Managing Legal Risks in Affiliate Marketing

Panel Notes

February 25, 2008

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five experts. one panel. no coincidence.

Don Mathis, PresidentAzoogle Ads

Steven Richter, MediaBreakaway

Jeffrey Greenbaum, Frankfurt Kurnit Klein & Selz

Bennet Kelley, Internet Law Center

Eileen Harrington, Deputy Director, FTC’s Bureau of Consumer Protection

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Don MathisPresident

Jeffrey GreenbaumPartner

Steven RichterPresident

Eileen Harrington, Deputy Director, Federal Trade Commission

Bureau of Consumer Protection

Bennet Kelley Founder

Keyword Search Liability

Five Facts

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Keyword Advertising

1. Commerce. Online Search generated $22.5MM in revenue per day in first half of 2007

2. Use in Commerce. Is Keyword Search a “use in commerce” under Lanham Act? Majority view – yes.

3. Confusion. Can you use competitor’s trademark?

Part 1: 9TH Circuit, others follows “initial interest confusion” doctrine (IIC Doctrine) to find injury under Lanham Act. Use is akin to a bait and switch.

4. Meaningful Confusion. Can you use competitor’s trademark?

Part 2: Other courts reject doctrine as not legally cognizable injury. Use is more akin to supermarket placing competing brands side by side.

5. Trademark Usage. No liability if trademark not used in ad text in jurisdictions not adopting the IIC Doctrine.

CAN-SPAM Act

Five Facts

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CAN-SPAM Act

1. Multiple Domains. Not deceptive to use multiple domains or non-corporate address if it can be looked up using Who Is; except where domain itself is misleading.

2. IASP Loophole. Private right of action for Internet Access Service Providers requires a demonstration of substantial injury, closing efforts by anti-spam advocates to exploit this as potential loophole to bring civil actions.

3. Liability for Affiliates. No Strict Liability for actions of Affiliates . . . yet.

4. Preemption. Courts are narrowly construing the preemption exception for state laws regulating fraud and deception so as not to defeat intent of the Act.

5. Wireless. 2004 FCC Rules apply to wireless communications. Opt-in standard with specific disclosure requirements.

Enforcement Initiatives

Five Facts

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Enforcement Initiatives

1. Data Security. Inadequate Security can constitute “unfair” practice under FTC Act. Commission has brought 14 law enforcement actions against companies that have failed to take reasonable measures to keep consumer information secure.

2. The Cost of Free. Consent decrees require disclaimers on “Free” offers be in the same color, font, and size, within close proximity to each representation and disclose monetary and non-monetary obligations.

3. Behavioral Targeting Guidelines. Behavioral Targeting Guidelines. Calls for a clear, concise, consumer-friendly, and prominent statement that data about consumers activities online is being collected at the site for use in providing targeted advertising and permit opt-out by consumers.

4. Online Gambling. Advertisers of online gambling have accessory liability. Google, Microsoft & Yahoo paid $31.5 million in settlement with Justice Department.

5. FTC “Affiliate” Marketing Rules. Refers to Affiliate in the legal sense and requires providing opt-out option for sharing of financial eligibility information under Fair Credit Reporting Act.

Marketing and Social Networking Sites

Five Facts

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Marketing and Social Networking Sites

1. Penetration. One in four Americans are on MySpace; Facebook has 60MM active users

2. 180% Growth. Ad spending is projected to rise from $900MM to $2.5BB between 2007-2011.

3. Remember COPPA. Fifteen percent of MySpace users are under 18.

4. Remember Beacon. Be sensitive to privacy concerns.

5. Follow Site Rules. Sites are sensitive to abusive advertising. Make affiliates sign addendum agreeing to best practices. Remember that you are part of a community.

Appendix

Speaker Bio’s

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Eileen Harrington – FTCEileen Harrington is Deputy Director of the Federal Trade Commission’s Bureau of Consumer Protection.  The Bureau of Consumer Protection’s mandate is to protect consumers from deceptive, unfair, or fraudulent practices. 

Ms. Harrington joined the FTC as Assistant Director for Marketing Practices in 1987, and served as Associate Director for Marketing Practices from 1991 to 2005.  In that role, she led the Commission’s consumer fraud law enforcement effort, and oversaw some of its most visible regulatory work, including the National Do Not Call initiative and implementation of the CAN-SPAM Act.  In 1997, President Clinton conferred on Ms. Harrington the rank of Distinguished Executive in the Senior Executive Service for "sustained extraordinary accomplishments" in organizing and leading interagency enforcement, education and regulatory efforts to halt consumer fraud.   In 2004, she was awarded a Service to America Medal for her work on the National Do Not Call Registry.

Eileen Harrington

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Steven Richter – MediaBreakaway

Steven is a highly recognized Internet Law Attorney and has served as General Counsel to many Internet-based businesses for many years. He frequently speaks at internet related industry events and has published articles pertaining to Internet law, civil and criminal tax controversy, accounting malpractice, and litigation. Since his arrival as President and General Counsel at Media Breakaway LLC, the home of CPAEmpire.com, the company has posted record breaking revenues and profits. Steven Richter

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Don Mathis – AzoogleAds

Don Mathis is the President and Chief Operating Officer of AzoogleAds, Inc., a leading online performance-based advertising network backed by TA Associates and The Stripes Group. Don's prior general management experience includes serving as Chief Operating Officer of the online fantasy sports company Small World Media, where he helped develop the company's web properties into being consistently ranked among the very top "stickiest" sites on the web, and co-led the sale of the company to Vulcan Ventures. Earlier, Don was Chief Financial Officer at FHI, an operational restructuring advisor for the noted turnaround firm AlixPartners, LLC, and a strategy consultant with McKinsey & Company.

Don graduated with honors from Harvard Business School (MBA) and Vassar College (BA in Asian Studies). He serves on the board of directors of Mystic Entertainment Corporation (Mystic, CT) and on the advisory board of Affinity Labs (San Francisco, CA).

Don Mathis

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Jeffrey A. Greenbaum - Frankfurt, Kurnit, Klein & Selz

Jeffrey A. Greenbaum counsels advertisers, media companies, and agencies on advertising, marketing, branded entertainment, and intellectual property matters. He was chair of the New York City Bar's Committee on Consumer Affairs, and has chaired its annual "Hot Topics in Advertising“ program. He recently spoke at the FTC's "Rebate Debate" workshop.

Contact: Frankfurt Kurnit Klein & Selz, PC 488 Madison Avenue New York, New York 10022 Tele: (212) 826-5525 Fax: (347) 438-2104 E-mail: jgreenbaum@fkks.com

Jeffrey A. Greenbaum

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Bennet Kelley – Internet Law Center

Bennet Kelley is founder of the Internet Law Center and has been at the center of many of the hottest Internet issues over the past decade including spam, spyware, privacy, behavioral targeting and domain tasting. Prior to founding the Internet Law Center, Bennet was Assistant General Counsel, Director of Governmental Affairs & Privacy for ValueClick. 

Bennet 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.

Bennet graduated magna cum laude from Georgetown University Law Center and received a B.S. in Political Science with honors from The American University.

Contact: Internet Law Center, 233 Wilshire Blvd, Suite 400 Santa Monica, CA 90401 310-452-0401 bkelley@internetlawcenter.net

Bennet Kelley

Additional Resources

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Additional Resources

Key Word Search Liability

• Technology & Marketing Law Bloghttp://blog.ericgoldman.org/archives/2007/08/american_airlin.htm

• Authority Supporting Initial Interest Confusion

• Brookfield Communications Inc. v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999)

• Thomas McCarthy, McCarthy on Trademarks & Unfair Competition § 23:26 (4th ed. 2003)

• Authority Rejecting Initial Interest Confusion Hasbro Inc. v. Clue Computing, Inc., 232 F.3d

1, 2 (1st Cir. 2000). J.G. Wentworth SSC Ltd v. Settlement

Funding LLC, No. 06-0597 (E.D. Pa. Jan. 4, 2007)

FragranceNet.com, Inc. v. FragranceX.com, et al. No. 06-CV-2225 (JFB)(ART)(E.D.N.Y. June 12, 2007)

CAN-SPAM Act

• IASP Private Right of Action• Gordon v. Virtumundo, Inc., No. 06-0204-JCC

(W.D. Wash. May 15, 2007)

• No Strict Liability• US v. Cyberheat, 2007 U.S. Dist. LEXIS

15448 (N.D. Ariz. 2007)

• Multiple Domain Names• Kleffman v. Vonage Holding Corp., Case No.

CV 07-2406GAFJWJX (C.D. Cal. May 23, 2007); Gordon v. Virtumundo, Inc., Case No. 06-0204-JCC (W.D. Wash. May 15, 2007)

• U.S v. Kilbride, 507 F. Supp. 2nd 1051 (D. AZ. Aug. 24, 2007)

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Additional Resources (con’t)Enforcement

• FTC Adteractive Settlementhttp://www.ftc.gov/opa/2007/11/free.shtm

• FTC Behavioral Targeting Pagehttp://www.ftc.gov/bcp/workshops/ehavioral/index.shtml

• FTC Marketing Guidance Documentshttp://www.ftc.gov/bcp/menus/resources/guidance.shtm

• FTC “Affiliate Marketing” Ruleshttp://www.ftc.gov/opa/2007/10/affiliate.shtm

Social Networks

Articles on Social Network Marketinghttp://www.relativitycorp.com/socialnetworkmarketing/

Ethics in Social Network Marketinghttp://www.articledashboard.com/Article/Ethics-in-Social-Network-Marketing/411491