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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?

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Rosenbaum Quoted in American Banker

Joseph I. (“Joe”) Rosenbaum was recently interviewed by American Banker reporter Maria Aspan in connection with advertising and marketing consumer credit cards, and certain legal implications in brand marketing and advertising, including some of the more subtle viral and social media campaigns. Joe’s quotes appear in an article by Ms. Aspan entitled, "Barclaycard U.S. Taking Baby Steps in the Public Eye".

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Did You Miss our Legal Seminar for Publishers? No Worries.

Even if you missed the educational webinar—held Oct. 23, 2009; sponsored by the Long Tail Alliance Program of the Interactive Advertising Bureau (IAB); and presented by Joseph I. (“Joe”) Rosenbaum, partner at Rimon and general counsel of the IAB, and Adam Snukal, senior associate at Rimon—you’re in luck. A PDF copy of the seminar, which covered many current legal issues in advertising compliance, privacy, and social media, can be downloaded right here: What Me Worry? Legal Best Practices for Small Publishers.

We’ve been told the Interactive Advertising Bureau will be posting a video recording of the webinar, so you can watch a replay of the entire broadcast, if you like, at your convenience. We will provide details once we receive them.

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A German Tale of Two Marks (neither Karl nor Groucho)

This post was also written by Katharina Weimar.

In 1904, the already acclaimed American novelist Jack London published The Sea-Wolf, a dramatic and powerful adventure story about a sea captain and the survivors he has rescued after an ocean collision. But then, that’s not news is it? What is news is the fact that two film producers in Germany, almost at the same time, recently produced films based on that novel, AND both used the German translation “Der Seewolf” as the title of their films. Really? Both of them? Yes, really.

Well it turns out that one of these producers had previously created a television production of Der Seewolf back in 1971. So that producer (we’ll call him Number 1) went to court in Munich demanding that the other producer (we’ll call him Number 2) relinquish the title and recognize the priority of the title in Number 1 – based on his earlier work and concerning the use of that name for his new film. But, as they say, the plot thickens. The defendant – producer Number 2 – had also applied for a German trademark registration after announcing his production in the film press in Germany.

Much like the psychological drama unfolding in the Jack London novel, the court decided that Number 2 must withdraw the trademark application and is prohibited from distributing the film using the name “Der Seewolf” or “Seewolf,” because Number 1 already has priority. You see, the 1971 work continues to enjoy re-runs and re-broadcasts so that, according to the court, copyright protection of the title “Der Seewolf” continues to exist for the benefit of Number 1. Not only that, but since the titles were identical and were based on the same novel, the court of course also concluded that there is a direct and clear likelihood of confusion – a key ingredient for a claim of trademark infringement. Following that logic, you might think that the requirements for both a copyright and a trademark infringement claim exist, so Number 2 is prohibited from using the title. However, quite unhappy about this state of affairs, Number 2 decided to appeal the ruling.

Now this is where truth becomes stranger than the underlying fiction, even though justice may well have been served in both the Jack London novel and this tale of two producers. The Higher Regional Court of Munich reversed the decision of the lower court, deciding that Number 2 is absolutely still entitled to publicize and distribute a cinematographic work using the title “Der Seewolf” or “Seewolf.” The court did not dispute that Number 1, as the legitimate user of the title dating back to 1971, had the right to bring an action against Number 2. You see in Germany, any legitimate user of the title of a work has the right to assert a claim to protect that title. Even further, the High Court agreed there indeed was a strong risk of confusion between the works given the 1971 title “Der Seewolf” and the new title “Der Seewolf” or “Seewolf,” since they were identical. So far so good.

BUT, the High Court didn’t stop there. You see, also under § 23, No. 2 of the German Trademark Act, the legitimate owner or user of a business mark (the title of a cinematographic work falls within the definition of business marks) cannot prohibit anyone else from also using an identical mark, as long as is it is used to describe the characteristics or properties of the goods or services (and, of course, unless there is some moral or public policy reason to create a restriction). Well, as you might have guessed, the Higher Court in Munich found no moral or public policy issue, AND it was their opinion that the titles were both descriptive: both films were adaptations of the same Jack London novel, The Sea-Wolf, and both titles were simply descriptive translations derived from that work.

So we end up with the curious situation (and result) in which it is true that Number 1 has the right to claim protection for the title “Der Seewolf” as an adaptation of the original Jack London novel based on the 1971 use of that title, but Number 1 also has to accept the legal conclusion that the exact same title may be used by anyone else producing an adaptation of that same novel!

What can we learn from this? First, intellectual property laws are different around the world, so don’t assume rights or protections without consulting legal experts and advisors who appreciate and understand the differences. Second, always remember that intellectual property, by definition, is a creature of specific laws and statutes. As with patents, rights in trademarks and copyright arise, and are interpreted and enforced under the specific laws of the jurisdiction involved. For example, aspirin is no longer a protected trademark in the United States, the United Kingdom and many other countries – the victim of “genericide.” But “Aspirin” remains a protected trademark in Germany, Canada and a host of other countries. Further, copyright laws protect against copying, not original creation, so two or more individuals, independently creating two identical works (without copying), would each be entitled to copyright protection, with neither able to stop the other – whether for paintings, novels or computer software programs. Besides, copyright protection is not forever. Jack London’s rights in The Sea Wolf copyright expired and his novel is publicly available. By adapting, translating or using a descriptive name to refer to these films, neither of the producers was able to claim exclusive rights to the use of the title, any more than Jack London’s heirs could claim the copyright still existed.

So when it comes to intellectual property rights, don’t assume, and do consult an expert. If you want to know more, just contact Katharina Weimer in Rimon’s Munich office or Joseph I. (“Joe”) Rosenbaum in New York, or any of the Rimon lawyers you work with. We are happy to help.

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IAB Long Tail Alliance: Join The Legal Briefing from Rimon

Just a reminder that this coming Friday, October 23, 2009, from 12 – 1 p.m. (Eastern US Time), Joseph I. (“Joe”) Rosenbaum, partner at Rimon and general counsel of the IAB, assisted by Adam Snukal, senior associate at Rimon, will be presenting an educational webinar, sponsored by the Long Tail Alliance Program of the Interactive Advertising Bureau (IAB). The title is: What, Me Worry? Legal Best Practices for Small Publishers. 

The webinar will provide an overview of the legal issues and suggested best practices in the following areas:

Advertising Compliance ** Privacy ** Social Media

There will be a Q&A session as time permits at the end of the session, and a .PDF copy will be available on Legal Bytes after the seminar is over.

The webinar is open not only to IAB members and Rimon clients, but also to anyone who is interested – on a first-come, first-served basis. So register now. You can get more information and register right here for What, Me Worry? Legal Best Practices for Small Publishers.

About the Long Tail Alliance Program

The IAB formed the Long Tail Alliance program in summer 2008 to encourage involvement with individuals and small business who, powered by interactive advertising, have turned their interests and passions into a media revolution. The Alliance is the beginning of something the IAB envisions as a much larger portrait of American entrepreneurs who are pursuing and achieving the American dream, even as they row hard against strong economic currents. The IAB hopes to expand its Long Tail Membership in order to encourage advocacy, training, and a coming-together of smaller publishers across America as their businesses grow, all while the dynamic of technology and media continues to change.

About the IAB

The Interactive Advertising Bureau is comprised of more than 375 leading media and technology companies who are responsible for selling 86 percent of online advertising in the United States. On behalf of its members, the IAB is dedicated to the growth of the interactive advertising marketplace, of interactive’s share of total marketing spend, and of its members’ share of total marketing spend. The IAB educates marketers, agencies, media companies and the wider business community about the value of interactive advertising. Working with its member companies, the IAB evaluates and recommends standards and practices, and fields critical research on interactive advertising. Founded in 1996, the IAB is headquartered in New York City, with a Public Policy office in Washington, D.C.

About Rimon

Rimon is a global, full-service law firm with nearly 1600 lawyers in 23 offices around the world. Joseph I. (“Joe”) Rosenbaum, a partner in the New York office, chairs the firm’s global Advertising Technology & Media law practice, is the editor and publisher of Legal Bytes, is Corporate Secretary & General Counsel to the IAB, and is an ex-officio member of the IAB Board. Adam Snukal is a senior associate who works with Joe in the Advertising Technology & Media law group and is editor of Adlaw by Request, the gold standard in advertising legal publications in the industry.

Join us for this exciting and timely IAB Long Tail Alliance webinar presented by Rimon. We look forward to your participation.

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Maine Recommends Repeal of Controversial Privacy Law

Under mounting pressure that "An Act To Prevent Predatory Marketing Practices against Minors"—which was recently enacted and which became effective last month—was unconstitutional (both on free speech grounds and because it unduly restricted intestate commerce), a Maine legislative committee recommended that the new privacy law be repealed. The law would have placed restrictions on the collection and use of data of minors—effectively extending many provisions of COPPA to teens age 13 to 18—and requiring parental consent for the collection of any personal information. While concern still remains over sensitive data (e.g., medical- and health-related information), Maine appears to be poised to modify the original law to limit its applicability to health- and medical-related information of minors. 

Without belaboring the Constitutional arguments (preemption by federal law, unlawful restriction on interstate commerce beyond a state’s interest in protecting its citizens) the Act, if enforced, would have even restricted the rights of teenagers to receive certain information or to participate in social media and social networking activities. Opposition was unusually diverse—with the Center for Democracy & Technology. a civil liberties-focused organization, and the Maine Independent Colleges Association, joining the marketing-oriented Motion Picture Association of America and the Association of National Advertisers in objecting to the legislation.

Apparently in deference to the court cases that had been filed in opposition and the arguments made, Maine’s attorney general previously indicated she would not enforce the Act.

Privacy? Children’s Advertising? State vs. federal law? We can help sort out the confusion. Call me, Joseph I. Rosenbaum, or John Feldman or Douglas J. Wood, or the Rimon attorney with whom you regularly work.

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Congressional Hammer Poised to Strike at Financial Advertising

The late Will Rogers, that wonderful American humorist from Oklahoma, once said: "This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer." Presumably, the image conjured up by that remark relates to just how much damage can be done before someone takes the hammer away! Well, in those days, Mr. Rogers lauded then-President Franklin D. Roosevelt for taking the hammer away from Congress before they did too much damage. If the strong response the newest Administration/Congressional initiative has evoked from the banking, advertising and media industries is any indication, one might conclude that President Obama has been providing too many hammers these days. This may be a little longer than my usual blog post, but read on . . . you won’t be disappointed.  

To provide a little context for the consternation, a few months ago, gift cards were inserted (for the first time) into federal legislation, ostensibly targeted at the practices of financial institutions applicable to credit cards. Where previously state legislation reigned supreme, the promotion of gift cards, disclosures regarding dormancy or inactivity fees, expiration dates, among other things, became part of U.S. federal law under the new Credit Card Act of 2009.. The legislation was intended to prevent abuses in the credit card industry and protect consumers, and in that spirit, a section covering gift cards seemed like a nice idea. But when it came to gift cards, it was unclear what problems had arisen that were not already (or couldn’t be) dealt with by state law – what was broken that needed to be fixed by federal regulators. Is concentrating regulatory power and discretionary rulemaking in the hands of federal agencies, simply for the sake of control, always a good thing?

So in case you haven’t heard, let’s talk about the newly proposed Consumer Finance Protection Agency (the “CFPA”). The CFPA is part of the Administration’s regulatory reform proposal submitted to Congress a few months ago, intended to provide a new regulatory framework for the financial services industry and, among other things, prevent practices and problems that led to the current crisis in the financial industry. Well, if you are a banker, broker-dealer, insurer or a financial officer, you probably already know the government is considering such major reforms and a restructuring of the current regulatory scheme.

BUT, have the finance folks told the marketing and advertising professionals to start worrying too? Perhaps now would be a good time to do so! In referring to the CFPA, Edward L. Yingling, President of the American Bankers Association, has said, “This agency would have broad powers that go beyond every consumer law that has ever been enacted.” You see, the newly proposed Consumer Financial Protection Agency Act of 2009, now fast-tracking its way through the U.S. House of Representatives, would restructure the Federal Trade Commission and give much of its current responsibility for regulating financial services-related advertising and marketing to a brand new regulatory agency – the newly proposed CFPA. I direct your attention to Subtitle C – Specific Authorities (Sections 131 – 139) of the Act, which would give the new CFPA the authority to review not only consumer lending practices, but also fraud and deceptive advertising, to determine and establish rules governing whether or not marketing practices and advertising are misleading, or if consumer financial products and services are being advertised and marketed fairly to consumers. By the way, the CFPA would also be empowered to interpret and enforce the new Credit Card Act of 2009 noted above. Would it surprise you that the Association of National Advertisers and the U.S. Chamber of Commerce would worry about what a new and potentially confusing and overlapping regulatory scheme, and a completely new regulatory agency, will mean for the advertising, agency and media industries?

If you thought all you had to worry about were things like privacy, behavioral advertising, free speech, blogger liability for claims, ‘Net neutrality, cloud computing, celebrity endorsements and social media – tweet, tweet – think again. Just yesterday, Advertising Age reported that some media industry professionals fear certain aspects of the new legislation will hold media liable for simply running advertisements related to financial services and products that the newly created CFPA believes are misleading. That would effectively push media into the role of de facto censors of advertising content. In other words, it would be a "safer" path (read less legal liability) to simply refuse to accept or run advertising that it determines might be too risky. One section of the proposed bill would empower the CFPA to create standards regarding what is or is not lawful in financial services advertising. Another section could be construed to extend liability to anyone in the chain of development, insertion, creation, displaying or broadcasting an unlawful advertisement. Could that be you?

Continue reading “Congressional Hammer Poised to Strike at Financial Advertising”

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Buzz Over Behavioral Advertising – Listen, Do You Want to Know a Secret?

This post was also written by Stacy Marcus.

The buzz over online behavioral advertising in the United States has been building since the 2008 hearings in Congress over deep packet inspection. The first class-action lawsuit targeting behavioral advertising, Valentine v. NebuAd (N.D. Cal., No. 3:08-cv-05113), was filed in November 2008, followed soon thereafter by Simon v. Adzilla (N.D. Cal., No. 3:09-c-00879) in February 2009.

In the first case, NebuAd and six other ISPs were accused of violating the Electronic Communications Privacy Act, the California Computer Crime Law, the California Invasion of Privacy Act, and the Computer Fraud and Abuse Act, by using deep packet inspection technology. Specifically, the NebuAd complaint alleged that customers were unaware their online activity was being monitored for marketing purposes; that either no notice or consent was provided; that any notice that may have been attempted was insufficient or misleading; and that their technology intentionally sought to negate customers’ efforts to remove tracking cookies. For their part, the defendants vigorously deny having violated customers’ privacy rights, noting that they did not collect personally identifiable information, and that the data collected was anonymized to protect the identities of customers.

Since its filing in November 2008, all of the defendants in the NebuAd case have moved to dismiss the action on various grounds, including lack of personal jurisdiction and failure to state a claim. Just a few days ago (Oct. 6, 2009), the court granted the motions in respect of five of the defendants, to dismiss for lack of personal jurisdictions, citing the fact that the ISPs that were not based in California did not provide a sufficient and constitutionally reasonable basis for a California court to assert jurisdiction. However, the ruling leaves NebuAd as the last defendant standing in the action. But wait. There’s more. In May 2009, NebuAd liquidated its assets and went out of business. In fact, on the day the court dismissed the action against the other five defendants, the court also granted NebuAd’s counsel’s motion to withdraw from the case. That said, the court refused the additional request to stay the proceedings against NebuAd until new counsel could be retained. Stay tuned . . . we’ll track this for you!

Now in the second case, Adzilla (whose website is currently “under construction”) and three other defendants were parties to a joint venture that created a technology called the “ZILLAcaster.” According to the press release of Adzilla partner NetLogix, “[t]he ZILLAcaster technology resides within the service provider’s network, the closest point to the subscriber, and utilizes network data in combination with contextual and behavioral targeting to make decisions regarding the delivery of the most relevant ad content for network users. Content can be delivered down to individuals without the use of any desktop, software, or adware.” The plaintiffs claim that this ZILLAcaster oversees, inspects, copies, transmits and actually permits the alteration of the user’s Internet communications – all without any notice to the user. Although there is no allegation that any actual ads were served to Simon (the plaintiff) as a result of this ZILLAcaster, the plaintiffs argue that simply tracking them in this manner violates the Electronic Communications Privacy Act, the California Computer Crime Law, the California Invasion of Privacy Act, and the Computer Fraud and Abuse Act through the use of deep packet inspection. Adzilla has denied plaintiffs’ allegations and asserted numerous defenses.

Less than two months ago (Aug. 18, 2009), Continental Broadband was dismissed from the action, and on Oct. 2, 2009, a filing in the case seeks to voluntarily dismiss Core Communications d/b/a CoreTel as a defendant in the lawsuit. If the filing is granted, only Adzilla and its parent company, Conducive Corporation, will remain as defendants.

So why should you care? Because given the settlement of Facebook’s class action lawsuit over its Beacon technology, these two lawsuits are the only major ones we are aware of that are pending, that concern online behavioral advertising AND that could potentially yield decisions and opinions. Given Congress’ and the FTC’s interest in consumer privacy in general, and online behavioral advertising in particular, a decision in either of these two cases could set the stage for government regulation and policy – confirming with or reactive to these decisions – and may well set precedent for future online behavioral advertising cases in the months and years ahead. While it’s too soon to tell, we will keep you posted as they unfold. As always, you can contact the authors, Stacy Marcus and Joe Rosenbaum, or any Rimon attorney with whom you regularly work, for more information or assistance.

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Rimon Analysis of the New FTC Endorsement and Testimonial Guidelines

A few days ago, Legal Bytes alerted you to the fact that the Federal Trade Commission has issued revised "Guides Concerning the Use of Endorsements and Testimonials in Advertising". These revisions update the FTC’s Guides, last modified in 1980, that provide direction to advertisers and agencies regarding compliance with the FTC Act.

John P. Feldman, a partner in our Washington, D.C. office and a key member of our Advertising Technology & Media law team, has prepared (and you can view and download) an Analysis of the New Guides. Of course, no memorandum prepared for general information or a summary of this type can provide legal advice, and you should be careful not to rely on it since everyone’s circumstances and the facts of each situation will differ – at a minimum, based on the type of product or service, the target audience, and the advertising media, among other things. That said, the summary will give you a good overview of what is in the Guides and what is different or updated from the prior Guides.

Of course, if you need specific guidance or need to know more about the FTC Guides, or the implications to social media advertising and marketing or traditional advertising, feel free to contact John P. Feldman, Douglas J. Wood or Joseph I. Rosenbaum, or the Rimon attorney with whom you regularly work.