Did you know that, under the U.S. copyright law, if a third party uploads or posts copyrighted material to your website, and the third party did not have authorization to do so from the copyright owner or exclusive licensee of that material, your organization can be held strictly liable for copyright infringement as the operator of the website where it was posted or uploaded?

This is alarming but true – there is strict liability in copyright law.  This means that, even if your organization did not put the infringing content on your website, or did not even know it was there, you can be held strictly liable for infringing content uploaded to your website by another.


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On June 19, 2015, the U.S. Court of Appeals for the Fourth Circuit issued its decision in In re GNC Corporation; Triflex Products Marketing and Sales Practices Litigation (No. II), — F.3d –, No. 14-1724, 2015 WL 3798174 (4th Cir. June 19, 2015), handing a significant victory not just to the defendants in that multidistrict false advertising class action litigation, but to dietary supplement manufacturers nationwide that face false advertising claims brought under state consumer protection laws.  More specifically, the Fourth Circuit’s decision made clear that, in order for a false advertising case to proceed beyond the dismissal stage, the complaint must allege that there is not a single qualified expert who would opine that the challenged representation is truthful.  The ruling should prove a useful tool to any dietary supplement manufacturer finding itself the defendant in a class action alleging unfair, deceptive, or misleading advertising or marketing.

In In re GNC Corporation, the plaintiff-consumers had purchased glucosamine- and chondroitin-based joint health supplements manufactured and sold by the defendants, GNC Corporation and Rite Aid Corporation.  The defendants alternately advertised on the supplements’ labels that the products “promote[] joint mobility & flexibility”; “protect[] joints from wear and tear of exercise”; “rebuild[] cartilage and lubricate[] joints”; “promote[] joint health”; and provide “[m]aximum strength joint comfort.”  The product label for GNC’s “Triflex Fast-Acting” product also represented that the supplement was “[c]linically studied” by means of a randomized, double-blinded, placebo-controlled trial, which concluded that the supplement was “shown to improve joint comfort and function.”  The plaintiffs alleged that the defendants violated the false advertising statutes and consumer protection acts of California, Illinois, Florida, Ohio, and New York by marketing their supplements as promoting joint health, even though many scientific studies purportedly have shown that glucosamine and chondroitin are “no more effective than placebo” in providing the advertised health benefits.  In essence, the plaintiffs asserted that the various health representations made by the defendants were false because the vast weight of competent and reliable scientific evidence indicate that glucosamine and chondroitin do not provide the promised health benefits. 
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While plaintiffs’ attorneys seek to streamline the filing of class actions under the Telephone Consumer Protection Act (“TCPA”), a recent court decision serves as a reminder that there are clear limits to a plaintiffs’ ability to recover statutory damages under a theory of vicarious liability. On May 18, 2015, the U.S. District Court for the Central District of California awarded summary judgment to defendant UTC Fire & Security Americas Corporation, Inc. (“UTC”), finding the security equipment manufacturer could not be held vicariously liable for the actions of its authorized dealers under any theory of agency. The decision marks a win for companies that operate using a dealer or retailer network to distribute their products, in a legal area that is a noted favorite of class action lawyers, and provides an example for how companies may avoid vicarious liability under the TCPA by carefully structuring the way in which they authorize resellers to use and advertise their product.
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The Supreme Court will decide whether a defendant can “pick off” the named plaintiff in a Telephone Consumer Protection Act (TCPA) class action – and moot the putative class claims – by making a Rule 68 offer of judgment before the putative class representative files a motion for class certification.  Thus, the Supreme Court could streamline putative class actions by eliminating the need for plaintiffs to file “protective” motions for class certification at the same time they file their complaints.  The case, Gomez v. Campbell-Ewald Co., also involves important vicarious liability issues that litigants routinely address in TCPA class actions.

In Gomez v. Campbell-Ewald Co., the defendant marketing consultant allegedly arranged to send the plaintiff unsolicited text messages in violation of the TCPA through a third-party caller called Mindmatics, purporting to recruit for the U.S. Navy.  Before the plaintiff filed a motion for class certification, Campbell-Ewald offered to pay the plaintiff $1,503.00 per violation, in full satisfaction of the plaintiff’s claims.  The plaintiff allowed the offer to lapse and sought class certification.  Campbell-Ewald argued to the United States District Court for the Central District of California and then to the Ninth Circuit that its Rule 68 offer of judgment mooted the plaintiff’s individual and putative class claims.  The Ninth Circuit disagreed with the defendant, aligning the decision with other circuits which have also held that a rejected Rule 68 offer does not moot claims if the offer is made prior to filing or, or ruling on, a motion for class certification.   The Seventh Circuit, in contrast, held in Damasco v. Clearwire Corp. that a Rule 68 offer made before the plaintiff had filed a motion for class certification mooted the class claims. 
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Statutes such as the Telephone Consumer Protection Act (“TCPA”), Fair Debt Collection Practices Act (“FDCPA”), and Fair Credit Reporting Act (“FCRA”) long have been favorites for class-action lawyers.  Plaintiffs’ attorneys leverage significant statutory damages to generate large judgments or settlements for persons who often experience nothing more than the inconvenience of receiving an unwanted call or text – in other words, no actual damages are present.  The United States Supreme Court recently granted certiorari in Spokeo, Inc. v. Robins to decide whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who, therefore, could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.  The case has widespread implications for lawsuits based on statutes that offer statutory damages (see our TCPA Update for a list of recent lawsuits).

Spokeo, Inc. v. Robins was filed in the United States District Court for the Central District of California under the FCRA.  The plaintiff alleged that Spokeo, Inc., a credit reporting agency, had published inaccurate information that potentially could affect his creditworthiness.  The district court dismissed his complaint, holding that the plaintiff failed to allege an injury or actual harm, characterizing the allegations as simply that the plaintiff had been unable to obtain employment.  According to the court, “allegations of possible future injury” do not satisfy Article III standing requirements.  
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Last week, Senators Al Franken (D-Minn) and Hank Johnson (D-Ga) revived the Arbitration Fairness Act (“Act”), which would ban arbitration provisions in consumer contracts, as well as employment, antitrust, and civil rights cases, and only allow the parties to agree to arbitration after the dispute arises.  The newfound interest in the Act demonstrates renewed opposition to arbitration as an alternative to litigation.

If passed, the Act would have a clear impact on marketers’ ability to avoid class actions and limit their liability in contracts with consumers.  Online marketers often implement binding arbitration provisions to reduce their exposure to class action lawsuits brought by consumers.  But the proposed Act would ban those provisions and only allow the parties to agree to arbitration after the dispute arises. 
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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. 
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The Federal Trade Commission (“FTC” or “the Commission”) has clearly subscribed to enforcing ROSCA recently.  On Tuesday, the FTC filed a complaint against DIRECTV’s negative option program and contract pricing structure under Section 5 of the FTC Act and ROSCA.

In the complaint, the FTC alleged that DIRECTV required customers to agree to a mandatory 24-month contract to receive television programming; customers who canceled their subscriptions before 24 months were charged an early cancellation fee.  Although the rates were set at a specific monthly charge for the first year of a 2-year customer agreement, in the second year of the agreement, the FTC alleged that DIRECTV would increase the monthly charges by 50-70% higher than customers paid in the first year.  After the first year of the agreement, customers either had to pay significant cancellation fees or pay the higher monthly price.  
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The gift card saga in New Jersey looks like it has finally wrapped up with Governor Chris Christie tying a bow on the proceedings by signing NJ S-2235, eliminating data collection requirements for sellers of qualifying gift cards and gift certificates.  Those who have followed this story may recall that back in 2010 New Jersey passed a new gift card law, which made a number of changes including shortening the abandonment period and requiring gift card sellers to collect address information, or at a minimum zip codes, from gift card purchasers.  The law was the first of its kind and led many companies, such as Blackhawk Network and InComm, to pull their gift cards from the state.  In 2012, we reported that the Third Circuit upheld the law, including the data collection provision, but as we advised later that year, the state subsequently amended the law, extending the abandonment period to 5 years and delaying the collection requirement until July 1, 2016. 
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