How Affiliate Marketers Can Avoid Legal Pitfalls

AFFILIATE SUMMIT WEST 2013
How Affiliate Marketers Can Avoid Legal Pitfalls

Eric S. Crusius, Esq. | Jan. 15, 2013 | Session 10b | Florentine 3 & 4

Centre Law Group, LLC
1953 Gallows Road, Suite 650
Vienna, VA 22182
(703) 288-2800
Website: www.centreinternetlaw.com
Blog: www.internetlawforbusinesses.com
© Centre Law Group, LLC 2013
E-Mail: ecrusius@centrelawgroup.com
All Rights Reserved

Today’s Topics

Three Areas of Importance For Any Company

1.Ensure Predictability – Why contracts are important
and what needs to be in them.
This will be illustrated with my uber-predictable cat.

2.Manage Risks – What legal risks are out there?
This will be illustrated with what else? A casino!

3.Corporate Incubation – how to protect your company
from internal and external maelstroms.
This will be illustrated with an adorable 15 week old
fetus. Yes, I am the father!
Vienna, VA 22182
(703) 288-2800

Today’s Topics

1

2

3
Vienna, VA 22182
(703) 288-2800

Predictability – The Importance of Contracts

Vienna, VA 22182
(703) 288-2800


THE PLAYERS – WHY HAVE A CONTRACT?

•Merchants: control how your products are marketed
and under what conditions; CAN-SPAM compliance and
other compliance issues; set payment amounts.

•Networks: keep control over affiliate marketing
practices; payment amounts; ensure compliance with
merchant agreements; set-up website contracts.

•Affiliates: set the terms and conditions of marketing and
payments; also set-up website contracts.

Vienna, VA 22182
(703) 288-2800


Merchants
• Website Contracts: general terms and conditions,
payment terms and conditions, and privacy policy.
• Network Contracts: protect intellectual property –
how and when your text, photos, logos, etc. can be
used; try to obtain indemnification for legal wrongs
by networks or affiliates working for networks; set
payment conditions.
• Affiliate Contracts: same as network contracts if
working directly with affiliates.

Vienna, VA 22182
(703) 288-2800


Networks
• Website Contracts: terms and conditions and
privacy policy.
• Contracts with Merchants: use of merchant’s
intellectual property – how and when merchant’s
text, photos, logos, etc. can be used; try to obtain
indemnification for legal wrongs by affiliates; set
payment conditions.
• Affiliate Contracts: govern how affiliates advertise;
avoid indemnification.

Vienna, VA 22182
(703) 288-2800


Affiliates
• Website Contracts: if applicable - terms and
conditions and privacy policy.
• Network Contracts: governs how affiliates can
utilize intellectual property – how and when text,
photos, logos, etc. can be used; network/merchant
may try and obtain indemnification for legal
wrongs; set payment conditions.
• Merchant Contracts: same as network contracts if
working directly with merchants.

Vienna, VA 22182
(703) 288-2800


What is Intellectual Property?
• Trademarks: include logo, name, and trade dress.
Violating a trademark can lead to significant
statutory damages.
• Copyrights: text, pictures, images, etc. Significant
statutory damages available though work is
considered copyrighted upon creation; easy to
register a copyright; beware of DMCA Takedown
Notices.
• Other IP: includes trade secrets and patents.

Vienna, VA 22182
(703) 288-2800

Manage Risks – Your Business is Not a Casino

Vienna, VA 22182
(703) 288-2800

Managing Risks – Your Business is Not a Casino

What are the risks?

•Risk #1: the Federal Trade Commission (FTC). Among
other things, the FTC monitors advertising claims made
by affiliates, networks, and other marketers.
• Avoid trouble – no deceptive formats (fake news
stories), no false endorsements, no
unsubstantiated claims.
•Risk #2: State Attorney General (AG) investigations.
Oftentimes State AGs will investigate a company after
receiving complaints from consumers – especially “free
trial” complaints. There is only one FTC, but there are
50 State AGs!
Vienna, VA 22182
(703) 288-2800


What are the risks?

•Risk #3: the CAN-SPAM Act. Ensure soliciting e-mails
are in compliance with the CAN-SPAM Act.

•Risk #4: violation of IP rights. IP in this field is often
very murky. Can you use a trademark in an AdWord
campaign? Can you tag a trademark in your blog? Can
you use product photographs that are not yours? What
are the rights among the parties in this situation?

Vienna, VA 22182
(703) 288-2800


From a merchant’s perspective, what are the risks?

•Networks and affiliates violate various laws
•Networks and affiliates misappropriate merchant’s IP
•Networks and affiliates draw the ire of the FTC
•Product does not function properly
•Product does not work in accordance with claims made
by advertisers

Vienna, VA 22182
(703) 288-2800


From a merchant’s perspective, what are best practices?

•Have iron-clad contracts with networks and/or
affiliates. Include indemnification if possible (though
may not be effective).
•Monitor networks and affiliates to ensure they are
compliant with various laws and are in compliance with
agreements.
•Research in who is used as network partner. Do they
have a good compliance history?

Vienna, VA 22182
(703) 288-2800


From a network’s perspective, what are the risks?

•Networks are sometimes caught in the middle and
catch the worst of both worlds.
•Affiliates can violate various laws
•Affiliates can misappropriate merchant’s IP
•Affiliates can draw the ire of the FTC
•Merchant’s product does not function properly
•Merchant’s product does not work in accordance with
claims made by advertisers

Vienna, VA 22182
(703) 288-2800


From a network’s perspective, what are best practices?

•Have iron-clad contracts with merchants and/or
affiliates. Include indemnification both ways if possible
(though may not be effective).
•Monitor affiliates to ensure they are compliant with
various laws and are in compliance with agreements.
•Research in who is used as affiliate. Do they have a
good compliance history?

Vienna, VA 22182
(703) 288-2800


From an affiliate’s perspective, what are the risks?

•Unaware of federal and state laws that govern
permissible actions
•Can unwittingly misappropriate merchant’s IP
•Can unwittingly draw the ire of the FTC
•Merchant’s product does not function properly
•Merchant’s product does not work in accordance with
claims made by advertisers

Vienna, VA 22182
(703) 288-2800


From a affiliate’s perspective, what are best practices?

•Understand contract signed with merchants and
networks. Have a list of what you can and cannot do.
•Evaluate a contract before signing it. Would you prefer
tow walk away?
•Try to negotiate “terms of contention.”
•Ensure product claims are accurate.
•Evaluate each advertisement to ensure compliant with
best FTC practices and CAN-SPAM practices.

Vienna, VA 22182
(703) 288-2800

Corporate Incubation – Protect Your Business from Internal
& External Maelstroms

Vienna, VA 22182
(703) 288-2800

Corporate Incubation

Internal Issues

•Rogue employees and business partners who steal trade secrets
(NDA), attempt a “corporate takeover,” engage in cyber attacks
and hacking, try to misappropriate corporate property, and go
loco.
•Partners who engage in “hacking.”

External Issues

•Products/services are criticized on the web by cybersquatters
and brand assassins.

Vienna, VA 22182
(703) 288-2800


Example of internal issue:

Vienna, VA 22182
(703) 288-2800


 Complaint websites such as www.complaintsboard.com
or www.ripoffreport.com
 Review websites such as www.yelp.com
 Dedicated hate websites
 Google AdWords
 Social media
 Domain name squatting (cybersquatters)

Vienna, VA 22182
(703) 288-2800


 Complaint websites are websites in which anyone can
file a complaint.
 They are dangerous because there is no minimum bar
before a complaint is published.
 Complaint websites also generally have excellent SEO
(Search Engine Optimization) and are often higher in
search engine rankings than corporate websites.

Vienna, VA 22182
(703) 288-2800


 A Word About SEO:

 There were 8.8 billion searches in July 2010.
That extrapolates to more than 100 billion
searches per year.
 Google accounted for 64.2% of all searches –
about 5.6 billion (67 billion per year).
 Yahoo and Bing! Each has a little less than
14% (which is still more than 14 billion
searches each).
Source: The Nielsen Company

Vienna, VA 22182
(703) 288-2800


 For instance:

Vienna, VA 22182
(703) 288-2800


Vienna, VA 22182
(703) 288-2800


 Opinion Corp. runs PissedConsumer.com which is a complaints website much like
ComplaintsBoard.com and RipOffReport.com.

Vienna, VA 22182
(703) 288-2800


 Pissed consumer would register complaints and set up a
dedicated subdomain using the target’s name such as
www.targetcompany.pissedconsumer.com.
 Pissed Consumer only agrees to alter the negative
complaint if target companies pay for “Reputation
Management Services.”
 Court recently held utilizing the subdomain was not a
trademark violation.

Vienna, VA 22182
(703) 288-2800


 Review websites such as Yelp.com.

Vienna, VA 22182
(703) 288-2800


 Dedicated hate websites:

Vienna, VA 22182
(703) 288-2800

 Google Adwords:

Vienna, VA 22182
(703) 288-2800


 Google Autocomplete:
 Now Google has gotten in the editorial game.
 Suggestions “pop” up when searching for a term.

Vienna, VA 22182
(703) 288-2800


 Social Media:

Vienna, VA 22182
(703) 288-2800


 Domain Name Squatting:
 Cybersquatters will purchase mis-keyed names,
variations on corporate names, or other domain name
extensions.

Vienna, VA 22182
(703) 288-2800


The sources of the attacks usually include:

An unhappy current/former employee
A competitor
An extortionist
A legitimately unhappy customer/client

Vienna, VA 22182
(703) 288-2800


How to push back:
For complaint websites, pay the fee or sue.
For review websites, respond to reviews. Engage in a dialogue.
For dedicated hate websites, try to improve SEO of other friendly
websites or unmask the hater if necessary.
For AdWords, file a complaint with Google or bring a Trademark suit.
For social media – have a closed social media page and train
employees how to respond. They are the voice of the company.
For domain names, contact the domain name owner, bring an
arbitration or bring a lawsuit.

Vienna, VA 22182
(703) 288-2800


 Getting a domain name back:
 UDRP Proceeding – Must Prove
• The domain name is identical or confusingly
similar to a trademark or service mark in which
the complainant has rights;
• The registrant does not have any rights or
legitimate interests in the domain name; and
• The registrant registered the domain name and is
using it in “bad faith.”
 Lawsuit under the Anticybersquatting Consumer
Protection Act.
Vienna, VA 22182
(703) 288-2800


Engage in Best Practices:
Train your employees
Register your name at social media websites
Register your name for common TLD extensions
Register your copyrights and trademarks
Monitor Google and other search engines
Engage with complaint websites

Vienna, VA 22182
(703) 288-2800

Practical Tips: Immediate Steps Everyone Must Take

Things to do before the sun sets today (and keep doing).

Vienna, VA 22182
(703) 288-2800

Practical Tips: Immediate Steps Everyone Must Take

 Check the claims that are being made – are they accurate;
 Monitor compliance by upstream and downstream
partners/parties;
 Do random Internet searches;
 Ensure how claims are framed does not run afoul of the spirit
of the FTC regulations;
 Handle defamation on the Internet immediately;
 Check to make sure IP is being respected;
 Have agreements with all partners;
 Check rights and responsibilities in all contracts and make
cheat sheet bullet list to use on daily basis; and
 Check state regulations – there are 50 state AGs!

Vienna, VA 22182
(703) 288-2800

Questions and Closing

Vienna, VA 22182
(703) 288-2800

Contact Information

Centre Law Group
Vienna, Virginia 22182
(703) 288-2800

Website: www.centreinternetlaw.com
Blog: www.internetlawforbusinesses.com
E-Mail: ecrusius@centrelawgroup.com
Tweet! @InternetBizLaw

Vienna, VA 22182
(703) 288-2800

How Affiliate Marketers Can Avoid Legal Pitfalls

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