Consent – in various iterations – continues to be a crucial issue with most TCPA claims.  The FCC recently issued pronouncements that express consent – in writing – had to be obtained before marketing to mobile phones.  Now comes as an interesting federal appellate decision from the 7th Circuit regarding whether consent is transferable.  In the case, Soppet v. Enhanced Recover Company, LLC , Plaintiff filed a TCPA class action alleging that ERC placed illegal autodialed, pre-recorded calls to mobile phone numbers.  Defendant contended that the intended recipients of the calls (the alleged debtors) had given their consent by providing their mobile numbers, but those number had since been transferred to the plaintiff (and putative class members) – who had not consented to receipt of such calls.  The 7th Circuit (Chief Judge Easterbrook) ruled that such consent was not transferable; “[w]e conclude that the called party means the person subscribing to the called number at the time the call is made.”  The appellate decision is available here: Soppet-TCPA-7th-Cir, and a succint write-up of the decision is available here: WSJ post.

In a significant coverage decision, the 4th District Appellate Court recently ruled that the $500 to $1,500 statutory damages recoverable per TCPA violation are tantamount to punitive damages and thus uninsurable under IL law.  The decision is available here:  AppellateOpinion.  In Standard Mutual v. Lay, the court reasoned that the TCPA statutory damages were not remedial in nature because the actual damages incurred by a recipient of an unsolicited fax were miniscule.  (Our experts have opined that the actual costs for an unsolicited fax are less than a nickel.)  The court concluded that clearly a part of the damages were designed with deterrence in mind.  Since the damages were not remedial (not addressing any actual harm), the damages were more in the nature of a penalty – i.e., punitive – and thus not insurable.

On May 30th, the FTC will host a one day public workshop to consider the need for new guidance for for online advertisers about making disclosures.  As loyal readers of this blog know, the disclosure obligations created by the FTC’s Revised Guides (and from other sources) are complicated by the size of the “third screen” (query whether mobile is truly the third screen anymore; many would contend it is the first screen).

In any event, details of the Workshop are accessible here: Preliminary Agenda for FTC Mobile Disclosure Workshop.

Couple of interesting articles and news stories of late about the proliferation of unsolicited text messaging and Twitter’s efforts to curb spam.  Regarding the former, expect the recent media attention to result in an uptick in the number of Telephone Consumer Protection Act (TCPA) class actions filed.  An interesting aspect of the NY Times story is that unsolicited texts are being used to drive traffic to sites where various personal information is being requested in order to claim prize, gift card or discount – and, in turn, that PI is used to compile a more robust composite of the consumer which is then sold, rented or otherwise used by marketing cos to send targeted messaging.

Regarding its recently filed lawsuits against 5 of its most prolific spammers, Twitter stated that “[w]ith this suit, we’re going straight to the source. By shutting down tool providers, we will prevent other spammers from having these services at their disposal. Further, we hope the suit acts as a deterrent to other spammers, demonstrating the strength of our commitment to keep them off Twitter.”

NY Times article re: proliferation of unsolicited text messages

Twitter Statement re Spam Lawsuits

Wanted to provide a link to an article I wrote which was published yesterday on Daily Deal Media regarding a proposed settlement of numerous class action lawsuits against Groupon (and participating merchants) alleging violations of the federal CARD Act, as well as various state laws.  The suits contend that Groupon’s daily deal vouchers either violate the federal requirement that gift cards can not expire sooner than 5 years from the date of purchase and/or various state laws - some of which impose different (and in some cases, longer) durational requirements.  Link to the article is here: Groupon MDL Preliminary Settlement.  Deal companies – like all social commerce and group buying sites – need to be particularly careful with respect to consumer protection laws especially those regulating gift cards and loyalty programs.

Social media has a new kid on the block, and its name is Pinterest.  Seemingly out of nowhere, Pinterest has become the fastest website ever to receive 10 million visitors in a month.

The concept is fairly straight forward; basically, Pinterest is an online pin board that allows users to pin images, text and videos to personalized boards that they create.  Those boards may be personalized according to themes selected by the user and can be populated with works taken from all over the internet.  For example, a user may create a board entitled “Dream Vacations” and pin images found on various websites of beaches, hillside cities and the Taj Mahal.  Users pin works to their boards by use of a “Pin It” tab installed on users’ tool bars.  Whenever users come across works they simply click the “Pin It” tab, and that work is pinned to the user’s board.  Users may also re-pin works that they like from the boards of other users and may chose to follow other users whose boards they like. 

Typically, users collect images or images of other content that they like—text and videos—from various sites across the web without concern for who might own and have licensing rights to these works.  Needless to say, all of this pinning and re-pinning raises numerous legal questions regarding copyright and privacy rights.

Copyright Basics

Generally speaking, the owner of a copyright has the exclusive right to use, reproduce, license and profit from the images, pictures and other creative works they create.  Importantly, a copyright owner has the right to decide how—if at all—their work will be used.  The impermissible use by another of a copyrighted work is typically infringement, unless such use is permitted “fair use” which is a limited exception recognized to further the free exchange of ideas without impairing the present or future economic value of the work.  Copyright holders profit from extending licenses to others to use their works.  If works are used or re-produced without a license, the copyright holder may be entitled to damages.

Pinterest’s business model certainly appears to be problematic when viewed from this intellectual property perspective.  Pinterest encourages its users to “organize and share all the beautiful things you find on the web.”  Even the simplest transaction on Pinterest may result in copyright infringement.  For example, a user who maintains a board of his or her dream travel destinations finds a beautiful picture of the Colosseum in Rome taken at sunset from the website of a photographer.  The user clicks the “Pin It” button on their browser and the image is pinned to their board.  What seems like a simple action may be direct infringement of the copyright held by the photographer.  Pinterest asks users to credit the source of images it pins, but doing so doesn’t necessarily cure the infringement because the user has not obtained permission to use the image.  Additional problems arise when users credit inaccurate sources and deprive the authors of appropriate credit as well as the ability to promote the work.

Pinterest arguably facilitates the violation of privacy rights as well; in particular, a person’s right to publicity, by allowing users to pin images of people.  A person has the right to control the commercial use of his image.  For example, if an actor or athlete has licensed his image for use by Warner Brothers Studio or the NFL, that license does not extend to users of Pinterest and those that pin those images may violate that person’s privacy rights.

Pinners and Pinnees Beware

Pinterest is likely protected from liability under the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”), which provides immunity to service providers for acts of copyright infringement by customers who use their service.  Nonetheless, Pinterest has implemented additional protective measures.  Its Terms of Service (“TOS”) require Pinterest users to certify that they “are the sole and exclusive owner” of all content that is pinned or that “you have all rights, licenses, consents and releases” necessary to grant Pinterest rights to the content.  The TOS further require users to represent that the content that they pin does not “infringe, misappropriate or violate a third party’s patent, copyright, trademark, trade secret, moral rights or other proprietary or intellectual property rights or rights of publicity or privacy.”  Users agree to furnish Pinterest with a “worldwide, irrevocable, perpetual, non-exclusive, transferable, royalty-free license” to use, sell, copy, transfer or distribute the works pinned by its users.  It is highly unlikely that the millions of users of Pinterest obtain these licenses and representations that Pinterest requires of its users.  Nonetheless, pinning continues and pinners increase their susceptibility to claims of infringement.

Pintrest users are not as able to insulate themselves from potential liability.  If Pinterest subsequently sells or distributes images pinned by a particular user, the user may be liable for infringement.  In addition, users who pin images taken from the web may be subject to infringement claims from the copyright holders whose content is infringed.  Notably, small businesses owners who use the web to sell and advertise their products stand to miss what are already very limited opportunities to license and profit off of their works.  They have a big incentive to bring infringement claims against users of Pinterest.

Pinterest has provided some protection for the copyright holders whose works are pinned, but it may not be enough.  Pinterest offers an “opt-out” code that allows websites with copyrighted works to prevent Pinterest users from pinning images from the copyright holder’s website.  Users who attempt to pin images from the websites that make use of the “opt-out” code receive a message stating, “This site doesn’t allow pinning to Pinterest.  Please contact the owner with any questions.  Thanks for visiting!”  The efficacy of this “opt-out” code is questionable, since Pinterest is new and copyright holders may not be aware that the code is available.  In addition, the existence of the code might result in the unintentional grant by the copyright holder of an implied license to pin for the pinner.  The grant of an implied license to use copyrighted materials has been found in similar situations.  In Nevada, the owner of a website containing copyrighted material failed to make use of widely available code that would enable him to prevent the display of images from his website on Google.  The court found that the website owner’s failure to make use of the code resulted in a grant of an implied license to cache and display images from the website to Google.  Copyright holders who fail to employ the “opt-out” code offered by Pinterest may similarly be at risk.

Pinterest Not Completely Out of the Water

Despite the DMCA and its TOS, Pinterest may not be able to shield itself completely.  Immunity under the DMCA might not be available should Pinterest start to monetize the pins.  Pinterest has experimented with several revenue options including advertising and embedding affiliate links to pins featuring goods from retails sites like Target and Amazon.  If someone clicks on the link and purchases a product featured in the pin, Pinterest may make money from the transaction.

Additionally, claims for contributory infringement (for inducing infringing behavior,) may start to proliferate, and courts could perceive Pinterest as they did Napster and find that the service Pinterest provides compels infringing behavior.  The Napster court found that Napster’s service, which allows users to exchange and download copyrighted music files from their computers, encouraged and assisted the infringement of its users and that Napster had actual and specific knowledge of the infringement.  The court also found that Napster derived a financial benefit because the infringing material attracted additional customers to the service, thereby increasing its customer base and ultimately its revenue.  The service provided by Pinterest arguably is comparable to Napster, and Pinterest certainly benefits from the increase in traffic and marketing opportunities.

Should I Use Pinterest?

Whether folks – particularly the risk averse (looking at all lawyers out there) among us – should use Pinterest in light of these concerns is an individual question.  Pinterest provides a unique and socially useful service that inspires creativity, yet places an important responsibility on its users.  Whether this responsibility is too much to ask from the typical consumer remains to be seen, but if Pinterest is to survive, users must evolve and adapt to the new digital media platform.  That means users of Pinterest must learn to comply with the TOS of the site and to obtain permission before using certain images that may infringe on the intellectual property rights of others.  It also means that small business owners should recognize the possibilities presented by Pinterest and take steps to protect their intellectual property (opt-out), while at the same time being open to free publicity or licensing of their works for display to the large (and growing) audience of Pinterest users. 

Big businesses such as large retail chains should view Pinterest as a gold mine as Pinterest combines consumers with similar interests and tastes in one place.  Companies that would benefit from this should open accounts and create boards with lasting imagery for its customers and products.  Doing so might create a buzz about certain products and drive traffic to Pinterest boards and their websites.  All companies must ensure that they make use of their own images, or images they are licensed to use, to avoid any infringement issues.

Pinterest must also be open to adapting and evolving.  Just as Pinterest allows for copyright holders to opt out of having their works pinned, it should work toward developing mechanisms for users to obtain permission, or limited licenses, from copyright holders in order to pin works on Pinterest properly.  That way Pinterest can at least provide some protection to those who are most important to the site: the users.

Many thanks to Paul Pittman, out of our D.C. office, who contributed greatly to the research and drafting of this article.

The Obama Administration recently released its white paper proposing a new framework for online privacy protections.  This is an extremely important development as it is the first pronouncement from the White House on its views of an overarching federal privacy mandate.  For more information, please review our recent client alert discussing the New Privacy Framework.

Things are aleady happening in response to the Administration’s pronouncement.  This week, the Department of Commerce National Telecommunications and Information Administration (NTIA) issued a Federal Register notice calling for public comments on the framework.  In short, NITA is looking for stakeholders to provide comments on the “substantive consumer data privacy issues that warrant the development of legally enforceable codes of conduct, as well as procedures to foster the development of these codes.”  The details are available here: NTIA Federal Register, and comments are due on or before March 26, 2012.

Enjoyed meeting folks at the Affiliate Marketers Meetup last night – as promised, here is the slide deck from the preso: DSA Deck for Affiliate Meet-Up 022812.  Enjoy!

The Federal Trade Commission’s recently-amended Business Opportunity Rule goes into effect tomorrow, March 1, 2012.  The changes to the BOR were made with an eye towards providing consumers sufficient (and understandable) information when they are considering participation in work-at-home programs or other business opportunities (so-called “bizopps”).  Further to the revised rule, those that are offering bizopps will be required to provide potential participants with a concise (1 page) disclosure statement containing the following information:

• the seller’s identifying information;
• whether the seller makes a claim about the purchaser’s likely earnings (and, if the seller checks the “yes” box, the seller must provide information supporting any such claims);
• whether the seller, its affiliates or key personnel have been involved in certain legal actions (and, if yes, a separate list of those actions);
• whether the seller has a cancellation or refund policy (and, if yes, a separate document stating the material terms of such policies); and
• a list of persons who bought the business opportunity within the previous three years.

Misrepresentations and omissions are prohibited under the Rule, and for sales conducted in languages other than English, all disclosures must be provided in the language in which the sale is conducted.  The FTC states that the new requirements are designed to reduce the prevalence of bizopp fraud.  The disclosure requirements will however increase the operating expenses and record-keeping responsibilities for vendors of legitimate business opportunities.  Accordingly, the BOR provides for several exceptions to the new requirements.  The FTC’s press release summarizing the changes to the BOR is available here: http://ftc.gov/opa/2011/11/busopp.shtm, and the full text of the rule is accessible here: bizopp rule.

The Ninth Circuit has reversed itself on the result in one of the few cases holding for liability under the Communications Decency Act – the roommate.com case. The CDA provides immunity to an “interactive computer service” that does not provide content to the site. The Ninth Circuit, en banc, had previously reversed a trial court ruling finding no liability on roommate.com on grounds that section 230 did not provide immunity because roommate.com actually developed the discriminatory questions, directly suggested discriminatory answers and included a discriminatory search mechanism all directly related to the alleged illegality of the site.

However, on the second time up, the Ninth Circuit found that the Federal Housing Act does not apply to the sharing of living units, and that privacy and constitutional concerns distinguish sharing of living units from simply renting accommodations. The basis for the ruling therefore leaves in place the analysis for finding liability under the CDA under the prior Ninth Circuit opinion, but finds there could be no liability in this case because even if the website actively assisted in the discriminatory activity, because it is not illegal to discriminate with regard to sharing living accommodations. Fair Housing Council of San Fernando Valley v. roommate.com, ___ F.3d ___ (9th Cir. 2012).