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Disappointed in Super Bowl Bid, Giants Seek to Score on the Legal Field

This past November, the New York Giants and the NFL filed suit against Clear Channel Communications alleging breach of contract, trademark infringement, unfair competition and fraud. Apparently, a number of Clear Channel websites advertised a promotion that would enable listeners to win tickets to Giants’ football games. Both the Giants and the NFL allege that the stations were not authorized to use tickets as prizes in connection with any such promotion, and since the printed text on the back of the tickets specifically indicates tickets may not be used for advertising, promotion or other commercial purposes without the written consent of the NFL and the Giants, they sued. The complaint alleges that these promotions were unauthorized and (because apparently this was not the first time promotions like this were attempted) were a “willful and bad-faith” attempt to trade on the Giants’ and NFL’s famous trademarks and their goodwill. That, the complaint says, is likely to confuse consumers into believing that these promotions were sponsored or endorsed—authorized. The NFL and the Giants are seeking to enjoin the websites (and presumably any other medium) from using these tickets for promotional purposes or using their trademarks at all.

We will let you know as the two-minute warning approaches.

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Product Placement–Time-Shifting Causes Ad Shifting

Product placement is an advertising activity which has grown for decades in the motion picture industry, going virtually unnoticed by legislators. When television began aggressively using product placement for advertising, concerns (and regulation) began increasing. Unlike motion pictures, television is legally required to distinguish between advertising and programming.

First, “infomercials” that looked and felt like programming were targeted by regulators, because they believed the infomercials were deceiving. After a number of cases, the industry developed and implemented disclosures to allay fears of regulators at the FCC and the FTC. Enter reality TV. Suddenly programs were using affiliations with sponsors as part of the content or story line, prompting fresh concerns. As cable television, pay-per-view and video-on-demand services, time-shifting and digital recording devices, and fast-forward buttons have become commonplace, advertisers have struggled to capture viewers’ attention with product placement. In 2004, product placement advertising rose to about $4.25 billion.

Why the fuss? Because product placement is advertising, subject to the same laws and regulations that govern commercials. On television, both the FTC and the FCC can regulate advertising, mandate disclosures and determine if something is deceptive or misleading. Where the line between harmless product placement and deceptive practices is drawn is increasingly blurred.

Whether a product placement is deceptive or misleading—sufficient to make it actionable under Section 5 of the FTC Act—depends on whether there is some representation or omission likely to mislead the consumer. The depiction of the product must be viewed from the perspective of a reasonable consumer in the situation and the representation or omission must be “material.” In other words, if the consumer knew or was told the truth, the consumer’s behavior would likely be affected in connection with the product.

The FCC also regulates deceptive product placements: viewers may not realize they are advertisements, hence the FCC requires disclosure. Failure to properly disclose the commercial nature of a product placement could amount to “payola” and would be illegal. Again, where the line is drawn between harmless inclusion of products in programming versus commercialization which misleads consumers is hardly clear.

The FTC and FCC regulations puts advertisers between a rock and a hard place. The FCC requires disclosure for a paid placement—which makes the product placement commercial speech. If it is commercial speech, is the placement then also subject to FTC disclosure rules? What if the advertiser has no control over the creative content and no approval over scripts or editing or even the extent of the product placement itself? Under those circumstances, how could the advertiser be responsible for the depiction of its product; the director, producer, actors, even the editorial staff, have ultimate creative control of what shows up on the screen. The advertiser could pay a substantial sum of money to watch its product wind up on the cutting room floor in post-production. Ouch.

Continue reading “Product Placement–Time-Shifting Causes Ad Shifting”

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Why-Fi??

In New York’s Westchester County, legislators are proposing a new law to compel commercial businesses (including home offices) that have an open wireless access point to have the “network gateway server” fitted with a firewall to block intrusions. Under the proposed legislation, not only may “public Internet access” not be provided without a gateway server equipped with a firewall, but any business or home office that stores personal information as well must install a server with a firewall—even if the wireless connection is encrypted and not open to the public. Publicly available Internet access sites would have to post a sign: “You are accessing a network which has been secured with firewall protection. Since such protection does not guarantee the security of your personal information, use discretion.” Come on.

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Upcoming Presentations

On January 25 and 26, 2006, the Association of National Advertisers hosts its second annual Advertising Law and Business Affairs Conference in New York City. For information contact Doug Wood. On January 31, Joe Rosenbaum will be speaking about “The New World of Branded Entertainment Transactions” at the New Technologies and New Media in Advertising Law Conference hosted by Law Seminars International. Information can be obtained from Joe.

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Ro’bots’ Are So Yesterday–It’s Just ‘Bots’ Now

Want some scary statistics for Halloween? In the first six months of 2005, the average number of “phishing” e-mails went from about 3 million to more than 5½ million, according to the Symantec, distributor and licensor, among other things, of firewall and virus protection software. Phishing, in case you’ve missed the news, is a scam which uses e-mail to spoof legitimate businesses such as banks and airlines, and attempts to entice you to enter personal data which can then be used by criminals. “Update your account” or “Your Security May Have Been Compromised and We Need You to Verify Your Password” are typical messages, often accompanied by logos and names that appear to be all too real.

Symantec also discovered 1,862 new software vulnerabilities, over the six month period—almost all moderate to high security threats and 60 percent were in Web-based applications. Symantec also found that the average number of denial-of-service attacks jumped from 119 to 927 a day during the first half of 2005. Why the increase? Personal computers are being overwhelmed with “bots”—penetrating vulnerabilities in personal computer software that allow the hackers—online criminals—to remotely control home computers. Not convinced? By monitoring customers and their networks the numbers of active bots more than doubled from 4,348 to 10,352 bot computers. The SANS Internet Storm Center, a not-for-profit organization that tracks hacking trends, detects an average of 260,000 bots each day that are out there looking for computers that are vulnerable to attack. No longer limited to “denial of service” attacks by triggering junk data to attack—and ultimately overwhelm—a legitimate website, these bots now are beginning to be used to generate SPAM and malicious code.

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100% Legal = 100% Deceptive

What if you offer a tutorial service that teaches how to use peer-to-peer file-sharing programs and refers members to P2P networks but doesn’t actually license file-sharing programs, and doesn’t operate a file-sharing network itself? Sounds like it would be tough to prove copyright infringement—the Grokster case notwithstanding.

But what if you advertise that by becoming a member, subscribing and paying a fee, your P2P file-sharing is legal. “PEOPLE ARE NOT GETTING SUED FOR USING OUR SOFTWARE. YES! IT IS 100% LEGAL,” or “Rest assured that File-Sharing is 100% legal.” What if customers are deceived into thinking that by becoming a member, P2P file-sharing is legal? Remember, when anyone uses a P2P file-sharing program to download copyrighted material, or to make that material available to others without the copyright owner’s permission, it’s copyright infringement. Well the FTC has charged Cashier Myricks Jr., doing business as MP3downloadcity.com, with deceptive advertising by falsely claiming that membership in the service makes P2P file-sharing legal; and acting on the FTC’s action, a U.S. District Court judge has stopped the deceptive ads. The FTC is seeking to make the ban permanent.

Want to know more? The FTC has published “P2P File Sharing: Evaluating the Risks.” Oh, and you should also probably call Rimon…after all, we know advertising, marketing and promotion like nobody else.

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KISS Technology–Don’t Just Keep It Simple, Keep It Really Simple

Did you think you just caught up to the clever marketing professionals that use search engines, click-throughs and product placement on reality TV or interactive gaming to stimulate your buying juices. Just hearing about “buzz” of viral marketing. Talk about being behind the times. A relatively new technology known as RSS (Really Simple Syndication—probably named by the same people who gave us KISS—Keep It Simple, Stupid) is beginning to attract some clever marketing professionals to the web. While the technology is in its relative infancy (about five or so years old) in Internet time, adolescence—and therefore a bit of rebellion and wild times—are just ahead. RSS feeds allow individuals to aggregate information updates from web sites and blogs so they can review headlines and often a synopsis of them on a single site. You might know these programs as “news readers” or aggregators, because news and media companies already use RSS feeds to distribute summaries for their readers. Why the excitement? Well, you already know that “per-click” advertising allows advertisers to match spending with the numbers of consumers that are attracted to the advertisement—to some extent, a real-time metric of the effectiveness of any particular marketing campaign on the Internet.

What if you could more effectively target your advertising to a tailor-made-market–consumers who have expressed an interest in particular subjects. Imagine putting advertising for cameras onto an RSS web feed from a camera or lens manufacturer’s site. What if you use RSS technology to keep up to date on the latest entries in the automotive marketplace—and an advertiser puts auto advertising on the feeds. Not only is RSS feed advertising cheaper, but marketers can also target precisely those consumers who may be predisposed—or have expressed an interest—in the market for those products or services!

While RSS technology is still to be refined, consumers who are overwhelmed with the volume of data floating around the Internet have turned to more refined search engines and tools which help them self-select what they do and do not see. RSS technology is a natural outgrowth of that need, and as programs become more user-friendly, the marketing community is beginning to take notice. Did you really think you could rest easy having mastered ad-ware, spy ware, phishing, SPAM, cookies and banners, and such arcane terms that hearken back to the Jurassic age? The times they are always a’ changing. Keep an eye out for RSS—it’s coming to a news feed near you.

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Telecommuting Can Be Taxing

A Tennessee employee worked for a Tennessee company in Tennessee and all was right with the world. But then the company dissolved, and the individual was hired by a client of his former company—the client is a New York company. Although he traveled to New York on business (and dutifully reported the 25 percent of his time he spent in New York), the rest of his time he earned his living from Tennessee, working by computer and telephone. The individual paid the New York taxing authority (and never disputed) the pro rata portion of his income for the time he spent in New York, but the remainder of his work was done in Tennessee and not (so he thought) subject to New York tax.

A few months ago, a divided Court of Appeals in New York ruled that the 25 percent connection to New York supported the argument that this “minimal connection” allows New York to tax everything the taxpayer earns because it is earned from a New York company! “Foul,” cries the dissent—what about the secretary working in the Boston office of a New York-based law firm? A sales manager for a New York company working in California? This was a very close decision (4–3) but the court ruled that tax was payable to New York on 100 percent of the income earned from the New York company.

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Would You Like Fries With That Game Card?

A woman buying french fries at a McDonald’s drive-through window received a game card which she thought was worth a million dollars. However, when she submitted the card to the McDonald’s redemption center, security codes revealed the card only entitled her to a relatively low dollar amount as a prize winner. Didn’t win. No problem—file a lawsuit: simply allege McDonald’s induced her to purchase the food item knowing that crooks were afoot trying to steal prize-winning game cards. That, she alleged, gave her worse odds to win the million dollars than those advertised. Therefore, she should be declared a winner of $1 million…are you actually following this logic?

But there is a happy (and, fortunately, rational) ending to this story. McDonald’s actually had “official rules” for its promotion. Those rules, among other things, had an arbitration clause which, if enforceable, would preclude her from bringing the lawsuit into court. So McDonald’s moved to dismiss the lawsuit. In addition to upholding the enforceability of the arbitration clause, this past August the U.S. Court of Appeals (7th Circuit) dismissed the woman’s argument that she could not be bound by a contract (the “official rules”) that she had never read, having gone through the drive-through window. The rules were posted near the food counter, the rules were on the reverse side of tray liners inside the restaurant, and were also posted near the drive-through window. Even the french fry containers which had the game cards attached to them mentioned that Official Rules governed participation in the game.

She was alerted that there were Official Rules, she had ample opportunity to read the Official Rules, the Official Rules were openly and conspicuously available for inspection, and it would be “unreasonable and unworkable” to require that each customer be afforded a personal reading of a lengthy set of game rules, and require each one read and then sign an agreement to be bound by their terms. Put that in your sesame seed bun for starters. A valid contract existed (and the customer is bound by the Official Rules—including the arbitration clause) because a contract does not have to be actually read to be enforceable. Here, the consumer knew and had every reason to know there were detailed rules that governed the promotion. The presence of Official Rules was clearly part of the game card promotion. The Official Rules were available and easily obtainable for inspection and review. To create a valid contract, it is enough that the Official Rules were identified to her as part of the contest and that she had an opportunity to read them.

Promotions such as sweepstakes and contests are regulated. States often have detailed regulations—some general and some targeted at categories of promotion (e.g., retail, online), others at particular industries, some relating to the target audience (e.g., children, senior citizens, cause-related charitable promotions), and yet others related to prizes (e.g., travel prizes, motor vehicles). There are regulations requiring registration and bonding in a few states (New York, Rhode Island and Florida in some circumstances), prize notification and disclosure statutes, and a variety of laws, regulations and judicial pronouncements on differentiating promotions involving chance versus those that involve skill and those that combine both—in stores, at county fairs and online. But by making sure you stay within the boundaries of the law and by ensuring your “Official Rules” are crafted and drafted properly, you can run successful promotions and withstand challenges like the one brought by our french fry purchaser in this case. Need help, call Rimon. Nobody does it better!

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File-Swapping Down Under Gets the Boot

A federal court in Sydney, Australia has ruled that Kazaa, a popular Internet file-swapping network, infringed copyrights—a ruling that reinforces the recent U.S. Supreme Court decision in MGM v. Grokster that recently held that those who encourage the theft of copyrighted music, films and other media can also be held liable. The ruling in Australia requires Kazaa to modify its programs within two months to include technology that will exclude or filter out copyrighted content. For those avid readers of Useless But Compelling Facts, it may interest you to know that Kazaa’s official business domicile is in Vanuatu, a remote Pacific Island. Why would they be located there? Perhaps time-sharing on an idyllic beach in the South Pacific is in the cards. Someone stealing your content? Infringing your copyright? Downloading music or films without authorization? Rimon can help—we have intellectual property lawyers and litigators, Internet and e-Commerce lawyers, and technology litigators. Let us worry about protecting your websites, your proprietary rights and your interests.