Happy New Year Wishes for 2010

Wishing you health, happiness, prosperity and peace in 2010

In a tradition that started almost 4,000 years ago by the ancient Babylonians – although they celebrated the new year upon seeing the first new moon after the vernal equinox – please enjoy a very happy, safe and joyous new year celebration.  Those of you who look forward to Useless But Compelling Facts can read more about the history of new year celebrations, or how the new year’s festivities, now televised around the world, began in New York’s Times Square.

New Year's Greetings
 
This is the first year we have published in a blog format, and with your feedback – mostly positive and always constructive – and more than 17,000 visitors in slightly less than 11 months, I am grateful and appreciative for your support.  Thank you for reading Legal Bytes.

–  Joe Rosenbaum

Puerto Rico Revises Regulations: Good Odds for More Promotions

This post was contributed by John Feldman, edited by Joseph I. Rosenbaum.

Puerto Rico Sweepstakes Regulation Revised

Earlier this week, Luis G. Rivera Marín, Secretary of the Department of Consumer Affairs (DACO) of the Commonwealth of Puerto Rico, announced the enactment of the country’s revised Sweepstakes and Games of Chance Regulation, effective Nov. 27, 2009. The new rules remove legal barriers that previously forced advertisers and other promoters to void sales promotions in Puerto Rico and to limit participation in many product and service sweepstakes to only residents of the 50 United States and the District of Columbia. When it becomes effective, the regulation will provide the 3.9 million residents of Puerto Rico with an array of opportunities to participate in the “chance to win” promotional marketplace more generally available within the U.S. market.

“I am pleased to announce that the many practical complications U.S. advertisers previously experienced conducting sweepstakes in Puerto Rico, which routinely led to excluding our residents from participation in their promotions, are now behind us,” Mr. Rivera said. “For many years our laws made it impossible for companies to conduct national sweepstakes here, and consequently we have been excluded from the opportunity to take part in these potentially valuable promotions. We enter a new chapter now whereby our law adequately protects consumers without locking ourselves out of perfectly legitimate sweepstakes.”

Changes in Puerto Rico’s Sweepstakes and Games of Chance Regulation align the Commonwealth’s rules and definitions with regulations in the United States promulgated by the U.S. Postal Service, the U.S. Federal Trade Commission and individual states. Highlights of the new regulation include:

  • The definition of “consideration” contains some of the best language for SMS and other technology-based sweepstakes in the United States
  • The requirement that the rules be certified by a notary is GONE
  • The vague prior reference to having to deliver prizes within three months is GONE
  • An express provision defining “abbreviated rules” has been added and the regulation provides for the use of abbreviated rules in advertising, so long as they point to where the full rules are published
  • Although rules still need to be “published,” you can now satisfy that requirement by putting them on a website
  • The requirement that rules be published, disseminated and spread in Spanish is GONE. The new regulations allow you to publish them in the language of the advertisement.
  • Complicated “odds of winning” statements have been simplified
  • Complicated publication dates for different types of promotions are GONE
  • The requirement that the drawing procedures be certified by a notary is GONE
  • Notarized certification of game piece security codes is GONE
  • Tax liability, which was previously placed on the promoter, is now on the entrant
  • A requirement that full rules appear in print ad covering more than two-thirds of the page is GONE
  • Regulations concerning unavailability of prizes based on “foreseeability” of circumstances is GONE
  • Penalty for not awarding prizes if the circumstances were foreseeable is GONE
  • Although changes to rules still need to be approved by the Secretary, if no action is taken after 10 business days, the default is approval
  • The complex prize awarding regulations (e.g., within three months; quality advertised) has been simplified—now requiring that prizes be awarded as advertised
  • The requirement that alternate winners be chosen is tempered by the caveat that some prizes, because of their nature, cannot be awarded to an alternate winner
  • Any distinction between games originating inside or outside of Puerto Rico is GONE

“DACO is grateful for the assistance of John Feldman, a partner in the Washington, D.C. office of Rimon LLP, an international law firm, and Gabe Karp, Executive Vice President and General Counsel of ePrize LLC, the worldwide leader in interactive promotions, who both provided the Department with a great deal of information and significant input and suggestions in redrafting the sweepstakes regulations,” Mr. Rivera said. “Without Mr. Feldman’s and Mr. Karp’s able consultation and guidance over the past several months, the opening of a vibrant Puerto Rican sweepstakes market for U.S. advertisers and our people would not have been possible.

“Both Rimon and ePrize are cutting edge in the area of promotions, particularly in the cross border aspects of this advertising specialty,” Mr. Rivera continued. “They provide aggressive and creative thinking, as John and Gabe did in helping us solve our longstanding issue with sweepstakes barriers.”

Legal Bytes congratulates John Feldman in our D.C. office, who is not only an authority in sweepstakes, contests and a wide variety of promotions, but is also well-regarded by peers and by regulators who, as in this case, call upon John for his insight and who respect his reasoned and experienced views. Nice work. You can download the text of the revised Sweepstakes and Games of Chance Regulation right here.

If you are a client, you can get the benefit of his experience by contacting John Feldman directly; or me or Douglas J. Wood any of our Advertising Technology & Media law team; or the Rimon attorney with whom you regularly work. If you aren’t a client and you advertise, engage in promotions or marketing – why aren’t you?

Rights of Publicity – Wake Up and Smell the Coffee!

Did you ever have the experience of someone walking up to you and telling you that you look just like someone . . ? Most of us at one point or another have had that experience. Well, Russell Christoff was in a store in 2002, when someone came up to him and said he thought he looked just like an image he had seen on a jar of coffee. Perhaps he laughed at that moment, but about a month later, when Mr. Christoff actually saw the jar of Taster’s Choice instant coffee on a shelf – with his recognizable image on the label – he bought the jar of coffee, stopped laughing, and called his agent.

It seems Mr. Christoff, a former model, had posed for a photo shoot for Nestlé (owner of the Taster’s Choice brand) back in 1986 and was paid $250, with the understanding that if the company used his likeness in marketing, he would receive $2,000 in compensation. Thus begins the tale and trail of a legal battle that continues to this day. Mr. Christoff filed suit in 2003 alleging violation by Nestlé of his right of publicity. (California Civil Code § 3344 bars, among other things, unauthorized use of a person’s image for commercial purposes.) The statute allows for damages, punitive damages, the award of attorneys’ fees AND (unlike many other state statutes protecting rights of publicity), profits attributable to the unauthorized use.

As the action unfolded, Mr. Christoff discovered Nestlé’s had begun using his image in 1986. Not only had he never been paid the $2,000, but there was more as well. Much more. It appears that from 1997 to 2003, Nestlé had also used his image on eight different varieties of Taster’s Choice brand labels in 18 different countries, including in Israel, Japan, Kuwait, Mexico, South Korea and the United States. At the trial, a jury concluded that Mr. Christoff should have been paid $330,000 for the use of his likeness and was entitled to damages of more than $15 million! California’s right of publicity statute, as it relates to proof of a defendant’s profits, states that the plaintiff needs to “present proof only of the gross revenue attributable to such use,” (emphasis supplied) while the defendant must prove “deductible expenses.”

In this case, even though the jury determined that only 5 percent of the sales of Taster’s Choice over the period of 1997 – 2006 were attributable to the use of the image, a profitable product and extended use made the jury award substantial, to say the least. Now you would think that the jury verdict in 2005 might have put an end to it, but predictably, Nestlé appealed and the saga continues.

Based on Nestlé’s appeal, the appellate court reversed the jury’s verdict based on the fact that Mr. Christoff had not brought his lawsuit before the statute of limitations had expired; but just this past Monday (Aug. 17), the California Supreme Court ordered the case back down to the trial court to take another look. Why, you may ask? Because the Supreme Court wants the trial court to answer the following question: What’s the correct way to calculate the statute of limitations – start date/end date – in lawsuits involving rights of publicity and product labeling?

Since Mr. Christoff brought his lawsuit six years after Nestlé USA, Inc. began using his image (but less than a year after he discovered it), the original trial court instructed the jury to use a two-year statute of limitation, but to use the point at which Mr. Christoff knew, should have known, or could have reasonably suspected his image was being used on the label, as the starting point for calculating when the statute of limitation would bar his lawsuit. It seems the trial court determined that unlike offensive or defamatory remarks that would not be considered “published” over and over again, simply because they were repeated in 100,000 copies of the same book, the “Single Publication Rule” (Uniform Single Publication Act as codified in Civil Code section 3425.3) did not apply to cases involving the use of someone’s likeness or image. So here’s how the wrinkle unfolds . . .

Continue reading “Rights of Publicity – Wake Up and Smell the Coffee!”

Gift Cards: The Chart is Free. It’s Our Experience You Pay For.

Last month, Legal Bytes posted Online Gaming Laws Survey – Free (Yes, You Read Correctly), which also included a link that would allow readers to download a copy of a chart summarizing the U.S. laws that apply to online gaming (Survey of U.S. Federal and State Gaming Laws & Regulations). In that posting, I asked “Why would a law firm be giving away such valuable research for free online, on the web, for everyone to see?” The answer, my friend, is . . . (you were expecting a Bob Dylan line, weren’t you) . . .

The answer is simple. We know that many lawyers and firms can do research! While it may come as a shock to some, it comes as no surprise to us that Rimon may not be the only, or even the first, law firm that has done 50-state surveys of various laws and regulations. However—and it’s a big HOWEVER—Legal Bytes may be among the few lawyer-driven blogs that actually gives research away to any visitor to our blog—for nothing. You don’t even have to be a client, but you may want to be. It’s free. Yours for the taking.

It’s free because in this age of information and social media, we believe it’s not the research that distinguishes lawyers or law firms. Oh, of course we must do research and, of course, we need to be good at it. We are. But clients want lawyers who can wisely and effectively apply and use the research; lawyers who know how to use years of hands-on experience gained from working with clients, and apply it to real-world, real-life and real-time situations. We give research away because our sustainable competitive advantage is based on relationships, and the depth and wealth of experience that enables us to bring value to clients when they call.

So, just as with online gaming, we turn today to gift cards and gift certificates, online and offline, and the wealth of experience our Advertising Technology & Media law group has developed and applies regularly for clients. The experience that lets us give valuable research away for free. So enough philosophy, show us the money.

In connection with the work we do for many clients, we have found it useful to develop and maintain a database, which we update periodically, relating to Gift Cards, payment instruments that are increasingly blurred with prepaid debit cards, stored value cards, smart or chip-cards, reward cards, discount certificates, and traditional credit, charge and debit cards. If you are in this market, you already know there are regulations that require certain disclosures, certain restrictions on expiration dates and on the imposition of inactivity fees, as well as escheat and abandoned property laws that may apply on a state-by-state basis. You also know that for the first time, the Credit Card Act of 2009 will impose federal legislative and regulatory requirements on gift cards.

So with pleasure to all of our current (and future) Legal Bytes readers and subscribers, here is a link to our publicly available chart covering Federal and State Gift Card Laws. The chart provides a handy citation and reference tool for the various gift card and gift certificate laws in the 50 United States and the District of Columbia, and includes a description of the newly enacted Credit Card Act of 2009, which provides certain consumer protections applicable to gift cards under U.S. federal law.

Now the disclaimers. First, no chart can be as comprehensive or as up-to-date or clear as actually reading and knowing the statutes and regulations themselves. It is a guide, not an authority, and you should not rely on it for anything other than as a roadmap to proper and thorough legal counsel based on the source material itself. That said, let’s not minimize its value either: it represents the distillation of years, and of hours of work and effort. A special thanks to Keri Bruce and Stacy Marcus for helping to consolidate and refine it so that it is ready for prime time.

Continue reading “Gift Cards: The Chart is Free. It’s Our Experience You Pay For.”

Ghostwriters: Medical Research or Paid Endorsers (and are they mutually exclusive?)

When Merck was busy battling lawsuits emanating from the pain medication Vioxx, the Wall Street Journal, among other news organizations that were reporting on the proceedings, also reported on the practice of “ghostwriting,” alleging that five out of the six authors of a study published in the Journal of the American Medical Association were paid consultants to Vioxx lawyers! An editorial accompanying the studies in JAMA opined that manipulation of publications in the promotion of drugs by paid ghostwriters might not be such an uncommon occurrence. The Washington Post even went so far as to report that the JAMA studies essentially “accuse” the drug manufacturer of “scientific fraud.”

Merck responded to the Wall Street Journal article expressing disappointment at reports that trial lawyers might have made payments to authors whose work found their way into medical journals. While a majority, if not all, of the Vioxx cases have been settled, inquiries into the practice of ghostwriting—payments by pharmaceutical manufacturers for articles frequently extolling the virtues of one drug or another and appearing in medical journals—seems to be a continuing, and problematic, means of promoting pharmaceuticals.

As they say, timing is often everything. A few weeks ago, I had prepared a presentation for an international gathering of lawyers at Limerick University in Ireland, describing the use of testimonials and endorsements in advertising. You can read my previous post and obtain a .PDF copy of the presentation. In briefing the assembled professionals—mainly from the United States and Europe—my presentation and their interest focused heavily on the Federal Trade Commission’s proposed updates and revisions to its Guides that were last revised in 1980.

One of the items clearly on the FTC’s agenda is DISCLOSURE—specifically, disclosure of material connections between those who promote and endorse products and services, and the advertisers and companies that create, manufacture, distribute and sell these products and services. Indeed, the FTC is considering extending liability to endorsers themselves who promote goods and services, if the claims being made are found to be false, deceptive, or misleading, or if they represent unfair competition. While much of the discussion surrounding these revisions has focused heavily on new social media and digital distribution—buzz, viral and word-of-mouth marketing, social networks, bloggers, vloggers, sploggers and virtual worlds—and both traditional and revised Guides (as well as specific advertising guidelines for regulated pharmaceuticals), all focus on the potential for misleading consumers as to the credibility of the speaker or writer, where a material connection to the sponsor is not clearly disclosed. Whether a physician who reads an article that is authored by a paid ghostwriter and that appears in a medical journal, would be considered a “consumer” under these circumstances; or whether an independently peer-reviewed article would be considered advertising or promotional activity, are separate questions. But clearly these are topics that have created “buzz.”

Well, here we go again. Just recently, the ABAjournal.com reported that Wyeth paid ghostwriters for articles published in medical journals—in this case promoting certain replacement hormone therapy in menopausal women. You can read the full article here. While proponents (or should we say “defenders”) of payments made to authors assert that if the medical professional is qualified; if the content is subject to rigorous peer-review by independent experts; and if the authors retain complete editorial control over the content and the views that are expressed; it should not be a problem and should be considered perfectly fine.

Assuming, as both the pharmaceutical companies and the individual authors assert, that the content of these articles is scientifically accurate, many questions arise. For example, is disclosure even necessary under these circumstances? Could failure to disclose these payments be construed as deceptive or misleading—always, or only under specific circumstances, and if so, what circumstances? What criteria will be used to determine if a payment is “material,” and if disclosing (or not disclosing) that fact that would affect the reader’s perception of the credibility or impartiality of the authors? Is this even a “consumer” regulatory issue or does this belong to the FDA or another regulatory body relevant to the medical profession, since this isn’t really “consumer” advertising? These are questions perhaps that that FTC and David C. Vladeck, its new Director of the Bureau of Consumer Protection, may well decide to focus upon.

Free CLE? Free To Travel? Start Packing!

“Advertising Law in the United States and Europe: The Challenges Ahead” is the subject of a CLE Conference organized and sponsored by the University of Limerick Law School and the Franklin Pierce Law School that is being held July 24 and 25 in Limerick, Ireland (Limerick is 20 minutes from Shannon). Douglas J. Wood and Joseph I. Rosenbaum, Co-Chairs of Rimon’s global Advertising Technology & Media Law Group, are among the distinguished faculty, which includes some of our clients, as well as scholars and government leaders from both sides of the Atlantic.

What’s more, these institutions have graciously agreed to allow us to invite our clients to attend at no charge. Yes, you read correctly. Free! Now you must be a client to take advantage of this promotional offer, and although you will have to pay your own way to join us and stay for the two-day course, what better time and excuse to visit Ireland? Yes, it’s short notice, but airfares are favorable, and if you are in Europe you literally have no excuse not to get away and take advantage of this great opportunity. Just click to learn more about the Agenda, the Faculty, the University of Limerick Law School, where the conference will be held; or nearby accommodations. Being a client does have its privileges, so if you are interested, email either Doug Wood or Joe Rosenbaum as soon as possible to take advantage of this opportunity. And start making your travel arrangements now!

Give Credit (Card), No Give a Gift (Card)! Why Not Give Both?

Although consumer credit regulation is hardly new – Regulation E, the Fair Credit Reporting Act, Regulation Z and laws regulating disclosures, debt collection practices, billing statements and the like have been around for decades – for the first time in U.S. history, Federal legislation is tackling pricing, rate modifications, advertising disclosures and fees, and adding a gift card angle as well. 

While the House has not yet passed this or any other version of the legislation, those in the know believe a similar, if not identical, bill will be approved by the House of Representatives and that the President is likely to sign it. 

Are you a bank, payment card association, credit union or financial institution that issues credit cards or gift cards? Here are highlights of the bill that passed the Senate:

  • When marketing, a card issuer would not be permitted to increase any advertised ‘teaser’ rates for at least a year after a new account was opened for the consumer, and promotional rates advertised to consumers must remain in effect for at least six month;
  • Unless the credit-issuing institution can get proof that anyone under 21 can actually repay their credit card debt, credit cards can only be issued to individuals under the age of 21 if a parent, legal guardian or guarantor agrees in writing to be responsible for the debts;
  • If a consumer pays more than the minimum balance due, the excess must be applied to the balance with the highest interest rate;
  • Card issuers will not be allowed to change rates retroactively on existing balances (there is an exception where the consumer is past due by 60 days – which, I guess, presumes that when a consumer can’t afford to pay their balance within 60 days, it’s ok to raise their rates since they probably won’t be able to afford to pay a higher rate either);
  • Bills for balances due must be sent at least three weeks (21 days) before their due date;
  • Card issuers will no longer be able to charge additional fees to consumers for alternate payment mechanisms (e.g., by mail, telephone, online, electronic, wire transfers), unless the consumer requests and the issuer offers some type of ‘expedited’ service;
  • Consumers must be asked if they want to allow ‘over-limit’ credit transactions and if they do not affirmatively consent, the card issuer will not be permitted to charge a fee if the issuer still authorizes the transaction (e.g., your credit limit is $1,000 and you charge something for $1,001 and the authorization system approves the transaction anyway);
  • Changes in the terms and conditions that apply to consumer cardholders will require at least 45 days’ notice; and
  • The minimum amount of time a gift card must remain valid for use will be 5 years. First, it is likely this will apply to gift cards that are consumer-oriented and where full value is paid, and not to discounted, bulk sales, non-consumer, incentive, employer or promotional gift cards – but then the legislation isn’t final yet, is it? Furthermore, the Federal legislation is not likely to preempt more consumer-friendly State law (e.g., California prohibits any expiration date on such gift cards), but it will place a minimum level of consumer protection against earlier expiration, even in States that have no applicable regulation.

There is also consideration being given to removing any current legal and contractual restrictions on merchants that would allow them to differentially price their products and services based on the incremental costs (or savings) of accepting different forms of payment. When credit and debit cards were scarce and cash was king (cash, as in ‘currency’), regulation and industry groups frowned upon differential pricing, arguing that allowing a merchant to charge more for the use of a credit card was discriminatory to the consumer – even though the cost of accepting such payment instruments was higher (the merchant pays a fee (discount rate) to the card-issuing enterprise for the privilege of accepting the particular brand of card). Furthermore, the growth of corporate and purchasing cards and the use of payment instruments in B2B transactions has resulted in situations where a manufacturer accepts a purchasing card (procurement-based credit card) in payment of sales to distributors, wholesalers and retailers – a fee is charged to the manufacturer for the card transaction. This chain continues until a consumer makes a retail purchase, and if any or all of these transactions involve branded payment instruments and not cash, travelers’ checks, bearer bonds or two goats and a chicken, today, a fee would most likely accrue on each payment-card transaction at each step of the way . . . significantly raising the cost to everyone and ultimately the consumer. Stay tuned.

So: Consumer Credit? Co-branded promotions? Loyalty Rewards Programs? Gift Cards? Premiums and Incentives? Retail Promotions? Payment Card Industry (PCI) Data Security Standards? Privacy & Data Protection? Identity Theft? Data Breach? Pre-Screening? Online Digital Payment Systems? Corporate Cards? Purchasing Cards? E-Commerce? Regulation E? Regulation Z? Statement Insert Advertising; Credit/Demographic Market Segmentation? Free? APR? Limited Time Offer?

Any of these sound familiar? It’s what we do? Our Advertising Technology & Media Law Group; our Financial Institutions Group; our Data Security and Identity Theft Group . . . need we say more . . . If you need help (or you are just over stimulated by the flurry of legislation, regulation and excitement), call us or email me at joseph.rosenbaum@rimonlaw.com. We can help.

Gift Cards (The Gift That May Stop Giving) *

Attention holiday shoppers. Not sure what to buy Aunt Matilda or cousin George? A gift card allows them to buy whatever they like? Maybe. Large retailers such as Sharper Image, Bombay Company and Linens ‘N Things have filed for bankruptcy or gone out of business, leaving behind millions of dollars in unused gift cards. In bankruptcy, money left on a gift card is treated as a debt, which the bankruptcy court can decide if it is to be repaid, and how. If the retailer stays in business, the court may allow it to continue to honor its cards, but even then consumers may not get the full value. Sharper Image, for example, was allowed to continue accepting gift cards, but only if the cardholder spent twice the value of the card in a single transaction. Bombay Company was allowed to pay its gift-card holders 25 cents on the dollar. If the retailer closes its doors, it is possible the consumer’s only recourse would be to file a claim and stand in line with the other unsecured creditors.

Continue reading “Gift Cards (The Gift That May Stop Giving) *”

Italian Authorities Aren’t Loyal to Customer Information Used for Behavioral Marketing

A new provision of the Italian data protection law (Loyalty Cards, issued Feb. 24, 2005), is getting a workout. The Data Protection Authority fined a well-known supermarket chain €54,000 for not giving customers adequate information regarding use of personal data. The retailer issued loyalty cards—for shoppers to obtain discounts and rewards—and gathered customer names, email and cell phone numbers (personally identifiable information) and behavioral marketing information (spending habits and locations). Customer profiles were then evaluated and used to create targeted ad campaigns. The retailer didn’t ask customers for consent for all of these uses—a violation of the data protection law.

In Italy, if customer information is not used solely for operating the loyalty program, but for customer profiling and advertising, the consumer must be told and must give consent. While consent is not needed to carry out contract obligations needed to fulfill the loyalty reward program itself, collecting more information than needed for that purpose or using information for other purposes requires specific consent. Is this true elsewhere? In Europe? The United States? Canada? Latin America? Asia? New Zealand? Call me and find out, or read my bio.

Deceptive Sweepstakes Draw NY Fines

In June, H&R Block settled charges brought by the New York Attorney General arising from two sweepstakes programs involving instant-win scratch-off cards. The cards were available at retail when purchasing tax-return preparation services, or online via free registration. The advertisements online, in print, and on radio and television mentioned “no purchase necessary,” but the mentions were fleeting or not conspicuous, according to the NY AG. Further, in-store advertising did not include these words, nor were Official Rules posted in the retail stores. The NY AG noted that under these circumstances, customers who found about the promotions in retail stores had no way to know they could enter online at no charge. The NY AG alleged the lack of disclosure in stores about free entry, coupled with unclear or minor disclosures in the other ads, was false and deceptive. To settle, H&R Block agreed not only to clearly post the Official Rules at participating retail offices, but also to pay $245,000 in penalties and costs. The settlement also requires H&R Block to train employees to direct consumers to information about no purchase means of entry and clearly disclose that alternate means of entry are available whenever advertising mentions entry is available by purchasing an H&R Block service.

There are complex state laws that cover how promotions, chance, skill or combinations, are to be advertised and operated. When marketing globally, rules are more complicated with language, currency, prize notification and disclosure regulations, as well as age and consent requirements on national, provincial or trading-block scale. What is a “skill” or when is “no purchase” required? When does the chance of winning have equal “dignity” when entering without a purchase? These are often subject to varying interpretation—online and offline. Compliance (registration and bonding in some jurisdictions) can seem an endless legal quagmire. Fortunately, Rimon’s Advertising Technology & Media lawyers around the world can help.