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This post is authored by Fox Rothschild associate Rashanda Bruce.

The National Advertising Division (NAD) announced revisions to its procedures governing advertising industry self-regulation during its Annual Conference on September 24-25. The revisions are in response to recommendations by the ABA Antitrust Section’s Working Group.

NAD is a branch of the Council of Better Business Bureaus (CBBB) responsible for monitoring the truthfulness and accuracy of all media advertising. NAD works to increase and maintain the public’s confidence in advertising by independently examining advertising claims that breach these standards. In addition to its independent review, NAD accepts consumer complaints about misleading advertisements and provides a forum for competitors to resolve advertising disputes.

The most recent revisions relate to NAD’s handling of competitors’ advertising claims that were previously recommended for modification or discontinuation. In the past, when NAD found that an advertising claim was unsubstantiated, it issued a decision recommending discontinuation or modification of the claim. NAD refused to reopen a case if an advertiser later proved its claims and wanted to resume advertisement. Under the new revisions, advertisers who believe they have developed new substantiation for their original advertising claims may now either resume use of the disallowed claim and request that NAD consider the new evidence, or the advertiser may seek NAD’s review of the new evidence prior to resuming the claims.

NAD made additional revisions to its procedures including: (1) identifying who should be contacted about a pending or closed case; (2) increasing the filing fee for challengers who have been National Partners of the Council of Better Business Bureaus for less than one year; (3) amending the construction of the Advertiser’s Statement to remove the option for advertisers to state that they will not comply with NAD’s recommendations; and (4) adding language to the section governing compliance decisions.

Laura Brett, the National Advertising Division Director, said NAD believes “the change balances allowing advertisers to make truthful, substantiated claims with the need for speed and finality in the self-regulatory process for competitive challenges.” Read the full text of revisions here.

This post is authored by Fox Rothschild associate Paul Fling:

Met with widespread support, the Music Modernization Act was signed into law on October 11, 2018. The Music Modernization Act (“MMA”) largely came about as a reaction to music streaming services’ domination of the music consumer market. In fact, streaming services such as Spotify and Pandora have more than doubled in revenue since 2015. As a result, a new system for distributing royalties was sorely needed.

So what does the MMA do? Generally, the MMA will set up a new, and (hopefully) more efficient way of paying mechanical royalties to songwriters when a musical composition is reproduced. Prior to the MMA, no central database or organization existed to facilitate music services filing for and obtaining a mechanical license to use a particular song. Because the growth of streaming services has led to a drastic increase in entities seeking mechanical licenses, the pre-MMA system no longer met the needs of songwriters/owners and streaming services alike. Essentially, services claim it is too difficult to find and pay the correct author for every song, while song owners claim services use such an excuse to avoid paying royalties.

To address these issues the MMA will set up a centralized entity to collect royalties and distribute them to the proper songwriter or owner. This group, for the time being, is called the Mechanical Licensing Collective. To participate in this system, digital services will pay the MLC and receive a blanket license allowing them to use any song without threat of infringement. In turn, the MLC will then seek to find the proper owner of songs that are played and pay those owners in accordance with the volume services have used the owner’s song.

Ultimately, musicians and music consumer services are hoping the MMA succeeds in creating an efficient and fair way of providing mechanical licenses and distributing royalties to the proper owners.

You can read the act in its entirety here.

The Food & Drug Administration (“FDA”) has published a Consumer Update with a reminder regarding the implementation of the new Nutrition Facts label.  According to the FDA’s Update, at least 10% of food packaging already carries the new label and therefore consumers are, and will be, seeing two different versions of the Nutrition Facts label on the shelf.  As I previously blogged about, the FDA announced in 2016 that there would be changes to the label required for packaged foods starting in 2018.  However, the FDA has extended the deadline to comply until 2020 for manufacturers with $10 million or more in annual food sales and 2021 for manufactures with less than $10 million in annual food sales.

In a nutshell, the FDA’s Update describes the new Nutrition Facts label as reflecting “updated scientific information, including our greater understanding of the links between diet and chronic disease” (e.g. obesity and heart disease) and as being “more realistic about how people eat today.”  The changes that the FDA has highlighted in its Update are provided verbatim below:

1. The new label makes it easier if you or a member of your family is counting calories by putting the calories, the number of servings, and the serving size in larger, bolder type. We thought it was important to better highlight these numbers because nearly 40 percent of American adults are obese, and obesity is associated with heart disease, stroke, certain cancers, and diabetes.

2. FDA is required to base serving sizes on what people actually eat and drink, so serving size requirements have been adjusted to reflect more recent consumption data.  This way, the nutrition information provided for each serving is more realistic. For certain packages that contain more than one serving, you will see nutrition information per serving as well as per package. That means for a pint of ice cream, calories and nutrients are listed for one serving and the whole container.

3. Added sugars are now listed to help you know how much you are consuming. The 2015-2020 Dietary Guidelines for Americans recommends you consume less than 10 percent of calories per day from added sugars. That is because it is difficult to get the nutrients you need for good health while staying within calorie limits if you consume more than 10 percent of your total daily calories from added sugar.

4. Good nutrition means that you are getting the right amount of nutrients for your body to function correctly and to fight chronic diseases like obesity, heart disease, certain cancers, and type II diabetes. The FDA has updated the list of nutrients required on the label to include Vitamin D and Potassium because Americans today do not always get the recommended amounts of these nutrients. Conversely, Vitamins A and C are no longer required, because deficiencies in these vitamins are rare today, but they can be listed by manufacturers voluntarily.

5. The old label lists calories from fats, but the new label does not. The FDA made this change because research shows the type of fat consumed is more important than total fats. For example, monounsaturated and polyunsaturated fats, such as those found in most vegetable oils and nuts, can reduce the risk of developing heart disease when eaten in place of saturated and trans fat.

6. Daily values for nutrients like sodium, dietary fiber, and Vitamin D have been updated and are used to calculate the % Daily Value (DV) that you see on the label. The % DV helps you understand the nutrition information in the context of a daily diet. The footnote at the bottom of the label has changed to better explain the meaning of the % DV.

See FDA Consumer Update, available at https://www.fda.gov/ForConsumers/ConsumerUpdates/ucm620013.htm?utm_campaign=Nutrition%20Facts%20Label%20Reboot%3A%20A%20Tale%20of%20Two%20Labels&utm_medium=email&utm_source=Eloqua.

What does “natural” mean in the context of product advertising?  Consumers see phrases like “natural,” “all natural,” and “100% natural” over and over again in modern marketing.  The trouble is that “natural” may not mean what consumers expect it to mean, thereby opening companies up to claims of false or misleading advertising.

Two recent lawsuits against Pret A Manger, the sandwich company, provide a cogent illustration.  One complaint was filed by two consumers as a class action.  The other was filed by three non-profit organizations (including the Organic Consumers Association) on behalf of their members and the general public.  Both complaints assert that Pret A Manger has deceptively labeled, marketed, and sold certain bread and other baked goods as “Natural Food” when the products contain trace amounts of a chemical biocide.  According to the non-profit plaintiffs, consumers are willing to pay more for “natural” products and consumers expect such products to be free of pesticides.

This isn’t the first time the Organic Consumers Association, the Federal Trade Commission, or others have gone after companies advertising their products as “natural.”  Companies should be mindful when marketing their products using that term, and should be prepared to defend the claim with substantiation if necessary.

 

Earlier this year, I authored a blog post about the so-called “Monkey Selfies” after the Ninth Circuit ruled that animals cannot sue for copyright infringement because, as nonhumans, they lack the required standing under the Copyright Act.  Recently, following a single judge’s request for a vote, the Ninth Circuit did not vote in favor of an en banc hearing (a full panel rehearing of the case).

Therefore, the Ninth Circuit’s earlier ruling against the People for the Ethical Treatment of Animals, Inc., on behalf of a monkey named Naruto, stands.  At least for now.

The General Data Protection Regulation, or GDPR, took effect May 25, 2018. As predicted, the GDPR has complicated access to WHOIS information (commonly used to look up the contact information for website domains for, among other things, stopping others from infringing IP rights) and given ICANN (the corporation that manages WHOIS data) a headache.

ICANN (Internet Corporation for Assigned Names and Numbers) continues to struggle to identify a proposal that bridges the gap between the requirements of the GDPR and access to WHOIS information. On the day the GDPR took effect, ICANN passed a Temporary Specification, which attempted to facilitate GDPR compliance while also preserving parts of the WHOIS system of domain name registration data. This temporary guideline states the registrar and registry operator must provide reasonable access to personal registration data to third parties for: (1) legitimate interests, except where those interests are overridden by the interests or fundamental rights and freedoms of the registrants or (2) when the specified request is deemed lawful by the European Data Protection Board (EDPB), a court having jurisdiction, or applicable legislation or regulation.

First, these temporary specifications have not prevented the brand enforcement problems I previously discussed. For example, some European domain name service registrars have decided to no longer collect WHOIS information. Furthermore, Brian Winterfeldt has reported that a California-based registrar has declined a data access request related to a specific enforcement effort of intellectual property rights and that other registrars are responding to such requests on a “case-by-case basis with no transparent or predictable criteria.” More alarming is the report that at least one global company has estimated its ability to enforce trademark rights against infringing domains may drop 24%.

Second, the EDPB still has problems with ICANN’s proposal. On July 5, 2018, the EDPB urged ICANN to develop new legal justifications for why it asks for the data that makes up the WHOIS database and provided further guidance in developing a GDPR-compliant WHOIS model. ICANN appears to be taking the EDPB’s guidance to heart and is hopeful they can create a GDPR-compliant-model that satisfies their purpose of providing WHOIS data to those who need it.

Unfortunately, only time will tell if a GDPR-compliant WHOIS database will emerge. In the meantime, it has become more difficult to determine who is in charge of websites infringing on intellectual property rights making brand enforcement more challenging.

Soy milk. Almond milk. Coconut milk. With the increase in health-conscious shopping and non-dairy diets, these terms and others have become household names.

But the Food & Drug Administration (“FDA”) recently suggested these products don’t constitute milk at all, since they do not come from animals. According to multiple sources, during the Politico Pro Summit in July, the FDA Commissioner commented that the FDA is probably not currently enforcing its “standard of identify” for milk considering the FDA defines “milk” by referencing the milking of cows.

Manufacturers and sellers of non-dairy products currently advertised and labeled as “milk” should keep watch on whether the FDA issues guidance on this issue or decides to strictly enforce its current definition of “milk.” If it does, the marketing for these products may drastically change.

The FTC has amended its Jewelry Guides (formally, the “Guides for the Jewelry, Precious Metals, and Pewter Industries”) which aim to help prevent deception in jewelry marketing by providing clear standards.

The Jewelry Guides, like other industry guides published by the FTC, are intended to help marketers understand their responsibilities with respect to avoiding consumer deception.  The Guides themselves are not binding law, but instead offer the FTC’s interpretation of how Section 5 of the FTC Act applies to certain practices within the industry.

For those in the jewelry industry, the issuance of these changes suggests it may be a good time for a compliance check.  Some noteworthy changes include:

  1. No more thresholds for describing alloys as “gold” or “silver.”

Under the old Guides, marketers were prohibited from using the terms “gold” and “silver” to describe a product made of a gold or silver alloy (combination of gold or silver and one or more other precious metals) unless the ratio of gold/silver to other metals met certain minimum thresholds.

The revisions eliminate these requirements.  From now on, any gold alloy may be marketed as “gold” as long as the marketing contains “an equally conspicuous, accurate karat fineness disclosure.”  The same goes for silver alloys as long as the marketing contains a conspicuous and accurate disclosure of the parts-per-thousand measurement.

  1. New requirements for describing silver- and platinum-coated products.

A preexisting rule advises against using the term “gold” to describe a product that is merely gold-coated.  The revised Guides extend this rule to silver and platinum products.

  1. New rule prohibiting the use of incorrect varietal names to describe gemstones.

The FTC now expressly prohibits the use of incorrect varietal names like “yellow emerald” or “green amethyst” to describe gemstones.  Instead, marketers should use scientifically-correct terms like “heliodor” and “prasiolite.”

  1. Relaxed rules for lab-grown diamonds and gemstones.

The revisions make several changes to the rules for marketing lab-grown diamonds and gemstones.  For the most part, these changes benefit the lab-grown sector.  For instance, the FTC now cautions marketers not to use the terms “real, genuine, natural, or synthetic” to imply that a lab-grown diamond “is not, in fact, an actual diamond.”

The Guides still prohibit the use of terms like “real” and “natural” to describe lab-grown diamonds and gemstones, but the FTC indicated that it might be willing to reconsider this position.

When evaluating how to address what you believe constitutes infringement, false advertising, or unfair competition, the decision to send a cease and desist letter or to file a lawsuit becomes an important one.  Is there a right approach in each instance?  No.  There are pros and cons to each and, in a typical lawyer answer, the best approach “depends.”

On the one hand, sending a cease and desist letter has the potential of resolving the issue outside of court, with fewer legal fees and on a quicker timeline.  It also has the effect of placing the other party on notice of your claim and allowing you to make an argument for willfulness down the road (if the party continues the conduct despite the allegations).

On the other hand, filing a lawsuit shows the seriousness of the allegations and preserves your choice of venue—i.e. which court you want to be in.  Sending a cease and desist letter first would let the other party know that there is a potential of a lawsuit, which would allow that party to file a declaratory judgment action in its own choice of venue before you have the chance to do so.  As a reminder, under the Declaratory Judgment Act, a party who has been accused of illegal conduct like infringement, false advertising, or unfair competition can affirmatively file suit and ask that a court declare its conduct lawful.

Deciding which approach to take will depend on the situation and any prior history with the alleged infringer or advertiser.  Make sure to weigh all of your options and discuss with your legal counsel if necessary.

We do it all the time, but is it legal? Maybe. Maybe not.

Embedding content from one source, e.g., a website, into another source, e.g., another website, is not uncommon. News sites embed photographs from Instagram, twitter messages, and videos into their content. Businesses embed videos and photographs of their products into their websites. Embedding also occurs when we post a link from a website into our social media accounts. For instance, after copying and pasting a website link into a social media post, an embedded version of the website automatically generates. This auto embedding typically consists of the formation of a small box or window which may include a reference to the website, an article name or title, and/or an image or video from the website. But is such use of embedded content copyright infringement?

Under the Copyright Act, the owner of a copyright has the exclusive right to “perform…. [or] display the copyrighted work publicly.” 17 U.S.C. §§ 106(4)-(6). Under the act, to” perform or display a work publicly” includes “to transmit or otherwise communicate a performance or display of the work… to the public, by means of any device or process.” 17 U.S.C. § 101. The Act further defines “display” as “to show a copy of it, either directly or by means of a film, slide, television image, or any other device or process.” Id.

In Perfect 10 v. Google the Ninth Circuit established the “server test.” In this 2007 decision, it was held that Google’s presentation of images in its search results via in-line linking did not infringe another’s copyrights because Google did not make a copy or store a copy of the image on its servers. That is, the court found that Google wasn’t displaying a “copy.” For many, this settled the issue: as long as the content was hosted on third-party servers, an in-line or embedded link showing the same content elsewhere would not infringe. But in the last several months, something unexpected happened.

Two district courts recently rejected the holding in Perfect 10 to the extent it required actual possession (e.g., a copy on the accused infringer’s server) as a prerequisite for infringement because neither could find any such requirement in the express language of the Copyright act.

First, the Northern District of Texas held that when one website displays content from another’s website through embedding, it can publicly display copyrighted works of another “by ‘showing a copy’ of the works via a ‘process’” in violation of the Copyright Act. In effect, the court held, this was a live stream of another’s copyrighted content and no different than if a movie goer live streamed a movie via the internet to the public – actions that clearly constitute infringement even if the infringer does not possess a copy. Next, the Southern District of New York similarly held that embedding content into a website such that it displays content from another source could violate a copyright holder’s display rights, even if the website’s server did not store a copy of the work.

Thus, the law on embedded content may not yet be as settled as some believed. Of course, there are always defenses to copyright infringement to consider, like fair use. In the meantime, however, it may be wise to think twice before posting embedded content.