News & Resources

NEWSLETTER: Advertising, Marketing & Promotions, Spring 2012

Spring 2012

Dear Clients, Colleagues and Friends,
We are pleased to send you Olshan's Advertising, Marketing and Promotions Group's Spring 2012 Newsletter.  There have been a number of important developments and activities of interest to those involved in advertising and promotional marketing matters.  Below we have summarized the developments that we believe to be of particular importance.

As always, if you would like to discuss any of these developments, have concerns about their impact on your business or marketing campaign, or have any questions about the legal aspects of advertising and promotional marketing, please feel free to contact us and to forward this newsletter to your contacts.

OLSHAN OBTAINS DISMISSAL OF VERIZON WIRELESS AND ONSTAR'S $100 MILLION TELEMARKETING LAWSUIT

A group represented by Olshan obtained a full dismissal of a potential $100 million telemarketing lawsuit filed by Verizon Wireless and OnStar against a marketer of discounted medical services.  The sellers conducted no telemarketing themselves but hired telemarketers to sell their services, and the telemarketers in turn subcontracted some of the telemarketing out. The problem arose when the subcontractors made hundreds of thousands of automated calls to people who did not consent in advance to receiving such calls. After a preliminary injunction motion, discovery, extensive motion practice and three different complaints, the seller filed a motion to dismiss on several bases, most notably that the telemarketers were independent contractors, and in any event, that Verizon and OnStar as telecommunications providers, could not sue under a consumer protection statute. In a case of first impression, District Judge Mary L. Cooper of the District of New Jersey granted the motion to dismiss with prejudice, accepting the argument that Verizon Wireless and OnStar, as providers of telecommunications services, lacked statutory and prudential standing to sue under a consumer protection statute.

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FCC CHANGES RULES FOR ROBO-CALLS AND CALLS TO WIRELESS DEVICES

Companies using auto dialed pre-recorded or artificial voice calls (or robo-calls as they are more commonly known) as well as make calls to wireless devices, beware. The FCC has revised its rules to completely eliminate the established business relationship exemption for pre-recorded and artificial voice calls to wireless and residential numbers and subject to limited exceptions, requires prior express written consent for all telemarketing calls to wireless numbers.

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FTC SETTLEMENT PROVIDES GUIDANCE ON GETTING A CONSUMER'S EXPRESS INFORMED CONSENT

The FTC settled with "Green Millionaire Book" promoters. The FTC alleged that the defendants lured consumers with a supposedly "free" book, falsely promising that it would show them how to power their cars and homes at no cost, and then billed them for an online magazine they never ordered. The defendants have agreed to a settlement that requires them to pay almost $2 million for consumer refunds, and permanently bars them from making misleading product claims. For marketers, the settlement is important for its great detail on the disclosures and process that must be followed to get a consumer's express informed consent when making a free offer online.

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FTC ISSUES FINAL COMMISSION PRIVACY REPORT

The FTC recently issued its Final Privacy Report, which sets forth best practices for businesses regarding users' personal data. The report calls on companies handling consumer data to implement recommendations for protecting privacy, including:

  • Privacy by Design - companies should build in consumers' privacy protections at every stage in developing their products. These include reasonable security for consumer data, limited collection and retention of such data, and reasonable procedures to promote data accuracy;
  • Simplified Choice for Businesses and Consumers - companies should give consumers the option to decide what information is shared about them, and with whom. This should include a Do-Not-Track mechanism that would provide a simple, easy way for consumers to control the tracking of their online activities.
  • Greater Transparency - companies should disclose details about their collection and use of consumers' information, and provide consumers access to the data collected about them.

The report refines guidance for providing consumers with choice. The FTC clarified its position that choice should depend on the extent to which the practice is consistent with the context of the transaction (such as product fulfillment) or the consumer's existing relationship with the business or is required or specifically authorized by law (such as fraud prevention).

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FTC RELEASES TOP COMPLAINT CATEGORIES FOR 2011

The FTC has released its list of top consumer complaints received by the agency in 2011. For the 12th year in a row, identity theft complaints topped the list. Of more than 1.8 million complaints filed in 2011, 279,156, or 15 percent, were identity theft complaints. Nearly 25 percent of the identity theft complaints related to tax- or wage-related fraud.

The complaint categories are:

 

Number

Percent

Identity Theft

279,156

15 percent

Debt Collection Complaints

180,928

10 percent

Prizes, Sweepstakes, and Lotteries

100,208

6 percent

Shop-at-Home and Catalog Sales

98,306

5 percent

Banks and Lenders

89,341

5 percent

Internet Services

81,805

5 percent

Auto Related Complaints

77,435

4 percent

Imposter Scams

73,281

4 percent

Telephone and Mobile Services

70,024

4 percent

Advance-Fee Loans and Credit Protection/Repair

47,414

3 percent

FTC SEEKS PUBLIC COMMENT ON AGENCY'S RULES OF PRACTICE

The FTC announces proposed changes to two parts of the procedures that govern the way the agency operates. The proposed changes would attempt to: 1) streamline the FTC's investigatory procedures; 2) make updates to keep pace with electronic discovery; and 3) detail the agency's procedures for evaluating allegations of misconduct by attorneys practicing before the FTC.

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ROCKYOU SETTLES COPPA AND DATA SECURITY ISSUES

The social media website RockYou settled claims asserted by the FTC relating to COPPA and data security issues.  The FTC alleged that the website knowingly collected approximately 179,000 children's email addresses and associated passwords during registration - without their parents' consent - and enabled children to create personal profiles and post personal information on slide shows that could be shared online. The FTC also alleged that Company's security failures put users' including children's personal information at risk.

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PRIVACY AND DATA BREACH: SMALL BUSINESS PARTICULARLY VULNERABLE

Olshan counsel Jonathan I. Ezor recently published an opinion piece in Long Island Business News regarding online privacy and small business.  In the piece, Ezor discussed the new Consumer Privacy Bill of Rights published by the Obama Administration and how small and mid-sized businesses may face greater risks, with fewer resources to address them, with regard to consumer data.

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ARIZONA PASSES LEGISLATION THAT REGULATES BUSINESS OPPORTUNITIES

Arizona House Bill 2825 which was passed by the Arizona legislature and signed by the governor amends the Telephone Solicitations Act and broadly defines business opportunity. The regulation imposes significant registration and disclosure obligations on business opportunity marketers.

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NAD REFERS DIETARY SUPPLEMENT ADS TO FTC FOR REVIEW
A recent case provides three valuable lessons to advertisers involved in proceedings before the National Advertising Division of the Better Business Bureau (commonly referred to as NAD). In a case decided in March, the Council For Responsible Nutrition challenged ads for Serranol, which claimed to help everything from fighting immunity to joint inflammation to slowing down the aging process as well as helping erectile dysfunction and "life-threatening conditions like cancer."  The lessons related to the level of scientific suppose required for a dietary supplement product, the use of abstracts, and compliance with NAD's recommendations.

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BE CAREFUL WHAT YOU TWEET

Social media sites such as Twitter and Facebook are gaining in popularity with companies and individuals using these valuable tools as a quick and cost-effective way of promotion and advertising. While such sites are no doubt extremely valuable marketing tools for any company, the informal nature of the sites and the ease by which they can be updated often leads to mistakes and careless errors.  Using Twitter for business purposes means using it for promotional purposes; therefore tweets should be checked for their accuracy and should not infringe on others' rights.

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DURACELL AND PROCTER & GAMBLE SUED FOR DECEPTIVE MARKETING

A federal class action lawsuit has been filed against Duracell, Inc. and The Procter & Gamble Company in the United State District Court in California alleging that defendants engaged in a deceptive marketing scheme to mislead consumers as to the battery life of the Duracell Ultra Advanced and Duracell Ultra Power batteries. According to the complaint, Duracell and Proctor & Gamble allegedly concealed and misrepresented material facts as to the actual battery life of their batteries in violation of California law, causing consumers to pay a premium price for batteries that did not have materially longer battery life than Duracell's lower-priced alkaline batteries.

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CLASS ACTION LAWSUITS FILED IN RESPONSE TO CHANGES TO GOOGLE'S PRIVACY POLICY

Reflecting the risks in changing a privacy policy, two class-action lawsuits were filed in response to changes to Google's privacy policies, which took effect March 1, 2012.  Plaintiffs seek damages and claim violations of The Federal Wiretap Act, The Stored Electronic Communications Act, The Computer Fraud Abuse Act, as well as various state and common law claims.

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CLASS CERTIFIED IN ACTION AGAINST ABERCROMBIE FOR GIFT CARDS

In a rare grant of class certification in a consumer fraud action, the Northern District of Illinois recently certified class claims against Abercrombie & Fitch brought by unhappy shoppers who claim that Abercrombie voided holiday gift cards that said they had no expiration date.

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KARDASHIANS SUED IN KONNECTION WITH THEIR ENDORSEMENT OF QUICKTRIM

A federal class action lawsuit has been brought against Kimberly, Khloe and Kourtney Kardashian, QuickTrim, LLC, and others in a $5 million lawsuit alleging that defendants falsely touted the effectiveness of QuickTrim diet pills for losing weight.  The complaint alleges that the Kardashians are the principal endorsers of QuickTrim and personify the brand. Their images adorn QuickTrim's labels and packaging and they appear in nearly every advertisement for the product.  Given their role, plaintiffs seek to hold them liable for the allegedly false claims, which serve as a reminder to endorsers to be careful about what they say.

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FOR NOW, GOOGLE LOSES ON FIRST AMENDMENT DISPUTE

Viral marketing has its risks, particularly where text messages are involved.  Google and co-defendant Slide, Inc. will have to defend a TCPA class-action lawsuit in the Northern District of California after Judge Yvonne Gonzalez Rogers denied a motion to dismiss based on First Amendment grounds. The lawsuit was based on text messages sent by Google's Disco application, which allowed customers to simultaneously send the same text message to a network of as many as 99 other cell phones, which the plaintiffs alleged were advertising in violation of the TCPA.

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FALSE FRIENDS: THE ETHICAL LIMITS OF DISCOVERY VIA SOCIAL MEDIA
As more people of every demographic become regular users of social media services, evidence arising out of social media postings is playing a much greater role in litigation. Plaintiffs in personal injury cases are being presented with Facebook photos showing them doing activities they claim their injuries made impossible, location-tagged tweets may establish (or destroy) alibis, and blog posts may breach confidentiality or provide case-critical facts.  Jonathan I. Ezor, in his Law Technology News article, examines the risks involved when attorneys seeking information or evidence decide to go beyond publicly available social media posts.

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INTELLECTUAL PROPERTY DEVELOPMENTS

Second Circuit Reverses DMCA Summary Judgment Grant In Viacom v. YouTube
In Viacom Int'l, Inc., et al. v. YouTube, Inc., et al., the United States Court of Appeals for the Second Circuit recently reversed a district court's holding that defendants were entitled to safe harbor protection under §512(c) of the Digital Millennium Copyright Act.  The court's decision is particularly interesting with respect to the potential limits of the safe harbor when there is an allegation that the service provider was willfully blind to infringing postings.

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How Far Can A Trademark Go?

A trademark is often a company's most valuable asset. It is what distinguishes a company's products or services from that of its competitors, and many times, consumers will make their purchasing decisions based on the goodwill of a particular brand. For that reason, it is not unusual for a company to have a knee-jerk reaction to challenge another company's use or ownership of the identical mark. When the other company's goods or services are related to those of the trademark owner, the use of and/or attempt to register an identical mark by the other company should be challenged to protect the rights of the trademark owner. What happens, however, when the goods or services of the other company are not related to the goods or services sold by the trademark owner? Can a trademark owner still challenge the other company's use or registration?

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Trendy Trademarks

Once a name, slogan or word becomes trendy, enthusiastic entrepreneurs race to file trademark applications in the hope of cashing in on the excitement. We witnessed two examples of this recently. One, with the birth of Blue Ivy Carter (the daughter of singer Beyoncé and rapper Jay-Z), and one with Jeremy Lin's surprising rise to fame with the New York Knicks, which sparked "Linsanity" around the country.

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New Social Media Site Can Pose Significant Intellectual Property Issue

The new social media website known as Pinterest has exploded in popularity in recent months. On the Pinterest site, users can "pin" images found on the Internet to their "Pinboards." Pinterest describes itself as a "virtual pinboard" that allows a user to "organize and share all the beautiful things" the user finds on the web. According to Pinterest, "[p]eople use pinboards to plan their weddings, decorate their homes, and share their favorite recipes."  However, the site is now being used by companies as a promotional and social networking tool, which raises intellectual property considerations and could be a trap for the unwary.

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Use Of Albert Einstein Image May Be Violation Of Right Of Publicity

In 2010, General Motors used an image of Albert Einstein in an ad for its Terrain vehicle. The image, which GM licensed from Getty Images, depicted Einstein's head on a muscular, shirtless body with an "e=mc2" tattoo. The image was used by GM in People Magazine's annual Sexiest Man Alive issue. The Hebrew University of Jerusalem, the current owner of Einstein's intellectual property rights, sued General Motors in California, alleging unfair competition under the Lanham Act and California law as well as a violation of the right of publicity. In a recent decision, the California court granted GM's summary judgment on the unfair competition claims, but denied summary judgment on the right of publicity claim.

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Sandra Bullock Sues Watch Company

Sandra Bullock has filed suit against ToyWatch USA and several vendors for using her image in a marketing campaign without her permission. In her Oscar-winning film "The Blind Side", Bullock's character, Leigh Anne Tuohy, wore a diamond-encrusted watch made by ToyWatch USA. ToyWatch advertised its watch as the "Sandra Bullock Watch".  Bullock filed a complaint in California state court alleging that her common law right of publicity/right of privacy was violated. The complaint alleged that "ToyWatch USA intentionally and prominently used Ms. Bullock's name, photograph, image, identity, and persona in advertising, marketing and/or promotion ... to sell watches." The complaint further alleges that in certain of the advertisements Bullock's "name, photograph, identity and persona were placed adjacent to or in close proximity of the Advertised Products, as well as the particular defendant(s)' company name(s), logo(s), trademark(s), trade name(s), trade dress, and slogan(s), so as to create an unauthorized and false association with Ms. Bullock".

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Rosetta Stone Lives To Fight Google Another Day

It has happened to all of us. We do a Google search for a company name or trademark, and when we get the results, in addition to the company's website, we see numerous other links of other companies. Wondering whether these other companies are legitimate and could be selling the goods we are looking for at a cheaper price, we click on a link and find out that the website we are brought to is not actually the company for which we were searching and does not sell the company's products at all. Other times, the link will take us to a site that states or implies that it is authorized by the trademark owner, but in fact, there is no such affiliation. It turns out that unbeknownst to many consumers, Google has an AdWords program, which allows third parties to buy keywords, including trademarks, that generate sponsored links when someone types the word or phrase in an online search.

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Urban Outfitters Sued For Unauthorized Use Of Model's Photograph

A judge in New York recently refused to dismiss the complaint filed by a model, Hailey Clauson, and her parents, brought against the retailer Urban Outfitters, claiming the unauthorized use of Clauson's photograph. At issue is an allegedly "salacious" photograph of the underage Clauson sitting on a motorcycle. The photograph is featured on t-shirts that were sold at Urban Outfitters. Urban Outfitters claims that it obtained the t-shirts from its suppliers (and co-defendants). The lawsuit alleges that the photographer who took the photos of Clauson had no right to use them or license them to the t-shirt company.

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BUZZ AT THE ADVERTISING, MARKETING & PROMOTIONS LAW GROUP

Andrew Lustigman Quoted In Law360 On Verizon & Third-Party Billing

Andrew B. Lustigman tells Law360 that Verizon's decision to cease third-party billing is "an enormous blow for competition in the telecommunications marketplace."  The Law360 article focuses on legislation expected in the Senate that would prohibit third-party charges on land-line phone bills.  Lustigman hopes any Senate action would try to enhance "cooperative sharing of information, compliance, and truth-in-billing requirements."

E-Commerce Quotes Scott Shaffer On Robocalls And FCC Regulation

Scott Shaffer is quoted by E-Commerce in an article reporting on the FCC's decision to place new restrictions on prerecorded telemarketing calls, aka "robocalls." The new regulations will force some organizations to get explicit consent from consumers before targeting them with such calls.

Olshan Counsel Jonathan Ezor Authors Article In Law 360

Jonathan I. Ezor discusses major marketers launching innovative social media initiatives that merit attention for their business impact as well as the legal issues they raise in "Big Social Media Initiatives, Big Legal Questions," appearing in Media & Entertainment Law 360 and Privacy & Consumer Protection Law360 (subscription required).  American Express announced the latest addition to its co-branded social media Card Sync programs.  Walgreen expanded its affiliation with social network Foursquare with a program giving users who "check-in" at a Walgreens pharmacy an instant scannable coupon "with no texting, reply or other steps required."

Olshan Counsel Jonathan Ezor Quoted In Augme/Velti Patent Story

Olshan counsel Jonathan I. Ezor was extensively quoted in a Mobile Marketer article by Chantal Tode about a new online advertising patent lawsuit brought by Augme against competitor Velti.  In the piece, Ezor discusses the typical progression of these types of disputes, including the possibility Velti might countersue based on its own patents.  The article concludes: "The broader message for marketers is that patents are so hard to know about in advance and so diverse that this type of thing could happen to almost any company providing services," Mr. Ezor said. "Companies that are marketing services and buying them have to be ready for that, it has to be part of the contingency planning, including in their contracts and their insurance," he said.

Andrew Lustigman And Howard Smith To Participate In ACI's Forum On Litigation & Resolving Advertising Disputes

American Conference Institute's 3rd Expert Forum on Litigation and Resolving Advertising Disputes has been specifically designed to help advertising litigators resolve their biggest challenges.  Olshan's Andrew B. Lustigman and Howard Smith will present a comprehensive review of the year's most important advertising cases.  The forum will be held on June 19 - June 21, 2012 at the Affinia Manhattan, New York.

OLSHAN UPDATES

The National Law Journal Names Olshan To 2012 "Midsize Hot List"

Olshan has been designated by The National Law Journal as one of the top 20 midsize law firms in the U.S., on NLJ's " 2012 Midsize Hot List."  NLJ says firms on the list are not only "good at what they do, but they're also good at how they do it."  NLJ specifically noted Olshan's litigation prowess as well as its leading Activist Practice and the new Advertising, Marketing & Promotions practice.

The Activist Report Features "10 Questions With Steve Wolosky" in May 2012 Issue

The May 2012 issue of 13D Monitor's The Activist Report features an extensive Q&A with Activist Practice leader  Steve Wolosky, who 13D Monitor called "the go-to lawyer for activist investors." Wolosky provides insights on trends in shareholder activism, pressing corporate governance issues, experiences in recent activist situations, potential 13D rule changes and other hot-button issues related to activist investors

Olshan Joins Leading Law Firms To Write AICPA M&A Disputes Practice Aid

Olshan is one of five leading law firms invited for the first time by the American Institute of Certified Public Accountants to work with CPAs on the Mergers & Acquisitions Dispute Task Force to author AICPA's Mergers and Acquisitions Disputes Practice Aid.  It will be a source of information for practitioners who provide M&A dispute consulting services, whether as a neutral accountant, a consultant or an expert witness.  Olshan's Jennifer L. Heil joined attorneys from DLA Piper, Latham & Watkins, Milbank Tweed and Nutter McClennan on the task force.

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Advertising Marketing & Promotions Group
Andrew B. Lustigman
Sheldon S. Lustigman
Scott A. Shaffer
Adam Z. Solomon
Jonathan I. Ezor
Safia A. Anand

****
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