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The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10. Presenting a live 90-minute webinar with interactive Q&A Drafting Affiliate Marketing Agreements: Ensuring Compliance With Advertising, IP and Internet Marketing Laws Structuring Provisions on Compensation, Indemnification, Limitation of Liability, Termination and More Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific THURSDAY, DECEMBER 10, 2015 Andrew B. Lustigman, Partner, Olshan Frome Wolosky, New York Kavon Adli, Founder and Managing Attorney, The Internet Law Group, Beverly Hills, Calif. Rachel Hirsch, Ifrah Law, Washington, D.C.

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The audio portion of the conference may be accessed via the telephone or by using your computer's

speakers. Please refer to the instructions emailed to registrants for additional information. If you

have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

Presenting a live 90-minute webinar with interactive Q&A

Drafting Affiliate Marketing Agreements:

Ensuring Compliance With Advertising,

IP and Internet Marketing Laws Structuring Provisions on Compensation, Indemnification,

Limitation of Liability, Termination and More

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, DECEMBER 10, 2015

Andrew B. Lustigman, Partner, Olshan Frome Wolosky, New York

Kavon Adli, Founder and Managing Attorney, The Internet Law Group, Beverly Hills, Calif.

Rachel Hirsch, Ifrah Law, Washington, D.C.

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FOR LIVE EVENT ONLY

INTRODUCTION TO AFFILIATE MARKETING

DRAFTING AFFILIATE MARKETING AGREEMENTS: ENSURING COMPLIANCE

WITH ADVERTISING, IP AND INTERNET MARKETING LAWS

KAVON ADLI, ESQ.

THE INTERNET LAW GROUP (BEVERLY HILLS, CA)

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

PARTIES TO AFFILIATE MARKETING RELATIONSHIP

• Affiliate network

• Publisher or “affiliate”

• Advertiser

• Sub-affiliate

• Lead purchaser or client

6

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

CONCEPT BEHIND AFFILIATE MARKETING

Network

Sub-affiliate

Sub-affiliate

Sub-affiliate

Affiliate

3rd party

advertiser Lead buyer

7

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

CATEGORIES OF AGREEMENTS IN AFFILIATE MARKETING ECOSYSTEM

• Publisher terms

between network and affiliate

• Client contract

between advertiser and lead

purchaser

• Advertiser contract

between network and third-party

advertiser

(non-exclusive)

Today’s focus: publisher terms

8

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

Key Terms in Affiliate Marketing Agreements

Part 1: The Legal Environment

Andrew B. Lustigman

Olshan Frome Wolosky LLP

General Legal Issues Involving Affiliate Marketing

• Many of the legal issues surrounding affiliate marketing center on the advertising materials produced and the method used by affiliates

• The retailer as the advertiser may be held liable for the advertising materials created by its affiliates under various federal and state laws

10

Section 5 of The FTC Act • “[U]nfair or deceptive acts or practices in or affecting commerce are

declared unlawful” (15 U.S.C. Sec. 45(a)(1))

• Is the claim likely to mislead a reasonable consumer?

• Can the consumer avoid the injury?

• Generally viewed from the reasonable consumer’s perspective

11

• What is the reasonable take away (net impression)?

• Was the claim material to the consumer’s decision to buy or use the product or service?

• Is it true?

• Is it substantiated?

• Are there unfair business practices?

12

Section 5 of The FTC Act

FTC’s Statements

• FTC’s prohibition against deceptive advertising applies

across the spectrum of players involved in affiliate marketing. David

Vladeck, Director of the Bureau of Consumer Protection for the FTC:

– “When you pay third parties to act on your behalf, you cannot

absolve yourself of responsibility for whatever actions those third

parties might take to sell your product.”

– “FTC liability for deceptive advertising can potentially reach anyone

in the chain between a seller and the ultimate consumer.”

– FTC wants to “make sure that affiliate marketers are on notice that

they will be held responsible for the claims they make.”

13

Legacy Learning Systems, Inc.

14

In The Matter of Legacy Learning Systems, Inc.

• FTC alleged Legacy Learning sold guitar-lesson DVDs through online affiliate marketers who falsely posed as ordinary consumers or independent reviewers

• Defendants advertised using an online affiliate program, through which it recruited “Review Ad” affiliates to promote its courses through endorsements in articles, blog posts, and other online editorial material, with the endorsements appearing close to hyperlinks to Legacy’s website

• Affiliates received commissions on the sale of each product resulting from referrals

• Such endorsements generated more than $5 million in sales of Legacy’s courses

15

FTC Settlement with Legacy Learning Systems

• Must monitor affiliates to ensure they disclose that they earn commissions for sales and are not misrepresenting themselves as independent users or ordinary consumers

• In a manner calculated not to disclose the monitoring process to the affiliates, must monitor their top 50 revenue-generating affiliates on at least a monthly basis and maintain reports documenting the same

• In a manner calculated not to disclose the monitoring process to the

affiliates, must monitor a random sampling of 50 other affiliate marketers on at least a monthly basis and maintain reports documenting the same

• Pay $250,000

16

ONE of the BEST

Amazing new

game!

[[[Game developer] hits another home

run with [game].

One of the best apps just got better

GREAT, family-friendly

board game

[[App developer]

does it again!

Deutsch LA, Inc. (March 24, 2015)

Reverb Communications, Inc., 150 F.T.C. 782 (2010) (consent order) 17

18

Operation Clean Turf • NY AG enters agreements with 19 companies to stop writing fake online

reviews and to pay more than $350,000 in fines

– ASEO. Company based in NYC, posted more than 1,500 fake reviews of clients on consumer-review websites such as Yelp.com and Google Places and attempted to defeat consumer-review website filters by changing the IP address of the computer from which it posted the reviews every week, making the reviews look like they came from different users.

– US Coachways, Inc. The management of this leading national bus charter company based in Staten Island, NY orchestrated an astroturfing campaign, writing bogus reviews themselves, soliciting freelance writers to write bogus reviews, and urging employees to pose as customers and write positive reviews. They also offered $50 gift certificates to customers to write positive reviews without requiring that the customers disclose the gift in the review.

19

Operation Clean Turf • Swam Media Group. The manager of this licensee of the Scores

gentlemen's club franchise orchestrated an astroturfing campaign with the help of a freelance writer that resulted in 175 fake reviews of entertainers at the Scores adult club in New York City and an affiliated website, scoreslive.com, most of which were posted online.

• XVIO, Inc. An SEO company based in NYC posted hundreds of fake reviews

of clients on consumer-review websites. Company also conducted a “secret shopper” campaign where its agents received free or discounted goods and services from Company’s clients in exchange for a review. However, the reviewers were encouraged to post on consumer-review websites only if they were positive, the “secret shopper” did not disclose that he or she had received a free or discounted product or service of the reviewed-business in the review, and the client knew the identity of the “secret shopper” prior to providing the product or service to be reviewed.

20

Competitor Claims • Swiss America Trading Corp. v. Regal Assets, LLC (C.D. Cal. Feb. 13, 2015) • Retailer relied on affiliate marketing program that included “ostensibly

independent consumer reviews” that disparaged competitor, and recommended Regal

• Failed to disclose material connection • Motion to dismiss denied

21

Use of Reviews with Commissionable Links or Business Relationship

• FTC Endorsement Guides: What People Are Asking

• Claims must be consistent with that of the retailer and must be truthful and good faith

• Disclose material connection

• Remember the 4P’s

– Prominence: big enough to read?

– Presentation: understandable?

– Placement: will it be seen?

– Proximity: close to the claim being modified

22

23

Don’t bury in about us or “Legal”

Don’t rely on “affiliate link” or “buy now”

24

FTC Sues Internet Marketers and Affiliate Networks Over Fake News Sites

• Summary of cases filed in suits against marketers and affiliate networks

– False and unsubstantiated weight-loss claims about acai berry weight-loss products

– Deceptive representation that affiliates’ pages were objective news sites

– Failure to adequately disclose affiliates’ connection to the merchant (i.e., earned commission for each sale)

25

FTC Sues Recognizable Companies and Individuals

– LeadClick/CoreLogic

– IMM Interactive Inc. (COPEAC) – Operated own sites plus recruited an network of affiliates to use sites

– Circa Direct LLC

– DLMX LLC

– Lead Expose Inc.

– Coulomb Media Inc.

– Charles Dunleavy

– Thou Lee

– Ricardo Jose Labra

– Beony International LLC

– Ambervine Marketing LLC

26

General FTC Allegations • Defendants operate websites that are meant to appear as if they belong

to legitimate news-gathering organizations, but in reality the sites are simply advertisements aimed at deceptively enticing consumers to buy the featured acai berry weight-loss products from other merchants

• Typical fake news sites have titles such as “News 6 News Alerts,” “Health News Health Alerts,” or “Health 5 Beat Health News”

• Often use investigative-sounding headlines; one such site proclaims “Acai Berry Diet Exposed: Miracle Diet or Scam?”

• The sub-headline reads, “As part of a new series: ‘Diet Trends: A Look at America’s Top Diets’ we examine consumer tips for dieting during a recession.”

• Article that follows purports to document a reporter’s first-hand experience with acai berry supplements – typically claiming to have lost 25 pounds in four weeks

27

FTC v. LeanSpa, LLC (D. Conn.) • Demonstrated LeadClick recruited the affiliates, had power to

approve or reject their marketing websites, paid the affiliates, purchased advertising space for them, and gave them feedback about the content of their sites.

• Court rejected claim that affiliate network was immune under Section 230 of the Communications Decency Act

• Summary Judgment granted in April 2015 against affiliate network and its parent - $11.9 million

28

FTC Settlements • Final Orders bar not only deceptive news

format, but also unsubstantiated health claims

• Require substantiation for non-health

claims (such as earnings claims)

• Requires pre-approval and monitoring of affiliate advertising

• Merchant settlements requires pre-approval of affiliate advertising content and monitoring

29

Central Coast Nutraceuticals Settlement

• Defendants have to monitor the activities of any affiliate marketers, including reviewing any marketing materials used to ensure that they comply with the order

• Defendants need to collect the following details for each affiliate and/or affiliate network used in any program:

– Name, physical address, phone number, email address and complete bank account information as to where payments are to be made

– Name under which it does business, state of incorporation, registered agent, contact details for an owner or manager

– Obligation on the affiliate network to maintain the details on the affiliate if identity of the affiliate is not provided

• Defendants need to review all materials created, location of all URLs and the range of dates that the marketing materials will run

30

• Defendants must promptly investigate any complaints to determine whether any affiliate or affiliate network is engaging in prohibited practices

• Upon determination that an affiliate or affiliate network is engaged in such conduct:

o Immediately halt the processing of any payments of charges generated

o Fully refund each consumer charged

o Immediately terminate

31

Central Coast Nutraceuticals Settlement

Recommendations • Affiliates should receive guidelines as to what information should be

contained in the advertising they disseminate

• Affiliates should also receive foreseeable types of claims or language that might be considered misleading and should not be used in ads

• Monitor affiliate advertising

• Investigate claims by consumers and competitors

• Take steps to stop continued publication of any deceptive statements

• Bar violators from participating in marketing programs and

32

Native Advertising

• Native advertising is an online advertising method in which the advertiser attempts to gain attention by providing content in the context of the user's experience

• Native ad formats match both the form and the function of the user experience in which it is placed

• Worried that consumers might be confused by native ads, the FTC conducted a workshop to help figure out if the agency should issue additional guidance to help advertisers and publishers steer clear of enforcement action

34

35

Use of Negative Option Marketing

• Use of negative option with low initial cost to generate sale/leads

• Risk of affiliates failing to clearly and conspicuously disclose terms and conditions

36

The Basics:

• The Four Ps

• Clear & Conspicuous disclosure of material offer terms

• Express, informed consent

• Simple cancellation mechanism

37

30 Day Free Trial Continuity Program Auto-renewal

Free Product – Just pay shipping and handling. Enrollment will automatically renew monthly at the end of the trial period for $19.99/month unless I cancel prior to the end of the 30 day trial period.

Automatic Shipment Terms. I will automatically receive a product each month for $19.99 plus shipping & handling unless I cancel.

Automatic Renewal Terms. My order will automatically renew every year at the then current rate at the end of the first period and each year thereafter.

38

FTC: ultimate test is whether information to be disclosed is actually conveyed to consumer

Clear & Conspicuous

• Proximity and placement

• Prominence

• Understandable language

• Repeat when necessary

39

Proximity and Placement

• As close as possible to triggering claim

• Same screen, no scrolling

• Unavoidable

• Prior to payment

40

In the Matter of Boardroom, Inc. (Florida, June 2013)

• To be Clear & Conspicuous, terms of a Negative Option offer must be “presented together in a distinct location, in a stand alone paragraph”

• Note – this applies offline as well as online

41

Clear & Prominent Requirement

Disclosure that is:

• Made clearly and conspicuously

• Most prominent of all offer terms

• Appears under heading that calls out negative option feature of offer

42

30 Day Free Trial with automatic monthly renewal

Additional disclosure requirements for free-to-pay conversion offers

Must disclose that Free Trial offer includes enrollment in negative option

• On initial representation o banner ad, link, subject line, etc.

• On order/enrollment page immediately adjacent to most prominent triggering representation

• In lesser of 16 point font or ½ size of FREE representation (Boardroom)

43

Negative Option Marketing • Snake Oil wants to provide its negative option disclosures in a pop up

or hyperlink

• Alternatively, Snake Oil wishes to provide the terms on the order page and use a pre-checked box indicating that the customer has agreed to the terms

44

For written offers (online and offline):

• Consumer must affirmatively select, sign or take action to accept negative offer terms

o No pre-checked box for acceptance of offer terms

• Offer terms disclosed in “direct proximity to order button or acceptance method before billing information is obtained

45

Disclosures that are integral to or inseparable from claim should not be communicated through link

• Any significant additional costs that consumer would not expect to incur should be disclosed on same page

• If space constraints require use of link, label to communicate specific information to be provided

o Not: “details,” “terms,” “learn more”

46

FTC - First Misimpression Theory

Dot com disclosures - “Don’t focus only on the order screen”

• Consumers may not relate disclosure on order screen to information viewed earlier

• Consumer may see initial online ad and then order offline without seeing order screen disclosure

47

QUESTIONS?

Thank you!

Andrew B. Lustigman [email protected]

Olshan Frome Wolosky LLP

KEY TERMS IN AFFILIATE MARKETING AGREEMENTS PART II OF DRAFTING AFFILIATE MARKETING

AGREEMENTS WEBINAR

PANELIST:

KAVON ADLI

THE INTERNET LAW GROUP

BEVERLY HILLS, CALIFORNIA

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

PRELIMINARY ISSUES

• Online and offline agreement forms

• Initial determination of which party will supply publisher terms

• Central battle over intermediary’s desire for “passthrough”

status as to alleged misconduct of other participants

network as against third-party advertiser and publisher

affiliate as against network and sub-affiliates

50

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

SPECIFIC CLAUSES

• CHOICE OF LAW

• CHOICE OF FORUM

• Common compromise: location of defending party

51

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

NON-CIRCUMVENT OR NON-SOLICITATION To disincentivize advertiser and publisher from cutting out intermediary

• Example (non-circumvent):

While an approved Publisher and for 180 days thereafter, Publisher

covenants that it shall not participate in any advertising relationship with

any Advertiser unless a previously existing business relationship between

Advertiser and Publisher can be demonstrated to the reasonable

satisfaction of the Network. In this connection, both parties agree and

acknowledge that if Publisher violates its obligations hereunder, in addition

to all other remedies available to Network, Publisher will forfeit any

outstanding commissions owed to it and Network will it be entitled to

liquidated damages in the amount of fifty percent (50%) of the gross

revenues resulting from transactions between Publisher and Advertiser.

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__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

INVALIDATING ELECTRONIC EXECUTION OF ALTERNATE TERMS

• Issue: parties to affiliate marketing relationships may inadvertently

agree to multiple sets conflicting agreements

• Example:

In the event a party is required to digitally sign or agree to additional

terms when using the other’s website or tracking platform, the parties

agree that such digital agreement is inconsequential and not binding as

it is the result of a technical requirement which cannot be altered to

view stats or access content. Therefore, such terms are to be

disregarded, and shall be superseded by this Agreement.

53

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

USE OF SITE CLAUSE

Example:

The Site allows Publishers to download creatives and

tracking URLs for specific offers within Network’s and its

Advertiser’s Program(s). Each Program will include the

following parameters, where applicable: Restrictions;

Description (the “Offer Description”); Payout; Category;

Landing Page (link to landing page); Link Types Allowed

(e.g., All, Email only, Search only); Incentives Allowed

(Yes/No); Region (e.g., U.S. only); From Lines (approved

from lines) and Subject Lines (approved subject lines)

(collectively the “Program Terms”). Compensation is

derived from completion of a specified event (“Event”)

identified in the applicable Program Terms, such as the

submission of a lead form or a partial lead form or a

sales transaction (collectively or individually an

“Action”), or other Event such as a click, click-through,

registration or impression. The Program Terms shall

supersede any inconsistent terms in these T’s and C’s.

The Program Terms will specify, among other things, the

Event as well as any additional terms affecting the

applicable Program. Where applicable, an Action

shall further be defined in the Offer Description. The

Network may change a Program at any time upon written

notice to Publisher. Unless otherwise specified in the Program Terms, the Network may change a

Program at any time upon written notice to Publisher.

Purpose. To:

• incorporate by reference into

publisher agreement program

terms on website that apply to

each offer

• explain how program terms

relate to publisher agreement

and possibly insertion orders

(how conflicts treated, etc.)

• define how compensation

works to the extent not

specified in program terms

54

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

PAYMENT TERMS

• who is responsible for tracking commissions owed

• when and how payment will be made

• minimum threshold for payment to be made (e.g., $50)

• time limitation (e.g., 30 days) on right to assert

underpayment claims or waived

• right to reduce payments in the event of invalid or

duplicate events, technical errors, tracking discrepancies

55

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

MARKETING GUIDELINES

Example:

If Publisher accepts a Program, Publisher agrees to

place that Program's advertising creative(s) (the

“Ad”), including, where applicable, the email subject

and from lines, lead generation opt-in copy, Can-

Spam Act disclosures and any other disclosures or

disclaimers provided therein, on Publisher’s Media in

accordance with the Program Terms. Publisher

shall display the Ad exactly as it appears and

is provided in creatives section for that

Program on the Site and will not alter it in any

way without written approval from Advertiser,

including without limitation, modifying

creatives, adding text links, editing text email

copy, popping Advertiser’s landing page for a

Program, or altering email subject or from

lines. Failure to adhere to these requirements may,

in addition to all other remedies available to

Company, result in termination of Publisher and

forfeiture of compensation to Publisher.

• Purpose: to specify

mandatory use and non-

modification of approved

marketing materials

• Pro: supports lead quality

and limits deceptive

advertising

• Con: exercise of control may

support vicarious liability

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__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

PUBLISHER COVENANTS

Example:

Publisher covenants that it shall not: (a) send unsolicited

commercial e-mail (spam) (i.e., it will send commercial

emails in connection with any Programs to only those email

addresses that have consented to receive such e-mails); (b)

attempt in any way to alter, modify, eliminate, conceal, or

otherwise render inoperable or ineffective the Site tags,

source codes, links, pixels, modules or other data provided

by or obtained from Company that allows Company to

measure ad performance and provide its service; (c) post

any content to newsgroups, chat rooms, bulletin boards,

social media or any other places regarding any Programs

unless expressly approved in writing by Company; (d)

promote via website or link to websites containing any

pornographic, software pirating or hacking, hate-

mongering, or otherwise illegal content; (e) use the Site or

conduct marketing in any manner other than that which is

specifically contemplated herein; (f) engage in any kind of

deceitful, misleading or other unfair trade practices, or

fraudulent or other unlawful practice when marketing any

Programs.

Purpose: general marketing

prohibitions, the violation of

which may result in pausing of

traffic, termination of publisher

and/or triggering right of

indemnity

57

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

FRAUDULENT OR UNAPPROVED MARKETING

Example (of remedies section, detailed prohibitions omitted):

If fraudulent or unapproved marketing is suspected, Company may

suspend the Publisher (or, if Publisher also maintains its own network

of Sub-Affiliates, the suspected Sub-Affiliate(s’) account and block all

traffic from Publisher or any Sub-Affiliate suspected of fraudulent or

unapproved marketing pending further investigation. In determining

whether fraudulent or unapproved marketing has occurred, lead to

action ratios that are materially above average for the type of

advertising (e.g., email, banners, pops or search) shall be considered

relevant. In the event of fraudulent or unapproved marketing,

Company need not return actual leads for all actions that Company

does not pay Publisher for. Failure by Publisher or its Sub-Affiliate to

cooperate to the extent reasonably requested by Company in an

investigation into suspected fraudulent or unapproved marketing shall

be considered determinative that fraudulent or unapproved

marketing has occurred. In the event of fraudulent or unapproved

marketing Company may withhold payment of Publisher’s commissions

for all events from the specific program with fraudulent or

unapproved marketing. In addition, in the event that Publisher has

receives payment for events occurring through fraudulent or

unapproved marketing, Company reserves the right to seek a credit

from future earnings or to obtain reimbursement from Publisher.

a. Includes more detailed

prohibitions to facilitate

imposition of remedies

b. Allows trends that are often

associated with fraud to be

acted upon in the absence of

proof of actual fraud

Tip: specify fraud presumed if

affiliate or sub-affiliate does not

reasonably cooperate with

investigation

58

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THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

INDEMNITY CLAUSE • Goal: To ensure that publisher will be held financially responsible if it or its sub-

affiliate causes network to be sued and/or held liable.

• Judgment call as to whether to start with one-sided or mutual clause. I prefer to

start with one-sided version and revise if there is push back. Primary reason:

Cal. Bus & Prof. Code Section 17529.5 claims have developed as a major risk

area for email marketing. Under statute, publisher and advertiser are each

strictly liable for violations of law and acts and omissions of both parties may

impact liability, so standard indemnity clause that makes each party responsible

for their own violations of law or their own acts or omissions may not be effective.

• If affiliate does not accept one-sided indemnity clause, be specific in identifying

what triggers indemnity claims. Example: since advertisers typically supply list of

required “from” and “subject” lines, specify that affiliate must indemnify for all

email marketing-related liability, except to the extent that claim relates

exclusively to alleged deceptiveness in advertiser-approved “from” or “subject”

line, in which case advertiser has indemnity obligation.

59

__________________________________________________________________________________________________________________

THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

TERMINATION

Example:

In the event of a breach of the Agreement or suspected fraudulent or

unapproved marketing, the Company reserves the right, in its sole and absolute

discretion, to terminate a Publisher, Sub-Affiliate or Program and remove any

advertisements at any time, upon written notice to Publisher. Termination notice

will be provided via e-mail and will be effective immediately, meaning, among

other things, that Publisher must immediately cease all advertising activities. In

all other cases, the Company shall provide the Publisher seventy-two (72)

business hours written notice of termination. All moneys then due to Publisher,

subject to the terms provided herein, will be paid during the next billing cycle.

The representations, warranties and obligations contained in sections __ - __

shall survive termination of this Agreement. In addition, all payment obligations

accruing prior to the termination date shall survive until fully performed.

60

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THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

LIMITATION OF LIABILITY

Example:

LIMITATION OF LIABILITY; DISCLAIMER OF WARRANTY

EXCEPT AS PROVIDED IN SECTION __ OF THESE T’S AND C’S [THE

INDEMITY CLAUSE], IN NO EVENT SHALL COMPANY OR ANY

PUBLISHER BE LIABLE TO THE OTHER FOR ANY LOST PROFITS OR

ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE

OR OTHER INDIRECT DAMAGES OF ANY NATURE, FOR ANY

REASON, WHETHER BASED ON BREACH OF CONTRACT, TORT

(INCLUDING NEGLIGENCE), OR OTHERWISE AND WHETHER OR

NOT EITHER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH

DAMAGES. THE INFORMATION, CONTENT AND SERVICES ON THE

SITE ARE PROVIDED ON AN “AS IS” BASIS. PUBLISHER USES THE SITE

AND RUNS THE PROGRAMS AT ITS OWN RISK. OTHER THAN AS

EXPRESSLY SET FORTH IN THESE T’S AND C’S, THE COMPANY

DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND,

EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED

WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A

PARTICULAR PURPOSE AND WARRANTY OF NON-INFRINGEMENT.

THE COMPANY MAKES NO REPRESENTATIONS AND WARRANTIES

WHATSOEVER, AND DISCLAIMS ANY RESPONSIBILITY AND LIABILITY,

REGARDING THE CONTENT OR NATURE OF ANY AD OR PROGRAM

MADE AVAILABLE ON THE SITE, OR ANY PRODUCT OR SERVICE

ADVERTISED IN CONNECTION THEREWITH.

a. Goal: To limit the scope of client’s

potential liability as provided in

agreement, and avoid consequential

damages and implied warranties that

may incentivize and/or magnify

disputes in potentially unpredictable

ways

b. Practice pointers:

i. Expressly exclude indemnity claims

from limitation of liability to ensure

limitation of liability clause does not

override right of indemnity

ii. Be aware of state law limitations

and format requirements

61

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THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

ADDITIONAL MISCELLANEOUS CLAUSES

• License: revocable, non-transferrable, non-exclusive license to

use site and site data solely for the purpose of marketing or

promoting the programs

• Nature of the relationship: publisher acting as independent

contractor only and not partner, joint venturer or agent

• Integration clause referencing main agreement, program terms

and IO which may include volume parameters and other terms

• Non-waiver, notice and “no construction against drafter”

provisions

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THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

THANK YOU! QUESTIONS:

Kavon Adli

The Internet Law Group

9107 Wilshire Boulevard, Suite 450

Beverly Hills, CA 90210

(310) 910-1496

[email protected]

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THE INTERNET LAW GROUP WWW.THEINTERNETLAWGROUP.COM

© Ifrah PLLC. Proprietary and Confidential. / (202) 912-4823 / ifrahlaw.com

Part III: Strategies For Streamlined Negotiations And Resolving Contract Disputes

(202) 524-4140

Drafting Affiliate Marketing Agreements: Ensuring Compliance With Advertising, IP And Internet Marketing Laws

Rachel Hirsch, Esq., Ifrah Law

KNOW YOUR OPPONENT

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Do Your Research

• Social Media • Blogs • Industry Connections • BBB Ratings • Public Filings • Choice of Counsel

Negotiate With The Right Person

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KNOW YOURSELF

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Are You In A Position to Negotiate?

Who Holds The Bargaining Power?

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PROTECT YOURSELF

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Who Carries The Risk?

Advertiser Affiliate

Advertiser/Affiliate Third Parties

Advertiser/Affiliate Private Litigants

Advertiser/Affiliate Government

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PROTECT YOURSELF

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Advertiser v. Affiliate

Representations/Warranties – Material Breaches Indemnification – Mutual/Unilateral Limitation of Liability – Damages Cap

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PROTECT YOURSELF

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Advertiser/Affiliate v. Third Parties

Is There An (Unknown) Third Person In Your Relationship?

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PROTECT YOURSELF

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Advertiser/Affiliate v. Private Litigants

It’s All About Control:

Messenger Message Forum Damages

REMEMBER! Private Contracts Do Not Prevent Lawsuits!

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PROTECT YOURSELF

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Advertiser/Affiliate v. Government

The Law Matters! Agency Principles – e.g., FTC Guidelines/TCPA

Accomplice Liability – e.g., TSR

REMEMBER! Your Private Contracts May Not Matter

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PROTECT YOURSELF

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Insurance: Are You Covered?

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KNOW YOUR OPTIONS

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Dispute Resolution: What Does Your Contract Say? Forum Selection Clause Governing Law Class Action Waivers Methods of Resolution:

• Negotiation • Mediation • Arbitration • Litigation

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KNOW YOUR OPTIONS

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Mediation • Promotes Communication And Cooperation • Provides Independent Basis to Resolve Disputes • Reduces Hostility • Preserves Relationships • Tailors Agreements To Meet Your Needs • Avoids The Uncertainty, Time, Cost, And Stress Of Going To Trial • Provides Flexibility In A Voluntary, Informal Setting

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KNOW YOUR OPTIONS

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Arbitration

Voluntary Private Less Formal Less Costly (Than Litigation)

Trial Rights Preserved (If Non-Binding)

REMEMBER! Arbitration Clauses Need To Be Well-Crafted.

Evidentiary Presentation

Choice Of Arbitrator Final Decision

Enforceable In Court

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KNOW YOUR OPTIONS

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

LITIGATION

Involuntary Formal/Structured Evidentiary Presentation Procedural Safeguards

Attorneys’ Fees/Costs

A Good Negotiator Will Not Turn To Litigation As a First Resort.

Public/Open Proceedings Law-Based Decision Final and Binding Decision Right Of Appeal

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COMMON AFFILIATE DISPUTES – CASE STUDY #1 – PAYMENT DISPUTES

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

“Per Click” “Per Lead”

“Per Sale/Action Basis”

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COMMON AFFILIATE DISPUTES – CASE STUDY #2 – CLICK FRAUD

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Sample Language:

Publisher Accounts Are Flagged That:

• Have Click-Through Rates That Are Much Higher Than Industry Averages And Where Solid Justification Is Not Evident To The Reasonable Satisfaction Of Advertiser;

• Have ONLY Click Programs Generating Clicks With No Indication By

Site Traffic That It Can Sustain The Clicks Reported; • Have Shown Fraudulent Leads As Determined By The Advertisers; • Have Much Higher Conversions Per Click Than Industry Averages And

Where Solid Justification Is Not Evident To The Reasonable Satisfaction Of Advertiser; Or

• Use Fake Redirects, Automated Software, And/Or Fraud To Generate

Events From the Programs.

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COMMON AFFILIATE DISPUTES – CASE STUDY #3 – IP INFRINGEMENT

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com

Trademark Infringement: Utilizing Someone Else’s Trademark IN: • Keyword Searches • Online Banner Ads Copyright Infringement – • Copyrighted Material Is NOT In The Public Domain Merely

Because It is Placed on the Internet • Material May Be Copyrighted Even If It Does Not Display a

Copyright Mark.

Who Is Responsible Under The Terms Of The Affiliate Contract For Violations Of A Third Party’s IP Rights?

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AVOIDING AND WINNING AFFILIATE DISPUTES

Never Work With An Affiliate Without A Contract – Sign-Up Terms Don’t Count!

Institute Best Practices And Hold Your Affiliates Accountable.

Conduct Periodic Audits, But Don’t Micromanage.

Maintain Good Record-Keeping.

Recognize The Limits Of The Relationship – Use Your Termination Clauses Wisely!

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com 80

Ifrah PLLC | 1717 Pennsylvania Avenue, N.W., Ste. 650, Washington, D.C. 20006 | (202) 524-4140 | ifrahlaw.com 81