Trademark Parody and Advertisers

The client is always right. Maybe not right in terms of correct, but usually in terms of prevailing in a dispute with its agency. The agency creates ads, the client reviews, likes it and says, "run it". The agency/client contract may or may not call for the agency to indemnify the client if something goes wrong, such as the violation of a third party's trademark rights. Even if the contract is dead set against the client, the resulting dispute will spoil the relationship, and it will only be a matter of time before the client looks to another agency. and if the agency fears the loss, but has the correct legal position, it may pay for the client's loses hoping to make up the out of pocket in the future. tought business. Best to try to get it right and avoid law suits.

Parody is a ripe area for creative directors. take another's brand and make fun of it on behalf of the client. Sometimes use it it make social comment (barbie and Ken and Aqua and Mattel) but usually not. One thing is for sure, parody is tough to get right. That's because effective parody should project two simultaneous messages. First, this is the real product, and second, this is not the real product.

Where most attempts at parody fail is that they appear to a court to cause some modicome of confussion that the parody is associated, or is, the real product. and sosmetimes two courts in two jurisdictions, dealing with similar facts, can come up with decisions that are 180 degrees apart.

If you don't believe this, look at Chewy Vitton and Butt Wiper. Hard cases to reconcile other than the fact that Budweisser came to court with a survey that indicated that 30% of the persons surveyed thought there was an association between Butt Wiper and the King of Beers. Pretty absurd, but the court bought the survey and ruled against the dog toy.

in the case of Chewy the court found no likelihood of confussion, but the plaintiff, apparently sure of its case, offered no survey evidence. Or perhaps it couldn't find an expert to opine its way. Not likely.

and then there is the case of the furniture delivery truck with pictures on the two large side panels depicting a sofa wrapped like a choclate bar. No confusion likely there, the court thought, but it did find a liklihood of dilution of the famous Hershey's tradedress. this, based on the colors used and the inner foil wrapper. In other words, the furniture store's use of a Hershey-like wrapper diluted the uniqness of the real bar's famous trade dress. How many trademark lawyers would haqve seen this one coming down the road?

Parody is funny, it attracts attention and it can be considered clever by some....such as the creative director. It works when executed properly because no one has a monopoly in their own trademark, and parody is fair use, protected expressly under the Lanham Act and by decisions regarding the First Amendment. But when a creative director parodies another's mark, he or she can be sure that the work will come to the attention of the mark's owner, and a letter demanding ceasation of the parody will result.

That's when the questions between client and agency arise.

FTC Ad Guides Puts Teeth into Endorsement Rules

THE FTC RELEASES MUCH ANTICIPATED REVISED “GUIDES CONCERNING USE OF ENDORSEMENTS AND TESTIMONIALS IN ADVERTISING.”

By: James B. Astrachan

Synopsis: The Guides, effective December 1, 2009, will require advertisers to be greatly more transparent when it comes to their associations with the persons who are endorsing their products and services. In essence, the Guides require that an endorsement must reflect “the honest opinions, findings, beliefs or experience of the endorser, and must alert the consumer to any material connection between any endorser.” The FTC has attempted to define who is an endorser and to create a myriad of disclosure requirements where endorsements occur to prevent consumer deception. While many of these rules are common sense, some are more subtle, particularly those dealing with endorsement in new media.

General

The Federal Trade Commission (FTC) published its revised Guides Concerning Use of Endorsements and Testimonials in Advertising. The Guides offer guidance to advertisers on how to ensure that their endorsements are not false or misleading under the FTC Act. The Guides were first published in 1975 and later revised in 1980. Because the last revisions were published in 1980, prior to the development and emergence of the Internet, the current revisions are the first to address the dissemination of endorsements through new media such as blogs, street teams and social network websites. Some important changes include: (1) guidance on the use of endorsements and testimonials offered by bloggers; (2) the liability of advertisers for false and unsubstantiated statements made by their endorsers and for failing to disclose their material connections with the endorser; (3) the elimination of certain disclaimers as effective means to prevent consumer endorsements from being false or misleading; and (4) the liability of endorsers for their statements.

Honest Opinions

Endorsements must reflect “the honest opinions, findings, beliefs or experience of the endorser.” The endorsement may not convey an express or implied representation that would be deceptive if made by the advertiser. If a material connection exists between the endorser and the advertiser, the advertiser must carefully monitor the content of the message, an easy feat for traditional media where the advertiser writes the script, but far less easy in the cases of blogging, message boards, street teams and other forms of viral advertising where the endorser is let loose to create the buzz.

The Guides cover celebrity, consumer and expert endorsements. The expert is a person, or entity, “possessing, as a result of experience, study or training, knowledge of a particular subject which knowledge is superior to what ordinary individuals generally acquire.” An obvious example might be an endorsement of tires by a well known NASCAR race driver. A less obvious example, cited in the Guides, is a blogging college student who has “earned a reputation as a video game expert,” of whom his readers frequently ask questions.

Disclosure of Endorser-Advertiser Relationship

The Guides generally require that where there is a relationship between advertiser and endorser that is not inherently obvious, it must be disclosed. That relationship, however, must be one that an ordinary person would believe would materially affect the weight or credibility of the endorsement (as viewed from the FTC’s perspective). It is well known that celebrities are paid a fee to endorse products, and consumers factor that into their decision to buy. It is not necessary to make the disclosure where the connection is obvious. It may not be obvious to viewers that a sports celebrity touting a medical clinic by name on a talk show has been paid by the medical clinic to talk it up when she can.

An advertiser may use the endorsement of experts and celebrities only as long as they have good reason to believe that the endorser maintains its product-related views. If an advertiser wants to use the endorsement over an extended time it must secure the endorser’s views over reasonable intervals. What is reasonable might be affected by new products, alterations, performance changes and the like. Also, if the advertiser represents that the endorser uses the products, the endorser must have been a user at the time the endorsement was made. The advertiser can only use the endorsement as long as it has good reason to believe the endorser remains a bona fide user of the product.

Consumer Endorsement

Consumer performance endorsements will be interpreted as representing that the product is effective for the depicted purpose. The advertiser must possess at the time the ad ran, adequate substantiation to support the claims. If appropriate, the FTC will require that substantiation be of a scientific nature. Specifically, the Guides provide, “consumer endorsements themselves, are not competent and reliable scientific evidence.” Thus, where the claim is capable of scientific substantiation or testing it is not sufficient to rely on the endorsement of consumers, who may have good faith beliefs, to establish the claim. The burden falls on the advertiser, and its agency. Disclaimers, such as “results not typical,” or “testimonials based on experience of a few people – you are not likely to have similar results” are not adequate or effective. The Guides, however, do recognize that in some, undisclosed instances, a strong disclaimer could be effective even when the advertiser does not possess reliable, empirical testing.

Transparency

The Guides provide examples that are helpful in understanding the FTC’s concerns in this area, but clearly run afoul of the often intended purpose of social marketing – that most often there be no transparency.

• A tennis star underwent laser vision correction surgery. She speaks highly of the clinic by name on TV talk shows, does not appear on commercials but does have a contract that pays her to publicly speak about her surgery when she can. Without a clear and conspicuous disclosure, the Guides provide that “this endorsement is likely to be deceptive.”

• A physician endorses an anti-snoring product must disclose that he owns part of the company.

• An online message board discussing new music download technology is frequented by MP3 player enthusiasts, including an employee of a leading playback device who touts her employer’s product on the message board. Knowledge of the affiliation would likely affect credibility and must be disclosed.

• A street team talks to friends about a product. Points are awarded for each interaction that result in valuable prizes. This relationship must be disclosed.

• A college student video game blogger, who reviews for free a new video game system from the manufacturer must disclose this.

The purpose of these requirements is simple. Consumers must understand what relationship exists between advertiser and endorser that is likely to affect the endorser’s endorsement.

The Guides attempt to restate old, and create new, rules. What comes through loud and clear for these advertisers who use new social and viral methods to advertise their products is that the FTC has announced that advertisers and their agencies will bear responsibility for the contents of their endorsers’ messages to consumers. To avoid liability, advertisers must direct their endorsers, employees and ad agencies to comply with the Guides.

Employees must be prohibited from anonymously posting touts for their employer’s products, and the prohibition should be written and often communicated.

Advertisers should require by contract that their agencies are aware of, and will comply with, the Guides. Advertisers and agencies are obligated to insist that their endorsers also comply and this should be written. Procedures should also be established to monitor compliance. Where product is provided for review, for example, the reviews should be monitored for sufficient disclosure of connection.

A copy of the revised Guides can be obtained at the FTC’s website, http://www.ftc.gov/os/2009/10/091005revisedendorsementguides.pdf. The Law of Advertising will provide a full discussion on the new requirements under the revised Guides in its Release 93 edition.

tiger's ad contracts

everyone's writing and talking about Tiger Woods so i thought i would also. my subject is what his endorsement contracts must look like, and i need to say i have never seen one of his. but i have seen many others over the years.

advertisers get into trouble when their celebrity endorsers die or become involved in unseemly activities. some advertisers would like to encourage their celebrity endorsers to be bad; others, like Tiger's, do not. Nike, Accenture, Tag Heur and the like run respectable companies and want respectable endorsers. its about the image.

these advertisers pay a lot of money for Tiger...Nike reportedly pays $30,000,000 a year! that's more than most people make...in 10 lifetimes. how do they control his activities?

bottom line is that they can't. they are not there to watch him all the time, so all they can do is give them selves an out with what is called a morals clause in his contract. that means if the endorser engages in some conduct that is disreputable the advertiser has the right to pull the plug eg, cancel the sontract. it is possible, however, that a celebrity with Tiger's pulling power would refuse to include a morals clause and it is possible that a sponsor hot to get him, and thinking about what appears to be his squeaky clean image, would not insist.

some sponsors have announced they are walking. Accenture is one. it is possible that Tiger would let a sponsor out of its contract even absent a morals clause, or that some other deal was made. for example, lesser payment without use of the ads.

time will tell how this shakes out. my bet is that Tiger will land on his feet in short time and pick up enough quality sponsors to live a prosperous life. they will include morals clauses in future contracts however, and i don't think he'll see the really big bucks for a while. but he will at ssome time. scandal or not, the man's a super star.

copyright, trademark mediation

mediation is an interesting concept. it can preceede or follow the filing of a lawsuit, and is supposed to involve a totally neutral third party as the mediator. it is held confidential by contract and what is said will not be used against the speaker if the case does not settle. say, for example, that you have been sued for copyright infringement. maybe you are an architectural firm and you have purloined, quite by accident you assert , another's plans. the owner is angry because it believes you have stolen from it and it wants compensation for your infringement.

there is no contract that requires mediation between you and the plan's authors so it is up to you and the author to each agree on mediation. is it a worthwhile process and how do you get there? what are you looking for in a mediator?

this isnt the garden variety of neighborhood dispute where one neihbor doesnt cut her grass and the person next door is trying to get her to do so. here, there is money at stake and a potential federal lawsuit that will be very expensive to resolve if it goes all the way (copyright cases can only be filed in the US district courts).

but as the case progresses it may become more difficult to settle at a reasonable price. the parties will be spending money on lawyers and feelings will become more frayed.

when i learn of a suit filed against my client, or threatened, i almost always call the other side's lawyer just to introduce myself...eventually, we will required to confer on electronic discovery and other preliminary issues anyway. so this is a good chance to say hello and begin to establish a rapport. depending how the conversation goes, i sometimes ask whether the other side will consider early mediation. sometimes they do, and sometimes they do not. some of the reasons for not doing so at that stage might be lack of discovery; lack of expert's opinion regarding money damages; the desire to stay with the case and not settle it; the desire of the plaintiff to punish the defendant; the feeling that "free" discovery will occur.

sometimes, however, the plaintiff is looking for a quick resolution and the lawyers can help that resolution along with mediation.

mediation is non binding. it helps each side learn about its case. sometimes it is desireable to conduct a little discovery before mediation to help flesh out the claims and the defenses. the mediator is supposed to be a neutral who really facilitates the process, but there are times when a person experienced in the subject area, whose been around the block...and has come back...can be helpful in interjecting a dose of reality into the discussions. that's for the lawyers to decide.

the parties and lawyers will meet with the mediator who should have requested a somewheat comprehensive briefing that might include what the parties think they can prove if the case goes to trial, strengths and weaknesses, and the history of any settlement discussions. following the mediator's introduction likely each party will make an opening statement about its perceptioon of its case, and its not a bad thing for the plaintiff and defendant to hear the other side's view. a mediator might restate this view point to reinforce it.perhaps it is being heard for the first time.

the mediator may or may not break the parties out into seperate rooms and shuttle back and forth. realisim is very important if the case is to be resolved in mediation, and the mediator if experienced in the subject area can add that rrealisim if both sides agree that the mediator should do this and not remain simply nuetral. i like to hear the mediator's perspective, and where cases can't be settled, the mediator's perspective may cause me to change my strategy. for example, if i am making no headway with the mediator in explaining an issue, or convincing the mediator, why should i think i will do any beeter with the judge or jury?

if the parties are able to reach agreement, it is very wise to document the agreement with enough detail that the agreement can be enforced if a party goes back on its agreement. even if the parties can't reach full settlement they may agree to resolution of certain aspects that will streamline the case, for example, a range of money damages. and they can always return to the mediation table in the future.

oh yes. don't fret that the judge who is assigned this case will feel left out if this case does not reach her court room. likely, she has more than enough to keep her busy. i have even received thank you notes from judges.