E-Commerce and Marketing

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Overview

Some of the most current and changing areas of business law are that of e-commerce and online marketing. While nearly all businesses are reliant to some degree on online advertising, communications and transactions, certain businesses, including consumer products and services companies, are constantly embracing new technologies to cultivate and interact with new and existing consumer groups. Adapting to an ever-shifting array of technologies, regulations and risk can be disconcerting for many businesses.

Orr & Reno’s e-commerce and marketing practice group understands these concerns and has extensive experience addressing the issues that are likely to arise in legal disputes involving Internet companies.  These include copyright issues relating to user-generated content, domain name and trademark disputes, online defamation and other communication torts.

Our interdisciplinary team includes litigators, intellectual property lawyers, transactional attorneys and counsel knowledgeable in the areas of marketing law and taxation of Internet transactions.

Practice Focus

  • Negotiation and advice on agreements for web hosting, web development, and with online partners and platforms
  • Drafting license and use terms for web-based services
  • Negotiation of technology licenses and agreements and agreements for (and suitable protection of) video, audio, and other media created for marketing purposes
  • Computer Fraud and Abuse Act issues, including potential liability for ACT violations
  • Domain name registrations and rights disputes – including representation in ICANN UDRP proceedings
  • Compliance of online and e-mail marketing efforts with FTC and other regulations
  • Use of social media for marketing and brand development
  • Issues arising from the use of digital and social media by employees
  • Making effective disclosures in digital advertising
  • Counseling on the use of endorsements and testimonials
  • Federal and 50-state compliance with sweepstakes and contest laws, including drafting and review of official rules, state registration filings, and guidance on overall structure of online promotions including those promoting user-generated content
  • Federal and 50-state compliance with charitable sales promotions laws in connection with cause marketing campaigns, including contract negotiation with charitable organizations, multi-state commercial co-venturer registration, and required advertising disclosures

Industries Represented

Our clients are engaged in a variety of businesses, including retail and online product and service sales, and other lines of business for whom e-commerce is a primary method of conducting business.

FAQs

What should I do if someone else is using my trademark as part of the domain name for another website?
If someone else is using your trademark as part of its domain name, you may have an infringement claim. If you can locate the contact information for the domain name registrant, sending a formal letter requesting the registrant to cease and desist using your trademark is generally a good first step. If your letter is ignored, or the registrant refuses to cease using your trademark, you can challenge such use through the Internet Corporation for Assigned Names and Numbers (“ICANN”) whose Uniform Domain Name Resolution Policy (“UDRP”) provides a mechanism for trademark owners to challenge the use of potentially infringing domain names registered by others. There are a number of factors you will need to assert, including that the domain name has been registered, the offending domain name is identical or confusingly similar to your trademark and that the domain name is being used by the other party in bad faith.

If ICANN determines that use of my trademark by another was improper, will that stop the offending use?
Unfortunately, ICANN decisions are not binding in court, and the losing party is entitled to seek a different outcome by bringing suit in federal court. The whole process may take a long time.

Our business wants to use endorsements and testimonials in our online social media pages. Are we subject to the same legal standards as print advertising?
Yes. Endorsements and testimonials must comply with the standards set forth in Section 5 of the Federal Trade Commission Act, which generally prohibit deceptive advertising. Endorsements and testimonials should also comply with the Federal Trade Commission’s comprehensive Guides Concerning Use of Endorsements and Testimonials in Advertising which reflect general truth-in-advertising principles applicable in all media (whether old or newly emerging) that endorsements must be honest and not misleading. Although the Guides lack the force of law, acts or practices inconsistent with the Guides may result in investigations and enforcement actions by the FTC.

How do I know whether my company’s sweepstakes is legal?
To be legal, a sweepstakes must eliminate one of the elements of a lottery. Federal and state laws prohibit illegal lotteries (except for state-sponsored lotteries), which consist of three elements: (1) prize; (2) chance; and (3) consideration. Because a sweepstakes without a “prize” would have no purpose and no entrants, and because sweepstakes winners are usually selected based on random “chance” selection (if some other winner selection methodology is used such as “skill”, then you may be dealing with a “contest” as opposed to a sweepstakes”), the element that traditionally needs to be eliminated is that of “consideration”. Consideration exists in many different forms, such as the requirement of a product purchase or the expenditure of substantial time and effort in order to enter. If consideration exists in your sweepstakes, you will need to offer an alternate method of free entry to ensure that your sweepstakes is not challenged as an illegal lottery. If entry into your sweepstakes is made available through a free method of entry, then you have likely eliminated the element of consideration. Of course, numerous considerations are involved in developing a legal sweepstakes, but ensuring you’ve eliminated consideration is a good first step.

Do I need to register my sweepstakes?
Yes. Florida and New York require sponsors to register sweepstakes with their respective states when the total announced value of prizes offered in any sweepstakes exceeds $5,000. As part of the registration process, sponsors are required to submit a registration form, attach a copy of the sweepstakes’ official rules, pay a filing fee and bond the sweepstakes. Sponsors are required by law to file their registrations in advance of the commencement of any sweepstakes (7 days in Florida, 30 days in New York), so you need to plan accordingly to ensure adequate time to complete the registration process. Rhode Island requires sponsors to register sweepstakes that are offered in any retail establishment where the total announced value of the prizes offered exceed $500. There is no bonding requirement in Rhode Island; but you will need to submit a registration form, filing fee, and copy of the official rules.

Can we change the official rules after our promotion has started?
Generally, “no”. It is imperative that you carefully craft your official rules as they will become a binding contract between you and the entrants of your promotion. Not only would you invite legal action by engaging in a mid-promotion rule change, but you might also unwittingly unleash a public relations nightmare.

We want to sponsor an in-store sweepstakes, are there any special considerations we should be aware of?
There are a number of legal and practical considerations that are involved in developing a legal in-store sweepstakes. Some of the more important ones include: (1) posting a copy of the sweepstakes official rules in a conspicuous and prominent location in every retail establishment which offers participation in the sweepstakes; (2) making sure you have a sufficient number of entry forms available at each location; (3) designating a manager with the task of manning/observing the entry form area to maintain your sweepstake’s integrity, answer questions, and control abuse; (4) ensuring that all employees have a basic understanding and familiarity with the sweepstake’s official rules – such as eligibility, methods of entry (including free methods of entry), promotion period, prizes, and how to obtain a copy of the official rules; and (5) most importantly, instructing employees not to take any action or make any statement that could be perceived as inducing someone to make a purchase prior to entry. This may seem obvious, but a number of businesses have come under fire for running otherwise legal sweepstakes that become “illegal” by virtue of employees’ having encouraged purchases.

What is the difference between a sweepstakes and a contest?
A sweepstakes is a promotion where the winner is determined based on “chance”, whereas in a contest, the winner is determined based on “skill”.

Our company wants to run a contest. Can we use our own employees as judges?
Yes. Except in rare cases, there is no legal requirement that judges must be totally independent, although it is generally a more favorable approach and one that adds legitimacy to your contest. For example, a company who uses independent judges is well positioned to combat criticisms that the contest was somehow “rigged” or the outcome pre-determined. As a general rule of thumb, companies who use employees as judges should ensure that the employee-judges are qualified to judge contest submissions. While an employee of your art department may be qualified to judge an art or photography contest, that same employee would not be as qualified to judge an essay contest as would a member of your editorial team.

What is the best way to incorporate public voting into our online user-generated content contest?
While businesses are attracted to the “buzz” that accompanies a public voting mechanism in online contests, public voting can be, and often is, fraught with perils including fraud, vote farming, and the selection of winning entries that lack the quality desired by a contest sponsor. The use of leaderboards exacerbates these tendencies. To retain control of a contest and prevent it from being hijacked by practices affecting its integrity, consider dividing your contest’s judging phase into two phases, with the first phase consisting of qualified judges reviewing all entries, applying the judging criteria published in your official rules, and narrowing down the entry field to a handful of finalists. The second phase would consist of a public vote to determine the winner from the Phase I judge-selected finalists. This method remains subject to interference as finalists may still engage in vote farming, fraud or other forms of impermissible coercion to enhance their voting totals. You will need to be vigilant in monitoring online voting activities. Be on the lookout for sharp and sudden spikes in votes for any given finalist, and ensure that you have a solid set of official rules enabling you to disqualify entrants engaging in prohibited activities. A more conservative approach would be to include public voting as merely one criterion by which a contest is judged (i.e. creativity 50%, fit to theme 25%, public vote 25%). By reducing the public’s role and preserving that of the judges, you are better positioned to preserve the integrity of your contest and increase the likelihood of securing quality winning entries.

If our contest ends in a tie, can we select the winner via random drawing?
Generally, “no”. The official rules for all contests need to include a tie-breaker mechanism, but use of a random drawing would be highly risky and could land your promotion in hot water. The better approach would be for your official rules to clearly state that in the event of a tie, the winner will be determined based on which entrant received the highest score from the judges in the most heavily weighted criteria. For instance, if the criteria was 75% originality, 25% fit to theme, the entrant with the highest score from the judges on “originality” should be deemed the winner in the event of a tie. The rationale for this approach is that because the outcome of a contest is determined on “skill” as opposed to “chance”, a number of states permit consideration to be present in a contest. This is not universal, however, and many states still expressly prohibit consideration to be present even in contests. Therefore, if contest entrants incurred “consideration” by competing for a “prize” in your contest, most states would consider the introduction of “chance” via a random drawing tie breaker as rendering your contest illegal because all three elements of a lottery would now be present.

Our business wants to conduct a promotion in which a portion of the proceeds from the sale of our products will be donated to a charitable organization. What do we need to know?
This type of “cause marketing” campaign involving a charitable sales promotion is highly regulated, and a number of federal and state laws will apply. For starters, your business will need a written contract with the charitable organization containing specific provisions enunciated in various states laws (i.e. description of goods being offered to public, estimated number of units to be sold, beginning and end dates of promotion, and statement of any guaranteed minimum or maximum amount to be paid to charity, to name a few). A number of states require business entities to register as “commercial co-venturers” prior to launching their charitable sales promotion, and to bond the promotion (i.e. $10,000 bond in Alabama, $25,000 bond in Massachusetts). Post campaign financial reporting requirements exist as well. In addition to your written contract and state registration requirements, you need to be aware of required advertising disclosures. The general rule of thumb is that transparency is king.

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