With the rise of social distancing and stay-at-home orders, the demand for online content has increased exponentially. Given this new reality, online content creators must take steps to ensure that their online creations don’t land them in legal hot water. One of the most prevalent cross-industry issues is music licensing. Music is everywhere in online content and often plays an integral part in the overall experience. From video game players streaming music as they show off their skills on the largest video platforms to fitness instructors using popular music to pump up their workout classes, individuals and companies must ensure that they don’t run afoul of the copyright laws when they incorporate music into their online content.

Copyright owners are granted an exclusive bundle of rights in relation to their copyrighted works, including the exclusive rights to reproduce, perform publicly, and distribute their copyrighted works.1 The copyright in music is broken down into two separate rights—one for the music’s composition (i.e., music and lyrics) and one for the actual sound recording (i.e., a fixed performance). Because of these dual rights, using copyrighted music may require two different licenses.

Whenever you release a video with a song that someone else wrote and composed, you need a synchronization (sync) license. For example, if you release a video of your band playing an Incubus song, you need a sync license to use the music and lyrics of that song, even if it’s a small portion of the song. You do not, however, need a sync license for songs that you wrote and composed yourself or songs in the public domain, so you’re free to use the song “Danny Boy” in your next YouTube video. But if you use a copyrighted sound recording in your video, you will need a sync license for the composition and a master use license for the original recording. Again, this applies even if you’re using a small portion of the original sound recording. Master use licenses are negotiated with a song’s owner—typically, a record label or the recording artist. Sync licenses and master use licenses are separate and distinct from public performance and personal entertainment licenses, which are not covered in this article. For a broader look at music licensing, please read this companion article. The following examples and best practices illustrate and address the challenges associated with using music in online content.

Continue Reading Legal Implications of Syncing Copyrighted Music with Other Content

Earlier this month, NAD issued its first decision under its Fast-Track SWIFT program, its expedited review track for single well-defined advertising issues. (Here are more details on NAD’s Fast-Track SWIFT program.) In its first substantive Fast-Track SWIFT decision, NAD dealt with a dispute between energy bar manufacturers Kind and Clif and reviewed the claim “A Better Performing Bar–Clif Bar For Sustained Energy,” which appeared as the top AdWords result for internet keyword searches for “Kind Bars” and “energy bars.”

Kind argued that this constitutes an express claim comparing the performance of Clif Energy Bars (either generally or with respect to sustained energy) to the performance of Kind Bars or all energy bars on the market, that must be supported by head-to-head product testing. Clif argued that the claim was not appropriate for SWIFT treatment because the challenged claim was too complex. Specifically, Clif argued that expert testimony and a consumer perception survey were necessary to determine whether the word “better” conveyed a comparative performance message or was merely an expression of the advertiser’s opinion of its product, and that these questions could not be obtained within the shortened SWIFT timeline. NAD concluded that the claims were appropriate for SWIFT treatment because they did not require NAD to evaluate complicated product testing (the advertiser did not argue that it had product testing to support a comparative performance claim), and any legal arguments were limited because the challenge involved a single claim in a single context.

Continue Reading NAD Issues First Decision under Fast-Track SWIFT Program

On June 17, 2020, the Ninth Circuit Court of Appeals issued a published opinion affirming the dismissal of a consumer class action seeking $32,000,000 against Venable client Premier Nutrition Corporation. The Court held that federal equitable principles must apply to class actions pending in federal court, even where state law rules the underlying causes of action. See Sonner v. Premier Nutrition Corp., No. 18-15890, 2020 WL 3263043 (9th Cir. June 17, 2020).

Plaintiff-Appellant Kathleen Sonner sued Premier on behalf of a class of California consumers claiming that Premier’s product, Joint Juice, did not provide its advertised joint health benefits. Sonner sought damages, restitution, and injunctive relief under the Consumer Legal Remedies Act (CLRA), as well as restitution and injunctive relief under California’s Unfair Competition Law (UCL).

Continue Reading Ninth Circuit Blocks Class Plaintiffs’ Efforts to End Run Jury Trial

Two weeks ago, the Supreme Court handed down its opinion in Liu v. SEC where it limited the SEC’s disgorgement authority to net profits returned to investors. Today, the Supreme Court granted certiorari in two FTC cases to decide whether Section 13(b) of the FTC Act providing for “injunctive relief” includes the authority to obtain “equitable monetary relief” in the form of disgorgement.

In the first of the two cases, AMG Capital Management v. FTC, the Ninth Circuit’s decision determined below that injunctive relief includes all of the ancillary equitable powers vested in the courts to order equitable monetary relief, including disgorgement. Most notably, Judge O’Scannlain and Judge Bea concurred with the Ninth Circuit’s decision to call into question the prior decisions the majority relied on in so ruling. In stark contrast, the Seventh Circuit in FTC v. Credit Bureau Center overturned its past precedent and determined that, by the express terms of Section 13(b), Congress only authorized restraining orders and injunctions, and thus it did not authorize the FTC to seek equitable monetary relief such as disgorgement. Another wrinkle to the contrast between these two cases is the dynamic between the FTC and the Solicitor General. As we’ve blogged about before, the Solicitor General is representing the FTC in AMG, but declined to take the case in Credit Bureau Center where the FTC appeared on its own behalf. Such a dynamic may lead to a divergence in the positions taken by the FTC and the Solicitor General office.

Though we’ve hinted before these cases could have a significant impact on the amount of monetary relief the FTC is entitled to seek (if at all), these cases will definitively decide whether the FTC is entitled to seek such relief. Because the Court has consolidated these cases, the Court has extended the time for oral argument to one hour. As the briefings in these cases are submitted and an oral argument date is set, we will continue to monitor and blog on future developments.

Today the Supreme Court granted certiorari in Facebook, Inc. v. Duguid where it will resolve a circuit split and decide the issue of whether an “automated telephone dialing system” (“ATDS” or “autodialer”) under the Telephone Consumer Protection Act (“TCPA”) encompasses any device that can “store” and “automatically dial” telephone numbers, even if the device does not “us[e] a random or sequential number generator.” In other words, the Court will determine whether a caller uses an autodialer to place a call or send a text message if the platform being used merely dials without human involvement from a stored list of telephone numbers (the minority view), or whether the platform itself must randomly or sequentially generate the telephone numbers that it dials (the majority view).

The decision below reaffirmed the Ninth Circuit’s and, more recently, Second Circuit’s expansive readings of the TCPA’s ATDS definition — that is, merely having the capacity to store and dial numbers automatically suffices for an ATDS. This is in stark contrast to cases in the Seventh, Eleventh, and Third Circuits, which have held that, to be an autodialer under the statute, a device must have the capacity to “store or produce” numbers “using a random or sequential number generator” and to dial those numbers. In those three circuits, merely dialing from a stored list of targeted telephone numbers is not enough to constitute an autodialer.

Notably, the Supreme Court refrained from tackling the other question petitioner presented: whether the TCPA is an unconstitutional restriction of speech under the First Amendment. As we discussed earlier this week, the Court struck down the Government Debt Exception to the TCPA as unconstitutional, severed it, and left the remainder of the TCPA in place.

As the disparity among the circuits shows, the Supreme Court’s decision in Duguid will have a pivotal impact on the scope of the TCPA’s ATDS definition. Stay tuned as we continue to monitor this case throughout the Supreme Court’s upcoming term.

On Monday July 6, 2020, the U.S. Supreme Court issued its long-awaited decision in Barr v. American Association of Political Consultants, Inc., in which a majority of the Court struck down and severed the 2015 Government Debt Exception (the Exception) to the 1991 Telephone Consumer Protection Act (TCPA) but held that the balance of the TCPA was constitutional.

First, as oral argument in May indicated, the Court was brief in striking down the Exception as unconstitutional.  A plurality of opinions found that the Exception was a content-based restriction that violated the First Amendment.  The majority opinion, authored by Justice Kavanaugh and joined by Chief Justice Roberts, Justice Alito, and Justice Thomas, found the government’s arguments that the Exception was not content-based unpersuasive, but, instead, relied upon the Exception’s text, drawing a distinction based on the message a speaker is permitted to convey: “A robocall that says, ‘Please pay your government debt’ is legal.  A robocall that says ‘Please donate to our political campaign’ is illegal.  Because the law favors speech made for collecting government debt over political and other speech, the law is a content-based restriction on speech.”  Given that the government conceded that it could not satisfy strict scrutiny for a content-based restriction, the majority struck down the Exception as unconstitutional.

Continue Reading Delicate Surgery: Supreme Court Upholds the TCPA but Strikes Down the Government Debt Exception as Unconstitutional in <em>Barr v. AAPC</em>

Earlier this month, the FTC approved a settlement with a developer of popular apps for purported violations of the Children’s Online Privacy Protection Act (COPPA).  The Commissioners voted 4-1 to authorize the Department of Justice to file the complaint and the stipulated final order resolving the matter.  Under the stipulated final order, the company was ordered to pay a $4 million civil penalty (although all but $150,000 of it was suspended for inability to pay).  The lone dissent came from Commissioner Noah Phillips who issued a dissenting statement criticizing the “recent push to heighten financial penalties . . . without clear direction other than to maximize the amount in every case.”

Commissioner Phillips made the case, as he has before, that harm should be the starting point when fashioning a penalty.  Steeped in economic theory, he argued that “basing penalties on harm forces defendants to internalize the costs their behavior imposes on others, orienting conduct in a socially beneficial fashion.”  Chairman Simons also issued a statement, contending that starting with harm is “inapposite” when Congress explicitly prohibits practices and directs the agency to impose penalties.

Continue Reading Two Conservative, But Very Different, Approaches to Calculating Civil Penalties: Harm vs. Deterrence

In a case that may have significant implications for the remedies available to the FTC, the Supreme Court issued its opinion yesterday in Liu v. SEC. We’ve written previously about Liu and several cert petitions now pending at the Court. The Court held that the SEC may only obtain disgorgement from defendants as equitable relief under 15 U.S.C. § 78u(d)(5) to the extent the disgorgement is limited to the defendant’s net profits gained from the defendant’s unlawful conduct. This decision is poised to impact the FTC’s authority to obtain disgorgement under Section 13(b) of the FTC ACT, which like Section 78u(d)(5) only provides for “equitable” forms of relief. Indeed, the Court’s decision may have a particularly dramatic impact on parties other than the actual advertiser litigating against the FTC, such as payment processors, whose net profits from alleged unlawful conduct are typically dwarfed by the alleged gross losses to consumer for which the FTC seeks to hold the defendant responsible.

Out of the gate, the Court declined to extend its prior opinion in Kokesh v. SEC to hold that disgorgement is always a penalty, and thus beyond the statute’s authorization for equitable relief. Ultimately, the Court stood by long-standing precedent that a federal agency’s ability to strip wrongdoers of ill-gotten gains constitutes an equitable remedy—provided certain boxes are checked.

Continue Reading Supreme Court Allows for Limited Disgorgement Remedy in SEC Context: What Does that Mean for the FTC?

An increasing number of celebrities and social media personalities are endorsing the use of cannabidiol (CBD) products through social media. Many of these “influencers,” however, fail to take into account and comply with the complex regulatory environment surrounding CBD advertisements, which can have consequences for CBD companies themselves. In the United States, the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) both limit the use of certain language in CBD endorsements. As these advertisements attempt to reach the broadest possible audience, possible violations are especially noticeable to regulators, who have stepped up their enforcement efforts in this area.

What is CBD?

With the passage of the 2018 U.S. Farm Bill, hemp-based CBD products were removed from the Drug Enforcement Administration’s list of scheduled substances, thereby decriminalizing the possession of such CBD products. The Farm Bill defines hemp as a strain of the Cannabis sativa plant species that does not contain more than 0.3% of the psychoactive component tetrahydrocannabinol (THC). Instead, hemp has significantly higher concentrations of CBD. The legalization of recreational and medicinal marijuana in certain states refers to the cannabis plant containing high levels of THC, which may also contain some CBD. Certain states, such as California, have stringent requirements regarding advertising cannabis products, but these rules do not apply to hemp-based CBD products.

Continue Reading CBD Advertisements: What CBD Companies and Celebrity Influencers Need to Know

The FTC continues policing business-to-business deception and its focus on small-business financing. On June 10, 2020, the FTC filed a Complaint in the Southern District of New York against two New York-based companies and several of their owners and officers for allegedly violating the FTC Act in connection with their business financing activities.

According to the Complaint, the defendants targeted small businesses, medical offices, non-profit organizations, and religious organizations. Since 2015, defendants allegedly deceived these consumers by misrepresenting terms of the merchant cash advances (MCAs) defendants provided, and subsequently used unfair collection practices to compel these entities to pay.

Continue Reading New York-Based Business Financing Companies Allegedly Deceive and Threaten Business Consumers