Advertising Law

Wasserman Invited to Moderate Panel Session at FDLI’s Enforcement, Litigation and Compliance Conference

On December 8-9, 2014, attorrneys and litigators, regulators, compliance experts and consultants in the drug, medical devices, biologics and food and dietary supplements industries will convene at The Food and Drug Law Institute’s (FDLI) Enforcement, Litigation and Compliance Conference in Washington, D.C. The presenters will focus on changes in the law and regulation over the year and predict changes in 2015. Manatt partner Ivan Wasserman has been asked to moderate a panel of presenters who will discuss “Pharmaceutical and Medical Device Advertising and Promotion.”

The conference will be held at the Renaissance Downtown Hotel. For more information, click here.

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SPECIAL FOCUS: Adding You to My Professional Network Emails May End Up Being Costly for LinkedIn as Publicity Rights Suit Moves Forward

Author:Jesse Brody

A putative class action alleging that LinkedIn Corp. violated their right of publicity by sending reminder emails to users’ contacts without their permission will move forward, the U.S. District Court for the Northern District of California recently ruled.

Plaintiffs in this case are seeking to represent a class of LinkedIn users who used an email address when signing up for a LinkedIn account. Plaintiffs brought a putative class action suit last September against the social media site, alleging it had harvested their email addresses during the sign-up process.

During that process, new users are given the option to allow LinkedIn to search their email contact list for individuals who are not already on LinkedIn. They are given next the option to choose whether or not to invite their contacts to connect with them on LinkedIn. If they do, the site sends an invitation to connect. These messages come from the user’s name via LinkedIn and contain the following text: “I’d like to add you to my professional network . . . .” This text is followed by a signature line that contains the LinkedIn user’s name. Two more messages are sent if the contact does not sign up. Plaintiffs refer to these messages as “endorsement emails,” because they are made to look, according to plaintiffs, as if they have been sent by the user and as if the user endorses LinkedIn.

Plaintiffs alleged the use of their names and likenesses to personally endorse LinkedIn’s services for the site’s commercial benefit violated California’s common law and statutory rights of publicity as well as the state’s unfair competition law, according to the complaint.

Back in June of this year, U.S. District Court Judge Lucy H. Koh granted in part and denied in part LinkedIn’s motion to dismiss the case. Koh dismissed the plaintiffs’ federal claims against LinkedIn under the Stored Communications Act, 18 U.S.C. § 2701, and Wiretap Act, 18 U.S.C. § 2511. She also held that the plaintiffs consented to the initial invitation emails, narrowing the case to whether the reminder emails were unlawful.

LinkedIn moved to dismiss plaintiffs’ amended complaint in September, which the court granted in part and denied in part. Plaintiffs alleged in the amended complaint that LinkedIn violated California’s common law and statutory right of publicity, Cal. Civil Code § 3344, and the unlawful prong of California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, based on abridging plaintiffs’ common law right of publicity.

While Koh agreed with the defendant that the statutory publicity rights claim should be dismissed, she allowed the suit to move forward on the plaintiffs’ other claims. The court dismissed plaintiffs’ statutory right of publicity claim because the plaintiffs failed to plead mental harm, which it said was required when requesting the minimum statutory damages figure of $750. The court said the plaintiffs alleged only economic harm as a result of the reminder emails. Although the California law doesn’t explicitly require plaintiffs to plead mental harm, the court said that Miller v. Collectors Universe Inc., 159 Cal. App. 4th 988 (Cal. Ct. App. 2008), held the requirement should be inferred based on a reading of the statute’s legislative history. Quoting Miller, the court said the statutory minimum damages were meant “to compensate non-celebrity plaintiffs” who suffer “mental anguish yet no discernible commercial loss.” The court did, however, grant plaintiffs leave to amend their complaint regarding their statutory right of publicity claim.

LinkedIn’s other defenses proved unavailing. LinkedIn argued that the plaintiffs’ case should be dismissed because its reminder emails were protected by the First Amendment and the Communications Decency Act, 47 U.S.C. § 230. The court rejected both claims. Section 230 of the Communications Decency Act, which provides immunity to providers of interactive computer services against liability from content created by third parties, does not apply to the creation of content by a Web Site, the court explained. The court said plaintiffs plausibly alleged that LinkedIn’s reminder emails were advertisements for the professional social networking site. The court added that it agreed with plaintiffs’ use of Facebook Chief Executive Officer Mark Zuckerberg’s quote from Fraley v. Facebook, Inc., 830 F. Supp. 2d 785 (N.D. Cal. 2011), that a trusted referral “influences people more than the best broadcast message” and that a “trusted referral is the Holy Grail of advertising.” The “true authorship” of the messages lies with the defendant: the text, layout, and design of the emails were generated by the site and then transmitted to thousands of recipients by the defendant, without the plaintiffs’ knowledge or consent. Even though the plaintiffs arguably consented to the use of their information for the initial message, that was not enough to protect the defendant. Thus the messages themselves constituted commercial speech and functioned as advertisements for LinkedIn, the court said, receiving less First Amendment protection and possibly none at all, given that plaintiffs “plausibly alleged that LinkedIn’s reminder emails are misleading commercial speech, for which the First Amendment provides no protection.”

Finally, Judge Koh rejected the defendant’s argument that its use of the plaintiffs’ names and likenesses was incidental and therefore did not give rise to liability. “Plaintiffs here have sufficiently alleged that LinkedIn’s reminder emails serve as personalized endorsements for LinkedIn’s services,” she wrote, and provided meaningful value to the site because they made use of plaintiffs’ names and likenesses to help grow the membership of LinkedIn virally.

To read the order in Perkins v. LinkedIn Corp., click here.

Why it matters: Although the court sided with LinkedIn and dismissed the plaintiffs’ statutory right of publicity claim, it granted the putative class leave to amend and refile the claim where plaintiffs can now allege they suffered mental anguish. While LinkedIn had initial success in an earlier ruling from the court dismissing claims based on the Wiretap Act and the Stored Communications Act and holding that the plaintiffs consented to the initial invitation email, the case continues with regard to the reminder emails sent by LinkedIn on the common law publicity rights claim and under California’s unfair competition statute.

Although LinkedIn has had some success in whittling down the lawsuit, the court’s recent order seems to indicate that there may be a good claim alleged by plaintiffs based on violation of a user’s right of publicity. It would seem easy for plaintiffs to be able to amend the complaint to allege that they suffered emotional harm as a result of seeing their network reputation suffer, and the court even alludes to the fact that emotional injury that results from reputational harm is sufficient. With that said, the right of publicity continues to be an area where brands and companies can get themselves into significant legal trouble.

Just as we have seen with respect to similar claims made in previous sponsored stories lawsuits involving other social media sites that have resulted in settlements, we will likely see LinkedIn take a similar path and settle this lawsuit. Even though we don’t yet have a definitive ruling, there are still key takeaways from LinkedIn’s right of publicity troubles:

  • Social media users, even if not celebrities, may have an actionable right of publicity associated with marketing or promotions that link them to the advertiser without proper consent.
  • Though their injury may not be as great as that of a celebrity who is in the business of selling endorsements, social media users may be able to establish some economic value to linking them to advertisers. In Perkins, using plaintiffs' names and likenesses was found to provide meaningful value to LinkedIn because it helped grow the membership of LinkedIn virally. In other similar lawsuits, plaintiffs have been able to point to linking user names and likenesses to advertising resulted in higher advertising rates.
  • As a result, not only might such a misappropriation support a right of publicity claim, it may also support an unfair competition claim. These decisions are likely to attract further claims by class action lawyers for other promotional campaigns that associate users or customers with advertising.
  • Social media and Web site providers should be careful to avoid notice and consent issues, including allegations of changed terms and insufficient notice to users.
  • Immunity afforded by the Communications Decency Act is limited. Outside of the Ninth Circuit, some courts still include rights of publicity as intellectual property claims excluded from the immunity.
  • Advertisers relying on third-party platforms to obtain consent are particularly at risk, as they are not in privity of contract even if the platform obtains consent. If you have questions about setting up a formal process in order to obtain consent from users to reuse content in promotional campaigns, we would be happy to share our depth of experience with you.

 

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FTC, Wyndham Head to Mediation – Could They Reach a Deal?

Could the high-profile dispute over the scope of the Federal Trade Commission’s data security authority be settled in mediation?

Just days after the Commission filed its response to Wyndham Hotel’s motion to dismiss the charges against it – with amicus briefs filed in support of both parties – the presiding judge ordered the parties to begin mediation.

The case began innocuously enough, with the FTC alleging that the hotel chain violated Section 5 of the Federal Trade Commission Act by misrepresenting the strength of its data security protection after suffering three cyberattacks between 2008 and 2010.

But unlike the more than 50 other companies facing similar charges from the agency, Wyndham fired back with a direct challenge to the FTC’s authority to make an unfair practices claim in the data security context. The company also contended that the agency violated fair notice principles by not first promulgating regulations before bringing a Section 5 charge.

In an opinion that recognized the “rapidly evolving” digital age, U.S. District Court Judge Esther Salas declined “to carve out a data security exception” to the FTC’s authority. Wyndham appealed to the Third U.S. Circuit Court of Appeals, which agreed to hear the case in August.

Continuing the battle, the hotel chain filed a motion to dismiss the suit. Wyndham contended that it did nothing and maintained that the agency seeks to hold them responsible for security breaches even though the agency has not established data security standards. “The Commission has simply anointed itself a roving cybersecurity prosecutor – but, unlike other prosecutors, one that seeks to define the offense and to do so after the fact,” Wyndham wrote in its brief.

Groups such as the U.S. Chamber of Commerce, the National Federation of Independent Business, the Electronic Transactions Association, and the Washington Legal Foundation backed the company in amicus briefs.

The FTC filed its response in which it reiterated the same lapses in security measures that, in its view, constituted an unfair practice. Consumer groups such as the Center for Digital Democracy, the Electronic Frontier Foundation, and Public Citizen have supported the agency’s position.

According to the agency, “Wyndham left customer data unprotected by firewalls; did not encrypt credit card information; used outdated software that could not receive security updates; used widely known default passwords and easily guessed passwords instead of complex passwords . . . and failed to employ reasonable measures for detecting and preventing intrusions.”

But while the federal appellate panel considers the arguments, the parties will be spending a little more time together. Citing the need to conserve judicial resources, Judge Salas ordered mediation for Wyndham and the FTC. He stayed formal discovery and ordered the parties to evenly split the meditation costs.

To read the court’s order in FTC v. Wyndham Worldwide Corp., click here.

Why it matters: Could the closely watched, heated battle between the FTC and Wyndham fizzle out in mediation? If the parties reach a deal, the question of the agency’s regulatory authority in the data security realm could go unanswered, a result that would frustrate many businesses hoping for guidance on the issue.

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Not as TRUSTe as It Claimed, FTC Says

The Federal Trade Commission reached a deal with privacy certification company TRUSTe to settle charges that the company misled consumers about its recertification program and that it falsely perpetuated its reputation as a nonprofit entity.

Consumers believe that a business with a TRUSTe seal has complied with standards such as the Children’s Online Privacy Protection Act or the U.S.-EU Safe Harbor Framework, the agency said, but over a seven-year period TRUSTe failed to conduct more than 1,000 recertifications for all companies holding TRUSTe Certified Privacy Seals. Even though the company’s Web site states that recertifications are conducted on an annual basis, between 2006 and 2013 TRUSTe just didn’t get around to doing it, the agency claimed.

In addition, after the company became a for-profit corporation in 2008, TRUSTe neglected to provide updated references about its status to clients. Companies bearing the TRUSTe seal continued to use the model language previously provided by TRUSTe stating that it was a nonprofit entity, the FTC said, perpetuating a misperception.

Pursuant to a proposed consent order, TRUSTe will be prohibited from future misrepresentations about its certification process, the certification timeline, and its corporate status. As a COPPA safe harbor entity, TRUSTe will be required to provide information about its activities in annual reports to the FTC for the next decade. The company also promised to pay $200,000.

While the Commission vote to accept the proposed consent agreement was unanimous, Commissioner Maureen Ohlhausen partially dissented with regard to the nonprofit misrepresentation charges. She argued that to be liable for deception under a “means and instrumentalities” theory requires that the party itself make a representation. TRUSTe’s recertification of an entity without requiring (albeit requesting) that the company update the relevant language that it was now a for-profit entity should not trigger liability, Ohlhausen said.

She expressed her concern that the FTC was “stepping beyond the limits.” “TRUSTe did not pass to clients any false or misleading representations regarding its for-profit status.”

In a joint statement, FTC Chairwoman Edith Ramirez and Commissioners Julie Brill and Terrell McSweeny characterized the means and instrumentalities charge as “particularly appropriate” given TRUSTe’s “unique position in the privacy self-regulatory ecosystem. Companies that purport to hold their clients accountable to protect consumer privacy should themselves be held to an equally high standard.”

The agreement is open for public comment until Dec. 17.

To read the complaint, proposed consent agreement, and statements from the Chairwoman and Commissioners in In the Matter of True Ultimate Standards Everywhere, Inc., click here.

Why it matters: In a press release, FTC Chairwoman Edith Ramirez characterized the action as a failure of self-regulation. “TRUSTe promised to hold companies accountable for protecting consumer privacy, but it fell short of that pledge,” she said. “Self-regulation plays an important role in helping to protect consumers. But when companies fail to live up to their promises to consumers, the FTC will not hesitate to take action.” The case also provided the Commissioners an opportunity to debate the scope of “means and instrumentalities” liability – an important consideration for advertisers.

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NAD Spits Out Taste Test Claims

Taste tests used by MOM Brands Company to support superiority claims for its Malt-O-Meal cereals were flawed, which prompted the National Advertising Division to recommend that the advertiser discontinue the ads.

Competitor Post Foods challenged comparative claims such as “National Taste Test WINNER Fruity Dyno-Bites Preferred Over Post Fruity Pebbles” and “MOM Oat Blenders with Honey & Almonds Preferred Over Post Honey Bunches of Oats with Almonds!”

Post argued that the advertiser’s taste test failed to meet industry standards for taste superiority claim substantiation as laid out in the ASTM Standard Guide for Sensory Claim Substantiation. In particular, the test populations did not accurately reflect the consumers of the product, the challenger said. Although consumers under the age of 35 compose a very high percentage of the cereals’ eaters (72 percent of Cocoa Pebbles consumers and 82 percent of Fruity Pebbles), the test subjects were limited to those aged 30 to 64.

But children are not the purchasers of the cereal products, MOM told the NAD, and the test properly encompassed the group targeted by its advertising: the actual purchasers of the products.

Citing concerns about the selected ages as well as the geographic range tested, the self-regulatory body recommended the claims be discontinued.

“NAD has established clear evidentiary standards for comparative taste claims,” according to the decision. “The best evidence to support taste preference claims is a double-blind taste test of comparative products and involves a geographically dispersed sample that reflects the population covered by the claim. The taste test should include adequate protocols, including: (1) compare products with similar shelf life that were purchased in the test market; (2) prepare both products according to instructions; (3) present and test products in the same way; (4) require test subjects to cleanse their palate prior to tasting each product; and (5) produce statistically significant results.”

MOM utilized only one testing center in the Northeast census region, as opposed to two or more – “a significant deviation from the industry standard” set by Section 5.2.8.2 of the ASTM Guide, the NAD said. “This affects the consumer relevance of the taste tests, as taste preferences can be significantly impacted by geographic variance.”

The claim that its products won a “National Taste Test” “conveys a broad, strong message regarding the taste preferences of the overall population of sweetened breakfast cereal consumers,” the NAD wrote. “Additionally, although the advertiser may have less of a presence in the Northeast, that may not necessarily be true for the challenger’s products or mean that there is not a significant population of a sweetened breakfast cereal consumers in that region.”

Because MOM limited the age range to 30 to 64, the self-regulatory body found the test to be insufficiently reliable and resulted in “problematic limitation on the taste tests’ sample population.”

“NAD and [the National Advertising Review Board] have held that ‘taste tests should sample consumers who customarily use the products being compared,’” the NAD wrote. “[B]y selecting a specific type of breakfast cereal purchaser for its taste test the advertiser excluded more than half of actual product users in the product category.”

MOM indicated that it plans to appeal the decision to the NARB. “We believe these decisions are inconsistent with the principles of the ASTM Guide for Sensory Claim Substantiation, and would do a disservice to the advertising industry if the decision stood as a precedent,” MOM said. The advertiser reiterated its position that the geographic locations were correctly chosen as “ten distinct locations in proportion to where the products are sold” so that the testing locations matched the locations where the claim would be seen.

As for the age groups represented in the samples, “We believe our use of adults was appropriate for buyers of all the products who primarily see the claim at the point of purchase,” the advertiser wrote. “MOM Brands also believes the NAD decision would impose, among other things, a requirement to test on children even for a product normally purchased and consumed by adults.”

To read the NAD’s press release about the decision, click here.

Why it matters: “Taste superiority claims should be supported by taste tests that sample consumers who customarily use the products being compared,” the NAD said. The self-regulatory body emphasized that the users of products should participate in testing, not the purchasers. In this case, that would mean consumers under the age of 30, a requirement MOM felt was inappropriate.

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Google Wins Another Challenge to Search-Results Ordering

Google has a First Amendment right to order its search results as it pleases, a California judge has ruled in the latest attempt to challenge the site’s results rankings.

Upset that his company appeared too far down in Google’s search results, CoastNews owner Lewis Martin filed suit against the search engine in California state court. Martin claimed that his site’s SEO was significantly impacted by appearing much lower on Google’s list when compared to results for Bing and Yahoo. The complaint sought $5 million in damages.

Google responded with an anti-SLAPP (Strategic Litigation Against Public Participation) motion, arguing that the suit must be dismissed because CoastNews was attempting to infringe the company’s free-speech rights in violation of state law. Search results are based on Google’s opinion about which Web sites will be most helpful to a user and are therefore fully protected by the First Amendment, the search engine told the court.

In a brief order, Superior Court Judge Ernest H. Goldsmith agreed and tossed CoastNews’ complaint.

“Defendant has met its burden of showing that the claims asserted against it arise from constitutionally protected activity, thereby shifting the burden to plaintiff to demonstrate a probability of prevailing on the merits of the complaint,” the court wrote. As the plaintiff failed to file an opposition to the motion “and has provided no evidence supporting a probability of success,” Judge Goldsmith struck the complaint without leave to amend.

To read the order in Martin v. Google, Inc., click here.

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Noted and Quoted . . . Law360 Turns to Aronson to Shed Light on Class Action Uptick Stemming from “Made in the USA” Law

On November 17, 2014, Law360 interviewed Manatt attorney Lauren Aronson about the increasing number of class actions that retailers face over California’s stringent “Made in the USA” labeling law.

Lauren noted, “As often happens with class actions, once there is room for a certain type of case, class action attorneys are going to pick up on that.”

To read the full article, click here.

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