Advertising & Product Risk Management

Over the past couple of years there have been several important conversations regarding intellectual property issues in the beauty industry. This industry faces a persistent issue of copycat beauty looks that are not credited to the original inspiration. For example, earlier this year Instagram account Diet Prada called out two editorial beauty looks worn by Rihanna in a magazine, arguing that the two makeup artists and creative teams had ripped off looks from their peers. Diet Prada commented that in its opinion, Rihanna’s silver glitter coated lids, lips and tongue were directly copied from a 2014 design by another artist for a 2018 Allure magazine story. Two years prior, Snapchat made headlines when it released a new batch of face-altering filters that seemed to be inspired directly by the creations of independent make-up artists. These filters weren’t just replicas of simple beauty looks. In fact, they were exact replicas of intricate works of art, arguably plucked directly from the make-up artists’ feeds.

The issue that many beauty artists face is that the industry does not have adequate avenues to protect their creations and take legal action for copyright infringement. Peter Philips, a well-known makeup artist and Creative Image Director of Christian Dior Beauty, saw his Swarovski crystal-rimmed eyes at the Dries van Noten Spring 2018 show replicated by many other makeup artists. Commenting on the copycats, he stated to website Fashionista: “what drives me is the creative process and trying to do different things than other people do.” He also said “I do respect the skills of people [re]doing my makeup, but on the other hand, I feel you miss out on something because doing our job is not only about repeating and what’s been done. That could be a starting point to push it further — that’s just the fun of it”. But what happens when no such “pushing further” occurs, and there are mere copies on the runway?

Present State of US Copyright Law

Copyright is a right given to its owner to prevent the unauthorized use of his/her work. Copyright may only subsist in certain categories of “works” including those that are literary, artistic, and musical.

Copyright is automatic. As soon as a work is produced, it is protected by copyright. One does not need to register the work or apply a copyright notice to it in order to be protected by copyright. As a general rule, a person who reproduces a substantial portion of the original work without the permission of the copyright owner is a prima facie infringer, and therefore must prove some affirmative defense such as fair use in order to escape liability.

A turning point for this issue came in 2000 when the Southern District of New York clarified that certain intricate tattoos and stage makeup qualify for copyright protection. In Carell v. Shubert, the Court held that the stage makeup featured in the Broadway musical Cats was protectable under copyright law, as even though actors in the show could change, the makeup was sufficiently fixed in the same way. They also considered choreography (with its ever-changing dancers) to be fixed. The Cats makeup required up to eight layers of products and several hours of work each night. This was found to be an original work of authorship that is fixed in a tangible medium, thereby satisfying the elements necessary for copyright protection under 17 U.S.C. §102.

Existing Issues for the Beauty Industry

One of the main issues with granting copyright protection to makeup looks is that makeup disappears and washes off instantly whereas clothing, artwork or even photography is long lasting. Makeup artists do not fit squarely into the protections afforded by US copyright law because these looks are not permanent. However, semi-permanence is part of the beauty of makeup—it allows the wearer to become whoever he/she wants to be.

Additionally, everyday hair and makeup, generic tattoos, and nail art would likely not be sufficiently original to qualify for copyright protection. The artwork done by a makeup artist would have to meet the definition of “sufficient originality” to be considered copyrightable. Under a portion of the Copyright Act known as the Visual Artists Rights Act (VARA), certain “works of visual art” may qualify for protection against distortion and other wrongs. In relevant part, section 101 of the Copyright Act defines a “work of visual art” to include: a painting, drawing, print, or sculpture, existing in a single copy or in a limited edition of 200 copies or fewer, which are signed and consecutively numbered by the author.

An artist may attempt to apply the same makeup design on different people, or even the same person. The definition of “work of visual art” appears to distinguish a work existing in a single copy from a work existing in multiple copies on the basis of copies of the latter work being derived from a common mechanical process (such as the multiple casting of a sculptural work or the manufacture of several photographs from the same negative). See id. § 101 (defining a work of visual art). Because the second and further applications of a makeup design are not mechanical, each application may count as a separate work of art.

Conclusions

Even though Carell held that makeup is protectable under copyright law, the landscape of makeup art and copyright law is still relatively undeveloped and requires some clarity on how to allocate copyright when no long-term record can be obtained.

This article originally appeared in FashionUnited.

 

On March 5, Lauren Aronson will moderate the panel, “Guidance on Reliable Testing to Support your Advertising Claims,” at the National Advertising Division’s West Coast Conference. Joining Lauren will be Benjamin Sarbo – Product Development Lead at Kimberly-Clark, Ray Iveson – Director and Senior Research Fellow, The Duracell Company, and Martin Zwerling – Deputy Director, NAD.

The panel will cover issues related to testing products to support advertising claims. Using real-life product examples, they will discuss key questions that advertising should address, including Is there an industry standard or, in the absence of an industry standard, what type of test method is reasonable and reliable? Is the test method consumer relevant? Do the test results correlate to the claim? This panel will explore these challenges from the perspective of in-house R&D, an in-house lawyer, and outside counsel.

Click here to register for the event.

Crowell & Moring has issued its seventh-annual “Litigation Forecast 2019: What Corporate Counsel Need to Know for the Coming Year.” 

The Forecast provides concise, forward-looking perspectives on technological developments that can help corporate counsel identify the many opportunities and challenges ahead as they harness the power of technology. The Forecast further explores the developing legal, regulatory, and technology developments affecting a wide range of companies in twelve areas of law: antitrust, corporate, cybersecurity, e-discovery, environmental, government contracts, health care, intellectual property, international trade, labor and employment, torts, and white collar.

In the article, “AGs: Watching Out For Consumers,” authors examine why state attorneys general are especially focused on consumer protection, bringing increased risk as well as potential opportunities to companies.

Be sure to follow the conversation on social media with #LitigationForecast.

businesswoman checking the time on watch

Do not assume a government shutdown means that reporting obligations at the CPSC are on hold. While the Commission’s staff designated as essential personnel are dedicated to protecting against substantial, immediate or “imminent threats to human safety” under the Commission’s shutdown directive[1], they will be reviewing reports to make that determination. The obligation to report is not suspended during the shutdown, even if there may be slower than normal response on matters that do not present an immediate threat. The filings are tracked by date and time electronically, and with 15 million in penalties at stake for failure to timely report, it is important not to confuse a partial shutdown of government operations with a stay on statutory obligations. There is no stay of the reporting obligations If you are a manufacturer, importer, distributor, and/or retailer of consumer products, you continue to have a legal obligation under the Consumer Product Safety Act (CPSA) and other statutes administered by the CPSC to report the following types of information to the CPSC:

  • A defective product that could create a substantial risk of injury to consumers;
  • A product that creates an unreasonable risk of serious injury or death;
  • A product that fails to comply with an applicable consumer product safety rule or with any other rule, regulation, standard, or ban under the CPSA or any other statute enforced by the CPSC;
  • An incident in which a child (regardless of age) chokes on a marble, small ball, latex balloon, or other small part contained in a toy or game and that, as a result of the incident, the child dies, suffers serious injury, ceases breathing for any length of time, or is treated by a medical professional; and
  • Certain settlements of lawsuits.

Notably, the government shutdown has no impact on the timely reporting of lawsuit settlements. The New Year brings a new time period for an additional and separate reporting requirement under Section 37 of the Consumer Product Safety Act. It requires manufacturers of consumer products to report information about settled or adjudicated lawsuits during specific 24-month periods. Specifically, companies are required to report when at least three civil actions filed in federal or state court involve the same model of a product and each suit alleges the product was involved in death or grievous bodily injury.  15 U.S.C. § 2084(a). The products at issue in the three cases must involve the same particular model, distinctive as to functional design, construction, warnings, and instructions, i.e. the characteristics that affect the product’s safety related performance.

The CPSC regulations define grievous bodily injury to include certain categories of injury, including, but not limited to:

  • Mutilation or disfigurement including permanent facial disfiguration or non-facial scarring that results in permanent restrictions in motion;
  • Dismemberment or amputation;
  • The loss of important bodily function or debilitating internal disorder such as the permanent injury to the loss of an organ, or blindness or permanent loss, to any degree, of vision.
  • Injuries requiring extended hospitalization, including in-patient care of 30 days in acute care facility or 60 days in a rehabilitation facility;
  • Severe burns or severe electrical shock.[2]

Section 37 sets forth specific statutory time periods within which three settlements involving the same product would trigger reporting. Each of the 24-month statutory periods begin every odd year.  For purposes of this analysis, the applicable statutory periods are:

  • January 1, 2015 – December 31, 2016;
  • January 1, 2017 – December 31, 2018; and starting now
  • January 1, 2019 – December 31, 2021.[3]

In addition to Section 37 reporting, lawsuits should be reviewed with an eye towards whether they contain information reportable under Section 15, such as if the allegations reasonably support the conclusion that a product contains a defect which could create a substantial product hazard or an unreasonable risk of injury. In-house counsel should keep these intersections in mind and make sure they bridge the gap between litigation and this regulatory reporting obligation.

It is a common tendency to think about product safety issues in separate buckets depending on whether they raise litigation or regulatory risks. But each should not be considered in isolation as they can overlap in various ways, including within the Consumer Product Safety Act.

 

[1] Order No. 0921.1

[2] 16 C.F. R. §1116.2

[3] See 15 U.S.C. § 2084(b); see also 16 C.F.R. § 1116.2(a); CPSC Recall Handbook at page 9 (found at https://www.cpsc.gov//PageFiles/106141/8002.pdf).

 

 

This article originally appeared in Bloomberg Law Big Law Business.

Pop-star Selena Gomez is an international celebrity with 144 million followers on Instagram. That’s second only to soccer icon Cristiano Ronaldo who trumps her by 500 followers.

So you might think companies would jump at the opportunity to enlist them as brand ambassadors. But companies are increasingly turning away from deals with mega stars like Gomez and Ronaldo and tapping lesser known social media personalities to represent their products. Too often, though, the liabilities involved in working with so-called micro-influencers are overlooked.

Companies can do more to protect themselves by simply using the same high level of caution with non-celebrity influencers as is used when entering arrangements with household names.

Influencers are becoming sought-after for two primary reasons:

  • they are considered more cost effective, and
  • their endorsements are often seen as being more authentic and better able to reach a highly engaged audience.

In fact, it is estimated that nearly 80 percent of professionals in fashion, luxury, and cosmetic industries in the U.S. and Europe implemented influencer campaigns last year.

However, the line between the traditional celebrity and the influencer is not as clear-cut as it once was. While influencer marketing continues to be far cheaper and can be more effective in reaching potential buyers, many influencers have shifted from casually filming videos in their bedrooms to becoming highly recognizable household names. Influencers are increasingly transforming this celebrity to build their own brands. With this transformation comes more risk.

While many companies have rapidly embraced influencer marketing, their legal strategies haven’t always kept pace. Missteps around content ownership and the lack of cohesive policies around disclosure requirements have led to costly and drawn out legal battles.

Accordingly, we suggest treating influencers like more conventional celebrities, specifically by focusing on the following.

1. Social Media Content Ownership

Companies should ensure that influencers are aware that sharing any image containing copyright-protected works might be infringing on third-party intellectual property and privacy rights and establish indemnity clauses and/or holdbacks for infringement by an influencer in any contract.

Further, while it is standard for influencers to own the content in social media posts, the brand should be sure both to retain the right to re-use it for future campaigns or advertisements and the ability to require the influencer to take down a post.

2. Design Collaborations

As influencers grow in popularity, many have established or are seeking to establish their own “brand” identity. Deals with influencers now go beyond mere endorsements, as many influencers aspire to launch their own product lines. This creates a gray area: does that, let’s say, pocket design belong to the company or is it emblematic of the influencer’s own brand?

In 2015, when Becca Cosmetics entered into a partnership with makeup artist and influencer Jaclyn Hill, it appears the company failed to establish ownership of the product packaging design of their wildly popular “Champagne Pop” collection. When another cosmetics company called Morphe later collaborated with Hill to launch a new “Vault” eyeshadow pallet with an arguably similar packaging design, Becca sent Morphe a cease and desist letter, prompting Morphe to file a lawsuit, leaving the two makeup companies embroiled in a legal battle. (See Morphe LLC v. Becca Inc., No. 2:18-cv-06667, C.D. Cal.)

Where both company and influencer may be competing for brand recognition, agreements with influencers should clearly specify which party owns the various elements relevant to the design collaboration and require an assignment of rights where necessary.

3. Risk of Reputational Harm

Brands may also want to make sure contracts with influencers protect against the reputational harm that can be associated with an influencer’s behavior, and not just focus on number of followers.

Influencers, like conventional celebrities, can become embroiled in scandals which can embarrass companies they work closely with. For example, beauty guru Laura Lee’s eponymous makeup line was recently dropped by Ulta Beauty after fans of rival beauty guru Jeffree Star uncovered racially charged tweets Laura sent in 2012.

To protect against these potential reputational risks, Companies should add mortality and non-disparagement clauses to the influencer’s contract, allowing them to terminate the relationship and/or recover damages in the event the influencer does anything that would reflect unfavorably on the brand.

4. Disclosure Requirements

In April 2017, the FTC sent letters to 90 influencers and marketers reminding them of their obligation to clearly disclose their relationships with brands when endorsing them on social media. The issue here is not always whether companies know that influencer disclosure requirements exist, but rather whether brands monitor their influencers’ compliance with these requirements.

Indeed, lack of compliance is so widespread that the FTC cracked down on companies and influencers and released updated FAQs clarifying how and when to comply with the 2008 Endorsement and Testimonial Guides.

While companies can’t shift the legal burden of disclosure to an influencer, they can protect themselves by crafting proactive compliancy policies, training influencers in the best practices for disclosure, and including a clear, simple, and specific disclosure mandate in the influencer’s contract. Companies must also actively monitor the influencer’s compliance.

Final Thoughts

As marketers have enthusiastically seized on influencer marketing as a relatively inexpensive and powerful way to reach their target consumers, the influencer economy has evolved. Influencers have increasingly transformed themselves into quasi-celebrities, building their own brands as they amass larger followings and command higher fees and more lucrative brand deals.

As the line between traditional celebrity and the influencer blurs, risk to brands engaged in influencer marketing increases. Legal departments can no longer engage with influencers as unsophisticated amateurs and should rethink the way they enter into agreements, incorporating some of the same protections they would when engaging with traditional celebrities.

This article originally appeared in Bloomberg BNA.

Image of ruler at the 10 inch mark
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When Subway faced a class action over its “footlong” sandwiches coming up short, a quick settlement seemed like a good bet. Instead the case became a memorable example of how the courts and the Justice Department are cracking down on settlements that often do little more than generate easy money for plaintiffs’ attorneys.

Companies facing meritless class actions often move to quickly settle to avoid costly drawn-out legal battles, but in this new legal climate, companies should reconsider their strategies for resolving these lawsuits.

One of the most famous examples of this trend is the proposed settlement of class action lawsuits filed after a picture of a Subway “footlong” sandwich measuring less than 12 inches went viral. The lawsuits claimed the sandwich company engaged in deceptive marketing and sales practices. But the company quickly provided discovery showing it used the same amount of dough in each “footlong” roll. Thus, any variation in length of the rolls was merely a fluke of the baking process and not an indication that consumers were receiving less food.

Still, Subway agreed to settle the case and committed to institute quality-control practices designed to ensure consumers received 12-inch rolls. The company also agreed to post notices explaining that, even with the quality-control practices, the bread-baking process sometimes results in rolls measuring less than 12 inches.

For obtaining these concessions, plaintiffs’ attorneys were to receive more than $500,000 in fees.

No Benefit to Class

Subway, like many companies, embraced the opportunity to quickly settle a meritless lawsuit for only the cost of legal fees and a few minor business changes. But the U.S. Court of Appeals for the Seventh Circuit, one of a number of increasingly skeptical courts, rejected the settlement because it provided “zero benefits for the class,” noting “[a] class settlement that results in fees for class counsel but yields no meaningful relief for the class is no better than a racket.”

Courts are not alone in turning a more critical eye on proposed class action settlements.

Earlier this year, the Department of Justice signaled it would be making a concerted effort to review class action settlements. For the past 13 years, the DOJ has had the authority to review and weigh in on the fairness of class action settlements but has rarely done so. But in February, departing Associate Attorney General Rachel L. Brand indicated that the DOJ would use its authority to ensure class action settlements provide meaningful value to class members.

Soon after, the DOJ made good on its promise and issued a statement of interest opposing a proposed consumer class action settlement in federal court in New Jersey. Again, the concern was that class counsel was receiving $1.7 million for a settlement of dubious value to consumers. The plaintiffs claimed that an online wine retailer had misled them by showing very high “original” prices for bottles of wines, leading consumers to believe they were getting a better discount. However, as the DOJ pointed out, the plaintiffs “actually received the products they ordered at the prices to which they agreed.”

But even assuming the plaintiffs could show they suffered a loss, the proposed settlement offered only rebate codes that would allow a plaintiff a $2 discount per bottle of wine purchased from the defendant. The DOJ determined that, either way, the settlement was not fair.

The court agreed and ultimately rejected the settlement.

Do Your Homework

With courts and the DOJ viewing class settlements more stringently, companies should carefully consider whether a settlement that appears to be an easy way out is truly the best approach.

Such settlements may prove a waste of time and resources if they are challenged by the DOJ or ultimately rejected by the court. Although plaintiffs’ attorneys could withdraw their claims following a rejected settlement, often companies are faced with months or even years of continued litigation. And even if the settlement survives the increased level of scrutiny, it will not necessarily reduce the risk of similar lawsuits by plaintiffs that were not bound by the agreement.

Instead, companies should determine whether, even if more costly in the short term, they may ultimately have more to gain from seeking a dismissal of the action on the merits.

If companies still decide to settle, they should avoid the hallmarks of settlements that were found not to provide benefits to the class. If the value to the class involves only business practice changes, the companies should make certain to include changes that were not already in place before the settlement and that will materially reduce the risk of harm to consumers.

And instead of offering consumers coupons, which have limited value because customers need to spend money to get the benefit, companies should offer them small credits instead. Apple showed benefit to its customers when it settled a 2016 class action lawsuit by agreeing to pay $400 million to consumers who bought e-books at an inflated price by automatically crediting their e-book accounts.

Given the increased scrutiny on class action settlements, a more thoughtful approach to settlements that seem like a quick fix could save companies time and money in the long run.

 

Join Us For A Complimentary Webinar – Thursday, October 25, 2018 – 12:00 – 1:00 PM ET

Two years into the Trump Administration and:

  • The Consumer Product Safety Commission finally has a Republican majority,
  • the Department of Transportation has released its 3.0 guidance on autonomous vehicles,
  • NIST has published a 375 page recommendation on medical device security,
  • the FTC is holding a series of hearings on the transformative nature of the digital transformation on markets.
@GettyImages

What does all this activity in the United States mean for companies following the rapidly evolving regulations globally related to the safety and security of products?

This PLAC webinar will describe the current landscape at the federal agencies setting policy for product safety and security. With all the recent talk of regulatory humility in the face of great technological change, we’ll discuss whether regulators practice what they preach and if recent actions encourage or stifle innovation. Our session will compare and contrast activities across the federal government relevant to consumer products broadly defined with a particular focus on product safety and security.

Presenters:

Cheryl Falvey, Partner, Crowell & Moring, Washington, DC
John Fuson, Partner, Crowell & Moring, Washington, DC
Peter Miller, Senior CounselCrowell & Moring, Washington, DC

Please click here to register for this webinar.

@GettyImages

Earlier this summer, President Trump nominated Republican Peter Feldman to serve as the fifth commissioner on the U.S. Consumer Product Safety Commission (CPSC). The Senate has now confirmed Mr. Feldman to both (1) serve out the remainder of former Commissioner Joe Mohorovic’s term, which expires in October 2019; and (2) serve a seven-year term beginning in October 2019.

Significantly, the confirmation of Mr. Feldman gives the Republicans their first majority control of the Commission in nearly twelve years, and presents an opportunity for Acting Chairman Ann Marie Buerkle to further move the agency in a direction that reflects her regulatory priorities, as well as those of the Administration. Notably, the Commission will soon consider its FY 2019 operating plan which sets the agency’s agenda for the coming year.

Interestingly, the Senate voted 80-19 to confirm Mr. Feldman to serve out the remainder of former Commissioner Mohorovic’s term. However, on the following day when it came to vote on Mr. Feldman’s own seven-year term that would start in October 2019, the Senate split along strictly partisan lines confirming Feldman by a slim 51-49 majority. Some had argued that since Mr. Feldman’s “new” term would not begin until 2019, the next Senate should take up the nomination after the midterm elections.

Mr. Feldman is well-known among the product safety community. Having served as legal counsel to Senator John Thune (R-SD) at the Senate Committee on Commerce, Science, and Transportation since 2011, he is experienced and well-versed in consumer product safety law and the activities of the Commission.

The CPSC released the following statement upon Mr. Feldman’s confirmation including this quote from Mr. Feldman himself:

“I believe strongly in the mission of the agency because American consumers have every right to expect that the products they purchase will be safe and will not pose an unreasonable risk of injury to themselves or their families,” Feldman said. “CPSC’s safety work is critical, particularly when it comes to protecting our most vulnerable populations. I look forward to advancing these agency priorities while ensuring fairness in the execution of its duties.”

We look forward to working with Commissioner Feldman in the years ahead and congratulate him on his confirmation.

 

© Getty Images

Two weeks ago, after the Senate confirmed Dana Baiocco to the U.S. Consumer Product Safety Commission (CPSC), we wrote that it would not be a surprise if President Trump appointed a fifth commissioner in the coming weeks to give the Republicans a 3-2 voting majority on the Commission. Well, on June 4, the President nominated Peter A. Feldman to be a Commissioner of the CPSC. This is a very significant development. If confirmed, Feldman will fill the remainder of former Commissioner Joe Mohorovic’s term, which expires in October 2019, and give the Republicans their first majority at the Commission in nearly twelve years. The confirmation would also allow Acting Chair Ann Marie Buerkle to start to move the agency in a direction that reflects her regulatory priorities, as well as those of the Administration.

Mr. Feldman is known to many in the product safety community. Having served as legal counsel at the Senate Committee on Commerce, Science, and Transportation since 2011 (most recently as Senior Counsel), he is knowledgeable and well-versed in consumer product safety law and the activities of the Commission. He is a graduate of American University’s Washington College of Law.

Upon his nomination, Senate Commerce Committee Chairman John Thune (R-SD) stated the following:

“Peter has been part of the Commerce Committee team and an invaluable resource during my entire tenure as ranking member and chairman. While I will miss his steady hand in our committee’s bipartisan efforts to fight for consumer safety and fairness, the Consumer Product Safety Commission will benefit from his expertise and leadership. Once the committee receives the formal nomination and other required submissions, I expect we will move quickly to convene a confirmation hearing.”

We expect Feldman’s nomination to move faster than that of Commissioner Baiocco. Should Feldman be confirmed to fill former Commissioner Mohorovic’s term, we also expect President Trump to re-nominate him for a new seven-year term in October 2019. In the meantime, until Feldman’s confirmation, the Commission remains in a 2-2 voting “tie.”

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Multiple class actions have alleged violations of the Telephone Consumer Protection Act (TCPA) for use of automated dialing systems (auto-dialer). In a 2015 Order, the Federal Communications Commission (FCC) defined an auto-dialer under the TCPA to mean any device with the theoretical “capacity” to place autodialed calls, even if had the potential to be transformed into an auto-dialer. Importantly, the FCC’s definition was prospective and applied even if additional software was required. However, several recent cases have narrowed the scope of the definition of “auto-dialer,” creating a potential hurdle for plaintiffs and creating confusion about the viability of class actions that hinge on whether the marketing platforms used to send messages to consumers qualify as “auto-dialers.”

In March, in ACA International v. Federal Communications Commission, No. 15-1211 (D.C. Cir. Mar. 16, 2018), the D.C. Circuit limited the FCC’s 2015’s broad prospective definition of auto-dialer, stating that it would “subject ordinary calls from any conventional smartphone to the act’s coverage” and that the statute did not necessitate such a “sweeping swoop.”  Instead, the court reasoned, the proper analysis of whether a device is an auto-dialer under the TCPA should turn on the capacity of a device to behave as an auto-dialer, as well as the amount of effort required to turn a device into an auto-dialer.

Continue Reading Who You Gonna Call? (Just Don’t Use an Autodialer!)