Friday, December 16, 2011

NAD Approves Using Promotion to Increase Facebook “Likes”

The National Advertising Division of the Better Business Bureau (NAD) recently approved leveraging special deals or discounts to increase “likes” on Facebook, provided the promotion is not misleading. 
In the Coastal Contacts case, the NAD reviewed a promotion of  a “free” product offer to increase the number of fans who “like” Coastal. Offering coupons and discounts in exchange for a “like” on the Facebook platform is not uncommon.  The NAD concluded such an exchange constitutes a general “social endorsement” and further found such a social endorsement is not misleading to others simply because the “like” was gained through use of a special offer or discount.
NAD Challenge Details
Coastal advertised to its Facebook page visitors that they could receive a “free” pair of glasses by clicking the “like” button.  Once they clicked the like button, the offer details would be revealed.
A competitor alleged the promotion was deceptive for two reasons.  First, the offer was fraudulent because the material terms of the “free” offer were not disclosed in proximity to the “free” offer.  Second, it alleged the “likes” were fraudulent endorsements that “perpetuate the misleading suggestion that Coastal enjoys broader support than it would actually have in the absence of its misleading ‘free’ promotion.” 
NAD Ruling
The NAD found that because a Facebook “like” could mean many things to consumers—such as liking the promotion, liking the company, or simply wanting to “share” with their friends—it was not misleading or deceptive to employ a “like-gated” promotion on a Facebook fan page.  Such promotions can deliver giveaways, coupons or discounts in exchange for “liking” the advertiser. 
However, the NAD did find Coastal’s free offer needed to be modified to include additional information in close proximity to the word “free.”  Despite this flaw, the NAD found that the offer was not deceptive since consumers were actually able to obtain a “free” pair of glasses. 
The NAD further found that, because the benefits of the promotion through “liking” the page were valid, any increased visibility was not fraudulently obtained.  The NAD cautioned its conclusion would be different if consumers who participated in the “like-gated” promotion were denied the promised benefit or offer.  The NAD compared deceptive promotions to other misleading activities such as paying a service to artificially inflate the number of “likes” and requiring employees to “like” their employer’s page without disclosing the employment connection.
If you condition participation in a promotion such as a contest, sweepstakes, or discount offer on a customer’s “liking” you on Facebook, be sure your promotion is not deceptive or misleading. 
Authors: Paul Van Slyke

Gregory Casamento
Jason Mueller

Tuesday, December 13, 2011

New California Law More Restrictive Than FTC Guides on Environmental Claims for Food, Beverages and Plastic Bags

Environmental packaging claims that pass muster under Federal Trade Commission (FTC) law and guides may now be unlawful under a new, more restrictive California law.
California Environmental Package Claims Unlawful
Recently, the California Attorney General sued two makers of bottled water and their plastic bottle supplier for marketing and labeling the bottles as “100 percent biodegradable and recyclable” in violation of California law. The Complaint alleges that such claims are inherently misleading to consumers.
In 2008, California banned the use of words like “biodegradable” “degradable,” or “decomposable” in the labeling of plastic food or beverage containers. It also prohibited calling containers “compostable” or “marine degradable” unless specific American Society for Testing and Materials (ASTM) standards were met.
A few months ago, California began requiring “compostable plastic bags” to contain visual cues for consumers, like dying the bag green, or labeling both sides as “COMPOSTABLE” in big letters next to a big green stripe—in compliance with the FTC Guides for Use of Environmental Marketing Claims (a/k/a the “Green Guides”). These bags also can’t be labeled “recyclable” for fear that added microbes they will “contaminate” the recycling stream.
 The California law provides for civil fines up to $2,000 per violation for repeat offenders, plus court costs if the state sues and wins. Class action lawsuits under California’s Unfair Competition Law or False Advertising Law are also possible.  In 2013, the California law will expand to  all plastic products beginning in 2013.
Companies Claim Plastic Bottles Decompose in 5 Years
The two companies, Balance and Aquamantra, claim that their bottles will decompose in less than five years in a landfill or compost area because of a microbial additive. The California Attorney General disagrees, contending that decomposition frequently does not take place for several reasons, such as improperly recycled bottles that sit in a landfill, which is not conducive to decomposition, as well as that the added microbes are ineffective.
FTC Green Guides Have Different Standard
Proposed changes to the FTC Green Guides would require only that biodegradability claims be substantiated by competent and reliable scientific evidence that the entire product or package will completely break down and return to nature( i.e., it decomposes into elements found in nature within a reasonably short period of time after customary disposal).
Thus, while the FTC permits  biodegradable claims if it occurs “within a reasonably short period after customary disposal,”  California law appears to create an irrefutable presumption that a biodegradable claim is inherently deceptive to consumers, regardless of substantiation proof.
Compliance with the FTC Green Guides will not be a safe harbor against violation of the California law. National marketing of plastic bottles and plastic bags (and as soon as 2013 all forms of plastic) making  claims such as biodegradable and compostable may therefore be practically impossible given California’s position. Alternatively, national marketers can try to craft a cost-effective way to market different bottle labels in California.

AuthorsPaul Van Slyke
      Brandon Witkow
     Gaston Kroub

Recording Industry vs. ReDigi -- Is Site Facilitating Re-Selling of "Pre-Owned" MP3s a Contributory Copyright Infringer or Protected under “First Sale Doctrine”?

Want to re-sell all those old MP3 files of songs you downloaded back in the day but no longer want? The New York Times recently reported about a controversial new business that wants to help. Why is this business—called ReDigi—controversial? Because it presents old copyright issues in a new technological guise—and rests on a creative attempt to avoid being snared in the contributory copyright infringement trap that killed the Napster and Grokster file-sharing services several years ago.

The Copyright Issues

Copyright law’s “first sale doctrine” permits a legitimate purchaser of a music CD, film DVD, book, painting, or other copyrighted works to re-sell the item freely. The copyright holder can control the “first sale,” but that’s it. When such tangible items are sold, the first owner no longer has the item. But if the first owner made and kept a copy of the item before re-selling it, then he’s probably infringed the copyright. And the law is the same with copyrighted works in digital format: first sale doctrine will likely protect the sale if the item is a lawful copy and the seller doesn’t retain a copy.

So if a resale facilitator (like ReDigi) simply provided an unrestricted forum to resell digital works—and it knew or expected that many users would be either trading infringing copies or unlawfully making additional copies to sell—it would probably be snared under the law as a contributory infringer. In a nutshell, this was the legal downfall of the well-known Napster and Grokster music and video “file-sharing” services. And a business can’t hide its head in the sand about such shenanigans: “willful blindness” is the legal equivalent of actually knowing that illegal copies are being made.

ReDigi’s Workaround

Here’s how ReDigi claims to work: It purchases your old MP3s sitting on sellers' hard drives. To ensure that sellers aren’t copyright infringers, ReDigi claims its technology: (1) verifies that your copy is legal; and then (2) deletes all copies of the audio file on your computer.

ReDigi says its business model has done just the opposite of willful blindness: it employs comprehensive preventative measures to ensure that its re-sellers are legitimate owners and don’t retain files and so avoid copyright infringement.

Will ReDigi Measure Up? -- The Tiffany v eBay Analogy

Are these steps enough to make ReDigi’s service legal? What if the re-seller burned a CD-ROM with the file? Or made and kept a copy of the hard drive itself? Or saved the file to a thumb drive?

These questions of what degree of diligence is needed to avoid contributory infringement liability bear some similarity to the Second Circuit’s recent Tiffany v. eBay decision (which we previously discussed here). In that case, eBay convinced the court that the steps it took to minimize the potential for trademark counterfeiting and address known instances of counterfeiting that slipped through were enough to insulate it from Tiffany’s claims that eBay was contributorily liable. Though the decision in Tiffany dealt with contributory liability under trademark law, the legal principles are very similar in the copyright context.

The First Attack is Launched

The Recording Industry Association of America (RIAA) has already sent ReDigi a "cease-and-desist" letter, accusing ReDigi of contributory infringement. Such demands to shut down are usually a prelude to a full-blown lawsuit, so it appears that we may not have to wait long for the first court decision to weigh in with answers to these important issues.

Authors: Tom Casagrande Jason Nardiello

Wednesday, December 7, 2011

FTC Chairman Criticizes ICANN’s Planned Domain Name Expansion

The opposition to ICANN's planned January 2012 major expansion of Top Level Domains seems to quickly be gaining momentum in Washington.

According to a news report, the chairman of the Federal Trade Commission said today that ICANN’s plan to allow an unlimited number of new Internet addresses could be a “disaster” for consumers. Also, two House subcommittees have scheduled hearings on the ICANN plan for next week.

FTC Chairman’s Opposition

Specifically, at this morning’s hearing on antitrust issues before the House Intellectual Property, Competition and the Internet subcommittee, FTC Chairman Jon Leibowitz said: “We are very, very concerned that the rollout of new [domain names] has the potential to be a disaster for consumers and for businesses.”  He continued:  “We see enormous costs here to consumers and businesses and not a lot of benefit. So we are working with consumer protection agencies around the world who also have concerns” with the plan.

Leibowitz noted that FTC Internet fraud investigations frequently reveal that scammers use fraudulent information to register domain names, making them harder to track. The availability of far more domain names will make stopping them even harder.

Both Chairman Leibowitz and Subcommittee Chairman Bob Goodlatte, R-Va., have communicated their concerns to the Commerce Department’s National Telecommunications and Information Administration.  The NTIA has oversight over ICANN and is currently weighing whether to extend a technical contract it has with ICANN that is up for renewal in March.  Leibowitz said he plans to contact ICANN directly soon about his concerns with the new proposal, as well.

Other Committee Hearings on ICANN Plan

As reported in our earlier blog post, the full Senate Commerce Committee will hold a hearing on Thursday  on ICANN’s new domain name plan.  Also, the House Energy and Commerce Committee said Wednesday that its Communications and Technology subcommittee also will hold a hearing next week on ICANN’s new domain name plan.

Authors:  Paul C. Van Slyke       Tom Casagrande

Witnesses for Senate Commerce Committee Hearing on ICANN Top Level Domain Expansion

Hearing:  Dec. 8, 2011 10:00 AM,  Russell Senate Office Building – 253. The hearing will be webcast live via the Senate Commerce Committee website
The names and titles of the witnesses scheduled to testify at the committee hearing are listed below from the committee website.  The bullet points beneath certain names are added.
·         Mr. Kurt Pritz
Senior Vice President
Internet Corporation for Assigned Names and Numbers
·         Ms. Fiona Alexander
Associate Administrator, Office of International Affairs, National Telecommunications and Information Administration
U.S. Department of Commerce
·         Mr. Dan Jaffe
Executive Vice President, Government Relations, Association of National Advertisers
Coalition for Responsible Internet Domain Oversight
·         Ms. Esther Dyson
New York, NY
·         Esther Dyson is an active angel investor in a variety of start-ups, for-profit and otherwise, around the world. She also operates as the Internet’s court jester, a person of no institutional importance who somehow manages to speak the truth and to be heard when and where it matters. She does business as EDventure, the reclaimed name of the company she owned for 20-odd years before selling it to CNET Networks in 2004.
·         Ms. Angela F. Williams
Senior Vice President and General Counsel
Young Men’s Christian Association of the United States of America
  • Angela F. Williams is bi-vocational -- she is both an ordained minister and a lawyer. The New York Times and L Magazine featured her in articles about people who pursue two full-time professions. In 2007, Warner Books published a book inspired by Mrs. Williams’ life entitled One Person/Multiple Careers: A New Model for Work/Life Success. In 2009, The National Law Journal named Mrs. Williams as one of the 20 most influential general counsel in America.  (See
Williams:  Protecting the YMCA's marks and brands is critical, Williams said, noting that a nonprofit's     biggest assets are its brand name and reputation. Damage to either affects donations and the ability to            serve the community. She sends out cease-and-desist letters when warranted, monitors the brand position and keeps track of registrations with the U.S. Patent and Trademark Office. "No other organization owns a letter of the alphabet," Williams said.  (See

Author:  Paul Van Slyke

Monday, December 5, 2011

Senate to Consider Delaying ICANN From Global Expansion of Internet Addresses

At 10:00 am on Thursday, December 8, 2011, the Senate Commerce Committee will conduct a hearing investigating whether to delay implementation of ICANN’s major expansion of global Internet Addresses (Top Level Domains), which is scheduled for January 2012..  Brand owners in the insurance and energy industries and in most other industry sectors have long feared that the planned expansion may confuse consumers, increase the already unacceptable level of fraud and identity theft on the Internet, create new opportunities for Internet crime, and jeopardize cybersecurity.  Consumer groups, government cybersecurity agencies, and law enforcement share these concerns.  Entities who wish to make their views known to the Senate Committee can file written comments with the committee by December 6 to be considered by its policy staff. If delivered to a Senator is a member of the Committee before the hearing, written comments can be entered into the record by the Senator to be considered after the hearing.  Private interviews with committee policy staff members are also available.
The Committee Hearing
The Committee notice indicates that the hearing will examine the merits and implications of this new program and assess ICANN’s efforts to address concerns raised by the Internet community. The hearing will be webcast live via the Senate Commerce Committee website 
Many were surprised that the Committee set this hearing on the eve of ICANN’s implementation of the expansion of Top Level Domains since there had already been a lengthy period for submission of comments on the plan. Until now, Congress and other federal government entities have shown little interest in examining the implications of ICANN’s planned expansion.
CRIDO’s Letter to Commerce Department Sparks Hearing
The hearing was sparked by the Coalition for Responsible Internet Domain Oversight (CRIDO)— consortium of a bevy of big-name companies, trade associations and organizations—which wrote requesting postponement of the expansion.  .
CRIDO’s letter complained that ICANN pushed the planned expansion forward despite widespread and significant objections raised by many in the global community of Internet users. CRIDO has stated that ICANN’s decision is not in the public interest, does not promote consumer trust, and does not benefit the public, as required in a September 30, 2009 Agreement between the U.S. Government (though the National Telecommunications and Information Administration) and ICANN. 
Specifically, the Coalition claims that ICANN plan would unduly burden public and private brand holders, who would be forced to spend ever-greater amounts of time and resources for brand protection.  In addition, the Coalition warns of an unacceptably high risk that the ICANN plan would confuse consumers, increase the already unacceptable level of fraud and identity theft on the Internet, create new opportunities for Internet crime, and jeopardize cyber security.  The Coalition also posits that the current state of the global economy raises substantial issues regarding the wisdom of moving forward with ICANN’s plan, given its undisputed costs and its merely claimed benefits. 
The Coalition urged postponement of the opening of the top-level domain application window until ICANN adequately addressed these concerns.

The scheduled hearing gives brand owners who act promptly another opportunity  to persuade ICANN to delay the planned expansion until it adequately addresses all these shared concerns.  Congress unquestionably can assert practical, leverage over ICANN to more adequately address these issues prior to expansion.  What is unclear at this time is whether Congress and other government agencies will use this leverage.

Author:  Paul Van Slyke

Friday, December 2, 2011

Wax Wars! Maker’s Mark v. José Cuervo – Is Melty Wax a Trademark? Or a Pretty Seal Available for All to Use?

Is wax coating on bottles of liquor a trademark?  Or is it a pleasing way to make the liquor look “artisanal”?  If your company sells products symbolized by a unique and visually attractive graphic or ornamental device, you should care about this question.
On December 2, two heavyweights in the hard liquor industry (we’ve heard of “Big Oil,” but is there such a thing as “Big Booze”?) argued before the U.S. Court of Appeals for the Sixth Circuit.  The legal issues:  (1) whether a melted wax seal on José Cuervo’s $100 reserve tequila infringed Maker’s Mark’s registered design trademark for “wax-like coating covering the cap of the bottle and trickling down the neck of the bottle in a freeform irregular pattern” on whiskey bottles; and (2) whether the use of dripping wax over the cap of a bottle of spirits is “aesthetically functional.”  Here are the two bottles:

Some courts have held that if a design element is so aesthetically pleasing that it makes customers want the item, one company cannot claim that design element as a trademark and keep others from using it, because that would put competitors at a disadvantage.  This notion of “aesthetic functionality,” however, is a controversial topic.  Earlier this year, we reported on a Ninth Circuit opinion that images of Betty Boop on clothing and handbags was unprotectable because it was aesthetically functional induced raised eyebrows and raised voices in the trademark world.  After the outcry, the Ninth Circuit quietly changed its ruling to sidestep the issue.

In the Maker’s Mark vs. José Cuervo case, aesthetic functionality is front-and-center once again, with Cuervo claiming that the “hand-dipped wax seal” look helps create an artisanal image that helped to sell its luxury tequila at $100 per bottle.  Cuervo has marshaled evidence that artisanal producers of alcoholic beverages have used hand-dipped wax seals for centuries (and still do).  Cuervo also argues that its bottle not only looked different from Maker’s Mark’s whiskey bottle, but prominently displayed the Cuervo brand—and that at $100 a pop, its customers would be well-aware that they weren’t buying Kentucky bourbon.  Maker's Mark relied on decades of advertising focusing consumers on the wax seal as creating an indelible association with its brand.
The Sixth Circuit is likely to issue its ruling in the next 6-8 months, and it’s certain that one side won’t be toasting the outcome.  If the court finds these wax seals aesthetic functional, then trademark law would not be able to stop consumer brand confusion.  But if the court rejects aesthetic functionality, then Maker’s Mark would have a de facto monopoly on that type of seal in the liquor business.  A real trademark law quandary.
In the meantime, however, owners of attractive packaging designs that could be attacked as aesthetically functional would be wise to shore up their trademark bona fides by, for example, use of advertising specifically calling attention to the attractive design element—be it packaging, product shapes, or product color combinations—that uniquely identifies the brand owner and drives sales. 

Authors:  Tom Casagrande    Paul Van Slyke

Thursday, December 1, 2011

New Model Order Limiting e-Discovery Can Substantially Lower Cost of Trademark and Advertising Litigation

A great weakness of the United States Court system is its discovery expense.  A new model court order can be adapted to trademark and advertising cases to sharply reduce the costs of the e-discovery part of these expenses.
In most cases, parties are brought to their knees by the discovery expense of federal litigation and forced to settle early without a full trial on the merits.  Increasingly, many parties balk at pursuing courtroom justice at all because of the specter of discovery expense.  In complex cases such as trademark infringement and advertising deception, discovery of electronic data (e-discovery) adds dramatically to the cost of this expense.
The Model Order and Its Limitations
Chief Judge Randall Rader of the U.S. Court of Appeals for the Federal Circuit, speaking at a bar conference, recently proposed a model order that places dramatic limits on e-discovery in patent cases.  This model order is easily adaptable to other kinds of cases and can be a powerful tool to limit the cost and inconvenience of e-discovery in trademark and advertising litigation.    
The model order places much tighter and more specific constraints on discovery of electronically stored information ("ESI") than those currently provided by the Federal Rules of Civil Procedure.  Some of the key limitations of the model order include:
  • Exclusion of peripheral metadata from general ESI production requests absent a showing of good cause.

  • Exclusion of email from “general” ESI requests.  To obtain email, parties must specifically request it.

  • Email production requests are limited to specific issues, rather than general discovery of a product or business.

  • Email production requests must identify the custodian, search terms, and time frame. 

  • Limit of five custodians per producing party for email requests, with up to five additional custodians upon agreement among the parties or a showing of “distinct need” based on the size, complexity and issues of the specific case.

  • Limit of five search terms per custodian per party, with search terms narrowly tailored to specific issues in the case.  No indiscriminate terms, such as the producing company’s name or its product name are permitted, unless combined with narrowing search criteria that sufficiently reduce the risk of over production.

Adapting the Model Order for Trademark and Advertising Cases

The model rule can be tailored to the specific issues in trademark and advertising cases.  For example, in a trademark infringement case, email production requests could be phased to occur after the parties have exchanged basic documentation about the trademarks, the products accused of infringement, and the relevant product sales. In false and deceptive advertising cases, email production requests could be phased to occur after the parties have exchanged basic documentation about the advertising, the advertising media, the ad agency file, and the profile of the target consumers. 

Effect of Using Adaptation of the Model Order
Having these limitations in a court order issued at the outset of litigation will help curb unnecessarily burdensome and costly requests for irrelevant material.  By laying out specific stipulations regarding what can and cannot be requested, ESI production will be more useful, more focused, and less wasteful.
Authors:  Paul C. Van Slyke       Tom Casagrande