Strange But True Courtroom Tales–Google Loses Round 1

Move aside file-sharing, user-generated content, and DMCA “take down” notices for copyright infringement; here come the trademark and brand protection lawyers taking on Google again. Just this month, a Federal Court in the Northern District of California refused to dismiss charges brought by American Blind & Wallpaper Factory (yes, they sell window blinds) that Google is illegally selling American Blind’s trademark as a keyword that consequently triggers sponsored links to competitors’ ads when they do a “Google” search. As you know, selling keywords is a huge source of revenue for Google, and the judges’ refusal to grant Google a summary judgment dismissing the case breathes some new trademark life into an old story. Google had argued its AdWords program is not a “use” of trademarks of others in “commerce” within the meaning of the federal law that regulates trademarks—the Lanham Act. In asking the court to dismiss the case, Google relied on two federal cases in the Southern District of New York.

In one case, the court held that unless the trademark was placed on the goods or their packaging or in advertisements, if the search word was invisible to the public—it wasn’t being “used” in the trademark sense and therefore wasn’t infringement. In the second case, Merck claimed that an online pharmacy infringed Merck’s trademark: it bought the keyword “Zocor”—a drug manufactured by Merck—and was using it to generate advertising and sponsored links to the online pharmacy’s generic version of that drug. The court analogized the use of a keyword to private thoughts or mental categorization, and upheld the pharmacy’s right to buy the word from Google for search purposes.

The court in California distinguished these cases from those decided in New Jersey and some unreported decisions emanating from Delaware and Minnesota, where search engines were considered to be infringing when they sold trademark keywords to competitors, noting that these transactions were trading on the value of a company’s trademarks—thus prohibited. Stay tuned. Round 2 is coming up.

FTC Continues to Focus on Marketing to Children

The FTC is expected to release a Report on how violence is being used to market to children—in movies, music and video games. Some insiders fear the FTC will suggest the entertainment industry has violated or outgrown its voluntary standards—can you say “regulation.” Both the FTC and the FCC have targeted children’s advertising, programming and products. Want to know more? Contact John P. Feldman in our Washington, D.C. office; me or Douglas J. Wood in our New York office; or Stephen Edwards, Michael Skrein or Carolyn Pepper in our London office. Please also visit our www.KidAdLaw.com web pages. If you market or advertise to children or if you are a company that carries advertising which is or could be targeted to children, why would you look anywhere else for legal counsel.

Employee Blogging May Subject Employers to Liability

The FTC, in a recent advisory opinion, highlighted the possibility that a seller’s failure to disclose the connection with an endorser could result in a violation of the FTC Act. This opinion has legal implications for blogging by employees, even on personal time and even if the company is unaware of the employee’s activities. Employees should be advised to strictly abide by their employer’s blogging policy, and if they blog about a product, they must identify their employment status. What? You don’t have an employee blogging policy? Shame on you. Come get one. Come to Rimon. Need to know more? Read our Labor & Employment e-flash bulletin “According to the FTC, Employee Blogging May Subject Employers to Liability” and contact the authors, Angela M. Washelesky in our Chicago office or Sara A. Begley in our Philadelphia office.

The Future of the Web

This is a portion of testimony before Congress. Think you know who said this?

“In the future, the Web will seem like it’s everywhere, not just on our desktop or mobile device. As LCD technology becomes cheaper, walls of rooms, and even walls of buildings, will become display surfaces for information from the Web. Much of the information that we receive today through a specialized application such as a database or a spreadsheet will come directly from the Web. Pervasive and ubiquitous web applications hold much opportunity for innovation and social enrichment. They also pose significant public policy challenges. Nearly all of the information displayed is speech but is being done in public, possibly in a manner accessible to children. Some of this information is bound to be personal, raising privacy questions. Finally, inasmuch as this new ubiquitous face of the Web is public, it will shape the nature of the public spaces we work, shop, do politics, and socialize in… Progress in the evolution of the Web to date has been quite gratifying to me. But the Web is by no means finished.

“The Web, and everything which happens on it, rest on two things: technological protocols, and social conventions. The technological protocols, like HTTP and HTML, determine how computers interact. Social conventions, such as the incentive to make links to valuable resources, or the rules of engagement in a social networking web site, are about how people like to, and are allowed to, interact. As the Web passes through its first decade of widespread use, we still know surprisingly little about these complex technical and social mechanisms. We have only scratched the surface of what could be realized with deeper scientific investigation into its design, operation and impact on society. Robust technical design, innovative business decisions, and sound public policy judgment all require that we are aware of the complex interactions between technology and society.

“So how do we plan for a better future, better for society? We ensure that both technological protocols and social conventions respect basic values. That the Web remains a universal platform: independent of any specific hardware device, software platform, language, culture, or disability. That the Web does not become controlled by a single company—or a single country. By adherence to these principles we can ensure that Web technology, like the Internet, continues to serve as a foundation for bigger things to come.”

Advertising & Marketing to Children–Update from Italy

This article was provided by Felix Hofer, partner in the Italian law firm of Hofer Lösch Torricelli and member of GALA. If you need more information, contact Felix.

Advertising targeted at children and minors has become the focus of legislators and watchdogs throughout the world. In the United States, the Mobile Marketing Association (“MMA”) released stricter industry guidelines directed to wireless carriers, aggregators and content providers, to increase protection of children in marketing practices. In the U.K., Ofcom (the regulatory authority) has required an end to “junk-food” advertising to children under 16. The Greek Ministry for Education has established a mobile phone ban for teachers and pupils at school that also regulates how students may carry cell phones onto school premises.

The issue has become a topic of intense debate in Italy and on Nov. 15, 2006, the local Communications Regulatory Authority (“Agcom”) required communication providers offering audiovisual and multimedia services available through mobile devices, to include technical means to prevent minors from accessing harmful content. Services with adult-oriented content must provide a control mode—allowing parents to block access. Providers should provide notice about these controls and users must confirm, in writing, receipt of the notices. A few days later, the same Agcom issued additional rulings to protect minors in the context of entertainment programming, requiring television and radio broadcasters to ensure that content directed at—or likely to attract—children complies with requirements as to language and behavior, and avoids unjustified violence, vulgarity, bad language and sexual innuendo.

Almost at the same time, the National Journalists’ Association released a new version of its rules (the so-called Carta di Treviso) with a specific section (no. 7) dedicated to protection of minors. The rules require that, with few exceptions, journalists refrain from publishing personal or identifiable data of minors; these rules have been approved by the local Privacy Commissioner as an ethical self-regulatory code. This updated version of the ethical rules now applies to on-line, multimedia and any kind of journalistic communication—even bloggers will have to take into account the Carta’s prescriptions.

Food advertising to children is being targeted by the authorities in Italy. For example, a company producing a lollipop popular among young consumers, ran into trouble in a recent television advertising campaign. The commercial depicted three young girls in a bedroom sucking lollipops. The narrative comments “New XX lollipop with fruit cream, really excellent!” One of the girls picks up her skates and says, “Well now we’ll have to do some exercise.” The other girls reply “Exercise? Why? XX contains 0% fat! Didn’t you know?” The commercial closes with the statement “XX: new ultra-juicy flavours and zero percent fat.”

The complaint filed with the Italian Authority for Market and Fair Competition argued the advertisement was targeted at children and the lollipop was presented as a food product that didn’t increase weight because it didn’t contain fat—thus exercise wasn’t needed, suggesting a “dietetic” effect for children and specifically young girls concerned about their weight. In its defense, the company argued the lollipop did not, in fact, contain any fat, and might actually be considered a dietetic product.

The Authority held that the ads were likely to reach an audience of children, considering the time the commercials were aired; and that stating there was no fat in the lollipop was irrelevant because it contained sugar, and the ads suggested exercise was unnecessary. Consequently, the commercial resulted in a misleading message and a fine was imposed.

In Italy, as elsewhere, the promotional message, as well as the presentation, in advertising directed to children requires a high level of attention—even more so with regard to food products, given the particular attention the obesity problem has raised among regulators.

Advertisers Online and on the Frontline

New York’s Attorney General has just settled actions against Priceline, Travelocity and Cingular Wireless for promoting products and services using “adware”—the first time a law enforcement agency has held an advertiser responsible for ads displayed through adware.

These settlements require the advertisers (and affiliates—presumably sales agents and promotional partners) to give consumers full disclosure of any adware (including adware bundled in other software); ensure advertising has a conspicuous, identifiable brand; obtain consent from the consumer to download and allow the adware to operate on the computer; and make it reasonably simple for a consumer to actually remove the adware from his or her computer. The settlements require these three companies to investigate how their online advertising is being distributed; and if the delivery mechanism violates the terms of the settlement (or the law), the advertisers must take immediate stops to cease use of the offending adware programs. Priceline, Travelocity, and Cingular have also agreed to pay penalties and investigatory costs to the State of New York.

To those of you familiar with the old saying “Caveat emptor,” we can now add “Let the Advertisers Beware.”
 

Video Gaming–First Amendment Prevails

A California appellate court has held (Kirby v. Sega of America) that makers of video games have a First Amendment right to base game characters on real celebrities, as long as the characters have been transformed. The celebrity in this case, Lady Miss Kier, former lead singer for Deee-Lite, claimed a character (named “Ulala”) in the video game Space Channel 5, infringed her rights. Not so—at least not in this case. So what does “transformed” mean? For that, you have to call us (or read the case for yourself).

Just When You Thought File Sharers Would Know Better

So you think it’s nice to share? A Federal District Court has ruled in favor of Universal and Paramount Studios, holding that willful copyright infringement is committed when digital movies are downloaded from KaZaA, a peer-to-peer file-sharing service, and stored in a directory of shared files capable of being downloaded by other KaZaA users.

New E-Discovery Rules

With file sizes growing, you would think computers that can rapidly process large files and storage capability would be all the rage. For compliance officers, record managers and lawyers, it’s retrieving the information that is the hot issue and hardly a trivial one. New Federal rules relating to civil litigation took effect at the end of last year, requiring companies involved in federal litigation to produce electronically stored information as part of the pre-trial discovery process. The new rules apply to employee e-mails, instant messages and other electronic, digitally stored information. In the event the companies are sued, legal experts say, companies will need to start worrying about everything in electronic form—from digital photos on employee cell phones to text (“SMS”) messages.

Companies need to have sound record retention and destruction of records policies to ensure compliance with regulatory record-keeping requirements and to avoid potentially massive costs of searching and retrieving information that could and should have been purged. Absent actual or an expectation of specific litigation or a subpoena requiring production of data, companies can purge their systems of information that may no longer be relevant or necessary to their business operations. As the cost of storage has come down, however, companies routinely store information and don’t bother to delete unnecessary information—because it’s easy and affordable to simply keep everything!

The opposite is also an issue. Communication between lawyers and technology folks is less than perfect. A lawsuit arrives, but no one tells data management or systems. Tapes and disks continue to be routinely erased or written-over, with corresponding loss of data. Lots of companies don’t have policies and don’t know what information they have, where it is stored, and who may have, have kept or destroyed copies of information in electronic form. Lack of information is a weakness for lawyers. If you remember the adage, “never ask a question you don’t already know the answer to,” imagine how a litigator for the company will feel blindsided by records she was unaware of or cited by a court for destroying records he didn’t know his client had.

Why pay attention? Because by exercising preventive care, you can avoid potentially huge legal and operational expenses. By crafting and enforcing compliant and well-thought-out record retention and destruction policies, you can avoid high-priced lawyers sorting through email messages about the staff luncheon, and the pitfalls associated with a “smoking gun” needlessly showing up in that pesky lawsuit. Call us. The ATM Legal Team can help!

Looking Back at 2006–Ahead to 2007

How Exciting Was 2006!

That introduction is not a question—it’s an exclamation! Buzz and viral marketing, branded entertainment, social networking, MMOG (that’s online, interactive, web-based gaming for those looking to impress their neighbors or their teenagers), and Internet gambling all made increasingly bigger news in 2006. Then came data protection, identity theft, data breach disclosure legislation, payment card industry data security standards, and gift cards on the top-10 list of technology related issues in 2006. Oh, did we mention virtual reality, digital music, DMCA (that’s Digital Millennium Copyright Act) take-down notices, streaming wireless video, user-generated content, and context sensitive advertising and product placements?

Some things won’t surprise you today, but if you thought about it only a few years ago—indeed, in some cases at the beginning of this year—it was an amazing year. The world’s largest licensor of personal computer operating systems delayed the launch of its new Windows Vista operating system—the traditional core of its business—but entered the digital music business. Some huge un-named search engine technology-driven company (that happens to derive its primary revenue from advertising), just bought a young company that made no profit but virtually created the buzz over user-generated content—YouTube—for more than $1.6 billion. Social networking companies were considered social and anti-social, depending on who you ask—kids, parents, regulators.

Laws and regulations took greater cognizance of the evolving interplay between advertising, technology and media. Identity theft and the compromise of data security became the basis for legislation in state after state in the United States. Obesity and the advertising and marketing of food to children became the soup du jour for regulators on both sides of the Atlantic, and potentially the world. Advertising regulators and marketing associations increasingly noticed the world was changing. Digital technology was not simply an enabler, an automation tool or business productivity tool—it invaded our schoolrooms, our playrooms, our automobiles (now I don’t have to stop and ask for directions) and our living rooms. New business models, new social models and new economic models. It’s just exhausting.

This has been an exciting year, one filled with change and challenge (did you know the Chinese word for “crisis” consists of two characters—one means danger and the other means opportunity). We hope you have enjoyed our year of Legal Bytes as much as we have taken joy in bringing it to you and highlighting some of these exciting developments. So let’s look at what’s ahead.