Advertising Law

Manatt's Advertising Practice Ranked Among Top in Nation by U.S. News and Best Lawyers

Manatt has been named by U.S. News & World Report and Best Lawyers as a Tier 1 firm in Advertising Law as part of the 2016 "Best Law Firms" rankings. Additionally, the firm received top-tier metropolitan rankings in the New York City and Washington, D.C., markets in the area of Advertising Law. The rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys, and review of additional information provided by law firms. Receiving a tier designation reflects the high level of respect a firm has earned for its abilities, professionalism and integrity.

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Fantasy Sports Has a New Teammate: Nevada Gaming Commission

Nevada's Gaming Control Board announced that fantasy sports will be regulated like other forms of gambling, and ordered operators to halt operation in the state unless and until they obtain gambling licenses.

The industry has been making headlines since it was revealed that employees at two of the major fantasy sites—FanDuel and DraftKings—regularly played on the other site, in some cases winning significant amounts of money. Allegations of insider information prompted letters from lawmakers, class action lawsuits, and multiple government investigations, including by the Federal Bureau of Investigation and the New York Attorney General's office.

The Unlawful Internet Gambling Enforcement Act of 2006 outlawed online poker and sports gambling but permitted an exception for fantasy sports, declaring them a game of skill, except in states where they were deemed illegal—Arizona, Iowa, Louisiana, Montana and Washington. Nevada has now been added to that list.

In a notice to these sites, the Nevada Gaming Control Board announced that "pay-to-play daily fantasy sports," or DFS, are a form of gambling under state law requiring a license issued by the Nevada Gaming Commission and ordered operations to cease and desist until a license is obtained. The notice added that "While this Industry Notice is intended to provide clear guidance as to Nevada law, Nevada licensees wishing to conduct business with DFS companies should also conduct thorough and objective reviews of DFS activities under the laws of other states and any applicable federal laws."

In support of its decision, the Board also released a memorandum from the state's Attorney General office on the legality of DFS in Nevada. "[B]ecause DFS involves wagering on the collective performance of individuals participating in sporting events, under current law, regulation and approvals, in order to lawfully expose DFS for play within the state of Nevada, a person must possess a license to operate a sports pool issued by the Nevada Gaming Commission," according to the notice.

Both FanDuel and DraftKings—neither of which are currently licensed—criticized the announcement. Noting that the company is "examining all options," FanDuel said the decision "deprives these fans of a product that has been embraced broadly by the sports community, including professional sports teams, leagues and media partners." DraftKings similarly emphasized the popularity of fantasy sports. "We understand that the gaming industry is important to Nevada and, for that reason, they are taking this exclusionary approach against the increasingly popular fantasy sports industry."

To read the Nevada Gaming Control Board's notice to industry, click here.

To read the Nevada Attorney General's memorandum on the legality of DFS, click here.

Why it matters: With Nevada joining the states where fantasy leagues are deemed games of chance, operators are continuing to feel the consequences of the recent scandal. Now the question becomes: will other states follow suit?

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Amazon Gives Fake Reviewers Zero Stars—And a Lawsuit

Amazon went after fake reviews on its website by filing suit against more than 1,100 individuals who offered to post positive reviews of products for a price.

Filed in Washington state court, Amazon's complaint alleged that the unnamed defendants advertised their services on the website, promising 5-star reviews and encouraging Amazon sellers to create the text for their own review. For example, "bess98" offered to place "awesome review on your amazon product" using multiple accounts and IP addresses.

Another Fiverr seller offered up to nine "Five Stars" reviews on Amazon for $5 each, adding, "You know the your [sic] product better than me. So please provide your product review, it will be better." In at least one instance, Amazon found a seller willing to receive an empty envelope—and not the product itself—to create a shipping record in an attempt to deceive Amazon customers, the plaintiff alleged.

Amazon emphasized the importance of customer reviews to its business, with "millions" of customers using the reviews each day to assist in purchasing decisions. "Reviews provide a forum for sharing authentic feedback about products and services—positive or negative," the company told the court, adding that it "takes the credibility of its customer reviews very seriously."

False and misleading customer reviews constitute "a very small minority" of reviews on the site, but "[w]hile small in number, these reviews can significantly undermine the trust that consumers and the vast majority of sellers and manufacturers place in Amazon, which in turn tarnishes Amazon's brand." The removal of individual listings from the Fiverr site—which Amazon has requested—does not address the root cause of the problem, Amazon said, nor does it serve as a deterrent.

In addition to violating the Washington Consumer Protection Act, the defendants' actions constitute breach of contract, Amazon said. In order to review a product, an individual must be an Amazon customer with an Amazon account, who has agreed to and is bound by the Conditions of Use for the Amazon site. Among other things, the conditions prohibit paid reviews.

The complaint requested an award of general, special, actual, and statutory damages, including treble damages under the state's consumer protection statute and injunctive relief that would halt the practice, provide identifying information for the John Doe and defendants, and establish an accounting of each defendant's profits.

To read the complaint in v. John Does 1-1114, click here.

Why it matters: As the online marketplace continues to grow, companies are taking action against fake reviews. Amazon filed suit against several websites that sold fake reviews of products in April, after which most of the sites shut down. The company said the new lawsuit targeting individuals who provide the reviews is a continuation of those efforts. And Yelp took similar action earlier this year, filing suit against three websites that offered to write fake reviews.

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Second Circuit Upholds Google's Book-Scanning Project

A unanimous panel of the Second Circuit Court of Appeals has ruled that Google's book-scanning project constitutes fair use, affirming a district court decision that digitizing books and then displaying short passages in search results did not violate copyright law.

"The purpose of the copying is highly transformative, the public display of text is limited, and the revelations do not provide a significant market substitute for the protected aspect of the originals," the court wrote. "Google's commercial nature and profit motivation do not justify denial of fair use."

The Authors Guild (with individual authors later substituted as plaintiffs) initiated the long-running legal battle in 2005, alleging that Google violated their copyrights by contracting with several major libraries to scan all of their books and create a searchable database of tens of millions of tomes.

Google countered that the project constituted fair use, but before a court could rule, the parties reached a $125 million settlement. A federal court judge refused to approve the deal and granted summary judgment in Google's favor in 2013.

The plaintiffs appealed, arguing that the digital scanning was not a "transformative use," and that Google was motivated by profit and dominance of the Internet search market. They also argued that Google violated their derivative rights in search functions, that the storage of the digital copies exposed them to the risk that hackers could steal their books and make them available on the Internet, and that the distribution to participating libraries of the digital copies was not a fair use.

Applying the four factors of fair use—the purpose and character of use, the nature of the copyrighted work, the amount and substantiality of the portion taken, and the effect of the use on the potential market—the federal appellate panel rejected each of the plaintiffs' contentions and affirmed summary judgment in Google's favor.

"Google's making of a digital copy to provide a search function is a transformative use, which augments public knowledge by making available information about Plaintiffs' books without providing the public with a substantial substitute for matter protected by the Plaintiffs' copyright interests in the original works or derivatives of them," the Second Circuit said.

In addition, the database allowed readers "to learn the frequency of usage of selected words in the aggregate corpus of published books in different historical periods," the court noted.

The same held true for the "snippet function" where Google displayed a horizontal segment comprising an eighth of a page of text in response to a search term. A process called "blacklisting" makes one snipped portion on each page and one complete page out of every ten permanently unavailable. The company will exclude any book from snippet view at the request of the rights holder and Google does not provide snippet view for certain books—such as cookbooks and dictionaries—where viewing a small segment was likely to satisfy the searcher's need.

"Google's division of the page into tiny snippets is designed to show the searcher just enough context surrounding the searched term to help her evaluate whether the book falls within the scope of her interest (without revealing so much as to threaten the author's copyright interests)," the panel wrote.

The court also dismissed the plaintiffs' concerns about having their derivative rights in search functions usurped, "in part because the licensing markets in fact involve very different functions than those that Google provides, and in part because an author's derivative rights do not include an exclusive right to supply information (of the sort provided by Google) about her works."

If Google converted books into a digitized form and made it accessible to the public, the plaintiffs' claim would be strong, the court said. But "Google safeguards from public view the digitized copies it makes and allows access only to the extent of permitting the public to search for the very limited information accessible through the search function and snippet view. The program does not allow access in any substantial way to a book's expressive content."

Under these circumstances, profit motivation did not justify denial of fair use, the panel said, and the record before the court did not demonstrate that the plaintiffs were exposed to an unreasonable risk that hackers would cause a loss of copyright value. As for the claim that distribution to the libraries violated the plaintiffs' rights, the court pointed out that the libraries already owned the books and making fair use through provision of digital searches was not an infringement.

To read the opinion in The Authors Guild v. Google, Inc., click here.

Why it matters: Could the overwhelming victory for Google survive a review by the U.S. Supreme Court? The plaintiffs said they will appeal the decision to the justices, asserting that the Second Circuit gave too much weight to the "transformative" issue and not enough consideration to other factors, such as how much of the original work was copied and the potential market effect on the plaintiffs' works.

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Fallout Continues From EU's Schrems Decision

Legal uncertainty continues in the wake of the Court of Justice of the European Union's decision to throw out the Safe Harbor agreement between the United States and the European Union concerning the international transfer of data.

Pursuant to the 15-year-old agreement, companies in the United States that self-certified their compliance with the EU's standards allowed them to transfer data from the EU to the U.S. without fear of violating the more stringent data laws found in the European Union.

American companies were left scrambling when the Safe Harbor was struck down in early October and the ensuing moves by data regulators across the globe have provided limited clarity. Below are a few of the actions taken by various government authorities in response to the Schrems decision.

  • The Article 29 Working Party, comprised of European data protection agencies, issued a statement on the CJEU's opinion, calling on member states of the EU and the U.S. authorities to work on finding a solution to allow the safe transfer of data while protecting EU citizens' fundamental rights. The group indicated it will continue to analyze the impact of the Schrems decision on other data transfer mechanisms, such as binding corporate rules and contractual clauses, although businesses may continue to rely on these agreements for now. The Working Party also set a deadline for the EU and the U.S. to agree on a new agreement. Safe Harbor 2.0 must be decided upon by the end of January, the group said, or American companies will begin to see enforcement actions.
  • The EU case began with a complaint filed by Austrian citizen Max Schrems with the Irish Data Protection Commissioner (DPC) against a social networking site, seeking to halt the transfer of his personal data to the U.S. in light of revelations about the surveillance activities of the National Security Agency (NSA). The DPC refused to investigate the complaint in 2013. But in light of the CJEU's decision, the Irish High Court ordered the country's DPC to launch an investigation into Schrems' complaint. DPC Helen Dixon confirmed that she would proceed to "investigate the substance of the complaint with all due diligence" in what is likely to be the first test of the CJEU's opinion.
  • In Germany, the Data Protection Authorities published a position paper to address the aftermath of the revocation of the Safe Harbor agreement. Based on the decision, the DPAs will prohibit data transfers from the country to the U.S. that are based only on the Safe Harbor, and consider questionable data transfers based on other mechanisms—such as contractual clauses or binding corporate rules. The position paper also stated that the German DPAs will not issue new approvals for data transfers to the U.S. at this time.
  • The impact of the decision has been felt outside of the EU as well. The Israeli Law, Information and Technology Authority revoked its prior authorization to transfer data from Israel to the U.S. in reliance upon the Safe Harbor agreement. Israel was one of 11 countries—others include Canada and New Zealand—that obtained "adequacy" status under the EU's Data Protection Directive allowing the free flow of personal data from Israel to the EU and by extension, the U.S., pursuant to the Safe Harbor. Given the findings in Schrems, Israel's data authority revoked approval for data transfers to the U.S.
  • In the United States, lawmakers attempted to help the situation by passage of the Judicial Redress Act (H.R. 1428), which would enable foreign citizens to bring civil actions under the Privacy Act of 1974 against certain U.S. government agencies "for purposes of accessing, amending or redressing unlawful disclosures of records maintained by an agency." The bill was a sticking point with the European Commission in earlier negotiations to renew the Safe Harbor agreement and the Schrems decision pushed House lawmakers to pass the measure and send it to the Senate. "Today's bipartisan passage of the Judicial Redress Act will help restore our allies' faith in U.S. data privacy protections and helping facilitate agreements … that strengthen our trans-Atlantic partnerships with Europe," co-sponsors Reps. Jim Sensenbrenner (R-Wis.) and John Conyers (D-Mich.) said in a joint statement along with Rep. Bob Goodlatte (R-Va.).

To read the Statement of the Article 29 Working Party, click here.

To read the Judicial Redress Act, click here.

Why it matters: The fallout from the Schrems decision is far from over. The U.S. and EU were already in talks to update the Safe Harbor agreement. Now the negotiations are even more complicated and a deadline is fast approaching. Federal Trade Commission member Julie Brill recently spoke at an international privacy conference and said the decision "has placed us at a critical juncture, where we need to reflect on the deep values that we share, be honest about the nature of our similarities and differences and assess the steps we need to take in order to develop a truly trusted framework for the transatlantic flow of information."

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In Case You Missed It: The "Dancing Baby" Case—Ninth Circuit Rules That "Fair Use" Must First Be Considered Before Sending Takedown Notices Under the DMCA

Manatt's Entertainment and Media Litigation Update recently published a detailed discussion regarding the Ninth Circuit ruling in the "Dancing Baby" case, Lenz v. Universal Music Corp., which dictated that prior to sending a takedown notice under the Digital Millennium Copyright Act, a copyright holder must first evaluate whether the alleged unauthorized performance constituted "fair use." To read this full article, click here.

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