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Hot Issues in Cyberspace Law
              10 Things You Should Know
                 About Online Advertising



                                 Bennet Kelley
                              January 18, 2008
About Us
   The Internet Law Center is a boutique firm
   with offices in Santa Monica, California and
   Washington, D.C. offering innovative legal
   and policy solutions for its clients.


   Bennet Kelley is a one of the nation’s leading 
   Internet attorneys, having counseled clients,
   litigated, testified, lobbied, offered seminars
   and written commentaries on many of the
   hottest Internet issues over the past decade. 
   Prior to founding the Internet Law Center,
   Bennet was Assistant General Counsel,
   Director of Governmental Affairs & Privacy for
   ValueClick and Vice President of Legal &
   Strategic Affairs for Hi-Speed Media.  Bennet
   also is Co-Chair of the Legislative
   Subcommittee of the California Bar's
   Cyberspace Committee, a regular contributor
   to the Journal of Internet Law and an award
   winning columnist.
Online Advertising: The Big Ten

           1.  It’s Booming
           2.  Key Word Search Liability
           3.  The Buzz on Behavioral Targeting
           4.  WWW≠ Wild, Wild West
           5.  No “Free” Ride
           6.  There’s A New Sheriff in Town
           7.  Online Gambling
           8.  CAN-SPAM in the Courts
           9.  Affiliate Networks
           10. Going Global
#1: Online Advertising is Booming



             4 Factoids
#1: “Hotter Than Georgia Asphalt”
                          US Online Ad Revenue 2001-2011 ($BB)

 $45.0
                                                                                             $42.2
 $40.0
                                                                                     $37.5
 $35.0
                                                                             $32.5
 $30.0
                                                                     $27.5
 $25.0
                                                             $21.4                                   Revenue
 $20.0
                                                     $16.9
 $15.0
                                             $12.5
 $10.0                                $9.6
                     $7.1 $6.0 $7.3
  $5.0
   $-
         01

         02

         03

         04

         05

         06

         07

         08

         09

         10

         11
       20

       20

       20

       20

       20

       20

       20

       20

       20

       20

       20
 Source: Emarketer
#2: Quickly Surpassing Old Media
                                               2008 Projected Share of
                                               US Advertising Spending
                                     TV
                                    44.1%

                                  MAGAZINES
                                    21.1%


                  Surpass in 11   NEWSPAPERS
                                     17.2%          Source: TNS Media Intelligence, Verona's
                                                    Suhler Stevenson

                                    ONLINE
                                     8.0%


           Surpassed in 07          RADIO
                                    7.0%


                                   OUTDOOR
      Surpassed in 06                2.6%

                                    CINEMA
Surpassed in 97
Merger Mania
           Putting the aQuantive and DoubleClick acquisitions in context
                                                                         LESS THAN
                                                           $164.7BB – AOL – Time Warner merger
                                                           $73.7BB – Exxon-Mobil merger
                                                           $60.1BB – Vietnam’s 2006 GDP
                                                           $28.7BB – Valule of NFL franchises


                                      $15BB – Facebook valuation
                                      $7.4BB – Value of NBA franchises
                                      $6.0BB – Microsoft -- aQuantive
                                      $5.4BB – Value of NHL franchises


                           $3.2BB – Cisco acquires WebEx
                           $3.1BB – Google -- DoubleClick
                           $2.6BB eBay acquires Skype
                           $2.5BB – Rwanda’s 2006 GDP

                 MORE THAN
$1. 65B – Google acquires YouTube
$905MM – Antigua’s 2006 GDP
#3: Election Year Promise?
        Projected 2008 Political Expenditures By Media Format
                             1.7%

                Online%Political Ad Spending ($MM)
                    9 .4


$ 80                                                    $73
$ 70
$ 60                                                                         Despite a 251% increase
$ 50                                                                      from ’04, online expenditures
$ 40         2 5.6 %   $29                                                will constitute less than 2% of
                                                      59 .3 %
$ 30                                                                         total political ad dollars
$ 20
$ 10
 $0

                       2004                           2008
       TV   Direct Mail   PR/Events   New spapers   Online      Outdoor
#4: Search Advertising is King

                         Online Ad Rev by Format Q2-07
                                               3% 2%1%
                                       7%

                                                                                                            Email
                              8%
                                                                                    40%                     Political Ad Dollars - 80%
                                                                                                            Total Online Ad Dollars – 2%

                                                                                                            That means the political
                           17%                                                                              market has yet to discover
                                                                                                             98% of online advertising
                                                                                                            capabilities – especially search.

                                                      22%
   S earch    Dis play     C las s ified    Lead	
  G en    R ich	
  M edia   S pons ors hip   E mail   Video




Source: IAB Internet Advertising Revenue
Report
#2: Key Word Search
      Liability
Keyword: Last Minute Travel
“Use in Commerce”

For purposes of this Act, a mark shall be deemed to be
in use in commerce—

(1) on goods when . . . placed in any manner on the
   goods or their containers or the displays associated
   therewith or on the tags or labels affixed thereto, or if
   the nature of the goods makes such placement
   impracticable, then on documents associated with the
   goods or their sale…
(2) on services when it is used or displayed in the sale
   or advertising of services and the services are
   rendered in commerce…
Is use of Trademark as a
       Keyword a Use in Commerce?
•  Majority View –
   Yes
•  New York view –
   not use in
   commerce since    You Are Here


   trademark not
   placed on any
   goods,
   advertisements
   or displays
Does Bidding on Competitor’s
Trademark Constitute Infringement?




                Likelihood of confusion
                among judges
Initial Interest Confusion
Use of another trademark
“in a manner calculated
to capture initial consumer
attention, even though no
actual sale is finally
completed as a result of
the confusion.”
Brookfield Communications Inc. v. West Coast
Entertainment Corp., 174 F.3d 1036 (9th Cir.
1999).
Rationale
•  Improperly Benefits From Goodwill of
   Trademark

•  False Detour From Information Super-
   highway
   –  Analogy to false detour sign directing consumers to take
      wrong exit. “Unable to locate West Coast, but seeing
      the Blockbuster store right by the highway entrance, they
      may simply rent there..” Brookfield Communications, Inc. v.
      West Coast Entertainment Corp., 174 F.3d 1036, 1062 (9th Cir.
      1999)


•  Bait and Switch
   –  “Initial interest confusion can be viewed as a variation on
      the practice of ‘bait and switch.’” 3 J. Thomas McCarthy,
      McCarthy on Trademarks & Unfair Competition § 23:26 (4th ed. 2003).
Counterpoint
•    Not a Detour, Merely a Lane
     Change
      –    Web surfers are accustomed to false starts
           and are unlikely to be dissuaded when
           they end up at the wrong site. Chatam Int'l
           v. Bodum, Inc., 157 F.Supp.2d 549, 559
           ED PA 2001).

•    No different than supermarket
     placing store brand next to branded
     products.
      –    FragranceNet.com, Inc. v. FragranceX.com,
           et al. No. 06-CV-2225 (JFB)(ART)(E.D.N.Y.,
           June 12, 2007)                                •  No Liability If Trademark Not
•    Legally Significant Confusion?
                                                            Displayed
      –    “The [District] court’s refusal to enter         –  Keyword advertising is a “use in
           the ‘initial interest confusion’ thicket is
           well taken given the unlikelihood of
                                                               commerce,” but cannot confuse
           ‘legally significant’ confusion.”                   consumers if the ultimate search
           Hasbro Inc. v. Clue Computing, Inc., 232 F.         results do not display plaintiff’s
           3d 1, 2 (1st Cir. 2000).
                                                               trademarks. J.G. Wentworth SSC Ltd v.
                                                               Settlement Funding LLC, No. 06-0597
                                                               (E.D. Pa. Jan. 4, 2007).
#3: Behavioral Targeting
The “Calm”
                Before. . .
2006




Spring
2007




August 2007
The Storm
The Debate
•  Industry                                 FTC “Recommendation”
   –  BT provides more relevant             •  Notice
      content to consumers                     –  Every website where data is
   –  Without BT consumers would                  collected for behavioral
      get more --- and less relevant              advertising should provide a
      ads                                         clear, concise, consumer-
   –  Studies show favorable                      friendly, and prominent
      response                                    statement that data about
                                                  consumers activities online is
       •  Boston Globe – 40-111%                  being collected at the site for
          increase in click through rates
                                                  use in providing targeted
                                                  advertising
•  Consumer Groups                          •  Choice
   –  Invasion of Privacy                      –  Consumer must have choice
   –  Beginning of Big Brother              •  Security
                                               –  Adequate security
                                               –  Data retained only as long as
                                                  needed
What about the offline world?
         Offline BT
                              Reported Data Breaches Q4-07
US Loyalty Cards – 1,300
   MM                             14%

•  Active Loyalty Cards –                         28%        Brick & Mortar

   537.6 MM                                                  E-Commerce
                                                             Government
•  Kroger Households –      26%
                                                             Education
   42.0 MM                                         4%        Medical & Other

US Population – 299.4 MM
US Internet Users –                         28%
   212.1MM
US Households – 114.4
   MM
#4 – WWW Does Not Stand
     For Wild, Wild West
Scammers Beware
FTC Act
     FTC Act:
     advertising must be truthful and non-deceptive;
     advertisers must have evidence to back up their claims; and
     advertisements cannot be unfair.



       What makes an                                     What makes an advertisement
       advertisement deceptive?                          unfair?


An ad is deceptive if it contains a statement       An ad or business practice is unfair if:
       - or omits information - that:               •    it causes or is likely to cause substantial consumer injury which
•      is likely to mislead consumers acting             a consumer could not reasonably avoid; and
       reasonably under the circumstances; and      •    it is not outweighed by the benefit to consumers
•      is "material" - that is, important to a      From: FTC's Unfairness Policy Statement
       consumer's decision to buy or use the
       product.


From: FTC's Deception Policy Statement
DotCom Disclosure Guidelines
•    The same consumer protection laws that
     apply to commercial activities in other
     media apply online. The FTC Act’s
     prohibition on "unfair or deceptive acts or
     practices" encompasses Internet
     advertising, marketing and sales.



•    Disclosures that are required to prevent
     an ad from being misleading, to ensure
     that consumers receive material
     information about the terms of a
     transaction or to further public policy
     goals, must be clear and conspicuous.
The Three P’s for Disclaimers


• Placement

• Prominence

• Proximity
Disclaimed Text

                  X




Disclaimer
HYPERLINK




            3 P’s = W OK
Other FTC Advertising Guides
•  Dot Com Disclosures:             •  FTC Guide
   Information About Online            Concerning the Use of
   Advertising
                                       Endorsements and
                                       Testimonials
•  Advertising and Marketing on
   the Internet: The Rules of the
   Road                             •  FTC Guides for the
                                       Use of Environmental
•  FTC Policy Statement                Market Claims (Green
   Regarding Advertising               Guides)
   Substantiation

•  FTC Guides Against Deceptive     •  Enforcement Policy
   Pricing                             Statement on Food
                                       Advertising
•  Dietary Supplements: An
   Advertising Guide for
   Industry
Price Comparisons
•  Savings must be based on bona fide
   price
•  MSRP comparisons only where that
   is price regularly charged in
   marketplace.
                 Example
•  Retailer Doe advertises Brand X pen
   as having ``Comparable Value
   $15.00''. Unless a reasonable
   number of the principal outlets in
   the area are offering Brand Y, an
   essentially similar pen, for that
   price, this advertisement would be
   deceptive
#5 – No Free Ride
The Best Things in
                                                  Life are Free*




*Except for everything really cool that you have to pay for. Participation or human sacrifice may be required. Void in Bosnia, Burkina Faso
and any country where Madonna adopted a kid. To claim your prize, you must tap your head and rub your belly while reciting the alphabet
backwards.
FTC Guidelines on
            Use of the Word “Free”

(a)(2) . . . the offer of ``Free''          (c) . . . When making ``Free'' or similar offers
merchandise . . . must be made with               all the terms, conditions and
extreme care so as to avoid any                   obligations upon which receipt and
possibility that consumers will be                retention of the ``Free'' item are
misled or deceived. . . .                         contingent should be set forth clearly
                                                  and conspicuously at the outset of the
b) . . . . when the purchaser is told             offer so as to leave no reasonable
that an article is ``Free'' to him if             probability that the terms of the offer
another article is purchased, the                 might be misunderstood. Stated
word ``Free'' indicates that he is                differently, all of the terms, conditions
paying nothing for that article and               and obligations should appear in close
no more than the regular price for                conjunction with the offer of ``Free''
the other. Thus, a purchaser has a                merchandise or service. For example,
right to believe that the merchant will           disclosure of the terms of the offer set
not directly and immediately recover,             forth in a footnote of an advertisement to
in whole or in part, the cost of the free         which reference is made by an asterisk
merchandise or service by marking up              or other symbol placed next to the offer,
the price of the article which must be            is not regarded as making disclosure at
purchased, by the substitution of                 the outset.
inferior merchandise or service, or
otherwise.                                      Use “Extreme Care”. . .
Free Can Be Expensive
Adteractive Consent Decree
                                                              MUST DISCLOSE
                                           ü  In the same color, font, and size,
  In any email and online advertisement,
  and on any landing page associated       ü  within close proximity touch representation
  with such email or online                ü  that a purchase is required, or that
  advertisement, that contains
                                             purchases are required, to obtain such gift
                                             or award, when such is the case;
•  any direct or implied representation
                                           ü  A list of the monetary obligations a
•  made by Defendant, or made by any         consumer is likely to incur to obtain the
   authorized agent on behalf of             advertised gift or award;
   Defendant
                                           ü  A list of any non-monetary obligations a

•  that a gift or award is free              consumer is likely to incur to obtain the
                                             advertised gift or award, such as having to
THEN . . .                                   apply and qualify for credit cards or an
                                             automobile loan.
#6: There’s A New Sheriff in Town
State AG Cybercrimes Units
                The Majors
                                                  Go ahead,
•    New York                                    make my day.
      –  Continues to be activist post-Spitzer
         under Andrew Cuomo

•    Texas
      –  80 Arrests First Three Years

•    Washington
      –  Five spyware lawsuits since 2005

          New Kids on the Block
•    Florida
      –  Established in 2007. Investigating 10
         companies over “free” promotions

•    Kansas
      –  Launched in September 2007
#7 Online Gambling
Online Gambling
Federal Wire Act - prohibits:
•    transmission in interstate or foreign commerce
     of bets or wagers
•    transmission of a wire communication which
     entitles the recipient to receive money or credit
     as a result of bets or wagers
•    information assisting in the placement of bets
     or wagers.

Illegal Gambling Business Act
•    bars gambling activity in violation of state or
     municipal law
•    online gambling violates various state laws

Unlawful Internet Gambling
Enforcement Act of 2006
      –  Prohibits accepting funds in connection
         with Internet gambling

      –  Exempts Fantasy Sports Leagues
Advertiser Liability
•  2003 DOJ Letter to NAB:
     individuals that accept and run      •  Google, Microsoft & Yahoo:
     [online gambling ads] may be
     aiding and abetting these illegal       $31.5 million settlement
     activities                              with DOJ

           “DotNet” Sites                 •  Sporting News: $7.2MM
                                             settlement with DOJ
•    There can be no web links from an
     online free-to-play poker website
     (i.e. “poker.nets”) to a online      •  Discovery: Over $5MM
     pay-to-play poker website (i.e.         Seized by US Marshalls
     “poker.com”) website

•    There must be an on-screen           •  Esquire: Search warrant
     disclaimer on the home page of the      after running BoDog ads
     online free-to-play poker website
     (i.e. “poker.nets”) that states
     that this site is purely
     educational."
The Mouse That Roared or
                   Pirate of the Caribbean?
     Antigua v. United States                 Congressional Action
                (WTO)
                                           •  HR 2046 Internet Gambling
•    Held that to the extent online           Regulation and
     gambling was allowed within the          Enforcement Act of 2007
     U.S. (some states permit online
     gambling for horse racing),              –  would establish a federal
     foreign companies were entitled             license for online gambling
     to equal access to this market              but still permit states to
                                                 prohibit online gambling in
•    Antigua awarded $21MM/year                  their jurisdiction;
      –  May suspend intellectual
         property commitments to recoup
                                           •  HR 2140 Internet Gambling
•    European Union, Canada,                  Regulation and
     Japan, Australia, India, Costa           Enforcement Act of 2007
     Rica and Macau also submitted
     damage claims                            –  Directs National Academy
      –  US granted trade concessions to         of Sciences to Study
         settle claims with EU, Canada           wisdom of UIGEA.
         and Japan but does not bar new
         case pending with EU
(Not so) Subliminal
  Message No. 1
 This is so much fun.
#8 CAN-SPAM Turns 4
CAN-SPAM
                     Principal Requirements
                                  From line must
                                 identify initiator




                                     Subject line must not be deceptive.
                                    Adult Messages must provide notice.


  UCE must be
   identified
      as
“advertisement”




      Requires Working Opt-Out
      Mechanism for Advertiser
                                                                Postal Address for Advertiser
2007 Cases
                                           •    From Lines
•    Commercial email – includes                 –  Not deceptive to use multiple
     emails as part of unionization                 domains or non-corporate
     campaign. Aitken v.                            address if it can be looked up
     Communications Workers of America,             using Who Is. Vonage” is
     496 F. Supp.2d 653 (E.D. Va. July              simply not a
     12, 2007)                                      misrepresentation”.
                                                    Kleffman v. Vonage Holding Corp.,
•    IASP Private Right of Action                   Case No. CV 07-2406GAFJWJX (C.D.
      –  Must demonstrate substantial               Cal. May 23, 2007); Gordon v.
         injury. “permitting private                Virtumundo, Inc., Case No. 06-0204-
                                                    JCC (W.D. Wash. May 15, 2007)
         parties with no harm to invoke
         CAM-SPAM to collect millions of
         dollars surely is not what              –  Except where domain itself is
         Congress intended when it                  misleading. U.S v. Kilbride, 507 F.
         crafted this “limited” private             Supp. 2nd 1051 (D. AZ. Aug. 24, 2007)
         right of action.” Gordon v.
         Virtumundo, Inc., No. 06-0204-    •    Pleading
         JCC (W.D. Wash. May 15, 2007)           –  Need not plead with particularity
                                                    but may be appropriate to move
•    No Strict Liability for actions of             for more definite statement.
     Affiliates. US v. Cyberheat, 2007              Gordon v. Ascentive LCC, No.
     U.S. Dist. LEXIS 15448 (N.D.                   CV-05-5079-FVS. (E.D. Wash.
                                                    June 19, 2007)
     Ariz. 2007)
#9: Affiliate Marketing
Protect Yourself
•  Have clear policies for affiliates or
   affiliate networks
•  Police these policies
•  Use monitoring services and seed
   lists to track activities of third party
   marketers
•  Set up blacklists for rogue affiliates
#10 – Marketing Overseas
A World Wide Opportunity
  •  62.6% of US retailers
     engaged in international
     e-commerce

  •  26.4% of US retailer’s
     have foreign sales that                         1958	
  
     are more than ten                                	
  
                                                   ACE
     percent of total online            CYBER	
  SP
     sales

  •  38.1% of US Retailers
     are expecting foreign
     sales growth exceeding
     ten percent
Source: Internet Retailer Survey 2006
Going Global Checklist
ü Can you export it?
ü Can you sell
   there?
ü How do you
   market it?
ü What terms can
   you sell under?
ü Privacy
   Compliance
Can you sell it to Country X?
Can you sell it from the US?
                                            Export Control 101
•    Treasury Department. Office of
     Foreign Assets Control                         •    State Department's Office of
      –    Restricts trade with countries subject        Defense Trade Controls
           to embargoes and sanctions (e.g.,              –    Regulates the export of "defense
           North Korea) pursuant to Trading with               articles" and "defense services“ which
           the Enemy Act, 50 U.S.C. App. 5 and                 Includes encryption systems and
           the International Emergency                         software with the capability of
           Economic Powers Act, 50 U.S.C. 1701                 maintaining secrecy or confidentiality
           et seq.                                             of information or information systems
                                                               pursuant to Arms Export Control Act,
      –    Restricted countries listed on List of              22 U.S.C. 2778, and the International
           Specially Designated Nationals and                  Traffic in Arms Regulations, 22 C.F.R.
           Blocked Persons                                     Parts 120-130
                                                          –    Restricted items listed on U.S.
                                                               Munitions List
•    Commerce Department's Bureau
     of Export Administration
      –    Controls the export of commercial and    •    Company and individuals may
           "dual use" products including                 be subject to civil and
           software and technical data pursuant          criminal penalties – including
           to Export Administration Act, 50
           U.S.C. App. 2401 et seq and Export            export denial order
           Administration Act Regulations 15
           C.F.R. Parts 700-799

      –    Restricted items listed on Commerce
           Control List
Axis of . . . ?

      Treasury Embargo List        Commerce Country Chart
•    Cuba                                    (Partial)
•    Cote d'Ivoire            •    Argentina
•    Iran                     •    Austria
•    Iraq                     •    Brazil
•    Libya                    •    Chile
•    North Korea              •    Finland
•    Sudan                    •    India
•    Liberia                  •    Ireland
•    Zimbabwe                 •    Israel
•    Sierra Leon              •    Kazakhstan
•    Angola                   •    Mexico
•    Syria                    •    South Korea
•    Burma                    •    Sweden
                              •    Switzerland
                              •    Vatican City
Doesn’t Anyone Here
            Understand American?
•  Cannot assume same rules
   apply
•  Germany
   –  Comparative Advertising
      Prohibited
•  France
   –  Bidding on competitors
      trademark constitutes
      trademark infringement and
      unfair competition
•  EU, Australia
   –  EU, Australia have strict
      opt-in spam laws, while the
      US CAN-SPAM Act follows
      an opt-out approach
   –  Stricter rules on data
      collection and retention
                                    United Nations Photo
(Not so) Subliminal Message No. 2
                     PATRIOTS WIN 4TH
                     SUPER BOWL

                17
                19
                18
              GO PATS!
Resources
•         It’s Booming
     –       IAB Revenue Reports
•         Key Word Search Liability
     •       Technology & Marketing Law Blog
•         The Buzz on Behavioral Targeting
     •       FTC Behavioral Targeting Page
•         No “Free” Ride
     •       FTC Adteractive Settlement
•         WWW≠ Wild, Wild West
     •       FTC Guidance Documents
•         There’s A New Sheriff in Town
     •       Florida AG Press Report
•         Online Gambling
     •       Article on Advertising Internet Gambling
•         CAN-SPAM in the Courts
     •       PowerPoint Presentation on CAN-SPAM at 4
•         Affiliate Networks
     •       DMA Guidelines
•         Going Global
     •       Department of Commerce Export Control Basics
Questions?
Contact Info
Santa Monica, California Office

Internet Law Center
Searise Tower
233 Wilshire Blvd, 4th Floor
Santa Monica, CA 90401
(310) 452-0401
(702) 924-8740 (fax)

Washington, D.C. Office

Internet Law Center
c/o Aduston Consulting
1301 Pennsylvania Avenue, N.W.
Suite 500
Washington, D.C. 20004
(202)689-5660
(702) 924-8740 (fax)

Email Address /Internet Address
bkelley@iinternetlawcenter.net
www.internetlawcenter.net

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Hot Issues in Cyberspace: 10 Things You Should Know About Online Advertising

  • 1. Hot Issues in Cyberspace Law 10 Things You Should Know About Online Advertising Bennet Kelley January 18, 2008
  • 2. About Us The Internet Law Center is a boutique firm with offices in Santa Monica, California and Washington, D.C. offering innovative legal and policy solutions for its clients. Bennet Kelley is a one of the nation’s leading  Internet attorneys, having counseled clients, litigated, testified, lobbied, offered seminars and written commentaries on many of the hottest Internet issues over the past decade.  Prior to founding the Internet Law Center, Bennet was Assistant General Counsel, Director of Governmental Affairs & Privacy for ValueClick and Vice President of Legal & Strategic Affairs for Hi-Speed Media.  Bennet also is Co-Chair of the Legislative Subcommittee of the California Bar's Cyberspace Committee, a regular contributor to the Journal of Internet Law and an award winning columnist.
  • 3. Online Advertising: The Big Ten 1.  It’s Booming 2.  Key Word Search Liability 3.  The Buzz on Behavioral Targeting 4.  WWW≠ Wild, Wild West 5.  No “Free” Ride 6.  There’s A New Sheriff in Town 7.  Online Gambling 8.  CAN-SPAM in the Courts 9.  Affiliate Networks 10. Going Global
  • 4. #1: Online Advertising is Booming 4 Factoids
  • 5. #1: “Hotter Than Georgia Asphalt” US Online Ad Revenue 2001-2011 ($BB) $45.0 $42.2 $40.0 $37.5 $35.0 $32.5 $30.0 $27.5 $25.0 $21.4 Revenue $20.0 $16.9 $15.0 $12.5 $10.0 $9.6 $7.1 $6.0 $7.3 $5.0 $- 01 02 03 04 05 06 07 08 09 10 11 20 20 20 20 20 20 20 20 20 20 20 Source: Emarketer
  • 6. #2: Quickly Surpassing Old Media 2008 Projected Share of US Advertising Spending TV 44.1% MAGAZINES 21.1% Surpass in 11 NEWSPAPERS 17.2% Source: TNS Media Intelligence, Verona's Suhler Stevenson ONLINE 8.0% Surpassed in 07 RADIO 7.0% OUTDOOR Surpassed in 06 2.6% CINEMA Surpassed in 97
  • 7. Merger Mania Putting the aQuantive and DoubleClick acquisitions in context LESS THAN $164.7BB – AOL – Time Warner merger $73.7BB – Exxon-Mobil merger $60.1BB – Vietnam’s 2006 GDP $28.7BB – Valule of NFL franchises $15BB – Facebook valuation $7.4BB – Value of NBA franchises $6.0BB – Microsoft -- aQuantive $5.4BB – Value of NHL franchises $3.2BB – Cisco acquires WebEx $3.1BB – Google -- DoubleClick $2.6BB eBay acquires Skype $2.5BB – Rwanda’s 2006 GDP MORE THAN $1. 65B – Google acquires YouTube $905MM – Antigua’s 2006 GDP
  • 8. #3: Election Year Promise? Projected 2008 Political Expenditures By Media Format 1.7% Online%Political Ad Spending ($MM) 9 .4 $ 80 $73 $ 70 $ 60 Despite a 251% increase $ 50 from ’04, online expenditures $ 40 2 5.6 % $29 will constitute less than 2% of 59 .3 % $ 30 total political ad dollars $ 20 $ 10 $0 2004 2008 TV Direct Mail PR/Events New spapers Online Outdoor
  • 9. #4: Search Advertising is King Online Ad Rev by Format Q2-07 3% 2%1% 7% Email 8% 40% Political Ad Dollars - 80% Total Online Ad Dollars – 2% That means the political 17% market has yet to discover 98% of online advertising capabilities – especially search. 22% S earch Dis play C las s ified Lead  G en R ich  M edia S pons ors hip E mail Video Source: IAB Internet Advertising Revenue Report
  • 10. #2: Key Word Search Liability
  • 12. “Use in Commerce” For purposes of this Act, a mark shall be deemed to be in use in commerce— (1) on goods when . . . placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale… (2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce…
  • 13. Is use of Trademark as a Keyword a Use in Commerce? •  Majority View – Yes •  New York view – not use in commerce since You Are Here trademark not placed on any goods, advertisements or displays
  • 14. Does Bidding on Competitor’s Trademark Constitute Infringement? Likelihood of confusion among judges
  • 15. Initial Interest Confusion Use of another trademark “in a manner calculated to capture initial consumer attention, even though no actual sale is finally completed as a result of the confusion.” Brookfield Communications Inc. v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999).
  • 16. Rationale •  Improperly Benefits From Goodwill of Trademark •  False Detour From Information Super- highway –  Analogy to false detour sign directing consumers to take wrong exit. “Unable to locate West Coast, but seeing the Blockbuster store right by the highway entrance, they may simply rent there..” Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1062 (9th Cir. 1999) •  Bait and Switch –  “Initial interest confusion can be viewed as a variation on the practice of ‘bait and switch.’” 3 J. Thomas McCarthy, McCarthy on Trademarks & Unfair Competition § 23:26 (4th ed. 2003).
  • 17. Counterpoint •  Not a Detour, Merely a Lane Change –  Web surfers are accustomed to false starts and are unlikely to be dissuaded when they end up at the wrong site. Chatam Int'l v. Bodum, Inc., 157 F.Supp.2d 549, 559 ED PA 2001). •  No different than supermarket placing store brand next to branded products. –  FragranceNet.com, Inc. v. FragranceX.com, et al. No. 06-CV-2225 (JFB)(ART)(E.D.N.Y., June 12, 2007) •  No Liability If Trademark Not •  Legally Significant Confusion? Displayed –  “The [District] court’s refusal to enter –  Keyword advertising is a “use in the ‘initial interest confusion’ thicket is well taken given the unlikelihood of commerce,” but cannot confuse ‘legally significant’ confusion.” consumers if the ultimate search Hasbro Inc. v. Clue Computing, Inc., 232 F. results do not display plaintiff’s 3d 1, 2 (1st Cir. 2000). trademarks. J.G. Wentworth SSC Ltd v. Settlement Funding LLC, No. 06-0597 (E.D. Pa. Jan. 4, 2007).
  • 19. The “Calm” Before. . . 2006 Spring 2007 August 2007
  • 21. The Debate •  Industry FTC “Recommendation” –  BT provides more relevant •  Notice content to consumers –  Every website where data is –  Without BT consumers would collected for behavioral get more --- and less relevant advertising should provide a ads clear, concise, consumer- –  Studies show favorable friendly, and prominent response statement that data about consumers activities online is •  Boston Globe – 40-111% being collected at the site for increase in click through rates use in providing targeted advertising •  Consumer Groups •  Choice –  Invasion of Privacy –  Consumer must have choice –  Beginning of Big Brother •  Security –  Adequate security –  Data retained only as long as needed
  • 22. What about the offline world? Offline BT Reported Data Breaches Q4-07 US Loyalty Cards – 1,300 MM 14% •  Active Loyalty Cards – 28% Brick & Mortar 537.6 MM E-Commerce Government •  Kroger Households – 26% Education 42.0 MM 4% Medical & Other US Population – 299.4 MM US Internet Users – 28% 212.1MM US Households – 114.4 MM
  • 23. #4 – WWW Does Not Stand For Wild, Wild West
  • 25. FTC Act FTC Act: advertising must be truthful and non-deceptive; advertisers must have evidence to back up their claims; and advertisements cannot be unfair. What makes an What makes an advertisement advertisement deceptive? unfair? An ad is deceptive if it contains a statement An ad or business practice is unfair if: - or omits information - that: •  it causes or is likely to cause substantial consumer injury which •  is likely to mislead consumers acting a consumer could not reasonably avoid; and reasonably under the circumstances; and •  it is not outweighed by the benefit to consumers •  is "material" - that is, important to a From: FTC's Unfairness Policy Statement consumer's decision to buy or use the product. From: FTC's Deception Policy Statement
  • 26. DotCom Disclosure Guidelines •  The same consumer protection laws that apply to commercial activities in other media apply online. The FTC Act’s prohibition on "unfair or deceptive acts or practices" encompasses Internet advertising, marketing and sales. •  Disclosures that are required to prevent an ad from being misleading, to ensure that consumers receive material information about the terms of a transaction or to further public policy goals, must be clear and conspicuous.
  • 27. The Three P’s for Disclaimers • Placement • Prominence • Proximity
  • 28. Disclaimed Text X Disclaimer
  • 29. HYPERLINK 3 P’s = W OK
  • 30. Other FTC Advertising Guides •  Dot Com Disclosures: •  FTC Guide Information About Online Concerning the Use of Advertising Endorsements and Testimonials •  Advertising and Marketing on the Internet: The Rules of the Road •  FTC Guides for the Use of Environmental •  FTC Policy Statement Market Claims (Green Regarding Advertising Guides) Substantiation •  FTC Guides Against Deceptive •  Enforcement Policy Pricing Statement on Food Advertising •  Dietary Supplements: An Advertising Guide for Industry
  • 31. Price Comparisons •  Savings must be based on bona fide price •  MSRP comparisons only where that is price regularly charged in marketplace. Example •  Retailer Doe advertises Brand X pen as having ``Comparable Value $15.00''. Unless a reasonable number of the principal outlets in the area are offering Brand Y, an essentially similar pen, for that price, this advertisement would be deceptive
  • 32. #5 – No Free Ride
  • 33. The Best Things in Life are Free* *Except for everything really cool that you have to pay for. Participation or human sacrifice may be required. Void in Bosnia, Burkina Faso and any country where Madonna adopted a kid. To claim your prize, you must tap your head and rub your belly while reciting the alphabet backwards.
  • 34. FTC Guidelines on Use of the Word “Free” (a)(2) . . . the offer of ``Free'' (c) . . . When making ``Free'' or similar offers merchandise . . . must be made with all the terms, conditions and extreme care so as to avoid any obligations upon which receipt and possibility that consumers will be retention of the ``Free'' item are misled or deceived. . . . contingent should be set forth clearly and conspicuously at the outset of the b) . . . . when the purchaser is told offer so as to leave no reasonable that an article is ``Free'' to him if probability that the terms of the offer another article is purchased, the might be misunderstood. Stated word ``Free'' indicates that he is differently, all of the terms, conditions paying nothing for that article and and obligations should appear in close no more than the regular price for conjunction with the offer of ``Free'' the other. Thus, a purchaser has a merchandise or service. For example, right to believe that the merchant will disclosure of the terms of the offer set not directly and immediately recover, forth in a footnote of an advertisement to in whole or in part, the cost of the free which reference is made by an asterisk merchandise or service by marking up or other symbol placed next to the offer, the price of the article which must be is not regarded as making disclosure at purchased, by the substitution of the outset. inferior merchandise or service, or otherwise. Use “Extreme Care”. . .
  • 35. Free Can Be Expensive
  • 36. Adteractive Consent Decree MUST DISCLOSE ü  In the same color, font, and size, In any email and online advertisement, and on any landing page associated ü  within close proximity touch representation with such email or online ü  that a purchase is required, or that advertisement, that contains purchases are required, to obtain such gift or award, when such is the case; •  any direct or implied representation ü  A list of the monetary obligations a •  made by Defendant, or made by any consumer is likely to incur to obtain the authorized agent on behalf of advertised gift or award; Defendant ü  A list of any non-monetary obligations a •  that a gift or award is free consumer is likely to incur to obtain the advertised gift or award, such as having to THEN . . . apply and qualify for credit cards or an automobile loan.
  • 37. #6: There’s A New Sheriff in Town
  • 38. State AG Cybercrimes Units The Majors Go ahead, •  New York make my day. –  Continues to be activist post-Spitzer under Andrew Cuomo •  Texas –  80 Arrests First Three Years •  Washington –  Five spyware lawsuits since 2005 New Kids on the Block •  Florida –  Established in 2007. Investigating 10 companies over “free” promotions •  Kansas –  Launched in September 2007
  • 40. Online Gambling Federal Wire Act - prohibits: •  transmission in interstate or foreign commerce of bets or wagers •  transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers •  information assisting in the placement of bets or wagers. Illegal Gambling Business Act •  bars gambling activity in violation of state or municipal law •  online gambling violates various state laws Unlawful Internet Gambling Enforcement Act of 2006 –  Prohibits accepting funds in connection with Internet gambling –  Exempts Fantasy Sports Leagues
  • 41. Advertiser Liability •  2003 DOJ Letter to NAB: individuals that accept and run •  Google, Microsoft & Yahoo: [online gambling ads] may be aiding and abetting these illegal $31.5 million settlement activities with DOJ “DotNet” Sites •  Sporting News: $7.2MM settlement with DOJ •  There can be no web links from an online free-to-play poker website (i.e. “poker.nets”) to a online •  Discovery: Over $5MM pay-to-play poker website (i.e. Seized by US Marshalls “poker.com”) website •  There must be an on-screen •  Esquire: Search warrant disclaimer on the home page of the after running BoDog ads online free-to-play poker website (i.e. “poker.nets”) that states that this site is purely educational."
  • 42. The Mouse That Roared or Pirate of the Caribbean? Antigua v. United States Congressional Action (WTO) •  HR 2046 Internet Gambling •  Held that to the extent online Regulation and gambling was allowed within the Enforcement Act of 2007 U.S. (some states permit online gambling for horse racing), –  would establish a federal foreign companies were entitled license for online gambling to equal access to this market but still permit states to prohibit online gambling in •  Antigua awarded $21MM/year their jurisdiction; –  May suspend intellectual property commitments to recoup •  HR 2140 Internet Gambling •  European Union, Canada, Regulation and Japan, Australia, India, Costa Enforcement Act of 2007 Rica and Macau also submitted damage claims –  Directs National Academy –  US granted trade concessions to of Sciences to Study settle claims with EU, Canada wisdom of UIGEA. and Japan but does not bar new case pending with EU
  • 43. (Not so) Subliminal Message No. 1 This is so much fun.
  • 45. CAN-SPAM Principal Requirements From line must identify initiator Subject line must not be deceptive. Adult Messages must provide notice. UCE must be identified as “advertisement” Requires Working Opt-Out Mechanism for Advertiser Postal Address for Advertiser
  • 46. 2007 Cases •  From Lines •  Commercial email – includes –  Not deceptive to use multiple emails as part of unionization domains or non-corporate campaign. Aitken v. address if it can be looked up Communications Workers of America, using Who Is. Vonage” is 496 F. Supp.2d 653 (E.D. Va. July simply not a 12, 2007) misrepresentation”. Kleffman v. Vonage Holding Corp., •  IASP Private Right of Action Case No. CV 07-2406GAFJWJX (C.D. –  Must demonstrate substantial Cal. May 23, 2007); Gordon v. injury. “permitting private Virtumundo, Inc., Case No. 06-0204- JCC (W.D. Wash. May 15, 2007) parties with no harm to invoke CAM-SPAM to collect millions of dollars surely is not what –  Except where domain itself is Congress intended when it misleading. U.S v. Kilbride, 507 F. crafted this “limited” private Supp. 2nd 1051 (D. AZ. Aug. 24, 2007) right of action.” Gordon v. Virtumundo, Inc., No. 06-0204- •  Pleading JCC (W.D. Wash. May 15, 2007) –  Need not plead with particularity but may be appropriate to move •  No Strict Liability for actions of for more definite statement. Affiliates. US v. Cyberheat, 2007 Gordon v. Ascentive LCC, No. U.S. Dist. LEXIS 15448 (N.D. CV-05-5079-FVS. (E.D. Wash. June 19, 2007) Ariz. 2007)
  • 48. Protect Yourself •  Have clear policies for affiliates or affiliate networks •  Police these policies •  Use monitoring services and seed lists to track activities of third party marketers •  Set up blacklists for rogue affiliates
  • 49. #10 – Marketing Overseas
  • 50. A World Wide Opportunity •  62.6% of US retailers engaged in international e-commerce •  26.4% of US retailer’s have foreign sales that 1958   are more than ten   ACE percent of total online CYBER  SP sales •  38.1% of US Retailers are expecting foreign sales growth exceeding ten percent Source: Internet Retailer Survey 2006
  • 51. Going Global Checklist ü Can you export it? ü Can you sell there? ü How do you market it? ü What terms can you sell under? ü Privacy Compliance
  • 52. Can you sell it to Country X?
  • 53. Can you sell it from the US? Export Control 101 •  Treasury Department. Office of Foreign Assets Control •  State Department's Office of –  Restricts trade with countries subject Defense Trade Controls to embargoes and sanctions (e.g., –  Regulates the export of "defense North Korea) pursuant to Trading with articles" and "defense services“ which the Enemy Act, 50 U.S.C. App. 5 and Includes encryption systems and the International Emergency software with the capability of Economic Powers Act, 50 U.S.C. 1701 maintaining secrecy or confidentiality et seq. of information or information systems pursuant to Arms Export Control Act, –  Restricted countries listed on List of 22 U.S.C. 2778, and the International Specially Designated Nationals and Traffic in Arms Regulations, 22 C.F.R. Blocked Persons Parts 120-130 –  Restricted items listed on U.S. Munitions List •  Commerce Department's Bureau of Export Administration –  Controls the export of commercial and •  Company and individuals may "dual use" products including be subject to civil and software and technical data pursuant criminal penalties – including to Export Administration Act, 50 U.S.C. App. 2401 et seq and Export export denial order Administration Act Regulations 15 C.F.R. Parts 700-799 –  Restricted items listed on Commerce Control List
  • 54. Axis of . . . ? Treasury Embargo List Commerce Country Chart •  Cuba (Partial) •  Cote d'Ivoire •  Argentina •  Iran •  Austria •  Iraq •  Brazil •  Libya •  Chile •  North Korea •  Finland •  Sudan •  India •  Liberia •  Ireland •  Zimbabwe •  Israel •  Sierra Leon •  Kazakhstan •  Angola •  Mexico •  Syria •  South Korea •  Burma •  Sweden •  Switzerland •  Vatican City
  • 55. Doesn’t Anyone Here Understand American? •  Cannot assume same rules apply •  Germany –  Comparative Advertising Prohibited •  France –  Bidding on competitors trademark constitutes trademark infringement and unfair competition •  EU, Australia –  EU, Australia have strict opt-in spam laws, while the US CAN-SPAM Act follows an opt-out approach –  Stricter rules on data collection and retention United Nations Photo
  • 56. (Not so) Subliminal Message No. 2 PATRIOTS WIN 4TH SUPER BOWL 17 19 18 GO PATS!
  • 57. Resources •  It’s Booming –  IAB Revenue Reports •  Key Word Search Liability •  Technology & Marketing Law Blog •  The Buzz on Behavioral Targeting •  FTC Behavioral Targeting Page •  No “Free” Ride •  FTC Adteractive Settlement •  WWW≠ Wild, Wild West •  FTC Guidance Documents •  There’s A New Sheriff in Town •  Florida AG Press Report •  Online Gambling •  Article on Advertising Internet Gambling •  CAN-SPAM in the Courts •  PowerPoint Presentation on CAN-SPAM at 4 •  Affiliate Networks •  DMA Guidelines •  Going Global •  Department of Commerce Export Control Basics
  • 59. Contact Info Santa Monica, California Office Internet Law Center Searise Tower 233 Wilshire Blvd, 4th Floor Santa Monica, CA 90401 (310) 452-0401 (702) 924-8740 (fax) Washington, D.C. Office Internet Law Center c/o Aduston Consulting 1301 Pennsylvania Avenue, N.W. Suite 500 Washington, D.C. 20004 (202)689-5660 (702) 924-8740 (fax) Email Address /Internet Address bkelley@iinternetlawcenter.net www.internetlawcenter.net