Electronic Retailer - September 2012 - 64

BY GREGORY J. SATER AND JEFFREY D. KNOWLES

A Legal Checklist for D2C Advertising
CHANNEL CROSSING: LEGAL
If you’re bringing a product to market direct to the consumer, there are several legal issues you need to consider and discuss with qualified legal counsel. This is a brief introduction just to get you started. and about all of your advertising claims (both express and implied). This is critical because direct-to-consumer products are regularly the subject of false advertising lawsuits brought by the FTC, state attorneys general, class action plaintiff’s lawyers and disgruntled competitors. You’ll want to find out if things should be phrased differently, if disclaimers should be added or, frankly, if some of your claims should be dropped altogether because they’re false or, if they’re true, they still pose a high level of legal risk because you don’t have legally sufficient substantiation for them. You and your legal counsel must consider not just your express claims but also what the FTC or others might allege to be your implied claims. You’ll have liability for both types of claims, if they’re not supported by adequate substantiation. What tends to happen is that the FTC “interprets” your ad in such a way that the agency alleges that you’ve made an implied claim that you disagree you made. It then asks you what substantiation you have for that implied claim. Chances are most people won’t have substantiation for an advertising claim that they didn’t think they were making in the first place! As for testimonials, if you’re going to use them, how were they recruited? Were they paid or given anything and, if so, what, when and for what? And have you ascertained, and if so are you intending to disclose in your ad, the results that consumers can generally expect from the use of your product?

Product/Patent Rights
If you’ve obtained the rights to your product from someone else, do you have a written contract with them, and does it clearly give you all of the rights you’re going to need in order to market that product effectively in all the channels you desire for as long as you desire? Are the financial obligations clearly laid out (e.g., any minimums to pay)? What about indemnification? Who will indemnify whom for what kinds of third-party claims? Has a search been done to see if the product can be sold without infringing someone else’s patent? Should a patent application be filed and, if so, in what countries, by whom and at whose expense?

Name/Trademark Rights
If you obtained the name of your product from someone else, the same questions arise. For example, does it potentially infringe anyone’s registered or unregistered trademark? Has a full trademark search been done? Who is going to file with the USPTO, in whose name, and what about international applications?

Manufacturing
Who will be manufacturing the product, are they based in China, and what does your manufacturing agreement with them say about the time frames for completion and shipment and about IP?

Internet
On your website, are your terms of use and your privacy policy clear and concise? Are you running a sweepstakes or contest? Are you offering a continuity product or a negative option? Are you offering a risk-free trial? Are you using disclaimers and disclosures properly and in the right locations? Are you passing any information about your customers to anyone else and if so what information? Are you using online affiliates? What about bloggers or other social media participants to whom you’ve paid compensation or to whom you’ve given free product samples or other goodies? Do you have a social media policy requiring such people to disclose the material connections they have with you, and are you enforcing that policy?

Ad Copy/Copyrights
Who will own the spot or infomercial that’s produced for your product? Who will own the content of the website? Do you have a written, signed “work-made-for-hire” agreement or copyright assignment from everyone providing any creative input, so that the “chain of title” is clear?

Production/Advertising Claims Review
Is there a production agreement? Is there a talent agreement? Are those documents clear as to everyone’s obligations, and as to your right to use people’s names, images, likenesses and creative contributions? Who has a right of approval over what content, and who owns that content? You really should consult with qualified legal counsel about the script, about any testimonials you intend to use, 64

Careful Planning
There’s much to be gained from a great D2C campaign, but it’s no exaggeration to say that it can all be lost, and lost in a heartbeat, if there hasn’t been careful legal planning and preparation from the get go.

electronicRETAILER | September 2012

Electronic Retailer - September 2012

Table of Contents for the Digital Edition of Electronic Retailer - September 2012