The Business Technology Law Blog
By Bradley J. Gross, Esq.
The Business Technology Law Blog

Text + Send = Call? Absolutely!

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 ambiguityBlinded 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.

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Affiliate Advertising: Rogue Affiliates Are Dangerous to Your Company's Health!!

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 adviceDon'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 recommendationContact 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."

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You Need To Have A Gold Star (Literally) To Bring A Copyright Infringment Lawsuit

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 >>

An (Implied) License is in the Eye of the Beholder

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.

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Private Domain Name Registration = Liability for Registrars !

Ever try to look up the owner of a domain name, only to find out that the owner's identity was blocked?  Instead of the real owner's name, you see something like, "Domain by Proxy" as the registered owner--or maybe it says, "Private Registrant". 

That's known as a "private registration", and it's a service offered by Internet registrars to help people protect their identities online. 

PROBLEM:  Private registration is being used increasingly as a weapon by hackers and cybersquatters.  What's worse is that registrars offering private registration services are not willing to reveal their customers' identities--even when told that their customers may be breaking the law.

That is, until now......

The recent decision in Solid Host, NL vs. NameCheap, Inc. may change the way registrars provide private registration services. 

Why? 

Because the Solid Host decision was the first court decision to hold that private domain name registration services by an Internet registrar (such as GoDaddy, Network Solutions or, as in this case, NameCheap) may subject the registrar to civil liability for cybersquatting

(Yes--cybersquatting!  For those of you who have been living under a rock, "cybersquatting" is
the moniker given to the illegal act of knowingly registering someone else's trademark as a domain name.)

By know you're asking, "How can that be?"  You're also probably asking, "What can registrars do to avoid liability?"  (If you're not asking these questions, I'm going to pretend you are because (i) it's my blog, and (ii) I need a segue into my analysis of the situation.)

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. 

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Exclusivity Clauses In Cable Contracts Are Dead, For Good, Says The Court

In late 2007, the FCC ruled that exclusivity clauses in bulk cable agreements between cable companies and owners of apartment buildings and other multi-unit developments were illegal.  (I wrote about this ruling shortly after it was announced---check out my blog entry HERE).

Some people didn't like that ruling--and I call those people "the Cable Companies."  Simply put, the cable companies felt that the FCC exceeded its authority by banning exclusivity clauses. 

UPDATE!!!
The United States Court of Appeals has entered the fray and sided with the FCC.  In a decision handed down last month, the Court concluded that the FCC "acted ...<< MORE >>

A Thought on IT Services and Commoditization

Have IT services become commoditized because of the standardization of hardware?  

Put another way, in our effort to have IT products and parts become more modular and intercompatible, have we created a situation where virtually anyone can provide the services necessary to diagnose and fix IT problems?

Answer: NO.  (If you said yes, you're wrong).

Calling IT services "commoditized" misses the point.  There are so many services that comprise the implementation of IT services, that IT services can never, in any sense of the word, be called commoditized.

Among other things, IT services includes sales staff, tech support, benchmarking, and reverse logistics.  Let's talk about each one....

Your company's sales staff is its selling force--it is the air that your company needs to inhale in order to exist.  That function can NEVER be called a "commodity".  Good customer service is rare, and until it becomes commonplace, it can't be a commodity.  'nuff said.

Regarding tech support: if you think that tech support is a commodity, then you must also believe that all service centers are exactly the same, all warranty services are handled identically, and all repairs of technology are equally reliable.  And if you think all of that is true, then you're a fool. (Sorry, but sometimes the truth hurts).

Tech support varies dramatically from company to company.  Even the replacement of a simple capacitor, hard drive, or motherboard can be handled with varying degrees of timing, efficiency, and competency.  As long as there is a human component to tech support, it won't--indeed, it CAN'T--be a commodity.

And on a related side note: too often, tech staff are  treated interchangeably with  sales staff. If your company is using the two interchangeably or, worse, relying on tech support to sell products or services, you need to revise your business model--FAST.  Remember, with precious few exceptions, your tech staff can no more sell products or services than your sales staff can fix things.

Benchmarking--if you're not doing it, then your boat is headed straight for the iceberg.  How can you determine the level of your services if you have nothing to benchmark them  against?  ANSWER: You can't.  Retain a good benchmarking service, such as Service 800, and make sure your services are the best they can be.  Once you start benchmarking things, you'll quickly see that IT services are FAR from being commoditized.

Reverse Logistics--this is the process of getting a defective part or product back to the manufacturer or repair depot for diagnosis and/or repair.  Think this is a commodity?  Just try to bring a product back to the vendor who sold it to you and see what happens.  See how long it takes just to get the product to the repair depot.  See how much it costs.  Then let me know if you think that such services are all the same.  Check out my friends at Flextronics RTS to see how things SHOULD be done.  No doubt you'll want to bring these guys into your company's IT support solution....

Commoditization in the IT Service industry?  Nope.  The two have nothing to do with each other.

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A Message to the Cable Company: Keep Your Hands Off Our Wiring

Your bulk cable contract is about to expire, and you’re thinking about bringing in a new cable provider…but there’s a problem.  The incumbent provider doesn’t want you to terminate its services, and delivers an ominous edict: If you don’t renew our contract, we’re going to remove all of the wiring in your building.


Can they do that?  Can an incumbent provider remove all cable wiring in your multiple-dwelling-unit building (or “MDU”) simply because it wants to?  You ...<< MORE >>

The Tech Tidal Wave will Raise All (Financial) Boats!

Here's a test--complete the following:

There's opportunity....

a)  in chaos.
b)  in a recession.
c)  now.
d)  tomorrow.
e)  wherever you look, assuming you're eyes are open.
f)  All of the above.


I'm not giving you the answer--it's self-explanatory.  If you can't figure it out, read option "e" out loud repeatedly until (i) you understanding my point, or (ii) you collapse--whichever occurs first.

So where's the opportunity?  Answer: TECHNOLOGY.  It is the antidote for the financial crisis; it is the panacea for our national debt; it is the future.  I see it everyday in the deals I handle; technology is booming, and it will continue to do well for ...<< MORE >>

Negative Options -- Do It Right to Avoid Prosecution

"Negative Options" is a fancy (and shortened) way of saying, "If you buy stuff from us, then we'll automatically keep sending you more stuff until you tell us not to.  Oh, and one more thing...we'll bill your credit card automatically for all the stuff we send you--until you tell us not to."

Negative options can be a really good thing--unless your company does it wrong, in which case it can get you in a lot of trouble.  (And by "trouble", I mean "sued", "fined", and/or "put out of business.")  Read on....

A "negative option" is not a new concept: record and book companies have been using the "negative option" for at least twenty years.  C'mon, who among us didn't have a Columbia House CD showing up in the mailbox once a month?  (Come to think of it, I think I still owe Columbia House some money from my 1980 purchase of AC/DC's "Back in Black."  I digress.)

Despite the "negative" connotation, negative options save time by automating payments, akin to setting up automatic payment mechanisms to pay your mortgage, your electric bill, and other recurring services that you may want (or need). 

The problem is that many companies don't clearly state the terms of the negative options that they offer to their customers.  (There are people who don't like when that happens, and I call those people "Attorneys General."

Customers who don't understand the negative option they sign up for usually feel like they're being ripped off.  Often they're not being ripped off--they simply didn't bother to read their sales contract before making their purchases.

So, what's a company to do??  Well, you have two options: do it right, or not.  If you do it right, all will be fine.  If not, you'll get prosecuted.   Your choice.

According to the FTC, here's how you do it "right" (with commentary by me....)

1.  Disclose material terms in an understandable manner, without making them unnecessarily long or inconsistent.  (BJG Comment: if you ramble, you're cooked.  If your document makes no sense, you're REALLY cooked).

2.  Make the disclosures clear and conspicuous by placing them where consumers are likely to look on Web pages, by labeling disclosures (and links to them) to indicate their importance and relevance, and by using easy-to-read fonts and colors.  (BJG Comment:  make important things OBVIOUS.)

3.  Disclose the offer’s material terms before the consumer incurs a financial obligation.  (BJG Comment: Let them know the four "Hows" before you take their money: How much?  How long?  How often?  How do I cancel?

4.  Obtain consumers’ affirmative consent to the offer by, for example, having them click “I Agree” and without relying on pre-checked boxes.  (BJG Comment:  Either make them check the "yes" box, or have them surrender their first born child.  Whichever is easiest.....)

5.  Avoid impeding the effective operation of promised cancellation procedures and honoring cancellation requests that comply with such procedures. (BJG Comment: They want their money back?  Fine, give it to them.  You don't need the cash that badly, and in any event, it's not worth the hassle of a government investigation.)


Concluding thought:  Negative options?  I like them.  Just make sure you do it right, or you'll end up being prosecuted by the State or Federal government. 

Questions?  Ask away.....



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