Covering Your Ads

Losing The Race To Trademark Sports Catchphrases

Sheppard Mullin — Wed, 25 Apr 2012 10:41:56 -0800

Baltimore Ravens linebacker Terrell Suggs may be fast on the field. But it’s too bad he wasn't faster to the U.S. Patent and Trademark Office.

During the telecast of a game between Suggs’ Ravens and the Pittsburgh Steelers on Nov. 6, 2011, Suggs referred to his alma mater, Arizona State University, as “Ball So Hard University.” This phrase immediately caught on, and three days later Suggs appeared at a press conference wearing a T-shirt with “Ball So Hard University” printed on the front. The only problem was that Suggs didn’t create or sell the shirt himself; he bought it from someone on the Internet.

When Suggs filed a number of trademark applications for "Ball So Hard University" less than a week later on Nov. 17, someone had already beaten him to the USPTO. Now Suggs is engaged in a legal fight to determine who owns prior rights to the trademark "Ball So Hard University."

Of course Suggs’s situation is not unique. Right around the time Suggs was proudly proclaiming his allegiance to his alma mater, a pair of fans in St. Louis were engaged in their own race to the USPTO to register the mark "Rally Squirrel." This term was adopted by fans of the St. Louis Cardinals when a squirrel scurried across the field at Busch Stadium first in game three of the 2011 National League Championship Series and then again in game four. Now, as with Suggs, two opportunistic fans are stuck in a legal dispute about which one of them has prior trademark rights.

And who can forget the case of Pat Riley, Hall of Fame NBA coach, and his trademark for the term "three-peat." Pat Riley will probably be the first to tell you that he didn’t coin the term “three-peat.” However, he was the first one to file a trademark application for "three-peat" with the USPTO in 1989, at a time when the Lakers team he was coaching was attempting to win its third consecutive NBA championship. Even though Riley’s Lakers did not accomplish this feat that year, the Chicago Bulls did so four years later in 1993. Because of his foresight, Riley was able to collect royalties from sports apparel makers who wished to use the "three-peat" mark in connection with the Bulls’ success.

So what are athletes, opportunistic fans, coaches and others to take from these examples?

The short answer is: In order to establish prior trademark rights to a term or catchphrase for which there has not yet been any valid trademark use, it is important to contact trademark counsel as soon as possible and to file a trademark application for that term or catchphrase with the USPTO.

In the U.S., there are essentially two ways in which one may establish priority in a trademark. The first is to start using the mark in connection with certain goods and services. To do this, a trademark owner must use a particular word or slogan as a source indicator — i.e., to denote the origin of the goods or services with which the mark is used, even if that origin is unknown.

An example would be to use the mark on the labels of goods like T-shirts, baseball caps or other articles of clothing. In this situation, one creates what are called “common law” rights to a mark. Such rights are fully enforceable against others as of the date the mark was first used and in the geographic region in which the mark was used, regardless of whether the mark is ever registered with the USPTO.

The problem with this approach as it relates to popular terms or catchphrases, however, is that such terms or catchphrases are typically uttered and catch on before use of the mark can commence. That is why the second way to establish trademark priority may be preferred.

The second way to establish trademark priority is to file an “intent to use” (“ITU”) application with the USPTO under Section 1(b) of the Lanham Act governing trademarks. To do this, one need not actually use the mark with the goods and services identified in the application yet — a mere “bona fide” intent to use the mark for such goods or services in the future will suffice. Eventually, use of the mark along the lines mentioned above “in commerce” (i.e., between state lines or between a state and a foreign country) is a prerequisite for registration of a federal trademark. However, once an ITU application proceeds to registration, the trademark owner will own rights to the trademark dating back to the filing date of the application, regardless of when such use began.

It may be the case that one simply cannot file a trademark application soon enough after the spontaneous debut of a soon-to-be-popular term or catchphrase in order to establish priority. In such cases, an athlete, fan or coach may need to rely on more sophisticated legal maneuvers in an attempt to obtain rights to a mark. For example, when a pair of fans tried to register "Tebowing" with the USPTO before NFL quarterback Tim Tebow could get his own applications for "Tebowing" on file, Tebow’s counsel sent the USPTO a letter of protest on Tebow’s behalf. Those fans’ applications have now been preliminarily rejected by the USPTO on the ground that they falsely suggest a connection to Tim Tebow under Section 2(a) of the Lanham Act, among other reasons.

Another possible yet risky option — especially if a particular mark or phrase does not call to mind a particular individual, as appears to be the case with "Tebowing" — is to simply commence use of the mark before the owner of an earlier-filed ITU application can establish use or is able to perfect the application.

Generally speaking, when a registrant sues for infringement of a registered mark, monetary remedies cannot be recovered for acts which took place after the application was filed but before the mark was actually used. See, e.g., Reliable Tire Distrib. Inc. v. Kelly Springfield Tire Co., 592 F. Supp. 127, 136 (E.D. Pa. 1984) (holding that the plaintiff could not recover damages because “[a] registrant cannot recover damages or lost profits prior to the date of registration of the mark.” (citations omitted)). It is worth noting that Nike has been offering shirts bearing the word “Linsanity” since March 2012, even though Jeremy Lin was the third person to file an application for "Linsanity" for apparel.

Athletes are used to being the fastest ones on the field, court, ice or pitch. The one area in which history has shown they have not been fast enough, however, is to the USPTO. If and until this changes, this is one contest they could find themselves losing.

This article was originally published by Law360.

Third Circuit Issues Decision in New Jersey Gift Card Escheat Suit

Sheppard Mullin — Mon, 30 Jan 2012 11:20:31 -0800

By Craig Cardon, Brian Anderson, Rachel Hudson.

On January 5, 2011, the Third Circuit issued its decision in New Jersey Retail Merchants Association v. Sidamon-Eristoff, Case No. 10-4551 (3d Cir. Jan. 5, 2012). The appellate court affirmed the decision of the District Court partially granting and partially denying a motion for a preliminary injunction of enforcement of New Jersey's unclaimed property law as applied to gift cards or stored value cards ("SVCs").

Background

The New Jersey Retail Merchants Association ("NJRMA"), New Jersey Food Council, and American Express Prepaid Card Management Corporation (referred to as "SVC issuers") are challenging New Jersey's statute regarding the return of unclaimed property, 2010 N.J. Laws, Chapter 25, also known as an escheat law, as it relates to SVCs. In general, escheat laws require that once property has been deemed abandoned, the holder must attempt to contact the owner at his or her last known address and if unsuccessful, turn the property over to the state for safe keeping. The New Jersey law amended the state's escheat laws to apply to SVCs for the first time and created new rules specifically relating to SVCs.

Third Circuit Decision

The Third Circuit's decision concerns the SVC issuers' motion for a preliminary injunction of certain provisions of the law. The District Court granted the motion as to the retroactive application of the law and the place-of-purchase presumption and denied the motion as to the two year abandonment period and the name and address collection requirement. The Third Circuit affirmed the decision.

The Third Circuit agreed with the lower court that it was reasonably likely that the SVC issuers would prevail on the issue of whether retroactive application would violate the Contracts Clause of the United States Constitution. The court held that retroactively applying the law would impair the contractual relationship between the SVC issuers and their customers by imposing a new burden on the SVC issuers not accounted for when the relationship was formed. The place-of-purchase presumption provision provides that where no information is known about the residence of the purchaser of the SVC, it is presumed that a SVC sold in New Jersey escheats to the State of New Jersey. Both courts held that the SVC issuers established a reasonable likelihood of prevailing on their claim that this rule is preempted by the federal common law rule that governs the priority of escheatment of property.

The Third Circuit affirmed the District Court's denial of the preliminary injunction of the two-year abandonment period as the court held that it was not reasonably likely that the SVC issuers would prevail on their claim that the New Jersey law is preempted by the federal Credit CARD Act, 15 U.S.C. § 16931-1(c).

The Third Circuit also affirmed the District Court's denial of the preliminary injunction of the requirement that SVC issuers collect the name and address of the purchaser or owner of each SVC issued or sold and at least maintain a record of the zip code of the owner or purchaser. The court held that this portion of the law was severable from the place-of-purchase presumption provision. The court further held that the SVC issuers were not likely to succeed on their claim that the requirement was preempted by federal law and that there are rational, legitimate reasons for the requirement.

Finally, the Third Circuit affirmed the District Court's holding that the SVC issuers did not establish a reasonable likelihood of success on their substantive due process challenge to the law.

The case will now return to the District Court to proceed on the merits should the parties continue to pursue the litigation, however, the parties still have the opportunity to petition for rehearing by the Third Circuit or appeal the decision to the Supreme Court. The NJRMA has stated that it is unlikely to petition for rehearing or appeal.

State Treasury's Response

The New Jersey Treasurer's office has stated that they are taking time to "digest" the decision and will then schedule a meeting within the next few weeks to discuss the NJRMA's concerns. The Treasurer's office has assured the NJRMA that they will not issue any type of implementation guidance prior to this meeting. The Treasurer's office has said that they will not begin enforcement of the law until they issue guidance.

Legislative Efforts

In addition, the NJRMA and other retail groups will continue to pursue legislative strategies if their discussions with the state are unproductive.

Losing Games: Player Strikes Adversely Affect Sponsorship Agreements

Sheppard Mullin — Tue, 01 Nov 2011 08:53:25 -0800

The end of the collective bargaining agreement between a professional sports league and the players association that represents the athletes triggers a series of dominos: The players go on strike, the league implements a lock-out of the players, the parties meet over the course of several weeks to try to negotiate a new deal, both sides posture (with the league cautioning that pre-season and regular season games will be cancelled and the players association threatening to decertify as a union if a new agreement cannot be reached), the league files an unfair labor practice complaint with the National Labor Relations Board coupled with a declaratory judgment action in U.S. district court seeking a ruling that the lock-out is a legitimate negotiation tactic under the labor laws, the union decertifies and files its own lawsuit claiming that the league's lockout constitutes price-fixing and an illegal group boycott in violation of the antitrust laws, and fans brace for lost games.

Many writers, observers and enthusiasts following the most recent professional sports labor disputes in both the National Football League (NFL) and the National Basketball Association (NBA) have focused solely on the players, the owners and the fans. But there is another group of stakeholders that is inevitably affected by a lack of labor peace: sponsorship partners. Sponsors such as banks, beverage companies, electronics manufacturers and athletic apparel companies that spend millions of dollars a season to sponsor the teams and promote their products to fans may be left losing much of the value they bargained for, even if no pre-season or regular season games are actually lost.

This article, by Benjamin Mulcahy, was originally published in the New York Law Journal. To read the full article please click here.

Compliance Deadline Looms for New Transparency in Supply Chains Act

Sheppard Mullin — Mon, 17 Oct 2011 14:08:53 -0800

On January 1, 2012, the California Transparency in Supply Chains Act of 2010 will become effective. This legislation will require every large retailer and manufacturer doing business in California to publicly disclose whether it has taken specified actions to eliminate slavery and human trafficking from its product supply chain. The Act does not require a company to make any effort to eliminate slavery or human trafficking, but only to disclose the extent, if any, to which it has taken the actions listed in the Act. The impact of the Act ultimately will depend on whether consumers, investors and activists use the required disclosure to pressure companies to monitor and eliminate abuses in their supply chains. California Civil Code Section 1714.43(a).

This article, by Peter Menard, was originally published in the Daily Journal. To read the full article please click here.

ZIPped Back Up: Williams-Sonoma Gains Federal Dismissal Of New Jersey Consumer Privacy Claim in Feder

Sheppard Mullin — Wed, 12 Oct 2011 04:33:58 -0800

In Feder v. Williams-Sonoma Stores, Inc, the United States District Court for the District of New Jersey joined the New Jersey Superior Court in weighing in on the issue of whether a retailer violates consumer privacy state law by requesting a customer's zip code at the point of purchase. Feder was brought by the same plaintiff’s lawyers and with claims similar to those in the state court case Imbert v. Harmon Stores, Inc.(Bed, Bath & Beyond). Imbert was decided last month, but without any written decision, and permitted that case to proceed past the pleading stage. The District Court in Feder, however, issued the first written opinion under the New Jersey statutes, finding that allegations that a zip code was verbally requested could not support a claim under New Jersey law.

Both Feder and Imbert involved plaintiffs suing under New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”), alleging that a store’s requirement that customers provide their zip codes during a credit card transaction violates their rights under the TCCWNA. The TCCNWA prohibits a seller from "offering, entering into, giving or displaying a written consumer contract or notice that violates a clearly established right of the consumer." N.J. Stat. Ann. 56: 12-15. As a predicate for the TCCNWA claim, both Feder and Imbert relied on the Restrictions on Information Required to Complete Credit Card Transactions ("Restriction Statute"). The Restriction Statute prohibits a retailer from requiring a customer to provide "personal identification information" to complete a credit card transaction, thus providing the basis for violation of a "clearly established consumer right."

Senior District Judge Walls in Feder granted Williams-Sonoma's Motion to Dismiss, finding that the plaintiff failed to sufficiently allege conduct that violated the TCCWNA because she failed to identify a particular provision of a written consumer contract that violated her rights. Feder pled that the credit card transaction form constituted the written consumer contract. Judge Walls, skeptical of this assertion, reasoned that even if the form qualified as a contract, plaintiff's recorded zip code and verbal request for the same did not constitute a contract provision. Consequently, Judge Wales found that plaintiff failed to satisfy the elements of TCCNWA because "[t]he alleged requirement that plaintiff provide her zip code would only violate the TCCWNA if it was a provision of a written contract." Plaintiff also alleged that her rights were violated under the Restriction Statute -- not by the recording of her zip code -- but by the requirement that she provide her zip code. However, the Restriction Statute does not provide for a private right of action, and, as discussed above, a claim under Plaintiff’s proposed private vehicle for enforcement, the TCCNWA, failed.

Williams-Sonoma also argued that if the credit card transaction was considered a written consumer contract, the court must consider all terms of that “contract” including the point of sale signage at Williams-Sonoma stores expressly stating that when a zip code is requested it is used for marketing purposes, and that providing it is voluntary and is not a condition of processing the transaction. The Restriction Statute differs critically from California’s Song-Beverly in that New Jersey’s Restriction Statute only applies to information being “required,” whereas Song-Beverly also applies to a “request.” This issue was not presented in Imbert. However, since the District Court ruled on the TWNCCA, it did not need to reach this issue.

One additional anomaly between the Feder and Imbert cases is that in Imbert the state court permitted the plaintiff to proceed with an invasion of privacy claim. However, when presented with Williams-Sonoma’s Motion to Dismiss, Feder abandoned her invasion of privacy claim in her Opposition because the Motion revealed she had previously provided her contact information to Williams-Sonoma. Feder also filed a cross-motion for leave to file an Amended Complaint, which the District Court denied as futile.

Craig Cardon, Elizabeth Berman; and Sean Kirby of Sheppard Mullin Richter & Hampton LLP represented Williams-Sonoma.

Authored By:

Ted Max
(212) 653-8702
tmax@sheppardmullin.com

and

Valentina Shenderovich
(212) 634-3019
vshenderovich@sheppardmullin.com

UnZIPped in New Jersey?

Sheppard Mullin — Thu, 22 Sep 2011 06:57:01 -0800

A New Jersey state trial court has initially weighed in on the issue of whether a retailer violates state law by requesting a customer’s zip code at the point of purchase. In a case fashioned after the California Supreme Court's decision in Pineda v. Williams-Sonoma, 51 Cal.4th 524 (Feb. 10, 2011), New Jersey Superior Court Judge Stephan Hansbury has denied a motion to dismiss brought by Harmon Stores, Inc. (Bed, Bath & Beyond), finding that the plaintiff Robert Imbert adequately pled a claim for violation of New Jersey's Truth in Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:11-17 (“TCCWNA”). The Court's ruling allows plaintiff to proceed beyond this initial stage, but no liability has been found.

In the matter of Imbert v. Harmon Stores, Inc., plaintiff Robert Imbert filed a complaint against Harmon Stores, Inc., alleging that Harmon Stores violated the TCCWNA by requesting his and other customers’ zip codes at the point of sale. The allegations in the complaint (which are virtually the same as the allegations set forth in California cases) assert that Harmon Stores’ practice of requiring a customer’s zip code at the point of sale violates the New Jersey Restrictions on Information Required to Complete Credit Card Transactions (the “Restriction Statute”), which prohibits a retailer from requiring a customer to provide “personal identification information” to complete the credit card transaction. The Restriction Statute is only directly enforceable by the state Attorney General. However, plaintiff has alleged that a violation of the Restriction Statute, in turn, violates the TCCWNA’s prohibition against “enter[ing] into any written consumer contract or giv[ing] or display[ing] any written consumer warranty, notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee as established by State or Federal law . . .” which does provide for a private right of action. In issuing his ruling from the bench, Judge Hansbury held that, as pled, the transaction appears to qualify as a written consumer contract within the meaning of the TCCWNA. The judge's reasoning in reaching this limited conclusion is not specifically known as no written opinion was issued. This decision appears to be the first decision outside of the State of California where a court has held that a retailer could potentially be held liable under state law for requesting a customer’s zip code at the point of sale.

One important difference between the Restriction Statute and California's Song-Beverly is that a "request" does not violate the Restriction Statute -- only "requiring" the information does. This issue is before a federal court in a different case alleging violations of the TCCWNA for requesting a zip code. That case against Williams-Sonoma Stores, Inc. (“Williams-Sonoma”) is currently pending in the District Court for the District of New Jersey. Williams-Sonoma has filed a motion to dismiss the plaintiff’s claims and is awaiting a ruling from the Court. That motion addresses the fact that Williams-Sonoma requires the posting of a sign at the point of purchase which explains that a zip code is requested for marketing purposes and that providing it is voluntary.

Authored By:

Craig Cardon
(310) 228-3749
ccardon@sheppardmullin.com

Who's Right On Privacy?

Sheppard Mullin — Thu, 08 Sep 2011 07:26:03 -0800

Advertisers are constantly looking for new ways to obtain more information from and about online consumers in an effort to provide a more enriching and satisfying online experience for the consumer. At the same time, consumers are becoming more and more knowledgeable about the online collection of their information and are finding new ways to prevent it. As technology evolves, advertisers are seeking to strike a balance between their business objectives and the rights and desires of the modern consumer. What if an advertiser were able to collect weeks, or even months of personal data, including a consumer’s location, time zone, photographs, text from blogs, shopping cart contents, emails and a history of web pages visited, all without the consumer giving consent? Would the collection of such information merely provide for a significantly enriched user experience, or does it present a substantial invasion of privacy? The World Privacy Forum fears the latter, and along with various class action plaintiffs’ lawyers, points to the increasing use of HTML5 as a data collection vehicle as the source of grave concern.

This article by Ben Mulcahy and Gina Ilardi was originally published in the Metropolitan Corporate Counsel. To read the article please click here, or visit the Metropolitan Corporate Counsel website.

Former Student Athletes' Right of Publicity and Antitrust Claims Will Proceed Against the NCAA and Electronic Arts

Sheppard Mullin — Wed, 15 Jun 2011 03:52:35 -0800

Closely watched class action lawsuits by former student athletes against the National Collegiate Athletic Association (“NCAA”), its licensing arm, the Collegiate Licensing Company (“CLC”), and the popular video game maker, Electronic Arts, Inc. (“EA”) will proceed following a May 2, 2011 decision by Judge Claudia Wilken of the United States District Court for the Northern District of California. See In re NCAA Student-Athlete Name & Likeness Licensing Litigation Case No. 4:09-cv-01967-CW (N.D. Cal. May 2, 2001) (the “May 2 Order”).

The stakes in the NCAA Student-Athlete Name & Likeness Licensing Litigation are high. If the student athlete plaintiffs are successful, the NCAA, as well as its member conferences and universities, could face significant liability, and the NCAA would need to substantially change the way in which it approaches its licensing efforts and student-athlete relationships. The resolution of the licensing and First Amendment issues also has the potential to cause significant repercussions across the entertainment industry, including the motion picture industry, as courts grapple with determining the breadth of First Amendment protection in an age of realistic computer generated depictions that could arguably be mistaken for the real thing.

This article by Daniel Brown was originally published in the Sports Litigation Alert. To read the article please click here, or visit the Sports Litigation Alert website.

March Madness Isn't for Everyone

Sheppard Mullin — Fri, 11 Mar 2011 15:22:13 -0800

It’s that time of year again. College campuses around the country are buzzing, co-workers are whispering about office pools, and “bracketology” is the popular science of the day. The NCAA men’s basketball tournament season, aka “March Madness,” has begun. To tap into the vast media audiences generated by the NCAA Tournament (the “Tournament”), ambush marketers have started populating the market with basketball-themed promotional materials. There is little doubt that ambush marketers can legally draw on generic basketball symbols and complimentary imagery to tie into the excitement surrounding the Tournament without exposing themselves to a meaningful risk of liability to the NCAA as the Tournament operator. But what about using the phrase “March Madness”?

The History of March Madness

The term “March Madness” first appeared with prominence in 1939 as the title to an essay written by Henry V. Porter for the Illinois Interscholastic, the official magazine of the Illinois High School Association (“IHSA”). See IHSA.org, A Brief History of March Madness, (last visited Mar. 11, 2011). The essay was written as a celebration of the IHSA’s annual high school basketball tournament, which began in 1908. See id. Since the early 1940’s, the IHSA has used “March Madness” to refer to its basketball tournament. See March Madness Athletic Association LLC v. Netfire, Inc., 120 Fed. Appx. 540, 544 (5th Cir. 2005). Over the years, the IHSA claimed exclusive rights over the term, and even licensed the phrase to companies such as Pepsi and the Chicago Tribune. See id. However, it hadn’t attempted to register “March Madness” as a trademark until 1990. See id. It was then that the IHSA learned that a television production company named Intersport had already registered the phrase one year earlier, in 1989, and a dispute ensued. See id.

Ultimately, the IHSA and Intersport agreed to resolve their dispute regarding the ownership of the mark by pooling their trademark rights. This arrangement continued until 1995, when the IHSA became embroiled in a dispute with the NCAA over the term. At that time, Intersport took itself out of the middle of the dispute and assigned its rights in the “March Madness” mark to the IHSA in exchange for a share of royalty payments and a limited license back, which allowed Intersport to continue using “March Madness” in connection with certain sports programming and to “advertise, promote, and sell publications, videos and media broadcasts” of such sports programming. See id.; see also Intersport, Inc. v. National Collegiate Athletic Association, No. 1-07-0626, 2008 Ill. App. LEXIS 227, at *3 (Ill. App. Ct. Mar. 26, 2007).

In the IHSA’s dispute with the NCAA, the NCAA claimed that its rights to the term “March Madness” stemmed from a 1982 Tournament broadcast during which announcer Brent Musburger described the Tournament as “March Madness.” See Intersport, 2008 Ill. App. LEXIS 227, at *4. Nevertheless, the IHSA brought suit to protect its interest in the mark after the NCAA purported to license the term “March Madness” to GTE Vantage Inc. in connection with the company’s promotion of a video game. The district court denied the IHSA’s motion for a preliminary injunction against the NCAA’s licensee, and in a case of first impression and an opinion written by Judge Posner, the Seventh Circuit affirmed.

Justice Posner pointed out that the IHSA could have supplicated the NCAA and its broadcast partners not to spoil its “March Madness” trademark by using it to name something else, but the IHSA had waited. And in the interim, “March Madness” came to identify not just the IHSA tournament, but the NCAA Tournament as well. Resolving the issue against trademark protection, the court characterized “March Madness” as a dual-use or multiple-use term, allowing the IHSA and the NCAA to co-exist in using “March Madness” to refer to their respective basketball tournaments. See Illinois High School Ass’n v. GTE Vantage Inc., 99 F.3d 244, 247 (7th Cir. 1996). The court also left open the possibility that other parties beyond the IHSA and the NCAA could use “March Madness”, as well, taking pains to explain “[w]e do not opine on the scope of the trademark rights that either IHSA or NCAA has, beyond ruling that IHSA’s rights do not extend to the NCAA tournament and to merchandise such as Vantage’s game that is sold in connection with that tournament.” After the ruling, the IHSA and the NCAA consolidated their interests and formed the March Madness Athletic Association (“MMAA”) in order to jointly exploit the “March Madness” mark and sue alleged infringers. See Intersport, 2008 Ill. App. LEXIS 227, at *4.

The MMAA in Action

Justice Posner’s decision cast some doubt on whether “March Madness” was protectable as a trademark at all. So the first step in the infringement arena was for the MMAA to try to convince a court that “March Madness” may be a “dual use” or even a “multiple use” term, but it had not become generic. The MMAA sued Netfire, Inc. to establish just that.

The MMAA sued Netfire, Inc. for trademark infringement after Netfire purchased the domain name “marchmadness.com” and developed content for the site related to the Tournament. See Netfire, 120 Fed. Appx. at 543-44. The case was ultimately resolved in the MMAA’s favor, after the Fifth Circuit upheld a lower court’s ruling that “March Madness” was a descriptive term which had acquired secondary meaning and was therefore protectable as a trademark under the Lanham Act. The court also upheld the ruling that the domain name marchmadness.com would create consumer confusion with March Madness. Accordingly, Netfire was compelled to surrender the marchmadness.com domain name to the MMAA. Today, users who type in marchmadness.com into their web browsers will be redirected to the home page for the Tournament.

Another such infringement suit brought the circle of rights back to Intersport itself. In that case, an Illinois state court held that Intersport’s limited license to use the term “March Madness” in order to “advertise, promote, and sell publications, videos and media broadcasts” in connection with certain sports programming, encompassed the right to distribute content via mobile devices and not just to television and radio. See Intersport, 2008 Ill. App. LEXIS 227, at *2-5. Despite the MMAA’s contention that Intersport’s license did not include a later-developed technology clause, the court held that when the license was agreed to in 1995, the parties could have contemplated that the term “video” might one day include distribution to mobile wireless communications devices. Thus, the MMAA was not able to enjoin Intersport from using “March Madness” to advertize, promote, and sell its mobile video content.

Conclusion

The quilt of rights-holders and the scope of their respective rights creates the possibility that an ambush marketer could secure a license from Intersport to use “March Madness” in connection with an ambush of the Tournament. That case has not yet been decided, but maybe there’s an ambush marketer this year who is willing to be the test case. If not, then in the words of Henry V. Porter, delight in the “happy Madness of March”, and enjoy the games.

Authored By:

Benjamin R. Mulcahy
(212) 634-3030
bmulcahy@sheppardmullin.com

and

Jonathan Sokolowski
jsokolowski@sheppardmullin.com

FCC Approves Controversial Net Neutrality Rules

Sheppard Mullin — Wed, 05 Jan 2011 05:04:48 -0800

On December 21, 2010, the FCC approved controversial net neutrality rules in a party-line vote. Democratic Commissioners Copps and Clyburn joined Chairman Genachowski in approving the Order, despite concerns that it did not go far enough. Republican Commissioners McDowell and Baker wrote lengthy dissents, arguing that the FCC had stepped far beyond its regulatory authority in approving Internet regulations.

According to the Order, the rules can be summarized as achieving three main objectives: (i) transparency; (ii) no blocking; and (iii) no unreasonable discrimination. More specifically, "fixed and mobile broadband providers must disclose network management practices, performance characteristics, and terms and conditions of their broadband services." Additionally, "[f]ixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites or block applications that compete with their voice or video telephony services." Finally, "[f]ixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic."

The regulations have garnered much criticism. Those who believe the FCC has overstepped its regulatory authority have called for reversal either by Congress or the courts. Indeed, Hill Republicans have vowed to reverse the new FCC rules. Commissioners McDowell and Baker both expressed dismay at the FCC's attempt to regulate a sector of the economy that, in their view, needs no fixing, particularly in light of the D.C. Circuit's recent decision that enforcement of net neutrality principles is beyond the FCC's authority.

Those who believe the Order did not go far enough complain that the rules apply primarily to fixed broadband providers, leaving wireless providers largely exempted, and that the rules do not expressly prohibit "paid prioritization," which would allow content providers to pay for faster transmission of their data.

Chairman Genachowski has defended the new regulations, stating in an interview with Gary Shapiro, head of the Consumer Electronics Association, "Our hope is that there's an outcome here that preserves a free and open Internet [that will] promote innovation, protect the free flow of information … and preserve and accelerate the kind of economic activity that we've seen out of this platform for the last several decades."

Whether the FCC's net neutrality rules can withstand judicial review and Congressional challenge remains to be seen.

Authored By:

Christopher S. Huther
(202) 772-5374
chuther@sheppardmullin.com

and

Megan H. Troy
(202) 772-5373
mtroy@sheppardmullin.com

and

Brian D. Weimer
(202) 469-4904
bweimer@sheppardmullin.com

and

Celia V. Cohen
(202) 469-4947
ccohen@sheppardmullin.com

Stealing the Show?

Sheppard Mullin — Mon, 01 Nov 2010 04:38:29 -0800

The image of 36 women wearing skimpy orange dresses at a World Cup soccer match last June raised the ire of Fédération Internationale de Football Association ("FIFA"), which had two of the women arrested for organizing the ambush marketing stunt on behalf of Dutch beer brewer Bavaria. Meanwhile, Nike’s "Write the Future" soccer-themed commercial, which is a 3-minute magnum opus featuring players from various national teams that qualified for the World Cup 2010, was allowed to launch an epic reign on YouTube unfettered by any interference from FIFA. Commentators have already pointed out that the players involved in Nike’s "Write the Future" campaign had disappointing World Cups: Ronaldinho didn’t even make the Brazil squad, while Cristiano Ronaldo, Wayne Rooney, Franck Ribery, Didier Drogba and Fabio Cannavaro were all knocked out of the World Cup 2010 before the quarterfinals, each after enduring various misfortunes. But that did not stop the spot from generating major brand exposure for Nike and accumulating more than 21,200,000 hits and counting on YouTube. How can FIFA justify having women arrested for wearing orange dresses while doing nothing against Nike? Only FIFA can definitively answer this riddle, but FIFA itself publicly forecasted that it would take this approach months before the World Cup 2010 even began.

This article by Ben Mulcahy was originally published in the Sports Litigation Alert. To read the article please click here, or visit the Sports Litigation Alert website.

Will The Revised "Green Guides" Do More Harm Than Good?

Sheppard Mullin — Thu, 14 Oct 2010 03:50:21 -0800

Last week Sun Chips pulled its biodegradable snack bag off the market around the same time that the FTC announced that it wanted to change its so-called "Green Guides." Coincidence? Maybe. Sun Chips explained that the more environmentally-friendly bag that it launched with a nice spot on Earth Day - was "noisier" than its regular bag, raising complaints from consumers who were more interested in having a quiet snack bag than doing something to help save the planet. But complaints about "noisy" bags aside, the changes that the FTC has proposed to the Green Guides will make it harder for marketers like Sun Chips to tout the things that they're doing to help reduce the negative effect that their product manufacturing and distribution pipelines are having on the environment. If the FTC takes away a brand's ability to tout those attributes, then it also takes away a brand's ability to leverage those attributes to increase sales. And if that's taken away, we run the risk that brands will make green initiatives less of a priority, which will hurt us all.

The FTC's proposed changes to the "Green Guides" were developed using information collected from public workshops, public comments and a study of how consumers understand certain environmental claims. The proposed changes can be divided into two parts: (i) revisions designed to strengthen and clarify the FTC's previous guidance on marketing claims addressed in the Green Guides that currently exist and (ii) new guidance addressing claims not addressed by the current Green Guides, such as "carbon offset" claims, "renewable energy" claims and "renewable materials" claims:

Proposed Revisions to Claims Addressed by the Current Green Guides

General Claims. Marketers should not make general environmental claims such as "earth friendly" without qualifying what attributes make the product "green". Qualifications must be clear and prominent and should limit the claim to a specific benefit.
Certification/Seals of Approval. Marketers should not use unqualified certifications or seals of approval, or certifications that do not specify the basis for the certification through specific criteria. The proposed revisions emphasize that certifications/seals are endorsements covered by the FTC Endorsement Guidelines and provide examples illustrating how those guidelines apply to environmental claims (e.g., marketers should disclose materials connections to the certifier). In addition, marketers are obligated to substantiate all conveyed claims, even when the marketer has obtained a third party certification.
Degradable, Recyclable, Ozone-friendly and "Free of" Claims. The revised Green Guides advise marketer that if a marketer claims that a product thrown in the trash is "degradable," it should compose in a "reasonably short period of time", which has been defined as no more than one year, even in a landfill. The revised Green Guides also include changes to use of claims that a product is "ozone friendly", recyclable, and non-toxic. For example, the revised Green Guides warn against broad environmentally friendly claims from removal/substitution of ozone depleting ingredients in products where the substitute ingredients still produce greenhouse gases or consume substantial energy.

Proposed Guidance for Claims Not Addressed by the Current Green Guides

Carbon Offset Claims. Marketers are advised that they should have competent and reliable scientific evidence to support any carbon offset claims, including appropriate accounting methods to ensure they are properly quantifying emission reductions and are not selling those reductions more than once. The revised Green Guides also advise marketers to disclose if the emission reductions that are being offset by a consumers purchase will not occur within two years, and to avoid advertising an offset if the activity that produces the offset is already required by law.
Renewable Materials and Renewable Energy Claims. When making claims about the use of renewable materials and energy, the revised Green Guides require that marketers provide specific information about the materials and energy used (e.g., "renewable – made with fast growing bamboo" or "renewable – manufactured with solar power"). Marketers should not make renewable energy claims if the power used to manufacture any part of the product, no matter how insignificant, was derived from fossil fuels. The revised Green Guides also prohibit "double counting", meaning if a marketer generates renewable energy (e.g. using wind power) but sells RECs for all of the renewable energy it generates, then it cannot represent that it uses renewable energy.

A copy of the proposed revised Green Guides can be found here. The FTC is seeking public comments on the proposed changes until December 10, 2010, after which it will decide which changes to make final.

Authored by:

Robert L. Magielnicki
(202) 218-0002
RMagielnicki@sheppardmullin.com

and

Benjamin R. Mulcahy
(212) 634-3030
bmulcahy@sheppardmullin.com

and

Gina Reif Ilardi
(212) 634-3031
gilardi@sheppardmullin.com

California Data Breach Notification Law Vetoed

Sheppard Mullin — Fri, 01 Oct 2010 11:14:04 -0800

This week the Governor of California vetoed what would have been a landmark law on data breach notification. The law sought to strengthen the notification required when databases of personal information are compromised. California’s existing data breach law, which will continue unamended, requires companies and state government agencies to notify individuals when their personal information has been compromised.

In the Governor's veto message, Governor Schwarzenegger made the point that the law was well-intended, but it imposed additional burdens on businesses without a corresponding consumer benefit, specifically stating:

To the Members of the California State Senate:

I am returning Senate Bill 1166 without my signature.

This bill would require any agency, person, or business that must issue an information security breach notification pursuant to existing law to also fulfill certain additional requirements pertaining to the security breach notification.

California's landmark law on data breach notification has had many beneficial results. Informing individuals whose personal information was compromised in a breach of what their risks are and what they can do to protect themselves is an important consumer protection benefit. This bill is unnecessary, however, because there is no evidence that there is a problem with the information provided to consumers. Moreover, there is no additional consumer benefit gained by requiring the Attorney General to become a repository of breach notices when this measure does not require the Attorney General to do anything with the notices.

Since this measure would place additional unnecessary mandates on businesses without a corresponding consumer benefit, I am unable to sign this bill.

Sincerely, Arnold Schwarzenegger

Why Every Business Should Have A Social Media Policy

Sheppard Mullin — Thu, 05 Aug 2010 11:02:13 -0800

Words matter. Words can come back and bite you. Think before you speak. These are all self-evident truths that no one is likely to dispute. Yet, we continue to see examples of people, who should know better, doing just the opposite. This is especially true in the context of electronic communications – first, in work emails, and now, on social media websites. If it was a simple matter of personal embarrassment alone, then there would be no need for this article. This is not the case however.

Social media - Tweets, Facebook posts, LinkedIn updates - can have real legal and economic consequences for businesses. A post may seem as innocent as an employee expressing a personal opinion. However, if the person describes herself as working for a particular company, and then speaks on a highly controversial subject, her post could damage the "good will" of the company. Or, the poster may be recommending a product to all of her Facebook friends without sharing that she happens to work for the product manufacturer in violation of fair advertising practices.

1. A Social Media Policy Is A Good Way To Show Compliance With The Federal Trade Commission's Revised Endorsement Guidelines.

In the last year, businesses have increasingly recognized the need for a social media policy. First, the Federal Trade Commission revised its "Guides Concerning the Use of Endorsements and Testimonials in Advertising" ("Endorsement Guidelines") to make it clear that, in some contexts, truth-in-advertising principles may apply to social media posts: (1) endorsements should not be misleading; and (2) non-obvious connections between the endorser and the marketer of the product should be disclosed if they would reasonably affect how much weight a consumer places on the endorsement.

The connection may include the endorser being paid or receiving some quid pro quo from the product being endorsed, and this needs to be disclosed. For example, reviews on social media sites such as Yelp should disclose if the reviewer also happens to be an employee of the business, or if the reviewer is swapping positive reviews with another business owner, or is receiving anything of value in return for their positive review. Similarly, the Endorsement Guidelines would require someone who tweets about a product to disclose if the poster is being paid to endorse the product.

More significantly for businesses, the FTC recognized in its Endorsement Guidelines that a business cannot realistically oversee all of the social media posts by its employees, and ensure that they do not violate the Endorsement Guidelines. The FTC has stated that the employer should not be held liable in this situation if: (1) the employer has a social media policy concerning the "social media participation" of its employees; and (2) the established company policy adequately covered the "rogue" employee's conduct.

Thus, the company can show that, despite its best efforts, the employee violated the Endorsement Guidelines, and the company should not be held liable for the employee's unauthorized acts. In order to do so, however, the employer also needs to establish procedures to monitor compliance with its social media policy. The FTC declined to say how the monitoring should be done, but put the onus on companies to determine for themselves what would best satisfy their legal responsibilities in the context of their business.

2. Businesses Can Better Protect The Value of Their Brand By Ensuring That Employees Do Not Post Unflattering Material In Association with The Business.

Second, businesses should have a social media policy in order to protect the considerable investment they have made in their "brand" and reputation in the marketplace. A social media policy is a proactive way for a business to try and not have its employees post on controversial subjects with the business suffering by association.

A perfect example of this was headline news a few weeks ago. Namely, the CNN reporter who was fired after she posted on Twitter that she had a lot of respect for a recently deceased Hezbollah leader: "Sad to hear of the passing of Sayyed Mohammad Hussein Fadlallah.. One of Hezbollah's giants I respect a lot. #Lebanon."

Octavia Nasr described herself in her Twitter profile as a 25 year veteran of the news business, and the CNN Senior Editor of Mideast Affairs, thereby, turning the personal into a reflection on her news agency CNN. The association with CNN was further highlighted by her Twitter name which was octavianasrCNN.

Ms. Nasr tried to explain the reason for her post a few days later. She said the 140 character limit on Twitter made her message too "simplistic." Her excuse came too late. The damage was done. She was forced out of her job because a single misguided tweet was seen as compromising her position as a CNN reporter.

The immediate public outcry was directed against CNN as well. The Simon Wiesenthal Center called on CNN to make a formal repudiation of Ms. Nasr’s comments. On the other end of the scale, editorials have criticized CNN as being hypocritical in its editorial standards, and for caving in to pressure from the Jerusalem Post and conservative blog site NewsBusters. Put simply, Ms. Nasr's tweet has had a negative effect on the public perception of CNN.

On the same day as Ms. Nasr's post, CNN issued its own statement through a spokesman: "CNN regrets any offense her Twitter message caused. It did not meet CNN’s editorial standards. This is a serious matter and will be dealt with accordingly."

This statement however does not go to the essence of the problem. Ms. Nasr was not submitting an article that needed to satisfy the editorial standards of CNN. What was absent from this statement, and is the best long term solution for this type of problem, is the implementation and enforcement of a social media policy.

3. The Barebones For Any Social Media Policy.

Every business should have a social media policy. The posts of your employees reflect on your business, and can result in negative impacts to it. The damage can range from harm to the company's brand and public perception of it to legal consequences such as loss of trade secret protections, unfair competition and deceptive advertising. A social media policy should include the following bright line rules:

DO'S:

Stop and think how your post will reflect on your company and its clients or potential clients.
Do assume that no matter how restrictive your privacy settings, your posts may become public. Litigation attorneys, professional colleagues, prospective clients and employers are searching these sites for information gathering purposes.
Cooperate with your company in monitoring the social network sites by providing a current list of the sites you are using if you are associated with the company in any way on the site. This is not intended to discourage employees from using social media sites. The company favors the use of social media in general provided it is in accordance with all governing laws.
Be transparent. Make clear that any opinions you express are your own, and not the views of your employer – don't associate your position at the company with your opinion.
Use privacy settings.
Maintain business confidences by not posting information that may reveal confidential information – a deal that you are working on, a customer the company is pursuing, a new product that is being developed.

DON'TS:

No discriminatory or harassing posts.
Do not divulge any non-public private information.
Do not endorse the company's products without having your message reviewed by the company's marketing department, and approved for content and necessary legal disclosures. This is necessary to ensure compliance with the FTC Endorsement Guidelines.
Do not post defamatory content – don't insult your competition.
Do not embarrass and disparage the company.
Do not violate the privacy rights of other people by posting their personal image without their permission, or sharing their personal information.

And, finally, businesses should recognize that an effective social media policy is tailored to the particulars of the business for which it is being adopted. Consult with an attorney who is well versed in social media and the laws governing it, so an effective policy can be prepared and implemented.

Authored by:

Michelle Sherman
(213) 617-5405
msherman@sheppardmullin.com

Sometimes "Compare To" Packaging Means Just What it Says

Sheppard Mullin — Wed, 21 Apr 2010 09:08:17 -0800

The verdict in a recent high profile case alleging false advertising claims is significant for the store brand industry. The case involved Perrigo Company, a producer of dietary supplements for the private label market, and Rexall Sundown, Inc. The jury upheld the practice of communicating choice to consumers through the use of a comparison statement specifically identifying a national brand

Rexall brought a multi-million dollar Lanham Act false advertising claim against Perrigo alleging that "compare to" advertising statements on the packaging of the Perrigo products were false and misleading to consumers because the statements allegedly conveyed that Perrigo's generic nutritional supplements are equivalent to Rexall's Osteo Bi-Flex products even though, Rexall alleged, the formulation of Perrigo's products is materially different from Osteo Bi-Flex.

The jury unanimously found that statements such as "Compare to Osteo Bi-Flex Ingredients" on the packaging for Perrigo's store brand products were not false and misleading. In addition, the jury ruled in Perrigo’s favor on a false advertising counterclaim it had asserted against Rexall Sundown based on an implied superiority claim arising from Rexall's Sundown's statement that one of the ingredients in Osteo Bi-Flex is "10 times more concentrated than typical Boswellia extracts." The jury determined that the statement was false and misleading and awarded Perrigo damages.

Sheppard Mullin represented Perrigo in the four week trial in the U.S. District Court for the Eastern District of New York.

For more information, please contact Paul Garrity at (212) 634-3057 or Robert Friedman at (212) 634-3058.

Efficiency v. Privacy: Is Online Behavioral Advertising Capable of Self-Regulation?

Sheppard Mullin — Wed, 14 Apr 2010 05:25:24 -0800

The Dilemma

In what began as an innovative way to improve advertising efficiency, online behavioral advertising has spawned “Big Brother”-type fear among watch-dog groups worried about consumer privacy. According to the advertising industry’s “Self-Regulatory Principles For Online Behavioral Advertising,” online behavioral advertising is “the collection of data from a particular computer or device regarding Web viewing behaviors over time . . . for the purpose of using such data to predict user preferences or interests to deliver advertising to that computer or device based on the preferences or interests inferred from such Web viewing behaviors.” In a recent Annenberg study, 66 percent of American adults indicated they did not want websites or networks targeting advertisements to them. Representing the other side of the spectrum, a representative of the American Association of Advertising Agencies has explained, “[M]arketers want their messages delivered to the customer most likely to buy—that is both economically efficient and completely sustainable in a consumer-driven, competitive marketplace.” The dilemma is thus presented: how to balance the privacy concerns surrounding the collection of personal information with the need to subsidize the availability of online content through effective and cost-efficient advertising. This is the dilemma that will eventually be addressed one way or another, either through continued industry self-regulation, or through actual regulation.

Self-Regulatory Principles for Online Behavioral Advertising

Despite a few states passing legislation regulating behavioral marketing, Congress has yet to enact a comprehensive federal law, nor has the Federal Trade Commission (“FTC”) implemented mandatory rules. At least, not yet. Instead, the FTC offers “Self-Regulatory Principles For Online Behavioral Advertising” (the “Guidelines”) which, as its name suggests, are nonbinding suggestions strongly encouraging the advertising industry to behave. The February 2009 revised Guidelines once again featured four key principles: Transparency and Consumer Control, Reasonable Security and Limited Data Retention, Affirmative Express Consent for Material Changes, and Affirmative Express Consent to Using Sensitive Data for Behavioral Advertising. While the interactive advertising industry promulgated its own “Self-Regulatory Principles For Online Behavioral Advertising” in July of 2009, the FTC's Guidelines make it clear that principles alone will not be enough to prevent rulemaking in this area, stating that the FTC will continue to “evaluate the development of self-regulatory programs and . . . conduct investigations, where appropriate, of practices in the industry to determine if they violate Section 5 of the FTC Act or other laws.”

Two particular concerns raised in the FTC Guidelines are the adequacy of opt-out or opt-in mechanisms and the scope of off-limits personal information. As reported in the Guidelines, the major search engines in the United States have introduced new tools that allow consumers to opt-out of receiving targeted online advertisements. However, critics have supported a more transparent opt-in mechanism, which would require consumers to affirmatively provide their express consent before their personally identifiable information is collected for behavioral advertising purposes. The Guidelines do not choose sides in the “opt-in” or “opt-out” debate, choosing instead to admonish advertisers that the choice mechanism should “be clear, easy-to-use, and accessible to consumers.”

Two exclusions are particularly noteworthy in the Guidelines. The first is the exclusion of “first party” behavioral advertising and the second is the exclusion of “contextual advertising” from the scope of the Guidelines. Due to the “first party” (aka “intra-site”) exclusion, an online retailer’s website may collect consumer information to deliver targeted advertising at its own website so long as it does not share that information with third-parties. For example, Amazon.com may recommend a book based upon the consumer’s prior purchases or browsing patterns, but it cannot transmit that information to other non-Amazon affiliated websites and still avail itself of the “first party” exclusion.

Under the “contextual advertising” exclusion, online retailers may target ads based on a search made by the consumer within the very website that the consumer is viewing. An ubiquitous example of this is Google AdWords, which triggers sponsored search results (i.e. ads) to be displayed based on the keywords that are used in the search. But the exclusion also arguably applies whenever a search functionality is used to search solely within the framework of the site that offers it.

Facebook’s Beacon Settlement

Representing an example of the privacy issues associated with online behavioral advertising is Facebook’s Beacon program. Launched in November 2007, Beacon allowed consumer information to be transmitted from affiliated retailers to Facebook and ultimately shared that information with the Facebook members’ friends. Equipped with an allegedly ineffective opt-out mechanism (a brief pop-up window), every time a Facebook user purchased, downloaded, subscribed, or viewed something at one of the participating online vendors, Beacon first triggered a script that utilized cookies to obtain information from the user’s computer, and then shared news of the Facebook members’ activity with their friends. As an example of the process, Sean Lane reportedly bought a ring for his wife from overstock.com only to have the purchase, along with the 51 percent discount he received, automatically published as a news headline on his Facebook wall visible to everyone in his online network, including friends, co-workers, acquaintances, and his wife.

After a flurry of bad press, Facebook switched its Beacon program from an opt-out to an opt-in arrangement. Nevertheless, a class action lawsuit was filed against Facebook, Blockbuster, Fandango, Hotwire, STA Travel, Overstock.com, Zappos.com, and Gamefly claiming that the Beacon program violated the Electronic Communications Privacy Act, Computer Fraud and Abuse Act, Video Privacy Protection Act, California Consumer Legal Remedies Act, and California Computer Crime Law. Lane v. Facebook, Inc., N.D. Cal., Case No. 5:08-cv-038450. At the crux of the complaint were Beacon’s allegedly “inadequate” and “deceptive” efforts to obtain a user’s consent before involving them in the Beacon program.

On September 17, 2009, the class action plaintiffs filed a Settlement Agreement in the U.S. District Court for the Northern District of California calling for a settlement fund of $9.5 million, out of which up to $3 million in attorneys’ fees and administrative costs will be paid. Also, “in recognition of their efforts on behalf of the [c]lass,” the 19 representative plaintiffs will receive a total of $46,000, with awards of either $15,000, $7,500, or $1,000 depending on their contribution during litigation. Finally, Facebook, with what is left of the $9.5 million settlement fund, will establish a nonprofit Privacy Foundation “to fund projects and initiatives that promote the cause of online privacy, safety, and security.” On March 17, 2010, Judge Richard Seeborg of the U.S. District Court for the Northern District of California approved this “cy pres” type of settlement, which often results in the creation of a foundation when locating every individual class plaintiff is difficult.

While on the surface it may seem like the plaintiff class “won” here, in fact, Facebook will likely receive much of the settlement fund back if class members fail to claim it, and Facebook will use those amounts to implement programs that, under state and federal law, it arguably has a legal duty to implement anyway (See, e.g., In re The TJX Companies, Inc., FTC Docket No. C-4227 (July 2008)(FTC consent order requiring the subject to implement “a comprehensive information security program that is reasonably designed to protect the security, confidentiality, and integrity of personal information collected from or about consumers.”); and Cal. Civ. Code § 1798.81.5 (b) (providing, “A business that owns or licenses personal information about a California resident shall implement and maintain reasonable security procedures and practices . . . to protect the personal information from unauthorized access, destruction, use, modification, or disclosure.”).

Possible Congressional (Re)Action

With Beacon serving as a banner for their cause, various consumer groups, industry representatives and members of Congress have been calling for expansive government regulation of online behavioral advertising. Even FTC Commissioner Jon Leibowitz said, “Industry needs to do a better job of meaningful, rigorous self-regulation or it will certainly invite legislation by Congress and a more regulatory approach by our Commission.” On the other hand, Randall Rothenberg, President and CEO of the Interactive Advertising Bureau (“IAB”), said, and understandably so considering his business interests, “We support the FTC’s call for industry self-regulation and we are very pleased that the commission endorsed the IAB’s analysis of the value of the ad-supported Internet.” Indeed, recognizing that actions speak louder than words, the IAB launched an educational campaign about behavioral advertising and recently declared that the campaign was a success.

Nonetheless, recent FTC hearings make it seem like some level of federal legislation is inevitable. Leading the charge is Rep. Rick Boucher, D.-Va., who heads the House Energy and Commerce Subcommittee on Communications Technology and the Internet, with the help of Rep. Cliff Stearns, R.-Fla., and Rep. Joe Barton, R.-Texas. They have drafted at least one bill that would regulate behavioral advertising and require heightened disclosure and visibility when users’ internet activity is being tracked. In a June 2009 House subcommittee joint hearing, Boucher indicated that the new bill would require that: (i) consumers be given “clear, concise information in an easy-to-find privacy policy about what information a website collects about them,” and how it is used and stored; (ii) consumers be able to opt-out of first party targeted ads including “use by third parties or subsidiaries who are part of the company’s normal first party marketing operations;” and (iii) consumers be able to opt-in to sharing the collected information with unaffiliated third parties.

Conclusion

Without the quid pro quo between advertisers, publishers and consumers, premium content that is ad supported and, therefore, free or low-cost to users will be in jeopardy. But absent effective and continuously evolving self-regulation, the players in the online advertising ecosystem risk consumer mistrust, government regulation, and possibly much more.

Authored by:

Benjamin R. Mulcahy
(212) 634-3030
bmulcahy@sheppardmullin.com

and

Dante M. DiPasquale
(212) 634-3092
ddipasquale@sheppardmullin.com

FDA Publishes Proposed Rule on Broadcast Direct-to-Consumer Prescription Drug Advertisement; the 4 New Standards

Sheppard Mullin — Tue, 06 Apr 2010 05:29:16 -0800

On March 29, 2010, FDA published a proposed rule setting forth how it would interpret the Congressionally mandated requirement that “major statements” in broadcast Director-to-Consumer (“DTC”) advertisements for prescription drugs be presented in a “clear, conspicuous and neutral manner." See proposed 21 C.F.R. § 202.1(e), 75 Fed. Reg. 15376 (March 20, 2010).

Under current rules, each DTC broadcast (TV/Radio) advertisement for a prescription drug must contain a “major statement” of the “major side effects and contraindications” of the advertised prescription drug, along with identification of means to obtain the approved labeling for the advertised product (referred to as “adequate provision”). Under current regulations, the “major statement” is required to be “comparable in prominence and readability to the presentation of effectiveness information in the advertisement.”

The Food and Drug Administration Amendments Act of 2007 (“FDAAA”) amended Section 502(n) of the Federal Food Drug and Cosmetic Act by requiring that “[i]n the case of a prescription drug subject to section 503(b)(1) presented directly to consumers in television or radio format and stating the name of the drug and its conditions for use, the major statement relating to side effects and contraindications shall be presented in a clear, conspicuous and neutral manner.” See Section 901(d)(3)(A) of FDAAA.

FDA has proposed four standards that it intends to use in interpreting the Congressional mandate. It will regard a broadcast DTC advertisement to meet the “clear, conspicuous, neutral” test if:

Information in the major statement is presented in language that is readily understandable by consumers;
Audio information in the major statement is understandable in terms of the volume, articulation, and pacing used;
The text of the major statement is placed appropriately and is presented against a contrasting background for sufficient duration and in a size and style of font that allows the information to be read easily; and
The advertisement does not include distracting representations (including statements, text, images, or sounds or any combination thereof) that detract from the communication of the major statement.

In proposing these standards, FDA looked to rules of other agencies, including the Federal Trade Commission, the Securities and Exchange Commission and others who had previously interpreted “clear and conspicuous” in a similar fashion. As to defining a “neutral manner,” the Agency noted it was unaware of similar regulatory precedent and determined that it would interpret “neutral” to mean “unbiased." To achieve a “neutral” and unbiased presentation, it said thatt “the major statement must not be presented in competition with other elements if these elements would arrest the attention and distract consumers from the presentation of the risk information."

Significantly, the Agency did not propose that the “major statement” be included in both audio and visual parts of the advertisement, even though it said it thought such a standard “could enhance the clarity, conspicuousness and neutrality” of the major statement. It is requesting public comment on whether major statements in TV advertisements should be in both the audio and visual parts of the advertisement. (Comments can be made on this issue and other issues raised by the proposed rule by June 28, 2010).

While to a great degree the Agency has already been utilizing similar criteria to determine whether a broadcast DTC advertisement is false and/or misleading, the new standards set forth in greater detail the approach FDA will utilize in reviewing broadcast DTC advertisement for prescription drugs. While it is not, as FDA says a “set formula," it does provide a roadmap as to how advertisers can satisfy FDA that their advertisements effectively communicate the overall message of a major statement.

Authored By:

Peter S. Reichertz
(202) 772-5333
preichertz@sheppardmullin.com

In re NCAA Student-Athlete Name & Likeness Licensing Litigation: Former Athletes Seek A Share Of NCAA Licensing Profits

Sheppard Mullin — Wed, 31 Mar 2010 05:05:01 -0800

The National Collegiate Athletic Association (“NCAA”) profits handsomely from the increasingly lucrative collegiate licensing and merchandising market— estimated to be worth $4 billion annually. Yet, current and former NCAA athletes do not share in these licensing fees. Two ways that the NCAA has accomplished this result are by requiring NCAA athletes to sign away their licensing rights, and by refraining from licensing players’ names to popular products such as video games. However, all of that may change as a result of related class action lawsuits filed by former Arizona State and Nebraska quarterback Sam Keller and former UCLA basketball star Ed O’Bannon.

The following article by Daniel Brown and Dante DiPasquale was originally published in the Sports Litigation Alert. To read the article please click here, or visit the Sports Litigation Alert website.

On Your Marks, Get Set.... Ambush!

Sheppard Mullin — Thu, 18 Mar 2010 04:04:19 -0800

The image of Michael Phelps “swimming” across a Midwestern wheat field toward Vancouver recently raised the ire of the United States Olympic Committee (“USOC”), which characterized the image as “crossing the line.” But is the USOC’s position legally warranted, or is the image nothing more than a lawful and effective ambush marketing campaign?

The following article by Ben Mulcahy was originally published in the Sports Litigation Alert. To read the article please click here, or visit the Sports Litigation Alert website.

Court Challenge to Maine's New Marketing Law Fails

Sheppard Mullin — Tue, 15 Sep 2009 12:01:49 -0800

On September 9, 2009, a federal judge in Maine agreed with retailers, marketers, and media companies that the recently enacted Maine law "An Act To Prevent Predatory Marketing Practices Against Minors" is likely unconstitutional. Nonetheless, the judge dismissed the challenge to the Act on the ground that the state Attorney General does not intend to enforce it.

The Act, which became effective on September 12, 2009, broadly prohibits the collection, receipt, and use of personal information and health-related information from minors under 18 for marketing purposes without first obtaining verifiable parental consent. The Act also prohibits "predatory marketing" which is broadly defined as the use of any personal information or health-related information regarding a minor for the purpose of marketing a product or service to that minor or promoting any course of action for the minor relating to a product.

The overly broad requirements and limitations of the Act were reportedly not the intent of the Maine legislature. The original version of the bill was focused on protecting children's health information, requiring parental consent before the collection and use of certain health-related information of minors. The bill, however, was amended at the last minute to include a new and expansive definition of personal information, which as a practical matter prohibits direct marketing of products and services to Maine residents under the age of 18.

Personal information means "individually identifiable information, including: (1) an individual's first name, or first initial, and last name; (2) a home or other physical address; (3) a social security number; (4) a driver's license number or state identification card number; and (5) information concerning a minor that is collected in combination with an identifier described in this subsection." Health-related information is defined as "any information about an individual or a member of the individual's family relating to health, nutrition, drug or medication use, physical or bodily condition, mental health, medical history, medical insurance coverage or claims or other similar data."

Similar to the federal Children's Online Privacy Protection Act (COPPA), the Act defines verifiable parental consent as "any reasonable effort, taking into consideration available technology, including a request for authorization for future collection, use and disclosure described in the notice, to ensure that a parent of a minor receives notice of the collection of personal information, use and disclosure practices and authorizes the collection, use and disclosure, as applicable, of personal information and the subsequent use of that information before that information is collected from that minor."

The Act provides for (1) relief as an unfair trade practice (enforced by both the state Attorney General and private rights of action specified in the Maine Unfair Trade Practices Act), (2) a private right of action for injunctive relief and/or damages, including attorneys' fees (monetary damages may be trebled for willful violations), and (3) a civil violation with monetary fines of not less than $10,000 and not more than $20,000 for a first violation, and not less than $20,000 for each subsequent violation.

Facing a September 12, 2009 effective date, retailers, marketers, and media companies filed an unsuccessful lawsuit seeking to enjoin the enforcement of the Act on the grounds that the law violates the First Amendment and the Commerce Clause of the Constitution and is preempted by COPPA. State lawmakers are expected to revise the Act next year. In the meantime, although the order dismissing the challenge to the Act indicates the state Attorney General does not intend to enforce the Act, the order does not prevent possible private causes of action under the Act.

Authored by:

Brian D. Anderson
(415) 774-3287
banderson@sheppardmullin.com