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Gift Cards Deal With Discounts & Charity; Chart Updated

This post was written by Keri S. Bruce and Joseph I. Rosenbaum.

If you have been coming back to Legal Bytes to keep up with this and other developments in the law of Advertising Technology & Media ("ATM"), you know that we have been following the world of gift cards for many years (e.g., Gift Card Issuers Fight & Switch, Gift Cards in New Jersey: It’s Complicated!, Federal Reserve Board Has a Free Gift (Card) For You, Credit Card Act of 2009: Act I, Scene 1, Gift Cards in the Legal Limelight, Gift Cards: The Updated Chart is Still Free). If you are a regular Legal Bytes reader, you also probably know that we published and routinely update our U.S. Gift Card Statutory Chart – a reference tool you will certainly find helpful, although not a substitute for experienced legal counsel. In addition to the amendments noted below, we have updated our U.S. Gift Card Statutory Chart and you can read or download the updated chart right here (U.S. Gift Card Statutory Chart) [PDF].

You will also appreciate that we advise clients in this area all the time, assisted by an able team of financial services regulatory specialists, and so it will come as no surprise that we are telling you about some changes to the law in Vermont and Rhode Island that apply to gift cards. The term "gift certificate" is often used in the law, but separate definitions make it clear that the law applies to cards or any similar instrument, regardless of the material (e.g., paper, plastic, beads).

In addition to the Federal Credit Card Act of 2009, many states have their own regulations of gift cards and gift certificates. While many states have carve-outs in their gift certificate laws for loyalty and reward cards, Vermont has gone a step further and embraced group coupon/discount providers by separately defining these cards and providing separate disclosures to benefit consumers. In light of popular group coupon/discount providers, new marketing efforts involving gift cards and the continued prevalence of class actions, such as In re Groupon Marketing and Sales Practices Litigation, where Groupon reached a nationwide class action litigation settlement over allegations it had illegal expiration dates and other provisions on its vouchers, it is even more important to stay on top of these ever-changing laws.

Effective as of May 18, 2012, amendments to the Vermont statutes (Vt. Stat. § 2701 et seq.) seek to address issues arising from popular group coupon/discount providers. The new amendments introduce definitions for "a loyalty, award, or promotional gift certificate," "paid value" and "promotional value," extend the expiration dates for the paid value of a gift certificate, and remove the specific exemption for food product gift certificates.

Under the amended law, a "loyalty, award, or promotional gift certificate" is defined as a gift certificate issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in connection with a loyalty, award or promotional program, and that is redeemable upon presentation to one or more merchants for goods or services, or is usable at automated teller machines.

These definitions are important because, if defined as loyalty, award or promotional gift certificates, they can be exempt from the statute’s requirements on expiration dates and fees and some other restrictions that would otherwise apply, provided that certain requirements are met.

To qualify, these instruments must disclose, on the front of the certificate, that the certificate is issued for loyalty, award or promotional purposes, and the date of expiration for both the paid value and promotional value (if any). (More on that distinction in a moment.) On or along with the instrument, the consumer must be informed as to the amount and conditions under which fees may be imposed, and if a fee is assessed and on the instrument, a toll-free telephone number and, if one is maintained, a website a consumer may use to obtain fee information (disclosed on the certificate).

The Vermont amendment distinguishes between "paid" and "promotional" value. Paid value is the value of any money or other consideration given in exchange for the gift certificate. Promotional value means any value shown on a gift certificate in excess of the paid value. Example, a loyalty program buys 1 billion $25 gift cards and pays $19.99 each. The $19.99 is the paid value and the $5.01 is the promotional value. The statute prohibits the paid value from expiring for five years (extended from the previous three-year requirement), while the promotional value is exempt from the restrictions on expiration dates and fees.

Meanwhile, in Rhode Island, amendments – effective as of June 19, 2012 – to gift certificate provisions of the state’s Unfair Sales Practices law (R.I. Gen. Laws § 6-13-12) allow gift cards donated for fundraising purposes to expire, but only if the card clearly states that the instrument has been donated for charity and a clearly defined expiration date of not less than one year after the issuance, is disclosed to the recipient.

If you need help from lawyers who know this area and can provide experienced, practical counsel, contact Joseph I. ("Joe") Rosenbaum or Keri Bruce or your favorite Rimon lawyer, all of whom will be happy to help.

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Annual Registrar Summit – Take the Fifth (Amendment or Bourbon – What’s In A Name?)

Just last Thursday, I had the joy of attending and presenting at the Fifth Annual Registrar Summit (2012) sponsored by GoDaddy.com. A great group of people gathered to discuss the current state of domain name registration. Kicked off by a terrific “how to properly hold a meeting of competitors without running afoul of anti-trust and competition laws” presentation by Chris Compton, the topics ranged from what ICANN is up to these days, to discussions of authentication, security, phishing, malware and what the domain name registration community is trying to do about it.

As I always attempt to do, when permitted, I post a PDF version of my presentation for all to read, and, if you choose, to download a personal copy in PDF form. So, without further ado – feel free to browse through “What’s in a Domain Name? Registration by Any Other Name Would Still Create Legal Issues (subtitled “Clouds, Mobile & Internet Domains – What Me Worry?” [PDF] (The embedded videos have file sizes that are too large to include – so next time show up in the audience and you’ll see them.)

If you want to know more about anything covered in the presentation, or if you need counsel or help navigating the legal issues, feel free to call me, Joseph I. (“Joe”) Rosenbaum, or any of the Rimon lawyers with whom you regularly work.

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CFPB Proposes Nonbank Risk Supervision

This post was written by Robert M. Jaworski and Joseph I. Rosenbaum.

The Dodd-Frank Act granted to the newly created Consumer Financial Protection Bureau (“CFPB”) supervisory authority over a wide array of financial entities, including large depository institutions and their affiliates, as well as various nonbank “covered persons,” such as residential mortgage originators and servicers, private education lenders, payday lenders, and “larger participants” in other markets and their respective service providers. To prevent “bad actors” from escaping through cracks in the CFPB’s supervisory reach, Dodd-Frank gave the CFPB broad authority to supervise other nonbank covered persons if CFPB has “reasonable cause to determine, by order … and after a reasonable opportunity to respond” that such nonbank covered person “… is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services” (“Additional Authority”). The CFPB has now taken its first step toward fleshing out this Additional Authority and providing a framework for this type of supervisory authority.

On May 20, 2012, the CFPB suggested rule was published in the Federal Register, proposing to establish procedures by which it will supervise any nonbank covered person that is not already subject to CFPB supervision. The most significant of these procedures would:

  • Require the CFPB to provide such unsupervised person with a Notice of Reasonable Cause, informing them that the CFPB believes it has a reasonable basis upon which to assert supervisory authority and providing facts that support that belief
  • Give the unsupervised person an opportunity to respond to the Notice, in writing within 20 days, either contesting the assertions or voluntarily consenting to supervision
  • Allow an unsupervised person to contest the assertion of such supervisory authority, in writing, but also through informal arguments in a supplemental oral response (typically by telephone), which would not constitute a hearing on the record, and neither discovery nor testimony of witnesses would be permitted. Following any contest and submissions, the Assistant Director for Nonbank Supervision would be required to make a recommendation, with the Director authorized to issue the final decision and Order as to whether or not the unsupervised person shall be subject to CFPB supervision.
  • Allow the unsupervised person, once becoming subject to CFPB supervision, to petition the Director after two years (and no more than annually thereafter) for termination of the Order. FYI, an unsupervised person that voluntarily consents to CFPB supervision would not have a right to file such a petition.

Issuance of a Notice does not mean charges have been filed against the unsupervised person, it simply triggers the procedures outlined in the CFPB rules. However, if the CFPB issues a notice of charges, it can choose, in its sole discretion, to utilize more formal adjudicatory procedures (including some variations) that are described in 12 C.F.R. 1081.200. Comments on the proposed rules are due by July 24, 2012, and you can read the entire proposed CFPB rule directly at Procedural Rules To Establish Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination.

If you need more information about these proposed rules, or want help determining if you should submit comments and the best way to approach the substance and form of those comments, please contact Robert M. Jaworski (rjaworski@rimonlaw.com). Of course, you can always find out more or get the assistance you need by contacting me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

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IAPP Privacy Presentation – Is the Wizard of Oz Still Behind the Curtain?

On May 10, 2012, I had the privilege of making a presentation at the IAPP Canada Privacy Symposium 2012. The title of my presentation was "Social and Mobile and Clouds, Oh My!" and it addressed some of the emerging issues in privacy, data protection and surveillance that arise as a result of globalizing technology and the convergence of social media, mobile marketing and cloud computing.

As part of that presentation (and as I have started to do for some time now in other presentations), I raised the issue of how lawyers, the law, legislators and regulators often use words to describe activities – words rooted in tradition or precedent – that are no longer applicable to the activity in today’s world. "Privacy" is such a word, although "not applicable" perhaps is too harsh. Obviously the word has significant applicability in a wide variety of situations. But "invasion of privacy" has become a knee-jerk reaction to virtually every information-gathering activity, even information readily and publicly available and, in some cases, posted, disclosed or distributed by the very individual whose privacy is alleged to have been "invaded."

Please feel free to download a PDF of my presentation, "Social and Mobile and Clouds, Oh My!" [PDF] (Note: Embedded video file sizes are too large to include), and let’s start a conversation about how we use words and how they wind up in laws and regulations. Lawyers work with words. Use them artfully and they provide powerful structures within which society, commerce and all forms of human endeavor function. Use them improperly and they cause confusion, uncertainty, inconsistency and inherently inequitable outcomes.

Seems like I am not the only one to point this out. Take a look at the insightful comments by John Montgomery, COO of GroupM Interaction, North America, as reported in a MediaPost RAW posting on Social Media entitled: If Marketing Terms Could Kill.

Kudos John. I’m with you. Let’s get it right.

FYI, Rimon has teams of lawyers who have experience and follow developments in privacy and data protection, information security and identity theft. If you want to know more, if you need counsel or need help navigating, or if you require legal representation in this or any other area, feel free to call me, Joseph I. ("Joe") Rosenbaum, or any of the Rimon lawyers with whom you regularly work.

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Krakatoa: East of Java; Google West of Fair Use

Some of you may remember the 1969 disaster film, "Krakatoa: East of Java" (which, coincidentally ties nicely to a recent Useless But Compelling Fact topic). Well today, Legal Bytes is happy to alert you to the results of jury deliberations – yet another copyright law disaster – just unfolding out West (West Coast of the United States, that is). Just hours ago (and providing more evidence that confusion reigns and continues to increase under existing copyright law), the jury has rendered its decision in the copyright phase of yet another intellectual property trial relevant to the online and mobile world. As you may recall, just last month we reported another copyright flip-flop winding its way through the courts in our post entitled, Appeals Court Vacates Summary Judgment in Viacom v. YouTube.

Today, a jury in California, deliberating in a case brought by Oracle against Google and alleging that Google infringed Oracle’s Java copyrights, concluded that Google did use the Java interfaces, but couldn’t reach any conclusion if that was protected use under the copyright "fair use" exception ("fair use" is a defense to copyright infringement). The jury did find separately that Google infringed some of the Java code and used it in developing the mobile phone platform, Android. However, before Oracle celebrates prematurely, Judge William Alsup noted that because only a minimal amount of code was actually used, Oracle’s request for $1 billion in damages or some share of Google’s profits was essentially ridiculous, and that only statutory damages, ostensibly a relatively nominal amount, would likely be applicable.

Indeed, these cases bolster a growing argument that as digital technology and innovation move forward, current copyright law is either inadequate or irrelevant, or both. Legal Bytes will continue to monitor developments in this evolving and convoluted intellectual property dilemma. I encourage you to take a look at an opinion piece I wrote separately entitled, A Contrarian’s View of Copyright: Much Ado About Nothing. But that’s just my opinion; the jury’s verdict is fact!

If you would like further information or need help making sense of the legal issues arising in our digital online and mobile world, feel free to contact me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

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Useless But Compelling Facts – April 2012

It happens rarely – usually no more than once a century or so – but when it does happen, it always occurs in pairs, eight years apart. It happened in 1761 and again in 1769. It will happen in 2117 and again in 2125. But it also happened in June 2004 and, in a little more than a month from now, at the beginning of June 2012, the second of this eight-year pair is scheduled to take place. What is it?

If you know the answers and are first to send them to me, you’ll win. Send your answers directly to me at joseph.rosenbaum@rimonlaw.com.

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Appeals Court Vacates Summary Judgment in Viacom v. YouTube

Back in December of 2010, after a previous ruling against Viacom in the billion-dollar copyright infringement case brought by Viacom (Viacom Appeals Google/YouTube Ruling) Legal Bytes reported that three legal scholars filed a brief in support of Viacom’s appeal, stating that “the central issue in this case are the legal tests for contributory and vicarious liability for copyright infringement from the use of Internet sites – in this instance, the YouTube site – to reproduce and disseminate large amounts of copyrighted material without authorization from copyright owners.” The U.S. District Court had previously ruled in favor of YouTube and Google, holding them protected against claims of copyright infringement by the safe harbor provisions of the Digital Millennium Copyright Act.

Today, in ruling on the appeal, the U.S. Second Circuit Court of Appeals essentially breathed new life into Viacom’s case, remanding it back to the lower court and instructing the District Court judge to determine whether YouTube had knowledge of specific infringing material and willfully blinded itself to that knowledge.

The ruling vacates the District Court’s summary judgment against Viacom, noting the facts might be interpreted by a reasonable jury in a way that would not exonerate or exculpate YouTube from liability. In his opinion, U.S. Circuit Judge Jose A. Cabranes wrote: "We conclude that the District Court correctly held that the 512(c) safe harbor requires knowledge or awareness of specific infringing activity, but we vacate the order granting summary judgment because a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website."

As we have over the years, Legal Bytes will continue to monitor developments in this complex, high stakes litigation involving significant intellectual property issues in our online and digital world. If you would like further information, feel free to contact me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

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Gift Card Issuers Fight & Switch

Back in August 2010, Legal Bytes reported that a New Jersey law applicable to abandoned property (escheat) would effectively alter the tenor and scope of the New Jersey gift card law (see, Gift Cards in New Jersey: It’s Complicated!).

Well today, in an Associated Press article published by ABC News Internet Ventures. Yahoo! – ABC News Network, it is being reported that American Express, which was already pursuing its legal rights and remedies in a law suit filed to overturn the law, has now opted to pull gift cards from retail sale in New Jersey.

The new law would require sellers in New Jersey to capture the ZIP code of everyone who buys a gift card. Monies left on those gift cards bought in New Jersey that lie dormant and unused after two years would then ostensibly be required to escheat to the state. After the law was passed about two years ago, American Express (joining forces with the New Jersey Retail Merchants Association and others), filed suit challenging the new law. Initially, a U.S. District Court issued an injunction against implementing it, but more recently the injunction was removed – perhaps the stimulus for the reported move by American Express.

If you have been coming back to Legal Bytes to keep up with this and other developments in the law of Advertising Technology & Media (“ATM”), you know that Keri Bruce in Rimon’s ATM practice group previously posted a report entitled Gift Cards Tag Along with Credit Card Legislation, noting that federal legislative and regulatory requirements will soon apply to gift cards. You will also see links to a U.S. Gift Card Statutory Chart (Updated), which those of you who work with gift cards and similar financial payment instruments may find helpful; and you already know we follow and advise clients in this area all the time, assisted by a team of financial services regulatory specialists as well.

So if you need help from lawyers who know this area and can provide experienced, practical counsel, contact Joseph I. (“Joe”) Rosenbaum or Keri Bruce, or your favorite Rimon lawyer, all of whom will be happy to help.