Space: Why Lawsuits over Slack Fill in Packaging Are Growing.” The article discusses the rise in lawsuits regarding slack fill, or the difference between the capacity of a container and the volume of the product inside. Read more…

ABA Section of Antitrust Law Presidential Transition Report

Partner Bill MacLeod addressed the American Bar Association’s Section of Antitrust Law with an introductory note to the Section’s 2017 Presidential Transition Report. The American Bar Association Section of Antitrust Law released its 60-page eighth sequential Presidential Transition Report, which offers a retrospective of current state and federal antitrust and consumer protection law and policy, as well recommendations for ways the new Trump administration might consider further strengthening policy and enforcement to deal with new antitrust challenges on the horizon. Read more…

Has the Supreme Court’s Resolution of Spokeo Played Out as Expected?

Partner Lee S. Brenner co-authored the Bloomberg BNA article “Has the Supreme Court’s Resolution of Spokeo Played Out as Expected?” On May 16, 2016, the United States Supreme Court held in Spokeo Inc. v. Robins that a consumer cannot satisfy the injury-in-fact demands of Article III by alleging only a bare procedural violation of a statute, divorced from any concrete harm. The article examines the Spokeo decision and how that case impacted litigation in various contexts, including data privacy, the Truth in Lending Act (TILA), the Fair and Accurate Credit Reporting Act (FACTA), and the Telephone Consumer Protection Act (TCPA). Read more…

Fifty Countries and Counting, Sixty Sessions and More – at Spring Meeting: A Message From Bill MacLeod, Chair, Section of Antitrust Law

Partner William MacLeod authored his monthly address to the American Bar Association’s Section of Antitrust Law. This month’s message features The Spring Meeting of the Section of Antitrust Law. Read more…

Upcoming Events and Speeches

Toys for Sale: IoT Devices and Connected Kids
February 15, 2017 |WEBINAR
American Bar Association
Dana B. Rosenfeld

Litigation is Inevitable: Update on Recent Advertising Class Actions
February 22, 2017 | WEBINAR
Jeffrey S. Jacobson

Regulation of Cosmetics
March 3, 2017 | WASHINGTON, DC
Introduction to U.S. Food Law and Regulation
Kristi L. Wolff

Doing Data Right: Legal Best Practices for Making Your Data Work
March 16, 2017 |SAN JOSE, CA
Strata + Hadoop World 2017
Alysa Zeltzer Hutnik

Eyes on the 1-800 Prize: IP Restrictions and Online Competition
March 29, 2017 | WASHINGTON, DC
65th Antitrust Law Spring Meeting
David H. Evans

Multi-State Privacy/Security Investigations: Expert Roundtable
April 20, 2017 |WASHINGTON, DC
Global Privacy Summit 2017
Alysa Zeltzer Hutnik

Impact of the 2016 Election on Antitrust and Consumer Protection Class Actions
April 27, 2017 |SEATTLE, WA
Law Seminars International’s Litigating Class Actions
Jeffrey S. Jacobson

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On January 16, 2017, the Article 29 Working Party (“Working Party”)—the EU’s central data protection advisory board—published a press release regarding its Action Plan for 2017, which was adopted as part of its wider implementation strategy for the General Data Protection Regulation (“GDPR”).  The Action Plan follows up on the actions initiated in 2016 and outlines the priorities and objectives for the year to come in anticipation of the entry into force of the GDPR in May 2018.

In 2017, the Working Party commits to continue and/or finalize work on several key issues:

  • Guidelines on certification and processing likely to result in a high risk and Data Protection Impact Assessments (“DPIA”);
  • Administrative fines;
  • Setting up the administration of the European Data Protection Board (“EDPB”) structure; and
  • Preparation of the one-stop shop and the EDPB consistency mechanism.

New work priorities and objectives for 2017 include:

  • Guidelines on the topics of consent and profiling;
  • Guidelines on the issue of transparency; and
  • Update of existing opinions and guidance documents on data transfers to third countries and data breach notifications.

Moreover, the Working Party commits to continue consultation rounds and will invite relevant stakeholders to provide input on topics of interest.  During a “Fablab” workshop announced for April 5 and 6, stakeholders will have the opportunity to comment on the Working Party’s Action Plan. Non-EU counterparts will have an opportunity to exchange views on the Working Party’s GDPR implementation and the GDPR generally during an interactive workshop scheduled for May 18 -19, 2017.

*           *           *

In other data protection news, on January 11, 2017 the U.S. and Switzerland signed a Privacy Shield Agreement recognizing the adequacy of U.S. data protection legislation in light of Swiss requirements.  Months earlier, on October 7, 2015, the Swiss Data Protection Commission stated that it would follow the Court of Justice of the European Union’s invalidation of the U.S. – EU Safe Harbor framework, and hence, a new framework was required.  Resembling the EU – U.S. Privacy Shield, the new Swiss – U.S. agreement enables certified companies to export data from Switzerland to the U.S. in compliance with Swiss data protection laws.  There are three notable differences between the EU –U.S. and Swiss – U.S. Privacy Shield frameworks:

EU – U.S. Privacy Shield Swiss – U.S. Privacy Shield
EU Data Protection Authority is cooperation and compliance authority Swiss Federal Data Protection and Information Commissioner is cooperation and compliance authority
Sensitive data definition under Choice Principle Modified sensitive data definition under Choice Principle includes ideological or trade union-related views or activities, information on social security measures or administrative or criminal proceedings and sanctions, which are treated outside pending proceedings
Binding arbitration option in place Commerce to work with Swiss Government to put in place binding arbitration option at first annual review

The new agreement replaces the existing U.S. – Swiss Safe Harbor Framework with immediate effect. The Department of Commence will begin accepting self-certification applications on April 12, 2017.

Please join Kelley Drye in 2017 for the Advertising and Privacy Law Webinar Series. Like our annual in-person event, this series will provide engaging speakers with extensive experience and knowledge in the fields of advertising, privacy, and consumer protection. These webinars will give key updates and provide practical tips to address issues faced by counsel.

This webinar series will commence January 25 and continue the last Wednesday of each month, as outlined below.

January 25, 2017 | February 22, 2017 | March 29, 2017 | April 26, 2017 | June 28, 2017
July 26, 2017 | September 27, 2017 | October 25, 2017 | November 29, 2017

Kicking off the series will be a one-hour webinar on “Marketing in a Multi-Device World: Update on Cross Device Tracking” on January 25, 2017 at 12 PM ET. For more information and to register, please click here. CLE credit will be offered for this program.

The advertising industry’s self-regulatory system may be “voluntary,” but ignoring NAD’s recommendations—or declining to participate when asked—buys advertisers a prompt referral to the Federal Trade Commission. NAD often touts its close working relationship with the FTC. But what becomes of these referrals from the self-regulatory system? At NAD’s annual conference last month, Mary Engle, the FTC’s Associate Director for Advertising Practices, pulled back the curtain on the Commission’s treatment of referrals from NAD.

Engle noted that the FTC has received 50 referrals from NAD between January 1, 2011 and August 17, 2016. Not surprisingly, post-referral outcomes vary a great deal. In some cases, the FTC staff takes no action at all. Far more often, however, the FTC delves into NAD’s case file. Sometimes the Commission’s post-referral role involves urging advertiser back to NAD. Other times, FTC staff launches a formal investigation.

Looking back at referrals from NAD over the past five and a half years, Engle provided the following statistics:

  • 22%: Company returned to NAD at the FTC’s recommendation
  • 22%: Outcome unclear, or FTC staff decided to take no action
  • 20%: FTC staff resolved the matter short of an investigation
  • 14%: Matter remains under review by FTC staff
  • 8%: FTC staff initiated a formal investigation, which it subsequently closed
  • 8%: Matter related to existing FTC investigation/litigation
  • 2%: Referral resulted in FTC law enforcement action
  • 2%: FTC took no action because matter related to non-FTC litigation

The moral of Engle’s story? Don’t dismiss the self-regulatory body too quickly. Refusing to participate, or to comply with NAD’s recommendations, risks unwanted attention from the FTC.