‘You Know How to Whistle, Don’t You? Just Put Your Lips Together and Blow.’

If you don’t know who said that or in what motion picture, stop reading and go to the next article. California Governor Schwarzenegger has just signed a bill specifically aimed at altering the future results of fact patterns analogous to two recent court decisions relating to the licensing of publicity rights for deceased celebrities. The two cases—one in New York and the other in California—dealt with a challenge to the right to license the use of Marilyn Monroe’s name and likeness for commercial purposes. The rulings stated that because at the time of her death neither California nor New York had a law allowing publicity rights to survive the death of a celebrity, and because those rights were not specifically bequeathed by Marilyn Monroe, those rights could not be construed as part of the “rest, residue and remainder” of her estate, and consequently not be part of the rights available to her estate (or subsequent licensors like the plaintiffs in these cases).

The legislation just signed by Gov. Schwarzenegger makes retroactive to before Jan. 1, 1985, the right of a celebrity’s estate to construe publicity rights as part of a “rest, residue and remainder” as a bequest in a celebrity’s will. January 1, 1985 was the effective date of the current California law allowing publicity rights to survive the death of a celebrity. Unfortunately, New York still does not have a law allowing publicity rights to survive the death of the celebrity.

Shop, Then Drop

Potentially signaling tougher enforcement initiatives ahead, New York recently enacted a law that gives consumers who shop online, essentially the same types of consumer protections available when buying over the phone or through the mail. New York’s law that now applies to sales over the Internet means that merchants must reasonably expect to be able to ship the goods ordered within 30 days or the order can’t be accepted; merchants who use a post office box or other fulfillment mail address must display (prominently) the company’s name and physical street address; merchants must allow a consumer to cancel any order that doesn’t actually ship within 30 days and either obtain a refund or pick substitute merchandise; the merchant must clearly detail the conditions under which the consumer will be entitled to a refund; and the merchant must keep records of consumer complaints that deal with failures to ship or to provide advertised goods and services.

Content is King, but the Medium Is Still the Message

Recently lawyers have begun to debate the question of just how much control advertisers can exert when paying for product placements or branded entertainment before the line between First Amendment expression by the creative staff putting together the program and the financial subsidies from advertisers is crossed. Now, the Ninth Circuit has dealt with a similar question relating to the immunity that interactive computer service providers have typically enjoyed under the Communications Decency Act (the “CDA”). The CDA insulates service providers from liability so long as the service provider remains a publisher of information and content of others (there are exceptions, so the immunity is not blanket and you should always consult legal advice for specifics that apply to your situation). That said, a company that operates an online web service that specializes in matching roommates based on their preferences has been held in violation of the Fair Housing Act because a questionnaire put together by the company asks for certain demographic information that, when posted on the website, could be used by users and site visitors to discriminate against others. The company, Roommates.com, asked users to disclose information, among other things, about roommate preferences such as age, sex, children, etc. The Ninth Circuit held that although Roommates.com was immune as long as it was simply enabling the distribution or display of information provided by its members, when it became an information content provider, it lost immunity with respect to that activity and information. And by putting together the questionnaires and soliciting their preferences in response, Roommates.com was not simply posting content authored by users, but rather was eliciting specific information that could be abused and that might or might not have been voluntarily posted or disclosed absent the questionnaires.

Hmmmm…user profiles, play lists, segmented marketing, asking consumers to participate in promotions…this is an interesting test of the limitations of the CDA to protect and insulate interactive online service providers from liability. As social networks, virtual worlds and other digital arenas that don’t simply enable but also solicit or encourage certain information to be provided, and as web services become more targeted, focused and segmented to match consumer preferences, the immunity is likely to be tested further. Stay tuned.

Want to Know What to Do After a Data Breach?

Read “After a Data Breach: Navigating the tangle of state notification laws can be exasperating—and costly” an Oct. 29, 2007 article by Jennifer McAdams, posted on ComputerWorldI was interviewed and quoted in the article. I have helped numerous companies navigate the tangled web of state laws and regulations that have appeared in the past few years, and the ATM Law group tracks and keeps up-to-date on developments in state and federal law concerning this important issue.

User-Generated Content

User-generated content (“UGC”) on the Web is serious business and becoming more so by the day. While many know UGC as a challenge to IP rights, eMarketer is predicting advertising spending on social networking, photo sharing, gaming and amateur video websites to reach $4.3 billion by 2011—compared with the $450 million in advertising revenue they reported in 2006. That means companies are going to have to figure out how to differentiate themselves and maintain positioning in the face of increased competition. The ease of creation, coupled with technology—whether embedded players, gadgets and widgets, or more sophisticated interactive game sites—means that millions of users can create, post and “snag” user-generated content, and the trend shows no sign of diminishing. Social networking companies are significant sources of advertising revenue and are growing targets for investors seeking to build market share or obtain a piece of the transactional pie. Increasingly, mobile marketing and messaging companies are building the wireless and global brands, and are increasingly monetizing their social networking and messaging capabilities.

Legislators and regulators are noticing the exuberant success and popularity these services enjoy and, with a demographic skewed to a younger portion of the population, there is no question these services, the advertising they carry, and the content available on their sites, will continue to draw scrutiny in the months and years ahead. Rimon represents social networking companies, advertising agencies, and advertisers and media companies around the world. When you think of legal issues surrounding user-generated content—standards, copyright protection, digital rights management, filtering, viral or buzz marketing and so much more—please think of our Advertising Technology & Media Law practice group.

Media in the Crosshairs?

I know of no suit by the FTC against a media company for running an allegedly deceptive advertisement for someone else’s product or service. In a July 9 letter, the FTC states the “active participation in advertising preparation” by a radio broadcaster is subject to challenge for possible violations of §5 of the Federal Trade Commission Act, which gives the Commission broad authority to prohibit “unfair or deceptive acts or practices.” The FTC characterized the broadcaster as a “hybrid entity,” both producing programming and participating in preparing advertising. In the past, ad agencies have been held liable for a deceptive advertisement if the agency was actively involved in developing and producing the advertising. Now the FTC is stating that media companies can be subject to the same analysis. Increasing use of product placement, sponsorships, context-sensitive advertising, branded entertainment and the host of ways advertising and programming increasingly intersect and blur, make it inevitable that media companies will more actively be challenged in connection with what products and services show up on the screen as part of programming. Now the FTC has also indicated the media may have responsibility for what shows up in advertising if a media company participates in its creation or development. It should also come as no surprise that certain advertising (targeted at children; diets)—those that have been special targets for FTC enforcement action—should receive the most attention. Do you have a policy regarding participation in the creation or development of advertising (if you are an advertiser or advertising agency you probably do) and does it need updating? If you are a media company, you may not (other than for your own ads)—but then, maybe you should. Where can you go for help? The answer is not a useless fact, but it is compelling.

The Law of Unintended Consequences

China: A 30-year-old man in the southern Chinese city of Guangzhou appears to have died of Internet gaming exhaustion. He had been playing online for three days and was declared dead at the Internet café where he had been playing. Clinics have sprung up to treat “Internet addiction,” noting that children and teenagers often play online games or surf the Web for days at a time. China has more than 140 million Internet users, and a huge market for online games.

Poland: A bus driver in Slupsk, a city in northwestern Poland, was fired for sending 38,000 text messages on his employer’s cell phone. The driver, Leszek Wojcik, told reporters he wanted to buy a car if he won the 100,000 zloty prize ($36,000) in an SMS (text messaging) contest. According to the Slupsk city transport service, Mr. Wojcik ran up a bill of about 94,000 zloty ($34,000) in his losing bid to win, sending an average of 1,200 text messages per day at a cost of 2.40 zlotys per message. Among the lessons learned: promotions and advertising using SMS, streaming and mobile technology are extremely powerful.

USA: A U.S. federal judge didn’t recall how he spent $3,000 at a strip club. He apparently also forgot a few other things, such as using a credit card for either an Internet dating service or to pay for pornography—all reportedly while married; the marriage has since ended. At the trial, when the Judge was asked about the $150 credit card charges, he reportedly replied, “I’m embarrassed to be even talking about this. I think you pay extra to get certain features, such as if you upload a picture or—I don’t even recall.” Under the Constitution, federal judges are appointed for life, and while they are supposed to follow an official code of conduct, they can be removed from the bench for high crimes, misdemeanors, treason or bribery.

Parallel Universe Spawns Parallel Legal Woes

You knew it had to happen, but are still surprised when it does. In what may be a first-ever, a lawsuit has been filed against a defendant that doesn’t really exist, over a non-existent furniture line. Yes, you guessed it, a bed with special embedded animations that allow participants in Second Life, the virtual reality world established by Linden Labs, to essentially recreate an adult film with their virtual persona—avatars.

For the past few years, Second Life’s approach to IP protection has been to allow players to keep rights to programs, animations and objects they create—although many of the tools (programming scripts, etc.) are Linden’s and are provided to enable players to build things in this virtual world. Much like user-generated content in the world of multimedia audio-visual works, creativity and innovation is creating virtual content by the boatload and creating virtual objects and businesses is not simply a recreational pastime, but also a source of entrepreneurial glee and money for many. Clothing, real estate, automobiles, virtually (pardon the pun) anything, becomes the object of virtual purchases, sales and licensing.

Well, the law has caught up with reality. One player, whose avatar is selling virtual items under the brand “SexGen” bed, is suing another avatar for selling fakes for less—undermining the business. Since you have no obligation to disclose your true identity in Second Life, who do you sue? Well, first you try to get information from Linden, presumably because their computers house the underlying registration and information that would disclose who is behind the knock-offs. But, if the alleged infringer has not registered a real name, credit card or other “real world” items to enable identification, you might only get an IP address.

So we’ll keep you posted on developments, but who knows where this will go. Will a court entertain the case? Will they discover the identity of the alleged infringer? Will copyright infringement principles apply in a virtual world? Perhaps the plaintiff will try to enjoin Linden from allowing or enabling the fake products, or send them a virtual Digital Millennium Copyright Act (“DMCA”) “take-down” notice.

Novel Judicial View: Parents, Not Advertisers, Must Mind Their Children

Earlier this month, the U.S. Court of Appeals for the Sixth Circuit dismissed a lawsuit filed by parents against manufacturers and importers of alcoholic beverages and the Beer Institute, that alleged advertising is responsible for the illegal purchase of alcoholic beverages by minor children. Although the suit had numerous technical flaws, the parents were suing to recover money their minor children spent on alcoholic beverages, and to enjoin advertising. While the first claim was economic, the second alleged injury to their “parental rights.” Although the court dismissed the suit for lack of jurisdiction, they cite prior decisions that clearly state there appears to be no legal authority to support the notion that expression of ideas by advertisers interferes with a parent’s right to make decisions regarding their children’s well-being or upbringing. To restrict advertising would be an inappropriate restriction on the advertisers’ rights to freedom of speech and expression.

The plaintiffs acknowledged that laws designed to protect against underage consumption of alcohol—laws which prohibit both the sale to and purchase of by a minor—lose their connection to the advertisers, since intervening criminal acts of third-party sellers and third-party underage purchasers are the direct cause of the illegal activity, not advertising. The court stated what many of us consider to be all too obvious: one must trace the injury or violation to actions of the defendant, not something that results from actions and activities of parties who aren’t even in court (i.e., merchants who sold the alcohol and minors who purchased it).

Perhaps the parents should bring an action against the merchants who sold the alcoholic beverages or even against their own children to recover money the children spent (“converted”) in their violation of laws prohibiting underage purchase of alcohol. The bottom line for this court is that if the First Amendment right to commercial speech (advertising) is to be outlawed, it is for the lawmakers or a constitutional amendment to do so, not the courts.

Don’t Like Pop-Ups or Banners? Try a Widget

Studies now show that marketing professionals looking to attract today’s generation of social networking, mobile messaging, interactive gaming young people might well experiment with more digital features that one can play and interact with on the Internet. If you responded to last month’s Legal Bytes “Useless But Compelling Facts” (or you peeked at the answer below), you know that a widget refers to a computer program that allows Web pages to be sophisticated and interactive—using graphics, animation, audio-visual effects and user-generated content. While advertisers lose control over where these little widgets are placed (e.g., next to a competitor’s widget), giving consumers—especially young people (another issue for marketing to children?)—a premium or incentive is more likely to get them to put advertising content on their pages. It appears, at least according to one study, that when kids are given a choice of what they want to appear on their pages, especially when some “goodie” is part of the offering (a game, free download, coupon, etc.), they are more likely to choose to use advertisers’ content, than if it is “pushed” to them.

Although using widgets as a promotional tool doesn’t guarantee a successful advertising campaign, especially if the product or service isn’t up to par, widgets represent another arrow in the quiver of advertising and marketing professionals to personalize and target audiences. Some social networking sites block users from putting up widgets, or selectively enable widgets based on endorsements or the protection of intellectual property rights. Widgets also represent another challenge to traditional advertising economics. Since users choose when and where to post the widget applications, the widget creator—generally a hosting, server or similar technology or digital graphics firm—is the only entity getting paid, and beyond that, advertising (and thus advertising revenue) is not tracked.