Advertising Law

Amazon, FTC Reach Deal Over In-App Charges

Amazon and the Federal Trade Commission have agreed to drop their appeals in a lawsuit accusing the online retailer of billing consumers for unauthorized in-app charges incurred by children.

The agency reached a settlement with Apple and Google, that lead to refunds for consumers of more than $50 million.

But Amazon fought back, and on July 2014 the agency filed a lawsuit in which it alleged that Amazon’s App Store did not require the use of a password for in-app charges between November 2011 and March 2012, including in children’s apps. Even when the company updated its system to require a password for an in-app purchase, it still permitted an unlimited number of smaller purchases without parental approval, the FTC said.

A federal court judge granted summary judgment in favor of the FTC last April, ruling that the company failed to obtain parental consent for the in-app charges made by their children. The court denied the Commission’s request for an injunction, however. Both parties appealed to the U.S. Court of Appeals for the Ninth Circuit and the district court stayed its order requiring Amazon to begin the refund process.

Now that the parties have agreed to end the litigation, the refund process—involving an estimated $70 million of in-app charges made between November 2011 and May 2016—will begin shortly. The FTC said details about the process will be released soon.

To read the joint motion for voluntary dismissal in FTC v. Amazon.com, Inc., click here.

Why it matters: “This case demonstrates what should be a bedrock principle for all companies—you must get customers’ consent before you charge them,” Thomas B. Pahl, Acting Director of the FTC’s Bureau of Consumer Protection, said in a statement. “Consumers affected by Amazon’s practices can now be compensated for charges they didn’t expect or authorize.”

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Copyright Law Precludes Athletes’ Publicity Rights Suit, Ninth Circuit Rules

The U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of a publicity rights suit filed by a pair of former basketball players at Catholic University, finding that copyright law trumped their claims.

Patrick Maloney and Tim Judge alleged that T3Media exploited their likenesses by selling non-exclusive licenses permitting consumers to download photographs from the National Collegiate Athletic Association’s Photo Library for non-commercial use. Maloney and Judge—who led Catholic University to its first Division III national championship game in 2001—asserted statutory and common law publicity rights claims as well as an unfair competition claim under California law.

T3, which provides storage, hosting, and licensing services for a variety of digital content, made photographs of the games available on its Web site and let consumers download a single copy for $20 to $30. The company moved to strike the complaint pursuant to California’s anti-SLAPP statute, arguing that the federal Copyright Act preempts plaintiffs’ claims.

The district court granted the motion and the Ninth Circuit affirmed.

The athletes maintained that photograph-based publicity right claims categorically fell outside the subject matter of copyright protection because such claims protect an individual’s persona—which itself cannot be fixed in a tangible medium of expression T3, however, told the court the publicity right protects against the non-consensual use of one’s name or likeness on merchandise or in advertising, not where a likeness has been captured in an artistic work and the work itself is being distributed for personal use.

As the plaintiffs’ publicity right and UCL claims challenged control of the artistic work itself and sought to hold T3 liable for exercising rights governed exclusively by copyright law, their claims were preempted by the Copyright Act, the panel said.

“[W]e conclude that a publicity right claim is not preempted when it targets non-consensual use of one’s name or likeness on merchandise or in advertising,” the court explained. “But when a likeness has been captured in a copyrighted artistic visual work and the work itself is being distributed for personal use, a publicity-right claim interferes with the exclusive rights of the copyright holder, and is preempted by section 301 of the Copyright Act.”

While the plaintiffs tried to drill down on the content of a publicity right claim, the court said prior case law clarified that “the distinction pertinent to the preemption of a publicity right claim is not the type of copyrightable work at issue, but rather the way in which one’s name or likeness is affected by the use of the copyrighted work.”

Under Ninth Circuit case law, “a publicity right claim may proceed when a likeness is used non-consensually on merchandise or in advertising,” the court said. “But where a likeness has been captured in a copyrighted artistic visual work and the work itself is being distributed for personal use, a publicity right claim is little more than a thinly disguised copyright claim because it seeks to hold a copyright holder liable for exercising his exclusive rights under the Copyright Act.”

Case law from the Third and Eighth Circuits supports this conclusion, the panel said, as does a leading copyright treatise.

“We believe that our holding strikes the right balance by permitting athletes to control the use of their names or likenesses on merchandise or in advertising, while permitting photographers, the visual content licensing industry, art print services, the media, and the public, to use these culturally important images for expressive purposes,” the court wrote. “Plaintiffs’ position, by contrast, would give the subject of every photograph a de facto veto over the artist’s right under the Copyright Act, and destroy the exclusivity of rights that Congress sought to protect by enacting the Copyright Act.”

To read the opinion in Maloney v. T3Media, Inc., click here.

Why it matters: The Ninth Circuit tried to draw a clear line between viable publicity right claims based on the nonconsensual use of the copyrighted work (in advertising or on merchandise, for example) and those that are preempted by the Copyright Act because a likeness has been captured in a copyrighted artistic visual work (in this case, the NCAA’s recorded games) and the work itself is being distributed for personal use.

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Carpet Cleaning Company Fails to Medal in Suit Against USOC

The U.S. Olympic Committee’s social media guidelines evaded review after a federal court judge found a legal challenge from a carpet cleaning business lacked an “actual controversy.”

As the 2016 Olympic Games in Rio de Janeiro approached, the USOC cautioned commercial entities against the use of USOC trademarks, even in hashtags such as #Rio2016 and #TeamUSA. Minnesota carpet cleaning company Zerorez—although not on the receiving end of a warning letter—filed suit against the USOC, seeking a determination of its rights to discuss the 2016 Olympic Games on social media.

Specifically, the company argued that the USOC cannot preclude businesses that are not official Team USA sponsors from discussing the Olympics on social media and that the Committee had exaggerated the strength of its legal rights.

The USOC responded with a motion to strike the complaint for lack of subject matter jurisdiction, arguing that no case or controversy existed between the parties. U.S. District Court Judge Wilhelmina M. Wright agreed, and dismissed the case for lack of an actual controversy.

Zerorez was unable to persuade the court that the USOC’s “broad warnings” against infringement, which were widely publicized by the media, made it reasonable for the company to believe it could become the target of an infringement lawsuit.

“If news reports of USOC’s letters to other companies warning that only official sponsors of Team USA are permitted to use USOC’s trademarks on their corporate social media channels create an actual controversy between USOC and Zerorez, a company with which USOC never communicated before this lawsuit, then any company that is not an official sponsor of Team USA could bring a declaratory judgment action against USOC by asserting the same facts,” the court wrote. “Such a conclusion would eviscerate the actual controversy requirement.”

Zerorez did not allege that the Committee ever communicated directly regarding the USOC’s trademark rights and the parties did not have any history of trademark litigation. Instead, the company argued that the combination of the USOC Brand Usage Guidelines, written communications notifying other businesses that their use of the trademarks without permission is prohibited, and the USOC’s track record of commencing trademark litigation were enough to establish an actual controversy.

But this totality of the circumstances was insufficient for the court, even if Zerorez was reluctant to post comments about the Olympics through its corporate social media accounts. “Importantly, USOC never threatened litigation against Zerorez,” Judge Wright wrote. “Zerorez’s concern that it might become the target of a trademark litigation lawsuit is speculative and one-sided. It is not based on the existence of a concrete dispute between the parties.”

To read the order in HSK, LLC v. The United States Olympic Committee, click here.

Why it matters: With the dismissal of Zerorez’s suit, many open questions remain about whether advertisers can discuss the Olympics on social media without facing legal action from the USOC. Perhaps the next Games will present an opportunity for a court to consider issues such as whether a non-sponsor can praise an athlete on their Facebook page or tweet congratulations after a gold medal victory.

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