Halloween Edition
Advertising Law Headlines for October
Deception. Disguise. Tricks or Treats. Tiks and Toks. Welcome to the Halloween Edition of the Ad Matter. Read boo-low for some scary Ad Law headlines (and even scarier puns).
FTC Hammers Use of Fake Endorsements by House Flipping Company
Zurixx, an event company that teaches consumers how to flip houses, received a restraining order from the FTC for using fake endorsements by TV reality stars such as the El Moussa’s (HGTV’s Flip or Flop) and others from well known network shows. Zurixx used the endorsements to entice hopeful home flippers to Zurixx events. At the events, attendees would be treated not to a comprehensive DIY plan but to a sales pitch alleging that the Zurixx programs, which cost between $2,000 - $40,000, could help attendees make large sums of money on the Zurixx program.
In addition to the FTC violations, Zurixx also violated the CRFA (Consumer Review Fairness Act, also enforced by the FTC) by requiring some consumers to contractually agree not to post negative reviews about Zurixx (among other CRFA violations).
Zurixx was forced to halt business operations and implement changes in order to comply with the FTC Act and the CRFA.
Why This Matters
FTC is taking notice of CFRA violations. It’s also continuing its focus on endorsements – especially the fake celebrity kind. Nothing scarier than a regulator knocking on your door.
TikTok Ticks Off Users
If you are the parent of a tween, or if you are just a human, you’ve heard of TikTok. TikTok is the app where you can lip-sync to your favorite 90s hair band with abandon and then show off your performance to your friends and followers. But as much as this app promotes self-exploitation, it’s recently come under scrutiny for using its users in advertisements for the app, without the knowledge or consent of the users.
This phenomenon brings to light several issues with the general nature of the kind of permission we grant these apps. Does anyone read the Terms of Service? In reality there’s probably a very small percentage of us that do. But those Terms are your legal agreement with the app and may dictate exactly what you can and can’t get out of them using your image, likeness or other content that you knowingly and willingly post on their platform.
The TikTok Terms state that if you submit content, you still own the copyright to that content but you “grant [TikTok] an unconditional, irrevocable, non-exclusive, royalty-free, fully transferable, perpetual worldwide license to use, modify, adapt, reproduce, make derivative works of, publish and/or transmit, and/or distribute and to authorize other users of the Service and other third-parties to view, access, use, download, modify, adapt, reproduce, make derivative works of, publish and/or transmit your User Content in any format and on any platform, either now known or hereinafter invented.” What this means in English is that your Livin’ on a Prayer performance, where you are fully recognizable, can be used for any reason by TikTok with zero remuneration to you. Ouch.
One of the stickier legal issues here is called the Right of Publicity. There is no national right but there are state rights of publicity laws. These laws protect the right of an individual to control and profit from the commercial use of his or her name, likeness or other forms of personal identification. In some states, use of a person’s name and likeness for advertising, requires express written consent.
There is potential and significant exposure for those companies that use user generated content for advertising without getting the requisite permission. So be careful if you are about to launch your next campaign using content that has been “legally” uploaded or submitted because it may not be enough to protect you from legal exposure.
Why It Matters:
User generated content is a brilliant way to create a message for your brand, but ticking off your users because you didn’t get their permission is the wrong message.
GDPR Continues to Haunt Companies
May 25, 2018 was the GDPR Day and since then, there has been no shortage of headlines announcing enforcement actions and other GDPR news. The latest headline involves the German Federation of Consumer Organizations and an online gaming company called Planet49.
Planet49 offered users the chance to play in online promotional games and contests but in order to do so, the users had to enter their names and addresses. They were then were presented with two sections of text and two “Check the Boxes”. One box was already checked - the one next to text reading “I agree to the web analytics service Remintrex being used for me. This has the consequence that, following registration for the games, the organizer sets cookies, which enables Planet49 to evaluate my surfing and use behavior on websites of advertising partners and thus enables advertising by Remintrex that is based on my interests. I can delete the cookies at any time. You can read more about this here.”
The word “here” was then hyperlinked to 57 other companies along with their contact information, and whether advertising would be communicated by email, mail or telephone. After each company’s name was the word “unsubscribe”.
According to the EU Court of Justice, this method of obtaining consent violated EU law, which requires that consent be given “unambiguously.” Since the box was already checked it would be impossible to determine whether a user gave his or her consent to the processing of personal data by not “deselecting a preselected checkbox, or even would not have noticed that checkbox, before continuing with his or her activity on the website visited.”
A user preselecting a prechecked box to indicate consent is not the same thing as a user actually giving his or her consent, concluded the court.
Why It Matters:
It’s scary but the GDPR is here to stay. And we are seeing an increase in rulings of this type that enforce this law. If you operate a website or online app that attracts EU users, take a look at your consent procedures for obtaining consumer consent to store cookies. According to this decision the use of a pre-checked box and a cookie banner that states that consent to store cookies is assumed by the consumer browsing the website (without other affirmative action indicating consent) will be insufficient for purposes of compliance with the GDPR.
Lettuce Learn About the Aesthetic Functionality Doctrine
Who doesn’t love a good pun? Well, apparently LTTB, LLC wasn’t all that happy when Redbubble, an online marketplace for independent artists, started selling products with the pun “Lettuce Turn Up the Beet”. The exact pun on much of the apparel sold by LTTB.
The Northern District of California granted summary judgment for Redbubble. According to the court, LTTB didn’t have an exclusive right to sell products with the pun and therefore didn’t have any trademark infringement claim.
Aesthetic Functionality Doctrine – Under this doctrine, when goods are bought mostly for their aesthetic value, their features may be merely functional. And if the feature itself is an important aspect of the product, then “free competition” permits the imitation of the feature absent any IP protection such as copyright or patent.
With LTTB’s vegetable pun, the court determined that the pun itself was the functional feature of the items made by LTTB and therefore, the aesthetic functionality doctrine should be applied. They further determined that no “reasonable trier of fact” could find that people were buying LTTB’s products based on the products’ reputation. On the contrary, most of those products were just ways to sell the trademark pun rather than the trademark identifying the source of the goods. The court did however say that LTTB can enforce its rights if a party tries to market a product as an LTTB product.
Why This Matters:
How many marketplace websites do you visit with sayings on pillows, tee shirts, cocktail trays or other “vehicles” for those sayings? Note here that LTTB lost on the use of the pun because it didn’t identify LTTB as the source of the goods, but LTTB’s ability to protect its own trademarks was not diminished and you should be diligent about protecting any mark that identifies your business as the source of the product.