Alerts

AD-ttorneys@law – July 23, 2020

Alerts / July 23, 2020

In This Issue:

Delayed Shipping Scams Get Their Turn in the Spotlight

FTC brings out MITOR for a new species of COVID-19 con

A Hundred Rip-Offs Bloom

Back at the beginning of July, the Federal Trade Commission (FTC) released stunning new online order complaint statistics: The number of unreceived online orders quadrupled in April and May over the reported figures from 2015. In a matter of weeks, online scammers were squeezing every possible advantage they could out of a population that’s spending more time at home, terrified of the pandemic. “People reported unreceived orders of face masks in April and May far more often than any other item,” the FTC noted.

Along with missing merchandise, another, slightly more subtle flavor of scam has surfaced: scammers that promise quick delivery times and fail to follow through.

The scam has its own logic. The crook can bank the consumer’s payment up front while waiting for stock to arrive – and save on postage. And when – if – the products are delivered; the exasperated consumer is less likely to make a complaint.

Delayed Reaction

Scammers that think they might squeak by with this scheme should think again. The FTC recently launched a complaint against just such an alleged scammer – Kevin J. Lipsitz, owner of SuperGoodDeals.com.

According to the FTC, SuperGoodDeals jumped on the pandemic bandwagon and began hawking face masks and other personal protective equipment (PPE) products. The company allegedly said the products were in stock and kept its “Pay Today, Ships Tomorrow” tagline on its website – but failed to deliver the products within its promised shipping time, or at all. Some customers claimed they were unable to cancel their orders for a refund or to consent to the delay.

The Takeaway

Lipsitz and company were charged with misleading acts under the Federal Trade Commission Act, but were also hit with charges under the FTC’s Mail, Internet, or Telephone Order Merchandise Rule (MITOR, to use a somewhat Power Ranger-ish acronym), which prohibits merchants from selling products without a “reasonable” expectation that they can ship them within the time they promise.

That the somewhat archaic MITOR was invoked in this instance demonstrates that the FTC is widening its enforcement repertoire. So, to reiterate advice that’s worth reiterating: If you’re a legitimate business (and we know you are), scour every corner of your website and other collateral for shipment promises, and make sure you can keep them. And remember that if no time frame is specified and you cannot ship within 30 days, you must give the consumer notice and an opportunity to accept the projected delay or receive a full refund.

Fake FDA Logos Used to Hawk PPE

Whether you have its approval or not, don’t use its art

Du Jour

While we’re on the subject of masks, let’s review the Food and Drug Administration’s (FDA) take on PPE. Scammers have obviously caught on to the inflated value of scarce PPE products, and they’ll lie about availability and cost to suck consumers into their schemes.

There’s a specific scam technique dealing with regulatory imprimatur that the FDA has addressed, albeit glancingly: “FDA Approved” logos, which have, not surprisingly, become quite popular among scammers during our current PPE craze.

Exposed!

Check out this handy FDA FAQ page dealing with all things COVID-19. Buried down the page, under the question “Do gowns and surgical masks provide protection from coronavirus?” there’s this notice: “At this time, FDA has not cleared, approved, or authorized any gowns or surgical masks for specific protection or prevention against the virus that causes COVID-19.”

Seems clear, right? According to a Truth in Advertising Inc. (TINA) report released in May, a number of scammers are using fake FDA approval logos to sell their wares online anyway.

The Takeaway

TINA has publicly identified more than two dozen merchants that it reports “have claimed in those listings that their face masks are ‘FDA approved’ or used the FDA’s logo to boost sales of their products, or both.” As is its habit, TINA launched a database to track the offenders, and it can be assumed that regulators will take notice.

In any case, the most important message for legit marketers to remember: Even if you’ve received FDA approval, don’t use the FDA logo. It’s against the law. If you want to read more, here’s the FDA’s policy statement. But really, it’s quite simple: Stay away from the FDA’s artwork.

Makeup Art May Be Copyrightable, Says Second Circuit

But even if it isn’t, it triggers preemption of state law claims

Get Over It

If you’ve ever snorted at the idea that makeup artists aren’t “real” artists, you’re a snob.

Case in point: Sammy Mourabit. He’s a makeup and special effects artist of the highest order whose creations have appeared in Vogue, Harper’s Bazaar, Paper Magazine and W Magazine; in advertisements for Versace and Moschino; and in music videos and fashion shows. Check out his editorial work as an example – it’s amazing.

Unless we’re lucky enough to be at a shoot, or on set, or sitting next to a catwalk, we inevitably witness the work of artists like Mourabit through photographs taken of it. So, the relationship between a makeup artist and the photographer who showcases his or her skill is a close partnership.

When Mourabit sued fashion photographer Steven Klein and makeup company Shiseido in 2018, that relationship was the subject matter of the dispute, which recently wrapped up in the Second Circuit. The case yielded results that will interest advertising creatives and the companies that pay for their work.

Strange Days

The background of the case is straightforward. Klein and Mourabit worked together in 2013 on a W Magazine photo shoot, which included a spacey picture of actress Juliette Lewis in glittery makeup (we think it’s this one). Two years later, Shiseido collaborated with Klein to create a holiday makeup collection. Klein used the picture of Lewis to advertise the new product line.

In June 2018, Mourabit registered a drawing of the Lewis makeup design for copyright and, shortly thereafter, sued Klein, Shiseido and various related entities in the Supreme Court of the State of New York for copyright infringement and a passel of state law claims including unjust enrichment, unfair competition and misappropriation.

Change of Focus

The case was removed to the Southern District of New York, and by the end of the year, Mourabit had dropped the copyright charges. The state claims persisted before the court, which received the defendants’ motions to dismiss in January 2019.

According to the Southern District, Mourabit argued that the state business claims concerned “makeup artistry” rather than the copyright on the photo, which was no longer central to the case because the original copyright claims had been dropped.

Unfortunately for Mourabit, the court held that the remaining state claims were preempted by – you guessed it – the Copyright Act. Why? Because makeup art, under the “subject matter” preemption requirement of the Copyright Act, fell within the “pictorial, graphic, and sculptural” category defined by the act and is “fixed in a tangible medium of expression” – Juliette Lewis’ skin.

Trick Mirror

Mourabit’s immediate reaction to having his claims preempted by the Copyright Act after dropping his copyright claims is not recorded. Perhaps something like this?

He did appeal the motion, though, and the case landed in the Second Circuit. To make the appeal, Mourabit engaged in a bit of legal backflipping: Despite his earlier copyright claims, he now argued that his work was not copyrightable and therefore not preempted under the subject matter requirement.

The specifics of his argument held that makeup artistry is not copyrightable because it does not fit under the “pictorial, graphic, and sculptural” categories of the Copyright Act. The Second Circuit disagreed and affirmed the district court’s holding. “Mourabit’s Makeup Artistry fits into this category in ‘a broad sense,’” the order read, “because it is essentially a painting that is displayed on a person’s face.”

On to the fixation requirement. Mourabit maintained that his work was not “fixed in a tangible medium of expression” because human skin is not a “tangible medium of expression” (creepy, right?). Even if it were such a medium, he continued, the specific work was not a permanent fixture on Juliette Lewis’ face.

The Takeaway

Recall that the district court originally held that Mourabit’s makeup application was sufficiently “fixed” on Lewis’ skin to satisfy the second preemption requirement. But the Second Circuit went further, adding another rationale for future copyright disputes in this arena.

After a nod to a “lively academic debate among copyright scholars” as to whether human skin was a tangible medium of expression (still creepy), the appeals court dismissed Mourabit’s argument, holding that the “Makeup Artistry was fixed in the photograph taken by Klein.” It’s an additional, alternate interpretation rather than an endorsement of the district court’s original understanding.

“Although Klein, not Mourabit, took the photograph,” the court wrote, “that fact is of no import here because a work of authorship may be fixed ‘by or under the authority of the author.’”

Before makeup artists become too confident about copyright claims, however, they should note that the preemption of Mourabit’s state claims did not mean that his work was, of necessity, copyrightable. The Second Circuit maintained in the order that copyright preemption is “broader than the scope of copyrightable materials” and that to trigger preemption, Mourabit’s artistry had only to occupy a similar domain as copyright-protected works in a “broad sense” – in this case, the “pictorial, graphic, and sculptural” category.

Nonetheless, photographers who shoot the works created by makeup artists – and the companies that hire them – need to consider clearing the rights. As of now, whether “face painting” may be afforded the same copyright protection as anything hanging on a gallery wall remains an issue for future litigation.

NAD’s New SWIFT Approach Nets Three New Challenges

Rocket Docket

Back in April, we told you about the National Advertising Division’s (NAD) new SWIFT process – SWIFT, as in Single Well-defined Issue Fast Track, a natty acronym.

To recap: SWIFT processes, which address digital advertising only, take no more than 20 business days from the time an advertiser initiates the challenge to NAD’s decision. NAD cites the “compelling need for quick resolution of truth and transparency issues that arise in digital advertising” as the main reason for instituting the program.

Such a streamlined process as this, of course, necessarily has its limits. SWIFT actions are “limited to a single issue, only one substantive submission per party is permitted (and must not exceed five pages and five exhibits), all submissions are made online, and meetings with NAD are held at NAD’s discretion,” says the watchdog group. Claims made under the SWIFT program cannot “require review of complex evidence or substantiation.”

For at least one company dealing with a SWIFT challenge, that last part became particularly important.

Short Cuts

First, let’s catch up on the latest SWIFT activity. NAD cleared three SWIFT cases in June.

Home alarm company ADT challenged a “no contract required” claim by rival Frontpoint Security Solutions. Bespoke kitchen designer Officine Gullo challenged L’Atelier Paris Haute Design’s claim related to its length of time in business – has it really been around since the 1830s?

We don’t know much more about either of these cases, except that each was resolved when the challenged companies discontinued or modified their claims.

However, we know a little more about the third case – a challenge by snack bar maker Kind against famous rival Clif Bar & Co. (In the interest of full disclosure, we have a weakness for Clif’s Dark Chocolate Mocha Flavor, but we’ll try to keep it from influencing this write-up.)

We know more about this case mostly because the main dispute seemed to be about the SWIFT program itself.

The Takeaway

The tag in question appeared in a Google Ad, claiming that Clif Bars were “a better performing bar … for sustained energy.” Kind took issue with the claim, but Clif took issue with SWIFT.

Clif contended “that its claim is too complex to be resolved in SWIFT because the express claim challenged and the messages reasonably conveyed would require expert testimony and possibly a consumer perception survey, all of which could not be obtained within the SWIFT timeline.” NAD countered that “the complexity of any legal argument is limited to a discussion of the express claim challenged here – a single claim in a single context, made simpler by the fact that there is no imagery in Google Ads advertising.”

Clif maintained that the claim was mere puffery, but NAD insisted that the use of the comparative word “better” attached to the measurable notion of “energy” demanded backup. Clif provided some nutritional information to justify the claim, but NAD was unimpressed and recommended the company discontinue the claim. Clif adopted the recommendation in full.

This SWIFT case, perhaps because of its brevity, condenses an important takeaway for marketers: If your objection to a challenged claim is that you don’t have enough time to assemble the necessary backup, you probably shouldn’t be making the claim in the first place.

TCPA Survives Gutting; Debt Collection Robocalls Don’t

Supreme Court delivers a decision holding back robocall conflagration

On the Brink

Back in May, the Supreme Court took up a momentous Telephone Consumer Protection Act (TCPA) case, one possible outcome of which would have gutted the TCPA altogether.

That outcome has been averted.

But let’s back up and review what was at stake. The case, Barr v. American Association of Political Consultants, Inc., presented two questions to the Court:

“Whether the government-debt exception to the TCPA’s automated-call restriction violates the First Amendment, and whether the proper remedy for any constitutional violation is to sever the exception from the remainder of the statute.”

The Chronicles

The case dealt with an exception that was added to the TCPA in 2015 allowing autodialed calls from debt collectors seeking repayment on debts owed to the federal government.

The plaintiffs sued the Federal Communications Commission (FCC) in North Carolina’s Eastern District in 2016. They claimed that the government-debt exception violated the First Amendment because it represented a content-based restriction on speech – preferential treatment for debt collectors calling on behalf of the feds. They sought to have the entire autodial ban rescinded based on this inherent unfairness.

Political consultants certainly have a vested interest in making limitless autodialed calls, so why should they be punished?

The FCC won summary judgment, and the case got kicked up to the Fourth Circuit in 2018. The appellate court split the decision: While the exception violated the First Amendment, it should be severed from the rest of the TCPA.

The plaintiffs petitioned the Supreme Court in late 2019, asking for one more swing. They were disappointed by the ruling.

The Takeaway

“Six Members of the Court today conclude that Congress has impermissibly favored debt-collection speech over political and other speech, in violation of the First Amendment,” the Court wrote. “Applying traditional severability principles, seven Members of the Court conclude that the entire 1991 robocall restriction should not be invalidated, but rather that the 2015 government-debt exception must be invalidated and severed from the remainder of the statute.”

What’s the takeaway for business owners? Unless you’re a debt collector, the ruling won’t have much impact on you.

What’s the next TCPA fracas to be tamed by SCOTUS? Perhaps they’ll take up the autodialer definition issue, which has been giving everyone agita for years now. You can read our latest about that here, but the tl;dr is simple: Circuit courts are breaking like billiard balls over the definition of a technology central to the TCPA, making it ripe for cert.

We’ll let you know what happens next.

Check Out Our Latest Blog Post

California AG Begins CCPA Enforcement

The International Association of Privacy Professionals recently hosted a keynote session with Stacey Schesser, supervising deputy attorney general (AG) of the California Department of Justice, to discuss the July 1 start of the AG’s enforcement authority under the California Consumer Privacy Act (CCPA). The deputy AG discussed the current scope of the AG’s enforcement authority and confirmed that on July 1, the Office of the Attorney General (OAG) sent businesses an initial round of letters, which included notices of alleged violations. The AG will open an investigation or file a lawsuit against companies that do not come into compliance within 30 days of receiving such notice letters. Read more here.

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