Hot Issues in Cyberspace: 10 Things You Should Know About Online Advertising
Hot Issues in Cyberspace Law 10 Things You Should Know About Online Advertising Bennet Kelley January 18, 2008
About Us The Internet Law Center is a boutique firm with offices in Santa Monica, California and Washington, D.C. offering innovative legal and policy solutions for its clients. Bennet Kelley is a one of the nation’s leading Internet attorneys, having counseled clients, litigated, testified, lobbied, offered seminars and written commentaries on many of the hottest Internet issues over the past decade. Prior to founding the Internet Law Center, Bennet was Assistant General Counsel, Director of Governmental Affairs & Privacy for ValueClick and Vice President of Legal & Strategic Affairs for Hi-Speed Media. Bennet also is Co-Chair of the Legislative Subcommittee of the California Bars Cyberspace Committee, a regular contributor to the Journal of Internet Law and an award winning columnist.
Online Advertising: The Big Ten 1. It’s Booming 2. Key Word Search Liability 3. The Buzz on Behavioral Targeting 4. WWW≠ Wild, Wild West 5. No “Free” Ride 6. There’s A New Sheriff in Town 7. Online Gambling 8. CAN-SPAM in the Courts 9. Affiliate Networks 10. Going Global
#2: Quickly Surpassing Old Media 2008 Projected Share of US Advertising Spending TV 44.1% MAGAZINES 21.1% Surpass in 11 NEWSPAPERS 17.2% Source: TNS Media Intelligence, Veronas Suhler Stevenson ONLINE 8.0% Surpassed in 07 RADIO 7.0% OUTDOOR Surpassed in 06 2.6% CINEMASurpassed in 97
Merger Mania Putting the aQuantive and DoubleClick acquisitions in context LESS THAN $164.7BB – AOL – Time Warner merger $73.7BB – Exxon-Mobil merger $60.1BB – Vietnam’s 2006 GDP $28.7BB – Valule of NFL franchises $15BB – Facebook valuation $7.4BB – Value of NBA franchises $6.0BB – Microsoft -- aQuantive $5.4BB – Value of NHL franchises $3.2BB – Cisco acquires WebEx $3.1BB – Google -- DoubleClick $2.6BB eBay acquires Skype $2.5BB – Rwanda’s 2006 GDP MORE THAN$1. 65B – Google acquires YouTube$905MM – Antigua’s 2006 GDP
#3: Election Year Promise? Projected 2008 Political Expenditures By Media Format 1.7% Online%Political Ad Spending ($MM) 9 .4$ 80 $73$ 70$ 60 Despite a 251% increase$ 50 from ’04, online expenditures$ 40 2 5.6 % $29 will constitute less than 2% of 59 .3 %$ 30 total political ad dollars$ 20$ 10 $0 2004 2008 TV Direct Mail PR/Events New spapers Online Outdoor
#4: Search Advertising is King Online Ad Rev by Format Q2-07 3% 2%1% 7% Email 8% 40% Political Ad Dollars - 80% Total Online Ad Dollars – 2% That means the political 17% market has yet to discover 98% of online advertising capabilities – especially search. 22% S earch Dis play C las s ified Lead G en R ich M edia S pons ors hip E mail VideoSource: IAB Internet Advertising RevenueReport
“Use in Commerce”For purposes of this Act, a mark shall be deemed to bein use in commerce—(1) on goods when . . . placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale…(2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce…
Is use of Trademark as a Keyword a Use in Commerce?• Majority View – Yes• New York view – not use in commerce since You Are Here trademark not placed on any goods, advertisements or displays
Does Bidding on Competitor’sTrademark Constitute Infringement? Likelihood of confusion among judges
Initial Interest ConfusionUse of another trademark“in a manner calculatedto capture initial consumerattention, even though noactual sale is finallycompleted as a result ofthe confusion.”Brookfield Communications Inc. v. West CoastEntertainment Corp., 174 F.3d 1036 (9th Cir.1999).
Rationale• Improperly Benefits From Goodwill of Trademark• False Detour From Information Super- highway – 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)• Bait and Switch – “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).
Counterpoint• Not a Detour, Merely a Lane Change – Web surfers are accustomed to false starts and are unlikely to be dissuaded when they end up at the wrong site. Chatam Intl v. Bodum, Inc., 157 F.Supp.2d 549, 559 ED PA 2001).• No different than supermarket placing store brand next to branded products. – FragranceNet.com, Inc. v. FragranceX.com, et al. No. 06-CV-2225 (JFB)(ART)(E.D.N.Y., June 12, 2007) • No Liability If Trademark Not• Legally Significant Confusion? Displayed – “The [District] court’s refusal to enter – Keyword advertising is a “use in the ‘initial interest confusion’ thicket is well taken given the unlikelihood of commerce,” but cannot confuse ‘legally significant’ confusion.” consumers if the ultimate search Hasbro Inc. v. Clue Computing, Inc., 232 F. results do not display plaintiff’s 3d 1, 2 (1st Cir. 2000). trademarks. J.G. Wentworth SSC Ltd v. Settlement Funding LLC, No. 06-0597 (E.D. Pa. Jan. 4, 2007).
The Debate• Industry FTC “Recommendation” – BT provides more relevant • Notice content to consumers – Every website where data is – Without BT consumers would collected for behavioral get more --- and less relevant advertising should provide a ads clear, concise, consumer- – Studies show favorable friendly, and prominent response statement that data about consumers activities online is • Boston Globe – 40-111% being collected at the site for increase in click through rates use in providing targeted advertising• Consumer Groups • Choice – Invasion of Privacy – Consumer must have choice – Beginning of Big Brother • Security – Adequate security – Data retained only as long as needed
What about the offline world? Offline BT Reported Data Breaches Q4-07US Loyalty Cards – 1,300 MM 14%• Active Loyalty Cards – 28% Brick & Mortar 537.6 MM E-Commerce Government• Kroger Households – 26% Education 42.0 MM 4% Medical & OtherUS Population – 299.4 MMUS Internet Users – 28% 212.1MMUS Households – 114.4 MM
FTC Act FTC Act: advertising must be truthful and non-deceptive; advertisers must have evidence to back up their claims; and advertisements cannot be unfair. What makes an What makes an advertisement advertisement deceptive? unfair?An ad is deceptive if it contains a statement An ad or business practice is unfair if: - or omits information - that: • it causes or is likely to cause substantial consumer injury which• is likely to mislead consumers acting a consumer could not reasonably avoid; and reasonably under the circumstances; and • it is not outweighed by the benefit to consumers• is "material" - that is, important to a From: FTCs Unfairness Policy Statement consumers decision to buy or use the product.From: FTCs Deception Policy Statement
DotCom Disclosure Guidelines• The same consumer protection laws that apply to commercial activities in other media apply online. The FTC Act’s prohibition on "unfair or deceptive acts or practices" encompasses Internet advertising, marketing and sales.• Disclosures that are required to prevent an ad from being misleading, to ensure that consumers receive material information about the terms of a transaction or to further public policy goals, must be clear and conspicuous.
The Three P’s for Disclaimers• Placement• Prominence• Proximity
Other FTC Advertising Guides• Dot Com Disclosures: • FTC Guide Information About Online Concerning the Use of Advertising Endorsements and Testimonials• Advertising and Marketing on the Internet: The Rules of the Road • FTC Guides for the Use of Environmental• FTC Policy Statement Market Claims (Green Regarding Advertising Guides) Substantiation• FTC Guides Against Deceptive • Enforcement Policy Pricing Statement on Food Advertising• Dietary Supplements: An Advertising Guide for Industry
Price Comparisons• Savings must be based on bona fide price• MSRP comparisons only where that is price regularly charged in marketplace. Example• Retailer Doe advertises Brand X pen as having ``Comparable Value $15.00. Unless a reasonable number of the principal outlets in the area are offering Brand Y, an essentially similar pen, for that price, this advertisement would be deceptive
The Best Things in Life are Free**Except for everything really cool that you have to pay for. Participation or human sacrifice may be required. Void in Bosnia, Burkina Fasoand any country where Madonna adopted a kid. To claim your prize, you must tap your head and rub your belly while reciting the alphabetbackwards.
FTC Guidelines on Use of the Word “Free”(a)(2) . . . the offer of ``Free (c) . . . When making ``Free or similar offersmerchandise . . . must be made with all the terms, conditions andextreme care so as to avoid any obligations upon which receipt andpossibility that consumers will be retention of the ``Free item aremisled or deceived. . . . contingent should be set forth clearly and conspicuously at the outset of theb) . . . . when the purchaser is told offer so as to leave no reasonablethat an article is ``Free to him if probability that the terms of the offeranother article is purchased, the might be misunderstood. Statedword ``Free indicates that he is differently, all of the terms, conditionspaying nothing for that article and and obligations should appear in closeno more than the regular price for conjunction with the offer of ``Freethe other. Thus, a purchaser has a merchandise or service. For example,right to believe that the merchant will disclosure of the terms of the offer setnot directly and immediately recover, forth in a footnote of an advertisement toin whole or in part, the cost of the free which reference is made by an asteriskmerchandise or service by marking up or other symbol placed next to the offer,the price of the article which must be is not regarded as making disclosure atpurchased, by the substitution of the outset.inferior merchandise or service, orotherwise. Use “Extreme Care”. . .
Adteractive Consent Decree MUST DISCLOSE ü In the same color, font, and size, In any email and online advertisement, and on any landing page associated ü within close proximity touch representation with such email or online ü that a purchase is required, or that advertisement, that contains purchases are required, to obtain such gift or award, when such is the case;• any direct or implied representation ü A list of the monetary obligations a• made by Defendant, or made by any consumer is likely to incur to obtain the authorized agent on behalf of advertised gift or award; Defendant ü A list of any non-monetary obligations a• that a gift or award is free consumer is likely to incur to obtain the advertised gift or award, such as having toTHEN . . . apply and qualify for credit cards or an automobile loan.
State AG Cybercrimes Units The Majors Go ahead,• New York make my day. – Continues to be activist post-Spitzer under Andrew Cuomo• Texas – 80 Arrests First Three Years• Washington – Five spyware lawsuits since 2005 New Kids on the Block• Florida – Established in 2007. Investigating 10 companies over “free” promotions• Kansas – Launched in September 2007
Online GamblingFederal Wire Act - prohibits:• transmission in interstate or foreign commerce of bets or wagers• transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers• information assisting in the placement of bets or wagers.Illegal Gambling Business Act• bars gambling activity in violation of state or municipal law• online gambling violates various state lawsUnlawful Internet GamblingEnforcement Act of 2006 – Prohibits accepting funds in connection with Internet gambling – Exempts Fantasy Sports Leagues
Advertiser Liability• 2003 DOJ Letter to NAB: individuals that accept and run • Google, Microsoft & Yahoo: [online gambling ads] may be aiding and abetting these illegal $31.5 million settlement activities with DOJ “DotNet” Sites • Sporting News: $7.2MM settlement with DOJ• There can be no web links from an online free-to-play poker website (i.e. “poker.nets”) to a online • Discovery: Over $5MM pay-to-play poker website (i.e. Seized by US Marshalls “poker.com”) website• There must be an on-screen • Esquire: Search warrant disclaimer on the home page of the after running BoDog ads online free-to-play poker website (i.e. “poker.nets”) that states that this site is purely educational."
The Mouse That Roared or Pirate of the Caribbean? Antigua v. United States Congressional Action (WTO) • HR 2046 Internet Gambling• Held that to the extent online Regulation and gambling was allowed within the Enforcement Act of 2007 U.S. (some states permit online gambling for horse racing), – would establish a federal foreign companies were entitled license for online gambling to equal access to this market but still permit states to prohibit online gambling in• Antigua awarded $21MM/year their jurisdiction; – May suspend intellectual property commitments to recoup • HR 2140 Internet Gambling• European Union, Canada, Regulation and Japan, Australia, India, Costa Enforcement Act of 2007 Rica and Macau also submitted damage claims – Directs National Academy – US granted trade concessions to of Sciences to Study settle claims with EU, Canada wisdom of UIGEA. and Japan but does not bar new case pending with EU
(Not so) Subliminal Message No. 1 This is so much fun.
CAN-SPAM Principal Requirements From line must identify initiator Subject line must not be deceptive. Adult Messages must provide notice. UCE must be identified as“advertisement” Requires Working Opt-Out Mechanism for Advertiser Postal Address for Advertiser
2007 Cases • From Lines• Commercial email – includes – Not deceptive to use multiple emails as part of unionization domains or non-corporate campaign. Aitken v. address if it can be looked up Communications Workers of America, using Who Is. Vonage” is 496 F. Supp.2d 653 (E.D. Va. July simply not a 12, 2007) misrepresentation”. Kleffman v. Vonage Holding Corp.,• IASP Private Right of Action Case No. CV 07-2406GAFJWJX (C.D. – Must demonstrate substantial Cal. May 23, 2007); Gordon v. injury. “permitting private Virtumundo, Inc., Case No. 06-0204- JCC (W.D. Wash. May 15, 2007) parties with no harm to invoke CAM-SPAM to collect millions of dollars surely is not what – Except where domain itself is Congress intended when it misleading. U.S v. Kilbride, 507 F. crafted this “limited” private Supp. 2nd 1051 (D. AZ. Aug. 24, 2007) right of action.” Gordon v. Virtumundo, Inc., No. 06-0204- • Pleading JCC (W.D. Wash. May 15, 2007) – Need not plead with particularity but may be appropriate to move• No Strict Liability for actions of for more definite statement. Affiliates. US v. Cyberheat, 2007 Gordon v. Ascentive LCC, No. U.S. Dist. LEXIS 15448 (N.D. CV-05-5079-FVS. (E.D. Wash. June 19, 2007) Ariz. 2007)
Protect Yourself• Have clear policies for affiliates or affiliate networks• Police these policies• Use monitoring services and seed lists to track activities of third party marketers• Set up blacklists for rogue affiliates
A World Wide Opportunity • 62.6% of US retailers engaged in international e-commerce • 26.4% of US retailer’s have foreign sales that 1958 are more than ten ACE percent of total online CYBER SP sales • 38.1% of US Retailers are expecting foreign sales growth exceeding ten percentSource: Internet Retailer Survey 2006
Going Global Checklistü Can you export it?ü Can you sell there?ü How do you market it?ü What terms can you sell under?ü Privacy Compliance
Can you sell it from the US? Export Control 101• Treasury Department. Office of Foreign Assets Control • State Departments Office of – Restricts trade with countries subject Defense Trade Controls to embargoes and sanctions (e.g., – Regulates the export of "defense North Korea) pursuant to Trading with articles" and "defense services“ which the Enemy Act, 50 U.S.C. App. 5 and Includes encryption systems and the International Emergency software with the capability of Economic Powers Act, 50 U.S.C. 1701 maintaining secrecy or confidentiality et seq. of information or information systems pursuant to Arms Export Control Act, – Restricted countries listed on List of 22 U.S.C. 2778, and the International Specially Designated Nationals and Traffic in Arms Regulations, 22 C.F.R. Blocked Persons Parts 120-130 – Restricted items listed on U.S. Munitions List• Commerce Departments Bureau of Export Administration – Controls the export of commercial and • Company and individuals may "dual use" products including be subject to civil and software and technical data pursuant criminal penalties – including to Export Administration Act, 50 U.S.C. App. 2401 et seq and Export export denial order Administration Act Regulations 15 C.F.R. Parts 700-799 – Restricted items listed on Commerce Control List
Axis of . . . ? Treasury Embargo List Commerce Country Chart• Cuba (Partial)• Cote dIvoire • Argentina• Iran • Austria• Iraq • Brazil• Libya • Chile• North Korea • Finland• Sudan • India• Liberia • Ireland• Zimbabwe • Israel• Sierra Leon • Kazakhstan• Angola • Mexico• Syria • South Korea• Burma • Sweden • Switzerland • Vatican City
Doesn’t Anyone Here Understand American?• Cannot assume same rules apply• Germany – Comparative Advertising Prohibited• France – Bidding on competitors trademark constitutes trademark infringement and unfair competition• EU, Australia – EU, Australia have strict opt-in spam laws, while the US CAN-SPAM Act follows an opt-out approach – Stricter rules on data collection and retention United Nations Photo
(Not so) Subliminal Message No. 2 PATRIOTS WIN 4TH SUPER BOWL 17 19 18 GO PATS!
Resources• It’s Booming – IAB Revenue Reports• Key Word Search Liability • Technology & Marketing Law Blog• The Buzz on Behavioral Targeting • FTC Behavioral Targeting Page• No “Free” Ride • FTC Adteractive Settlement• WWW≠ Wild, Wild West • FTC Guidance Documents• There’s A New Sheriff in Town • Florida AG Press Report• Online Gambling • Article on Advertising Internet Gambling• CAN-SPAM in the Courts • PowerPoint Presentation on CAN-SPAM at 4• Affiliate Networks • DMA Guidelines• Going Global • Department of Commerce Export Control Basics