Fact: There's a federal law that says that you can't make a call to a cell phone number (unless it's an emergency call or the recipient gave his permission to receive the call) using any automatic telephone dialing system or an artificial or prerecorded voice.  (Let's call this law the "Telephone Consumer Protection Act", or "TCPA" for short).

Fact:  Lots of companies send text messages--not "calls" per se, but messages--to cell phones across the country, and think they can avoid liability under the TCPA. 

Why? 

Because a text message isn't a "call", it's an SMS (or "short message service").  And that's not a "call", is it?

Well is it?

For the answer, we go to the Court of Appeals for the Ninth Circuit, which just handed down its decision in the case--dare I say, battle royale--of Satterfield v. Simon & Schuster, Inc. 

The ruling is important, but even more interesting when read using a Howard Cosell voice.  (Hey, it's my blog, and I'm being creative here.  Work with me.  When I ask you to use your best Cosell voice, please do so.  If you need to remember what he sounded like, go HERE.) 

Now on to the case....

In one corner we have Satterfield, who received a text message from Simon & Schuster which, she claimed, she did not consent to receive.  (Cosell: Horrors abounded for Ms. Satterfield.)

In the other corner we have the famous publishing house Simon & Schuster, which was responsible for sending the text message to Satterfield through a somewhat convoluted affiliate relationship it had with other marketing companies. (Cosell: The tenacity shown by this powerhouse publishing company was nothing short of incredible.)

Let's go to the videotape.  Here's a blow-by-blow account of the fight....(you have my permission to read all of this as Cosell).

In the opening round, it's Satterfield--receiving a powerful, hard-hitting text message squarely on her cell phone.  It's a promotional message for a new book by Stephen King.  Satterfield was totally not expecting that.

Satterfield counters with a litigation uppercut--a federal lawsuit against Simon & Schuster alleging that the publisher violated the TCPA by sending her the unsolicited text message using an automatic dialing system.  Simon & Schuster is momentarily stunned by the courage of young Satterfield.

Simon & Schuster counters, arguing that the TCPA only prohibits "calls" and a text message is not a "call".  Satterfield is literally being pounded with legal ambiguity.  Blinded by legal loopholes, she can barely see the shimmering glimmer of her cell phone nestled in its leather case.

The referee looks to the TCPA for a ruling...but there's no definition for the word "call" under the TCPA.  What to do?? It appears that Satterfield is doomed, the victim of a legal rope-a-dope the likes of which have not been seen since Ali sued his former manager back in 1999.

But wait--the Court of Appeals for the Ninth Circuit just jumped into the ring--and brought the FCC with it!  Examining the legislative history behind the TCPA, the Court rules that the FCC intended to include "text messages" when it used the term "call" under the TCPA.

It's a victory for Satterfield! 

The bottom line:  the law can't keep up with the changes in technology, so you have to expect that courts will expand the meaning of older laws to include newer technologies.  

The (really bottom) bottom line:  if your company is using text messaging to promote its products or services, you need to speak with an attorney about how to do it legally.  A year ago I wrote a white paper on how to incorporate text messaging into your marketing plan without violating the law, contact me if you want a copy.

I hope you enjoyed this broadcast.

        

Websites often use affiliate advertising to promote their goods and services.  That's nothing new....

But what is new is the fact that with increasing frequency, affiliates are using improper--sometimes illegal--methods to lure visitors to the websites they are promoting. 

No doubt, you've seen such affiliate ads before: "Actor X looks twenty years younger than he really is--learn how he does it!"  or "Lose 50 pounds in a month - it's Hollywood's best kept weight loss secret!" 

Often, however, the first time that the owners of the promoted websites learn of their affiliates' improper activities is when the owners receive a cease and desist letter, or a court complaint, alleging that the owners are engaged in unfair or deceptive trade practices.

In their defense, website owners say, "We can't control the activities of our affiliates!" 

And you know what?  Often the owners are right.  But being right doesn't always stop the letters or the lawsuits or the inquiries from government agencies (such as the Attorney General's Office, the District Attorney's Office, the State Attorney's Office---I'm sure you get the picture).   

So, if you use affiliate advertising to promote your site, how can you avoid getting into hot water due to the acts of your affiliates?

Keep reading.....

The Affiliate Paradigm

There are a few versions of the affiliate paradigm, but the most popular version can best be described by the simple chart below.  Here's how it (often) works:

Website owner wants to promote his website, so he retains the services of an Affiliate Network Company. 

The Affiliate Network Company manages a small army of Affiliates who are given marching orders to promote the owner's Website.  (I only displayed four affiliates in my chart, but in reality the Affiliate Network Company often has hundreds, if not thousands, of affiliates at its disposal.)

The Affiliates then set out to promote the Website.

Usually, the Website owners and the Affiliates do not know each other; the selection and identities of the Affiliates are known only to the Affiliate Network Company.

Affiliates are given a unique identification number by the Affiliate Network Company, and that number is attached to all traffic that the Affiliate directs to the Website.  (Tip: If you're really bored and have some time to spare, you can see the number by clicking on an affiliate advertisement, then examining the URL that's displayed.  In the URL you'll see the word "subid" followed by a number.  That number usually is the unique identification number assigned to the Affiliate by the Affiliate Network Company.)

So what's the problem?  The problem is that Affiliates often use improper methods to advertise the websites they seek to promote.  Celebrity endorsements, outrageous claims, and SPAM are methods that some Affiliates use--all without the knowledge or permission of the websites they are promoting.

Of course, consumers don't know (and often don't care) that the website owners are oblivious to the affiliates' activities.  All they care about is the fact that the website's products or services are being promoted through improper means.  And there, my friends, is the rub.

Protect Yourself

Don't get me wrong, I'm not saying that affiliate networking is a bad thing--it isn't.  I'm not saying that all affiliates are bad people--they're not.  But I am saying that as affiliate advertising becomes more popular, website owners need to protect themselves against rogue (or just plain stupid) affiliates that engage in improper behavior.
 
Before I tell you how to go about doing this, let me give you my (usual) disclaimer:  What I'm about to tell you is NOT legal advice.  I'm giving you information, not advice.  Don't rely on it without speaking to an attorney first.  What you're reading doesn't establish an attorney/client relationship between us.  (Almost done....)  Don't set up an affiliate relationship without an attorney's help, or else you could find yourself in hot (arguably scalding) water.  'Nuff said.

Ok, here's the moment you've been waiting reading for....some information you can use.

If you're engaged in affiliate advertising, then you MUST:

1.  Use reputable Affiliate Network Companies.  Not all network companies are the same; some have higher standards than others.  Do your homework, and find one that has a good reputation for recruiting high quality affiliates.  Need a recommendation?  Contact me.

2.  Have an attorney review the agreement between your company and your Affiliate Network Company.  Make sure it clearly states which party is responsible for policing the affiliates' activities.  Also, make sure there is a method by which unsavory affiliates can quickly be removed from the pool of affiliates promoting your website.  Oh yes, one other thing: make sure your agreement specifically states that the Affiliate Network Company will not tolerate improper or illegal behavior from affiliates.

3.  Assign a specific person in your organization to be the "point person" to handle reports of improper affiliate behavior.  That person should be responsible for contacting your Affiliate Network Company pursuant to a written company policy.  That person should also be responsible for following up with the Affiliate Network Company to ensure that proper and timely action was taken.  Do not assume that "someone" will take care of it--assign the person to the job immediately. 

4.  Let your Affiliate Network Company do the "heavy lifting", i.e., communicating with the affiliates, assigning affiliates, etc.  That's what you pay them to do, so let them do it. 

5.  Avoid direct communication with affiliates (see #4, above).

6.  If you have the manpower to do so, search the Internet from time to time for rogue affiliates who are acting improperly.  If you find such affiliates, call your Affiliate Network Company immediately and report them. 

Want more ideas on how to protect yourself?  Contact me, and I'll send you a copy of my white paper, "Managing Affiliate Advertising: A Legal Perspective."

        

The recent case of DO Denim, LLC v. Fried Denim, Inc., reminds us that the mere filing of a copyright application with the United States Copyright Office is NOT enough to protect your intellectual property.  Instead, you need to have an actual certificate of registration from the Copyright Office to be able to enforce your copyright. 

A little bit of (legal) background will put this in perspective for you.

Everything that you create (that has a modicum of origniality) is protected by copyright the moment that it's put in a tangible form.  In other words, once you write it ...<< MORE >>

Here's the situation: You're a software developer, and you agree to create custom software for your customer, Joe.  Joe agrees to pay you $10,000 for the software. 

You create the software, give it to Joe, and say, "Joe, here's the software.  It's what you wanted--go use it.  Oh, and by the way, here's my invoice."  But Joe doesn't pay.

You say, "Hey Joe, pay me."  Joe pays only half of what's owed, and doesn't give you another dime.

You say, "Hey Joe, stop using the software until you pay me everything."  Joe says, "no."

You should be able to stop Joe from using the software, right? 

Maybe not.

The recent case of Beholder Productions Inc. v. Catona reminds us that under certain circumstances (such as those described above), an implied license may be granted to a software recipient--even though the recipient didn't pay for the software in full.  If that happens, the recipient can continue to use the software, and you're stuck with an unpaid bill !!

Scary stuff.  So how do you avoid this from happening to you?  Read on.....

In the Beholder case, the plaintiff, Beholder, developed custom software for the defendant, Catona.  The parties had an agreement that said, "No copyrights will be transferred until Beholder is paid in full." 

(Hey, wait a minute!  Is that provision--or something like it-- in your development contract?  Hmmm...) 

Beholder gave the software to Catona before Catona paid for it in full--a bad move.  Then Beholder allowed Catona to distribute the software to Catona's customers, again, before Catona paid in full for the software--a worse move.

Beholder said, "Hey Catona, we gave you the software, now pay us in full or stop using the software." 

Catona said, "We've paid you alot already--we're not paying you any more money."

Beholder sued--and lost.  Why?

Becuase under copyright law, a software developer can unknowingly grant an implied license to a recipient if (i) the recipient requested the creation of the software, (ii) the developer created the work and delivered it to the recipient, and (iii) the developer intended that the recipient copy and distribute the software. 

That is, of course, unless there is an agreement to the contrary....(hint, hint).

So how do you avoid giving away an implied license in your software?

1.  Make sure you have a written software deveopment agreement with your customers; AND,

2.  Make sure the agreement specifically says that the recipient does not acquire a license, implied or otherwise, in the software until you are paid in full; AND,

3.  If possible, DON'T deliver the software until you're paid in full; AND,

4.  If you must deliver the software before you're paid in full, then make sure that your agreement specifically states that if payment is not timely made, all rights provided to the recipient terminate immediately and unconditionally, including any implied rights of use.

Keep in mind, the above-listed suggestions are ONLY SUGGESTIONS--you may need much more in your agreement to protect your rights.

Think you're at risk of giving away an implied license to your software?  Call your attorney, or contact me.  This is all fact-sensitive stuff, and depending on the facts of your situation, you may be able to prevent a licensing tragedy before it happens.

Disclaimer:  The suggestions described above are not legal advice---and if you're getting your legal advice from a blog, then you need to call a professional (of the mental health or business coach variety).  Speak to a qualified attorney before engaging in any activity involving contracts.  Speak to a doctor before engaging in any exercise regimen.  Speak to the postman before mailing something.  You get the point.

        

A (Very Short) Summary of the Case

Solid Host owned a domain name, <solidhost.com>.  A hacker broke into Solid Host's domain name account, and transferred the domain name from Solid Host's registrar to a different registrar, NameCheap.  The hacker used NameCheap's private registration services to hide his identity from Solid Host

Solid Host said, "Hey NameCheap, your customer stole our domain name.  Can you tell us who your customer is so we can get the name back?"

NameCheap said, "Nope, the hacker is a private registrant.  We can't help you."  (Amazing, but true.)

SolidHost sued NameCheap under the theory that NameCheap was helping a hacker steal SolidHost's domain name.

NameCheap said, "Hey, you can't sue us.  There's a federal law that says that you can't sue Internet registrars for providing domain name registration services."  (In fact, there is a federal safe harbor provision that gives registrars immunity for damages relating to domain registration services.  You can read the law HERE.)

The Court said, "NameCheap---you're right, and you're wrong."

The Court held that NameCheap could not be sued for providing domain name registration services.  But the Court also ruled that NameCheap's private registration services were NOT the type of services that the federal law was meant to protect.  As a result, NameCheap could be sued for cybersquatting (and other sundry causes of action).

My Thoughts on the Decision

Hooray!  The Court got it exactly correct.   

Where Registrars Go From Here  

The case doesn't spell the end of private registration services.  But it does send a clear message to Internet registrars that they should consider including sentences similar to the following in their private registration customer agreements:

               Customer acknowledges and agrees that Registrar will disclose Customer's
               information to third parties, without notice to Customer, if (i) compelled to do
               so by law, or (ii) if Registrar believes, in its sole but reasonable discretion, 
               that the domain names are the subject of theft, misappropriation, conversion,
               or improper transfer.  Customer shall hold Registrar harmless for any costs,
               fees, expenses or damages Customer incurs as a result of Registrar's 
               disclosure of Customer's information.

DISCLAIMER:  Am I giving you legal advice?  NO!  Don't be silly.  I'm only suggesting that there may be a way for registrars to continue to provide private domain registration services while avoiding liability for cybersquatting.  (Anyway, if you were my client, you'd already know this because I would have corrected your agreement by now....) 

Check with your attorney before changing any of your agreements.