Category: Media

Trade Secret Misappropriation: When An Insider Takes Your Trade Secrets With Them

Raymond Law Group LLC‘s Stephen G. Troiano recently had an article, Trade Secret Misappropriation: When An Insider Takes Your Trade Secrets With Them, featured in The National Law Review:

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While companies are often focused on outsider risks such as breach of their systems through a stolen laptop or hacking, often the biggest risk is from insiders themselves. Such problems of access management with existing employees, independent contractors and other persons are as much a threat to proprietary information as threats from outside sources.

In any industry dominated by two main players there will be intense competition for an advantage. Advanced Micro Devices and Nvida dominate the graphics card market. They put out competing models of graphics cards at similar price points. When played by the rules, such competition is beneficial for both the industry and consumers.

AMD has sued four former employees for allegedly taking “sensitive” documents when they left to work for Nvidia. In its complaint, filed in the 1st Circuit District Court of Massachusetts, AMD claims this is “an extraordinary case of trade secret transfer/misappropriation and strategic employee solicitation.” Allegedly, forensically recovered data show that when the AMD employees left in July of 2012 they transferred thousands of files to external hard drives that they then took with them. Advanced Micro Devices, Inc. v. Feldstein et al, No. 4:2013cv40007 (1st Cir. 2013).

On January 14, 2013 the District Court of Massachusetts granted AMD’s ex-parte temporary restraining order finding AMD would suffer immediate and irreparable injury if the Court did not issue the TRO. The TRO required the AMD employees to immediately provide their computers and storage devices for forensic evaluation and to refrain from using or disclosing any AMD confidential information.

The employees did not have a non-compete contract. Instead the complaint is centered on an allegation of misappropriation of trade secrets. While both AMD and Nvidia are extremely competitive in the consumer discrete gpu market involving PC gaming enthusiasts, there are rumors that AMD managed to secure their hardware to be placed in both forthcoming next-generation consoles, Sony PlayStation 4 and Microsoft Xbox 720. AMD’s TRO and ultimate goal of the suit may therefore be to preclude any of their proprietary technology from being used by its former employees to assist Nvidia in the future.

The law does protect companies and individuals such as AMD from having their trade secrets misappropriated. The AMD case has only recently been filed and therefore it is unclear what the response from the employees will be. What is clear is how fast AMD was able to move to deal with such a potential insider threat. Companies need to be aware of who has access to what data and for how long. Therefore, in the event of a breach, whether internal or external, companies can move quickly to isolate and identify the breach and take steps such as litigation to ensure their proprietary information is protected.

© 2013 by Raymond Law Group LLC

Controversial Film “Escape From Tomorrow” Shows Need to Protect Intellectual Property

The National Law Review recently published an article written by Matthew J. Kreutzer with Armstrong Teasdale regarding Intellectual Property Protection:

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“Escape From Tomorrow,” one of the most controversial films at the 2013 Sundance Film Festival, has put copyright and trademark law, as well as the question of what constitutes parody, in the spotlight. The film reminds companies why it is important to protect their intellectual property: to prevent use (or misuse) by others.

“Escape” tells the story of a family on vacation at Disney World during the outbreak of a mysterious new flu virus. As family members tour the park, they are plagued by increasingly bizarre events that make the rides at the “Happiest Place on Earth” appear to have sinister undertones. As the film progresses, the audience is forced to question whether there really is something unpleasant lurking beneath the famously joyful facade, or if instead, the parents themselves are slowly losing their grip on reality.

Although the film is interesting in its own right, it has become both controversial and noteworthy because it was made “guerilla-style” at the Disney World and Disneyland theme parks without the knowledge or consent of Disney. The cast and crew are seen in the film walking the parks, riding the famous rides, and interacting with the beloved Disney characters without having names, likenesses or locations blurred or obscured. Moreover, ordinary park visitors, who did not know they were being filmed or consent to being in the movie, appear as the background actors.

In the end, Disney may not choose, and ultimately may not be able, to stop the general release of “Escape,” but the specter of IP protection at least gives Disney a possible avenue to pursue. Section 107 of the Copyright Act lists the various purposes for which the reproduction of a particular work may be considered fair use, such as criticism, comment, news reporting, teaching, scholarship, and research. The section also sets out factors to be considered in determining whether a particular use is fair including whether the work is of commercial nature.

Although the U.S. Supreme Court considers parody to be fair use, the particular facts are critical to the final outcome since there is a fine line between parody and a derivative work. Thus, whether the depiction of the Disney parks in “Escape” constitutes fair use could be a matter of interpretation.

“Escape” serves as a warning to those in marketing and sales about the risks of using intellectual property owned by others, such as copyrighted images, when developing promotional materials and webpages. Use of protected images, for example, may not be fair when designed for commercial gain.

Finally, the controversy surrounding “Escape” is a reminder about the danger of showing people in commercial videos, including those used in social media, who have not given their consent to being filmed. Those individuals may have a right of publicity or even claims based on a violation of a right to privacy.

© Copyright 2013 Armstrong Teasdale LLP

Privacy of Mobile Applications

The National Law Review recently featured an article, Privacy of Mobile Applications, written by Cynthia J. Larose with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.:

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As we continue our “new year, new look” series into important privacy issues for 2013, we boldly predict:

Regulatory Scrutiny of Data Collection and Use Practices of Mobile Apps Will Increase in 2013

Mobile apps are becoming a ubiquitous part of the everyday technology experience.  But, consumer apprehension over data collection and their personal privacy with respect to mobile applications has been growing.   And as consumer apprehension grows, so does regulatory scrutiny.  In 2012, the Federal Trade Commission (FTC) offered guidance to mobile app developers to “get privacy right from the start.”    At the end of 2012, the California Attorney General’s office brought its first privacy complaint against Delta Airlines, Inc., alleging that Delta’s mobile app “Fly Delta” failed to have a conspicuously posted privacy policy in violation of California’s Online Privacy Protection Act.  And also in December, SpongeBob Square Pants found himself in the middle of a complaint filed at the FTC by a privacy advocacy group alleging that the mobile game SpongeBob Diner Dash collected personal information about children without obtaining parental consent.

In 2013, we expect to see new regulatory investigations into privacy practices of mobile applications.   Delta was just one of 100 recipients of notices of non-compliance from the California AG’s office and the first to be the subject of a complaint.  Expect to see more of these filed early in this year as the AG’s office plows through responses from the lucky notice recipients.   Also, we can expect to hear more from the FTC on mobile app disclosure of data collection and use practices and perhaps some enforcement actions against the most blatant offenders.

Recommendation for action in 2013:  Take a good look at your mobile app and its privacy policy.   If you have simply ported your website privacy policy over to your mobile app – take another look.  How is the policy displayed to the end user?  How does the user “accept” its terms?  Is this consistent with existing law, such as California, and does it follow the FTC guidelines?  

©1994-2013 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Privacy Policies Now a Must for Mobile Apps

The National Law Review recently published an article, Privacy Policies Now a Must for Mobile Apps, written by Tanya L. Curtis, Leonard A. Ferber, and Doron S. Goldstein of Katten Muchin Rosenman LLP:

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California has long been a leader in privacy legislation. That position was strengthened recently when the California Attorney General filed a first-of-its-kind lawsuit against a company for its failure to include a privacy policy with a smartphone application. The lawsuit, filed on December 6 against Delta Airlines, alleges that the airline violated California law requiring online services to “conspicuously post its privacy policy” by failing to include such a policy with its “Fly Delta” mobile application. This action by the state of California has broad implications to anyone developing or distributing mobile apps.

Background

In 2004, California enacted the California Online Privacy Protection Act (CalOPPA)requiring commercial operators of websites and online services to conspicuously post detailed privacy policies to enable consumers to understand what personal information is collected by a website and the categories of third parties with which operators share that information. CalOPPA provides that “an operator shall be in violation of this [posting requirement] only if the operator fails to post its policy within 30 days after being notified of noncompliance,” and if the violation is made either (a) knowingly and willingly or (b) negligently and materially. In the case of an online service, “conspicuously posting” a privacy policy requires that the policy be “reasonably accessible…for consumers of the online service.”

While CalOPPA does not define an “online service” or specifically mention “mobile” or “smartphone” applications, the California Attorney General considers any service available over the internet or that connects to the internet, including mobile apps, to be an “online service.” In light of this interpretation, in 2011 the Attorney General’s office contacted the six leading operators of mobile application platforms in an attempt to improve mobile app compliance with CalOPPA. In February 2012, the Attorney General reached an agreement with these companies on a set of principles designed to ensure that mobile apps include a conspicuously posted privacy policy where applicable law so requires (such as in California), and that the policy appear in a consistent location on the app download screen.

Delta markets its Fly Delta mobile app though various online “app stores.” Among other things, the Fly Delta app allows customers to check in to flights, rebook cancelled flights and pay for checked baggage. Delta has a website that includes a privacy policy, but that policy did not mention the Fly Delta app or the types of information collected from the app.

The Case

In October, the California Attorney General’s office sent letters to a number of mobile application makers, including Delta, that did not have a privacy policy reasonably accessible to app users, giving them 30 days to respond or make their privacy policies accessible in their apps. Delta either forgot about or ignored the letter, and the Attorney General filed suit.

The complaint stated that the Fly Delta application did not have a privacy policy within the application itself or in the app stores from which the application could be downloaded. The complaint also noted that, while Delta’s website has a privacy policy, the policy does not mention the Fly Delta app or the personal information collected by the app, and is not reasonably accessible to consumers who download the app. Since Delta failed to respond to the October letter, the Attorney General charged the airline with violating California law by knowingly and willfully, or negligently and materially, failing to comply with CalOPPA. And, in a separate charge under a provision of CalOPPA not requiring 30 days’ notice of noncompliance, the Attorney General alleged that Delta failed to comply with the privacy policy posted on its own website, in that the Fly Delta app does not comply with that policy. The complaint asks for damages of $2,500 for each violation, presumably for each download.

What You Need to Know

While California is currently unique in applying its privacy law to mobile applications, many states look to California, as a leader in this area, for guidance. CalOPPA applies to any “operator of a commercial website or online service that collects personally identifiable information through the Internet about individual consumers residing in California who use or visit its commercial website or online service…” In light of California’s large population, the practical effect of CalOPPA is that an overwhelming number of online businesses (including mobile app developers) must comply with it.

It is now clear that virtually all mobile or smartphone app makers, as well as companies that use smartphone apps as part of their “mobile strategy,” must make privacy policies accessible to app users. The actions of the California Attorney General also make it clear that there is a cost to noncompliance. Such accessibility can be achieved either by including the privacy policy within the app itself or by creating an icon or text link to a readable version of the privacy policy, which may be part of a company’s or developer’s overall web privacy policy.

©2012 Katten Muchin Rosenman LLP

Internet Defamation—What Can You Do When You Are the Target?

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We’ve all seen them.  Anonymous spewing hate-filled, defamatory statements on Facebook and Twitter, as well as in the comment pages of news stories on both local and national news.  The commenters have a certain entertainment value, until you or your business are in their sights.  So what do you do?  The answer is not always so simple, especially when you don’t even know who is speaking.

Internet freedom has allowed for an unprecedented expansion in opportunities for the Average Joe to speak, but that expansion has come with a price for those defamed on the internet.  In order to foster a free and expansive internet, in 1996 Congress enacted Section 230 of the Communications Decency Act, 47 U.S.C. § 230.  Section 230 grants interactive internet service providers (such as Facebook, Yelp, YouTube, and Twitter) immunity from civil defamation claims for user-created content.

There are very few exceptions to Section 230 immunity, with the only one recognized in case law being a case in which provider Roommates.com directed the posts to a certain extent using drop-down menus.  See Fair Housing Council v. Roommates.com, LLC, 521 F.3d 1157 (9thCir. 2008).  Providers have learned from Roommates.com’s example and are careful to maintain their Section 230 immunity.

What this means in simple terms is that if you or your business is defamed on Facebook or Twitter, you can’t sue Facebook or Twitter, and you can’t force Facebook or Twitter to remove the defamatory postings.  Section 230 forces you to attempt to track down the user who originally posted the speech—often a virtual impossibility in this day and age when the vast majority of defamatory postings on the internet are done anonymously.

So what can you do?  First, don’t give up on social media and its ability to deal with at least some of the problems.  Interactive internet service providers are aware of the damage defamatory statements can do, and know that they risk losing their Section 230 immunity if they don’t self-police to a certain extent.  All interactive internet service providers have terms of service, and the majority ban defamatory and harassing speech.  Most will delete the offending material upon a showing that the material is indeed defamatory (i.e., not protected opinion), and most providers include a function allowing you to report the post directly from the webpage, without the need to send a demand letter from an attorney.

Furthermore, interactive internet service providers realize that though anonymity enjoys protections under the First Amendment, it also feeds a great deal of the ugliness seen on the internet today.  Facebook, for instance, requires posters to use their real names, and if Facebook is informed that a person is using a pseudonym, Facebook will disable the account.  Likewise, news sites are increasingly requiring commenters to link their comments to their Facebook accounts in order to provide a measure of accountability that anonymous posts lacked.  YouTube also recently began asking posters to use real names, though that is not currently a requirement.  Not all interactive internet service providers eschew anonymity – Twitter and Tumblr still tout the user’s ability to post anonymously – but increasing numbers of providers are requiring that speakers stand behind their comments.

If you can’t get posts removed through the interactive internet service provider, you still have legal options available.  Of course, quite often the best action at this point is no action.  Often defamation lawsuits are counterproductive in that they simply bring more attention to the posts than if the posts are simply ignored.  While difficult to do, sometimes ignoring a simply nasty post is the best policy.

If the post can’t be ignored but is not worth litigation, you can engage with the poster on the interactive site. If someone posts a negative review on Yelp, address the review and contest any factual misrepresentations.  If someone posts on your Facebook wall or sends an angry or defamatory Tweet, address the poster’s concerns.  You have the right to speak too, and quite often thoughtful, careful engagement is the best remedy.

Some posts are simply so egregious and damaging that they must be addressed in a court of law.  If action is warranted, and you are lucky enough to have the name of the poster, you can pursue traditional legal avenues available to victims of defamatory speech.

If you do not have the name, however, if you want to take action you will need to file a civil defamation lawsuit naming as defendant a John Doe.  Unfortunately, even though many interactive internet service providers will remove defamatory posts upon request, none will give up the names, email addresses, or IP addresses of posters without a subpoena.  Once litigation is filed, you and your legal counsel will have subpoena power to require the interactive internet service provider to give up the names, emails and IP addresses associated with the poster.  Normally the providers will still put up a fight even in light of a subpoena, but this is the only way available to obtain the identity of an anonymous poster so that you can hold them responsible for their defamatory speech.

While we have the right to free speech in the United States, our laws require us to take responsibility for what we say when we are wrong and our speech causes damage.  In the case of internet-based speech, it may be difficult to vindicate your rights and hold speakers responsible, but with persistence and a clear understanding of how interactive internet service providers work you can protect your good name on the internet.

© 2012 by McBrayer, McGinnis, Leslie & Kirkland, PLLC

Why Social Media Matters to Lawyers – Reason #2: Out-of-Pocket Spending Efficiency

Womble Carlyle

In my previous post, I discussed how the use of social media makes sense for attorneys because it offers tremendous personal-effort efficiency. With one action – social media – lawyers can initiate and advance relationships…and they can enhance their digital footprint, making it easier for search engines to find them.

A second great reason that lawyers should care about social media is that, unless one subscribes to enhanced versions such as LinkedIn’s Sales Navigator, it’s a free medium.

In 2012, both the Harvard Business Review and the McKinsey Quarterly pointed out that because of the emergence of social media, sophisticated commercial companies are able to reduce advertising spend and, even for companies that still spend big, to dramatically leverage their advertising’s messages via social media.  One of the reasons that law firm advertising has been limited is because of the placement cost, which, in a professional services firm, is a direct hit on partners’ wallet. However, social media removes that barrier.

Next: How attorneys can use social media to leverage content.

Note: This post is the second blog entry based on a Nov. 17th presentation I made at the 2012 Lex Mundi Latin America/Caribbean Regional Conference in Santiago, Chile.

Read the rest of the series:

Why Social Media Matters to Lawyers – Reason #1: Personal-Effort Efficiency

Copyright © 2012 Womble Carlyle Sandridge & Rice, PLLC

Why Social Media Matters to Lawyers – Reason #1: Personal-Effort Efficiency

The National Law Review recently published an article, Why Social Media Matters to Lawyers – Reason #1: Personal-Effort Efficiency, written by Steven Bell of Womble Carlyle Sandridge & Rice, PLLC:

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After all these years, I have concluded (as some, such as Mark Maraia have done long before me) thatrelationships are the foundation of client development at law firms.

Research by Hellerman Baretz Communications and BTI Consulting shows that, by far, personal referrals are the top driver for outside law firm engagements. Relationships with lawyers, existing clients, referral sources and other contacts are the lifeblood of any attorney’s practice, and I have been told that 70% of law firms’ new business derives from these relationships.

The same research shows that approximately 10 to 20 percent of a law firm’s business comes via online search engines such as such as Yahoo! and Google.

I know of only one activity that directly addresses both the initiation, advancement and monetization of relationships AND the enhancement of the digital footprint: social media. That alone is reason enough for attorneys to post, Tweet and comment. But there are other benefits for attorneys who engage in social media, including personal effort efficiency.

One of the real advantages of social media as a marketing exercise is that busy attorneys can fit it into their hectic schedules. Anyone with a little bit of technology education and a will to succeed in the information age can dash off a Tweet or a LinkedIn post, use it to initiate and/or advance a relationship, and create a ripple in the digital pond.  Thanks to mobile devices, one can even handle your social media activities while waiting for a meeting or sitting at the airport terminal.

Social media was tailor-made for the hectic, on-the-go lifestyle that most attorneys (and the professionals who support them) lead.

Next, Reason #2 – Out-of-Pocket-Spending Efficiency

Note: This post is the second blog entry based on a Nov. 17th presentation I made at the 2012 Lex MundiLatin America/Caribbean Regional Conference in Santiago, Chile.

Copyright © 2012 Womble Carlyle Sandridge & Rice, PLLC

Gossip Mag’s “Fair Use” Claim in Publishing a Celebrity’s Wedding Photos Rejected

The National Law Review recently published an article regarding “Fair Use” of Celebrity Wedding Photos, written by Sarah Bro of McDermott Will & Emery:

 

The U. S. Court of Appeals for the Ninth Circuit reversed the district court’s grant of summary judgment in favor of Maya Magazines and Maya Publishing Group (collectively Maya), finding that the media company did not meet its burden of establishing that its publication of previously unpublished photos of a celebrity couple’s wedding constituted fair use. Monge  v. Maya Magazines, Case Nos. 10-56710, 11-55483 (9th Cir., Aug. 14, 2012) (McKeown, J.) (Smith, J., dissenting).

Latin American celebrities, Noelia Lorenzo Monge and Jorge Reynoso (the couple), filed an action against Maya in the district court for copyright infringement and misappropriation of likeness based on Maya’s publication of previously unpublished photographs of the couple’s 2007 secret Las Vegas wedding in the Spanish-language celebrity gossip magazine TVNotas.

Maya purchased the six wedding photos at issue from a paparazzo, who was also an occasional driver for the couple. The paparazzo had previously tried to “sell” the photos to the couple to relieve a debt he owed to one of them. The photos were on a memory chip containing hundreds of photos of the couple that were unrelated to the nuptials.  In addition to publishing one of the wedding photos on the cover of TVNotas, Maya also published a two-page spread within the magazine showing all six wedding photos interspersed with captions. Due to the privacy of the wedding (to protect Monge’s image as a single pop star), the six photos were the only published images of the nuptials.

Because federal registration of a copyright is required before bringing an infringement action, after learning of Maya’s publication of the photographs, the couple registered copyrights in five of the images. The couple’s lawsuit was filed shortly thereafter.

The district court dismissed the misappropriation of likeness claims and granted Maya’s motion for summary judgment based on its affirmative defense of fair use of the copyrighted photographs. On appeal, the sole issue was whether the district court properly granted summary judgment based on the fair use doctrine. Accordingly, the court analyzed the four fair use factors under copyright law, finding that none of them topped in favor of Maya.

1.  The Purpose and Character of the Use of the Copyrighted Work

Although it agreed that the wedding photos were newsworthy, the 9th Circuit reaffirmed that news reporting alone is not “sufficient itself to sustain a per se finding of fair use.” Thus, the commercial nature of the use of the photographs was determined to weigh against a finding of fair use. The Court also found that the reproduction of the photos as a two-page montage with captions was not a sufficient transformation of the original works to allow Maya to properly claim fair use.

2.  The Nature of the Copyrighted Work

The 9th Circuit explained that photographs—even those that are not highly artistic in nature—are entitled to copyright protection.  Even though the unpublished status of a work does not bar a finding of fair use, the court cited Harper & Row v. Nation Enters., stating that the couple’s right to control the first public appearance of its copyrighted photographs outweighed Maya’s claim of fair use.

3.  The Amount and Substantiality of the Portion Used in Relation to the Work as a Whole

With respect to the third fair use factor, the 9th Circuit noted that the only existing photos of the couple’s wedding and wedding night were used in the magazine, and that Maya’s minimal cropping of the photos meant that the “heart” of each copyrighted photograph was published. Because “Maya used far more than was necessary to corroborate its story,” this factor also weighed in favor of the couple.

4.  The Effect Upon the Potential Market for the Copyrighted Work

Finally, the court found that Maya’s unauthorized publication of the photos “substantially harmed” and “completely usurped” the couple’s potential market for the photos.  The court disagreed with the district court’s claim that there was no potential market for the photographs because the couple did not intend to sell their publication rights in the images.

Instead, the court explained that the potential market for the photos existed independently of the couple’s intent to market the photos. Specifically, the court focused on the fact that the couple was in the business of selling images of themselves and that Maya had previously paid Monge to pose for one of its publications and had also paid Reynoso for pictures of his prior marriage.  Therefore, the court determined that Maya’s purchase of the photos from the paparazzo confirmed the potential market for the photographs.

The Dissent

The dissent argued that the decision of the panel majority was inconsistent with Supreme Court precedent and undermined the fair use doctrine and free press. In particular, the dissent stated that it would have affirmed the district court’s ruling with respect to at least three of the photographs that “directly proved” the couple’s marriage. The dissent also noted that the nearly 400 photos on the memory chip (which were unrelated to the couple’s wedding) constituted a “compilation” and that Maya’s use of only five of those 400 photos was not a substantial portion of the work in relation to the whole.

© 2012 McDermott Will & Emery

‘Get-Rich-Quick’ Systems Penalized by FTC to Tune of $478 Million

As part of the Federal Trade Commission’s ongoing efforts to shut down scams that target financially vulnerable consumers, a U.S. district judge has issued a $478 million judgment at the request of the FTC against the marketers of three get-rich-quick systems that the agency says are used for deceiving consumers. The order is the largest litigated judgment ever obtained by the FTC.

The judgment was awarded against companies and individuals who marketed the schemes, titled “John Beck’s Free & Clear Real Estate System,” “John Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions.”

Nearly a million consumers paid $39.95 for one of these “get-rich-quick” systems, and some consumers purchased personal coaching services, which cost up to $14,995. According to the FTC complaint filed in June 2009, one system was marketed to consumers with the promise that consumers could “quickly and easily earn substantial amounts of money by purchasing homes at tax sales in their area ‘free and clear’ for just ‘pennies on the dollar’ and then turning around and selling these homes for full market value or renting them out for profit.”

The FTC said that nearly all the consumers that bought the systems lost money.

The FTC’s suit alleged violations of the Federal Trade Commission Act, based on the defendants’ representations in connection with the advertising, marketing, promoting and sale of the systems. The FTC also alleged that the defendants’ violated the Telemarketing Sales Rule through their marketing to consumers.

Two of the individual defendants, Douglas Gravnik and Gary Hewitt, were held jointly and severally liable for the monetary part of the judgment. The judge also imposed a lifetime ban from infomercial products and telemarketing against Gravnik and Hewitt. Gravnik and Hewitt indicated that they are likely to appeal the order to the extent it imposes a lifetime ban. A third individual, John Beck, is responsible for $113.5 million of the judgment.

In its case, the FTC filed 30 consumer declarations detailing consumers’ experiences with the defendants’ products. The defendants objected to many of these declarations on various grounds, including hearsay, relevance, and the best evidence rule among other objections, but these objections were all overruled.

The defendants also objected to the use of a survey by the FTC that showed that less than 0.2 percent of consumers who purchased the defendants’ system made any profits and only 1.9 percent of consumers who purchased coaching material made any revenue. The defendants moved to exclude all evidence relating to the survey on the ground that the pre-notification letter “poisoned the well in such a way as to invalidate whatever survey finding the FTC obtained” and argued that the manner in which the survey was conducted rendered the results unreliable. The court found that the survey was performed under accepted principles used by experts in the field and was admissible.

The court granted summary judgment for the FTC , finding that the defendants made material misrepresentations that were either false or unsubstantiated. The court pointed out that the materials provided by the defendants to consumers taught consumers how to purchase tax liens and certificates, but these purchasers do not obtain title to the property and thus were not “purchasing” the homes as the advertising materials stated.

The court also granted summary judgment on the Telemarketing Sales Rule allegations. The basis of the defendants’ argument was that the violations were isolated and should not be the basis for liability. The court found that there was no dispute that the defendants’ telemarketers repeatedly initiated calls to consumers who asked the defendants not to contact them. The FTC also produced “overwhelming” evidence that the defendants lacked a meaningful compliance program or any written procedures in place to comply with the regulations.

Jeffrey Klurfeld, director of the FTC’s Western Region, stated in a press release that “This huge judgment serves notice to anyone thinking of using phony get-rich-quick schemes to defraud consumers. The FTC will come after you if you violate the law.”

In this case, the FTC had already completed its surveys when it went to court. Trial judges will often be very impressed with FTC surveys and will grant judgment to the agency in nearly every case. Therefore, it is critical that a company that is being targeted by the FTC obtain counsel at the earliest possible stage, before the agency files anything in court. Counsel should be ready to vigorously defend the client’s marketing practices with techniques such as the use of countersurveys and customer testimonials and expert testimony, before the FTC files in court.

© 2012 Ifrah PLLC

Restrictions on Digital Billboards Are Valid Under the First Amendment

Varnum LLP

A municipal zoning ordinance that restricts the placement of digital billboards does not violate an advertiser’s right to free speech, according to a recent decision  by the U.S. District Court for the Western District of Michigan in Hucul Advertising, LLC v. Charter Township of Gaines, No. 1:11-cv-682 (Bell, J.).  The lawsuit follows an earlier, unsuccessful lawsuit by Hucul against the Township that was the subject of an earlier blog post.

The case involves the outdoor advertising company’s challenge of a Township ordinance under the First Amendment to the U.S. Constitution.  The ordinance requires that billboards be placed next to a local highway and that digital billboards be placed more than 4,000 feet apart from one another.  Hucul filed the lawsuit after the Township denied the company’s application to erect digital billboards that did not conform with the ordinance.

In granting summary judgment for the Township, the Court explained that a municipality may place valid limits on the “time, place, and manner” of speech provided:

(1) that they are justified without reference to the content of the regulated speech, (2) that they are narrowly tailored, (3) to serve a significant governmental interest, and (4) that they leave open ample alternative channels for communication of the information.

Applying this test, the Court found that the restrictions in the ordinance were valid.  The ordinance: (1) did not distinguish between commercial and non-commercial speech; (2) was “content neutral”—i.e. they didn’t depend on the message being displayed on the billboard; (3) furthered the Township’s interest in traffic safety and community aesthetics; and (4) was a reasonable fit with the Township’s goals.  Further, the Court emphasized the fact that the ordinance did not restrict Hucul from communicating its speech through alternate channels.

© 2012 Varnum LLP