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User-generated content (UGC) is content created by consumers and posted to third-party Web sites. The Web sites YouTube, MySpace, Wikipedia, Facebook and TripAdvisor, among many others, all rely on UGC for the vast majority of their content. Although user-generated content has been around in various forms for a very long time (just look at America’s Funniest Home Videos, the analog precursor to YouTube), and advertisers have been soliciting “content” from consumers in one way or another through essay, photograph and other skill contests, it is the rise of YouTube and the digital revolution, coupled with Web 2.0, that has made the creation and sharing of consumer-created content fun and easy. But it’s not just for entertainment. As consumer’s eyeballs have migrated from the television screen to online, with an increasing amount of time spent on watching other consumer-created videos, advertisers are looking at UGC as the possible Holy Grail of advertising and marketing. From a marketing perspective, UGC is usually used or created by advertisers and their advertising agencies in one of three ways. An advertiser may solicit content directly from consumers, asking them to create a video or post a picture that tells a story about their interaction with a particular product. Since there is already a significant amount of existing user-generated content, advertisers may choose instead to license previously created clips from consumers. Finally, advertisers may create “fake” user-generated content (without any obvious sale or brand messages) in the hope that the content will “go viral” and become embedded in the collective pop culture conscience. Before an advertiser becomes involved with any of these methods, however, it is imperative to understand the legal risks attendant in doing so, and the proper steps to take to avoid legal issues, including the possibility of infringing on third parties’ intellectual property rights. Two recent cases illustrate the danger for advertisers that get involved in this nascent marketing technique. In Euro-Pro Operating LLC v. Dyson Inc., No. 4619, NAD Decision released Jan. 12, 2007, Euro-Pro filed a complaint with the National Advertising Division (NAD) Review Board, alleging that Dyson’s claims regarding its vacuum cleaners were false, unsubstantiated and based on tests that are unreliable and misleading. The key complaint alleged by Euro-Pro was that a video posted on YouTube as part of an online promotion was false and misleading because the comparison test depicted in the clip was conducted improperly. The video, “Dyson Call Video � Dyson has balls” (which is no longer available via YouTube or Google Video), tested both brands’ vacuums’ ability to pick up eight ball bearings with .88 pounds of DMT Type 8 dust in each vacuum’s receptacle. Dyson’s vacuum picked up eight, Euro-Pro’s only seven. However, the receptacles of the two vacuums varied in size and the video showed that Euro-Pro’s receptacle was operating beyond capacity. Euro-Pro also attacked the appropriateness of the specific test employed by Dyson. Because Dyson discontinued the use of the video before the decision was made, the NAD declined to make any findings on Euro-Pro’s arguments, closing the matter. However, it noted that “Dyson’s video depicted a comparative product demonstration and was therefore advertising and subject to the legal requirement that it be truthful and accurate.” This marks the first time the NAD ruled on a video posted on a user-generated content site and opens up possible liability to any advertiser posting videos online. The NAD did not discuss whether advertiser liability extends to consumer-generated content, but it seems likely that issues of inducement and secondary liability could come into play if the advertiser encouraged the creation and posting of the content, as was the premise of the Quiznos contest discussed below. The Quiznos contest In the second case, Doctor’s Associates Inc. v. QIP Holders LLC, 82 U.S.P.Q.2d (BNA) 1603 (D. Conn. April 18, 2007), Doctor’s Associates (the operators of the Subway chain of sandwich shops) amended its complaint to add a fourth count alleging a Lanham Act violation: that QIP Holders (the operator of the Quiznos chain of sandwich shops) engaged in false and misleading advertising by its “Quiznos v. Subway TV Ad Challenge.” The nationwide contest encouraged contestants to submit video entries comparing Quiznos Prime Rib Cheesesteak sandwich with Subway’s sandwiches. Sample videos and contestant entries were posted on iFilm’s Web site and remained until the close of the contest. Quiznos asserted it had immunity from such a claim under the Communications Decency Act � 230(c)(1), which shields interactive service providers from liability so long as it is not acting as an information content provider. Quiznos essentially argued that it could not be held liable for user-generated content. The court denied Quiznos’ motion to dismiss, stating that the question of whether Quiznos was acting as an information content provider required further discovery, which would include “whether or not Quiznos altered or was otherwise creatively involved with any part of the contestant videos.” A final ruling has not yet been made. What should be obvious, but what the foregoing two cases clearly illustrate, is that user-generated content, when used in all of its various forms by advertisers for marketing purposes, is advertising, and must be treated as such. That potentially includes content created by consumers at the request of the advertiser. Since UGC is advertising, advertisers creating or using UGC must consider the full panoply of rules and regulations applicable to more traditional advertising. These include the Federal Trade Commission Act (FTC Act). Section 5 of the FTC Act generally prohibits unfair or deceptive acts or practices affecting interstate commerce. In essence, all marketing, including UGC, must not include any misrepresentations or omissions likely to mislead consumers acting reasonably under the circumstances. Similar standards apply at the state level. In addition, advertisers are expected to have a reasonable basis for objective claims in advertising prior to the dissemination of such advertising. See Thompson Medical Co., 104 F.T.C. 648, 839 (1984), aff’d, 791 F.2d 189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987) and the Federal Trade Commission Policy Statement on Advertising Substantiation appended thereto. Any claims about a product or service contained in user-generated content created for advertising purposes similarly must be appropriately substantiated. Of particular importance to UGC created in response to an advertiser’s request to show an interaction with a product or service, or tell a story about the consumer’s experience with the product or service, is the FTC’s Guides Concerning Use of Endorsements and Testimonials in Advertising. Under the endorsement guides, “an endorsement means any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual . . . ) which message consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser.” The endorsement guides require not only that statements made by endorsers reflect the honest opinions and beliefs of the endorsers, but also that any connections between the endorser and the advertisers that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience) be fully disclosed. A payment or promise of payment or other inducement (such as the potential to receive a prize in a sweepstakes or contest) is likely to be considered such a connection by the FTC. Therefore, in conjunction with the use of UGC that includes a consumer endorsement or testimonial, the advertiser must disclose that the testimonial was given in return for the promise of a potential payment or prize. Lastly, as with any other advertising campaign, UGC campaigns must abide by any laws that exist regarding the use of third-party materials and intellectual property. Any third-party materials used in the campaign (such as photographs, video, news stories, Web sites, music, names, images and likenesses) will typically be protected by copyright or trademark law, or other laws that protect an individual’s rights of privacy or publicity. Therefore, they must be licensed or cleared prior to use. This applies regardless of whether the content was created by the advertiser or the consumer at the behest of the advertiser. Soliciting consumer content Before soliciting UGC from consumers, it is critical that a comprehensive set of rules be developed to protect the advertiser against claims from consumers and third parties relating to intellectual property infringement and other matters. These rules establish the contract between those submitting the content and the advertiser. Indeed, “[i]t is hornbook law that the rules of a contest constitute a contract offer and that the participant’s [entry into] the contest ‘constitute[s] an acceptance of that offer, including all of its terms and conditions.’ ” Diop v Daily News L.P., No. 13777/05, 2006 WL 1041064, at *3 (Bronx Co., N.Y., Sup. Ct. Feb. 27, 2006 ) (quoting Fujishima v Games Mgt. Servs., 110 Misc 2d 970, 976 (Queens Co., N.Y., Sup. Ct. 1981)). To help ensure that the content created by the consumers does not infringe upon the rights of third parties or otherwise create legal issues, the rules should include general prohibitions against using third-party materials; showing anyone else in the video (without written permission); copying any existing works; and showing any activity that violates the law, is obscene, vulgar or defamatory, involves drug or alcohol use, is dangerous or that disparages competitors. The rules should also contain a provision whereby the consumer represents that anything submitted by the consumer is the consumer’s original work and does not infringe the rights of any third parties. Finally, the rules should provide the advertiser with the right to use the submitted content, either via a license or transfer of ownership. While the rules will serve to provide some protection for the advertiser, consumers typically do not understand the complexity of advertising law or the use of intellectual property. It is possible, therefore, that despite the prohibitions included in the rules, UGC submissions may still contain content that has the possibility of infringing third-party rights or otherwise violating the law. Since UGC will be treated in the same manner as advertising, advertisers should consider screening user-submitted content prior to posting, and should refuse to post any materials that do not comply with the applicable rules or otherwise put the advertiser at risk. Screening will help enable the advertiser to catch intellectual property issues, public relations issues, product claim issues and endorsement and testimonial issues. Using pre-existing UGC Since there is so much UGC available online, advertisers are also increasingly looking to incorporate such content into the advertising they are producing. In many respects, doing so is easier than soliciting UGC from consumers, since advertisers will know in advance what they are dealing with and the issues involved. In using existing user-generated content, first and foremost, advertisers must make sure to enter into a written agreement to license the clip with the person who created it before using it as part of the applicable advertising campaign. The person who filmed the video generally will be the copyright owner, so it is important to contact this person first. This may sound easier than it is, since the person who posted the video may or may not be the same person who filmed it. Advertisers must be sure to perform adequate due diligence to fully vet these issues. While making sure to obtain the correct rights for the video itself, advertisers must also be concerned with the content of the video, and must ensure that all third-party rights contained in the video are cleared and that other potential legal issues have been vetted. Advertisers must obtain signed releases from all individuals who are visible and identifiable in the video. If there is music in the clip, there is a high degree of likelihood that it hasn’t been appropriately licensed. The best practice with music is to enter into a separate license agreement, or the advertiser should create its own music. If the video depicts an interaction with the advertiser’s product and that interaction amounts to a demonstration of the product’s capabilities, the advertiser must ensure that the demonstration is a true and accurate representation of the product’s capabilities and has not been modified in any way to skew the demonstration. Similarly, if any person appearing in the video is endorsing the advertiser’s product or service, the advertiser must make sure that the endorsement or testimonial complies with the endorsement guides discussed above. Depending on prominence and use, props and third-party names or logos appearing in the video may give rise to a claim from a third party for violation of copyright, trademark and trade dress rights. Advertisers should consider either removing these items or obtaining appropriate releases. Finally, if the advertiser is interested in airing the video on the national broadcast networks, such networks’ broadcast guidelines must be taken into consideration. Among other things, if the content in the video has taste issues or shows unsafe behavior, the video may not be permitted to air on the networks. Creating ‘fake’ UGC Seeking to ride the wave of popularity that UGC is now experiencing, advertisers are also creating their own. Of course, this advertiser-created user-generated content is not user-generated content at all, since it is not created by consumers. However, it is typically recorded in a manner to look like “real” UGC, and there is typically no real product pitch or brand message, although there may be subtle hints or visual cues that key in to the advertiser’s product, service or brand. These fake videos are typically distributed to various video-sharing sites in the hope of garnering attention for the video content, not the advertising component, but the advertiser may eventually reveal that it in fact was created by the advertiser. Before distributing the video in this manner, however, advertisers must be sure to review the terms and conditions of each site on which the videos are posted. Most of them will actually prohibit this practice. For example, YouTube’s terms and conditions state: “You agree not to use the Website, including the YouTube Embeddable Player for any commercial use, without the prior written authorization of YouTube. Prohibited commercial uses include any of the following actions taken without YouTube’s express approval . . . use of the Website or its related services (such as the Embeddable Player), for the primary purpose of gaining advertising or subscription revenue” Posting a fake UGC video or other advertising content would likely violate these terms. While there appears to have been little or no enforcement of these terms, as file-sharing sites continue to move to an advertising-based model of revenue generation, advertisers can expect enforcement to start soon. While it remains to be seen whether the popularity of user generated content will continue, for the time being it remains very popular. At least for the foreseeable future, advertisers will continue to use UGC as one of the weapons in their marketing arsenal. However, it is important to understand, spot and deal with the legal risks of this new marketing method to prevent getting caught in the crossfire. Joseph J. Lewczak is a partner in the advertising, marketing and promotions group of New York-based Davis & Gilbert. He represents advertising agencies, promotions agencies, advertisers, direct marketers and telemarketers in connection with all aspects of advertising and marketing. He can be reached at [email protected].

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