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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
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
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).
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
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
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
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”. . .
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.
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
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
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
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