How Affiliate Marketers Can Avoid Legal Pitfalls

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The session will provide an overview of the legal landscape affiliate marketers face, including the common pitfalls that can threaten every business.

Experience level: Beginner
Target audience: Network
Niche/vertical: Compliance

Eric Crusius, Senior Attorney, Centre Law Group (Twitter @InternetBizLaw)

Published in: Business
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How Affiliate Marketers Can Avoid Legal Pitfalls

  1. 1. AFFILIATE SUMMIT WEST 2013 How Affiliate Marketers Can Avoid Legal PitfallsEric S. Crusius, Esq. | Jan. 15, 2013 | Session 10b | Florentine 3 & 4 Centre Law Group, LLC 1953 Gallows Road, Suite 650 Vienna, VA 22182 (703) 288-2800 Website: www.centreinternetlaw.com Blog: www.internetlawforbusinesses.com© Centre Law Group, LLC 2013 E-Mail: ecrusius@centrelawgroup.comAll Rights Reserved
  2. 2. Today’s Topics Three Areas of Importance For Any Company 1.Ensure Predictability – Why contracts are important and what needs to be in them. This will be illustrated with my uber-predictable cat. 2.Manage Risks – What legal risks are out there? This will be illustrated with what else? A casino! 3.Corporate Incubation – how to protect your company from internal and external maelstroms. This will be illustrated with an adorable 15 week old fetus. Yes, I am the father!Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  3. 3. Today’s Topics 1 2 3Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  4. 4. Predictability – The Importance of ContractsCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  5. 5. Predictability – The Importance of Contracts THE PLAYERS – WHY HAVE A CONTRACT? •Merchants: control how your products are marketed and under what conditions; CAN-SPAM compliance and other compliance issues; set payment amounts. •Networks: keep control over affiliate marketing practices; payment amounts; ensure compliance with merchant agreements; set-up website contracts. •Affiliates: set the terms and conditions of marketing and payments; also set-up website contracts.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  6. 6. Predictability – The Importance of Contracts Merchants • Website Contracts: general terms and conditions, payment terms and conditions, and privacy policy. • Network Contracts: protect intellectual property – how and when your text, photos, logos, etc. can be used; try to obtain indemnification for legal wrongs by networks or affiliates working for networks; set payment conditions. • Affiliate Contracts: same as network contracts if working directly with affiliates.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  7. 7. Predictability – The Importance of Contracts Networks • Website Contracts: terms and conditions and privacy policy. • Contracts with Merchants: use of merchant’s intellectual property – how and when merchant’s text, photos, logos, etc. can be used; try to obtain indemnification for legal wrongs by affiliates; set payment conditions. • Affiliate Contracts: govern how affiliates advertise; avoid indemnification.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  8. 8. Predictability – The Importance of Contracts Affiliates • Website Contracts: if applicable - terms and conditions and privacy policy. • Network Contracts: governs how affiliates can utilize intellectual property – how and when text, photos, logos, etc. can be used; network/merchant may try and obtain indemnification for legal wrongs; set payment conditions. • Merchant Contracts: same as network contracts if working directly with merchants.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  9. 9. Predictability – The Importance of Contracts What is Intellectual Property? • Trademarks: include logo, name, and trade dress. Violating a trademark can lead to significant statutory damages. • Copyrights: text, pictures, images, etc. Significant statutory damages available though work is considered copyrighted upon creation; easy to register a copyright; beware of DMCA Takedown Notices. • Other IP: includes trade secrets and patents.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  10. 10. Manage Risks – Your Business is Not a CasinoCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  11. 11. Managing Risks – Your Business is Not a Casino What are the risks? •Risk #1: the Federal Trade Commission (FTC). Among other things, the FTC monitors advertising claims made by affiliates, networks, and other marketers. • Avoid trouble – no deceptive formats (fake news stories), no false endorsements, no unsubstantiated claims. •Risk #2: State Attorney General (AG) investigations. Oftentimes State AGs will investigate a company after receiving complaints from consumers – especially “free trial” complaints. There is only one FTC, but there are 50 State AGs!Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  12. 12. Managing Risks – Your Business is Not a Casino What are the risks? •Risk #3: the CAN-SPAM Act. Ensure soliciting e-mails are in compliance with the CAN-SPAM Act. •Risk #4: violation of IP rights. IP in this field is often very murky. Can you use a trademark in an AdWord campaign? Can you tag a trademark in your blog? Can you use product photographs that are not yours? What are the rights among the parties in this situation?Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  13. 13. Managing Risks – Your Business is Not a Casino From a merchant’s perspective, what are the risks? •Networks and affiliates violate various laws •Networks and affiliates misappropriate merchant’s IP •Networks and affiliates draw the ire of the FTC •Product does not function properly •Product does not work in accordance with claims made by advertisersCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  14. 14. Managing Risks – Your Business is Not a Casino From a merchant’s perspective, what are best practices? •Have iron-clad contracts with networks and/or affiliates. Include indemnification if possible (though may not be effective). •Monitor networks and affiliates to ensure they are compliant with various laws and are in compliance with agreements. •Research in who is used as network partner. Do they have a good compliance history?Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  15. 15. Managing Risks – Your Business is Not a Casino From a network’s perspective, what are the risks? •Networks are sometimes caught in the middle and catch the worst of both worlds. •Affiliates can violate various laws •Affiliates can misappropriate merchant’s IP •Affiliates can draw the ire of the FTC •Merchant’s product does not function properly •Merchant’s product does not work in accordance with claims made by advertisersCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  16. 16. Managing Risks – Your Business is Not a Casino From a network’s perspective, what are best practices? •Have iron-clad contracts with merchants and/or affiliates. Include indemnification both ways if possible (though may not be effective). •Monitor affiliates to ensure they are compliant with various laws and are in compliance with agreements. •Research in who is used as affiliate. Do they have a good compliance history?Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  17. 17. Managing Risks – Your Business is Not a Casino From an affiliate’s perspective, what are the risks? •Unaware of federal and state laws that govern permissible actions •Can unwittingly misappropriate merchant’s IP •Can unwittingly draw the ire of the FTC •Merchant’s product does not function properly •Merchant’s product does not work in accordance with claims made by advertisersCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  18. 18. Managing Risks – Your Business is Not a Casino From a affiliate’s perspective, what are best practices? •Understand contract signed with merchants and networks. Have a list of what you can and cannot do. •Evaluate a contract before signing it. Would you prefer tow walk away? •Try to negotiate “terms of contention.” •Ensure product claims are accurate. •Evaluate each advertisement to ensure compliant with best FTC practices and CAN-SPAM practices.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  19. 19. Corporate Incubation – Protect Your Business from Internal & External MaelstromsCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  20. 20. Corporate Incubation Internal Issues •Rogue employees and business partners who steal trade secrets (NDA), attempt a “corporate takeover,” engage in cyber attacks and hacking, try to misappropriate corporate property, and go loco. •Partners who engage in “hacking.” External Issues •Products/services are criticized on the web by cybersquatters and brand assassins.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  21. 21. Corporate Incubation Example of internal issue:Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  22. 22. Corporate Incubation  Complaint websites such as www.complaintsboard.com or www.ripoffreport.com  Review websites such as www.yelp.com  Dedicated hate websites  Google AdWords  Social media  Domain name squatting (cybersquatters)Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  23. 23. Corporate Incubation  Complaint websites are websites in which anyone can file a complaint.  They are dangerous because there is no minimum bar before a complaint is published.  Complaint websites also generally have excellent SEO (Search Engine Optimization) and are often higher in search engine rankings than corporate websites.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  24. 24. Corporate Incubation  A Word About SEO:  There were 8.8 billion searches in July 2010. That extrapolates to more than 100 billion searches per year.  Google accounted for 64.2% of all searches – about 5.6 billion (67 billion per year).  Yahoo and Bing! Each has a little less than 14% (which is still more than 14 billion searches each). Source: The Nielsen CompanyCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  25. 25. Corporate Incubation  For instance:Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  26. 26. Corporate IncubationCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  27. 27. Corporate Incubation  Opinion Corp. runs PissedConsumer.com which is a complaints website much like ComplaintsBoard.com and RipOffReport.com.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  28. 28. Corporate Incubation  Pissed consumer would register complaints and set up a dedicated subdomain using the target’s name such as www.targetcompany.pissedconsumer.com.  Pissed Consumer only agrees to alter the negative complaint if target companies pay for “Reputation Management Services.”  Court recently held utilizing the subdomain was not a trademark violation.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  29. 29. Corporate Incubation  Review websites such as Yelp.com.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  30. 30. Corporate IncubationCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  31. 31. Corporate IncubationCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  32. 32. Corporate Incubation  Dedicated hate websites:Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  33. 33. Corporate Incubation  Google Adwords:Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  34. 34. Corporate Incubation  Google Autocomplete:  Now Google has gotten in the editorial game.  Suggestions “pop” up when searching for a term.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  35. 35. Corporate Incubation  Social Media:Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  36. 36. Corporate Incubation  Domain Name Squatting:  Cybersquatters will purchase mis-keyed names, variations on corporate names, or other domain name extensions.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  37. 37. Corporate Incubation The sources of the attacks usually include: An unhappy current/former employee A competitor An extortionist A legitimately unhappy customer/clientCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  38. 38. Corporate Incubation How to push back: For complaint websites, pay the fee or sue. For review websites, respond to reviews. Engage in a dialogue. For dedicated hate websites, try to improve SEO of other friendly websites or unmask the hater if necessary. For AdWords, file a complaint with Google or bring a Trademark suit. For social media – have a closed social media page and train employees how to respond. They are the voice of the company. For domain names, contact the domain name owner, bring an arbitration or bring a lawsuit.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  39. 39. Corporate Incubation  Getting a domain name back:  UDRP Proceeding – Must Prove • The domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; • The registrant does not have any rights or legitimate interests in the domain name; and • The registrant registered the domain name and is using it in “bad faith.”  Lawsuit under the Anticybersquatting Consumer Protection Act.Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  40. 40. Corporate Incubation Engage in Best Practices: Train your employees Register your name at social media websites Register your name for common TLD extensions Register your copyrights and trademarks Monitor Google and other search engines Engage with complaint websitesCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  41. 41. Practical Tips: Immediate Steps Everyone Must Take Things to do before the sun sets today (and keep doing).Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  42. 42. Practical Tips: Immediate Steps Everyone Must Take  Check the claims that are being made – are they accurate;  Monitor compliance by upstream and downstream partners/parties;  Do random Internet searches;  Ensure how claims are framed does not run afoul of the spirit of the FTC regulations;  Handle defamation on the Internet immediately;  Check to make sure IP is being respected;  Have agreements with all partners;  Check rights and responsibilities in all contracts and make cheat sheet bullet list to use on daily basis; and  Check state regulations – there are 50 state AGs!Centre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  43. 43. Questions and ClosingCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800
  44. 44. Contact Information Centre Law Group 1953 Gallows Road, Suite 650 Vienna, Virginia 22182 (703) 288-2800 Website: www.centreinternetlaw.com Blog: www.internetlawforbusinesses.com E-Mail: ecrusius@centrelawgroup.com Tweet! @InternetBizLawCentre Law Group, LLC1953 Gallows Road, Suite 650Vienna, VA 22182(703) 288-2800

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