Oprah, Dr. Oz Sue for Alleged Unlawful Use of Names, Pictures, Voices and Identities

Dr. Mehmet Oz v. FWM Labs., 09-CV-7297 (S.D.N.Y. August 19, 2009)

Complaint:

Plaintiffs include Dr. Mehmet Oz; Zo Co. I, LLC; OW Licensing Company, LLC; and Harpo, Inc.
Dr. Oz is a frequent guest on The Oprah Winfrey Show.
Defendants consist of more than 50 entities in the business of selling, importing and/or marketing various products including dietary supplements, cosmetics and "over-the-counter" drugs.
According to the complaint, plaintiffs alleged that defendants capitalized on plaintiffs’ reputation and intellectual property rights to entice customers into ordering their products by falsely representing that they had been tested or recommended by Oprah Winfrey and/or Dr. Oz.
Specifically, plaintiffs alleged that "defendants are fabricating quotes or falsely purporting to speak in Dr. Oz’s and/or Ms. Winfrey’s voice about specific brands and products that neither of them has endorsed."
By virtue of this complaint, plaintiffs are seeking to put an end to the alleged use of the names, pictures, voices and identities of Dr. Oz and Ms. Winfrey, as well as the trademarks and copyrighted works of plaintiff companies in connection with defendants’ marketing and sales of particular products.
Plaintiffs have alleged various causes of action including a violation of their statutory rights of privacy and publicity, claims for trademark infringement, false endorsement, sponsorship or affiliation, dilution under the Lanham Act, copyright infringement, false advertising and cybersquatting.
Plaintiffs are seeking injunctive relief, damages (both exemplary and punitive) and attorneys' fees.

Summary:

Plaintiffs alleged that defendants unlawfully used their names and intellectual property within metatags, by purchasing keywords for sponsored links, and through Internet and behavioral advertising methods.
As the complaint involves companies whose Internet marketing strategies have come into question, we will be following closely any procedural and/or substantive action taken.

In a related matter . . .

Illinois Attorney General Files Lawsuits Against Suppliers and Marketer for False Endorsement Claims
August 19, 2009

AG Filed Consumer Fraud Lawsuits:

Attorney General Lisa Madigan filed suit against three (3) suppliers and one (1) local affiliate marketer of acai berry products.
Regarding the marketing company, the complaint alleged that it lured customers with "free" offers through Internet marketing campaigns and then charged their credit cards prematurely.
The gist of the complaint against the affiliate marketer is that it allegedly misled consumers through false advertising and false endorsements.
The AG’s office is seeking a permanent injunction to put a stop to the marketing campaign.
Madigan is also asking the court for restitution and civil penalties of $50,000 for alleged violations of the Illinois Consumer Fraud and Deceptive Business Practices Act.

FTC and Debit Card Company Settle Payday Loan Complaint

Federal Trade Commission Press Release
August 20, 2009

FTC Allegations:

According to the FTC, consumers who applied for a payday loan online were charged a fee for a debit card that they unknowingly ordered.
The debit card company, VirtualWorks, LLC, sold its cards through the payday loan marketer, Swish Marketing, Inc., which is also facing separate FTC charges.
The FTC press release indicates that VirtualWorks sold debit cards through Swish Marketing’s websites.
The Swish Marketing websites enabled consumers to fill out an online payday loan application.
At many of these sites, upon submitting the first part of the payday loan application, advertisements would then appear on the next screen. The consumer could either select "Yes" or "No" regarding each featured non-payday loan offer.
"No" was pre-checked for three (3) of the products and "Yes" was pre-checked for the VirtualWorks-sponsored debit card. Appearing below the "Submit" button, was a disclosure in smaller print explaining that consumers would be providing consent for their bank account to be debited in connection with signing up for the debit card.
Consumers who did not change the debit card offer election to "No" and went ahead and clicked the button "Finish matching me with a payday loan provider!" incurred the fee for the debit card.
VirtualWorks paid Swish Marketing $15 for each transaction.

Charges:

Defendants were charged with falsely representing that consumers who completed an online loan application and clicked the submit button were only applying for a loan when it seems that they were also purchasing a prepaid debit card.
The FTC also charged that defendants falsely represented that loan applicants would receive a prepaid debit card at no charge.

FTC Settlement Order:

The order permanently bars VirtualWorks (and its principals) from misrepresenting the cost of any product or service, the way consumers are charged, or any other material fact.
Further, the terms of the order prohibit VirtualWorks from misrepresenting in the future that a product or service is free or a "bonus" without disclosing all associated material terms and conditions.
VirtualWorks is also barred from charging consumers without first disclosing applicable billing information, the amount to be charged, the way payment is assessed, the entity for whom the payment will be assessed, and all material terms and conditions associated with the subject product or service.
Further, when marketing financial products or services, VirtualWorks is expected to monitor its marketing affiliates to make sure that they are complying with this order.
Although the order contains a $5.5 million judgment, all but $52,000 is suspended and must be paid by the owners of VirtualWorks. If material misrepresentations concerning the principals' financial condition are subsequently discovered, the full amount of the judgment will become due and owing.

Summary:

There is a separate action pending against Swish Marketing.
The FTC seems to be striving for companies and their marketers to use the most transparent methods of doing business, seeking full disclosure where consumers’ interests are at stake.

Plaintiff Lacks Standing to Bring Private Action Under CAN-SPAM

Gordon v. Virtumundo, Inc., No. 07-35487
(9th Cir. August 6, 2009)

Facts:

As reported in the September, 2007 issue of our KZR Newsletter:

James Gordon is the registrant of the URL, gordonworks.com.
His business, Omni Innovations, is involved in software development and is an "anti-spam business," which entails notifying alleged spammers that they are violating the law and filing lawsuits if they do not cease sending email to the gordonworks domain.
Virtumundo and another defendant, Adknowledge, market products for their clients by transmitting email to interested consumers.
Plaintiff brought an action against Virtumundo, Inc., et al., under the CAN-SPAM Act and various Washington State laws, claiming that the "from" lines of various email messages that Virtumundo had sent violated the law because they did not contain the name of the company or an employee of the company.
The district court granted summary judgment in favor of defendants, dismissed plaintiff's CAN-SPAM claims for lack of standing and dismissed the state law claims.
The court also awarded fees to the defendants.

CAN-SPAM Act:

CAN-SPAM regulates commercial email messaging practices.
The Act prohibits transmitting messages with "deceptive subject headings" or "header information that is materially false or materially misleading."
It also sets forth certain requirements regarding email content, format and labeling.
Under CAN-SPAM, only certain entities may enforce its provisions: the Federal Trade Commission, state attorneys general, and other state and federal agencies.
The Act also provides a limited private right of action to a "provider of Internet access service (‘IAS’) adversely affected by a violation of" the Act.

The Issue:

The court reviewed whether plaintiff had standing to bring an action under CAN-SPAM.
Specifically, whether plaintiff is an IAS provider and whether he was "adversely affected" by statutory violations.

Court of Appeals Decision:

The Ninth Circuit Court of Appeals affirmed the lower court’s decision that plaintiff lacked standing to bring an action under CAN-SPAM.
The court concluded that plaintiff failed to "fit any reasonable definition of IAS provider."
Further, the court found that plaintiff was not "adversely affected by" unsolicited email solely by virtue of receiving a large amount of commercial email.
According to the court, "the harm must be both real and of the type experienced by ISPs . . . something beyond the mere annoyance of spam and greater than the negligible burdens typically borne by an IAS provider in the ordinary course of business."

Analysis:

In rendering its decision, the court considered many issues:

Congress’ intent to promote and preserve the benefits of commercial email;
Congress provided standing only to a narrow group of potential plaintiffs;
The Congressional record indicates a concern that the private right of action be circumscribed and confined to a narrow group of private plaintiffs; and
The unique nature of the subject matter -- the ever-evolving world of Internet use and the developing marketplace.

Plaintiff’s State Law Claims:

The Court of Appeals found that plaintiff’s state law claims were preempted by CAN-SPAM, interpreting its express preemption clause "in a manner that preserves Congress’ intended purpose -- i.e., to regulate commercial email ‘on a nationwide basis’. . . and to save from preemption only ‘statutes, regulations, or rules that target fraud or deception.’"

Summary:

The court rejected Gordon’s efforts to devise a claim and right of action that does not exist under CAN-SPAM.

Governor Schwarzenegger Vetoes Internet Tax Legislation -- Overstock.com Resumes Business In California

Press Release from the Office of the Governor
July 1, 2009

California Proposed Tax on Affiliate Advertising:

Similar to the "Amazon Tax," the California Legislature considered imposing a tax on affiliate marketing and sent a bill to the Governor for approval.

Background - "Amazon Tax":

New York Law Enacted - April 2008 ("Amazon Tax")

The law creates a presumption that certain out-of-state sellers of goods and services via the Internet ("e-retailers") qualify as "sales tax vendors" and are, thereby, required to: (1) register with the State of New York for sales tax purposes; and (2) collect state and local sales taxes on all purchases made by New York State residents.
Under the new law, e-retailers are presumed to be sales tax-based vendors if they enter into agreements with New York affiliates to compensate them for the referral of customers.
An affiliate is an online marketing company that refers customers to e-retailers in return for a commission on any sale resulting from such referrals.

Reaction to Proposed California Tax:

In an effort to avoid being subjected to the proposed tax, Overstock.com announced a decision to pull its affiliate advertising from California.
Other companies, including Amazon.com, also threatened to pull their affiliate advertising from California.

Governor’s Office Response:

Following Overstock.com’s announcement, Governor Schwarzenegger vetoed the bill because, as his office indicated in a recent press release, "[w]e cannot solve our budget deficit by raising taxes and driving businesses out of the state."
Schwarzenegger’s administration immediately notified Overstock.com of the decision.
Upon receipt of the news, Overstock.com reversed its decision and plans to continue to do business with affiliates in California.

Summary:

According to the Governor’s press release, the State recently imposed the largest tax increase (unrelated to this affiliate tax) in California history.
Passing the affiliate tax would have taken a huge toll on the State’s revenue generated through Internet affiliate advertisers.
Based on California’s position and refusal to pass the legislation, perhaps other states with similar laws or pending bills will take a second look and re-weigh the benefits compared to the costs of imposing such a tax.

Maine’s New Data Collection Law May Present Challenges for Marketers

Act to Prevent Predatory Marketing Practices Directed at Minors
LD 1183

Maine Law:

The Act was signed by Governor John Baldacci on June 2, 2009 and is due to become effective on September 12, 2009.
The Act prohibits marketing campaigns directed at minors, both online and off-line.
The Act specifically proscribes: (1) the collection or use of health-related information and personal information of individuals under the age of 18 for marketing purposes without verifiable parental consent, and (2) the sale or transfer to a third party of health-related information or personal information of a minor if that information was unlawfully collected, individually identifies the minor, or will be used for "predatory marketing."
The Act defines "personal information" as "individually identifying information" and sets forth five (5) non-exclusive examples:

an individual’s first name, or first initial, and last name;
home or other physical address;
social security number;
driver’s license or state-issued ID card number; and
any information "concerning a minor that is collected in combination with an identifier described in this subsection."

"Marketing purposes" is broadly defined as "the purposes of marketing or advertising products, goods, or services to individuals."
The Act also provides a private right of action and, therefore, its enforcement is not limited to state agencies and other public entities.
Violation of the Act is considered an "unfair trade practice" and is subject to a fine of $10,000 to $20,000 for a first violation.

Relation to the Children’s Online Privacy Protection Act ("COPPA"):

The new Maine law applies to individuals that are less than 18 years of age, where COPPA applies only to children under 13 years of age.

Summary:

Companies are barred from collecting any personally-identifiable information from minors for "marketing purposes," including for demographic research.
Two (2) concerns with the newly-enacted Maine law are: (1) the law has been described as overbroad in its reach; and (2) marketers (located within and outside of Maine) will need to know from whom they are collecting data at the time of collection.
Web marketers may consider reviewing their marketing strategies and age verification procedures to ensure compliance with the new law.
Many believe that members of the Internet marketing industry will persuade the legislature to amend the Act in order for companies to be able to realistically comply with its provisions.
A lawsuit was filed on August 26, 2009 seeking a stay of enforcement of the Act. We will keep you apprised as the lawsuit progresses.

Senate Commerce Committee Adds New Company to Internet Marketing Billing Investigation

U.S. Senate Committee on Commerce, Science and Transportation Press Release
July 10, 2009

Investigation:

On May 27, 2009, John D. (Jay) Rockefeller IV, Chairman of the U.S. Senate Committee on Commerce, Science and Transportation, announced an investigation into certain e-commerce marketing practices that trigger mysterious monthly charges appearing on consumers' credit cards.
On July 10, 2009, the Senate Commerce Committee added Affinion Group, Inc. (and its subsidiaries) to the investigation.

The Press Release Describes "Mystery Charges":

According to the Commerce Committee’s press release, these monthly fees appear to be generated by several marketing companies that obtain consumers’ billing information through agreements with various online retail sites.
Some of these sites include Priceline.com, Staples.com and Classmates.com.
Once consumers make a purchase, a hyperlink or "pop up" window appears on the screen and offers a cash back incentive if they sign up for an unrelated third-party company’s online membership service.
Per the Commerce Committee, if a consumer accepts the offer by providing an email address and clicking a "yes" button, his/her credit or debit card information is automatically forwarded to the company sponsoring the offer.
The consumer’s credit or debit card is, thereafter, indefinitely charged on a monthly basis until the consumer cancels the subject online membership service.