Legal 2.0 affiliate summit slides


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Legal 2.0 affiliate summit slides

  1. 1. Legal 2.0 Hot Topics in Affiliate Marketing
  2. 2. The Program What You Need to Know about Advertising Law Jeffrey A. Greenbaum, Frankfurt Kurnit Klein & Selz, PC The Latest Issues in Online Marketing Bennet Kelley, Internet Law Center Regulators ’ View of Online Marketing Leonard L. Gordon, Federal Trade Commission & Will Haselden, Florida Attorney General ’s Office Cyberfraud Section The Big Picture Zoom Lens The Firemen
  3. 3. THE BIG PICTURE : Jeffrey A. Greenbaum Frankfurt Kurnit Klein & Selz, PC What You Need to Know about Advertising Law
  4. 4. What is advertising? It ’s almost any communication with consumers
  5. 5. What is advertising? <ul><li>Television, radio, print, outdoor, collateral </li></ul><ul><li>Phone, fax, mail, e-mail </li></ul><ul><li>Web </li></ul><ul><li>Branded entertainment </li></ul><ul><li>Product placement </li></ul><ul><li>Viral videos </li></ul><ul><li>Blogs </li></ul><ul><li>Press releases </li></ul><ul><li>Spokespeople </li></ul>
  6. 6. Nike v. Kasky <ul><li>Press releases and letters to newspaper editors and university officers </li></ul><ul><li>Defending Nike ’s labor practices </li></ul><ul><li>California Supreme Court: </li></ul><ul><ul><li>Speaker </li></ul></ul><ul><ul><li>Intended audience </li></ul></ul><ul><ul><li>Content of the message </li></ul></ul>
  7. 7. Facenda v. NFL Films <ul><li>“ Making of” film about “Madden NFL ’06” produced by NFL Films </li></ul><ul><li>Is it a documentary or is it advertising? </li></ul><ul><li>Court looked at factors such as ownership, journalistic independence, and content </li></ul><ul><li>Court says that it ’s advertising </li></ul>
  8. 8. What standards apply? Marketers are held to very high standards
  9. 9. What standards apply? <ul><li>Federal, state, and local standards . . . and that ’s only the United States </li></ul><ul><li>Self-regulatory bodies too </li></ul><ul><li>Overlapping jurisdiction </li></ul>
  10. 10. FTC Act <ul><li>prohibits “unfair or deceptive acts or practices” </li></ul>
  11. 11. “ Deception” <ul><li>Misrepresentation or omission </li></ul><ul><li>Likely to mislead the consumer </li></ul><ul><li>Acting reasonably </li></ul><ul><li>And it must be material </li></ul>
  12. 12. What does this mean? <ul><li>Advertising must be truthful and not misleading </li></ul><ul><li>You must have prior substantiation </li></ul><ul><li>You ’re responsible for both express and implied claims </li></ul><ul><ul><li>Net impression </li></ul></ul><ul><ul><li>What is the take-away? </li></ul></ul><ul><ul><li>The “reasonable” consumer? </li></ul></ul>
  13. 13. FTC v. Telebrands <ul><li>Advertising for the Ab Force belt </li></ul><ul><li>What was advertised? </li></ul><ul><ul><li>No express claims </li></ul></ul><ul><ul><li>Well-sculpted bodies </li></ul></ul><ul><ul><li>References to other products on the market </li></ul></ul><ul><li>FTC argues that Telebrands is making claims that the product works </li></ul>
  14. 14. Disclosures <ul><li>Is qualifying information necessary to prevent a claim from being misleading? </li></ul><ul><li>Disclosures must be “clear and conspicuous” </li></ul><ul><ul><li>Performance standard </li></ul></ul><ul><ul><li>Will consumers actually see, read, and understand the disclaimer? </li></ul></ul>
  15. 15. What doesn ’t work? <ul><li>Mouse type </li></ul><ul><li>Contradictory disclosures </li></ul><ul><li>Disclosures that are often made later on </li></ul><ul><ul><li>When can you send consumers somewhere else to find the qualifying information? </li></ul></ul><ul><ul><li>What if it ’s only a few clicks away? </li></ul></ul><ul><li>Check out the FTC ’s “Dot Com Disclosures” guidelines </li></ul>
  16. 16. FTC & Subway <ul><li>Subway TV commercial comparing the Subway club sandwich to the Big Mac </li></ul><ul><li>Subway sandwiches are made to order, so nutritional content can vary widely </li></ul>
  17. 17. “ less than half the fat of a Big Mac”
  18. 18. “ fat claim for footlong sub based on white or wheat bread without cheese or condiments that contain fat”
  19. 19. Subway <ul><li>FTC says that the disclosure does not adequately convey the limitations </li></ul><ul><li>FTC says the presentation was not conspicuous </li></ul><ul><ul><li>Small font size </li></ul></ul><ul><ul><li>White print on a light background </li></ul></ul><ul><ul><li>Moving background </li></ul></ul><ul><ul><li>Flashed briefly on the lower part of the screen </li></ul></ul><ul><ul><li>No audio component </li></ul></ul><ul><li>Closing letter </li></ul>
  20. 20. <ul><li>This is the disclosure that studies showed was not effective. </li></ul><ul><li>This is the disclosure that you ’re probably using. That is, if your marketing folks are letting you do a “big” disclosure. </li></ul>
  21. 21. Puffery <ul><li>No proof is required for “puffery” </li></ul><ul><ul><li>Hyperbole </li></ul></ul><ul><ul><li>Consumers won ’t take it seriously or rely on it when making a purchasing decision </li></ul></ul><ul><li>Is it puffery? </li></ul><ul><ul><li>“ The ultimate driving machine” </li></ul></ul><ul><ul><li>“ Better ingredients. Better Pizza” </li></ul></ul>
  22. 22. “ Unfairness” <ul><li>Substantial injury to consumers </li></ul><ul><li>Not reasonably avoidable by them </li></ul><ul><li>And not outweighed by countervailing benefits to consumers or competition </li></ul>
  23. 23. FTC v. D-Squared <ul><li>FTC alleged that Windows Messenger was used to advertise repeatedly on people ’s computers, even when they weren’t online </li></ul><ul><li>The pop-ups sold software to make these pop-ups go away </li></ul><ul><li>FTC alleged lost data and productivity, frozen screens, and consumers spent money needlessly </li></ul>
  24. 24. Where are we headed? New marketing challenges and uncertainty
  25. 25. Deceptive formats <ul><li>Do consumers have a right to know that they are being advertised to? </li></ul><ul><li>When do you have to disclose? </li></ul><ul><ul><li>Brand integration </li></ul></ul><ul><ul><li>Viral videos </li></ul></ul><ul><ul><li>Guerilla advertising </li></ul></ul><ul><ul><li>Flogs </li></ul></ul><ul><ul><li>Spokespeople </li></ul></ul><ul><li>Potential regulatory action? </li></ul>
  26. 26. User generated content <ul><li>Advertising has become a conversation </li></ul><ul><li>Are you responsible for what consumers post on your site? </li></ul><ul><ul><li>Truth in advertising </li></ul></ul><ul><ul><li>Defamation </li></ul></ul><ul><ul><li>Intellectual property </li></ul></ul><ul><ul><li>Crimes and other harms </li></ul></ul><ul><li>Does monitoring help or hurt? </li></ul><ul><li>Continuing DMCA and CDA battles </li></ul>
  27. 27. Hot Issues in Online Marketing Bennet Kelley Greg Gladman
  28. 28. Email Marketing: Advertiser Liability for Affiliates <ul><li>CAN-SPAM Act </li></ul><ul><ul><li>Liable if “ actual knowledge, or by consciously avoiding knowing ” about affiliate violations </li></ul></ul><ul><ul><ul><li>ASIS Internet Services v. Opt-In Global, Inc. (N.D. Cal. April 29, 2008). “Although ASIS has pointed to significant evidence that Azoogle . . . did little to investigate the third party vendors it engaged, there is no evidence in the record . . . that Azoogle . . . made a deliberate choice not to know.” </li></ul></ul></ul><ul><ul><ul><li>Hypertouch v. Kennedy-Western University , 2006 WL 648688 (N.D. Cal. 2006) –strict anti-spam policies and policing of affiliates defeated allegation of intent. </li></ul></ul></ul>
  29. 29. Email Marketing: Advertiser Liability for Affiliates <ul><li>Vicarious liability still exists for tort and other statutory claims </li></ul><ul><li>Advertisers seeking compliance solutions and greater transparency </li></ul><ul><ul><li>Some refuse to deal with networks that lack transparency </li></ul></ul>
  30. 30. Email Marketing: FTC Discretionary Regulations Designated Sender Rule Victoria Peckham Sender Requirements FTC Advisory Letter (2005 ) Multiple Advertisers  Opt-in Requirement  Name in from Line  Controls Lists or IDs Recipients  Controls Content Compliance with principal provisions of CAN-SPAM  Sender Requirements Proposed Rule (2005) Multiple Advertisers  Opt-in Requirement Name in from Line  Controls Lists or IDs Recipients  Controls Content  Compliance with principal provisions of CAN-SPAM  Sender Requirements Final Rule (2008) Multiple Advertisers  Opt-in Requirement Name in from Line  Controls Lists or IDs Recipients Controls Content Compliance with principal provisions of CAN-SPAM 
  31. 31. Email Marketing: Spamigators <ul><li>Losses </li></ul><ul><ul><li>Preemption </li></ul></ul><ul><ul><li>Faux-ISP CAN-SPAM Plaintiffs </li></ul></ul><ul><ul><li>Use of non-corporate domain </li></ul></ul><ul><ul><li>Use of multiple domain names </li></ul></ul><ul><li>Latest Moves </li></ul><ul><ul><li>Attacking Privacy Domains under CAN-SPAM </li></ul></ul><ul><ul><li>California Legislation </li></ul></ul>
  32. 32. Email Marketing: FCC CAN-SPAM Rule <ul><li>Express Prior Authorization </li></ul><ul><li>Must Specify </li></ul><ul><ul><li>Mobile Address </li></ul></ul><ul><ul><li>Potential Senders </li></ul></ul><ul><ul><li>Potential Charges </li></ul></ul><ul><ul><li>Revocable </li></ul></ul><ul><li>Must be </li></ul><ul><ul><li>Clearly legible, </li></ul></ul><ul><ul><li>In sufficiently large type </li></ul></ul><ul><ul><li>Separate from other disclosures </li></ul></ul>Press 1 for Viagra, 2 for a free iPod
  33. 33. Does Bidding on Competitor ’s Trademark Constitute Infringement? <ul><li>Likelihood of confusion among judges </li></ul>
  34. 34. Initial Interest Confusion Use of another trademark “ in a manner calculated to capture initial consumer attention, even though no actual sale is finally completed as a result of the confusion. ” Brookfield Communications Inc. v. West Coast Entertainment Corp ., 174 F.3d 1036 (9th Cir. 1999). B Tal
  35. 35. Initial Interest Confusion <ul><li>Improperly Benefits From Goodwill of Trademark </li></ul><ul><li>False Detour From Information Super-highway </li></ul><ul><ul><li>Analogy to false detour sign directing consumers to take wrong exit. “Unable to locate West Coast, but seeing the Blockbuster store right by the highway entrance, they may simply rent there..” Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1062 (9th Cir. 1999) </li></ul></ul><ul><li>Bait and Switch </li></ul><ul><ul><li>“ Initial interest confusion can be viewed as a variation on the practice of ‘bait and switch.’” 3 J. Thomas McCarthy, McCarthy on Trademarks & Unfair Competition § 23:26 (4th ed. 2003). </li></ul></ul>
  36. 36. Counterpoint <ul><li>Not a Detour, Merely a Lane Change </li></ul><ul><ul><li>Web surfers are accustomed to false starts and are unlikely to be dissuaded when they end up at the wrong site. Chatam Int'l v. Bodum, Inc., 157 F.Supp.2d 549, 559 ED PA 2001). </li></ul></ul><ul><li>No different than supermarket placing store brand next to branded products. </li></ul><ul><ul><li>, Inc. v. , et al. No. 06-CV-2225 (JFB)(ART)(E.D.N.Y., June 12, 2007) </li></ul></ul><ul><li>Legally Significant Confusion? </li></ul><ul><ul><li>“ The [District] court’s refusal to enter the ‘initial interest confusion’ thicket is well taken given the unlikelihood of ‘legally significant’ confusion.” Hasbro Inc. v. Clue Computing, Inc ., 232 F.3d 1, 2 (1st Cir. 2000). </li></ul></ul><ul><li>No Liability If Trademark Not Displayed </li></ul><ul><ul><li>Keyword advertising is a “use in commerce,” but cannot confuse consumers if the ultimate search results do not display plaintiff’s trademarks. J.G. Wentworth SSC Ltd v. Settlement Funding LLC , No. 06-0597 (E.D. Pa. Jan. 4, 2007). </li></ul></ul>
  37. 37. BT
  38. 38. Behavioral Targeting <ul><li>2008: $775 MM (3% of online ad spending) </li></ul><ul><li>48 days later - FTC “Recommends” Self Regulatory Principles </li></ul>FTC BT Town Hall - No evidence of harm Higher Consumer Response Rate Technophobia & Big Brother 2012: $4.4 BB (8.6%)
  39. 39. BT Solutions
  40. 40. What about the offline world?
  41. 41. Also Simmering . . . <ul><li>The High Cost of “Free” </li></ul><ul><li>Online Gambling </li></ul><ul><ul><li>US Closed </li></ul></ul><ul><ul><li>UK, EU Liberalizing </li></ul></ul><ul><ul><li>Trade Battles </li></ul></ul><ul><li>NY Amazon Sales Tax Law </li></ul><ul><li>ICANN - gTLDs Expansion </li></ul>
  42. 42. Superiority of numbers is the most common element in victory – Carl Von Clausewitz
  43. 43. The Firemen
  44. 44. DISCLAIMER <ul><li>The views of the distinguished public servants who are about to speak are their own. They may not necessarily be endorsed, approved by or represent the views of </li></ul><ul><ul><li>The Federal Trade Commission </li></ul></ul><ul><ul><li>The Florida Attorney General </li></ul></ul><ul><ul><li>not to mention . . . </li></ul></ul><ul><ul><li>2 out of 3 dentists </li></ul></ul>
  45. 45. Priorities at the FTC Leonard L. Gordon Director, Northeast Regional Office Federal Trade Commission
  46. 46. Testimony/Rule Making/Guidance <ul><li>Behavioral Advertising </li></ul><ul><ul><li>Self-Regulatory Principles issued in November 2007. </li></ul></ul><ul><ul><li>4 Governing Principles: </li></ul></ul><ul><ul><ul><li>Transparency and Consumer Control </li></ul></ul></ul><ul><ul><ul><li>Reasonable Security </li></ul></ul></ul><ul><ul><ul><li>Affirmative Express Consent for Material Changes in Privacy Policy </li></ul></ul></ul><ul><ul><ul><li>Affirmative Express Consent for Use of Sensitive Data </li></ul></ul></ul>
  47. 47. Testimony/Rule Making/Guidance <ul><li>FACTA Affiliate Marketing Rule –effective 1/1/08, must be in compliance by 10/1/08. </li></ul><ul><li>Rule prohibits using information from an affiliate to make a solicitation about your product or service, unless consumer given opportunity to opt-out and does not do so. </li></ul>
  48. 48. Cases <ul><li>Breakage Cases </li></ul><ul><ul><li>ValueClick </li></ul></ul><ul><ul><li>MemberSource Media </li></ul></ul><ul><ul><li>Adteractive </li></ul></ul><ul><li>Think All Publishing </li></ul>FREE FREE FREE
  49. 49. Cases <ul><li>Spam Cases </li></ul><ul><ul><li>Sili Neutraceuticals </li></ul></ul><ul><ul><li>Spear Systems </li></ul></ul><ul><ul><li>Cyberheat </li></ul></ul><ul><ul><li>Impulse Media </li></ul></ul>
  50. 50. Cases <ul><li>Action Research Group </li></ul><ul><li>Web Source Media </li></ul><ul><li>Imbee </li></ul>
  51. 51. Cases <ul><li>Data Security </li></ul><ul><ul><li>Lexis/Nexis </li></ul></ul><ul><ul><li>TJX </li></ul></ul><ul><ul><li>Life Is Good </li></ul></ul><ul><ul><li>Goal Financial </li></ul></ul>
  52. 52. Will Haselden, Florida Attorney General ’ s Office Cyberfraud Section
  53. 56. <ul><li>3 Zones </li></ul><ul><li>All zones must be “above the fold” / visible to consumer w/o scrolling </li></ul><ul><li>All font types must conform to Web Standard size equivalencies </li></ul><ul><li>W3C Color Contrast standard applies to all disclosures in all zones (125 min.) </li></ul><ul><li>All disclosures must be visible at all times throughout the order path </li></ul>
  54. 57. <ul><li>Zone 1 – Price and Term ($9.99 per month) </li></ul><ul><li>Must be disclosed entirely within 125 pixels in any direction from the cell submit field and the P.I.N. code submit field. </li></ul><ul><li>12pt. minimum font size </li></ul><ul><li>Must be disclosed in numerical format 0-9 and include $ </li></ul><ul><li>Google Compliant. For Non-Google Compliant Pages, Price disclosure must not contain any other text except price and term ($9.99 per month) </li></ul><ul><li>Zone 2- Types of Content (Ringtones and Other Text Services) </li></ul><ul><li>Must be disclosed no greater than 20 pixels from the Offer Description (Get 10 Bonus Ringtones) </li></ul><ul><li>Other Text Services can be no smaller than 50% of the font size of the Offer </li></ul><ul><li>Description (Get 10 Bonus Ringtones) Minimum font size is 20pt. </li></ul><ul><li>Zone 3 – Age / Other T ’s and C’s </li></ul><ul><li>Age description must be above T ’s and C’s. Minimum 12pt. font size. </li></ul><ul><li>3 lines of other T ’s and C’s must be visible above the fold. </li></ul>
  55. 63. Questions?
  56. 64. Bios
  57. 65. Leonard L. Gordon <ul><li>[bio] </li></ul>Leonard L. Gordon serves as the Director of the Northeast Regional Office of the Federal Trade Commission, where he supervises the investigation and litigation of both consumer protection and antitrust matters.  Mr. Gordon joined the FTC in 2005 as a senior attorney, and, since joining the agency, he has led numerous antitrust and consumer protection investigations.  He became the Assistant Director in August 2007 and the Director in March 2008.  Mr. Gordon also regularly speaks to legal, business and consumer groups on both antitrust and consumer protection topics.  Mr. Gordon joined the FTC after 17 years as an associate and then a partner with the firm now known as DLA Piper, where his practice focused on antitrust, business tort and general business litigation and counseling.  Mr. Gordon graduated from the George Washington University Law School with honors in 1988.
  58. 66. Jeffrey A. Greenbaum Jeffrey A. Greenbaum counsels advertisers, media companies, and advertising agencies on advertising, marketing, branded entertainment, and intellectual property matters. He is a director of the Promotion Marketing Association, and recently co-chaired its annual law conference. He was also chair of the New York City Bar's Committee on Consumer Affairs, and has chaired its annual &quot;Hot Topics in Advertising “ program for several years. He recently spoke at the FTC's &quot;Rebate Debate&quot; workshop. Contact: Frankfurt Kurnit Klein & Selz, PC 488 Madison Avenue New York, New York 10022 Tele: (212) 826-5525 Fax: (347) 438-2104 E-mail:
  59. 67. Wil Haselden <ul><li>Mr. Haselden is the Section Chief of the Cyberfraud Section in the Florida Attorney General's office, located in Tallahassee, Florida. In that position, he recently negotiated a settlement with AT&T that provides for changes to the online affiliate marketing model by which mobile content is sold to consumers across the nation. The Cyberfraud Section continues to seek compliance with applicable marketing law from other businesses in this online space. </li></ul><ul><li>Mr. Haselden is a trial attorney with both governmental and private practice experience. He is licensed to practice in both federal and Florida state courts. </li></ul>
  60. 68. Bennet Kelley Bennet Kelley is founder of the Internet Law Center in Santa Monica where he helps clients navigate the challenges of the digital economy. He has been active in many of the hottest Internet issues over the past decade including cyber squatting, internet marketing and promotions, online gambling, net neutrality, privacy and spam. Bennet will be Vice-Chair of the California State Bar's Cyberspace Committee and is a regular contributor to the Journal of Internet Law. Bennet worked in-house with companies such as ETM Entertainment Network,, Hi-Speed Media and ValueClick prior to launching the Internet Law Center last September. The Internet Law Center ’s newsletter, Monday Memo, recently was named one of the top 100 Internet Law resources. . Contact: Internet Law Center 100 Wilshire Blvd, Suite 950 Santa Monica, CA 90401 310-452-0401 [email_address]
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