FTC Leads Charge Against Deceptive Affiliate Marketing Tactics

In recent years, affiliate marketing has emerged as a profitable medium to generate interest in a merchant’s products or services, with affiliate marketers often earning huge payouts for generating leads or sales for merchants.  The FTC has taken notice, filing a number of actions against affiliate marketers for violations of Section 5 of the FTC, including several high-profile suits against marketers of weight-loss products.  In March, the FTC obtained summary judgment against LeadClick Media, Inc., an affiliate marketing network operator hired by LeanSpa, LLC to advertise its weight-loss products through affiliate websites using a number of fake news websites.  The Ruling highlights the broad net the FTC now casts in its cases.

The FTC originally sued LeanSpa for making deceptive claims about its weight loss products through fake news stories.  The FTC later amended its complaint to include LeadClick and CoreLogic, the corporate parent of LeadClick.  LeanSpa and its principals settled in December 2013, while LeadClick and CoreLogic continued toward trial.  Most recently, both the FTC and the remaining defendants moved for summary judgment, which the court granted in the FTC’s favor.  Continue Reading

Tough Pill to Swallow: Court Imposes Over $3 Million in Civil Penalties on Dietary Supplement Company

On March 31, 2015, the United States District Court for the District of Columbia issued an opinion, granting the Department of Justice’s (DOJ) motion for a final order providing injunctive relief, monetary relief, and civil penalties against Daniel Chapter One and James Feijo for making claims that Daniel Chapter One’s dietary supplements could treat, cure, or prevent cancer, inhibit tumors, and lessen adverse side effects of radiation and chemotherapy.  For those following this case, this final order is a long time coming, as the defendants repeatedly refused to comply with earlier cease-and-desist orders.  As a result, the FTC and DOJ have doggedly pursued enforcement against the defendants since the FTC first initiated an administrative proceeding for false and deceptive practices under the FTC Act in 2008.

The court granted summary judgment on liability for violations of the cease-and-desist order in September 2012, and finally, in 2014, the U.S. filed a motion for entry of final judgment. The recent opinion represents the culmination of a long battle between the supplement marketer and the government, and demonstrates the various penalties available to the court when orders are violated.  In particular, the opinion highlights the court’s authority under FTC Act Section 13(b), 15 U.S.C. § 53(b) to order equitable redress, and serves as a cautionary tale for how high civil penalties can become when a business fails to comply with an order.  Continue Reading

3D Printing Series: 3D Printing of Medical Devices

3D printing, also referred to as “additive manufacturing” or “rapid prototyping,” is the process of making three-dimensional objects from digital designs. Two of the most common types of printers are “disposition printers,” which deposit layers of materials until the 3D object is built, and “binding printers,” which build the object by binding, usually with adhesive or laser fusing, the underlying layers, to create a whole object at the end of the process.

Perhaps this seems pretty straightforward, but delving into the 3D printing of medical devices highlights the multiple aspects of this process, and underscores the potential challenges associated with the FDA’s current and future regulatory paradigm.

When it comes to printing medical devices, the first step involves developing a computer-aided design (“CAD”) file, or animation modeling software, which tells the printer what to make and how to make it.  After the finished design file is sent to the 3D printer, the user chooses a specific material.

3D-printed medical devices allow for a high degree of customization. Think of 3D-produced dental implants which fit perfectly the first time because they are manufactured for your mouth. Or a map of a highly delicate cardiovascular procedure sized precisely to your needs or, more importantly, those of your newborn.  Continue Reading

ESPN’s Fantasy Fulfilled? Network Reportedly Nearing Purchase of Significant Stake in Fantasy Sports Site DraftKings

While March Madness has cooled down, the news around fantasy sports keeps heating up.  We recently wrote about the National Advertising Division (NAD) decision in the dispute between the two leading daily fantasy sports sites, DraftKings and FanDuel.  ESPN is reportedly in talks with DraftKings to invest $250 million in the company.  For years, the “Worldwide Leader in Sports” has offered free-to-play fantasy baseball, football, and the popular NCAA bracket challenge, among many other games.  Now, under the reported deal, ESPN would receive a 20% stake in DraftKings, while DraftKings would sign a three-year, $500 million advertising commitment with ESPN, giving DraftKings priority advertising placement on ESPN’s platforms.

Although fantasy sports appear to be widely accepted by the public (and most regulators) nationwide, this move represents a significant step in the legitimization of monetized fantasy sports.  However, fantasy sports operators, especially daily fantasy sports sites, continue to face legal questions, most prominently whether fantasy sports are permissible under state and federal law and whether certain advertising used in connection with the sites is false and deceptive.

Continue Reading

3D Printing Series: Be Right Down — Printing My Makeup

Image via Inhabitat.Since we are now fully comfortable with “smart” everything, it should be no surprise that 3D printing has taken center stage in the tech world. It’s easy to imagine 3D-printed machine parts, prototype models, or even toys, but it might be harder to accept 3D-printed foods, implantable medical devices, cosmetics, drugs, and even human tissue.  Too futuristic? Not really. The technology to 3D-print, U.S. Food and Drug Administration (“FDA”)-regulated products is, in large part, already here and rapidly progressing.

Yet, as technology continues to develop, questions arise as to whether, and how, the FDA regulatory framework will keep pace to impose the same safety, quality, and efficacy standards to 3D-printed foods, drugs, cosmetics, and medical devices that currently apply to traditionally manufactured goods. How FDA chooses to deal with 3D-printed products will significantly impact not only barriers to market-entry, but also post-marketing enforcement risks. Similarly, even assuming an FDA-regulated 3D-printed product is successfully brought to market in accordance with FDA standards, manufacturers must still assess options and potential challenges associated with protecting their intellectual property.

Continue Reading

FTC Throws the Works at iWorks and Obtains Partial Summary Judgment on Online Advertising Issues

Last week, the United States District Court for the District of Nevada granted partial summary judgment for the Federal Trade Commission (“FTC”) against Jeremy Johnson and a number of related corporate entities collectively referred to as “iWorks,” offering a glimpse into how the FTC and the courts analyze certain online advertising issues. The FTC first brought suit in 2010, alleging, in part, that Jeremy Johnson’s websites used misleading testimonials, failed to disclose that consumers would be entered into negative option plans, and failed to disclose that websites and positive articles about the products were created by the defendants.  While some defendants in this case settled with the FTC in 2014, the battle between Jeremy Johnson and the FTC has raged on, with the court’s most recent order constituting a significant victory for the FTC on some counts, but requiring the FTC to prove much of its case at trial.  The court’s opinion highlights the difference between alleging deception and proving it, as the court refused to imply that all of the thousands of websites that iWorks operated were deceptive based on the selected sample that the FTC provided the Court.

For our loyal readers, many of the advertising issues in the order may seem all too familiar, as negative options, testimonials, and forms of native advertising are frequent topics of the blog.  However, the order is worth a read, as it provides an analytical roadmap for advertising interpretation and disclosure issues in online advertising cases. Continue Reading

Think You Are Exempt from FTC Jurisdiction? Think Again, Judge Says after Throttling AT&T’s Motion to Dismiss FTC Lawsuit

keepcalmLast week, a federal judge in the Northern District of California denied AT&T’s motion to dismiss the FTC’s lawsuit against the company concerning its advertising and business practices for its mobile wireless data plans.

As we noted last fall, the FTC accused AT&T of misleading millions of its customers by marketing “unlimited” data plans, but then “throttling,” or reducing data speeds, for unlimited plan customers after they used a certain amount of data in a given billing cycle.  As a result of the throttling, customers’ smartphone applications, such as GPS, would not function as they would under higher internet speeds.  The FTC asserted that AT&T had been throttling data speeds for its unlimited data customers since 2011, and that it has throttled at least 3.5 million customers a total of more than 25 million times.  Continue Reading

FTC Shines High Beams on Warranty Claims

A recent Federal Trade Commission (“FTC”) settlement with BMW serves as a good reminder to take a fresh look at Mag-Moss compliance for all companies offering warranties. The FTC’s business guidance provides a helpful checklist to make sure your warranty program is all tuned up.

BMW for its MINI Coopers offered a 4-year or 50,000-mileage warranty. The car owner needed to take care of routine maintenance in order to enjoy the warranty coverage. For the first three years of car ownership, routine maintenance was free at BMW dealers.  After that, the owner needed to pay for such work on his/her own. The warranty said that routine maintenance had to be done at the dealer or the warranty would be voided. Mag-Moss has an anti-tying provision that says you cannot condition a warranty on the customer using your own parts and service unless you provide those parts and service for free. Because in year 4 a MINI owner had to pay for his/her own oil changes, BMW allegedly violated Mag-Moss to say that such paid for maintenance had to be done at the dealer. The settlement requires BMW to send notice to its customers telling them they can use other providers for routine maintenance.  Continue Reading

3D Printing Series: No One Goes into Space for the Food – Yet

As expected, NASA recently successfully completed the first hot-fire tests on an advanced rocket engine thrust chamber assembly using copper alloy materials.  This was the first time a series of rigorous tests confirmed that 3D manufactured copper parts could withstand the heat and pressure required of combustion engines used in space launches. In all, 19 hot-fire tests on four injector and thrust chamber assembly configurations were conducted. These successful tests represent a milestone in NASA’s use of 3D printing.  However, NASA leaders have set their sights on many other uses of 3D printing, including the on-site preparation of meals.

3D printing, also referred to “additive manufacturing” or “rapid prototyping,” is the process of making three-dimensional objects from digital designs. Two of the most common types of printers are “disposition printers,” which deposit layers of materials until the 3D object is built, and “binding printers,” which build the object by binding, usually with adhesive or laser fusing, the underlying layers, to create a whole object at the end of the process.

Perhaps this seems pretty straightforward, but delving into 3D printing applied to the preparation of food ushers in images of the Jetsons eating on their supersonic armchairs. So it won’t require much of a leap to imagine real astronauts in real space vehicles preparing 3D foods to be consumed in space.

Continue Reading

TTAB Rulings Held Preclusive in Federal Court

Trademark enthusiasts, hold onto your hats. The Trademark Trial and Appeals Board (TTAB) just got a bit of a promotion, compliments of the U.S. Supreme Court. On March 24, 2015, the Court released its decision in the long-awaited B&B Hardware v. Hargis Industries case, holding that TTAB findings of mark similarity can be preclusive in later federal proceedings as long as “the ordinary elements of issue preclusion are met.”  This ruling stands in direct opposition to the majority of recent federal precedent, and may dramatically increase the import of TTAB rulings in the coming years. In other words, the TTAB just got a lot more powerful.

What is this case about, anyway?

This case initially arose when Hargis Industries applied to register the trademark “SEALTITE” in the construction industry in 1996.  B&B Hardware opposed this application and simultaneously filed a trademark infringement lawsuit, asserting that B&B had previously registered the trademark “SEALTIGHT” in 1993. While B&B’s federal suit was pending the TTAB determined that Hargis’s proposed mark was confusingly similar to B&B’s mark and denied Hargis’s trademark application. As a result, B&B argued in its district court proceeding that the TTAB’s finding of mark similarity was entitled to preclusive effect in the court.  Continue Reading