Monday, November 16, 2009

The FTC Revises Its Guidance For Advertising Through Blogs, Endorsements, Testimonials, And More

If you advertise through blogs, testimonials, or celebrity endorsements, the Federal Trade Commission’s (“FTC”) recent revisions to its official guidance (the first revisions since 1980) on that topic are a must read. The revised guidance makes it clear that both the advertiser and endorser may be held liable under the FTC Act for false or unsubstantiated claims or for failure to disclose material connections between the advertiser and endorser.

Consumers today greatly rely upon advertising that appears as journalism, like blogs, or as anecdotal endorsements or testimonials, including celebrity advertisements. Hence, businesses have a greater imperative to fully disclose any media that is, in reality, advertising, as well as any material connections between a business and bloggers or endorsers of its products and services.

A Summary Of Revisions To The Guides

The revised guidance asks businesses to disclose “material connections” between advertisers and endorsers, especially when such connections may not be expected by the consumer. So, if your favorite radio talk-show host raves about a new spinal decompression therapy that helps his back pain, but never discloses that he gets this therapy for free in exchange for “talking it up” on his show, both the therapy provider (advertiser) and the talk show host (endorser) could end up being in trouble with the FTC, along with being held liable under the FTC Act.

Similarly, when a blogger reviews a product or service in exchange for cash or in-kind payment, it is considered to be an endorsement. The FTC requires that the blogger disclose any relationship with the seller of the product or service, and payment received, in the blog post. With many consumers browsing online reviews of products and services before making a purchase, the FTC’s revised guidance is aimed at blogs that may be perceived by consumers as a source of independent opinion on a particular product or service, but are, in reality, endorsements paid for by the seller of the product or service.

Also, a business may refer to research findings in its advertising, and this often occurs with health and nutrition products and services. If that business sponsored the research, it must disclose this material connection in the advertising. On a related note, businesses can no longer get away with featuring the experience of a consumer, for example of losing 50 pounds with a weight loss product, and disclaim that “results are not typical.” The FTC now advises that businesses clearly disclose the results that consumers can generally expect.

What This Means For You

As a practical matter, any business looking to reach consumers through blogs, viral videos, testimonials, or other unconventional forms of advertising should take steps to ensure that consumers understand that the media is really an advertisement and to ensure that the advertising clearly conveys the nature of the business’s relationship with the advertising source.

-- Anuj Desai, Esq.

Not if, but how

Arnall Golden Gregory, LLP has significant experience in the area of marketing and promotions, including evaluating advertisements and advertising-related disputes. Do not hesitate to contact us if we can be of help to you.

Please visit our web site for more information, www.agg.com.

A copy of the FTC’s revised Guides Concerning the Use of Endorsements and Testimonials in Advertising, with illustrations of applications of the revised guidance, is available at www.ftc.gov.

Friday, November 13, 2009

Senate Moves to Clarify Tension between Patent and Antitrust Law

Patent law limits competition, keeping prices high in order to foster innovation. Antitrust law promotes competition, keeping prices low to benefit consumers. The following “reverse payment” scenario illustrates the tension between the two:

Branded Drug Company sells a patented drug. Generic Drug Company files an application to bring a competing generic drug to market. Branded sues Generic for patent infringement. A settlement is reached where Branded pays Generic to delay entering the market, a so-called “reverse payment.” Branded maintains its patent, and continues to monopolize the market for the patented drug.

The question at the heart of the reverse payment scenario is whether drug patents are truly property. According to both pharmaceutical companies and the U.S. Court of Appeals for the Eleventh Circuit, less competition and higher prices are the natural result of the “permissible monopoly” created by patents, and thus there is nothing wrong with reverse payments. Lawyers for the federal government disagree, arguing that patents are not true property rights, but rather a right to “try to exclude.” The Federal Trade Commission (FTC) has thus determined that “collusion by pharmaceutical manufacturers is contrary to free competition, to the interests of consumers, and to the principles underlying antitrust law.” The Department of Justice (DOJ), which did not oppose the settlements during the Bush administration, now considers these deals to be straightforward violations of antitrust law, and thus “presumptively unlawful.”

Regardless of who is correct, the decade long battle reached an important point on October 13th, when the Senate Judiciary Committee voted 12 to 7 to approve its draft legislation, the Preserve Access to Affordable Generics Act of 2009. The bill makes it unlawful for a person, in connection with the sale of a drug product, to be a party to any agreement resolving or settling a patent infringement claim in which: (1) an abbreviated new drug (generic) application filer receives anything of value; and (2) such filer agrees not to research, develop, manufacture, market, or sell the generic product for any period.

The Judiciary Committee bill specifically cites the appellate court decision approving reverse payments, and points out that several settlements since that decision have resulted in generic companies receiving compensation to keep cheaper drugs off the market. According to an FTC study released in June, consumers, insurance companies, and the federal government have spent an extra $3.5 billion for prescription drugs every year because of such settlements.

As expected, the Senate’s reverse payment legislation is strongly opposed by both generic and branded drug companies. These companies argue that parties need to be able to negotiate such agreements, given the uncertainties of litigation, and that reverse payment legislation will result in more cases going to trial rather than settling. The result, they say, could be less predictable litigation costs, less generic drug filings, and less generic drugs for consumers.

Although courts are reluctant to oppose reverse payments, both Democrats in Congress and the Obama Administration seem eager to score political points by slamming pharmaceutical companies as responsible for the high cost of healthcare. With the DOJ and FTC aligned on the issue, it is increasing likely that the recently approved Senate Judiciary bill will end the era of reverse payments between branded and generic drug companies.

Arnall Golden Gregory LLP serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, http://www.agg.com/.

Tuesday, November 10, 2009

New Wireless False Advertising Litigation: A Reminder to Look at "The Big Picture"

The battle that broke out last week over the accuracy of Verizon Wireless’ new cell phone coverage campaign is not focused solely on the language of Verizon’s advertisements. It is focused on the images, and specifically, on two coverage maps and the message they convey. In two television pieces and on its website, Verizon uses side-by-side maps of the US with color coding to show 3G coverage. The maps emphasize what Verizon believes is its overwhelming advantage over AT&T in territorial 3G coverage. The ads parody the popular iPhone advertisements with the refrain that to explain spotty AT&T coverage, “there’s a map for that.”


AT&T, locked in competition in its most important quarter of the year, is not laughing. In a lawsuit filed in federal district court in Atlanta, AT&T claims that the maps mislead its customers “into believing that when they are

in the areas depicted by large swaths of white or blank space in AT&T’s ‘3G’ coverage maps, they have no coverage whatsoever.” The lawsuit, at least at this point, is actually fairly narrow. AT&T is not claiming anything in the ads is actually false but believes the overall piece is still misleading. Even though Verizon added the phrase, in small font, “Voice & data services available outside 3G coverage areas,” and even though the map is based on actual coverage data, AT&T suggests that the maps convey the complete absence of coverage in the white areas. It asks the Court, at least in its initial request for a temporary restraining order, to stop Verizon from displaying the maps.

To obtain an injunction where no statement is literally false, AT&T is required to put forward some evidence of deception. Usually in federal advertising cases, that evidence takes the form of consumer focus group or survey data. Here, AT&T offers a survey it says shows a 23.5% level of confusion among wireless customers: Assuming AT&T’s survey is valid and was conducted in accordance with generally accepted survey principles, that data is more than enough to justify a finding of confusion. Verizon has not yet filed its response, but it will be interesting to see the competing testimony and market research on the effect of the advertisements. And certainly, the district court will be looking at more than just deception in making its decision.
We’ll continue to follow the dispute and report on the first round. Argument is scheduled for later this month – though we’re certain AT&T would have preferred an earlier hearing – so we should have some early insight fairly soon. If AT&T loses its early TRO request, its momentum is gone and much of the steam leaves its suit.

Regardless of the outcome, though, the case provides a good reminder: If your company sells products or services in a competitive market, especially head-to-head using comparative advertising, keep your eye on more than just the accuracy of advertising copy. Also look to the advertising’s overall impact and impression, and ask what messages a reasonable customer will take away. For purposes of this kind of competitive advertising review, marketing-savvy businesses should be aware that federal law prohibits not just false, but misleading advertising. Even if the words themselves literally true, they may imply a false message, especially when the advertising piece is considered as a whole.

--Andrew Flake

Andrew B. Flake is a partner in the Litigation Group at Arnall Golden Gregory LLP (andrew.flake@agg.com). Our firm serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, http://www.agg.com/.

Wednesday, November 4, 2009

ICANN's New gTLD Initiative -- A Potential "Top-Level" Problem for Brand Owners

In 2010, the Internet Corporation for Assigned Names and Numbers (ICANN), the non-profit body dedicated to coordinating the Internet’s unique identifier system, will begin accepting applications for new generic top-level domains (gTLDs).

The new gTLD program presents an unprecedented opportunity for brand owners. While individuals and businesses have historically distinguished themselves with second-level domains (e.g., the “icann” in www.icann.org) and shared gTLDs with their “.com” or “.net” competitors and others, ICANN’s new gTLD program provides a mechanism for brand owners to operate and control an entire universe of internet addresses with common domains. To illustrate, a company such as Microsoft may wish to acquire the gTLD “microsoft,” thereby opening the door to the registration of virtually any conceivable second-level domain with a top-level “microsoft” suffix.

However, where there is opportunity for brand owners, there is also potential for danger. Chief among the concerns of brand owners is that individuals or entities will apply for and obtain a gTLD that is identical or confusingly similar to the brand owner’s trademark. While many brand owners have had to contend with identical or confusingly similar second-level domains from time to time, contending an entire set of infringing top-level domains could present a problem of staggering proportions.

In addition, the acquisition of a gTLD will carry with it the ability to control the registration of second-level domains within that gTLD. Thus, brand owners could acquire gTLDs for the generic name of their products (e.g., “.computers,” “.wine,” or “.jeans.”) and freeze out competitors in the same generic product category. Thus, for example, Apple Computers could acquire the gTLD “.computers” and prevent Hewlet-Packard from registering the domain www.hp.computers.

In response to this and other brand owner concerns, ICANN has set forth proposed applicant screening and dispute resolution procedures in its Applicant Guidebook. The current version of the Applicant Guidebook is available at ICANN’s website. Importantly, the Applicant Guidebook has not been finalized, and, in fact, is open for public comment through November 22, 2009.

While the procedures set forth in the Applicant Guidebook likely will filter out obvious trademark conflicts without the brand owner having to intervene (e.g., a company other than Microsoft that attempts to register the gTLD “microsoft”), they may not catch less obvious trademark conflicts. If ICANN does not identify a conflict, it will be up to the band owner to come forward to object to potentially-problematic gTLD applications. Critically, the Applicant handbook provides only a two-week window to make such an objection.

Brand owners should become familiar with ICANN’s new gTLD program, and, specifically, the Applicant Handbook. In addition, even those brand owners who do not wish to apply for a gTLD should closely monitor pending applications, and, if necessary, take prompt action.

-- Tucker Barr

Arnall Golden Gregory LLP serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, www.agg.com.

ICANN’s New gTLD Program Presents Opportunities and Risks for Brand Owners

In 2010, the Internet Corporation for Assigned Names and Numbers (ICANN), the non-profit body dedicated to coordinating the Internet’s unique identifier system, will begin accepting applications for new generic top-level domains (gTLDs).

The new gTLD program presents an unprecedented opportunity for brand owners. While individuals and businesses have historically distinguished themselves with second-level domains (e.g., the “icann” in www.icann.org) and shared gTLDs with their “.com” or “.net” competitors and others, ICANN’s new gTLD program provides a mechanism for brand owners to operate and control an entire universe of internet addresses with common domains. To illustrate, a company such as Microsoft may wish to acquire the gTLD “microsoft,” thereby opening the door to the registration of virtually any conceivable second-level domain with a top-level “microsoft” suffix.

However, where there is opportunity for brand owners, there is also potential for danger. Chief among the concerns of brand owners is that individuals or entities will apply for and obtain a gTLD that is identical or confusingly similar to the brand owner’s trademark. While many brand owners have had to contend with identical or confusingly similar second-level domains from time to time, contending an entire set of infringing top-level domains could present a problem of staggering proportions.

In addition, the acquisition of a gTLD will carry with it the ability to control the registration of second-level domains within that gTLD. Thus, brand owners could acquire gTLDs for the generic name of their products (e.g., “.computers,” “.wine,” or “.jeans.”) and freeze out competitors in the same generic product category. Thus, for example, Apple Computers could acquire the gTLD “.computers” and prevent Hewlet-Packard from registering the domain www.hp.computers.

In response to this and other brand owner concerns, ICANN has set forth proposed applicant screening and dispute resolution procedures in its Applicant Handbook. The current version of the Applicant Handbook is available at ICANN’s website. Importantly, the Applicant Handbook has not been finalized, and, in fact, is open for public comment through November 22, 2009.

While the procedures set forth in the Applicant Handbook likely will filter out obvious trademark conflicts without the brand owner having to intervene (e.g., a company other than Microsoft that attempts to register the gTLD “microsoft”), they may not catch less obvious trademark conflicts. If ICANN does not identify a conflict, it will be up to the band owner to come forward to object to potentially-problematic gTLD applications. Critically, the Applicant handbook provides only a two-week window to make such an objection.

Brand owners should become familiar with ICANN’s new gTLD program, and, specifically, the Applicant Handbook. In addition, even those brand owners who do not wish to apply for a gTLD should closely monitor pending applications, and, if necessary, take prompt action.





Arnall Golden Gregory LLP serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, http://www.agg.com/.