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NEWSLETTER: Advertising, Marketing & Promotions, Summer 2012

Summer 2012

On June 21, 2012

ADVERTISING, MARKETING & PROMOTIONS LAW

Dear Clients, Colleagues and Friends,

We are pleased to send you Olshan's Advertising, Marketing and Promotions group's summer 2012 newsletter. There have been a number of important developments and activities of interest to those involved in advertising and promotional marketing matters. We have summarized items 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.

William R. MacDonald joined Olshan as a partner in the Advertising, Marketing & Promotions and Intellectual Property practice groups. Bill, who comes to Olshan from Dewey & LeBoeuf LLP, has 15 years' experience focused on information technology and intellectual property transactions, advertising, marketing and licensing. He is also a Certified Information Privacy Professional. Prior to Dewey, he was the general counsel of Euro RSCG Life Worldwide.

The Best Lawyers In America 2013 recognized partners Steve Wolosky for securities / capital markets law and Eric Goldberg for real estate law. Steve Wolosky counsels clients in the areas of proxy contests, mergers & acquisitions, as well as equity investments in public companies including in activist situations. Eric Goldberg represents clients in high-profile residential and commercial real estate development & transactions, and he is recognized for his handling of real estate acquisitions, joint ventures and restructurings. For additional information about Best Lawyers, please click here.

The main event on ESPN's nationally - televised Friday Night Fights went on as scheduled on July 27, 2012 despite the filing of a last-minute preliminary injunction that would have prohibited the title defense by #1-ranked lightweight Hank Lundy. Representing the promoter Classic Entertainment & Sports (CES) was Scott Shaffer. Scott convinced a New York Supreme Court Justice that the injunction would have been unfair to all parties.

Sheldon Lustigman tells Law360 that the NY Attorney General's investigation into PepsiCo Inc. and two other companies over caffeine levels in their energy drinks and marketing methods will "result in modifications by the industry to try to comply with objections that have been raised." The Law360 article (access to the article requires a subscription) focuses on the first overall state-level investigation of its kind.

Scott Shaffer was victorious against a plaintiff trying to start a class action lawsuit against our client arising from a Domino's pizza franchisee's misuse of our client's database to make 40,000 calls advertising pizza specials to its customers. Because the law provides a $500 award for each illegal call, the class action lawsuit exposed our client to up to $20 million dollars in damages. When the class certification motion was denied, the plaintiff was limited to pursuing only her own $500 claim. This is a victory in a complex area of telemarketing law. Read the decision here.

On August 15, 2012, Olshan presented a webinar entitled "Shareholder Activism - Issues, Tactics and Trends." Activist investors are an integral part of the U.S. corporate governance landscape. Olshan's Activist Practice has been involved in over 300 activist campaigns for board representation, and this webinar discussed our recent experience with activist investor clients and with management teams and boards on the other side. Please click here for more information about this webinar and how to register for each webinar and CLE credit.

On June 21, 2012, Olshan presented a webinar entitled "What Every Business Should Know About Creating and Protecting its Brand." Olshan attorneys included a discussion on trademarks, copyrights and other types of intellectual capital. This webinar also discussed ways to get protection from infringement claims. Please click here for more information about this webinar and how to register for each webinar and CLE credit.

Jonathan Ezor, in Law Technology News, thinks the new Samsung smartphone may meet or beat the iPhone in the legal industry. Ezor feels the Galaxy SIII could be a useful and productive addition to a legal department or a law firm.

Olshan's Howard Smith was interviewed by The New York Law Journal as an expert on the recent trend of mediation for resolving disputes because the parties save "time and money." Howard notes that in the past two to three years he has seen "a marked rise in cases going to mediation" to the point where almost 80% of his complex commercial cases ended in meditation. Howard also serves as a panel mediator to the Southern District of New York.

Kyle C. Bisceglie, Thomas J. Fleming, and Herbert C. Ross authored part of the LexisNexis, NY Commercial Litigation Guide, which is a comprehensive 21 chapter overview, which discusses key areas in commercial litigation including D&O, contract disputes, business torts and business fraud. This guide is an essential reference for when your business has been sued or is suing. A full description and information for ordering can be found here.

The New York Times quoted Jeffrey A. Udell on the criminal prosecution of former Israeli Prime Minister, Ehud Olmert, and Jeff's representation of Rachel Moore, a controversial witness at the trial.

Aliza F. Herzberg is widely quoted in the HR Hero Line concerning paid time off (PTO), particularly the list of issues that PTO plans should include, which she presented in greater detail during the BLR Webinar in September 2011 titled "PTO: How to Handle the Day-to-Day Challenges When Employees Unexpectedly - and Repeatedly - Call Out."

Congressional Bill To Regulate The Practice Of Cramming


On June 13, 2012, Senator John D. Rockefeller introduced a bill in the United States Senate that, if passed, would be called the Fair Telephone Billing Act of 2012. The bill's official title is "a bill to prohibit unauthorized third-party charges on wireline telephone bills, and for other purposes." Contrary to the bill's name, it would regulate the placement of third-party charges on both wireline and wireless telephone bills. The bill is still in its infancy and has been referred to the Committee on Commerce, Science, and Transportation for further consideration.

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FCC Issues Final Cramming Rule; Seeks Comments On Applicability To Wireless


On May 24, 2012, the FCC issued a final rule amending its existing Truth-in-Billing rules. The new rule is designed to help consumers prevent unauthorized charges on their telephone bills. This rule applies only to landline ("wireline") telephone carries.

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FTC POM Wonderful Decision Clarifies And Eases Substantiation Standards Required Of Advertisers Of Nutritional Products


In a 345-page Initial Decision by the Chief Administrative Law Judge, the FTC's complaint against POM Wonderful LLC (POM) and its principals was upheld to the extent that the company had claimed that its products would treat, prevent or reduce the risk of heart disease, prostate cancer and erectile dysfunction because these claims were not supported by sufficient competent and reliable evidence. Perhaps more importantly, however, the ALJ rejected FTC's position that POM was required to have double-blind randomized placebo controlled studies before it could make the claims. The decision is a fascinating analysis of advertising law and the rules applicable to substantiating health claims.

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FTC Secures Judgment Against Marketers Of Three "Get-Rich-Quick Schemes"


The U.S. District Court for the Central District of California has granted summary judgment in favor of the FTC and against the marketers of three get-rich-quick systems: (1) "John Beck's Free and Clear Real Estate System," (2) "John Alexander's Real Estate Riches in 14 Days" and (3) "Jeff Paul's Shortcuts to Internet Millions." The systems were originated and developed by defendants John Beck, John Alexander, and Jeff Paul, respectively, and each system was run by entities directly and indirectly owned and controlled by defendants Gary Hewitt and Douglas Gravink.

The defendants advertised their products and services through infomercials and on the Internet, marketing materials that cost $39.95, plus shipping and handling, and consisted of educational CDs, written materials, and a free month-long membership in a club advisory service. Also advertised were coaching services for as much as $14,995 that defendants claimed would substantially enhance consumers' chances of making money. The FTC requested both injunctive and monetary relief of over $450 million dollars. The court granted injunctive relief and left the decision regarding damages open until it received additional evidence from both parties.

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Skechers Settles FTC Charges Of Deceptive Advertising In Connection With Ads For "Toning Shoes"


Skechers agreed to pay $40 million to the FTC to settle charges that the company deceptively promoted a number of its "toning shoes," including the company's Shape-ups, Resistance Runners, Toners, and Tone-ups, by making unsupported claims that the shoes helped consumers lose weight and strengthen and tone their buttocks, legs and abdominal muscles. The FTC charged that Skechers violated federal law by falsely representing the clinical studies supposedly backing up its claims.

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Using An Auto-Dialer Just Got Riskier: Consent Must Come From The Current Subscriber


A federal appeals court affirmed that companies using automated dialers can be sued for calling a telephone number, even if they had permission to call the number from the prior subscriber to that phone number. The consent must come from the current subscriber. Given the turnover rate in cell phone numbers, the ruling makes using automated dialing devices riskier because this decision makes it clear that if a new subscriber receives an auto-dialed call on his or her cell phone, there is exposure to a class action lawsuit.

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Judge Rejects Facebook Sponsored Stories Settlement


A federal judge in California rejected a proposed settlement in response to a lawsuit claiming that Facebook's "Sponsored Stories" advertising program violated California law by publicizing users' "likes" of certain advertisers without paying them or giving them a way to opt out. Facebook and attorneys representing the putative plaintiff class had reached a settlement, which called for Facebook to make certain changes to its Statement of Rights and Responsibilities, and to implement certain additional mechanisms to give users greater information about, and control over, how their names and likenesses are employed in connection with Facebook's Sponsored Stories programs.

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Judge Rules Lawsuit Can Proceed Against CytoSport, Inc., Producer Of Muscle Milk Products


On June 28, 2012, a federal judge in California ruled that a false advertising class action against the makers of the popular Muscle Milk line of products can proceed. Delacruz v CytoSport, Inc., Case No. 4:11-cv-03532-CW, 2012 WL 2563857 (N.D. Cal. June 28, 2012). The lawsuit alleges that CytoSport, Inc. misled consumers by describing its Muscle Milk bars and beverages using the words "healthy" and "nutritious" even though such products contain as much, if not more, fat, calories and sugar as unhealthy snacks such as donuts and candy bars. The suit claims violations of the California Consumer Legal Remedies Act, California's Unfair Competition Law and False Advertising Law, as well as common law claims for fraud, negligent misrepresentation and unjust enrichment.

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Court Refuses To Dismiss Claim In Celebrity Endorsement Lawsuit


A federal judge has refused to dismiss a suit brought by professional football player Rashard Mendenhall, who filed a breach of contract claim against Hanesbrands, Inc. In May 2008, Mendenhall entered into a multi-year endorsement agreement with Hanesbrands under which he agreed to promote certain Hanesbrands' products sold under the Champion trademark. The endorsement agreement contained a "morals clause" that permitted Hanesbrands to terminate the agreement if Mendenhall became involved in any situation or occurrence tending to bring him "into public disrepute, contempt, scandal, or ridicule, or tending to shock, insult or offend the majority of the consuming public or any protected class or group thereof."

The day following the announcement of Osama bin Laden's death, Mendenhall stated on Twitter that this was something that should not be celebrated and questioned whether the collapse of the twin towers was really caused by hijacked planes. Soon after, Hanesbrands declared their intention to terminate the endorsement agreement.

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Judge Dismisses Lawsuit Over Opt-Out Acknowledgment


Sanity has prevailed in a Southern California lawsuit concerning the sending of text messages. A lawsuit claiming that the simple acknowledgment of an opt-out request violated the Telephone Consumer Protection Act (TCPA) was dismissed.

Plaintiff Jason Ibey admitted he signed up to receive text messages from Taco Bell, but some time later, he decided he no longer wanted to receive the fast food restaurant's texts, and he sent Taco Bell a text asking it to "STOP". Taco Bell responded with a text saying it had received Ibey's opt-out request and was unsubscribing him from future texts. Shockingly, Ibey filed a federal lawsuit, claiming the acknowledgment of the opt-out request was itself an unsolicited text.

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Disney Sues Dead Horse Racing Announcer's Estate Over Right Of Publicity, Copyright Assertions


On June 29, 2012 Walt Disney Pictures and Buena Vista Home Entertainment, Inc. filed a declaratory judgment action against the heirs and estate of the late CBS horse racing announcer Charles (Chic) Anderson. Anderson was the announcer who "called" the 1973 Belmont Stakes when famed racehorse Secretariat clinched the Triple Crown, taking the final leg by 31 lengths. Disney's lawsuit, filed in the Eastern District of New York, seeks a declaration that Disney's 2010 motion picture Secretariat and the additional bonus materials included with the home entertainment release of the film, which contain video clips of races including Anderson's original calls, do not infringe Anderson's publicity, copyright, or other rights.

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Class Action Suit Claims Starbucks Failed To Disclose Food Dyed With Bugs


On May 25, 2012, a class action lawsuit was filed against Starbucks Corp. for failing to disclose that some of its products were made with cochineal extract, a common food-coloring ingredient. Anderson v. Starbucks Corp., No. BC485438 (Cal. Super. Ct., Los Angeles County). The suit claims that Starbucks had been selling food and drinks dyed red with an extract from pulverized beetle carcasses without disclosing it as required. Plaintiffs seek compensatory and punitive damages, restitutional and equitable relief, corrective advertising, an apology, costs and expenses, and attorneys' fees.

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Test Prep Company Files Suit Against David Hall and Velocity Test Prep For Advertising False Test Scores


Robin Singh, founder and owner of TestMasters, one of the nation's largest LSAT test preparation companies, has filed suit in California state court against David Hall and his company, Velocity Test Prep LLC, for allegedly defrauding students preparing to take the LSAT. The complaint accuses Hall of making false and misleading statements about his LSAT scores to promote his test preparation services and of forging documents to prove that his scores were legitimate, harming consumers and plaintiff's reputation as well as diverting profits away from plaintiff's business.

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New Domain Names For Global NGO Community


The Public Interest Registry (PIR), the not-for-profit operator of the .ORG domain, recently announced that it has formally submitted its applications to the Internet Corporation for Assigned Names and Numbers (ICANN) for the .NGO and .ONG domain extensions. If approved by ICANN, the new domain extensions may go into effect as early as January 2013. The .NGO and .ONG domains would provide an exclusive domain extension for charities and other non-profits seeking immediate recognition online and broader opportunities for public engagement, funding and partnerships.

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OTHER DEVELOPMENTS

The FTC Guides For Jewelry Are Changing

If you advertise or sell jewelry, the claims you make about the products must be accurate and it is important that product descriptions are not misleading and that the material information is disclosed. The FTC's Jewelry Guides explain to businesses how to avoid making deceptive claims about precious metal, pewter, diamond, gemstone, and pearl products, and when they should make disclosures to avoid unfair or deceptive trade practices. The Guides can be viewed here.

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FTC Sues Wyndham Following Series Of Data Security Breaches

On June 26, 2012 the FTC filed a lawsuit against Wyndham Worldwide Corporation and three of its subsidiaries accusing them of failing to protect consumers' personal information leading to a series of three data security breaches over a two-year period. The FTC alleges these breaches resulted in the compromise of more than 600,000 payment card accounts, fraudulent charges on consumers' accounts, millions of dollars in fraud loss, and the export of hundreds of thousands of consumers' payment card account information to an Internet domain address registered in Russia. The FTC also charges that Wyndham's privacy policy misrepresented the security measures used by the company and its subsidiaries to protect consumers' personal information and this failure led to serious consumer injury.

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FTC Announces Public Workshop On Competition And Consumer Protection Issues In Pet Medication Industry

The FTC announced that it will host a one-day public workshop on October 2, 2012, to examine competition and consumer protection issues in the pet medications industry.

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The Importance Of A Writing

In a recently filed case entitled Wayne Wm. Peterson v. Harley-Davidson, Inc., et al., Case No. 12-cv-00381 (E.D. Wisc. 2012), Harley-Davidson may learn the hard way that no matter who pays for a copyrighted work, if the creator of the work (other than works made for hire as defined by the Copyright Act) does not assign his or her rights in writing, the copyright may continue to belong to the creator. Peterson, a free-lance commercial artist, alleges that Harley-Davidson commissioned him to create over 600 pictorial and other works, many of which have since become iconic to the Harley-Davidson brand. Peterson further alleges that he never assigned his copyrights in these works to Harley-Davidson, and thus, he remains the owner of the copyrights. He is claiming that Harley-Davison's continued use of the these works constitutes copyright infringement, and he is seeking an injunction and unspecified damages.

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Humphrey Bogart and the Trenchcoat

A movie-still from the final scene from the classic film Casablanca, is at the heart of recently-filed lawsuits in New York and Los Angeles between Burberry and the heirs of Humphrey Bogart. The controversy arose when Burberry used a still photo from Casablanca of Bogart wearing the famous trenchcoat. Burberry placed the photo on its Facebook "Timeline" as part of a "historical timeline depicting the evolution of Burberry's culture, products and people." Burberry also used the Bogart photo on its other social media sites. Burberry claims that it licensed the image from Corbis Images for "editorial use." Bogart, LLC claims that it owns "common law" rights in the HUMPHREY BOGART, and BOGART trademarks, as well as the exclusive right to use Humphrey Bogart's name, image, likeness, voice and celebrity.

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Hermes Wins $100 Million Judgment Against Websites in Counterfeiting Suit

The French luxury brand Hermes has been awarded $100 million and a permanent injunction in an action against 34 websites that sold counterfeit Hermes products. In Hermes International v. John Doe, 12-cv-1623(DLC)(SDNY April 30, 2012), the Court entered a Default Judgment and Permanent Injunction against the owners of 34 websites, which included domains such as DiscountHermesBag.com, HermesOutlet.org, HermesOutletBags.net, Outlet-Hermes.net, and others. The Order found that the Defendants, who did not appear in the action, were guilty of federal trademark counterfeiting, infringement, false designation of origin, trademark dilution, and cybersquatting, as well as violations of various state laws.

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George Clooney and Julia Roberts Sue For Unauthorized Use Of Their Names and Images

George Clooney and Julia Roberts recently teamed up to sue two audio/visual technology companies, Digital Projection, Inc. and Beyond Audio, Inc., in California state court, for misuse of their names and images to sell expensive movie projectors and entertainment systems. The lawsuit alleges that the Defendants used the stars' photographs, identities, personas, publicity rights, privacy rights, trademarks, and trade dress in advertisements without permission.

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Advertising Marketing & Promotions Group

Andrew B. Lustigman
Scott A. Shaffer
Howard J. Smith
Adam Z. Solomon
Sheldon S. Lustigman
Jonathan I. Ezor
Safia A. Anand
Alexander J. Sperber

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