Defamation Mass Media Law

Period of time during which plaintiff must file a lawsuit. N.C. statute is 1 year from the date of publication of the allegedly false or defamatory content.

Plaintiff has burden of proving that content is false. If the allegedly defamatory content is substantially true, it can serve as a complete defense. Minor inaccuracies or errors don't prevent complete truth. The court looks at the overall picture and how the audience would perceive it and if the gist is essentially the same as the truth, the defendant cannot be found liable.

One whose reputation is considered legally incapable of sustaining compensable harm from a defamatory communication, even if the defamatory content is false.

Sony Pictures bought rights to a book called Donny Brasco written by an undercover FBI agent. During the time he was working as an agent, he mostly combated organized crime
-Book was made into a film and the film included a characterization of an alleged mafia associate, John Cerasani, that Brasco had encountered in his undercover work. Before the movie, Cerasani was already widely known as a racketeer, mafia associate, bank robber and drug dealer. In the movie, character is depicted as beating someone and watching while this person is killed and stuffed into a trunk. Cerasani sued Sony for falsely depicting him as beating someone and watching he/she get murdered and stuffed in a trunk. Sony raised the libel-proof doctrine defense and said that as a well-known bank robber, mafia associated and drug dealer, his reputation couldn’t be damaged any further. The court ruled that Cerasani was a libel-proof character.

A single false statement is not actionable if it causes harm that is merely incremental beyond the harm caused by the true statements, which are protected

Libel plaintiffs with tarnished reputations with regard to a particular issue are libel-proof only with respect to that topic area.

“The publication of defamatory matter concerning another in a report of an official action or proceeding or of a meeting open to the public that deals with a matter of public concern is privileged if the report is substantially accurate and complete or a fair abridgement of the occurrence reported.” The reporter cannot draw conclusions or add comments to the official report.

Can be defeated if plaintiff can demonstrate that publisher had “ill will” and/or based report on second-hand information.

Official proceedings (and their transcripts) and records of the executive, legislative and judicial branches of government including agency proceedings, lawmaking proceedings (i.e, Congress), and criminal and civil trials, just to identify a few examples

Examples:
Executive branch: Release from sheriff
Legislative proceeding: City council meeting
Judicial proceeding: Criminal trial

Fair reports must cover all false and defamatory content and must not slant coverage in favor of one side of another

Protects accurate, unbiased (objective) news reporting of accusations that prominent, responsible persons make against public figures regardless of doubts that the reporter may have as to the truth of the accusations

Statements must be published in “good faith” with the belief that what is being published is truthful AND a legitimate interest or duty held by the publisher AND
be targeted to those who have a mutual legitimate interest or duty in regard to the content (cannot target too broadly)

-Mr. Straitwell was a national sales rep and interacted w/ a lot of the public in his business dealings on behalf of the country. There were allegations that he was going outside of company policy (not acting illegally, but acting in violation of company policy) in his conduct in several ways (ex: giving contracts to friends)
-Straitwell’s employment was terminated and the company released a press release in connection w/ his firing to local and national media (he was a high-ranking employee)
-Straitwell won verdict in trial court, but the company appealed the decision saying that the judge improperly rejected the privilege of the material. Decision to issue a press release to national media was based on company’s mutual interest to communicate to people throughout the country that Straitwell had interacted w/ in the scope of his business dealings (his business contacts on a national level, including suppliers, consumers, etc.), whom they didn’t have a list of. Decision to issue a press release to local media was based on the company’s mutual interest to inform citizens living around the company headquarters b/c that was the pool of people from which they hire.
-Verdict was overturned in appeals court

An aspect of "Responsible reporting"

Impact varies from state to state

In some states, a prompt and complete apology, correction and retraction will protect a defendant from punitive damages.

In other states, retractions may limit the amount of damages awarded

Many states require a plantiff to give a publisher an opportunity to retract a libelous statement prior to initiating a libel suit.
-Request be honored in a timely and retraction must be prominent.
-Retraction, apology, or correction may be used by the plaintiff as an admission of liability.

A business organization that is a legal fiction, i.e. it was created by virtue of law

Corporation formed for the purpose of making a profit and generating returns

Organizations that not allowed to make a profit. All money must be funneled back into organization's operations. Generally has some sort of philanthropic or health mission.

People and organizations can own a percentage of the company

Company is owned by a relatively small number of holders who do not trade the stock publicly on the stock market

First Amendment treats commercial speech differently.

Commercial speech (and campaign contributions) is protected at an intermediate level when it is truthful and non-misleading and promotes a
lawful transaction. In this case, only a substantial government interest is required for either to be restricted. Substantial government interest means a reasonable public policy goal.

Non-commercial political and social speech (and campaign expenditures) is entitled to the highest level of
First Amendment protection and can be restricted only in service of a compelling government interest (a public policy goal of the highest order).

“Speech” (whether commercial or non-commercial)
does not lose its First Amendment protection just because the “speaker” is a
corporation.

First Amendment strongly protects expression of opposition or support on public referenda (an issue that is presented to the public for a vote) votes and
issues and matters of public concern

Voters were asked whether Massachusetts should have a state income tax

-First National Bank wanted to oppose the referendum b/c an income tax would leave less money for people to deposit in banks and make it more difficult for them to carry out their banking operations

-Massachusetts outlawed corporations from spending any money to influence the outcome of a public referendum

-First National Bank sued Massachusetts for violating its first amendment rights of free speech through the incorporation clause of the fourteenth amendment

-Content-based statute calls for the strict constitutional scrutiny test

-strict constitutional scrutiny test requires that the statute serve a compelling government interest (public policy interest of the highest order) by the least restrictive means (abridging speech no more than is absolutely necessary to serve the CGI)

-State argued that the statute protects the referendum process b/c corporations have more resources than the general public so voters would hear no other messages

-Supreme Court argued that there was no evidence that this was a problem or would be a problem and speculation is not sufficient to fulfill the requirements of the strict constitutional scrutiny test

-State also argued that shareholders might not agree with the position a corporation takes and the Supreme Court held that the statute wasn’t a good way to protect shareholders b/c it made no exception for cases in which shareholders did agree with the position taken nor did it address issues other than public referenda in which shareholders may not agree with the position taken by the corporation

-Supreme Court ruled that the statute was unconstitutional because it violated the corporation’s first amendment rights through the incorporation clause of the fourteenth amendment

Con-Ed insert in January 1976 bills stated in the headline: “Independence Is Still a Goal, and Nuclear Power Is Needed To Win the Battle” and asserted “the benefits of nuclear power” and asserted benefits “far outweigh any potential risk”

NRDC (National Resource Defense Council) requested rebuttal from Con-Ed

-Con-Ed refused and regulatory agency, PSC, said that they could not force Con-Ed. to carry the messages of others

-Instead, the PSC enacted the Policy on Advertising and Promotional Practices (1977) which
banned public utilities from using bill inserts to express views on “controversial issues of public policy”

-Case went all the way to the Supreme Court

-Regulation is content-based, requiring the test of strict constitutional scrutiny

-State argued that regulation was necessary to prevent utility company from imposing its views on a captive audience

-Supreme Court ruled that the regulation didn’t support a compelling government interest b/c the consumers have the choice whether or not to read the insert and receive information from many other sources. Also, other groups, like the NRDC, have other means for disseminating their message.

-California’s Public Utility Commission (PUC) imposed order on utility companies that to the extent that it has extra room in its bill for inserts, the company must include material from a consumer advocacy group, TURN, four times a year and PG&E could not edit TURN content, although a disclaimer was required (compelled speech)

-Extra space: Space remaining in the billing envelope, after inclusion of the monthly bill and required legal notices, for inclusion of other materials… [that would not] result any additional postage cost.”

-Utility company argued that they have a first amendment to decide what material to include and not to include when it communicates with its consumers

-Case went to Supreme Court

-Statute is clearly content-based regulation, so it is presumed unconstitutional and must survive the test of strict constitutional scrutiny

-State argued that regulation was necessary to promote fair and effective regulation utility rates

-Supreme Court ruled that state can regulate utility rates itself by putting limits on utility rates

-State also argued that statute was necessary to prevent an overriding of viewpoints and promoting a diversity of viewpoints

-Supreme Court ruled that it was a laudable goal, but that the regulation was an unconstitutional means of fulfilling this goal

Speech that proposes a commercial transaction

-Constitutional test that determines whether speech is commercial or non-commercial

1. Is the speaker a commercial speaker?

2. Is the content aimed at a commercial audience?

3. Are there representations of fact of a commercial nature- about products or services?

Corporation issued contraception pamphlets about birth control and the prevention of venereal disease. At the end of the pamphlet, the corporation said that they had these products available for sale to consumers through the mail.

The contraception pamphlets were found to be “commercial” despite “discussions of important public issues such as prevention of venereal disease and family planning”

Why? Pamphlets were conceded to be advertisements and made reference to specific products, and the company had a clear economic motivation in mailing the pamphlets

-This case is important b/c it distinguishes between advertising and issue advocacy

-Public allegations that Nike’s products were produced in sweatshops

-In response, Nike initiated a crisis campaign by taking out space in media publications, sending letters to University presidents and sports personnel, and communicating in many other forms, that they complied with all labor laws in the countries in which their factories were located

-Consumer group, led by Mark Kasky, sued Nike arguing that Nike’s PR response to sweatshop allegations were false and deceptive and were advertising and therefore, could be regulated under California’s false advertising laws

-Critical question is: was Nike’s response non-commercial political and social speech, highly protected by the first amendment, or was it commercial speech (i.e. advertising) which is strictly regulated?

-If non-commercial, case would be thrown out of court. If commercial, case could proceed.

-California consumer group claimed that Nike’s claims that its products weren’t made in sweatshops were false and deceptive advertising

-California Supreme Court used a 3-part test derived from the Bolger case

1. Is the speaker a commercial speaker?
Nike is clearly a commercial speaker.

2. Is the content aimed at a commercial audience?

-Supreme Court looked at the media through which Nike disseminated its message (Nike took out paid ads in mass media, wrote to University presidents, etc. to reach the parties involved in its commercial deals)
-Supreme Court determined that Nike did target a commercial audience

Are there representations of fact of a commercial nature- about products or services? Do they make a claim about their products that can be proven false or true?
-Nike’s claims that its products are not made in sweatshops can be proven false or true

Cali. Supreme Court determined that Nike’s campaign was commercial in nature. Commercial speech must be truthful to be protected by the First Amendment and because the court concluded that Nike's speech was both false and misleading, it determined that the expression could be regulated and Nike penalized for its falsity.
-The court remanded the case back to the trial level, where it had been dismissed on first amendment grounds

-The Supreme Court refused to hear the case, leaving the question of whether Nike's speech was political speech or commercial speech unanswered

-Nike settled out of court w/ the consumer group

Regulates communications and activities related to publicly-traded
securities, among other things?

-Regulates the initial offering and sale of securities.

-Outlines disclosure requirements in connection with registering securities for sale to the investing public

-Mandates “Waiting period” (a/k/a “quiet period”) – before IPO (initial public offering)
-Waiting period is the time period between filing registration and the date SEC determines the registration to be “effective”

-The corporation is permitted to communicate legitimate company news, regular advertising, and other typical corporate communications

-The corporation is NOT permitted to communicate advertising promoting sale of shares in upcoming IPO or anything
aimed at fueling investor interest in IPO

-Designed to allow investors to become acquainted with the information contained in the registration statement and to arrive at an unhurried decision concerning the merits of the securities

-Regulates the trading of securities on stock exchanges after they are offered to the public

-Principally concerned w/ the trading of securities from one purchaser to another after distribution on the nation's stock exchanges

-Large publicly traded companies are required to file annual, quarterly, and other reports w/ the SEC about the company's operations.

-Other sections of the act regulate the solicitation of proxies and tender offers.

-Prohibits a company from "going public" by offering its stock for sale before it has filed a registration statement with the SEC containing extensive financial information about the company. A company whose shares are already traded on an exchange must file registration statements if a new stock offering is made.

-A “deliberate” and “misleading”…
“Material statement” (or “material omission”) that is…
Made “in connection with” the purchase or sale of securities

Material facts are important to the decision of a reasonable investor to buy, sell or hold a security. A fact must not necessarily change an investor's decision to buy or sell. It must be significant to reasonable shareholders in the "total mix" of their information.

-Includes a sharp change in the company's earnings, the imminence of a very profitable transaction, information about a possible merger or bankruptcy, or the illness or disability of a key executive.

-Merger negotiations become material either when they are so advanced as to make a merger very probable or at an earlier point in the discussion of the magnitude of the merger would substantially alter the company.

Statements that are not based in generally accepted fact

-deceptive half-truths

-more common than misstatements

-Even when a company communicates material facts, statements may be misleading b/c of the form of presentation.
Ex: scattering material facts through a lengthy document, usage of unnecessarily technical terminoloy

The in-connection-with test is met if a corporation issues a materially false or misleading statement on which other investors rely for their purchases or sales

-It is also met when materially false statements are made in corporate annual reports, product promotions, speeches by corporate directors to securities analysts, advertisements, rate-filing hearings, labor negotiations, and in other public circumstances b/c investors might rely on the statements when buying or selling securities.

-If the error in a material misstatement originates w/ the corporation or its agent.

-If the company approves or helps to draft reports by stock analysts or public relations firms containing material misinformation

-If changing conditions transform accurate statements into misleading statements

-NOT if the material misstatement is attributable to market gossip and rumors, and not the company

-NOT if the material misinformation is found in an inaccurate interpretive article not attributable to the company

-NOT if the company provided accurate information, which resulted in an inaccurate news article as a result of misinterpretation of the author

Sec. 17(b) of the Securities Act makes it ILLEGAL to “publish, give publicity to, or circulate any notice, circular, advertisement, newspaper article, letter, investment service, or communication about a security without revealing payments received”

-Applies to PR professionals hired to promote a company

-Designed to halt articles in newspapers or periodicals that appear to be unbiased opinion about a company but that in fact are purchased

-First Amendment prohibits inquiry into who pays a writer or how much of a published article is written by someone outside of a magazine b/c it would impermissibly interfere w/ editorial judgments about constitutionally protected content
-The First Amendment protects the publisher's right to determine who writes and edits published material. Content is protected regardless of its author.

-Must be sent to shareholders and filed for public inspection with the SEC

-Annual reports contain information about management, net sales, earnings, dividends, and other information about the financial condition of the company.

-Annual reports also contain the "management discussion and analysis" that describes in detail the capital resources, results of company operations, and projected performance

-Quarterly reports update the information found in annual reports

-Between quarterly reports, publicly traded corporations are mandated to report to the SEC changes in control of the company, the buying or selling of significant assets, filing for bankruptcy or receivership, changing in the company's CPAs, and the resignation of directors, within 15 days.

-Corporations may report other important occurrences, but the law doesn't require the company to do so unless it is necessary to avoid fraud.

-The SEC does NOT require corporations to report major litigation against the company.

-The effectiveness of reports is weakened by the 15-day window corporations have to file reports and by the fact that individual investors are not allowed to sue over violations while stock exchanges often ignore violations of exchange requirements, like failure to follow SEC regulations, b/c their enforcement powers are too drastic to be employed frequently or effectively.

-For projections made in connection with future performance, they must be prepared with a reasonable basis and disclosed in good faith.

-A company is within the “safe harbor” and protected from liability
for projections that turn out to be wrong when the projections are accompanied by adequate cautionary statements cautioning investors about important factors that could create results different from those envisioned by management

-Allows companies to make predictions about earnings or new products without liability for fraud if the predictions are subsequently proven wrong.

-Safe harbor legally means freedom from liability for fraud

-Securities laws do not define but insider generally means one who has access to nonpublic corporate information only intended to be utilized for corporate purposes and not personal gain

-Insiders: Corporate officers, directors, controlling stockholders

-Quasi-insiders: Public relations firms, ad agencies, law firms and accounting firms that corporations hire, for example

-Knowingly basing securities transactions on nonpublic material information obtained through “insider” status without first disclosing this information to the public

-Arises from financial responsibility to shareholders and to the market

-Idea is that every investor should have equal access to material information about a stock

The practice of passing nonpublic material information to friends or brokers so that they can trade.

-The tipper may be liable for fraud along with the tippee.

-A scalper manipulates the market, usually by buying stock, touting it in a publication, and then selling it when the price of the stock rises.

-Tipping and scalping are regulated under the Insider Trading and Securities Fraud Enforcement Act of 1988, which was passed by Congress and increased penalties, particularly criminal penalties, extended liability, encouraged revelation of insider trading, and allows the SEC to pay persons who provide information about insider trading

-Not only are illegal traders and tippers liable, but so also are the brokers, investment advisers, and other supervisors who fail to take appropriate steps to prevent illegal trading.

-A person violates securities laws when he or she misappropriates confidential information for securities trading purposes in breach of a duty owed to the source of the information.

-Regulation FD (Fair Disclosure) was enacted by the SEC in 2000 to prevent unfair selective disclosure of material nonpublic information and increase fairness in the dissemination of information

-Requires that issuers (publicly traded corporations) and their agents must make non-public information public at the same time as they release material non-public information to certain persons like securities market professionals and those who already hold the issuer’s securities

-Before Regulation FD, issuers would selectively disclose nonpublic material info to the public by releasing info first to their favored investors (large corporations like mutual fund companies, etc.)

-Exclusion for confidential “temporary insiders”: Issuers can disclose material info to confidential “temporary insiders” like attorneys, accountants, investment bankers, PR and advertising professionals without having to simultaneously disclose it publicly

-Requires that CEOs and CFOs of publicly-traded corporations assess and report compliance with “best practices” type standards regarding financial statements

-Requires faster and more complete disclosure of important changes at publicly traded companies, including disclosing material transactions and special-purpose entities not reported on the corporate balance sheet in the company's annual report. Other material changes to a company's financial situation must be reported on a "rapid and current basis."
-Increased criminal penalties by quadrupling penalties for corporate mail and wire fraud from five years in prison to twenty years

-Passed by Congress in 2002 to increase corporate accountability and restore confidence in the markets in the wake of unreported sweetheart loans, off-the-books entities, and insider dealing at infamous companies like Enron, WorldCom and Adelphia by strengthening independing accounting at publicly traded companies

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-Magazine published by Wall St. Publishing called Stock Market Magazine gave companies a corporate feature with a favorable portrayal if they agreed to buy a certain number of advertising and story reprints. There were also allegations that the portrayals were written by the companies themselves or by their PR people.

-The Court ruled that this was a violation of the SEC requirement to disclose payments made in exchange for publicity.

-First Amendment argument that Wall St. Publishing had a first amendment right not to disclose that the editorials were essentially advertisements was rejected.

-Argument that publishing company had a first amendment right not to disclose the authors of the editorials was accepted.

-Example of fraud by omission

-Texas Gulf Sulphur Company (TGSC) issued a materially deceptive press release to dampen rumors of a major copper discovery. In the press release, TGSF said that press reports of the discovery were exaggerated and that public estimates of the size and grade of the ore were without factual basis and have evidently originated by speculation of people not associated with TGS. Relying on this negative press release, several investors sold shares in the company, only to learn from another TGS press release 12 days later that the company had made one of the largest ore strikes in history.

-TGF said it would have been premature and possibly misleading for the company to speculate on the size and grade of the ore at the mining site in its first release since the company hadn't yet had the ore samples analyzed chemically.

-A federal appeals court ruled that the known richness of the ore samples even more chemical analysis was material and did not justify a press release as negative as the one that TGS first issued using the fact that several TGS executives bought shares of the company before the ore strike was announced as evidence of the materiality of the ore samples to investors' decisions even before chemical analysis

-The U.S. court of appeals ruled that the TGS press release misleadingly suggested that there was no basis for consumer optimism and that they should have said nothing about the rumors since they aren't required by law to respond to them, said how promising the ore samples were by visual inspection, or said the situation was in flux.

Interstate Commerce Clause of Article 1, section 8 of the Constitution

-the Congress shall have power to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.

-The Supreme Court has interpreted promote to include stimulating, encouraging and inducing.

To stimulate activity and progress in the arts and sciences and thus enriching the public.
-to increase, rather than impede, the harvest of knowledge (the Supreme Court)

-Statutory law

-Different from trademark protection because trademark protection protection is not automatic upon creation. To become recognized as a trademark, a name must be unique and widely used so that the public comes to identify it with a particular company, product or service.

Copyright protection arises as soon as it meets criteria of a “copyrightable” work, even before it is registered (can put symbol on work)
-But the work must be registered before the author can sue for infringement

O]riginal works of authorship that are…
[F]ixed in any tangible medium of expression, …from which they can be…
[P]erceived, reproduced or otherwise communicated either directly or with the aid of some device.”

Original: Independently created by its author with a modest amount of intellectual effort

Includes:
Literary works – broadly defined
Musical works, including … lyrics
Dramatic works, including … music
Pantomimes and choreographic works
Pictorial, graphic and sculptural works
Motion pictures and other A/V works
Sound recordings
Architectural works

Other examples of protected works:
Collective works
Compilations
Derivative works

-Allows the plaintiff to choose the type of damages that would be most lucrative

-Actual damages (out-of-pockets) plus lost profits OR
-Statutory damages up to $30k per infringement and up to $150,000 if willful infringement proven

-When registered, a copyrighted work appears in a searchable database available to the public

-C indicates to the public that the material is copyrighted and is not public domain

-Can preclude claim of “innocent” infringement

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-“Useful article” that has intrinsic utilitarian function that is not merely ornamental or expressive
-Formats and layouts, typestyles and fonts
-Mere lists of ingredients and contents
-Names, short phrases, slogans (TM law might protect)
-Works in “public domain” or created by government

-Aren't protected b/c they aren't fixed in a tangible medium

Protects goods (trademark), services (service mark), and businesses or vocations (trade name)

-Gives notice that mark intended for exclusive use by owner

-Registered marks must be “distinctive” so owner will not have to prove “distinctiveness” in an infringement suit like the owner of an unregistered mark will have to prove

-Unique enough that it won't be confused with the mark for another good, service, business or vocation

-Immediate, not over time

Fanciful – Coined specifically to be a trademark
“Clorox” bleach, “Kodak” photo equipment

Arbitrary – Common words whose meaning have no relationship to the product (or service)
“Apple” computers, “Old Crow” whiskey

Suggestive – Suggests what product does without describing the product
“Brilliant” furniture polish, “Gleem” toothpaste

-Merely descriptive terms describe some aspect of the product

-Terms that are merely descriptive of a product (or service) are not distinctive enough usually for TM protection

NO: “Cola” “Vanilla”
YES: “Coca-Cola” “Pepsi Vanilla”

-Descriptive term that has developed a distinctive “secondary meaning” and can be protected under TM law

-Connection between word, name, term or symbol and specific product(s) or service(s) offered by a company

-Factors to determine secondary meaning
1. Extent and amount of time used
2. Extent and scope of advertising and promotion
3. Actions by company to establish connection between word, name, term or symbol and product(s) or service(s)

Examples: Vogue magazine and Look magazine

-Word, name, symbol or device that is likely to cause consumer confusion about the source of the goods or services at issue

-Factors courts consider on “confusion” issue:
Strength or weakness of original mark
Similarity of products or services being marketed under the original mark and the allegedly infringing mark
Evidence of actual consumer confusion
Whether alleged infringer acted in good or bad faith
Quality of defendant’s products goods or services
Sophistication of potential consumers
Trade channels for the products or services
Similarity of the advertising or promotion

-Unauthorized commercial use of a strong and distinctive mark that blurs or tarnishes the mark

-Blurring: impairs disctinctiveness of trademark

-Tarnish: harms the reputation of a mark

-Must prove likelihood of dilution

-Not every state recognizes trademark dilution actions at common law

Exceptions:(
1) Comparative advertising
(2) news reporting and commentary, AND
(3) other non-commercial uses

-Lasts 10 years but is renewable indefinitely

-Allows continual use in business, commerce

Informational campaigns (PR)

Specific warnings and notices

Litigation – they sue!

-Federal Trademark Office refuses to renew trademark b/c the trademark has fallen into generic use

-Ex: aspirin, thermos

-Qualitex decided to brand its color w/ the name and w/ the unique shade of green that its pads were
- A competing company started to use the same color green to market its pads
-The Supreme Court (not a constitutional issue so it goes immediately to the Supreme Court) decided that color could be distinctive enough to be trademark protected b/c that color green has nothing to do w/ dry cleaner pads
-Qualitex was successful in establishing a unique color as a secondary meaning mark when its not descriptive

-Color can't be protected when it is merely descriptive
Ex: purple for grape juice

Federal trial court issued an injunction against Penguin Books not to sell the books b/c there was a likelihood of consumer confusion
-appellate court upheld the trademark infringement decision
-court held that Penguin Books acted in bad faith by trying to use the valuable trademark of another to sell a different product
-In this case, they were trying to sell a story about the OJ Simpson case, but didn’t want to think of their own unique way to sell the product so they used the already established Cat in the Hat mark

-Court ruled that infringing work didn't create a transformative work with new expression, meaning or message

-At the time of the case, V. Secret had to get evidence of actual dilution of their trademark

-V Secret lost suit on appeal

-Congress amended the FTDA by requiring likelihood of dilution (of a trademark), not actual dilution

Act or practice that causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition

1. There must be a representation, omission or practice that is likely to mislead consumers
Net impression of the entire ad considered
Not necessary to prove ad is actually misleading

(2) Examined from the perspective of a “consumer acting reasonably in the circumstances”
Again, the net impression of the entire ad is considered

(3) Materiality requirement
Meaning, the representation, omission or practice is likely to affect the consumer’s “conduct or decision with regard to a product or service”

-Obviously exaggerated claims

-Reasonable consumers would not take seriously

-Objective claims for products or services represent explicitly or by implication that the advertiser has a reasonable basis supporting these claims.”

-Materiality: Representations of substantiation are MATERIAL because consumers would be less likely to rely on the truth of claims for which the advertiser does not have a reasonable basis

Factors: ●Type of claim ● product ● consequences of false claim ● benefits of a truthful claim ● cost of developing substantiation ● amount of substantiation experts in the field think is reasonable

Express claims: “The Commission expects the firm to have at least the advertised level of substantiation.”

-Implied claims: “[T]he advertiser must possess the amount and type of substantiation the ad actually communicates to consumers.”

-“Endorsement” means…
“[A]dvertising message…consumers are likely to believe reflects…opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser”

-“Expert” means…
[I]ndividual, group or institution possessing…knowledge [that] is superior to that generally acquired by ordinary individuals”

General considerations – Section 255.1
Truthful, nondeceptive and substantiated (reasonable basis)

Consumer endorsements – Section 255.2
Use and results claims: If not what typical consumer could expect – a clear and conspicuous disclosure is required
-Actual-consumer portrayals must use actual consumers

Expert endorsements:
Endorsers presented as experts – directly or by implication – must have the expected level of relevant expertise

Claims related to expected results or superiority must be backed with appropriate research or testing within endorser’s expertise

Organizational endorsements:
Must “fairly reflect the collective judgment” of the organization’s membership and not the subjective opinion of one or a few
Remember:
-Organizations can be presented as experts

Disclosing “material connections”:
Must disclose that payment was given for an endorsement when reasonable consumers would not expect compensation was paid
Example: Most people know celebrities in ads are compensated
Deceptive: Stating or implying no payment was made (but it was)

PROMINENCE: Is the disclosure large enough for consumers to notice and read?
PRESENTATION: Is the wording and format easy for consumers to understand?
PLACEMENT: Is the disclosure located where consumers are likely to look?
PROXIMITY: Is the disclosure near the claim that it qualifies?

Prospective measures:
Opinions and advisory letters
Policy statements, industry guidances
Rules and regulations
Remedial measures:
Consent agreements (most common resolution of cases)
Affirmative disclosures, corrective advertising
Cease-and-desist orders
Injunctions (federal district court)
Civil fines including consumer redress (federal district court)
Referral to U.S. Dept. of Justice for CRIMINAL prosecution

1. Minimize government involvement in the advertising business

2. Maintain a level playing field for settling disputes between competing advertisers

3.Foster brand loyalty by increasing public trust in the credibility of advertising.

Truthful and Accurate Advertising

Regulates advertising targeted toward children based on what is true, accurate and “appropriate”

Handles appeals of NAD and CARU decisions

1. Is the secondary use of a commercial nature or for non-profit educational purposes?

2. Does the secondary use serve the public interest by stimulating creativity as copyright law intended?

3. Does the secondary use do more than paraphrase the original by adding value or transforming the original copyrighted work?

-More likely to protect an out of print book than one available for purchase

-Less protected if a work is designed to be used only once.

-Whether original work is fictional or fact. Fact receives higher protection.

-Whether original work is published or unpublished. Copying from an unpublished work tends to negate the fair use defense.

-If a large amount of the copyrighted work or if the most significant part of it is taken

-Weighed against first and fourth factors. Transformative works may require larger parts to be taken. Large or significant part may be fair use if it is unlikely to affect the potential market or value

-Some courts consider this the most important factor

-Supreme Court recently held that factors 1 and 4 should be weighed against one another w/ the transformative nature of work lessening the significance of effect of potential market or value