Google Files Trademark Infringement Lawsuit Over Work-At-Home Offers

Google v. Pacific Webworks, 2:09-cv-01068-BSJ
(Utah Dist. Ct.) 12/07/2009

Complaint:

Google filed a lawsuit against Pacific WebWorks alleging that it advertises the sale of
“work-at-home” kits by using Google trademarks in its email and online marketing campaign.
Google also named in the lawsuit 50 “John Does” who, it is anticipated, will be identified and added as the case progresses.
The complaint, filed in federal court in Salt Lake City, sets forth claims for trademark infringement and dilution, unfair competition, federal cyber-piracy and violation of consumer sales practices.
Specifically, Google alleges that Pacific WebWorks sells a “work-at-home” toolkit that enables the purchaser to work online from home.
Allegedly, consumers are asked to pay an “instant access” fee for access to a members-only portal or a “shipping and handling fee” for a DVD that purported to explain how to earn money through use of the “work-at-home” kit.
The complaint further states that after the purchase, the defendant continued to charge the consumer’s credit card offering “little of value, or nothing at all, in return for their payments.”
According to the complaint, “[c]onsumers are not enrolled in any program that provides opportunities for generating income” for their $79.90 in monthly fees.
A few of the allegedly offending kit names include: “The Home Business Kit for Google,” “Google StartUp Kit” and “Google Adwork.”

Pacific WebWorks' Reaction to the Suit:

According to a newspaper article, Pacific WebWorks was surprised by the lawsuit initiated by Google.
In a public statement, CEO Kenneth W. Bell said, “As we review this lawsuit with our counsel, we find questionable claims that the company will vigorously and responsibly defend.”

Summary:

As we reported in our July 2009 Newsletter, the Federal Trade Commission ("FTC") recently announced "Operation Short Change" -- a law enforcement crackdown on companies seeking to capitalize on the economic downturn.
Google’s allegations here seem to fall squarely within the type of activities addressed by the FTC’s crackdown.
We will continue to follow any progress in this case and keep you apprised of future developments.

Online Marketer of “Free” Internet Auction Kits Settles FTC Charges

FTC v. Commerce Planet, Inc., C.D. Cal., No. 09-CV-01324
11/10/09

Federal Trade Commission ("FTC") Complaint:

The FTC filed a complaint against defendants Commerce Planet, its Chief Executive Officer, Michael Hill, and Aaron Gravitz, former president of Legacy Media LLC, a wholly-owned subsidiary of Commerce Planet.
The FTC alleged that defendants used deceptive online marketing practices to entice consumers into purchasing a “free” online auction kit.
The kit included information on how to start a business selling products via online auctions sites, including eBay.
According to the FTC, the advertisement indicated that consumers were obligated to pay only $1.95 for shipping and handling for the “free” trial offer.
Many consumers inadvertently signed up for the company’s “Online Supplier” program at a cost of $59.95 per month.
The FTC complained that Commerce Planet did not clearly and conspicuously disclose that, by registering for the free offer, consumers were agreeing to be enrolled in this Online Supplier program for a monthly recurring cost.
It was only after their credit cards were billed that consumers realized that they had signed up for the program.
The FTC further indicated that consumers who complained had difficulty obtaining refunds.

Commerce Planet’s Terms and Conditions:

The FTC contended that the program’s Terms and Conditions, including the $59.95 fee, were difficult to locate on Commerce Planet’s website, appearing on a separate page only accessible through a link, or on the payment page but below the initially-viewable area of most computer screens.

FTC Charges:

According to the complaint, defendants violated federal law by failing to disclose that consumers who ordered the auction kit would be signed up for a continuity program and for charging consumers for the program without first getting their express informed consent to do so.

Settlement:

The court-ordered settlement includes the following provisions:

defendants are prohibited from misrepresenting any material facts associated with the sale of a product or service, including specific representations that are common in negative-option offers;
defendants must make specific disclosures before requesting payment for any product or service and before billing for any offer that contains a continuity plan feature;
defendants are required to obtain a consumer’s express informed consent before charging for any goods or services and must document that consent in all transactions involving a continuity plan feature; and
defendants are required to provide adequate information about their refund policies, honor those policies, and monitor the practices of their sales agents.

While the order includes judgments of $19.7 million against each defendant, it has been suspended due to the defendants' inability to pay. Instead, Commerce Planet has been ordered to pay $100,000; Gravitz, $192,000; and Hill, $230,000 plus future proceeds from loans.

craigslist Afforded CDA - Section 230 Immunity Against Public Nuisance Claim

Dart v. craigslist, Inc., ___F. Supp.2d___, 2009 WL 3416106 (N.D. Ill. Oct. 20, 2009)

Facts:

Plaintiff Thomas Dart, Sheriff of Cook County, sued craigslist, Inc. ("craigslist"), alleging that its Internet classifieds service facilitates prostitution and is a public nuisance.
craigslist’s users create and post millions of new classified ads each month.
craigslist creates the categories within which the ads are displayed.
Its users, however, create the content and determine within which category the subject ads should appear.
craigslist’s “Terms of Use” prohibits the posting of unlawful content.
The site’s “erotic” subcategory comes with an additional warning and disclaimer - indicating that users agree to identify any content that violates the “Terms of Use” including “offers for or the solicitation of prostitution.”
Dart complained that this erotic-services category constitutes a public nuisance and, as such, he sought an injunction to prevent this practice from continuing.
After Dart filed this suit, craigslist voluntarily changed the category from “erotic” to “adult” and added that all adult category submissions would be subject to a “manual review process.”
craigslist filed a motion for judgment on the pleadings, contending that Section 230 of the Communications Decency Act (the “CDA”) immunizes it from liability for the dissemination of third-party content by virtue of the fact that it is the provider of interactive computer services.
Dart argued that craigslist was not entitled to such immunity due to its alleged role as a facilitator of prostitution.

Court Decision:

The court reviewed various earlier decisions, and one in particular, that shielded craigslist from housing discrimination claims under Section 230 (Chicago Lawyers’ Comm. v. craigslist, 519 F.3d 666 (7th Cir. 2008)) (holding that craigslist was not liable for discriminatory advertisements as it was not the author of the ads and could not be treated as the speaker of the posters’ words).
Dart argued that in the case at hand, craigslist played a more active role than it did on the facts in the Chicago Lawyers decision, and that its knowledge and involvement in creating illegal content here was more extensive.
The court disagreed with plaintiff’s contention that craigslist caused or induced any illegal content, noting that the term “adult” in conjunction with “services” is not necessarily unlawful and craigslist repeatedly warns users not to post such content.
The court granted craigslist’s motion holding that it was entitled to CDA Section 230 immunity.

Summary:

It seems that websites such as craigslist will continue to be shielded from liability under the CDA insofar as they do not direct (cause or induce) the posting of illegal content.

Dietary Supplement Company and Florida AG Reach Settlement

Florida Attorney General’s Office
Press Release
November 24, 2009

Facts:

According to the Florida Attorney General ("AG"), Bill McCollum, FWM Laboratories offers 17-day free trials of several products, including non-prescription dietary and health supplements.
The free trial is conditioned upon the consumers’ ability to cancel their subscriptions before the end of the trial period in order to avoid receiving monthly bills.
The AG’s office received numerous complaints from consumers who alleged that they had tried to cancel their subscriptions but were unable to contact the company by phone, email or through the company’s website.
Ultimately, these complaining consumers were allegedly billed a monthly fee of at least $80 for products they did not order or want.

Settlement:

According to the AG’s office, FWM Laboratories has cooperated fully throughout all stages of the investigation and has agreed to clearly and conspicuously detail all material terms and conditions of any trial offer made available on the company’s websites.
FWM has issued over $34 million in refunds since the investigation began.
The settlement requires that the company and its subsidiaries clearly and conspicuously disclose to customers how and when products may be returned.
The company has also agreed to maintain the appropriate level of customer service resources to handle cancellation requests and will continue to timely examine, address and resolve all complaints related to the company’s business, products and trial offers.
Under the terms of the settlement, FWM will pay $200,000 in attorneys’ fees and costs to the AG and will continue to issue refunds to any consumers that file complaints.

Summary:

According to the AG, “free trial offers” conditioned upon a consumer’s ability to cancel before being billed, must adhere to that promise when consumers endeavor to cancel before the trial period ends.
Companies marketing “free” products should carefully consider this settlement and the agreement between the Federal Trade Commission and Commerce Planet, et. al., also reported on in this issue.

Email Confirmation of Internet Purchase Not Entitled to FACTA Protection

Shlahtichman v. 1-800 CONTACTS, Inc.
2009 WL 4506535 (N.D. Ill. Dec. 2, 2009)

Facts:

Plaintiff Eduard Shlahtichman used his credit card to purchase contact lenses online from defendant 1-800 CONTACTS, Inc. ("1-800 CONTACTS").
On the day of purchase, plaintiff received - at his home - a computer-generated receipt, which included his credit card’s expiration date.
Plaintiff brought an action against 1-800 CONTACTS seeking statutory damages for willfully violating the Fair and Accurate Credit Transactions Act (“FACTA”) by displaying the credit card expiration date on the email confirmation of his order.
1-800 CONTACTS moved to dismiss, arguing that electronic mail order confirmations are not entitled to FACTA protection asserting that: (1) an email confirmation is not an “electronically printed” receipt under FACTA; and (2) email confirmations are not provided “at the point of the sale or transaction” as required for FACTA to apply.

FACTA Regulations:

FACTA imposes regulations that either demand or forbid the disclosure of consumers’ credit card information in specific circumstances.
In this case, the applicable FACTA subsection prohibits the electronic printing of receipts that contain more than the last five (5) digits of a consumer’s credit or debit card number or the expiration date of the applicable card.

Court Decision:

The court agreed with defendant and held that email order confirmations do not fall within FACTA protection.
First, the court found that an email order confirmation is not an “electronically printed” receipt under FACTA for the following reasons:

while FACTA does not define “print”, the court weighed definitions from various dictionaries and found plaintiff’s argument unpersuasive, noting that “print” is not commonly understood as a display on a computer screen;
the statutory context of FACTA supports the holding;
the legislative history indicates that FACTA was directed at printed, paper receipts; and
if Congress intended for FACTA to apply to Internet transactions, it would have made a reference to email order confirmations or Internet commerce in the statute itself.

Second, the court found that FACTA was inapplicable because the order confirmation was not provided at the point of sale.
According to the court, the statute “clearly contemplates a transaction where the customer is present in the location where the sale is made, and where the merchant provides the receipt to the customer at that same location.”
Internet transactions occur wherever the purchaser is located, and the confirmation is sent to an email account which can be anywhere in the world.

Model Privacy Notice for Financial Institutions Published

Federal Trade Commission
November 17, 2009

Model Privacy Notice:

The Federal Reserve Board, in conjunction with seven (7) other federal agencies, published a model privacy notice that financial institutions can adopt to comply with the Gramm-Leach-Bliley Act (the “GLB Act”) financial privacy rules.
The GLB Act requires institutions to notify consumers of their information- sharing practices and inform consumers of their right to opt out of certain of these sharing practices.
While developing the model notice form, the agencies conducted extensive consumer research and testing and also solicited public comment in order to create a consumer-friendly document. Their research revealed that consumers found many existing privacy notices to be confusing and excessively long.

Purpose of the Model Privacy Notice:

The final model privacy notice form was created to make it easier for consumers to understand how financial institutions collect and share their information.
Specifically, the Model Notice Rules are designed to:

provide conspicuous privacy disclosures to consumers about financial institutions’ data-sharing practices;
be comprehensible;
enable consumers to easily identify and compare institutions’ information-sharing practices; and
be clear and succinct.

Effect of Adopting the Model Privacy Notice Form:

A financial institution that chooses to use the model form obtains a “safe harbor” and will satisfy the disclosure requirements for notices.
After a transition period, the rule also removes the sample clauses now included in the appendices of the agencies' privacy rules.