FTC Stays the Course on Prenotification Negative Option Plans

On July 25, the FTC announced that it would retain its Prenotification Negative Option Rule (“Rule”) without modification after completing a regulatory review of the Rule.  Numerous state and local law enforcement agencies had submitted comments urging the FTC to expand the scope of the Rule.  The FTC declined to do so, and instead adopted a wait-and-see approach regarding the impact of the Restore Online Shoppers Confidence Act (ROSCA) and possible revisions to the Telemarketing Sales Rule (“TSR”).

The Rule covers those negative option plans that notify a consumer that she will purchase a good unless the offer is declined within a set period of time.  For those of you old enough to remember such things, think Columbia House Record Club.  The Rule enumerates seven material terms of the purchase plan that sellers must clearly and conspicuously disclose; and also provides guidance on how a consumer is notified regarding each installment.  Continue Reading

Venable LLP’s 2014 Intellectual Property Symposium

Our colleagues in the Intellectual Property group have an upcoming event in Washington DC that we’re so excited about that we just can’t help plugging it here.

Venable is sponsoring a half-day IP- law symposium on Wednesday, September 10 at our Washington DC offices. Our Venable colleagues who are experts in areas such as trademarks, patents, licensing, and copyright will update you on recent trends in these areas, and on how to negotiate and settle a case effectively. And you’ll have an opportunity to hear from outside counsel such as former Venable Partner Vicki Margolis, now head of IP at Kimberly-Clark, along with other in-house IP lawyers and academics. There will be plenty of time for networking at lunch and at a reception on the roof, next to our Bocce court, afterwards. And, depending upon which state you practice in, we may be able to get you CLE credit. There is so much overlap of IP and advertising law that we all plan to attend and hope you will too.

The complete agenda and invitation can be found here. We’d love to have you join us if you can.

No Agency, No Claim: Taco Bell and the TCPA’s Vicarious Liability Standard

With the FCC’s recent record fine of $7.5 million against Sprint Corp. for alleged Do-Not-Call violations, the more restrictive prior express written consent rule for marketing calls made to cell phones by an autodialer, and the continuous filing of class action complaints (See TCPA Update for recent filings), it is easy to understand why companies are wary of liability under the Telephone Consumer Protection Act (“TCPA”).  As we’ve discussed previously, general uncertainty around how to interpret certain provisions of the TCPA has resulted in numerous petitions being filed with the FCC.

Although many areas still require clarification, the law around vicarious liability under the TCPA continues to develop.  Most recently, on July 2, 2014, the Ninth Circuit weighed in on Thomas v. Taco Bell Corp. in an unpublished decision that addresses vicarious liability under the TCPA. Let’s take a closer look.

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FTC Takes Plastic Lumber Manufacturers to the Wood Shed for Misleading Green Claims

While enjoying these lovely summer days, did you ever wonder how many milk jugs or detergent bottles went into making that “green” picnic table you’re sitting at? You may now. The already peculiar concept of “plastic lumber” is further complicated when manufacturers make false statements about its contents. As new products emerge touting environmental attributes, the FTC continues to warn manufacturers, distributers, and marketers of environmentally-friendly products against misleading consumers as to how “green” the product is.

In two recent cases, the FTC took aim at a plastic lumber marketer and a manufacturer, both advertising and marketing products said to be made (almost) entirely of recycled plastics. Both companies have now settled with the FTC and are prohibited from making such misleading representations.

On Thursday, the FTC settled with Engineered Plastics Systems, LLC (“EPS”), a manufacturer, advertiser, and distributer of plastic lumber products such as picnic tables and benches. In its complaint, the FTC alleged that EPS’s advertisements and marketing materials deceived consumers into believing the plastic lumber products were made entirely of recycled plastic. For example, the materials read “Made entirely of recycled plastic lumber” and “All recycled plastic design.” According to the FTC, these representations would lead the average consumer to believe that the products were composed entirely of, or almost entirely of, recycled plastic, however, the FTC found that the products contained an average of only 72 percent recycled plastic. This deceptive and misleading conduct, in violation of the FTC Act, put EPS in hot water with the FTC.

Under the settlement, EPS is prohibited from making similar claims that deceive consumers, and EPS must ensure claims are true, not misleading, and substantiated by proper evidence before stating information about recycled contents or environmental benefits of a product (or packaging). Additionally, EPS may be required to provide scientific research to verify its claims, and must give evidence that the materials used were taken from the waste stream according to the FTC’s “Green Guides for Environmental Marketing.”

The EPS settlement came less than a month after the FTC settled a similar case with American Plastic Lumber, Inc. (“APL”). Like EPS, APL distributes plastic lumber products such as picnic tables, benches, and speed bumps. APL hit a speed bump of its own after the FTC alleged its advertising and marketing materials deceived consumers into believing the products were made of virtually all recycled plastic. In fact, APL’s products averaged less than 79 percent of recycled plastic, and the FTC found no recycled content at all in nearly eight percent of APL’s products.

Similar to EPS, the settlement prohibits APL from making false representations about the recycled content of its products unless it is true, not misleading, and is backed up with evidence. APL is also required to maintain and make advertisements and marketing materials with claims covered by the settlement available to the FTC for five years.

These cases confirm that Green Claims remain a priority at the FTC. As “green” products continue to hit the market, the FTC continues to enforce its “Green Guides” and pursue “green” claims through consent orders with the violating companies without providing consumer redress. To avoid deceptive pitfalls, companies advertising and marketing products with recycled content should carefully review the FTC’s “Green Guides.” Otherwise, you might end up in the FTC woodshed.

* Michael Isselin is a Venable summer associate and not admitted to practice law.

The CFPB at Year Three: A Look Back, and a Look Forward

3The Consumer Financial Protection Bureau (CFPB) turns 3 on Monday, July 21, 2014.   Created under Dodd-Frank, the CFPB already has made a significant impact on the consumer protection legal landscape and, more specifically, on how consumer financial services providers advertise and market their services.  Nevertheless, the CFPB’s track record continues to be controversial, despite the expected press releases and reports relating to the upcoming anniversary, which already include an announcement of an expanded consumer complaint portal (Wednesday, July 17), and a field hearing on Thursday morning.

Many industry groups and companies view the CFPB’s regulation and enforcement of consumer financial protection laws as more aggressive and results driven than other federal and state regulators that historically covered (and in some cases continue to cover) many of the same activities and statutes.  For example, through its examinations, multiple settlements, and enforcement lawsuits, the CFPB appears committed to taking a broad view of what’s considered an unfair, deceptive or abusive act or practice.  As a result, the CFPB has taken pro-consumer regulation to an entirely different level through supervision and examinations of banks and companies in nonbank markets such as mortgage, small dollar loans, private student loans, debt collection, and credit reporting, which had previously been unsupervised.  On top of this all, the CFPB’s activities have been a catalyst for other agencies to step-up their own regulatory activities, both on their own and in joint actions such as the settlements reached with banks on credit card marketing and investigatory sweeps with the FTC.

On Monday, July 21, join members of Venable’s CFPB Task Force for a panel discussion that will examine both the CFPB’s history and future, and will include case studies and trivia.  We’ll discuss the formation of the CFPB; the use of its supervision, enforcement, and rulemaking authorities since it began operations in 2011; and what’s on the horizon.  Click to register for “The CFPB at Year Three: A Look Back, and a Look Forward.”  

*To celebrate the CFPB’s birthday, CLE credit is available for this program.

Using Copyright to Protect Your Brand’s Characters

1989 BatmobileIn advertising when one says “Brand Protection”, they instinctively think of trademark protection.  An often overlooked tool is copyright protection.  If in advertising you have developed a “character” (think Progressive Insurance’s “Flo” character or Haverty’s “Emily”) or have an object (think Geico’s Gekko or the Batmobile) that is essential to your advertising campaigns, under the right circumstances, it can be protected by copyright.  While trademark law can protect a specific individual rendition of the character, copyright will protect the persona.  In other words, you may be able to prevent a competitor from using a substantially similar character.

Certain characters in literature and in the movies have long enjoyed copyright protection (James Bond, Rocky Balboa, Tarzan, E.T., etc.).  The key is that in order to be afforded copyright protection, a character has to be distinctive and essential to the story.  Characters have to be especially distinctive, sufficiently delineated, and have displayed consistently, widely identifiable traits.

Most advertisements characters are interchangeable by type (i.e., the loud electronics salesman) and not protectable, however, there have been numerous advertising programs in which a character has clearly defined a distinct set of characteristic and the character is used over and over (Flo has appeared in over 50 Progressive Insurance commercials).  In such a case, copyright protection could attach to the character.  Also, if the ad is featuring an object that also has distinct characteristics is essential to the theme and, in a sense is treated like a character, it too can have copyright protection (i.e., Aflac’s duck). Continue Reading

The Duke Versus The Blue Devils: Who Has Trademark Rights to “Duke” Alcohol?

There’s been a lot of stories about how I got to be called Duke. One was that I played the part of a duke in a school play—which I never did. Sometimes, they even said I was descended from royalty! It was all a lot of rubbish. Hell, the truth is that I was named after a dog!” – John Wayne, a.k.a. Duke Morrison, Duke Wayne, Duke, and The Duke

So goes the story of how Hollywood legend John Wayne got his nickname, from the mouth of The Duke himself.  Now his heirs are suing Duke University in California federal court to protect their right to further Wayne’s legacy through alcohol products such as this fine bottle of Kentucky bourbon:

TheDuke

Last year, Wayne’s heirs filed trademark applications for “Duke” and “Duke John Wayne,” to use the marks on “alcoholic beverages except beers, all in connection with indicia denoting the late internationally known movie star John Wayne.”  Duke University filed oppositions to the registrations citing deceptiveness, likelihood of confusion, and dilution of the university’s marks containing the word “Duke.”

Wayne’s heirs complain Duke University has never been associated with the actor and has never been in the alcohol business.  Moreover, the university “does not own the word ‘Duke’ in all contexts for all purposes,” as “Duke is a common word that has been in use for centuries.”  The Wayne family now seeks a declaration that its mark registrations are not likely to cause confusion and do not dilute Duke University’s marks.  The family argues there is a real controversy here “[i]n light of the multiple oppositions and cancellation proceedings Duke University has filed,” creating a “cloud of an eventual infringement claim.”

The case is in very early stages, having been filed in early July.

A Whole New Lanham Act? A Look at Lexmark and POM Wonderful in Action

As we previously reported here on March 25, 2014 the United States Supreme Court issued its much-anticipated decision in Lexmark Int’l Inc. v. Static Control Components, Inc The decision resolved a three-way Circuit split, rejected the test in the Seventh, Ninth and Tenth Circuits that the plaintiff and defendant had to be direct competitors, and articulated a new test for standing to bring a Lanham Act false advertising claim – a plaintiff must be in the “zone of interest” and must have injuries proximately caused by the defendant’s false advertising.

The other recent landmark Supreme Court decision in this area is of course POM Wonderful LLC v. Coca-Cola Co., which we also previously reported on here.  That case held that competitors could bring suits under the Lanham Act challenging food and beverage labels that were regulated by the Federal, Food, Drug, and Cosmetic Act (“FDCA”) and complied with those regulations—in other words, the FDCA does not preclude claims under the Lanham Act, at least in the area of food and beverage labeling.

Lower courts are already recognizing that Lexmark and POM Wonderful have broadened the scope of Lanham Act litigation between competitors, and in fact are applying Lexmark and POM Wonderful beyond the realm of false advertising.  Continue Reading

Seeking Backers for That Kickstarter Campaign You’re Cooking Up? Better Make It One Heck Of A Dish…

Zack (Danger) Brown recently made headlines for his Kickstarter® Campaign, which was featured in CNN.com, The Washington Post, and The New Yorker as well as on Good Morning America (I guess TV stars eat carbs after all).  Unlike other entrepreneurs on the popular crowdfunding platform, who use Kickstarter to launch a business idea or concept, Brown has been raising money for … potato salad.  And not a special family recipe for a potato salad, either – according to Brown, this will be his first potato salad and “[i]t might not be that good.”  The campaign has gone viral, and people have given upwards of $42,000 (the amount is still growing) – a sum that should more than cover the bag of Idaho spuds, mayonnaise, chives, and other ingredients to make the picnic staple.

potatosalad

Brown’s promised deliverables have evolved as he has acquired more and more money.  Now, folks who contribute $20 are enticed by the following:  “Receive a potato-salad themed haiku written by me, your name carved into a potato that will be used in the potato salad, a signed jar of mayonnaise, the potato salad recipe, hang out in the kitchen with me while I make the potato salad, choose a potato-salad-appropriate ingredient to add to the potato salad, receive a bite of the potato salad, a photo of me making the potato salad, a ‘thank you’ posted to our website and I will say your name out loud while making the potato salad.”  Regardless of whatever spud-themed poetry Brown writes, according to the Kickstarter Terms of Use, Brown has to follow through on what he promises to backers.  And a recent proceeding by the Washington Attorney General suggests that Brown had better get ready to wax poetic about that most soulful of tubers, the potato.  Continue Reading

Made in USA on Steroids

MadeInByForAmericaIt has become something of a blog tradition to mark the Independence Day holiday with a blog on Made in USA issues. As fate would have it, very recently we blogged on that topic. However, we couldn’t resist a blog on an ad we saw last week at the airport in Savannah, Georgia.  Not only is this product “Made in America” but it is Made “By America” and “For America.”  The product, of course, we’d be referring to is small arms, many of which are apparently used by the US military. Now we don’t have anything particularly profound to say about this that we haven’t already said in our prior blog relating to the potential risks associated with Made in USA claims.  But, we are left wondering whether from an enforcement discretion standpoint the FTC (or class action lawyer) would rather not have a conversation with the manufacturer about whether its trigger mechanism is domestic in origin or whether the silencers or gun barrel liners are domestically sourced.  However that hypothetical conversation might go, we wish each of you a happy and restful Fourth of July weekend.

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