On December 5, the House of Representatives voted to pass H.R. 3309, also known as “The Innovation Act”, whose supporters believe will help to address the issue of Patent Assertion Entities (also referred to as “Patent Trolls”) by placing a greater burden and risk on the asserting parties. For more information on the bill and its implications, read our Intellectual Property Group’s recent alert entitled Patent Suits Becoming More Onerous for Plaintiffs?, which provides a summary of the bill’s key provisions.
The Federal Trade Commission (“FTC”) will host a one-day workshop on Wednesday, December 4, 2013 to look at the issue of “sponsored content” or “native advertising,” terms which refer to advertising that is blended into news, entertainment, and other content. According to the FTC, the workshop will “bring together publishing and advertising industry representatives, consumer advocates, academics, and self-regulatory organizations to explore: the ways in which sponsored content is presented to consumers online and in mobile apps; consumers’ recognition and understanding of it; the contexts in which it should be identifiable as advertising; and effective ways of differentiating it from editorial content.”
According to eMarketer, spending on sponsored content is expected to grow 24% to $1.9 billion this year, a faster growth rate than for most other forms of digital marketing. New publishers, such as Buzzfeed, generate their ad revenue around sponsored content, and more traditional publishers, like Forbes and the Washington Post, are following suit.
The blending of advertising and content, though, has been met with regulatory scrutiny. For example, search engines have drawn the attention of the FTC for the practice. The National Advertising Division also examined Qualcomm’s sponsored content campaign. As companies look for new and better ways to reach consumers through their ads, they should proceed with caution and ensure that they’re providing the necessary disclosures. Clearly, the FTC is paying attention.
The collective bargaining agreement between the American Federation of Musicians (AFofM) and the advertising industry (as extended by the bargaining parties in 2012) will expire on February 14, 2014.
What needs to be done?
If your company is a Joint Policy Committee (JPC) authorizer, your company’s interests in this agreement will be represented by the JPC in negotiations with the AFofM; no further action is required.
If your company no longer wishes to be represented by the JPC in collective bargaining, you must withdraw your authorization from the JPC no later than December 14, 2013, by written notice to the JPC and a copy to the AFofM. Additionally, if you also wish to terminate your signatory status and adherence to the contract upon the expiration date, you must provide AFofM with sixty (60) days advance written notice of your desire to terminate the contract.
For further details, please read the instructions outlined in the recent memo to all JPC Members and ANA Members.
States continue to focus their investigation and enforcement efforts on privacy issues, with no sign that the focus will shift anytime soon. The most recent example is a $17 million settlement between 37 states (and D.C.) and Google related to Google’s use of tracking cookies on Safari browsers. For more information about this case and some other developments on the state level, read "State Attorneys General Maintain Sharp Focus on Privacy" on Reed Smith's Global Regulatory Enforcement Law Blog.
In its first ever compliance warning, the Online Interest-Based Advertising Accountability Program Council (“Accountability Program”) noted that many website operators are omitting notices of data collection for online behavioral advertising (“OBA”) on their websites where third parties, such as ad networks, are not able to provide notice without the website operator's assistance. Such notices are required under the Self-Regulatory Principles for Online Behavioral Advertising (“OBA Principles”).
In an effort to encourage compliance, the Council has delayed enforcement against first parties that fail to provide the required enhanced notice beginning until January 1, 2014.Continue Reading...
The Digital Advertising Alliance (DAA), the self-regulatory program for online behavioral advertising (OBA), was busy last week, releasing four formal review decisions.
The cases discussed below highlight DAA’s commitment to spreading consumer awareness about OBA, educating consumers on OBA activities, and providing consumers with options regarding the collection of their data. The cases were initiated by DAA itself, and not by competitors or consumers. OBA activity is a relatively unregulated area, and consumer protection authorities have largely relied on businesses self-regulating to protect consumers. To avoid heavier regulation, it is important that businesses make concerted efforts to be aware of and comply with DAA’s Self-Regulatory Principles for Online Behavioral Advertising (OBA Principles).
While you are reading this, the Internet is changing. Over the past several years, you may (or may not) have heard that the number of Top Level Domains (such as .com, .net, .eu, etc.) was going to grow exponentially at some point in the future. Well, the future is here.
The first of the “new gTLDs” opened for registrations October 31 for a trademark “Sunrise” – dotShabaka, an Arabic domain (technically, شبكة.) – which is the generic name in Arabic for the Internet. On November 26, the first English language new gTLDs will begin their Sunrise Periods – .bike, .clothing, .guru, .holdings, .plumbing, .singles, and .ventures. (A Sunrise is a period during which trademark owners can register domains matching their trademarks, typically for a higher price than during the general registration period.) This is only the beginning. We can expect new Sunrise announcements on a regular basis – up to 20 a week or more – until approximately 1400 new gTLDs are delegated over the next two to three years.
This post was written by Christine E. Nielsen.
The FCC is seeking comments on industry group petitions for clarification and forbearance on the recently amended Telephone Consumer Protection Act (TCPA) Rules. A petition filed with the FCC by a Coalition of Mobile Engagement Providers specifically seeks clarification that the revised forms of consent are only required for new customers such that customers who previously provided valid consent will continue to receive requested communications without having to re-opt-in. The Direct Marketing Association (DMA) also petitioned the FCC to forbear enforcement of the disclosure requirements because, while those requirements were meant to be consistent with the disclosures required by the Federal Trade Commission (FTC), the DMA argues that they actually go beyond the FTC’s disclosure requirements. Comments are due to the FCC on December 2. You can read more about the new rules, the recent petitions, and the request for comments on the Global Regulatory Enforcement Law Blog’s related post.
The ANA-4A’s Joint Policy Committee (JPC) and the American Federation of Musicians (AFofM) have mutually agreed to an extension of the current Commercial Announcements Agreement through February 14, 2014.
All current rates, terms and provisions remain in effect through 2/14/14.
Read the fully executed Memorandum of Agreement.
From time to time I like to remind clients of specific network guidelines to keep in mind when developing advertising. One such guideline involves Safety in Advertising.
Per the network guidelines, all advertising that disregards normal safety precautions is unacceptable. The networks will not accept advertising that directly or indirectly condones or glamorizes unsafe or antisocial behavior, or that minimizes or ignores the consequences of any unsafe or antisocial behavior being portrayed.
It is the advertiser’s responsibility to portray compliance with standard safety precautions. Some examples include the following:
- Commercials depicting use of recreational equipment – i.e., bicycles, in-line skates, and/or skateboards must show users of the products practicing proper safety methods, such as those recommended by the U.S. Consumer Product Safety Commission. For instance, bicyclists should wear bright clothing and approved helmets; in-line skaters and skateboarders should wear helmets, wrist guards, knee and elbow pads, and gloves. All bicyclists and skaters should be depicted obeying traffic laws.
- Commercials depicting use of mechanical equipment or power and/or hand tools must show users of the products wearing appropriate safety gear.
- The depiction of driving an automobile requires special care. Seatbelts and shoulder harnesses should be worn (unless in an historic setting or in period footage). Both of the driver’s hands must be on the steering wheel at all times. The use of cellular phones or other electronic devices (other than “hands-free” devices) is not permitted. All laws and safety regulations should be carefully observed.
- Food and beverages should not be consumed while engaging in physical activity or while driving.
- Advertising that depicts reckless or dangerous behavior by drivers is unacceptable.
- Feats of skill or athletic prowess may be allowed if the depiction meets safety guidelines and if the action is reasonably related to the product or service being promoted. Audio or visual disclaimers or warnings may be required.
It is interesting to note that the U.S. Postal Service recently pulled a series of stamps depicting children engaging in various physical activities in response to concerns raised by the President’s Council on Fitness, Sports and Nutrition that some of the depictions were unsafe.
The networks are very careful not to accept advertising that disregards normal safety precautions. So, if you have plans to create advertising that you feel could present a safety concern, make sure your creative complies with the network guidelines. And remember, when in doubt, ask questions. The network editors are there to answer any questions you may have.
Marilyn Colaninno is Director of Rights and Clearances for Reed Smith and is responsible for clearing commercials for the firm’s many clients in the advertising industry. If you have specific questions, please contact Marilyn directly at 212-549-0347 or at email@example.com.
When businesses pay for goods and services, they generally like to receive them. Unfortunately, as any bankruptcy lawyer will tell you, this consistent desire is not matched by uniform experience.
Most recently, the bankruptcy of KSL Media again illustrated the risks and concerns when an advertiser entrusts significant funds to an entity that is too thinly capitalized or, as some allege, guilty of diverting funds that were to be passed through and in breach of a fiduciary duty to its clients. KSL’s bankruptcy, of course, was also noteworthy not because KSL was a start-up, but because it was not. We might expect capitalization risks with start-ups. But KSL was an established media company that failed. So the question remains: how can advertisers protect funds entrusted to suppliers, particularly those that are earmarked for payments to third parties?
First and foremost, a little research goes a long way toward preventing surprise and disappointment. This is true with any supplier, even those not entrusted with funds. But where pass-through funds are given to a supplier, it is irresponsible not to investigate the financial stability of the supplier as a first step.
When considering engaging any supplier, the advertiser should, at a minimum, ask the following questions:
- What is the company’s operations history?
- What does its balance sheet look like?
- How is the entity capitalized? Is the entity funded with capital or debt, and – if the latter – when are interest payments or principle reduction payments due?
- What strain does debt service put on the company’s cash flow and its ability to make capital investments?
- How has the company grown? Did it grow by taking on debt as opposed to organically?
- Are bank references available? Are there any other credit reports?
- Have you seen certified financials?
Where cash is given to a supplier in anticipation of a “pass through” of the cash to the eventual provider of a good or service, several additional questions should to be asked:
- Who “owns” the money as it is transferred along the chain of distribution?
- How are the relevant accounts structured? Are dollars earmarked for the company or are those earmarked for pass-through co-mingled?
- Who has control over those accounts?
- What is the procedure for the release of funds? Who has the right to release the funds, and under what circumstances?
- Are there any “secured” creditors with potential claims to the relevant funds? Over what funds do those secured creditors have a right to assert a claim? Is there an agreement with creditors defining the relative rights to those funds?
- If the funds are not passed through on a timely basis or if they are diverted for improper purposes, what are the ramifications to the advertiser? The KSL bankruptcy best illustrates how the seller (the media company) will go up the supply chain and demand payment from the advertiser, asserting that everyone in the supply chain was an agent for the advertiser. And it’s not just about media buying. It applies to any supplier entrusted with pass-through monies. An astute advertiser will also determine if non-pass-through of the monies creates statutory violations, e.g., sales tax, payroll, and associated taxes.
- Are funds from multiple clients pooled together in a common fund and, if so, how are respective rights to such monies determined?
What advertisers should be wary of is reliance on indemnities or contractual provisions that adopt the concept of sequential liability, or assert that the supplier is acting as a principal and not an agent. All too often, particularly with media buys, the media does not agree with sequential liability or that the media buyer is acting as a principal. Nor is the advertiser necessarily told what the media will agree to. Instead, media outlet forms generally provide for joint and several liability, i.e., the media outlet can go after either or both the media buyer and/or the advertiser. In such circumstances there is no “meetings of the mind” with respect to debtor(s) against whom a claim can be asserted. This creates a textbook case of who is liable to third parties in an agent/ principal relationship. Absent extenuating circumstances, the law is clear: an agent is not responsible for third-party obligations it incurs on behalf of its principal, regardless of whether the principal has paid the agent. While the principal may be able to seek reimbursement from the agent, non-payment by the agent is not a defense to paying the third party what it is due. Over the years, all too many advertisers have been stung by such double payments, and an agent that has either gone bankrupt or diverted the entrusted funds to other (sometimes illegal) purposes.
The bankruptcy of a supplier entrusted with pass-through monies can be even worse. The classic bankruptcy-court example is the case of a buyer who prepays for goods or services, and the would-be supplier goes out of business prior to delivery. In such circumstances, the funds earmarked for the purchase may not be traceable and, even if they are, they may be the subject of a senior claim of a lender or other party and therefore not recoverable. Worse, in some industries, the customer of the bankrupt service provider may remain responsible for the services that the bankrupt supplier was supposed to perform, and liable if they are not performed.
Undercapitalized or over-leveraged suppliers present a challenge to those who do business with them. It is important to make sure that you will get what you pay for. And in order to be safe, a goodly measure of investigation is crucial.
Widely known as California's "Eraser Button" law, SB 568 recently cleared the governor’s desk and has been signed into law. The new law, which takes effect on January 1, 2015, adds two key privacy-related requirements for operators of websites, online services, and mobile apps directed toward minors. Find out whether it will apply to your business by reading the latest post on our sister site, the Global Regulatory Enforcement Law Blog.
On October 21, New York Governor Andrew Cuomo signed into law amendments to New York’s labor laws to specifically cover child models. The legislation aims to protect runway and print models who are under the age of 18 in accordance with the same state labor laws that already protect other young entertainers, including actors, dancers, musicians, singers, and voice-over artists. Specifically, the law, which goes into effect 30 days from its October 21 signing, contains mandated education, oversight, and financial protections, and requires employers to obtain work-related certificates of eligibility and maintain proper records of all work performed by child models. Among other provisions, this legislation requires: (i) chaperones to monitor the workplaces of models under 16 years of age; (ii) employers to provide nurses with pediatric experience and, under certain circumstances, teachers, as well as a dedicated space for instruction; (iii) employers to deposit at least 15 percent of the child’s gross income into a financial trust created by the model’s parents or guardians; and (iv) employers to provide notice to the NYS Labor Commissioner at least two business days prior to employing an underage model. Employers that violate the provisions of this legislation will be subject to monetary fines, generally ranging between $1,000 – 3,000 per violation.
This post was written by Marc S. Kaufman.
Last year, B.E. Technology LLC filed several suits for patent infringement against a host of companies whose business model depends on advertising. The patents in suit, U.S. Patent 6,628,314 and U.S. Patent 6,771,290, date back to 1998 and are alleged to protect software that serves advertisements based on personal characteristics and behaviors, i.e., targeted advertising. Martin D. Hoyle, the CEO of B.E. Technology LLC, is the sole inventor listed on the patents. On October 8, 2013, Microsoft and Facebook challenged the validity of the patents by requesting “inter partes review” of the patents in the U.S. Patent Office. Clearly, the outcome of this case could have significant ramifications for the Internet advertising community.
Inter partes review is a new procedure, created by the America Invents Act, for challenging patents in the U.S. Patent Office. Inter partes review is less expensive and faster than typical civil litigations, and provides the challenger with the opportunity to demonstrate that a patent should not have been issued because invention protected by the patent was not novel, or would have been obvious, at the critical date – 1998, in the case of the patents in this case. The inter partes review will take about 18 months to complete and, at the discretion of the judge in each case, the civil litigations may be stayed, i.e., put on hold, pending resolution of the inter partes review.
B.E. Technology LLC is alleging that, among other activities, the targeted advertising on the Facebook website and mobile app, and the targeted advertising in Microsoft’s Xbox video console, infringe the patents. Microsoft and Facebook have submitted evidence including earlier patents for delivering demographically targeted advertising. The Patent Office will review the request for inter partes review and will decide if the Requestors – Microsoft and Facebook – are likely to prevail. If so, the Patent Office will grant the request, and the review of the patent will be undertaken by a panel of judges at the Patent Office. Both the Requestors and the patent owner will be given the opportunity to argue their position to the judges. If the Requestors prevail, the patents will be declared invalid and unenforceable, and the civil cases will be dismissed. If the Requestors do not prevail, their position in the civil litigation will be more difficult.
The future of the Do-Not-Track working group remains unclear, according to a recent survey taken among its participants. Forty-three of the 100 or so working-group participants submitted responses to the survey, which proposed five paths for the group moving forward.
According to the survey, 17 participants voted that they have “no confidence” in the group and that all work should be discontinued. Some of the comments described the proceeding as “so flawed [that] it’s a farce.” Others called the progress made to date, “shameful.” Other participants remained somewhat more hopeful; though, ideas on how to achieve a more meaningful Do-Not-Track standard varied. Twenty-six participants voted against continuing to stay on the current path and resolving the remaining open issues as outlined in the proposal. The remaining proposals, which garnered the most votes, recommended splitting up the working group’s focus on establishing a technical means for sending a Do-Not-Track signal and establishing compliance standards for when a company receives a signal.
While the working group’s future may be in question, there may still be a glimmer of hope for finding a Do-Not-Track standard. The Digital Advertising Alliance, who recently departed from the working group, has said that it will start its own “process to evaluate how browser-based signals can be used to meaningfully address consumer privacy.” In addition, at least one state has taken proactive measures regarding Do-Not-Track. See our previous blog post on California’s new law requiring companies to disclose in their privacy policies how their websites and apps respond to a “Do-Not-Track” signal. We’ll continue to follow the industry’s efforts in this space.