While I know I don't usually write about patent issues, this one is too big to pass up. Today, the United States Supreme Court issued a long awaited patent decision on which the viability of business method patents hung in the balance. While there was technically no dissenting opinion, the decision was far from unanimous. In fact, the only thing that they all agreed on was that Mr. Bilski's invention was not patentable. Bilski v. Kapos, 561 U.S. ____ (2010).
Here are a few key holdings from the "opinion of the court:"
1. The term "process" under the Patent Act may include some methods of doing business.
2. The "machine-or-transformation" test is not the sole test for patentability. In other words, a process is patentable even if it is not tied to a machine and even it if doesn't transform something into something else.
3. Computer programs are not categorically unpatentable.
4. Abstract ideas are not patentable. Certain whole categories or classes of instructions on how to conduct business may be merely abstract ideas and not patentable.
Items 3 and 4 come from a portion of the opinion in which Justice Scalia did not join. So the weight of these portions of the opinion is on much less solid footing.
The absolutely key question raised by the case going forward is; "how do we determine what is an unpatentable abstract idea and what is a patentable process?" I suspect that this is a topic about which myriad scholars and pundits will write volumes for years to come. To some degree, the majority seems to have taken the "we know it when we see it" approach to determining whether the claimed invention in this case was merely an unpatentable abstract idea. In fact, they expressly declined to provide guide lines that would be helpful in distinguishing unpatentable abstract ideas from patentable processes. They simply said that based on three prior cases, the claimed invention looked like an abstract idea to them (apparently each and every member of the court agreed on this point) and so, therefore, it was not patentable. And there you have it.
So ... what we have for guidance are the three prior cases (referred to as Benson, Flook and Diehrand) and now, the Bilski case. According to the majority, then, here is the guidance that the business world has to go on.
Benson - mathematical algorithms are most likely (if not categorically) not patentable.
Flook - a invention which would not be patentable otherwise, is not made patentable merely because the patentability claim is limited to use within a particular technological environment.
Diehr - the application of a law of nature or mathematical formula (or an abstract idea, perhaps?) to a known structure or process may be patentable.
Bilski - mathematical formulas for hedging risk are non-patentable abstract ideas and claims applying them to a particular industry or market do not make them patentable.
Got it? I hope this clears everything up for everybody. :-> (sarcastic smile).
It is interesting (one might even go so far as to say moderately "helpful") that the court seemed to go out of its way to expressly address computer programs (i.e., software). The "opinion of the court" expressly says that computer programs may be patentable processes. Unfortunately, this portion of the majority opinion was not joined in by Justice Scalia and so, may actually represent only a minority view on the issue.
Now here is where it gets dicey. So far, I've been careful to couch what I've said by referring to the "opinion of the court." This is a term of art. While it generally refers to the majority opinion (and thus, the law of the land), in this case it is hard to tell, especially when it comes to the viability of the business method patent. Here is why.
As everyone knows, there are 9 justice on the US Supreme Court. In this case, the "opinion of the court" was joined in by 5 justices (with Justice Scalia declining to join in two key parts). There are also two other "concurring" opinions the first of which is joined by the remaining 4 justices (Breyer wrote an additional concurring opinion although he joined in the first concurring opinion). The main reason why the concurring opinions are "concurring" is because they all agree that Mr. Bilski's invention is not patentable. Where the concurring justices deviate from the majority justices is on the very issue that makes this case so important. Namely, the concurring justices disagree with the majority on the patentability of business methods. In fact, the "concurring" opinion expressly finds that business methods are not patentable. So, here's what we've got.
Roberts, Thomas, Kennedy & Alito (the "opinion of the court") - business methods are not categorically unpatentable and, thus, are potentially patentable.
Stevens, Ginsburg, Breyer & Sotomayor (the "concurring" opinion) - business methods are categorically unpatentable.
Scalia - Agrees generally with the opinion of the court, but declines to join in the portions that contemplate that:
(1) the law on patentability of inventions must evolve with technology;
(2) categorically denying patentability to business methods because they were not historically contemplated by the statute is problematic; and
(3) the unpatentability of abstract ideas is a useful tool in determining patentability.
Essentially, while this is a unanimous decision on the unpatentability of Mr. Bilski's invention, it is, at best, a 5-4 decision on the patentability of business methods. Query whether Justice Scalia could have been (or could be in the future) swayed over to the side of the concurring justices. If so, the decision (and the patent world) could have been completely different.
Now, as the world knows, Justice Stevens has announced that he is retiring. It will be interesting to see if this issue finds its way into the confirmation hearings for Supreme Court nominee, Elena Kagan. If Kagan is confirmed and if she believes that business methods should not be patentable, then it is more likely that another case will be brought on the same issue to see if Justice Scalia can be swayed.
Stay tuned. It ain't over yet.
Monday, June 28, 2010
Saturday, May 29, 2010
A New Defense for Brand Owners Against Unwanted Key-Word Advertising
Just came back from the International Trademark Association (INTA) annual meeting in Boston. Being on the Key-word Advertising Working Group of the Internet Committee, I spent quite a bit of time talking to colleagues from around the world about issues surrounding key-word advertising. From these discussions (and some recent developments in the law), it dawned on me that there may be a new way for brand owners to defend themselves against unwanted key-word advertising.
By way of reminder, key-word advertising (in its most traditional sense) is a dynamic form of advertising where search engine's selling (and advertisers buying) the ability to have the advertiser's advertisement displayed automatically when an end user enters that key-word into the search engine.
There are at least two primary things that frustrate brand owners about key-word advertising. First, companies can purchase the brands of their competitors as key-words and thereby use their competitors' trademark (and arguably their good will) to divert Internet traffic to the competitor's website and divert potential buyers to the competitor's products. Second, search engines are making money using the brand owner's trademark.
One of the significant legal developments in the last year in this area is that the majority of US courts seem to have reached a consensus that a search engine's sale of a trademark as a key-word constitutes a use of the trademark in commerce. The unsettled issue is whether and under what circumstances, that use gives rise to a likelihood of confusion so as to constitute infringement. Reflecting on this, it occurred to me; what if a brand owner used its brand not only as its trademark for its goods, but also used its brand for its own key-word advertising?
Bear with me here. Suppose Widgco, Inc. sells widgets under the brand SPARROW. (What's a widget?). Now, ordinarily, a search engine could then sell SPARROW as a key-word to the highest bidder (e.g., perhaps Widgco's competitor). But what if Widgco also had its own search engine and used the word SPARROW as a key-word to trigger its own advertisements on its own search engine. Under the majority of current cases, this should constitute "use in commerce." As such, Widgco would be using the brand SPARROW not only for widgets, but would also be using the word SPARROW for the advertising service of providing the key-word to trigger advertising displays. Now imagine that Widgco registers its SPARROW brand for "advertising services, namely, use as a key-word to trigger advertising displays." Okay, I admit, the description could use some refining, but you get the point. It would potentially be problematic for any search engine that wanted to use the SPARROW brand as a key-word.
Anyone else think this might work as a good defense against use of a trademark by search engines as a keyword? How long do you think it will be before someone tries this out and brings the first case like this? Just a thought ...
By way of reminder, key-word advertising (in its most traditional sense) is a dynamic form of advertising where search engine's selling (and advertisers buying) the ability to have the advertiser's advertisement displayed automatically when an end user enters that key-word into the search engine.
There are at least two primary things that frustrate brand owners about key-word advertising. First, companies can purchase the brands of their competitors as key-words and thereby use their competitors' trademark (and arguably their good will) to divert Internet traffic to the competitor's website and divert potential buyers to the competitor's products. Second, search engines are making money using the brand owner's trademark.
One of the significant legal developments in the last year in this area is that the majority of US courts seem to have reached a consensus that a search engine's sale of a trademark as a key-word constitutes a use of the trademark in commerce. The unsettled issue is whether and under what circumstances, that use gives rise to a likelihood of confusion so as to constitute infringement. Reflecting on this, it occurred to me; what if a brand owner used its brand not only as its trademark for its goods, but also used its brand for its own key-word advertising?
Bear with me here. Suppose Widgco, Inc. sells widgets under the brand SPARROW. (What's a widget?). Now, ordinarily, a search engine could then sell SPARROW as a key-word to the highest bidder (e.g., perhaps Widgco's competitor). But what if Widgco also had its own search engine and used the word SPARROW as a key-word to trigger its own advertisements on its own search engine. Under the majority of current cases, this should constitute "use in commerce." As such, Widgco would be using the brand SPARROW not only for widgets, but would also be using the word SPARROW for the advertising service of providing the key-word to trigger advertising displays. Now imagine that Widgco registers its SPARROW brand for "advertising services, namely, use as a key-word to trigger advertising displays." Okay, I admit, the description could use some refining, but you get the point. It would potentially be problematic for any search engine that wanted to use the SPARROW brand as a key-word.
Anyone else think this might work as a good defense against use of a trademark by search engines as a keyword? How long do you think it will be before someone tries this out and brings the first case like this? Just a thought ...
Wednesday, March 24, 2010
Anonymous Internet Defamation
If you have any presence on the Internet, sooner or later you will have to cope with anonymous defamation. So ... what can you do about it? The first thing that everyone wants to know, of course, is the identity of the person who posted or emailed the defamatory statement anonymously. However, the First Amendment to the U.S. Constitution generally protects anonymous speech. A recent New Jersey Appellate Division case (A.Z. (a minor) and B.Z. (on behalf of A.Z., as parent) v. John Doe and Jane Doe, Docket No. A-5060-08T3 (App. Div. March 8, 2010)) laid out two key elements that are required to force someone (typically an Internet Service Provider) to divulge the identity of the anonymous person. As lawyers like to do, let's call the anonymous person "John Doe."
In a nutshell, there are two key requirements you must satisfy if you want to force an ISP to tell you John Doe's identity. First, you need to prove to the court that you have all of the elements necessary to prove your case for defamation. Second, you need to persuade the court that your need for John Doe's identity outweighs John Doe's First Amendment right of anonymous speech.
If you are like me, its easy to quickly get bored reading lengthy articulations of intricate facts of legal cases. So, I'll try to keep it short, but this one is worth reading. The case arose when Jane Doe sent an email to a faculty advisor of a high school honors club. The email attached photos allegedly taken from posts on FaceBook showing various students holding beer cans and bottles and a beer funnel and inhaling what appeared to be an illicit drug. In one of the photos, A.Z. (the plaintiff in the case) is allegedly depicted poised to toss a ping pong ball on a table containing several plastic cups and beer cans. The email also alleged that the students depicted were "breaking their contracts [with the school] and breaking the law." The email was then forwarded to the principal, the school superintendent and the police. The police ultimately chose not to prosecute.
The trial court was persuaded that A.Z. had established a prima facie case for defamation (the first requirement), but did not feel that A.Z.'s need for John Doe's identity outweighed John Doe's First Amendment right of anonymous speech (the second requirement). The appeals court disagreed and found that A.Z. had not established a prima facie case for defamation.
In order to establish a case for defamation, one needs to prove that: (1) the defendant made a defamatory statement of fact about the plaintiff, (2) the statement was false, (3) the statement was communicated to a third party, and (4) the defendant knew the statement was false or faild to exercise due care in ascertaining its truth or falsity. In this case, the appeals court was not persuaded that the defendant's statements (i.e., that the students depicted were "breaking their contracts [with the school] and breaking the law") were false. Oddly enough, according to the appeals court decision, A.Z. never provided any evidence that the statements were false; not even a sworn affidavit. Having found this, the appellate court did not bother analyzing the other factors.
Long story short ... if you want to find out who is defaming you on the internet, you had better be prepared to swear under oath that the defamatory statements are false.
In a nutshell, there are two key requirements you must satisfy if you want to force an ISP to tell you John Doe's identity. First, you need to prove to the court that you have all of the elements necessary to prove your case for defamation. Second, you need to persuade the court that your need for John Doe's identity outweighs John Doe's First Amendment right of anonymous speech.
If you are like me, its easy to quickly get bored reading lengthy articulations of intricate facts of legal cases. So, I'll try to keep it short, but this one is worth reading. The case arose when Jane Doe sent an email to a faculty advisor of a high school honors club. The email attached photos allegedly taken from posts on FaceBook showing various students holding beer cans and bottles and a beer funnel and inhaling what appeared to be an illicit drug. In one of the photos, A.Z. (the plaintiff in the case) is allegedly depicted poised to toss a ping pong ball on a table containing several plastic cups and beer cans. The email also alleged that the students depicted were "breaking their contracts [with the school] and breaking the law." The email was then forwarded to the principal, the school superintendent and the police. The police ultimately chose not to prosecute.
The trial court was persuaded that A.Z. had established a prima facie case for defamation (the first requirement), but did not feel that A.Z.'s need for John Doe's identity outweighed John Doe's First Amendment right of anonymous speech (the second requirement). The appeals court disagreed and found that A.Z. had not established a prima facie case for defamation.
In order to establish a case for defamation, one needs to prove that: (1) the defendant made a defamatory statement of fact about the plaintiff, (2) the statement was false, (3) the statement was communicated to a third party, and (4) the defendant knew the statement was false or faild to exercise due care in ascertaining its truth or falsity. In this case, the appeals court was not persuaded that the defendant's statements (i.e., that the students depicted were "breaking their contracts [with the school] and breaking the law") were false. Oddly enough, according to the appeals court decision, A.Z. never provided any evidence that the statements were false; not even a sworn affidavit. Having found this, the appellate court did not bother analyzing the other factors.
Long story short ... if you want to find out who is defaming you on the internet, you had better be prepared to swear under oath that the defamatory statements are false.
Tuesday, January 12, 2010
To Defense Contractors, Al Frankin Amendment is No Laughing Matter
Prime contractors who want to be eligible for Department of Defense government contract awards will have to comply with a new law banning arbitration with employees for claims. Compliance with the new law will likely require defense contractors to review, revise and renegotiating existing agreements with many of their independent contractors and subcontractors. On December 19, 2009, President Obama signed a new spending bill into law which implemented this requirement. The amendment to the bill providing for the arbitration ban was originally offerred by Sen. Al Frankin (D- Miss).
Under the new law (Sec. 8118 of HR 3326 ), prime contractors under DOD contracts will have to agree not to "enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 (prohibiting employer descrimination on the basis of race, color, religion, sex or national origin) or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention." The new law goes further to require that such prime contractors will also have to agree not to take any action to enforce any provision of an existing agreement which would require such arbitration. This provision applies only to government contracts in excess of $1,000,000 awarded more than 60 days after the effective date of the Act.
It is not entirely clear what is intended to be covered by phrase "independent contractors." Perhaps it is intended to cover temporary help staffing who are not technically employees. However, does it apply to subcontractors?
A second provision of the new law expressly deals with and uses the word "subcontractors." The fact that the new law uses the phrase "independent contractors" in one section and "subcontractors" in another, might suggest that the phrases were intended to apply to different groups of non-employee workers.
The second provision dealing with subcontractors requires the prime contractor to certify that it requires each "covered subcontractor" (a subcontractor with a subcontract in excess of $1,000,000) to abide by the first provision applicable to prime contractors. This second provision applies to contracts awarded more than 180 days after the effective date.
Prime contractors and subcontractor who have agreements with their employees, independent contractors or subcontractors which contain these types of arbitration provisions may very well have to revise their contracts. Contracts which have general arbitration provisions, will have to be revised to exclude these particular types of claims. This provision has already been construed to apply to all employees, not merely those working on the government contract.
Under the new law (Sec. 8118 of HR 3326 ), prime contractors under DOD contracts will have to agree not to "enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 (prohibiting employer descrimination on the basis of race, color, religion, sex or national origin) or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention." The new law goes further to require that such prime contractors will also have to agree not to take any action to enforce any provision of an existing agreement which would require such arbitration. This provision applies only to government contracts in excess of $1,000,000 awarded more than 60 days after the effective date of the Act.
It is not entirely clear what is intended to be covered by phrase "independent contractors." Perhaps it is intended to cover temporary help staffing who are not technically employees. However, does it apply to subcontractors?
A second provision of the new law expressly deals with and uses the word "subcontractors." The fact that the new law uses the phrase "independent contractors" in one section and "subcontractors" in another, might suggest that the phrases were intended to apply to different groups of non-employee workers.
The second provision dealing with subcontractors requires the prime contractor to certify that it requires each "covered subcontractor" (a subcontractor with a subcontract in excess of $1,000,000) to abide by the first provision applicable to prime contractors. This second provision applies to contracts awarded more than 180 days after the effective date.
Prime contractors and subcontractor who have agreements with their employees, independent contractors or subcontractors which contain these types of arbitration provisions may very well have to revise their contracts. Contracts which have general arbitration provisions, will have to be revised to exclude these particular types of claims. This provision has already been construed to apply to all employees, not merely those working on the government contract.
Tuesday, December 15, 2009
Who Owns the Rights to Santa Claus?
I was recently asked this question and fell in to the common quasi-misperception that the common Americanized image of of the "jolly old elf" was a creation of the Coca Cola company cut from whole cloth. Well, I was partly correct, but, as it turns out, the history of the image of Santa Claus is a little richer than I had originally appreciated.
Fortunately, you don't have to look far to get some pretty good triangulation of the "modern" history of the Americanized image of Santa Claus. Here is what I found.
However, the first Americanized visual image of our familiar Saint Nick (which appears to incorporate the narrative attributes provided by both Irving and Moore) is attributed to illustrator Thomas Nast who drew an image of Santa for Harpers Weekly magazine in 1863.
This image is in the public domain and is available from Wikipedia and the Library of Congress. Another Santa image (which starts to look more like our familiar Santa Claus) attributed to Nast can be seen below (also from the Library of Congress) titled "Merry old Santa Claus" from 1889.
So far so good. As long as I am using Washington Irving, Clement C. Moore or Nast as my basis for creating my own image of Santa, I'm pretty safe, right? Not so fast.
The modern version (which would appear to draw significantly from the attributes of those images that came before, especially Nast) that most of us (well ... at least me anyway) think of when we think of Santa Claus is largely attributable to the handy work of one Haddon Sundblom who painted Santa images for the Coca Cola company in the 1930s. The Coca Cola company actual has their own accounting of the history of the Santa image on the Coke website. They state that Sundblom's inspiration came largely from the the Clement C. Moore poem. That said, there are clearly similarities between the 1889 Nast image and the Sundblom images.
So, who owns the rights to Santa Claus? Well, while the Sundblom images are owned by the Coca Cola company (I suspect), the Nast images appear to be in the public domain. Does that help? .... I didn't think so.
The better question is who owns the spirit of Saint Nicholas. Hopefully, the answer to that question is all of us.
Fortunately, you don't have to look far to get some pretty good triangulation of the "modern" history of the Americanized image of Santa Claus. Here is what I found.
While the historical roots of the origin of Santa Clause have been traced to the 4th Century Greek Saint Nicholas of Myra (apparently a resident of what is now Turkey (yes, the food irony is not lost on me)) that was not what I was looking for. I was more interested in the origins of the American iconic image.
The commonly found explanation seems to trace the origins of the American image to Washington Irving who (influenced by Dutch and, quite likely, early British images) first described an image of Saint Nicholas in his History of New York (1809) as "equipped with a low, broad brimmed hat, a huge pair of Flemish trunk hose, and a [long] pipe." This image was greatly enhanced in Clement C. Moore's 1823 poem A Visit from St. Nicholas (aka Twas the Night Before Christmas).
However, the first Americanized visual image of our familiar Saint Nick (which appears to incorporate the narrative attributes provided by both Irving and Moore) is attributed to illustrator Thomas Nast who drew an image of Santa for Harpers Weekly magazine in 1863.
This image is in the public domain and is available from Wikipedia and the Library of Congress. Another Santa image (which starts to look more like our familiar Santa Claus) attributed to Nast can be seen below (also from the Library of Congress) titled "Merry old Santa Claus" from 1889.
So far so good. As long as I am using Washington Irving, Clement C. Moore or Nast as my basis for creating my own image of Santa, I'm pretty safe, right? Not so fast.
The modern version (which would appear to draw significantly from the attributes of those images that came before, especially Nast) that most of us (well ... at least me anyway) think of when we think of Santa Claus is largely attributable to the handy work of one Haddon Sundblom who painted Santa images for the Coca Cola company in the 1930s. The Coca Cola company actual has their own accounting of the history of the Santa image on the Coke website. They state that Sundblom's inspiration came largely from the the Clement C. Moore poem. That said, there are clearly similarities between the 1889 Nast image and the Sundblom images.
So, who owns the rights to Santa Claus? Well, while the Sundblom images are owned by the Coca Cola company (I suspect), the Nast images appear to be in the public domain. Does that help? .... I didn't think so.
The better question is who owns the spirit of Saint Nicholas. Hopefully, the answer to that question is all of us.
Tuesday, November 24, 2009
Thanksgiving is Dead
That's right. You read it correctly. According to the U.S. Patent & Trademark Office, Thanksgiving is listed as dead. Officially, it is listed as having died three days before Christmas in 1988. On December 22, 1998, the THANKSGIVING trademark officially died after Alterman Foods, Inc. had failed to file a Section 8 affidavit continuing the mark. The mark was registered for Cooked Fruits, Cooked Vegetables, Hamburger Patties, Ground Pepper and Tea and, according to its owner, had been in use since September 1912. So the rest of it I can understand, but hamburger patties? Please let me know if you or anyone you know has a tradition of eating hamburger patties at Thanksgiving. I'm not offended, just curious.
On a more upbeat note, however, I am happy to report, that THANKSGIVING has been given new life by Hidden Wineries, Inc. who recently applied for the mark in August of this year for one of my favorite beverages: wine.
You'll also be glad to know that Macy's THANKSGIVING DAY PARADE is alive and well on the USPTO trademark roster, although with a claimed date of first use dataing back to 1924, I was surprised to see that it was only recently registered in 1998.
Finally, of all things, HAPPY THANKSGIVING is currently registered to Mattel. Go figure. Fortunately, it is only registered for toys and not bloging services. So hopefully Mattel will not be offended if I wish you all a HAPPY THANKSGIVING!!!
On a more upbeat note, however, I am happy to report, that THANKSGIVING has been given new life by Hidden Wineries, Inc. who recently applied for the mark in August of this year for one of my favorite beverages: wine.
You'll also be glad to know that Macy's THANKSGIVING DAY PARADE is alive and well on the USPTO trademark roster, although with a claimed date of first use dataing back to 1924, I was surprised to see that it was only recently registered in 1998.
Finally, of all things, HAPPY THANKSGIVING is currently registered to Mattel. Go figure. Fortunately, it is only registered for toys and not bloging services. So hopefully Mattel will not be offended if I wish you all a HAPPY THANKSGIVING!!!
Saturday, November 7, 2009
New FTC Guidelines to Address "Astroturfing"
Ever wonder whether the reviews allegedly posted online by consumers about a product were actually written by independent consumers or by the people on behalf of the company itself? Me too. Apparently, so does the Federal Trade Commission. On October 5, the FTC released its new “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”
The previous guides (which were almost 3 decades old) did not expressly address internet based consumer endorsements sometimes referred to as "astroturfing." The new Guides clearly do, by expressly providing that where bloggers, paid by the advertiser, post product reviews, such reviews will be treated as endorsements. As such, the new Guides apply the previous rule (that the “material connections” between the endorser and the advertiser must be disclosed), at least in part, because these are connections that consumers would not expect.
The new Guides also require advertisers who rely on research findings to disclose material connections between the advertiser and the research organization. Similarly, with few exceptions, celebrity endorsers are also required to disclose any material connection between them and the advertiser.
Another key change under the new guide is that the FTC has gotten rid of the safe harbor that had previously existed for product endorsements. Under the old guidance, an advertiser could simply include a statement to the effect that “your results may vary” as a guard against a claim of false advertising if an endorser’s statements were not generally representative consumers’ experience with the product. Not any more. Now, advertisers and their endorsers are required to clearly disclose the results that consumers should generally expect.
Finally, the new Guides expressly provide that the endorser (not merely the advertiser) can be held liable for unsubstantiated claims made in the endorsement.
Much of the new Guides focus on the FTC’s opinion as to what a consumer is likely to perceive with respect to the relationship between the advertiser and the endorser. Unfortunately, there are not a lot of bright line tests that can be used by advertisers to know what is in the mind of the average consumer. It will be interesting to see how advertisers (especially those focusing on advertising in online social media) react to this new guidance.
The previous guides (which were almost 3 decades old) did not expressly address internet based consumer endorsements sometimes referred to as "astroturfing." The new Guides clearly do, by expressly providing that where bloggers, paid by the advertiser, post product reviews, such reviews will be treated as endorsements. As such, the new Guides apply the previous rule (that the “material connections” between the endorser and the advertiser must be disclosed), at least in part, because these are connections that consumers would not expect.
The new Guides also require advertisers who rely on research findings to disclose material connections between the advertiser and the research organization. Similarly, with few exceptions, celebrity endorsers are also required to disclose any material connection between them and the advertiser.
Another key change under the new guide is that the FTC has gotten rid of the safe harbor that had previously existed for product endorsements. Under the old guidance, an advertiser could simply include a statement to the effect that “your results may vary” as a guard against a claim of false advertising if an endorser’s statements were not generally representative consumers’ experience with the product. Not any more. Now, advertisers and their endorsers are required to clearly disclose the results that consumers should generally expect.
Finally, the new Guides expressly provide that the endorser (not merely the advertiser) can be held liable for unsubstantiated claims made in the endorsement.
Much of the new Guides focus on the FTC’s opinion as to what a consumer is likely to perceive with respect to the relationship between the advertiser and the endorser. Unfortunately, there are not a lot of bright line tests that can be used by advertisers to know what is in the mind of the average consumer. It will be interesting to see how advertisers (especially those focusing on advertising in online social media) react to this new guidance.
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