FTC Issues Final Rule on CAN-SPAM

The FTC issued its Final Rule concerning certain aspects of the CAN-SPAM Act May 12, 2008. The Final Rule: (a) allows multiple marketers to designate an otherwise legally qualified entity as the single “sender” for purposes of compliance. The sender still must comply with the opt out, identification and other requirements of the Act, but no longer must be the entity that controls all the content or determines all the email addresses to which the message will be sent. In practice, this means only the designated sender (not the other marketers) needs to honor opt-out requests, and only the designated sender needs to have a physical address in the message; (b) prohibits conditioning an opt-out request on paying a fee or providing some personal information other than an email address; (c) allows senders to use a P.O. Box as the physical address if they have accurately registered the P.O. Box with the United States Postal Service; and (d) defines the word “person” to include business entities. As part of its ruling, the FTC also refused to change the amount of time (10 business days) a sender has to comply with an opt out request from an email recipient, and also rejected putting any time limits on how long an opt-out request from a recipient would remain valid and in effect.

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E-Mail. E-Sign. Egad!

The New York Appellate Division has ruled that an email exchange between two parties can amend a contract—even if the agreement specifically states amendments “must be in writing signed by both parties” (Arthur Stevens v. Publicis USA). Here, an employment agreement was the subject of emails between the parties. The court ruled that emails containing the name of the sender in a signature block are a “signed writing” sufficient to amend the contract! Ouch! It is not hard to imagine any email communication with all the elements of a meeting of the minds (“gee, that sounds perfect”), an intent to be bound (“I agree”) and authenticated as attributable to the parties—would fit the argument. Have you looked at your contracts lately? Your outgoing email messages? Our own Peter Raymond and John Webb argued and won this case for our client Publicis USA and have authored a Rimon Bulletin. Our ATM team is working with them to counsel clients on how best to protect themselves in light of this decision.

It’s a Dyanmic Environment Out There: Yes, You Can Still Avoid Being a Target

Most of us know the law tends to lag behind the marketplace. It is in the nature of most legal systems to try and balance statutory and regulatory authority—which makes rules based on experience or potential issues that will apply to future conduct—with judicial and regulatory decisions—cases that are adjudicated, create precedent and help shape the contours and boundaries of what is or is not permissible behavior within the statutory authorities.

In such a framework, we are often asked to counsel clients as to what is or is not acceptable when there may be little law, few regulations and sometimes no precedent. What to do? Well, as you may imagine, there is no simple answer. But there are some guideposts. A key guidepost is to consider common sense, best practices and some lessons learned from analogous legal precedent.

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The Medium May Be the Message, but Content is Still King — Sex, Lies and Videotape

The Mobile Marketing Association has promulgated guidelines, now adopted by many leading wireless carriers and programming networks, to deal with the growing use of email, SMS (text messaging) and similar mechanisms in advertising and marketing. As you will recall, legal and regulatory actions have arisen based on the fact that some companies’ marketing practices fail to adequately disclose the charges, whether subscription or imposed by the wireless carriers, that apply to some of their services and, in some cases, to the advertisements and marketing messages themselves.

Wireless carriers are beginning to adopt content guidelines for what they will or will not transmit from content partners—regulating such things as sexually explicit, graphic violence, profanity, hate speech and other topics, words and images—in some cases including lengthy lists of “forbidden words.” CTIA, the wireless industry trade association, issued fairly broad content guidelines last November, but left the specific implementation to the individual carriers. Some carriers have carried this implementation to a level of detail that covers everything from games, music, images and video, and in some cases even governs the file names of anything downloaded or transmitted.

Wait until you wake up to the issues raised by transmission and posting of “user generated content.” As you may know, in addition to the FTC regulating advertising and certain content in the U.S., and on top of state laws, the Federal Communications Commission (“FCC”) having authority to regulate indecent content on television and radio and the mobile phone as a media and entertainment device is no longer fiction, but fact in many cases. Did you know that our Advertising, Technology & Media Law group has significant experience in all these areas (Judith Harris for FCC and communications; Doug Wood for advertising and marketing; and, of course, any of us or me, if you simply can’t figure out where your need fits).

Data Miners Can’t Market to Minors?

Just last month (June was a busy month), Utah and Michigan laws came into force which prohibit sending commercial e-mail to children for products a minor can’t legally own there—but the children must be signed up in the newly created Child Protection registries to be covered by the protection. That means not just gambling or alcohol, but tobacco, prescription drugs and a host of other items which children are not permitted to own in those states. Michigan and Utah will both impose fines for violations , and in Utah, sending a message or a web link could also land you in jail for up to three years. And you thought CAN-SPAM was tough—in both states, the penalties apply even if a parent requested the e-mail. Although likely to be challenged, at this point, if you are using e-mail or web-based links to market in these states, the time to worry about doing a merge-purge against the registries before you e-mail is now.

Judge Awards $1 Billion in Spam Suit

In what may be the largest judgment in a suit against spammers so far, a company that offers subscribers an e-mail service in Iowa has been awarded more than a billion dollars by a federal judge; the allegations were that the company’s servers were inundated with as many as 10 million spam e-mails a day. The judgments were obtained under the Federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) and the Iowa Ongoing Criminal Conduct Act. Iowa law allows damage claims of $10 per spam message and were tripled under RICO. Not particularly surprising, no attorneys for the defendants were present during a bench trial in November and the judgments were entered by default.

Court Sanctions UBS for Destroying E-Mails

On July 20, the U.S. District Court for the Southern District of New York imposed sanctions against UBS Warburg for destroying relevant e-mail messages during the course of litigation (Zubulake v. UBS Warburg LLC, et al., 2004 U.S. Dist. LEXIS (S.D.N.Y, July 20, 2004)). The Court ordered UBS to pay expenses and attorney fees incurred by the plaintiff, granted plaintiff’s request for further discovery, and agreed to instruct the jury that a negative inference may be drawn against UBS as a result of the missing evidence. The case provides important guidance for counsel on electronic discovery issues and record management, and the Court notes counsel is expected to take some affirmative steps: (1) “identify sources of discoverable information”; (2) “put in place a litigation hold and make that known to all relevant employees by communicating with them directly” and not only repeat these instructions “regularly” but also “monitor compliance”; (3) “call for employees to produce copies of relevant electronic evidence”; and (4) “safeguarding any archival media” the client must preserve. Given the notoriety of the case, these practices will likely become a de facto standard in evaluating electronic discovery issues and requests for sanctions. Got litigators? Call Rimon—we not only have knowledgeable litigators, but we also have an entire team of professionals skilled in data management, record retention, and compliance in and out of litigation. Try us, you’ll like us.

Spam Settlement Restricts E-Mail Marketing in New York

Last month, New York’s Attorney General announced a settlement against OptInRealBig.com, a bulk e-mail marketing company based in Colorado. Although much of the settlement focused on clearly deceptive spamming practices (e.g., using forged “sender” names and addresses to hide the source of the e-mail, using names of well-known companies without permission), it also prohibits false or misleading information in the subject line—so called “teaser” lines. As someone who receives lots of unsolicited email, trying to get me to open and read a particular message from someone I don’t know (or don’t think I know) is an increasing challenge to marketers. Using context or other snappy text in the subject line to get me to read these messages, when they cross over the line, may be considered false and misleading and a deceptive trade practice. Trying to induce me to read an e-mail by implying it is personal (i.e., from someone who knows me) or is part of the subject matter of messages I have sent to others, could be deceptive—especially if there is no readily apparent way of determining that it actually is unsolicited commercial e-mail.

The lawyers in Rimon’s Advertising & Marketing Group (yes, I am a member of that one too) are experts on counseling you and guiding you through the maze of laws and regulations so that you stay on the correct side of these lines. Not only are our litigators armed with first-hand experience in dealing with and defending these issues, but Rimon’s transactional and business lawyers are also widely regarded as among the most skilled and knowledgeable in the world. Whether counseling you about e-mail, web policies, “Spam Settlement Restricts E-mail Marketing in New York” privacy on the Internet, e-commerce, web-based sweepstakes, or simply helping protect one of your most valuable assets—your brand—Rimon has the capability and happy-to-help attitude you need. Try us, you’ll like us. Want to know more? Visit us at rimonlaw.com—or, better yet, check out our other resources at www.adlawbyrequest.com.

Think brands, teasers and tag-lines are unimportant? Think again. Few people may remember who Al Dvorin was—but everyone remembers his tag line!

CAN-SPAM: It’s Not Phat!

Federal Commercial E-Mail Legislation Takes Effect A major change in the law that affects privacy and commercial e-mail on the Internet took effect on January 1, 2004. The CAN-SPAM Act of 2003 doesn’t simply establish an “opt-out” framework for commercial e-mail, it completely pre-empts state law. Although an individual consumer doesn’t have the right to sue an offender under the Act, the Federal Trade Commission, along with the Attorneys General of each state, do. So what should you know?

First, the Act only applies to commercial e-mail—an e-mail whose primary purpose is promoting a commercial product or service. Although the FTC has not yet promulgated any regulations under the Act, simply because an e-mail has a URL link to a commercial website or refers to product or service doesn’t make it commercial e-mail. There are, of course, certain obvious exemptions built into the law. Product safety recall information or e-mails notifying you about changes or important notices concerning your subscriptions, memberships, purchase confirmations, accounts or e-mail related to your employment—all of these are so-called “transactional relationship messages” where the main purpose is communication related to a commercial transaction, rather than promotion or advertising.

Second, what does the law require. Starting January 1, 2004, all commercial e-mail (even if an existing business relationship exists and whether or not the e-mail was solicited or not) must contain a clear and conspicuous notice that a consumer can opt out of future e-mails and provide a web-based means to do so. A consumer’s request to opt out must be honored within 10 business days and marketers can’t sell or share the e-mail addresses of those who have opted out. The e-mail must also clearly identify itself as an advertisement—unless a consumer has specifically asked to receive commercial e-mail from a particular commercial entity. Third, the e-mail must contain a postal, physical address of the sender. Although it is not yet clear if a post office box is enough, the less-risky approach is to have a street address.

The Act has a number of other requirements related to labeling—for example, the subject (header) must accurately reflect the body or content of the message and the sender (the sponsor of the promotion) must be identified. Although the Act preempts state commercial e-mail laws, beware of the fact that state fraud, trespass and certain consumer protection laws can still apply.

Violations of the CAN-SPAM Act are criminal offenses and involve both fines and potential jail time upon conviction. As with most Federal crimes, aggravating factors increase the penalties and implementing good faith and reasonable measures to attempt to comply with the Act can lessen them. These penalties can be serious—jail-time of up to five years, $250 per e-mail up to $2 million in fines (which can be tripled up to $6 million if aggravating factors are present) and all computers and software used in the commission of the crime can be forfeit.

Although the primary purpose of Legal Bytes is to enlighten and inform you, it obviously does promote Rimon and encourages you to call us when you need legal support. Accordingly we will always give you the opportunity to opt out of receiving our publication by email and when we send you an e-mail, it will be clear as to what it is and who is sending it. This is not just the law, it’s good practice.