It sounds like a scary title, and it probably is. It had Lee Berlik saying,

Will this be my last tweet? Attending "the Perils of Social Media"

Dominique Sheldon of Wildman Harrold spoke about behavioral advertising, and the legal risk it can entail. There can often be unintended consequences as the result of business use of social media.

Clients will want to advertise online, irrespective of the potential for backlash. It's a growing market, and it's where consumers are spending their time. Zenith predicts an explosive growth of online advertising in the next few years,

…internet advertising continues to grow at breakneck pace, at a forecast average rate of 14.4 percent annually between 2010 and 2013. Zenith is forecasting newspaper ad spend to fall from $95.2 billion in 2010 to $91.2 billion in 2013, while internet ad expenditure rises from $63 billion to $94.5 billion over the same period.

But many clients aren't fully aware of the risks they may be assuming.

UGC Case Studies

Many User Generated Contest (UGC) campaigns involve the unlicensed use of music, photos and logos. One question that may be examined by courts in are whether they inducing people into copyright infringement.

Doritos and Pepsi Max held a UGC campaign called "Crash the Super Bowl." One video submission, created entirely by members of the public, was entitled Feed the Flock, and poked fun at the church. The Catholic community responded by starting their own campaign against the company, even though the company did not direct the content of the submission.

In 2006, Quiznos launched the "Quiznos v. Subway TV Ad Challenge," where users compared Quiznos sub sandwiches against Subway sandwiches. Subway was not amused, which led to a product disparagement lawsuit in Doctor’s Assoc. v. QIP Holders, 82 U.S.P.Q.2d 1603 (D. Conn 2007). Quiznos cited the Digital Millennium Copyright Act (DMCA) and Communications Decency Act (CDA) stating they were a third party, but the court found they created the tools and themes for the public to create the disparagement. The parties quickly settled after the motion for summary judgment by Quiznos failed, and Joseph Lewczak suggests this could have serious implications for UGC campaigns in the future.

Lewczak suggests UGC sponsors consider:

1. limiting subject matter to innocuous content that does not include claims about competitors or the sponsors, including any testimonials
2. allowing users to determine the content to preserve CDA immunity
3. screening content, although screening can compromise CDA immunity as well

An FTC Report released December 2010, Protecting Consumer Privacy in an Era of Rapid Change, proposed a do-not-track list, similar to do not call list. Four bills in the U.S. are currently pending on this, but the concept actually originated in Canada in that companies should give users notice that tracking is occurring and the need for transparency. The EU requires explicit consent before engaging in tracking. There are a number of lawsuits in the U.S. stemming from behavioural advertising, and we will see greater enforcement in Canada as well.

In Valdez v. Quantcast, MTV, NBC Universal et al (C.D. Cal. July 23, 2010), the plaintiffs filed a class action against a number of major networks for the use of flash cookies on their websites to track consumer behaviour.

In White v. Clearspring Technologies, Disney Internet Group, Warner Bros. Records et al. (C.D. Cal. August 10, 2010), the defendants were sued for their user of widgets. The case settled for $3.25 million, but there was no payment to the class.

A mobile web advertiser, Ringleader Digital, was recently sued in a proposed class action lawsuit over HTML5 used to
to track iPhone and iPad users. The class claims that the code was used to send private information to a database that was then shared with a number of other defendants.

Interclick was sued on December 17, 2010 in a class action lawsuit over using flash cookies and hidden code for “history sniffing” to monitor user activity and track the sites they visit.

Mobile apps are also being targeted in behavioural advertising suits. Freeman v. Apple was filed December 23, 2010 in northern California federal court and claim that the apps downloaded from the iTunes store sent personal information to other parties without their consent. The claim is based on violations of the Computer Fraud and Abuse Act for accessing the devices without authorization, and the Electronic Communications Privacy Act for willfully intercepting communications. A lawsuit against Google for its Android apps may also be in the works.

Shelton suggests finding out whether clients use flash cookies, and sensitize them to the issues. She states lawyers should be up to date on industry standards, and ask questions from vendors and obtain indemnities and warranties against privacy-related claims.

A copy of Shelton's complete slides are available here. Also see an article by Dominique Shelton and Alan Friel, Online Behavioral Advertising Litigation and Proposed Legislation: Lessons for Online Publishers and Advertisers, in the Winter/Spring 2011 issue of The Association of Media & Entertainment Counsel's (AMEC) M/E Insights.

Time to Quit?

So did all this liability scare off Berlik? Apparently not,

After careful consideration, I have decided not to quit the Internet.

And since your clients aren't likely to quit either any time soon, the growing areas of UGC and OBA liability is something that counsel should become aware of.