DMCA Safe Harbor Registration Deadline Is Fast Approaching

picture of letters DMCA on deck to accompany post about DMCA digital safe harbor registration
57854715 – the acronym “dmca” is lined with gold letters on wooden planks. 3d illustration image

Do you want to be held responsible for other people’s intellectual property missteps? No? Then register for the DMCA Safe Harbor program at dmca.copyright.gov by December 31, 2016. People who previously registered by mail must re-register using the online system. Need help? Contact Kelly / Warner.

Mandatory Online Registration For DMCA Safe Harbor Program

The U.S. Copyright Office changed the DMCA agent registration process. Previously, online service providers could mail in their registration requirements. Not anymore.

By December 31, 2016, all parties wishing to maintain their safe harbor status must register using the online system at dmca.copyright.gov (link doesn’t go live until Dec. 1, 2016).

The DMCA Safe Harbor Provision

The Digital Millennium Copyright Act (DMCA) governs online intellectual property in the United States. Section 512(c), commonly known as the “Safe Harbor” program, outlines how ISPs can protect themselves from third-party intellectual property liability.

To put it another way, the DMCA Safe Harbor program is why authorities don’t punish Google when *John Doe* posts a pirated film on YouTube.

DMCA Designated Agents

The DMCA Safe Harbor program isn’t an automatic protection bestowed on all websites. To qualify, every three years, ISPs must formally designate and register an agent — typically an attorney — who acts as the receiver for all site-specific intellectual property notifications and takedown requests.

What happens if you don’t register a DMCA agent? Authorities could hold you responsible for users’ intellectual property foibles. So, if you’re an OSP, and you don’t want to pay the price for users’ actions, register for the DMCA Safe Harbor program.

Online Trade Libel Attorney Gets Facebook Defamation Ruling Reversed

Picture of blackboard featuring the word Trust to accompany blog post about online trade libel caseTo his client’s relief, online trade libel attorney Dan Warner convinced an Arizona appeals court to vacate a trial court’s ruling in a Facebook defamation case. By successfully arguing that the presiding judge failed to properly apply the appropriate legal tests established in Mobilisa, Inc. v. Doe, Warner was able to slip his client from the defamation liability noose.

About the Case: Business Criticism On Facebook Leads To Online Trade Libel Lawsuit

An online trade libel lawsuit, the Plaintiff (whom we’ll call “Acme”) sued an anonymous user (“John Doe”) for allegedly posting false and defamatory statements about Acme’s product on Facebook.

Since the user posted under an alias, Acme filed a John Doe claim to uncover the real name of the anonymous defendant. After initiating the lawsuit, Acme sent subpoenas to Facebook and Domains by Proxy, in search of information (like an IP address) that would help reveal the identity of the product-critiquing user.

Upon receiving the subpoena, Facebook notified John Doe; Doe then retained online trade libel attorney Dan Warner who filed a motion to quash the subpoenas.

Online Trade Libel Catch-22: Preserving Privacy v. Accountability

Online service providers avoid passing out user data like Gremlins avoid bright lights. Why? Because online privacy is a legal quagmire, and if they’re not careful, ISPs can unwittingly find themselves dragged into users’ legal battles. Thus, to avoid unnecessary, resource draining, litigation entanglements, most websites adopt a hands-off approach when faced with civil information requests.

In some cases, however, ISPs are legally compelled to release user data, by force of a court order.  However, in Arizona, to secure a subpoena that forces websites to hand over identifying information on anonymous Internet speakers, plaintiffs must show that:

  • The speaker has been given adequate and a reasonable opportunity to respond to the discovery request;
  • The plaintiff’s action could survive a summary judgment on elements, irrespective of the speaker’s identity; and
  • The balance of the parties competing interests favors disclosure.

Unfortunately, in Acme’s case, the trial court judge denied the motion without making any findings of fact — or conclusions of law — regarding the required three-part Mobilisa test.

Warner’s appeal included several points on which the appellate court could have hung a reversal, but it chose to focus on the trial judge’s failure to adequately apply the “balancing” test, as outlined in Mobilisa.

The appeals court, in Warner’s client’s case, expressly held:

Because of the conclusory nature of the order below, we are unable to tell if the trial court correctly used the 3-part test outlined in Mobilisa v.  Doe, 217 Ariz.  103, 170  P.3d  712 (App.  2007) (using  a  summary  judgment  standard)  or  the  lower  prima facie standard urged by Dream Steam below with their citation to Best W. Int’l Inc., v. Doe, WL 2091695 (D. Ariz. July 2007). See Chaparral DIVISION ONE FILED:  RUTH A. WILLINGHAM, CLERKBY: 6/27/2016 RB Dev. v. RMED Int’l, Inc., 170  Ariz.  309, 311, n.3,  823  P.2d  1317, 1319  (App.  1991) (citation  omitted)  (conclusory  rulings  impair effective  appellate  review).    We  are  likewise  unable  to  discern whether  the  trial  court  engaged  in Mobilisa’s third-prong  balancing test when considering whether the disclosure of Doe’s name outweighed the community’s protected interest in supporting anonymous speech on the internet.

In other words, the court of appeals ruled that it was unclear if the trial court judge considered whether the plaintiff’s business interests outweighed the defendant’s right to anonymously express opinions on the Internet.

Consult With An Experienced Online Trade Libel Lawyer

In today’s digital, viral marketplace, a pristine reputation is crucial to maintaining a competitive edge; protecting your business’ good name is arguably as important as securing seed money.

If you’re fighting a product or business disparagement headache, get in touch with our team of online defamation fixers. We can help.

To learn more about online trade libel lawyer Dan Warner, head here.

Amazon Sues Over Fake Reviews: FBA News

Picture of fake dollar bill to accompany a blog post about Amazon sues over fake reviews

Amazon Does Not Suffer Fools Fake Reviews

Amazon sues over fake reviews, and actively engages courts to enforce its “zero tolerance” stance. Recently, the company filed yet another lawsuit against several phony feedback facilitators.

Amazon Sues Over Fake Reviews

In the past year alone, the online retailer has already sued hundreds of businesses and individuals who create and deploy fake reviews. (You can read about other instances here, here, and here.)

Why Does Amazon Hate Fake Reviews?

Amazon — (and the Federal Trade Commission, for that matter) — views fake reviews as an act of unfair competition. Or, in legalese, buying fake reviews violates Section 5 of the FTC Act because the practice qualifies as an intentional attempt to mislead consumers.

Amazon explained its position to TechCrunch

“Our goal is to eliminate the incentives for sellers to engage in review abuse and shut down this ecosystem around fraudulent reviews in exchange for compensation. As long as this type of abuse exists, we will continue to take enforcement and legal action against sellers participating in fraudulent reviews.”

Discount-For-Review Programs Are Also Against Amazon Policy

The news comes in the wake of Amazon’s announcement to purge the site of incentivized reviews (exception: books).

What does this mean for e-commerce entrepreneurs? In all probability, traditional advertising will make a triumphant comeback.

Is Amazon Hamstringing Startups?

In addition to investor cynicism, Amazon’s recent crackdowns have sparked a concern flame in the e-commerce industry. Is Amazon, in a way, raising the barrier of entry way too high, by ultimately forcing startups to outlay a larger initial marketing spend?

Fake Reviews v. Discount-For-Reviews: Both Are Now No-Nos on Amazon

What is the difference between fake reviews and discount-for-review programs? The former conspicuously violates Federal marketing regulations; the latter is (perhaps, it’s now more accurate to say, “was”) an enormously helpful startup marketing tool — which also spawned an entire promotional services niche, feedback facilitation.

Or, to put it simply: discount-for-review programs helped grow the online business economy.

Difficult But Necessary?

On account of Amazon’s no-holds-barred approach to exterminating solicited reviews, a big e-commerce question now looms: Do Amazon’s actions fall into the “difficult-but-necessary” category? Did company quants crunch numbers and discover that its third-party selling programs were ballooning at a breakneck — and unsustainable — speed, flooding the platform with potentially problematic digital detritus?

Because here’s the thing: Amazon is currently the top-dog, and as such, greatly exposed. It must be careful. Other online retailers are patiently crouching in the tall weeds, waiting for the perfect opportunity to pounce — and that opportunity could be Amazon’s deteriorating respectability. After all, if the platform becomes synonymous with counterfeit goods and phony reviews, the public will start to look elsewhere.

Adjust To Survive

Now, does all this news spell doom and gloom for FBA sellers? No. Surviving amounts to adjusting. Brands and marketers should consider:

  • Launching products at a low price, along with a well-executed customer satisfaction email campaign, which encourages consumers to leave reviews.
  • Readjusting budgets to include other types of “Off Amazon” marketing efforts.
  • Adding an unexpected packaging surprise. Why? Because people are more likely to leave a review if they’re delighted by an unanticipated treat. This tactic also has the added advantage of acting as a counterfeit deterrent.

Need Advice From An Amazon E-Commerce Attorney?

Our firm helps business owners overcome online review challenges, in addition to other Internet business issues, like account suspensions, counterfeiting, and intellectual property troubles.

Source

Yelp Defamation: Is The Site Required To Remove Defamatory Reviews?

Yelp Defamation

Yelp! (“Yelp”) isn’t happy.

A California judge ordered the review site to remove a defamatory posting. Yelp, for its part, felt the decision defied Section 230 of the Communications Decency Act and appealed — but lost.

Will the ruling affect future Yelp defamation claims? Will business owners be helped or hurt by this turn of events?

Let’s review the case and discuss the potential implications for SMBs.

Background Summary: Business Owner Sues For Defamation Over Yelp Review

We live in the Age of Online Reviews, so it happens all the time. A service provider clashes with a client. Eager to share his displeasure with the world, said client (under the altruistic auspices of “warning others”) takes to Yelp and posts a scathing — often hyperbolic — negative review. Within days, the target’s inquiries come to a grinding halt.

It’s every business owner’s worst nightmare, and it happened to an attorney a few years back — so she sued for online defamation.

Who won?

To shorten a long story, the client failed to appear in court, which triggered a default win, and the judge ordered Yelp to remove the defamatory review.

Yelp’s Position: Forcing Content Removal Defies Section 230 of the CDA

But Yelp didn’t want to remove the review.

In its defense, the review website argued insufficient governance, maintaining that Yelp wasn’t party to the lawsuit, and subsequently not subservient to the court in this matter. Yelp also reasoned that the removal order contravened Section 230 of the CDA, which gives immunity to websites dragged into lawsuits involving defamatory user content. Or, to put it another way, it’s the law that stops users from suing, say, Facebook (or even Yelp) over another user’s post.

Now, please don’t read us wrong: you CAN sue individuals who post libelous statements, but not the social media platform on which the contested statement sits. (Section 230 applies to most social media sites. The rules, however, vary for blogs, news sites and other informational platforms that can legally be deemed “the publisher”).

Excerpt From Yelp Defamation Removal Lawsuit

“Yelp’s claimed interest in maintaining its site as it deems appropriate does not include the right to second-guess a final court judgment establishing that statements by a third party are defamatory and thus unprotected by the First Amendment.”

Why Doesn’t Yelp Want To Remove Defamatory Reviews?

Why is Yelp against weeding the site of defamatory posts? In its estimation, removing content is a free speech quagmire, so the company spares no expense in defending removal requests.

A spokesperson for the review aggregator explained:

“The ruling undermines the free speech and due process rights of consumer reviewers and the online platforms that host their content. In a single jumbled ruling, the court managed to contravene and contort longstanding precedent concerning the First Amendment, constitutional due process and Section 230 of the Communications Decency Act.”

Section 230 of the Communications Decency Act, or CDA, says, “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

Court’s Reasoning: Asking Yelp To Remove Defamatory Review Doesn’t Have Anything To Do With Section 230 In This Case

According to the court, the removal order wasn’t legally damaging, and therefore fell outside the Section 230 sphere. In other words, since Yelp wouldn’t face imminent legal injury by deleting the defamatory post, the removal order doesn’t interfere with the CDA.

And on a technical note, according to the ruling, Yelp allegedly filed its protest motion too late.

Who Can I Talk To About My Yelp Defamation Issue?

Dealing with a defamatory Yelp review? We can help. Our team has assisted countless small- and medium-sized business owners overcome setbacks related to damaging Yelp reviews. Not every case requires a lawsuit. In many instances, we’ve been able to rectify the situation without filing a claim.

Contact us now. We’ll discuss your situation, (even vent about Yelp if you want), and then start formulating a plan — that’s both effective and budget conscious — to reverse the damage done by Yelp defamation.

Time To Rethink Your Trade Secret Strategy? Legislation is Looming.

trade secret law change

Are you trade secret reliant? If yes, take two minutes to read this post. Why? Well, federal Representatives OK’d a bill that, if fully passed, may impact your intellectual property protection strategy.

Summary of Proposed Trade Secret Law: Addition Of Federal Jurisdiction Privileges

Dubbed the Defend Trade Secrets Act (DTSA), it’s been described as the “most significant expansion of federal law in intellectual property since the Lanham Act in 1946.”

Currently, trade secret governance is a state issue. If, however, DTSA becomes law, certain people could file trade secret claims in federal court. To qualify, potential plaintiffs would have to supply “evidence of actual or threatened misappropriation before a court [could] issue an injunction to prevent it.”

Join or Die! The Supporters Are Saying…

Why alter trade secret standards? The argument goes like this:

  • Back in the day, trade secret disputes were “largely a local matter.” Typical cases involved a departing employee smuggling confidential customer lists to their new job…down the street.
  • Enter the Internet. Many a tech fortune was built on the back of a trade secret (i.e., Google’s infamous algorithm). Or, to put it in cash-money terms: Trade secrets represent trillions of publicly traded dollars!

On account of their exalted economic position, people feel that federal courts are best equipped to handle complex, high-dollar trade secret claims.

Objection! The Opposition’s Standpoint…

Not everyone is cheering for this new trade secret law. Opponents say the measure is superfluous. States, they argue, are well-equipped to handle all manners of trade secret claims. Also, DTSA detractors think the bill’s wording — specifically the phrase “extraordinary circumstances” — is too vague.

Pundits portend a trade secret litigation spike if  politicians pass the law.

Speak With A Trade Secret Lawyer

Trade secrets play a giant role in today’s tech industry. Formulas, algorithms and calculations are at the heart of many startups and established firms.

Our team has successfully handled all manners of trade secret-related situations. A lawsuit isn’t always necessary to remedy a misappropriation. Get in touch today to start reviewing potential solutions.

Article Sources

Gershman, J. (2016, April 27). Congress May Be About to Shake Up Trade Secret Law: Is That a Good Thing? Retrieved June 17, 2016, from http://blogs.wsj.com/law/2016/04/27/congress-may-be-about-to-shake-up-trade-secret-law-is-that-a-good-thing/

Alibaba E-commerce Update: 5 Things To Consider When Strategizing

Picture of Alibaba banners outside new york stock exchange to accompany article about Alibaba e-commerceAlibaba is at a crossroad. The path it picks could profoundly affect the company’s future. Why should sellers and marketers care? Well, if Alibaba’s *health* declines, it could impact the e-commerce ecosystem.

Alibaba E-commerce Update: Counterfeits and Government Skepticism

What should you know about Alibaba’s current position?

  • Many U.S. officials want Alibaba on the Notorious Markets List because of alleged counterfeit goods on the site. This latest warning isn’t the first time a counterfeit outbreak has hurt the platform. Before its IPO, Alibaba was on the List; but cleaned up its act, and got removed in 2012.
  • Ostensibly in response to U.S. concerns, Jack Ma — the Mark Zuckerberg of Alibaba — has promised to scrub the site of scammers and insists he’s never “missed any meetings relating to [Alibaba’s] anti-counterfeit team.” Another show of commitment? The company hired a slew of new employees to work on the Alibaba e-commerce counterfeit problem.
  • Ma hinted at an Internet-wide strategy, specifically mentioning JD.com and WeChat. Choosing rodents as an allegorical vehicle, Ma explained, “If before we were huffing and puffing to chase down and kill mice, now what we’re going to do is annihilating [sic] the environment the mice need to survive.”
  • Alibaba allegedly partnered with law enforcement officials to arrest 75 suspected *e-commerce criminals.* In other words, the platform isn’t necessarily a privacy stronghold. Be aware.
  • Another interesting tidbit? Whispers indicate that Chinese officials could be “turning against” Alibaba over some tension between Ma and China’s President Xi Jinping. You can read about it here. Will the beef affect Alibaba’s platform? Believe it or not, there is a chance — albeit slim. But, China’s current administration has shown a Napoleonic appetite for Internet control. Watch this space.

We Solve E-commerce, Marketing & Private Label Business Problems

Do you sell things online?

  • Are you dealing with an account suspension at Amazon, Etsy, eBay or another e-commerce portal?
  • Has someone hijacked your listing on Amazon or another open catalog website?
  • Have counterfeiters latched onto one (or more) of your products?
  • Is it time to formally protect your products with intellectual property protections?

If you answered yes to any of these questions, we can help.

Our firm has carried many sellers and marketers over professional obstacles. We also handle mundane — but critical — corporate governance, business, and intellectual property legalities.

Our goal is to ensure that the people with whom we work are profitable, protected, and compliant.

If you want to read more Alibaba e-commerce updates and other online retail legal news, head here.

Article Sources

Lopez, L. (2016, March 21). There are signs that China is turning against Alibaba. Retrieved April 18, 2016, from http://www.businessinsider.in/There-are-signs-that-China-is-turning-against-Alibaba/articleshow/51502849.cms

Custer, C. (2016, March 14). Tech in Asia – Connecting Asia’s startup ecosystem. Retrieved April 18, 2016, from https://www.techinasia.com/jack-ma-lays-alibabas-brutal-strategy-war-fake-counterfeit-goods

Arizona Internet Law Update: Revenge, Sharing & Crowdfunding – Oh My!

Arizona Internet law update
Let’s take two minutes to review the latest Arizona Internet law headlines.

Arizona Revenge P-rn, Take Two

After a false start, Arizona now has a revenge porn law. The State Legislator passed a similar statute in 2014, but it was ultimately deemed unconstitutional and excised from the books.

Arizona’s Failed Revenge P-rn Law

Loosey-goosey language killed the state’s first revenge porn law. Under it, anyone who published images with any nudity — and without consent — risked a criminal record.

What’s wrong with that, you ask? Well, people worried that the vague wording created a loophole that gave legislators leeway to censure controversial images (example: the infamous abu ghraib photos, which did include nudity).

Under the new Arizona revenge porn law, plaintiffs must prove ill intent on the part of the defendant. The law was fast-tracked to the Governor’s desk and the statute is already in effect.

The New Parameters

Under the new iteration of the Arizona Internet law, plaintiffs must prove ill intent on the part of the defendant. Immodest pictures released in service of the public interest won’t be subject to Arizona’s revenge p-rn law.

In extreme cases, revenge p-rn felons may land a 2-year prison sentence. Most first-time offenders, however, will walk away with probation.

The law was fast-tracked to Governor Doug Ducey’s desk, he signed it, and the statute is already in effect.

Arizona Wants To Become A Sharing Economy Stronghold

A group of State legislators want to make Arizona a “sharing economy” (e.g., Airbnb, Uber) stronghold. The State Senate recently waived in a measure that disallows towns, counties and cities from banning short term rentals. Or, in more colloquial terms: a law that would allow people to operate Airbnb businesses without much hassle from local authorities who may be a smidge more hostile about short-term rental properties.

The Pro Sharing Economy Argument

But state officials want to grow the state’s sharing economy. The increase in “hotel tax” revenue would boost government coffers; and by voting for the bill, politicians can legitimately position themselves as “small business-friendly;” plus, the new rules would likely increase affordable accommodations in Arizona — and by extension tourism.

Nay-Sayers: Airbnb-Type Rentals Can Ruin A Suburban Neighborhood!

Not everyone is thrilled with Arizona’s push to grow its sharing economy.  State Sen. John Kavanagh, the lone legislative dissenter, is Team NO because he fears tourists may disrupt the suburban force. Kavanagh explained the other side of the coin:

I didn’t move into a neighborhood to have the house next door to me turned into a weekly rental property […] We had a problem in Fountain Hills where people were renting houses and they were allowing individuals through services like this to rent them for the weekend when there are big golf or other events in town. And a whole bunch of people come and they party at the house, they arrive on Friday and they leave on Sunday.

But Kavanagh doesn’t seem to have a lot of support on the issue; the majority of officials voted in lock-step with a vision Governor Ducey painted during the State of the State address:

Arizona should be to the sharing economy what Texas is to oil and what Silicon Valley used to be to the tech industry.

The Senate recently waived in a measure that disallows towns, counties and cities from banning short term rentals. Or, in more colloquial terms: a law that would allow people to operate Airbnb businesses without much hassle from local officials who may be a smidge more hostile about short-term rental properties.

The so-called “Airbnb Bill” has yet to be signed into law; it’s currently making its way through the approval process.

An Amendment For Arizona’s Crowdfunding Bill? (Great For Startups!)

Last year, to energize Arizona’s startup economy and stimulate job growth, state legislators passed a crowdfunding bill. Its weakness? The law limits investment to Arizonians.

But that may soon change! The Arizona Small Business Association (ASBA) is lobbying for an amendment that permits out-of-state investments.

Senator David Farnsworth is marshaling the bill through Phoenix. Essentially, the proposal seeks to expand the current crowdfunding law by permitting:

  • Limitless numbers of unaccredited investors;
  • No individual investment cap;
  • Debt and equity investing;
  • Investor-friendly liquidity provisions; and
  • Favorable SEC reporting parameters;

ASBA CEO Rick Murray explained why the crowdfunding amendment would stimulate the state’s startup economy:

With the success of the Arizona Crowdfunding Law, this legislation would be right in line with what we are trying to do here for Arizona businesses. Getting this on the books would help to make Arizona look even more attractive to the underwriting community, thus increasing business being conducted here in our state.

But that may soon change! The Arizona Small Business Association (ASBA) is lobbying for an amendment that permits out-of-state investments for crowdsourced ventures.

An Arizona Internet Law Attorney Can Help Solve Your Startup’s Challenges

Need an Arizona Internet law attorney? Kelly Warner has been working with startups, entrepreneurs and tech companies for nearly a decade. We’re not a group of armchair lawyers that only read about the emerging business ecosystem. Instead, we’re lawyers and programmers; attorneys and early adopters; legal eagles who know the difference between black hat and white hat marketing.

Head here to read what people like you have to say about lawyers like us.

If you’re ready to solve your Internet law issue, we’re ready to listen and provide cost effective, profit bearing, protective solutions.

Call, message or stop by; our Arizona Internet law team is here to help.

Article Sources

Baker, D. (2016, March 12). Arizona Gov. Doug Ducey signs bill criminalizing ‘revenge porn’ Retrieved April 11, 2016, from http://www.azfamily.com/story/31455001/arizona-gov-doug-ducey-signs-bill-criminalizing-revenge-porn

A. (2016, February 18). SB-1425 boosts state’s equity crowdfunding law | AZ Big Media. Retrieved April 11, 2016, from http://azbigmedia.com/ab/sb-1425-complements-states-equity-crowdfunding-law

Banchiri, B. (2016, March 11). A new law in Arizona would protect Airbnb and similar sites. Retrieved April 11, 2016, from http://www.csmonitor.com/USA/USA-Update/2016/0311/A-new-law-in-Arizona-would-protect-Airbnb-and-similar-sites

Using Gag Clauses To Prevent Negative Online Reviews?

gag clauses to prevent negative online reviewsAre contractual “defamation clauses” – a.k.a. “gag clauses”—acceptable? Legally enforceable? Can you sneak them into customer agreements in an attempt to mitigate bad online reviews?

Let’s review.

Using Gag Clauses To Prevent Negative Online Reviews Can Backfire – Badly.

If you asked ten U.S. citizens, “What’s the cornerstone of American law,” nine of them might say, “Free speech!” And it’s a solid answer — which is why contractual consumer gag clauses are short sided. Not only is it an affront to the Constitution, but doing so will probably land you a boatload of viral, negative press.

Not All Gag Clauses Are An Assault On Free Speech…

To be clear: not all gag clauses are a spit in the face of freedom. Many contractual articles, which demand confidentiality, are perfectly fine – if not commonplace.

You may be thinking, “WTF!? How is that possible!? What happened to free speech?”

Fair question. But here’s the crux: confidentiality is the focal point of many agreements. To wit, celebrities regularly make employees sign privacy contracts – a type of “gag clause.” Commonly, startups and businesses require employees to sign non-disclosure agreements to protect corporate secrets.

…But Some Are

So, we’ve established that not all gag clauses are the work of a freedom-hating baddie. But, some contracts do cross a Constitutional line.

When online reviews became de rigueur‎, businesses and professionals started stuffing gag clauses into service contracts. But the practice quickly backfired. Netizens took to the Internet and shout-typed outrage over agreements that prohibited negative online reviews. In short order, lawyers who previously advocated for restrained gag clauses began advising against their use.

When Free Speech Crosses The Legal Line

It’s never OK to ban legitimate free speech, but there are legal limits – like defamation. In laymen’s terms, defamation (libel if written; slander if spoken) is purposefully negligent, harmful public lie telling.

As previously discussed, some people try to use gag clauses to prevent negative online reviews, but it typically backfires – especially if the language is hyper-aggressive.

Moreover, time and again, courts have established that the Constitution (and case law) rarely allows for “prior restraint.” In other words, it’s fine to punish a person, post-facto, for committing an act of slander or libel; however, trying to hush someone – before anything untoward actually happens – is contrary to established legal standards (except in certain circumstances, which usually involve commerce and employment). Or, in other words, it’s not kosher to use gag clauses to prevent negative online reviews — if said reviews are honest.

Some people try to use clauses to prevent negative online reviews, but it typically backfires – especially if the language is hyper-aggressive.

So, Then What Can Business Owners Do About Difficult Clients Who Litter The Web With Negative Reviews?

So, what’s an honest business owner to do when faced with a testy, ranting client? A client that embellishes the truth, but doesn’t, exactly, tell a bold-faced lie?

It stinks, but businesses must contend with client-induced reputational challenges all the time. In reality, the best thing to do is talk to a lawyer. (“Yeah, right – you’re just saying that because your law firm that handles this type of issue,” you protest. Yes, we’re a law firm that helps clients with reputation issues. But think of it this way: would you want a dentist to operate on your spleen? The same logic applies here.)

Gag Clause Case Study

FTC Sues Weight Loss Product Company Over Gag Clause

Recently, the Federal Trade Commission targeted a weight loss supplement company (for this article, we’ll call the company “WLC”) for “unfair and deceptive” marketing. As the nation’s consumer watchdog, the FTC punishes parties that use underhanded methods to market and promote. In fancy FTC language:

“[The FTC goes after businesses that] cause substantial injury to consumers that is not reasonably avoidable by consumers and that is not outweighed by countervailing benefits to consumers or competition.” 

Specifically, the case against “WLC” involves accusations of:

  • False and unsubstantiated claims;
  • Unconstitutional prior restraint;
  • Failure to disclose that some positive reviews were penned by people who were in some way compensated; and
  • Possibly violating HIPPA restrictions by inadvertently disclosing health information to banks and payment processors.

The “Gag Clause” That Had People Seeing Red

The terms of purchase agreement for WL’s weight loss powder included the following phrase:

“Regardless of your personal experience with [WL], you will not disparage [WL] and or any of its employees, products or services.”

In other words: Even if you don’t like the product, you’re barred from saying anything bad about “WLC” – anywhere.

The Defamation Clause Deemed Unacceptable by the FTC

Typically, businesses fall under the FTC’s scope for:

  • Making false claims about a product’s effectiveness.
  • Fabricating “studies” that unfairly sway public perception.
  • Engaging in negative option marketing.
  • Not disclosing “discount for feedback” initiatives (i.e., giving away free samples, money or discounts for writing reviews).
  • Deceptive billing.

FTC Rejects Gag Clause Explanation

Ostensibly, “WLC” opted to include a defamation gag clause in its user contract. But the FTC said, “Nah-ah,” which isn’t surprising since the agency has traditionally kept a close eye on supplement manufacturers and marketers. Moreover, the clause included a damning phrase: “regardless of your personal experience with [WLC],” which probably tipped the legal scale. For it’s one thing to warn against defamation, but another to threaten against free speech.

Free Contracts, Which Can Be Found Online, May Invite An FTC Investigation

In the resultant case, the nation’s consumer watchdog deemed the company’s defamation clause “unfair and deceptive.”

So, how can businesses can guard against “unfair and deceptive” clients? By working with a lawyer who creates practical and protective arrangements that won’t attract the FTC’s watchful eye.

If you use a free online contract, the consequences could be dreadful. Why? Because freebie agreements usually aren’t as comprehensive as they can — and should — be. Sometimes, they include sneaky clauses that work against businesses.

A Lawyer Can Fix It

The Federal Trade Commission estimates that “WLC” made about $20 million over the past five years. But if the company loses this case, that figure could evaporate because the FTC has the authority to fine…heavily. In some instances, the commission can even go after family members’ assets; the agency can even confiscate fur coats, boats, watches and  homes.

To avoid a run in with the Federal Trade Commission over unfair and deceptive marketing practices, work with an Internet marketing lawyer. The attorneys at Kelly Warner have been practicing online marketing law for a long time. Partner Daniel Warner is an astonishingly effective litigator, and Aaron Kelly – the other named partner, enjoys a 10-out-of-10 rating on lawyer review website AVVO.com. Kelly also maintains a preeminent rating with venerated attorney assessment group Martindale-Hubbell.

To learn more about Kelly Warner, click here. To read more about other FTC cases and legal issues that affect today’s marketplace, head here. If you are currently dealing with an FTC investigation or inquiry, get an attorney. Going it alone could result in an avoidable — and unfavorable — business-crushing fine. Besides, hiring a lawyer to help with marketing initiatives may be a lot less costly than you think – and could ultimately save you a small fortune. Don’t wait. Get in touch today.

The Takeaway: In the United States, home to the world’s most free-speech-friendly constitution, using gag clauses to prevent negative online reviews is tantamount to a criminal act in the minds of many people. And adding egregious clauses to consumer contracts isn’t a wise move, as they’re becoming more and more ineffectual in the eyes of judges.

Article Sources

Trujillo, M. (2015, September 28). FTC sues weight-loss company for online ‘gag clause’ Retrieved January 12, 2016, from http://thehill.com/policy/technology/255130-ftc-sues-weight-loss-company-over-online-gag-clause

ATTN BUSINESS OWNERS: THE FTC NOW FINES FOR BEING HACKED!

FTC can fine for being hacked
Yep. The FTC can fine for being hacked. Not the hackers, but the businesses that are breached.

Is your online security house in order? If not, stop what you’re doing and contact a digital security guru, pronto – especially if you collect and store customers’ personal and financial information. Why? A U.S. court recently ruled that the Federal Trade Commission can pursue companies that fail to sufficiently protect consumer data.

In other words: If someone hacks into your business, YOU could be held responsible and fined into submission. Yes, the FTC can now fine for being hacked!

Wyndham Hotel Hack

The Appeals Court ruling was a result of Wyndham Hotels and Resorts’ data breach from a few years back. The high-profile hack exposed approximately 619,000 records and allegedly resulted in $10.6 million in “fraudulent charges.”

FTC’s Argument In Hacking Case: Company Did Not Do Enough To Protect Consumer Data

When pursuing the case, FTC staffers identified four points of protest. According to available reports, Wyndham allegedly:

  • Wasn’t using an appropriate firewall at the time of the breach;
  • Didn’t encrypt customers’ credit card information;
  • “Failed to address known vulnerabilities”;
  • Maintained a poorly managed network – so much so that staffers weren’t aware which computers were connected to it.

The FTC Can Now Fine For Being Hacked

Though the FTC has been granted new leeway in regards to punishing companies that are hacked, the agency is still murky on what constitutes the “reasonable steps” a company should follow to prevent a security breach.

It’s wise to work with an attorney who handles online privacy and security issues. The mere act of working with a firm looks good in the eyes of the law.

“But, Wait! It’s Not The Company’s Fault!” The FTC Doesn’t Care

In its defense, Wyndham argued that the company “does not treat its customers in an ‘unfair’ manner when the business itself is victimized by criminals.” But the court disagreed, reasoning:

“A company does not act equitably when it publishes a privacy policy to attract customers who are concerned about data privacy, fails to make good on that promise by investing inadequate resources in cybersecurity, exposes its unsuspecting customers to substantial financial injury, and retains the profits of their business.”

The court determined that lack of a privacy policy doesn’t preclude lax security. FTC chairperson, Edith Ramirez further explained:

“It is not only appropriate, but critical, that the FTC has the ability to take action on behalf of consumers when companies fail to take reasonable steps to secure sensitive consumer information.”

Get An Online Privacy Lawyer, Who Deals With Hacking Incidents, On Speed Dial

Some business owners may be peeved about the FTC’s new authority regarding hacks. Understandably. But as they say: there’s no use crying over spilled milk the long arm of the Federal Trade Commission. Instead, it’s best to get your digital security house in order and have a hacking lawyer on speed dial, in the event of a breach.

Contact Kelly Warner’s Internet Law Aficionados

Lawyers Daniel Warner, Aaron Kelly and Raees Mohamed are partners at Kelly Warner Law. A firm that focuses on 21st-century legal issues, Kelly Warner has grown to become one of the preeminent Internet law practices in the country, helping clients with issues related to online privacy and hacking.

To learn more about the firm, please click here. To read more about Kelly Warner’s lawyers, head here. If you’re interested in further reading regarding FTC legalities, please peruse the Federal Trade Commission section of our blog.

If you’re ready to speak with an attorney well versed in online privacy and hacking law, please get in touch. We look forward to sorting any legal challenges you may be facing.

And remember, the FTC can now fine for being hacked, so make sure you have an online privacy lawyer on speed dial.

Article Sources

Bloomberg, J. (2015, August 25). Company Breached By Hackers? You’re Being Deceptive, According to FTC And The Court. Retrieved October 19, 2015, from http://www.forbes.com/sites/jasonbloomberg/2015/08/25/company-breached-by-hackers-youre-being-deceptive-according-to-ftc-and-the-court/

Legal Lessons 101: Can I Get An Injunction?

get an injunction lawyer
Just how difficult is it to get an injunction?

Business competition can get ugly. And occasionally, aggressive opponents may cross legal lines when elbowing their way to #1. Our law firm works  with startups, entrepreneurs and businesses who face egregious acts of disruptive marketing, and they all ask: “Can I get an injunction against [insert name of competitor]?”

So, due to popular demand, let’s review a few “injunction law” basics. If you still have questions when we’re done, get in touch.

Real Talk: Injunctions Are Tough To Get

Before you start the injunction process, it’s important to understand one major thing: injunctions are tough to get. Why? Simply Stated: Because free speech and fair competition are two philosophical cornerstones of the U.S. marketplace. Courts are exceptionally cautious about dolling out injunctions that could impede another party’s First Amendment rights or free market ambitions.

What You Must Prove To Get An Injunction

injunction lawyer
Injunctions are as difficult to get as VIP tickets to a high-profile premier.

You may be thinking: “What must I prove to successfully motion for an injunction?”

Like most legal questions, the answer isn’t simple – because litigation strategies are largely dependent on the details. That said, we’ve outlined some “ballpark” parameters regarding the acquisition of either a temporary or permanent injunction related to unfair competition, defamation or disruptive marketing that crosses the legal line.

#1: Ongoing Damage

To get an injunction to remove content from the Internet, the requesting party must convince a judge that letting the content stay will cause ongoing damage, at the hands of another party, who is acting contrary to laws or regulations.

injunction law attorney
To win an injunction, the petitioning party must demonstrate a likelihood of lawsuit success.

#2: Probability of Success

As stated above, judges don’t hand out orders willy-nilly. Instead, to get an injunction, judges must be convinced that, based on statutes and case law, you will most likely win the lawsuit associated with the request.

#3: Keeping the Information Published Will Cause Great Harm “In the Absence of Preliminary Relief”

If a published statement is likely to cause long term harm if not quickly removed, the statement may be a candidate for an injunction action (if the other tests are also met). To win this point, plaintiffs must demonstrate how the statement will cause actionable harm and why temporal concerns are likely to exacerbate said harm.

#4: The Public’s Interest Is Best Served by Granting an Injunction

Philosophically speaking, laws are meant to protect citizens’ interests. So, for a court or judge to grant an injunction, the potentially impending harm must be detrimental to the public’s best interest in some capacity.

Questions? Speak With An Unfair Competition Lawyer About Your Chances Of Securing An Injunction

Do you have more questions about how to get an injunction? If yes, contact the online reputation and removal lawyers at Kelly Warner. We’ll review the details of your situation and provide potential solutions.

Contact us today to begin the conversation.

Arizona Crowdfunding Law and Lawyer

Arizona crowdfunding lawyer
A change in AZ crowdfunding laws may be in the works.

July 2015 Update: It’s the law. Arizona legislators approved the measure at the beginning of the month.

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Arizona crowdfunding may become easier if state legislators push through a new Internet law.

Currently, AZ crowdfunding regulations are strict. Because of state finance regulations, Arizona-based project creators can’t offer investors a piece of the profit pie on sites like Kickstarter.com and GoFundMe.com. Instead, Grand Canyon State entrepreneurs can only accept pure donations or offer discounts or rewards to entice “investors.”

AZ Legislators Want to Eliminate Crowdfunding Restrictions

But Arizona legislators hope to weaken the crowdfunding restriction wall by loosening the regulation reigns.

Senate Bill 1450 and its House counterpart HB 2591 would allow small businesses in Arizona to sell securities in exchange for funding. Currently, in Arizona, it’s illegal to do so without first getting the blessing of the Securities and Exchange Commission.

The Catch: Only Arizonans Can Participate in Arizona Crowdfunding

But the bill has parameters. Perhaps most notably, it only applies to Arizona residents. In other words, project creators can only offer securities to other Arizonans. To wit, a Silicon Valley VC wouldn’t be able to “buy” securities, in an Arizona, online crowd-sourced initiative.

Why the border throttle?

Lawmakers are promoting the bill as one that will jump start local investment. The operative word being “local.” In the words of Arizona Sen. David Farnsworth:

“This gives people who would ordinarily not be investing the opportunity to invest in something they believe in; something that’s close to home.”

Despite the restrictions, if the Arizona crowdfunding bill passed, it could be a great tool for Arizona startups previously rejected for bank loans.

Speak with a Crowdfunding Lawyer

Currently, 15 states have crowdfunding laws. Kelly / Warner is an Internet law firm that works with businesses and entrepreneurs in all 50 states, Canada, Europe and Australia. To speak with a lawyer about your Arizona crowdfunding legal questions, contact us.

Crowdsource Lawyer Explains Abandoned Project Legalities

crowdsource lawyer
Crowdsource Lawyer Talks About Legalities of Abandoned Projects

You’ve finally figured out a million-dollar-idea. Eager to act, you draft and polish a mission statement, create a project outline, determine contribution awards, gather graphics, and voila! – 7 days later, you’re up and running on Kickstarter or GoFundMe.

And you do a great job – because within a few weeks, your project is funded! Time to start producing what you promised. Right?

Collected Crowdsourced Funds, But Didn’t Deliver

Well, life doesn’t always work out as planned. Sometimes, good intentions become shelved aspirations. So what happens when you set up a Kickstarter, get funded, and then don’t follow through on promises to backers? Can you abscond with their money with no explanation? Absolutely not. And to ensure that entrepreneurs get this message, the Federal Trade Commission recently announced its first “crowdsourced project abandonment bust”.

Who did the FTC investigate for possible crowdsource marketing violations?

Erik Chevalier, who came up with the idea for “The Doom That Came to Atlantic City,” which he described as a “Lovecraftian” board game about “urban destruction.”

What did Chevalier promise potential backers on his Kickstarter page?

According to Chevalier’s Kickstarter page, people who invested in the project, depending on their level of commitment, would receive either a t-shirt or “a copy of the game with pewter figurines made by well-known sculptor Paul Komoda.”

How much did Chevalier raise with his crowdsourcing efforts?

The board game developer’s initial goal was $35,000, which he surpassed by raising a little over $122,000 from more than 1,000 supporters.

Why did the FTC launch an investigation into Chevalier’s Kickstarter project?

According to a group of the game’s backers, Chevalier allegedly didn’t deliver on promises. As a result, a group of “The Doom’s” investors filed an FTC complaint against Chevalier to get their money back.

What did the FTC conclude in its first crowdfunding investigation?

Ultimately, the Federal Trade Commission found evidence that Chevalier may not have used backers’ funds to work on the game. According to the commission’s statement about the case (via NPR):

“He represented in a number of updates that he was making progress on the game. But after 14 months, Chevalier announced that he was cancelling the project and refunding his backers’ money.

“Despite Chevalier’s promises he did not provide the rewards, nor did he provide refunds to his backers. In fact, according to the FTC’s complaint, Chevalier spent most of the money on unrelated personal expenses such as rent, moving himself to Oregon, personal equipment, and licenses for a different project.”

Did the FTC fine Chevalier for not using the money he raised on Kickstarter for the stated purpose?

Yes, the commission did issue a $111,793.71 judgment against Chevalier but suspended it because of his “inability to pay.”

Besides the fine, what other penalties did the FTC impose on the “Kickstarter absconder”?

In addition to the suspended fine, Chevalier is also barred from “making misrepresentations about any crowdfunding campaign” and he must honor any stated refund policies.

Speak With A Crowdsource Lawyer

NPR spoke to one of Chevalier’s backers who explained:

“I really don’t care about the money that is gone at this point, nor the game. I pledged $75 to get the [board game] figures, which I’m sure I’ll never see. Now I just want to see this guy put in prison.”

As a first offense, prison is probably a little drastic. But Chevalier’s run-in with the Federal Trade Commission should serve as a cautionary reminder that there are regulations tied to the crowdsourcing process.

Before you start a project, make sure you understand what laws and regulations you must follow. If you don’t know them, consult with a crowdsource lawyer at Kelly Warner to ensure you have all your legal ducks in a row.

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