But I Thought They Really Liked Me! Facebook's Prohibition on Like-Gating Apps

This post was written by Keri S. Bruce and Matthew Y. Kane.

A recent Facebook Platform Policy change may affect the way many promotions are run on Facebook.  The change, effective November 5, 2014, prohibits Facebook Page owners from requiring a user to “like” their Page in order to access content, such as entry into a contest or sweepstakes, via a Facebook application (“App”).  Advertisers often use this technique, known as “like-gating,” as a way to increase the amount of likes their Pages receive. 

Facebook believes that a prohibition on like-gating will benefit both advertisers and consumers.  In announcing the change, Facebook stated in a blog post: “[T]o ensure quality connections and help businesses reach the people who matter to them, we want people to like Pages because they want to connect and hear from the business, not because of artificial incentives.” 

A like can be valuable to an advertiser, regardless of whether it is generated organically or artificially. When a user likes a Facebook Page, the like may appear on the user’s Timeline, stories from the Page may show up on the user’s news feeds, and users may also appear in advertisements for that Page.

While the implications of the change are yet to be seen, here are a few things that advertisers should keep in mind:

  • The new prohibition is part of the Facebook Platform Policy that applies to Apps on Facebook Pages.  Facebook’s Page Terms require that all Page Apps comply with the Platform Policy.  Although Facebook has not yet updated its Page Terms to prohibit like-gating for on-Page promotions that don’t use Apps, advertisers – given Facebook’s rationale for the Platform Policy change, and given the FTC’s recent guidance on social media promotions – should not be surprised to see Facebook amend its Page Terms even further to address incentivizing likes for on-Page promotions and other benefits, such as discounts or free items. 
     
  • For now, though, if an advertiser plans to run a Facebook promotion via an App that will extend past November 4, 2014, the advertiser should no longer require a Facebook user to like its Page in order for the user to participate. 
     
  • The prohibition on like-gating applies to all content provided by an advertiser via an App – not just an entry into a contest or sweepstakes.  Thus, if an advertiser is offering songs, brochures, or any other custom content where access is through an App, it should not require a user to like its Page in order to download or access this content.
     
  • Although incentivizing Page-likes will be prohibited, advertisers are still permitted to incentivize users in other ways, such as to log in to the advertiser’s App, enter a promotion through an App, and check-in to a location via an App. 

Facebook's Platform Policy change is just another reminder that the terms and conditions of using social media platforms such as Facebook, Twitter, Instagram, Pinterest and the like are constantly evolving.  In order to ‎take advantage of the opportunities presented in social media, advertisers, agencies and mobile app developers must stay abreast‎ of these changes and ensure their activities remain in compliance with the applicable platform's terms and conditions of use.

New SIFMA Guidance May Ease Accredited Investor Verification Worries, Assist Reg D Offerings Using General Solicitation

This post was written by Robert K. Morris.

One of the goals of the federal JOBS Act, enacted in 2012, was to expand the ability of companies (both operating companies and funds) to make non-registered securities offerings using general solicitation and advertising.  Offers made through general solicitation and advertising have been prohibited under the SEC’s private offering safe harbor ever since Regulation D was adopted in 1982, and many have complained that the restriction was pointless where all purchasers were accredited investors as defined in Regulation D.  However, the SEC believed a change required legislation.

The JOBS Act made that change.  However, the Act, and the new rule adopted in 2013, imposed a new requirement – the issuer of the securities must take reasonable steps to “verify” that all the purchasers in a general solicitation offering are accredited investors. Failure to take reasonable verification steps would violate the rule even if it turned out that all purchasers actually were accredited.

For an individual to be an accredited investor, he or she must have net worth excluding principal residence of at least $1 million, or net income of $200,000 ($300,000 with spouse) in each of the two most recent years and a reasonable expectation of achieving the same in the current year.  Under the new rule, reasonable steps by the issuer to verify these criteria would include reviewing tax returns, bank statements, brokerage statements and consumer reports from recognized agencies.  To date, these steps have not seen significant use, as issuers have found them burdensome, and investors have asserted privacy concerns.  Critically, the SEC has made it clear that an issuer may not simply rely on the investor’s own representation that he or she is an accredited investor.

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Wearable is the New Black (and Latest Privacy Risk)

There has been a proliferation of wearable devices hitting the market, such as Google Glass, Fitbit and others, all with the ability to collect data and track behavior.  These "wearables" have begun to receive some scrutiny by senators and regulators, including New York's senior senator Chuck Schumer, who recently urged the FTC to push fitness device and app companies to provide users with a clear opportunity to "opt-out", since personal information may be potentially sold to third parties without the users' knowledge or consent.  For additional information on this story, please read the latest post on our firm's Global Regulatory Enforcement Law Blog.

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).