Just Released: This Quarter's GALA Gazette

Read the latest issue of the Global Advertising Lawyers Alliance (GALA) quarterly e-newsletter, the GALA Gazette, containing advertising law news and updates from around the world.
Reed Smith is founder and member of GALA, a network of local counsel who specialize in advertising, promotions and media law, in more than 50 countries.

Snapchat Settlement with MD AG Marks Latest State-Level Privacy Enforcement Action

This post was written by Michael Schaeppi and Frederick Lah.

Last month, Snapchat reached a settlement with the Maryland Attorney General over alleged deceptive trade practices regarding Snapchat’s marketing claims that user “snaps” disappear forever.  In addition, the Attorney General alleged that Snapchat had violated the Children’s Online Privacy Protection Act (COPPA).  This settlement follows a similar settlement between Snapchat and the Federal Trade Commission, which we reported on previously.

After announcing the settlement, Attorney General Douglas F. Gansler said that “despite Snapchat’s marketing claims to the contrary, no company can fully prevent content you send to someone else from being copied, shared or posted online[.]” Attorney General Gansler went on to state that companies operating online or through mobile devices have a responsibility to safeguard user privacy and to be transparent about the information they collect. According to Attorney General Gansler, Snapchat misrepresented to consumers that pictures and video messages sent using the Snapchat mobile application are only viewable temporarily, when in fact they can be captured by the recipient for future viewing or circulation. As a result of these representations, some Snapchat mobile application users may have sent pictures or video messages they would not have sent were these risks adequately disclosed.  The Attorney General further alleged that Snapchat secretly collected information from users’ contact lists without their consent, and that Snapchat failed to comply with COPPA by knowingly collecting the personal information of children under the age of 13 without verifiable parental consent.

While Snapchat did not accept liability in the settlement (and made that very clear on its own website), it did agree to implement measures to address the Attorney General’s allegations, including, by agreeing to disclose to users that the recipients of “snaps” have the ability to copy photos and video messages they receive. Snapchat further agreed to comply with COPPA for a period of 10 years, and said that it would take specific steps to ensure children under 13 were not creating accounts.  Snapchat also agreed to pay $100,000 to the State of Maryland as part of the settlement.

This action by the Maryland Attorney General is the latest in a growing number of state-level privacy enforcement actions.  When we reported on the privacy enforcement actions brought in New Jersey and California, we questioned whether other states would follow suit in their focus on consumer privacy.  It looks like we have our answer.    

ANA Webinar - Managing the Risk of Social Media

While social media has matured over the past decade as a marketing platform, it is still very much a legal work in progress.  Join Reed Smith partner and ANA General Counsel, Douglas J. Wood, on Tuesday, July 29 at 1:00 p.m. EDT for a complimentary webinar entitled Social Media’s Murky Legal Waters to hear what legal risks lie ahead for marketers operating in the social media space, and how they can work to build powerful creative while keeping those risks within reason.

Visit the ANA website to register for this webinar.

Get Your Docs in a Row: A Practice Tip for Promotions

We wanted to share the following best practice tip with our readers who conduct sweepstakes, contests, and other prize-based promotions:  When conducting such promotions, we always recommend that our clients have the potential winners execute and return a set of verification documents before confirming them as winners.  Generally, this involves having the winner sign an affidavit and release form confirming their eligibility, compliance with the official rules of the promotion, and releasing the sponsor (and their agencies and parents, subsidiaries, and affiliates) from any liability that may arise in connection with the promotion.  In addition, if you need to conduct a background check on the potential winners before issuing a prize to them, you should have them complete a form authorizing you (and/or your agencies) to do so prior to obtaining any consumer reports from a consumer reporting agency.  Under the federal Fair Credit Reporting Act (FCRA), consumer reporting agencies may only issue consumer reports with a consumer’s consent, or for one of the other delineated permissible purposes.  Obtaining a properly executed authorization will not only allow you to conduct your background check more seamlessly, but it will also help to reduce the risk in playing part to a potential FCRA violation, which can result in high statutory penalties.

Canada Requires Closed Captioning for All TV Commercials

Effective September 1, 2014, all advertising commercials, sponsorship messages and promotions broadcast on television stations in Canada must be aired with closed captions for the hearing impaired.  This requirement may necessitate that you add closed captioning to commercials previously produced and aired that will be broadcast on or after September 1st.

For a complete explanation of the requirements, please download the Institute of Communications Agencies (ICA) member bulletin.

JPC and AFM Reach Agreement on New CBA

On June 5, 2014, the Joint Policy Committee on Broadcast Talent Union Relations (JPC) and the American Federation of Musicians (AFM) reached agreement on a new three-year collective bargaining agreement.  Attached is the summary and MOA.  The agreement is subject to ratification by AFM members.

Massachusetts Enhances Protections for Celebrities (and Others) After Death

This post was written by Rebecca Maller and Keri S. Bruce.

On June 13, 2014, the Massachusetts Senate passed S. 2022, beginning the process of joining 13 other states that prohibit companies from using celebrities’ identities after they die. The bill amends Section 3A of Chapter 214 of Massachusetts General Laws, and creates a post-mortem “Right of Publicity” interest. The bill prohibits commercial use of the name, image, and likeness of a “personality” for 70 years after his or her death without written permission from either the personality or “persons who collectively own more than 50 per cent of the aspect of the personality’s right of publicity that was commercially used . . . .” “Personality” is defined as “an individual whose identity has commercial value.” To garner the bill’s protection, however, the personality must be domiciled in Massachusetts as of the date of his or her death.

Championed by Massachusetts resident Bill Cosby and sponsored by Democratic State Senator Stanley Rosenberg of Amherst, the bill continues the trend of states providing additional publicity rights after death, as discussed in our earlier post regarding California’s protection of the rights of deceased soldiers who became famous because of their deaths. The bill—designed to control commercial exploitation of the benefits of the personality’s name and image following death—is merely an extension of the protection afforded a personality during his or her lifetime. Of the states providing this safeguard, Massachusetts’ bill ranks among the strongest protection by providing a 70-year period within which the statute applies, joining California (70 years), Indiana (100 years), and Tennessee (perpetual).

Why This Matters: If the Massachusetts House passes its version of the bill, Massachusetts will be one of only 14 states that provide post-mortem Right of Publicity protection. Other states in addition to those mentioned above include Arizona, Florida, Kentucky, Nevada, Ohio, Oklahoma, Pennsylvania, Texas, Virginia and Washington.

Supreme Court Rules that Aereo Violated Copyrights

Earlier this week, the U.S. Supreme Court handed its decision in ABC v. Aereo, ruling that Aereo's service of providing its subscribers with streaming broadcasts obtained through the company's miniature antennas is illegal.  The court ruled that over-the-air broadcasts count as a public performance and that Aereo essentially is no different from cable companies, which are subject to limitations on freely transmitting programming under the Copyright Act.  For additional information on this story, please read the recent Reed Smith Client Alert written by Brad R. Newberg.

Copyright Owners Go the Distance with 'Raging Bull' Victory

This post was written by Michael E. Strauss and Stacy K. Marcus.

In a recent Forbes article, Brad Newberg discussed in depth the Supreme Court’s recent decision in Petrella v. Metro-Goldwyn-Mayer, Inc., and ways for businesses to adapt in light of the shocking decision.  With its decision in Petrella, the U.S. Supreme Court made clear that in the world of copyright infringement litigation, time is not always of the essence.  The question presented was simple: “[W]hether the equitable defense of laches (unreasonable, prejudicial delay in commencing suit) may bar relief on a copyright infringement claim brought within § 507(b) [of the Copyright Act]’s three-year statute of limitations period.”  And the Court’s answer was clear: “[C]ourts are not at liberty to jettison Congress’ judgment on the timeliness of suit.  Laches, we hold, cannot be invoked to preclude adjudication of a claim for damages brought within the three-year window.”  Yet, the implications of this case going forward are not quite as simple or clear.

Frank Petrella wrote a screenplay depicting the career of famed boxer Jake LaMotta.  In 1963, the screenplay became a copyrighted work registered with the United States Copyright Office.  Metro-Goldwyn-Mayer (“MGM”) acquired the rights to use Petrella’s screenplay in 1976.  Eventually, through famed director Martin Scorsese and Academy Award winning actor Robert De Niro, MGM transformed Petrella’s screenplay into the critically acclaimed 1980 motion picture “Raging Bull.”  When Petrella died in 1981, his renewal rights reverted to his daughter, Paula Petrella.  Paula renewed her father’s copyright in 1991.  Though Paula informed MGM of the renewed copyright, MGM continued to market and sell “Raging Bull” without permission.  Paula brought an action against MGM in 2009, 18 years after the renewal.  She alleged that MGM’s “Raging Bull”—a derivative of her father’s 1963 screenplay—infringed upon her renewed copyright.

Relying on the equitable doctrine of laches, MGM successfully dismissed Paula’s action as untimely.  On appeal to the Ninth Circuit, the trial court’s order was affirmed.  However, when Paula’s case reached the Supreme Court, an alternate ending was written.  Writing for the 6–3 majority, Justice Ginsburg noted that the Copyright Act (the “Act”) does not require copyright owners to “sue soon, or forever hold [their] peace.”  Instead, the Act expressly contemplates the limitations period for copyright infringement actions, and courts need not render equitable decisions on the timeliness of such suits.  Accordingly, the laches defense—once a permissible ground for dismissing an action where Congress failed to enact a statute of limitations—is not viable under the Copyright Act because Congress has mandated a three-year limitations period.  Under the Act, each infringing act equates to a new wrong, thus triggering a new limitations period.  This means, no matter how long a plaintiff knew of the infringing conduct, he or she is not time-barred from litigating claims that fall within the three-year window.  Therefore, despite waiting 18 years, Paula Petrella will have her day in court to argue that she is entitled to damages resulting from any MGM infringing conduct that occurred from 2006 through 2009.

FDA Writes Prescription for Social Media for Drug and Device Companies

The FDA issued two draft guidance documents on social media last week. The first guidance pertains to product claims and risk information on platforms such as Twitter and Google’s sponsored links, while the second guidance covers correcting misinformation that originates from independent third parties on the Internet and social media sites.  The FDA has opened up a comment period and will be accepting comments until September 16, 2014.

For additional information and a full analysis on both guidances, please read the latest post on our firm's Life Sciences Legal Update blog.

No Sleep 'Til . . . Copyright Victory? The Beastie Boys Continue Their String of Successes with a $1.7 Million Award in Monster Energy Case

This post was written by Rebecca Maller, Frederick Lah and Stacy K. Marcus.

On June 5, 2014, a federal jury in the Southern District of New York awarded the Beastie Boys $1.7 million for copyright infringement and false endorsement committed by the beverage company Monster Energy.  Since Monster Energy admitted to infringing on the band’s songs at the outset of the trial, the issue at trial was to determine damages.

In 2012, Monster Energy sponsored a video for a snowboarding competition, which featured a sampling of five of the Beastie Boys’ songs.  The Beastie Boys responded by suing Monster Energy for copyright infringement.  The focal point of the group’s action was a segment in the video that featured the words “RIP MCA,” in a manner resembling Monster Energy’s logo.  According to the Complaint, the logo implied the group’s endorsement of the video and violated a provision in deceased Beastie Boy Adam “MCA” Yauch’s will, which prohibited any use of his name and/or likeness in promotional campaigns.  In its defense, Monster Energy alleged that it received permission to use the sampling from Zach Sciacca (a.k.a. DJ Z-Trip), who originally created the sample with permission from the Beastie Boys.  That allegation was later rebuffed in a third-party action brought by Monster Energy against DJ Z-Trip.  Lacking the permission to use the sample, the federal jury ruled that Monster Energy should pay the Beastie Boys $1.7 million based on the jury’s determination that Monster Energy’s copyright violation was willful and in bad faith.

This is the Beastie Boys’ second copyright victory in as many months.  Two months ago, the group settled an infringement action against the toy company GoldieBlox, over the company’s video ad, which featured the Beastie Boys’ 1987 hit “Girls.”  Fearing a copyright infringement action, GoldieBlox sued the Beastie Boys in California, arguing fair use of the song as a parody.  Despite GoldieBlox’s preemptive claim that it was unaware of the salient provision in the will, the band successfully filed a counter-suit, asserting various federal and California state copyright and trademark infringement claims.  The dual actions ultimately resulted in a settlement directing GoldieBlox to issue an apology to the band and to pay a percentage of its revenues to charities, selected by the Beastie Boys, which support girls’ education in science, technology, engineering and mathematics.

While these successive victories may appear threatening to advertisers and brand representatives, the success of the Beastie Boys’ claims were to a certain extent because of the stipulation in MCA’s will.  Advertisers should make sure to diligently investigate whether there are pre-existing bars on the intellectual property assets they seek to incorporate.

NAD Jumps the Shark on Use of Consumer Reviews as Substantiation

Sniffing something fishy in the sea of consumer reviews, the National Advertising Division (NAD) snapped its jaws at advertising claims made in television commercials, infomercials, and on the Web by Euro-Pro Operating for its Shark brand vacuum cleaners.  The advertising was brought to the NAD’s attention by competing vacuum cleaner manufacturer, Dyson, Inc.  The claim at issue was:

“America’s Most Recommended Vacuum Brand.*

*Based on percentage of consumer recommendations for upright vacuums on major national retailer websites through August 2013, U.S. Only.”

What was special about this case was that Euro-Pro sought to substantiate its “most recommended” claim on aggregated consumer reviews.

The first issue was, what did the claim really mean?  Dyson said it meant that the Shark is the most recommended vacuum among vacuum cleaner owners, nationwide, and that the claim communicated a comparative message, namely that the Shark was recommended over other brands.  Euro-Pro, on the other hand, thought the claim was as clear as Caribbean water: the Shark is “America’s Most Recommended Vacuum Brand” “based on percentages of consumer reviews for upright vacuums on major national retailer websites through August 2013.”  There was nothing comparative about the statement, according to the advertiser.  Interestingly, the NAD tended to side with the advertiser’s interpretation, namely that the claim “America’s Most Recommended Vacuum Brand*” reasonably conveyed a message that Shark is the most recommended vacuum brand among American vacuum cleaner consumers.  However, it interpreted the asterisked second part of the claim to be an explanation of how Euro-Pro sourced the data on which it based its claim.  So, the Shark wins, right?  Not so fast.

The second (and ultimately determinative) issue was whether the basis of the claim was sufficiently reliable in order to form a reasonable basis for the claim.  Here is where the NAD really sunk its teeth into aggregated reviews as a source for advertising claims.  The NAD started from “first principles.”  Were consumer reviews “representative”?  That is, was the data representative of “America”?  The reviews that were used were sourced based on the question as to whether the consumer recommended the product or not.  There were thousands of these reviews, tabulated on a quarterly basis across many online retailers and some brick-and-mortar stores.  What these data offered in terms of volume, they lacked in scientific integrity, according to the NAD.  It was apparently placed into the record that an overwhelming majority of vacuum cleaner sales occurred in brick-and-mortar stores, and yet the aggregated universe of reviews was largely skewed toward online retailers.  Should it matter where a person purchased the product?  The NAD thought so.

What did the advertiser know about the demographics?  A lot, but apparently the fact that it was “self-reported,” as consumer reviews naturally are, was a virtually fatal flaw.  The NAD found that this demographic information was “unverified.”  The NAD also faulted the consumer reviews for not having verifiable insight into household income.  The NAD, seemingly unclear as to whether or not consumer reviews could ever be representative in a verified and meaningful way, concluded that the advertiser had not been able to show in this case that the aggregated data were reliably representative. 

In addition to problems with representativeness, the consumer reviews were just generally unreliable.  In a fascinating statement, the NAD suggests that consumer reviews can be relied upon by consumers in making purchasing decisions, but that does not make them “reliable” for purposes of advertising substantiation.  And, this is the key take-away from this case:  The NAD wisely does not take issue with consumer reviews generally.  (And the aggregator of the consumer reviews was never even mentioned in the case.)  The problem is that when consumer reviews are aggregated across many Web sites and under various conditions and in various contexts, there is no way (currently) to ensure that these reviews are reliably tabulated and integrated for purposes of forming a reasonable basis for an advertising claim.  The NAD did not say that it would be problematic to call out that on Amazon.com, the Shark has a 5-star average from consumer reviews.  What the NAD decision stands for is the proposition that aggregation of data across platforms and sites must be shown to be reliably and scientifically performed in order to meet a basic threshold for adequate substantiation.  It was the aggregation and the subsequent interpretation of the aggregation (“America’s Most Recommended…”) that really bothered the NAD.

(Query: what would the NAD think about awards and seals that are based on aggregated data?)

The story doesn’t end here, though.  Euro-Pro has decided to take its case to the NARB.  However the panel decides, this case is an important one because it is the first time anyone has really examined the increasing use of aggregated data for purposes of marketing claims.

Euro-Pro Operating, LLC, Shark-brand Vacuum Cleaners, NAD Case Reports #5717 (May 29, 2014).

Oklahoma Joins the Rapidly Growing Number of States with Social Media Password Laws

This post was written by Rose Plager-Unger and Frederick Lah.

On May 21, 2014, Oklahoma enacted H.B. 2372, following the trend outlined in our earlier article on the growing number of states prohibiting employers from requesting employee or applicant social media account passwords.  H.B. 2372 prohibits employers from requesting or requiring the user name and password of employees’ or applicants’ personal social media accounts or demanding employees or applicants to access the accounts in front of the employer.  The law also prohibits employers from firing, disciplining, or denying employment to employees or applicants who refuse to provide the requested information.

Currently, fifteen states have enacted laws similar to Oklahoma’s law, and legislation has been introduced in at least thirteen more states.  This issue only continues to grow as Facebook has publically supported laws restricting employer access.  Further, even if a state has not adopted a law specifically prohibiting employers’ access to employees’ or applicants’ passwords, employees and applicants can invoke common-law privacy principles to protect their privacy rights.

While questions remain as to how widespread the practice of requesting employee or applicant social media passwords was, there is no denying the fact that Oklahoma’s new law represents the latest in a growing trend.  Employers should take proactive steps to protect themselves from potential violations including updating internal policies and procedures to comply with the new legislation.  Given the patchwork of laws governing this issue, it is the best practice for an employer who maintains employees in many of these jurisdictions to comply with the most restrictive state’s law.  Further, once employers revise their policies and procedures, they should make sure that employees involved in the hiring process and in managerial positions are aware of what they can and cannot ask of applicants and employees.

Stay in Tune with SAG-AFTRA - Town Hall Meeting in New York

Join us on Wednesday, June 25, for the Joint Policy Committee’s New York Town Hall Meeting, hosted by The TEAM Companies. Find out what’s new in 2014, including the following hot topics:

  • Resolution of the SAG-AFTRA CBA Issues
  • Overview of the Audit Process
  • Recent SAG-AFTRA Arbitration
  • Ad-ID
  • Discussion of the Experimental Waiver for Made Fors
  • AFM Update

Register Now! RSVP to Leon Vaught at lvaught@teamservices.net (space is limited)

Wednesday, June 25th
8:30am - 10:00am:  Breakfast & Networking
10:00am - 12:00pm:  Stacy Marcus, JPC - NY Town Hall Meeting

Helen Mills Event Space
135 West 26th Street, Suite 7A
New York, NY 10001
Map and Directions

FTC Calling for Legislation in Recent Report on Data Brokers

The FTC released its report “Data Brokers: A Call for Transparency and Accountability”, which calls for more transparency and accountability from the companies that collect, resell or share consumers’ personal information, generally known as data brokers.  While the report mentions some of the benefits of these companies, it strongly emphasizes their associated risks, noting that data brokers often store delicate consumer information, potentially exposing consumers to fraud, theft, and other types of consumer harm.  One of the FTC’s key findings was that consumers have little access or control over their information once it is provided to data brokers, sparking a call for legislative action for increased transparency and accountability.  For more information on this issue, please read the latest post on our Global Regulatory Enforcement blog.