Retail and Consumer Products Law Roundup

Eye on the Courts: IP Cases for Retailers to Note

Why it matters

Retail companies have closely monitored a series of cases from the U.S. Supreme Court on down, which have focused on IP matters covering induced and direct infringement under the Patent Act (and, in one case, the Tariff Act of 1930); the likelihood of confusion under the Lanham (Trademark) Act; and standing to sue under the Copyright Act. Read on for a survey of cases that struck our eye.

Detailed discussion

Following is a survey of recent U.S. Supreme Court, circuit court and district court decisions covering a range of IP matters impacting retailers and consumer products companies that we found worthy of note:

Patent Cases: Commil USA, LLC v. Cisco Systems, Inc.: On May 26, 2015, the U.S. Supreme Court held that a defendant's good faith belief regarding a patent's invalidity is not a defense to an induced infringement claim. The Supreme Court granted certiorari to consider "a question of first impression: whether knowledge of, or belief in, a patent's validity is required for induced infringement under §271(b) [of the Patent Act]." The Court vacated the Federal Circuit's judgment and remanded the case to the district court for further proceedings consistent with its opinion. Justice Anthony Kennedy wrote the majority opinion with Justice Antonin Scalia dissenting. The Court found that defendant's belief regarding patent validity is not a defense to a claim of induced infringement. The Court pointed out that, if an accused infringer believes a patent to be invalid, it has numerous avenues to pursue, including seeking inter partes review or reexamination of the patent through the PTO (as Cisco did in the latter case). Moreover, the Court stated that creating a "new" defense to induced infringement revolving around belief in invalidity would "render litigation more burdensome for everyone involved," and that such a new defense could prove useful to combat "frivolous" cases brought by so-called "patent trolls"; however, the Court stated that the district courts have within their arsenal tools to combat such suits, including the imposition of attorney sanctions and fee awards, and concluded that "[t]hese safeguards, combined with the avenues that accused inducers have to obtain rulings on the validity of patents, militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and validity. This dichotomy means that belief in invalidity is no defense to a claim of induced infringement." (Emphasis added.)

See here to read the 5/26/15 U.S. Supreme Court decision in Commil USA, LLC v. Cisco Systems, Inc.

Akamai Technologies, Inc. v. Limelight Networks, Inc.: On August 13, 2015, the Federal Circuit, sitting en banc, unanimously expanded the scope of direct infringement under § 271(a) of the Patent Act in situations where all the steps of a claimed method are not actually being performed by the accused infringer, holding that an entity will be held liable for the performance of method steps by others if (1) the entity directed or controlled the others' performance, or (2) the entity and the others are part of a joint enterprise. The court held that "[d]irect infringement under § 271(a) occurs where all steps of a claimed method are performed by or attributable to a single entity….Where more than one actor is involved in practicing the steps, a court must determine whether the acts of one are attributable to the other such that a single entity is responsible for the infringement. We will hold an entity responsible for others' performance of method steps in two sets of circumstances: (1) where that entity directs or controls others' performance, and (2) where the actors form a joint enterprise." (Emphasis added.) Applying these principles to the facts of the case, the court held that "the facts Akamai presented at trial constitute substantial evidence from which a jury could find that Limelight directed or controlled its customers' performance of each remaining method step. As such, substantial evidence supports the jury's verdict that all steps of the claimed methods were performed by or attributable to Limelight. Therefore, Limelight is liable for direct infringement."

See here to read the 8/13/15 Federal Circuit decision in Akamai Technologies, Inc. v. Limelight Networks, Inc.

Suprema, Inc. v. International Trade Commission: On August 10, 2015, the Federal Circuit, sitting en banc, overturned a decision by its own panel and held that the International Trade Commission (ITC) has the power to exclude goods whose mere importation does not infringe a patent, but whose use by the importer afterwards directly infringes the patent at the inducement of the seller of the goods. The question before the en banc panel was whether "the [ITC] correctly concluded that unfair trade acts covered by Section 337 [of the Tariff Act of 1930] include the importation of articles used to infringe by the importer at the inducement of the articles' seller." The court stated that "because Section 337 does not answer the question before us, the Commission's interpretation of Section 337 is entitled to Chevron deference," i.e., the principle of administrative law established by the U.S. Supreme Court in 1984 in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., that requires courts to defer to "reasonable" interpretations of statutes made by the governmental agencies charged with enforcing them. Applying Chevron deference to the situation at hand, the court held that "the Commission's interpretation that the phrase 'articles that infringe' covers goods that were used by an importer to directly infringe post-importation as a result of the seller's inducement is reasonable. Accordingly, we return the case to the panel for further proceedings consistent with this opinion." (Emphasis added.)

See here to read the 8/10/15 Federal Circuit decision in Suprema, Inc. v. International Trade Commission.

Trademark Cases:

Multi Time Machine, Inc. v., Inc.: On October 21, 2015, the Ninth Circuit reversed itself and withdrew its earlier July 6, 2015, opinion in which it had held that it is a question of material fact for a jury to decide as to whether online retailer Amazon.Com, Inc. (Amazon) created a likelihood of consumer confusion through the format of its product search returns. This time around, the court held that, because the search results returned by Amazon "clearly labeled the name and manufacturer of each product offered for sale and even included photographs of the items, no reasonably prudent shopper accustomed to shopping online would likely be confused as to the source of the products." This time, the majority opinion was written by Judge Silverman with Judge Bea dissenting. Analysis and holding: The question before the Ninth Circuit (both times) was whether the factual scenario set forth above regarding Amazon's search results methods constituted trademark infringement. In the October 21 opinion, the Ninth Circuit concluded that it did not. The court acknowledged but differentiated its 1979 decision in AMF, Inc. v. Sleekcraft Boats, which established an eight-factor test for determining likelihood of confusion, stating that the Sleekcraft test is not "particularly apt" in this situation and that "the ultimate test for determining likelihood of confusion is whether a 'reasonably prudent consumer' in the marketplace is likely to be confused as to the origin of the goods." Thus, the court stated, the case turned on "the answers to the following two questions: (1) Who is the relevant reasonable consumer?; and (2) What would he reasonably believe based on what he saw on the screen?" The court analyzed those two questions as related to the facts of the case and the applicable law, and held "[i]n light of Amazon's clear labeling of the products it carries, by brand name and model, accompanied by a photograph of the item, no rational trier of fact could find that a reasonably prudent consumer accustomed to shopping online would likely be confused by the Amazon search results. Accordingly, we affirm the district court's grant of summary judgment in favor of Amazon." (Emphasis added.)

See here to read the 10/21/15 Ninth Circuit decision in Multi Time Machine, Inc. v., Inc.

Tiffany & Co. v. Costco Wholesale Corp.: On September 9, 2015, a district court judge in the Southern District of New York granted summary judgment to Tiffany & Co. (Tiffany) on its trademark infringement claim against Costco Wholesale Corp. (Costco), finding as a matter of law that Costco's sale of rings advertised as "Tiffany" settings gave rise to a likelihood of confusion and that "Tiffany" is not a generic term so as to enable Costco to claim fair use. The court held that "[b]ecause Tiffany has proffered credible evidence establishing both: (1) that it owns a validly registered mark; and (2) that Costco's use of that mark is likely to cause confusion, and because Costco has failed to proffer contrary evidence that raises a disputed issue of fact with respect to either prong of the Lanham Act infringement analysis, the Court grants Tiffany's motion for summary judgment insofar as it seeks a finding of Costco's liability for trademark infringement." (Emphasis added.) The court further granted Tiffany's motion with respect to Costco's liability for "trademark counterfeiting" under the Lanham Act, and rejected Costco's counterclaims alleging "genericism" and fair use.

See here to read the 9/9/15 S.D.N.Y. decision in Tiffany & Co. v. Costco Wholesale Corp.

Copyright Case:

Minden Pictures, Inc. v. John Wiley & Sons, Inc.: On July 29, 2015, the Ninth Circuit held that, under the "divisibility principle" embodied in the Copyright Act, a licensing agent for individual photographs had standing to sue a textbook publisher for unauthorized use of the photographs, even though the individual photographers retained the right to personal and limited commercial use thereof. The question before the Ninth Circuit was "whether Minden, as a licensing agent, has statutory standing under the Copyright Act to bring an infringement suit based on alleged violations of the terms of its licenses to Wiley." The court concluded that it does. The court pointed out that, under the Copyright Act, "a single copyright, or right thereunder, may be divided between parties, with each co-owner entitled to sue to protect his or her interest in the right" and "[w]e see no reason why the divisibility principle should not apply with equal force when the interest granted is an exclusive license to grant licenses to others." The court thus concluded that "[b]ecause we conclude that the Agency Agreements convey the rights to reproduce, distribute, and display the photographs to Minden via an 'exclusive license' to grant licenses to third parties, we hold that Minden may bring an infringement action to remedy the unauthorized reproduction, distribution, and display of the photographs by those to whom it has granted licenses." (Emphasis added.)

See here to read the 7/29/15 Ninth Circuit decision in Minden Pictures, Inc. v. John Wiley & Sons, Inc.

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NLRB Goes One Step Further, Holds Optional Waiver of Class Action Arbitrations Illegal

Why it matters

Reiterating its stance against arbitration agreements that prohibit class or collective actions, a panel of the National Labor Relations Board (NLRB) ordered a California-based grocery chain to revise its employment agreement. A Bristol Farms worker filed a putative class action in state court asserting multiple wage violations. When the company sought to compel arbitration based on an employment agreement, the employee filed an unfair labor practices charge against the grocery store with the NLRB.

An administrative law judge ordered the company to revise its employment agreement, and the employer responded by proposing a settlement agreement to modify the agreement to add the statement: "SIGNING THIS AGREEMENT IS OPTIONAL." Reaffirming its commitment to both D.R. Horton and Murphy Oil, the majority of the panel was not persuaded by Bristol Farms' argument that its agreement was "truly optional." "[A]n arbitration agreement that precludes collective action in all forums is unlawful even if entered into voluntarily, because it requires employees to prospectively waive their Section 7 right to engage in concerted activity," the majority wrote. A dissenting member of the panel voiced his position that both of the controversial precedents were wrongly decided and that employees have the right to waive their rights if they choose to.

Detailed discussion

A worker at California-based grocery chain Bristol Farms filed a putative collective action against the employer alleging multiple violations of state wage law. Based on an employment agreement signed by the employee that included a provision waiving his rights to class or collective action in any forum, the company moved to compel individual arbitration.

The employee filed a charge with the National Labor Relations Board (NLRB), and in October 2014 an administrative law judge (ALJ) found the agreement violated Section 8(a)(1) of the National Labor Relations Act (NLRA). The ALJ ordered Bristol Farms to rescind or revise the agreement to clarify to employees that it does not constitute a waiver in all forums of their right to maintain employment-related class or collective actions and provide notice to employees of the change.

Bristol Farms participated in the Board's dispute resolution program and proposed a settlement agreement. The employer suggested a modification to the agreement adding the statement: "SIGNING THIS AGREEMENT IS OPTIONAL," as well as an explicit class and collective action waiver and language clarifying that employees may access the Board and its processes.

The Board's Regional Director rejected the offer and the employer filed a motion seeking approval of the settlement agreement, arguing that the proposed changes rendered the agreement "truly optional."

But a majority of an NLRB panel disagreed, not just relying upon D.R. Horton and Murphy Oil but taking those holdings—that employment agreements waiving class arbitration violated the NLRA—one step further. "[A]n arbitration agreement that precludes collective action in all forums is unlawful even if entered into voluntarily, because it requires employees to prospectively waive their Section 7 rights to engage in concerted activity," the majority wrote.

The right to pursue joint, class, or collective claims arising in the workplace is a substantive right under Section 7 of the NLRA, the Board stressed.

A dissenting member of the panel reached the opposite conclusion. Having previously dissented in the Murphy Oil case, he wrote that the NLRA does not vest authority in the Board to "dictate any particular procedures pertaining to the litigation of non-NLRA claims, nor does the Act entitle employees to class-type treatment of such claims."

Instead of creating a substantive right for employees to insist on class-type treatment of non-NLRA claims as the majority holds, the dissent said the NLRA in fact preserves every individual employee's right to adjust any employment-related dispute with his or her employer—including a waiver of class or collective rights.

The dissent also pointed out that the revised agreement merely permits employees to opt in to signing, making it "even more clearly lawful under the NLRA."

To read the order in Bristol Farms, click here.

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Copper-Infused Apparel Company Settles With FTC for $1.4M

Why it matters

Tommie Copper, Inc. and company founder Thomas Kallish reached a deal with the Federal Trade Commission to settle charges that they misled consumers by claiming that their products would relieve pain and inflammation caused by diseases such as arthritis, multiple sclerosis, and fibromyalgia, and were comparable to—or better than—drugs or surgery.

What message should advertisers take from the settlement? According to an agency blog, it "underscores the long-standing requirement that advertisers need appropriate science to support their representations," noting that this wasn't the FTC's first action challenging allegedly deceptive health claims for apparel. "Regardless of the nature of the product or how it purports to provide a health benefit, established proof principles apply."

Detailed discussion

The New York-based athletic apparel company marketed its copper-infused compression clothing—including socks, braces, sleeves, and shirts—in brochures, print media, social media, as well as in infomercials. From April 2011 to October 2014, the defendants extolled the use of copper to alleviate the pain associated with arthritis, fibromyalgia, and multiple sclerosis with advertising statements such as: "By placing the copper at the source of the discomfort, it provides immediate relief from inflammation, starts to stimulate blood flow and harnesses the other well-known health benefits of copper."

Montel Williams appeared in infomercials, touting the products with statements like, "Since my diagnosis over 13 years ago with MS, I have been on a constant mission to manage my pain. I've tried more prescription medication than you can imagine. I dulled my pain, but it's also dulled my life. Now, Tommie Copper truly is pain relief without a pill." Ads for the products, which ranged in price from $29.95 to $69.50, also featured celebrity and consumer testimonials claiming that Tommie Copper garments could provide pain relief comparable to—or better than—drugs or surgery.

But the claims were false and misleading, the FTC said in its New York federal court complaint. "It's tempting to believe that wearing certain clothing will eliminate severe pain, but Tommie Copper didn't have science to back its claims," Jessica Rich, Director of the FTC's Bureau of Consumer Protection, said in a statement.

The defendants reached a deal with the agency, promising to pay $1.35 million (a partial payment of the $86.8 million total judgment) and to gather competent and reliable scientific evidence before making future claims about pain relief, disease treatment, or health benefits.

To make claims about any devices or garments similar to those challenged in the complaint, they must conduct randomized, double-blind, and placebo-controlled human clinical testing that is "sufficient in quality and quantity, based on standards generally accepted by relevant medical experts, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true."

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Game's Over: Jordan, Grocers Settle Publicity Rights Suits

Why it matters

To avoid a second trial in litigation initiated by Michael Jordan challenging the use of his likeness in a commemorative issue of Sports Illustrated, the basketball legend announced a deal with the defendants.

This high profile and long running litigation certainly provides a cautionary tale for advertisers about the dangers of using a celebrity's identity in advertising without permission. Jordan did not hesitate to enforce his publicity rights and jurors awarded him almost $9 million over a single page advertisement in a commemorative magazine with limited distribution. And case law was made in the process, when the Seventh Circuit recognized that modern commercial advertising is "enormously varied in form and style," and acknowledged the value of using "appealing images and subtle messages" to build goodwill for a brand.

Detailed discussion

In 2009, Sports Illustrated published a special issue in recognition of Jordan's induction into the Basketball Hall of Fame. Two different grocery chains—Dominick's and Jewel—took out ads in the publication that resulted in lawsuits from His Royal Airness.

The Jewel ad appeared on the inside back cover featuring a picture of the grocer's logo and text reading, "Jewel-Osco salutes #23 on his many accomplishments as we honor a fellow Chicagoan who was 'just around the corner' for so many years," a play on Jewel's slogan "good things are just around the corner."

In the Dominick's advertisement, the grocery chain included a coupon for $2 off steak underneath an image of a pair of basketball shoes in Chicago Bulls colors with the statement, "Michael Jordan … you're a cut above" in addition to its logo.

Jordan claimed both the ads violated his rights under the Illinois Right of Publicity Act and sought $10 million against each defendant. After several years of legal wrangling, the suit against Dominick's went to trial this summer. Because a federal court judge had already determined the advertisement violated the state statute, the jury was tasked with simply deciding the amount of damages.

After Jordan's team presented evidence that despite his 2003 retirement, he still earns about $100 million per year in endorsement income, jurors deliberated roughly six hours before awarding him $8.9 million.

A trial in the case against Jewel was scheduled for December. That case has already created case law after the district court dismissed the suit on the grounds that the ad was noncommercial speech and entitled to full constitutional protection. The Seventh Circuit Court of Appeals reversed, finding the ad to be commercial speech and therefore subject to the Illinois statute as well as the Lanham Act.

Now, both suits have settled.

While the terms of the agreement are confidential, the parties said they were satisfied with the deal. "The terms of the agreement are confidential, but we are pleased to have reached a resolution of these matters," a Safeway spokesperson said, while a representative for Jordan agreed that he was pleased.

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On the Clock: Employer's Three-Month Delay in Responding to Accommodation Request Triggers Claim

Why it matters

How long is too long for an employer to grant an employee's request for accommodation? A three-month delay and the need for multiple reminders raised enough questions for a California federal court to allow an employee's disability discrimination claim to move forward. Piyush Gupta experienced back problems due in part to frequent business trips and requested two accommodations: to fly business class and use a prescribed sit/stand desk. The business class request was approved for longer flights but IBM took more than three months to grant approval of the ergonomic desk and only did so after Gupta had been designated to be let go as part of a reduction in force.

While the court granted summary judgment for the employer on Gupta's Fair Employment and Housing Act disability bias claim, the manner in which IBM handled the ergonomic desk request potentially violated its duty to engage in a good faith interactive process and failure to accommodate under state law, the court determined.

Detailed discussion

Piyush Gupta began working for IBM in May 2009. By 2013, he was a vice president of product management and took frequent and extended business trips, which contributed to his development of back problems. In early 2013, he discussed with his supervisor and a senior vice president his discontent with his current position and consideration of a new role or a potential exit strategy from the company.

Not long after, his physician recommended that to alleviate some of his back problems, he fly business class and prescribed him a sit/stand desk. Gupta formally requested both accommodations and IBM granted the request to fly business class on flights longer than six hours.

His supervisor informed him of a coming reduction in force (RIF), and when she asked for suggestions, he told her that if she had to lay off many people, she should probably put him on the list, too. During this time, the desk request was approved by IBM's ergonomic expert and nurse but waited approval by Gupta's supervisor. His supervisor then informed him that she was going to take him up on his suggestion and include him in the RIF. A few weeks later, she granted the approval for the sit/stand desk.

Gupta filed for short-term disability and declined to sign his severance package, electing to file suit against IBM. In his state court complaint, he alleged disability discrimination in violation of the Fair Employment and Housing Act (FEHA), disability discrimination in the failure to engage in a timely, good faith interactive process, failure to provide disability accommodation, fraud in the inducement, and wrongful termination in violation of public policy.

IBM filed a motion for summary judgment.

First considering the disability discrimination claims, U.S. District Court Judge Edward J. Davila sided with the employer. Gupta offered no argument discussing how his termination was due to his disability, the court said, and the record demonstrated that several allowances were made for it—the employer granted his request to fly business class and he was able to work from home, for example.

The employer also presented a legitimate, nondiscriminatory reason for his termination in the form of a RIF and no evidence of pretext existed. Although the timing between his requests for accommodation and termination was close, the court said IBM had been aware of Gupta's back problems since 2011 and he volunteered himself for the layoff. Although he argued his volunteering was a spontaneous remark made in the heat of the moment that neither he nor his supervisor took seriously, the court said it was reasonable to believe that the supervisor relied on his statement when she selected him for the RIF.

Turning to the claim for failure to engage in a timely, good faith interactive process to accommodate the plaintiff's disability, the court reached a different conclusion. The more than three-month delay for his ergonomic desk request to be reviewed and approved—only after he had been informed he was selected for the RIF—validated his allegations, Gupta said. IBM argued that the short delay in processing the request reflected nothing more than the routine processing of an accommodation request by a large corporation.

"Based on the record, it appears that it took 3 ½ months—and three reminders—for [Gupta's supervisor] to approve Plaintiff's request for ergonomic furniture," Judge Davila wrote. "In addition, [his supervisor] approved the request while knowing that Plaintiff was already selected for layoff, and there is no indication that [she] alerted Plaintiff that he would be ineligible to receive the ergonomic furniture due to the layoff. As such, there is a triable issue of fact as to whether IBM participated in a timely, good faith interactive process."

Further, the court denied the employer's motion with regard to the failure to provide disability accommodation claim. Again, the court found the argument that the more than three-month delay in approving the sit/stand desk request could constitute a failure by the employer particularly in the absence of evidence from IBM that the employee failed to engage in good faith discussions. "Plaintiff continued to inquire about the ergonomic furniture even after the date of separation," the court said, with evidence that Gupta continually inquired about the desk.

"[T]he court cannot determine whether the 3 ½ month delay in approving the ergonomic furniture request is 'reasonable,' " the court added. "The record does not provide information on how long IBM typically takes to approve such request, nor was IBM able to offer that information at oral argument. Given that this delay could have impeded Plaintiff's ability to obtain a reasonable accommodation, there is a triable issue of material fact as to whether IBM fulfilled its duty to provide a reasonable accommodation."

Addressing the final claims, Judge Davila dismissed Gupta's fraud in the inducement and wrongful termination in violation of public policy claims (with no FEHA violation to hang it on) and ruled he was not entitled to punitive damages.

To read the order in Gupta v. International Business Machines Corp., click here.

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FDA: "Non-GMO" Could Be Deceptive Advertising

Why it matters

Labels describing food products as "Non-GMO" are a no-go for the Food and Drug Administration pursuant to new guidance released on labeling food with or without genetically altered plant ingredients.

The FDA's guidance leaves manufacturers with a choice: they can decide not to disclose the use of genetically engineered ingredients in their products and avoid the headache of using the proper labeling terminology. Or they can opt for voluntary labeling and take a careful read of the final guidance to ensure their claims are not false or misleading.

Detailed discussion

Although most headlines discussed the agency's grant of its first approval for a genetically engineered animal intended for food, the AquAdvantage Salmon, the FDA also released two guidances: draft guidance for labeling of genetically engineered Atlantic salmon and final guidance for manufacturers wishing to voluntarily label their products as containing genetically engineered (GE) or non-GE sources.

Importantly, the agency did not mandate that manufacturers disclose the use of genetically modified ingredients, and held to its position that GE products are not materially different from non-engineered foods. Instead, it emphasized that its main concern "is that such voluntary labeling be truthful and not misleading."

The agency did set forth certain rules regarding terminology. The term "Non-GMO," short for non-genetically modified organisms, conveys an overly broad and inaccurate meaning when applied to food products, the FDA said, as most foods do not contain entire organisms. Instead, the agency pushed for the use of label terminology such as "Not bioengineered" or "This oil is made from soybeans that were not genetically engineered."

Also problematic are claims such as "None of the ingredients in this food are genetically engineered" when some of the ingredients, like salt, are incapable of being processed through genetic engineering. Similarly, a statement that suggests or implies that a food product or ingredient is "safer, more nutritious, or otherwise has different attributes" than comparable foods because it was not GE may be false or misleading, the FDA said.

As for products that contain both GE and non-GE ingredients, the FDA said accurate labels should provide information in a context that refers to bioengineering technology, such as "Genetically engineered." Where a multi-ingredient food contains a bioengineered ingredient, claims should be worded to address the ingredient and not the food as a whole, the agency added. It suggested a statement like "This product contains laurate canola from bioengineered canola that may be used as an alternative to palm kernel oil."

The FDA said it has no plans to take action against labels making use of the "GMO" terminology, but cautioned advertisers that the use of terms like "GMO free" or "Non-GMO" could face false advertising challenges from consumers. It recommended that "manufacturers not use food labeling claims that indicate that a food is 'free' of ingredients derived through the use of biotechnology."

To read the FDA guidance, click here.

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Groups Call on FTC to Investigate Food Ads on Kids' Site—Again

Why it matters

In two complaints filed with the Federal Trade Commission, the Center for Digital Democracy (CDD) and Campaign for a Commercial-Free Childhood (CCFC) requested that the agency pursue an investigation into junk food ads on child-directed video sites like YouTube Kids (YTK) and the sites' relationships with food, beverage, and toy companies and its "unboxing" video partners.

With these complaints, the groups continue to focus attention on the issue of child-directed advertising on video sites and increase the pressure on the FTC to look into the issue. Jessica Rich, Director of the FTC's Bureau of Consumer Protection, would not confirm that the agency was investigating the earlier complaint and what—if anything—it would do about the new complaint. "We welcome and we review carefully all such complaints submitted to us," she told The New York Times.

Detailed discussion

The complaints follow an earlier missive from the groups to the agency about potential deceptive and unfair advertising practices on the video site. Despite that April complaint, "Young children watching YTK are still being exposed to a large amount of deceptive and unfair commercial matter," the CDD and CCFC told the agency. "It is essential that the FTC complete its investigation and use its enforcement power to stop these deceptive and unfair practices on YTK."

In the new complaint, the groups argued that members of the Children's Food and Beverage Advertising Initiative (CFBAI) deceptively claim that they comply with their pledge not to advertise to children under the age of 12 even though its members produce hundreds of commercials and videos promoting food and beverage products from CFBAI members.

The CFBAI pledge applies to advertising, including ads on the Internet, product placements, and ads directed to children under age 12 on cellphones, smartphones, and other digital devices. Despite the promise not to market to this audience, the groups said they found products from 16 of 18 CFBAI members during a search process between May and June 2015.

A total of roughly 600 videos were found on the YouTube Kids channel consisting of commercials that previously aired on television, promotional videos that were created by the companies for their brands and products, and product placements and endorsements that they included.

If the FTC finds that CFBAI members have been complicit in getting their promotional content on YouTube Kids, the CDD and CCFC argued that the companies should face an enforcement action for engaging in deceptive marketing practices by misrepresenting their compliance with self-regulatory principles in violation of Section 5 of the Federal Trade Commission Act.

The second complaint follows up on the April complaint and contains additional information about the relationships between YouTube and paid advertisers and their various intermediaries, including agencies that specialize in "influencer" marketing. "Because these relationships are not disclosed on YouTube Kids as required by the FTC's Endorsement Guide, CCFC and CDD call on the FTC to investigate the contractual and other business connections between Google and its YouTube commercial partners and affiliates," the groups wrote.

To read the complaint and request for investigation with regard to CFBAI members, click here.

To read the follow-up complaint, click here.

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Providing Number Demonstrates Consent, California Court Rules

Why it matters

Because the plaintiffs voluntarily provided their cellphone numbers to Microsoft, the company had their express consent to text them and cannot be held liable under the Telephone Consumer Protection Act for the messages, a federal court judge in California ruled.

The class action complaint was dismissed with prejudice. Interestingly, the court's order did not note that prior express written consent is required for promotional or marketing messages or that certain disclosures are required for written consent.

Detailed discussion

Edmund Pietzak filed a putative class action against Microsoft after receiving promotional text messages. He claimed the company relied upon deceptive sweepstakes and discount promotions to gather cellphone numbers and then sent text messages in violation of the TCPA and the California's Unfair Competition Law (UCL).

Microsoft countered that the plaintiffs gave their consent to receive such messages by providing their cellphone numbers and filed a motion to dismiss the suit.

Granting the motion, U.S. District Court Judge Manuel L. Real referred to the Federal Communications Commission's 1992 implementing regulations for the TCPA, which state: ". . . persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary. Hence, telemarketers will not violate our rules by calling a number which was provided as one at which the called party wishes to be reached."

Many federal district courts have relied on the 1992 FCC Order to hold that plaintiffs who provided a business with their phone numbers and then received a text message have no claim under the statute, the court said, citing decisions from across the state. "This case is no different than those before it."

"Under the FCC's definition, it is undisputed that Plaintiffs 'knowingly release[d]' their cellphone numbers to Microsoft when they participated in the promotional activities," Judge Real wrote. "Through such acts, Plaintiffs gave permission to be texted at that number by an automated dialing machine. Plaintiffs do not allege that Defendants, unprompted, began sending text messages directly to their mobile phones. Rather, the allegations are clear that it was Plaintiffs who initiated the receipt of text messages from Microsoft by voluntarily participating in Microsoft promotions. In doing so, Plaintiffs not only unequivocally expressed their interest in learning more about Microsoft's promotional offers, but they also provided their consent to receive that information through text messaging."

As the plaintiffs' UCL claim was premised entirely upon the alleged violation of the TCPA, it also failed, the court said. The plaintiffs also lacked standing for the UCL claim, Judge Real added, because they did not allege they suffered any lost money or property or suffered any economic injury. While Pietzak claimed he dealt with "repeated embarrassment, financial loss, and emotional injury," the court was not moved by the "conclusory allegations."

"Even assuming the truth of Plaintiffs' allegations, their claims fail because Microsoft's text messaging program complies with the TCPA," the court concluded. "Plaintiffs voluntarily sought specific information about Microsoft promotions, providing both their phone numbers and their express consent to receive that information by texting specific keywords from their mobile phones. There is no cognizable legal theory that could support liability against Defendants, and dismissal with prejudice is appropriate."

To read the order in Pietzak v. Microsoft Corp., click here.

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