Florida Attorney General and Telemarketer Reach Agreement on Consumer Data-Based Due Diligence

State of Florida v. Vici Marketing, LLC, 6th Cir., Case No. 09-6306c1
April 8, 2009

AG Complaint Alleged:

Vici Marketing, LLC ("Vici") obtained and used numerous consumer data leads without first performing due diligence as to the original source of, and the legality of telemarketing to, the data.
The data included consumers’ personal and credit card information, which was initially made available through a data broker who had obtained the records from a former employee of Certegy Check Services, Inc. (that employee has since been convicted of data theft).
It was alleged that Vici used the data for a telemarketing operation employing deceptive marketing methods aimed at enrolling consumers in third-party membership programs. Under this arrangement, monthly fees were billed unless consumers cancelled.

Consent Judgment:

Vici agreed to pay $350,000 to reimburse the Florida AG for its investigative costs associated with the matter and for ongoing and future investigation and enforcement efforts.
Vici is permanently prohibited from acquiring or using data without due diligence, using data of unlawful or questionable origin, accessing and using data for consumer telemarketing without background due diligence, and unlawful telemarketing.

New Industry Standard Set:

According to the Florida AG, the judgment sets a new standard for telemarketers by requiring them to ascertain the legitimacy of their data sources through due diligence prior to the use of data for telemarketing purposes.

Summary:

If the terms of the injunction are violated, Vici could be subject to a $1 million civil penalty.
The Florida AG continues to closely monitor the Internet, mobile and telemarketing space.
Businesses in the industry should make it a priority to stay abreast of local and national marketing developments as the regulatory landscape continues to evolve.

Appeals Court Allows Keyword Advertising Trademark Lawsuit to Proceed

Rescuecom Corp. v. Google Inc., 2009 WL 875447 (2d Cir. April 3, 2009)

Facts:

Rescuecom is a national computer service franchising company offering on-site computer services and sales.
Rescuecom conducts a great deal of business over the Internet and receives between 17,000 and 30,000 visitors to its website each month.
“Rescuecom" has been a registered trademark since 1998.
The company uses web-based advertising services, including those offered by Google.
Google operates a search engine that responds to search requests in two (2) ways: results are listed in “descending relevance” in relation to search terms based on Google’s proprietary algorithms; and by “context-based advertising.”
Google uses at least two (2) programs to offer “context-based” links: AdWords (allows advertisers to purchase terms or keywords) and Keyword Suggestion Tool (a program that recommends keywords to advertisers for purchase).
Once an advertiser purchases keywords, searches employing those terms will reveal the subject keyword advertisements as “sponsored links” on the right side of the search results page.

Allegations:

Rescuecom claimed that a Google search for the term “Rescuecom” revealed links to websites of its competitors in a manner likely to cause the searcher to mistakenly believe that a competitor’s advertisement and website link is sponsored by, endorsed by, approved by or affiliated with Rescuecom.
Accordingly, Rescuecom alleged that the appearance of a competitor’s ad and linked in response to a search for the term “Recuecom” is likely to cause trademark confusion as to affiliation, origin, sponsorship or approval of service.
Further, Rescuecom alleged that through its Keyword Suggestion Tool, Google recommended that competitors of Rescuecom purchase the Rescuecom trademark as a keyword.

The Lower Court:

Compelled by the decision in 1-800 Contacts, Inc. v. When U.com, Inc., 414 F.3d 400 (2d Cir. 2005), the district court concluded that Google’s allegedly-infringing activity did not involve the use of Rescuecom’s mark in commerce (an essential element to establish an action under the Lanham Act).
In so holding, the district court reasoned that competitors’ advertisements triggered by Google’s programs did not actually exhibit Rescuecom’s trademark. Because the use of the trademark was “internal,” it was found not to be a “use in commerce” within the meaning of the Lanham Act.

Court of Appeals:

The court disagreed with the lower court’s interpretation of the 1-800 Contacts decision and found that Rescuecom adequately plead a case for use in commerce.
The court distinguished the 1-800 Contacts case as follows:
1. In the 1-800 Contacts decision, the court emphasized that the defendant made no use whatsoever of the plaintiff’s trademark. Here, however, Google is recommending and selling to its advertisers the Rescuecom trademark.
2. Further, in contrast to 1-800 Contacts where the defendant did not “use or display” or sell trademarks as search terms to its advertisers, in the case at issue, Google displays, offers and sells Rescuecom’s mark to its customers seeking advertising services.
3. The court also pointed out that Google encourages the purchase of Rescuecom’s trademark via its Keyword Suggestion Tool.

Summary:

While the court vacated the dismissal of the action against Google, it specifically pointed out that it cannot say whether or not Rescuecom can prove that Google’s AdWords program causes likelihood of confusion or mistake.
This decision is of great import in that it appears to place the Second Circuit in alignment with the rest of the country in finding that trademark use in keyword advertising is an actionable "use in commerce."

Internet Gambling Company - PartyGaming - Forfeits $105 Million

U.S. Attorney’s Office, Southern District of New York
April 7, 2009

Non-Prosecution Agreement:

The U.S. Attorney’s Office entered into a non-prosecution agreement with PartyGaming (PLC) (hereinafter “PartyGaming”).
Under the agreement, PartyGaming agreed to forfeit $105 Million --comprising some of the proceeds of its U.S. Internet gambling business.
Because PartyGaming agreed to cooperate with the investigation, the U.S. Attorney’s Office is not seeking criminal prosecution of PartyGaming, or any of its subsidiaries, for the illegal Internet gambling services provided to customers in the U.S.

Some Background:
According to the U.S. Attorney’s Office:

PartyGaming is incorporated in Gibraltar and publicly traded on the London Stock Exchange under the ticker symbol "PRTY."
The Internet gambling company offers web-based real-money and free play games, such as poker and other casino gambling.
Despite the fact that Internet real-money gambling is illegal in the U.S., PartyGaming made such gaming available to players in the U.S. from 1997 through October, 2006.
In 2005, Americans represented 88% of PartyGaming’s customers.
PartyGaming attempted to disguise payment of winnings to U.S. customers.
PartyGaming has since acknowledged that this conduct violated criminal laws under Title 18 of the United States Code.

Summary:

PartyGaming’s business of real-money Internet gambling in the U.S. was clearly illegal.
Companies that offer such services must be aware of the location of its client base.
The founder and former officer and director of PartyGaming pleaded guilty to one count of transmitting bets and wagering information in interstate commerce, and is facing a maximum sentence of up to two (2) years in prison and a fine of $250,000

DirecTV and Comcast to Pay $3.21 Million to Settle “Do Not Call” Violations

Federal Trade Commission - April 16, 2009

According to the FTC:

Satellite T.V. provider DirecTV, Inc. and cable company Comcast Corp., agreed to pay a combined $ 3.21 Million to settle separate Federal Trade Commission ("FTC") charges alleging violations of various “Do Not Call” provisions of the Amended Telemarketing Sales Rule (the “ATSR”).

Specific Claims against DirecTV:

The FTC alleged that DirecTV had violated the ATSR, as well as a 2005 federal court order, by causing one of its telemarketers, Voicecast Systems (operating under the trade name InTouch Solutions), and two (2) of its principals, to place more than a million calls delivering pre-recorded messages to consumers.
According to the FTC, InTouch contacted consumers who had previously asked to be placed on the “Do Not Call” list.
Based on these calls, the FTC charged DirecTV and InTouch with violating two (2) provisions of the ATSR.

Specific Claims against Comcast:

The FTC alleged that Comcast was responsible for causing its in-house call centers and outside telemarketing contractors to telemarket Comcast’s cable television, Internet, and Voice over Internet Protocol (VoIP) telephone services.
According to the FTC, more than 900,000 calls were placed to consumers who had previously requested that the company stop calling them.
The FTC claimed that Comcast did not implement a TSR-compliant “Do Not Call” program.
Comcast was not charged, however, with calling consumers whose numbers are on the National “Do Not Call” Registry.

Summary

The FTC has indicated that compliance with the National “Do Not Call” Registry alone is not enough -- companies must also ensure that they honor consumers’ company-specific “Do Not Call” requests.

Use of “Citybank” Domain Name Violates ACPA

Citigroup, Inc. v. Shui, 2009 WL 483145 (E.D. Va. Feb. 24, 2009)

Facts:

Citigroup, Inc. provides financial services in the United States and throughout the world.
It is the registrant and owner of the United States trademarks CITI and CITIBANK (since 1981 and1960, respectively).
The marks have also been registered in approximately 200 countries worldwide.
Citigroup operates its online business through citi.com, citibank.com and citibankonline.com.
Defendant, Shui, is a resident of China and the registrant of the domain name, citybank.org.
In late 1997, Shui began using the citybank.org website to market financial services to its visitors.
Upon visiting the site, the following link options would appear on the landing page: “Citibank Student,” “Citibank Student Credit Card” and “Citibank Visa.”
Clicking on one of these links would redirect the visitor to either a relevant third-party vendor or to another page within the citybank.org website.
Defendant received compensation for each “click-through” from defendant’s website to that of a third-party vendor.
Plaintiff never granted defendant permission to use the marks CITI or CITIBANK.

Action:

Plaintiff brought an action under the Anticybersquatting Consumer Protection Act (the “ACPA”) challenging defendant’s use of the domain name, citybank.org.
To establish a violation under the ACPA, plaintiff must show: (1) that defendant has a bad faith intent to profit from using the subject domain name; and (2) that the domain name at issue is identical or confusingly similar to, or dilutive of, plaintiff’s distinctive or famous mark.
The ACPA provides nine (9) non-exclusive factors that support a finding of bad faith.

Court:

The court found that defendant used the disputed domain name in bad faith and listed many reasons in support of its decision, including that: (1) defendant had no trademark or intellectual property rights in the domain name; (2) the domain name was the legal name of Citibank with one change -- merely replacing the “i” with “y”; and (3) defendant clearly intended to confuse, mislead and/or divert traffic away from plaintiff’s official site to its own in an effort to collect “click-through” compensation.
The court reviewed seven (7) factors established by the Fourth Circuit and found that the CITI marks are distinctive because plaintiff has been using the CITIBANK mark for over 50 years in affiliation with its financial services, and that the CITI marks are registered in over 200 countries.
The court held that the citybank.org domain name is identical or confusingly similar to, or dilutive of, plaintiff’s distinctive or famous mark.

Summary:

In finding that defendant’s actions were “sufficiently willful, deliberate, and performed in bad faith,” the court awarded plaintiff a permanent injunction against defendant, the maximum statutory damages award of $100,000 and attorneys’ fees.
It is surprising that the case proceeded this far -- a “cease and desist” letter should have put an end to the matter much earlier.

U.S. Supreme Court Refuses to Consider State Anti-Spam Law -- Denies Petition for Writ of Certiorari

Virginia v. Jaynes, __U.S.__, 129 S. Ct. 1670 (Mar. 30, 2008)

The U.S. Supreme Court:

Without comment, the Supreme Court declined to hear the State of Virginia’s petition for review of the decision overturning the constitutionality of its Computer Crimes Act (the "Act").
The Act, aimed at restricting the sending of unsolicited e-mail, was reported to be one of the toughest laws of its kind in the nation.
The Court’s inaction essentially upheld the Virginia Supreme Court’s opinion that the statute is unconstitutionally overbroad and violates First Amendment rights (see summary of decision below).

Back in September, 2008:

We reported on the Virginia State Court decision overturning the State anti-spam law and a related conviction under the Act.

The Law:

The Virginia Act is considered to be, in most respects, the State equivalent of the federal CAN-SPAM Act, but differs in that it affords only criminal penalties for its violation.
The law provides in pertinent part:
Any person who: 1. Uses a computer or computer network with the intent to falsify or forge electronic mail transmission information or other routing information in any manner in connection with the transmission of unsolicited bulk electronic mail through or into the computer network of an electronic mail service provider or its subscribers . . . is guilty of a Class 1 misdemeanor.

The Underlying Facts:

On three (3) separate occasions, Jeremy Jaynes used computers, Internet routers and servers, each time sending over 10,000 unsolicited commercial e-mail messages to subscribers of America Online, Inc. (“AOL”).
Jaynes falsified the e-mail header and routing information before sending the subject e-mail messages to recipients.
At Jaynes’ home, police found compact discs containing over 176 million e-mail addresses and 1.3 billion e-mail user names.
In 2003, Jeremy Jaynes was the first person indicted under the newly-enacted Virginia State anti-spam law.
Jaynes was convicted in 2004 for sending tens of thousands of unsolicited commercial e-mail through AOL servers in Virginia, and was later sentenced to nine (9) years in prison.
Just six (6) months ago, the Virginia Supreme Court upheld the State anti-spam law by a 4-3 margin. Jaynes’ attorneys moved the court to reconsider.
The court reversed itself.

The Virginia Supreme Court:

The court struck down the law, holding that it is “unconstitutionally overbroad on its face because it prohibits the anonymous transmission of all unsolicited bulk e-mails including those containing political, religious or other speech protected by the First Amendment . . . .”
Viewed under the “strict scrutiny” standard, the court found that the statute is not narrowly tailored to protect the compelling interests advanced by the State Constitution.

Summary:

The overturned law applied to the “falsification” of e-mail header information, which serves to include those who send unsolicited e-mail, as well as those using a “fake” name or pseudonym.
In addition, the law regulates both commercial and non-commercial e-mail – which could, by definition, cover and apply to legitimate e-mail messages in violation of the First Amendment.

New Law Coming Soon?

There have been reports that Virginia State Attorney General Bill Mims is planning to present a new anti-spam law in the next General Assembly that will be tailored to address the constitutional concerns detailed by the courts.