The document summarizes best practices for advertisers and affiliates based on perspectives from regulators, internet service providers, and the advertising industry. It discusses avoiding liability for affiliates' wrongful acts, advertising content regulations from agencies like the FTC, and ISP enforcement strategies against issues like spam, viruses, and phishing. Key topics include having proper agreements with affiliates, ensuring advertising claims can be substantiated, following rules around using terms like "free", and addressing privacy, data security, and legal content concerns to avoid problems with regulators.

1. Best Practices for Advertisers and Affiliates A View from the Regulators, ISPs, and Industry Steven Richter President and General Counsel, Media Breakaway, LLC Eileen Harrington Deputy Director, FTC's Bureau of Consumer Protection Bennet Kelley Assistant General Counsel, ValueClick, Inc. Aaron Kornblum Sr. Attorney, Worldwide Sales Group, Microsoft Corp. Pete Wellborn Attorney, Wellborn & Wallace, LLC

2. PART ONE AVOIDING VICARIOUS LIABILITY FOR THE WRONGFUL ACTS OF YOUR AFFILIATE Pete Wellborn Attorney-at-Law [email_address] WELLBORN & WALLACE, LLC Attorneys-at-Law

3. AFFILIATE DRIVES TRAFFIC/SALES TO MERCHANT SITE AFFILIATE PROGRAMS 101

4. WHEN IS LIABLE FOR ? AFFILIATE PROGRAMS 101

5. LAW 101 Respondeat Superior (Employer liability for employee) Q: Is the Affiliate an “employee” ? A: Control Test: Time & Manner ALMOST CERTAINLY NOT

6. LAW 101 Independent Contractors Principal liable for contractor acts only under limited circumstances

7. LAW 101 Liability For Contractors’ Acts (Affiliates’)  Participation  Ratification/Adoption  Willful Ignorance  Negligent Hiring

8. What will your answer be when you receive a demand letter or lawsuit seeking to hold you responsible for the misconduct of your affiliate?

9. “ NO PROBLEM!” (. . . if you follow this advice . . .)

10. WHO  WHAT  WHERE WHO WHOM ARE YOU DEALING WITH? (WHO IS YOUR AFFILIATE?)

11. WHO  WHAT  WHERE WHAT WHAT TERMS AND GUARANTEES WILL YOU REQUIRE FROM YOUR AFFILIATE?  Eligibility  Copyright Acknowledgments  Compliance (CAN-SPAM)  Compliance (ISP AUP/CEP)  Sub-Affiliate Voucher  Indemnify, Defend & Hold Harmless  Consent to Release Info  Boilerplate

12. WHO  WHAT  WHERE WHERE WRITTEN AGREEMENT EXECUTED BY BOTH PARTIES

13. WHO  WHAT  WHERE Seed suppression lists

14. Bennet Kelley Assistant General Counsel Director of Govt’l Affairs & Privacy ValueClick, Inc. Westlake Village, CA [email_address] PART TWO ADVERTISING BEST PRACTICES Steven Richter President and General Counsel Media Breakaway, LLC Westminister, CO [email_address]

15. These materials have been prepared for informational purposes only and are not legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship. Internet subscribers, listeners and online readers should not act upon this information without seeking professional counsel. The information contained in this presentation and/or web site is provided only as general information which may or may not reflect the most current legal developments. This information is not provided in the course of an attorney-client relationship and is not intended to constitute legal advice or to substitute for obtaining legal advice from an attorney licensed in your state. This web site is not intended to be advertising and neither Media Breakaway, LLC nor its officers, members, employees, or agents wish to represent anyone desiring representation. Privacy Concerns & Advertising Content Regulations Three letters you want to avoid : FTC, FDA, DOJ, FBI DISCUSSION TOPICS

16. PRIVACY CONCERNS Hot, Hot, Hot Topic for FTC, DOJ, AND FBI Have your Privacy Policy updated at least quarterly. Make sure counsel considers Federal and state laws. Collegenet v. XAP Corporation (Federal Case) Disclaimer to Privacy Policy through a pop up may not work

17. FTC Privacy Enforcement Accuracy & Fairness “ In our investigations, we look at the overall security system that the firm has implemented and its reasonableness in light of the size and nature of the business, the nature of the information it maintains, the security tools that are available, and the security risks it faces. I emphasize that the standard is ‘ reasonableness,’ not perfection . . . . [T]his is not a game of ‘ cybersecurity gotcha ’ – we are not trying to catch companies with their digital pants down; rather, we are trying to encourage companies to put their data security defenses up.” – FTC Chairman Deborah Platt Majoras (May 10, 2006)

18. The Wares Adware Software bundled with ad service software Notice & consent issues Spyware Gathers information on user without knowledge Email addresses Passwords Credit Card Information Keystroke Logging Alters default settings Malware Software designed specifically to damage or disrupt a system, such as a virus or a Trojan horse. Scareware “ Faux Spyware”, i.e., benign applications falsely labeled as Spyware Warez Term used by software "pirates" to describe software that has been stripped of its copy-protection and made available on the Internet for downloading. .

19. Spyware 15 States with Spyware Laws California law is model Prohibits deceptive downloading and/or collection of information Prohibits taking over third party computer or altering default settings No Federal Law 108th & 109 th Congress: Passed House & Senate Commerce Committee No Senate Vote FTC Position – already have sufficient authority Enforcement actions against Digital Enterprises; Seismic Entertainment Productions; Max Theater; TrustSoft; Advertising.com; Odysseus Marketing; Enternet Media

20. Enforcement

21. The FTC Act Under the FTC Act: advertising must be truthful and non-deceptive; advertisers must have evidence to back up their claims; and advertisements cannot be unfair. From: FTC Frequently Asked Advertising Questions: A Guide for Small Business Rule of Thumb: Would your grandmother understand the ad? You don’t want to mess with me

22. What makes an advertisement deceptive or unfair? What makes an advertisement deceptive? According to the FTC's Deception Policy Statement, an ad is deceptive if it contains a statement - or omits information - that: is likely to mislead consumers acting reasonably under the circumstances; and is "material" - that is, important to a consumer's decision to buy or use the product. What makes an advertisement unfair? According to the Federal Trade Commission Act and the FTC's Unfairness Policy Statement, an ad or business practice is unfair if: it causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid; and it is not outweighed by the benefit to consumers

23. ADVERTISING CONTENT (1) SIZE Terms, conditions and obligations of the offer must be printed in a type size at least half as large as the word "free” AND (2) PROXIMITY All of the terms, conditions and obligations should appear in close proximity with the offer of "free" goods or services; AND Use of the word “FREE” EXAMPLE One Ohio lawyer (also a Plaintiff in several lawsuits) believes that Ohio law requires that, when the word "FREE" is used: (3) NO ASTERISK Disclosure of offer terms set forth in a footnote of an advertisement, to which reference is made by an asterisk or other symbol placed next to the offer, does not constitute “disclosure at the outset.”

24. ADVERTISING CONTENT Disclaiming “FREE” All terms not required to be included. FTC has held that an advertisement shall have a clear and prominent statement “directing consumers to a location where the disclosure required herein will be available (e.g., "For conditions and membership details," followed by: "load up trial software" or "see registration process" or words of similar effect.)” Ohio statute gives “great weight” to FTC rulings In re American Online , 125 F.T.C. 403 (1998); Ohio R.C. § 1345.05(B) (2)

25. Michigan, Utah and more to come. What is prohibited: if it is otherwise a crime for the minor to purchase, view, possess, participate in or otherwise receive the product or service. No alcohol, tobacco, firearms, adult content (including sex for hire), gambling, illegal or prescription drugs. ADVERTISING CONTENT

26. ADVERTISING CONTENT Example: Online Gambling 2003 DOJ Letter to NAB: individuals that accept and run [online gambling ads] may be aiding and abetting these illegal activities. Sporting News: $7.2MM settlement with DOJ Discovery: Over $5MM Seized by US Marshalls Esquire: Search warrant after running BoDog ads

27. FTC Rules and Acts http://www.ftc.gov/bcp/conline/edcams/spam/rules.htm FTC Advertising on the Internet: Rules of the Road: http://www.ftc.gov/bcp/conline/pubs/buspubs/ruleroad.pdf ADVERTISING CONTENT The government is here to help you

28. When Using Hyperlinks to Lead to Disclosures: ADVERTISING CONTENT FTC Dot Com Disclosures http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.pdf Make the link obvious. • OBVIOUS • LABEL • STYLE • LOCATION • STRAIGHT LINK • EFFECTIVENESS • INSTRUCTION • NOT SUBTLE • BANNER

29. ADVERTISING CONTENT When Using Hyperlinks to Lead to Disclosures: FTC Dot Com Disclosures http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.pdf Label the hyperlink appropriately to convey the importance, nature, and relevance of the linked-to information. • OBVIOUS • LABEL • STYLE • LOCATION • STRAIGHT LINK • EFFECTIVENESS • INSTRUCTION • NOT SUBTLE • BANNER

30. ADVERTISING CONTENT When Using Hyperlinks to Lead to Disclosures: FTC Dot Com Disclosures http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.pdf Use hyperlink styles consistently so that consumers know when a link is available. (“Don’t hide the link.”) • OBVIOUS • LABEL • STYLE • LOCATION • STRAIGHT LINK • EFFECTIVENESS • INSTRUCTION • NOT SUBTLE • BANNER

31. ADVERTISING CONTENT When Using Hyperlinks to Lead to Disclosures: FTC Dot Com Disclosures http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.pdf Place the hyperlink near relevant information and make it noticeable. • OBVIOUS • LABEL • STYLE • LOCATION • STRAIGHT LINK • EFFECTIVENESS • INSTRUCTION • NOT SUBTLE • BANNER LINK INFO

32. ADVERTISING CONTENT When Using Hyperlinks to Lead to Disclosures: FTC Dot Com Disclosures http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.pdf Take consumers directly to the disclosure on the click-through page. • OBVIOUS • LABEL • STYLE • LOCATION • STRAIGHT LINK • EFFECTIVENESS • INSTRUCTION • NOT SUBTLE • BANNER

33. ADVERTISING CONTENT When Using Hyperlinks to Lead to Disclosures: FTC Dot Com Disclosures http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.pdf Assess the effectiveness of the hyperlink by monitoring click-through rates and make changes accordingly. Be prepared to show the link is effective. • OBVIOUS • LABEL • STYLE • LOCATION • STRAIGHT LINK • EFFECTIVENESS • INSTRUCTION • NOT SUBTLE • BANNER

34. ADVERTISING CONTENT When Using Hyperlinks to Lead to Disclosures: FTC Dot Com Disclosures http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.pdf An explicit instruction like "see below for important information on diamond weights" will alert consumers to scroll and look for the information. The text prompt should be tied to the disclosure that it refers to. General or vague statements, such as " see below for details ," provide no indication about the subject matter or importance of the information that consumers will find and are not adequate cues . • OBVIOUS • LABEL • STYLE • LOCATION • STRAIGHT LINK • EFFECTIVENESS • INSTRUCTION • NOT SUBTLE • BANNER

35. ADVERTISING CONTENT When Using Hyperlinks to Lead to Disclosures: FTC Dot Com Disclosures http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.pdf Don’t be subtle. Asterisks or other symbols by themselves may not be effective. Typically, they provide no clues about why the claim is qualified or the nature of the disclosure. • OBVIOUS • LABEL • STYLE • LOCATION • STRAIGHT LINK • EFFECTIVENESS • INSTRUCTION • NOT SUBTLE • BANNER

36. ADVERTISING CONTENT When Using Hyperlinks to Lead to Disclosures: FTC Dot Com Disclosures http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.pdf Disclose required information in the banner itself or clearly and conspicuously on the Web site it links to . Advertisers should consider how important the information is to prevent deception. • OBVIOUS • LABEL • STYLE • LOCATION • STRAIGHT LINK • EFFECTIVENESS • INSTRUCTION • NOT SUBTLE • BANNER Important Stuff Goes Here

37. FTC Guide Concerning Use of the Word “FREE'' http://www.ftc.gov/bcp/guides/free.htm ADVERTISING CONTENT At least 30 days should elapse before another such offer is promoted in the same trade area. No more than three such offers should be made in the same area in any 12-month period. A single size of a product or a single kind of service should not be advertised with a “Free'' offer in a trade area for more than 6 months in any 12-month period.

38. CONCLUSION Never underestimate the value of giving your competition a bad client. Quarterly attorney review of Privacy Policy. Strict compliance of Privacy Policy. Awareness of current Federal and State law and regulations. The fact that “the competition is doing it” does not make it right.

39. PART THREE THOUGHTS FROM AN ISP Pete Wellborn Attorney-at-Law [email_address] Aaron Kornblum Sr. Attorney, Worldwide Sales Group, Microsoft Corp.

40. Secure platforms, products and services strengthened by safety innovations, user guidance and industry cooperation efforts to help keep customers safe Excellence in fundamentals across platforms, products and services Other security-enabling innovation Educational content and tools Authoritative incident response Safety in user experience Ecosystem Awareness and education Collaboration and partnership Public policy and enforcement Microsoft’s Online Safety Strategy

41. ISP Enforcement Strategies Why? How? Where? Who? What? @ Microsoft Malicious Code: Viruses and Botnets Phishing/ID Theft Spam Domain Defense: cybersquatting Spyware

42. QUESTIONS?