Winter 2013
by Seyamack Kouretchian 

In order to remain relevant to today’s technologically savvy consumers, promotional sales consultants need to develop an effective online strategy and to consider how to extend their services to the comfort of a customer’s distant couch. 

The good news is that options to interact with customers over the Internet run the gamut. From a basic website with glossy photos, contact info and directions, to a mobile app that promotes specials based on a user’s geo-location, or even a fully-functioning ecommerce store with a deep virtual inventory of products, possibilities are largely limited by creativity and budget. But a lofty imagination and a fat wallet will only go so far. To successfully implement an online strategy, it’s important to establish an understanding of the legal rights and issues implicated when forging the digital marketplace.

Though it’s strongly encouraged to work closely with competent counsel to navigate the legal minefields littering the online world, familiarity with some of the most common issues will surely help. Read on for summaries of such issues.

Respect the Rights
Virtually every online interaction implicates the rights of intellectual property owners. Be it the shopping cart icon, the “stock” photo of a model using a product you sell, a shot from a supplier’s inventory of catalog images, or the method by which a shopper uses a mouse click to conclude a sale, be sure to acquire the necessary intellectual property rights when venturing online.

Said rights come in many forms. For example, inventions, methods of operation, processes, machines, articles of manufacture and certain ornamental designs are protected by patent laws. Essentially, patent owners are granted a limited-time right to exclusively market, sell, use and manufacture the patent-protected invention. The applicability (or existence) of a patent to a specific online process can be difficult to identify and/or navigate, covering such innocuous online activities as the “one click” process of purchasing, the use of a shopping cart and websites that process financial information entered by customers online.
Patent infringing can be very expensive; we can learn from the ongoing Apple versus Samsung saga.

Patents are not the only intellectual-property right likely to be trampled. Though often easier to identify, copyrights are another form to follow. Essentially, copyrights grant creators of “original works of authorship” the exclusive right to reproduce, display, perform and sell the protected works, including literary, pictorial, graphical, artistic and musical works.

As applied to the online world, copyrights cover such elements as the software used to run a website, graphical icons, pictorial images, statistical graphs, databases and written text. Because infringement here can also be expensive, with statutory damages totaling up to $150,000 per violation, be sure to secure the necessary rights to use the corresponding works.

Also take care not to violate a third party’s trademark rights. The distinctive name, symbol, slogan, design or combination thereof used to identify the source of a particular product or service is protected from unauthorized use by state and federal trademark laws.

As with all intellectual property infringements, stepping on the rights of a trademark owner can also add up quickly. Though certain descriptive uses of a third party’s trademarks may be made without an expressed license from the trademark owner, careful attention must be paid to ensure that the intended use doesn’t rise to the level of a false endorsement or tarnish the trademark itself.

With so many intellectual property rights to consider, business owners must be aware that the use of materials such as third-party photographs, icons, graphs, product descriptions, brand names and slogans can implicate the rights of third parties. Additionally, where such materials are developed internally via in-house employees or contracted
freelance artists, PPDs cannot safely assume that they are deemed the owner via “work
for hire” theories. This is especially critical in terms of corporate logo reproductions.

The reality is that a variety of factors must be satisfied before one can legally be deemed the owner of the corresponding work. To minimize risk, therefore, be vigilant in securing the required rights for all intellectual property, whether created internally or by third parties.

Responsible Online Marketing
Be it via a Google Adwords campaign or emails sent to existing or prospective customers, online marketing efforts can offer a variety of benefits. Effective online marketing allows for better targeted messaging based upon prescreened demographics. But it also creates what may feel like a more direct, immediate, continuous and personal relationship with customers and further provide promotional consultants with valuable information about preferences, tastes and trends.

Whatever the goal, certain legal issues should be top of mind. For example, a patchwork of state and federal laws govern everything from required disclosures in a website’s posted privacy policy, to the accuracy of a commercial email’s subject line content. Failure to comply with these various laws can result in everything from a shakedown lawsuit to an FTC investigation and fine.

Whether to promote an ecommerce website or advertise services, email marketing provides a direct and economical line of communication to customers. These messages are, however, governed by the Can Spam Act, as well as various state laws, essentially
legislating that retailers only transmit commercial emails to existing or prospective customers who have otherwise consented to receive such communications. Additionally, the emails must contain:

• Accurate (i.e., not deceptive) subject headings and content,
• A return email address that the recipient can use to identify the actual sender, and
• A working opt-out mechanism.

Recent case law in California has taken matters even further by essentially mandating that the use of private registry proxies can violate applicable law when other conditions apply.

The claims set forth in an online marketing action can also create liability if not accurate and properly vetted. The Federal Trade Commission has taken an increasingly active role in monitoring online commercial marketing to ensure that the proverbial sales pitch contained in website splash pages, email messages or banner ads does not include potentially deceptive or inaccurate information. So tread carefully when making product claims online. For example, statements that certain products are environmentally friendly or claims that products contain bacteria-killing properties can expose resellers to an FTC complaint if the claims aren’t entirely accurate.

Finally, consider that third party advertisers and/ or affiliates that manage online campaigns can end up working with others that utilize deceptive means to drive traffic to a particular website. The use of fake news sites (aka advertorials) or promises of a free iPad to get users to click through can actually create liability. As a result, businesses should take the time to monitor the sources of their affiliate-generated online traffic to ensure that deceptive means are not being employed.

Website Basics
When it comes to running a website, there are a few fundamental issues that even the most experienced distributors tend to overlook. The result can both damage customer relations and expose the business to liability.

Take, for example, the privacy policy. A common mistake is to simply have the third-party website developer create and post the privacy policy, which itself is often a form copied from some third-party website. Then, without regard to the actual terms of the posted policy, the PPD collects, uses and shares customer information in a manner that is inconsistent with its own stated privacy policy. This can catch the attention of government regulators and enforcers.

The FTC is, after all, more than happy to take website operators to task for failing to follow their own privacy policies. Existing laws require that website operators post privacy policies that accurately describe what type of information will be captured (such as name, address, shopping habits, etc.) and how that information will be used and shared. If a posted privacy policy claims that user information is not shared with any third party, the business must confirm that it doesn’t decide to disclose that information to, for instance, a manufacturer in a collaborative effort to notify customers of an upcoming sale.

Those operating ecommerce stores must also regularly review their terms and conditions to confirm that they, too, are consistent with actual practices. As time goes on and businesses modify their practices and/or processes, forgetting to update posted terms and conditions can create all sorts of problems when the inconsistency is finally brought to the business owner’s attention.

Ecommerce-enabled promotional product agencies must also check with their accounting professionals to determine if they are required to collect sales tax on qualifying sales. Taxes can depend upon a variety of factors and, in some cases, taxes need not be collected, which can ultimately result in pricing advantages.

From the marketing activities of an affiliate, the posted privacy policy or the digital reproduction of a product photo, all sorts of legal issues are implicated. And as PPDs attempt to increase sales and customer loyalty via an online strategy, they need to ensure that their practices are compliant with applicable law.