Until recently, Faceporn billed itself as “the number one socializing porn and sex network,” offering a range of pornographic content.  In its advertisements, it claimed to be the “Facebook of Sex”. It also copied the Facebook logo, site design and Wall trademark.” Screen shots filed with the lawsuit show some Facebook-like elements, including Wall postings and a similar blue-and-white color scheme.

In its lawsuit, Facebook claims that Faceporn tarnished the Facebook brand and diluted their trademark. Trademark dilution allows the owner of a trademark the right to forbid others from using from using that mark in a way that would lessen its uniqueness, or create confusion. It also lets trademark owner stop other uses which may tarnish or diminish its reputation.

Under the Trademark Dillution act of 2006, Facebook must prove that Faceporn’s marks are merely likely to cause confusion with their own. Several courts have held that dilution protection also applies to domain names and cybersquatting.

U.S. trademark law requires trademark owners to “use them or lose them.” If they permit unauthorized uses of their trademark, they face the risk of losing them. Facebook has gone to court on several occasions to stop social networking websites from using the names “Face” or “Book”, which it considers to be its property.

Essentially, they are claiming a method where users purchase virtual currency with real money that can be used in the online game. The virtual currency cannot be redeemed for legal money, but can be used to purchase “virtual objects” used within the game. The application specifically references Virtual Poker and Farmville. The virtual currency market is expected to hit $1.6 Billion in revenue this year.

Under US patent law, an invention may not be patented if it has been publicly disclosed or in use for more than one year prior to the filing of a patent application. Zynga filed a preliminary application on March 3, 2010 and a actual application on September 9, 2010. A preliminary application is nothing more than a placeholder. It gives an inventor one year to test the market for their invention before filing for a patent. If the inventor files an application during that one year and the patent is granted, the patent runs from the date of the preliminary application. However, other similar forms of virtual currency, such as Linden Dollars have been in use for several years.

Also, in April, 2010, it sued Playerauctions.com for operating a website which creates an unauthorized secondary market which allows Zynga users to post and sell “Virtual Currency” and “Virtual Goods” allegedly in violation of the Zynga terms of service.

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In June 2009, Google changed its AdWords policies regarding the use of a competitor’s trademarks. Previously, it allowed bidding on competitor’s trademarks but did not allow them to be used in the advertisement’s text. For example a search for “Pepsi” could show advertisements for other soft-drinks but those advertisements could not contain the word “Pepsi”. The new policy allows an advertiser to use its competitors’ trademarks in their text. Rosetta Stone sued claiming that this policy allows Google, and other advertisers to take advantage of its trademarks and business goodwill. The company claims that it has been forced to spend “millions” of dollars in keyword bids to keep its competition from using its name and trademarks.

Google’s policies affect businesses both large and small. AdWords allows advertisers to target their advertisements to specific markets. Advertisers can direct their advertisements according to their country, state, city and even zip code. For example, a restaurant in Alamosa, Colorado could have their advertisements appear only to searchers in that specific community.

AdWords permits bidding on keywords, combinations of keywords, and misspelled keywords. Keywords can be exact matches, phrase matches, or broad matches. For example, [toy poodle] is an exact match and that advertisement will only be shown when someone types in “toy poodle” and not “white toy poodle”. A phrase match looks like “toy poodle” and matches “white toy poodle” but not “poodle toy”. A broad match looks like toy poodle and will match the search “best place in Chicago to buy a toy poodle”. Naturally, broad match keywords have higher bids than exact, or phrase matches. In order to drive sales, marketers want their advertisements to show up for as many relevant searches as possible. Those terms which produce the best sales require higher bids than less effective terms.

Some marketers use “Deceptive Term Bidding” which involves bidding on competitor’s trademarks and using deceptive ads to sell different products. Others use a “Scam Keyword Bidding” strategy by bidding on terms such as (Is Product X a scam? ) or (Product X is a scam) in order to drive customers to their own website.

For a business to protect its trademark, it would be required to buy combinations of as many relevant keywords as possible and include as many “Deceptive” and “Scam” terms as possible. A company may have to spend many millions of dollars to simply protect its trademarks and online reputation.

This is a new area of the law. However, in order to win, Rosetta Stone must prove that consumers were mislead by the use of its trademark. However, another U.S. Circuit Court of Appeals recently reinstated a trademark lawsuit by a computer repair company Rescuecom against Google. A district court had dismissed the case, but the appeals court said that Rescuecom should be allowed to present evidence that consumers would be mislead if advertisements for rival firms appeared along with or instead of their own advertisements.

Lately I have been receiving more and more spam messages on my Twitter account. It got me to wondering whether this practice violates the CAN-SPAM Act and if so, what could be done about it. I have noticed that spammers have started using shortened web addresses to hide their true identity. The FTC has prosecuted spammers for sending unauthorized text messages. It seems to me that spam is spam regardless of the way in which it gets online. Myspace and Facebook have both successfully sued spammers under CAN-SPAM and for Terms of Service violations. The last time that I looked, Twitter.com’s Terms of Service prohibit using it “for any illegal or unauthorized purpose”. They also require that users agree “not create or submit unwanted email to any Twitter members (‘Spam”).

CAN-SPAM applies to anyone, who sends commercial email in the United States. If an internet marketer solicits business, or sells goods / services to United States residents, United States law applies to those activities.

The CAN-SPAM ACT places several requirements on commercial e-mailers. CAN-SPAM is an acronym for “Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003. It covers those e-mails whose primary purpose is advertising or promoting a commercial product or service, including web site content. Violations can be subject to a $16,000 fine and trigger other false or misleading advertising laws. Here are some of CAN-SPAM’s requirements.

* It bans using false or misleading header information, as well as, using deceptive subject lines.

* It requires that your email give recipients an opt-out method and provides specific requirements for your opt-out method.

* You must specify that your email is an advertisement and include your valid physical postal address.

There are other penalties for those commercial e-mailers who illegally harvest email addresses from other Web sites or services, use “dictionary attacks”, register multiple accounts to send spam, or relay emails through a computer or network without permission.

Finally it allows the United States Department of Justice to seek criminal penalties, including imprisonment, for commercial emailers who do or conspire to: use a computer to retransmit a commercial email to mislead recipients or Internet access service about the true origin of the message; register multiple accounts or domain names using falsified identities; or, falsely represent themselves as owners of multiple IP addresses used to send commercial email messages.

Here’s why I believe that it would be impossible to comply with CAN-SPAM on Twitter. Twitter only allows 140 characters per post. To comply with CAN-SPAM’s requirements, a person must provide the necessary disclosures, as well as an opt out method. Then, in the remaining characters, he or she would need to include their link and create interesting content. It would be even harder to post “Adult” content or links, because the act requires additional disclosures.

1. He Lied About His Products
   
Pham claimed that his products had been proven reliable by clinical testing for the treatment and prevention of several health conditions from diabetes to diarrhea. In fact, no clinical testing had taken place. Also under federal law a dietary supplement may not claim to treat, cure, or prevent a disease or types of diseases.

2. None of His Products Were FDA Approved

Since none of his supplements were recognized by qualified experts as being safe and effective for use under the conditions recommended in their labeling, they are a new drug, not a dietary supplement. As new drugs, none of them were FDA Approved.

3. His Product Labels Violated FDA Regulations

The product labels did not have adequate directions for use. Therefore they were also mis-branded drugs according to the FDA.

4. He Used False Testimonials

Pham made up fake customer identities using photographs purchased online. He then published made-up testimonials from these customers promoting his unapproved new drugs and misbranded drugs. He used one photo to created a non-existent physician to lend credibility to his customers with diabetes. On another site, that same photograph was used to create a non-existent nurse to promote the effectiveness of his unapproved and misbranded drugs.

7. He Used Mirror Image Technology

Finally, he used mirror-image technology to avoid detection by the FDA. When his sites were accessed from a FDA computer they displayed a “sanitized” version of the website that appeared to comply with federal law. When the sites were accessed from computers that could not be traced to the FDA, they displayed the false claims and fake testimonials.

Conclusion

Here are some lessons we can learn from Mr. Pham’s case. First, if you are selling nutritional supplements, natural cures, or diet products remember that there are very specific federal laws regulating the ways in which they may be marketed. Violating those laws can have serious civil as well as criminal consequences.

No matter what you sell, tell the truth. If you can’t back up your claims, don’t make them. Also, never create fake customers or write fake testimonials. If you want to get testimonials from customers, ask for them. Before you publish them on your site, get both the testimonial and permission from the author to use them in writing. The same is true for images.

Finally, don’t use mirror-image technology in order to hide from the authorities.

The World Intellectual Property Organization is a United Nations agency formed to promote intellectual property protection through the cooperation of states and various international organizations. It has helped negotiate international treaties which provide for international trademark, copyright and patent protection. Its’ fast track arbitration and mediation center is the leading mediation and arbitration service for challenges by trademark owners in cybersquatting cases. Its decisions are legally enforceable. Their arbitration procedure is conducted online and can usually be completed within 60 days.

Other celebrities such as Martha Stewart, Larry King and Wayne Rooney have filed cases using this system.

Tags: Cybersquatting, World Intellectual Property Organization, WIPO, United Nations

Legislatures in New York, California, Hawaii, North Carolina, and Rhode Island have all proposed levying a sales tax on transactions generated through affiliate sales. Online retailers believe that these taxes are unconstitutional because they do not have a physical presence in those states. Amazon collects sales taxes in the states of Washington, Kansas, and Kentucky where it has a physical presence.

Amazon.com has cut off its affiliates in Hawaii, North Carolina and Rhode Island. Overstock.com has cut off its affiliates in California, Hawaii, North Carolina, and Rhode Island. Blue Nile has cut off its North Carolina affiliates.

Tags: SalesTax, Affiliates, Amazon, Overstock, Blue Nile

In 2008, Amazon sued New York over a similar law. Although that case was dismissed, Amazon has not yet cut ties with its New York affiliates. According to a study by Forrester Research, state and local governments could generate approximately $3 billion in additional revenues if online retailers were required to collect taxes on all of their sales.

Amazon argues that these laws are unconstitutional because they impose tax collection obligations on out-of-state business entities. It currently collects sales taxes from those states in which it has a physical presence including Kansas, Kentucky and Washington.

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Tags: Amazon.com, Affiliate Marketing, Sales Tax,

In August 2000, after it was unable to keep up with orders on its own site Toys “R” Us contracted with Amazon to handle its Internet sales. The companies signed a 10-year contract that created a co-branded virtual store where, for $50 million per year, plus additional fees and commissions, Amazon.com sold merchandise for Toys “R” Us under a separate tab on the website.

The contract also allowed Toys “R” Us to designate exclusive items that were not to be sold by Amazon but could be sold by third parties on the site up to a maximum of 3.5% of Toys “R” Us revenues on those items. As Amazon.com expanded its relationships with other toy sellers, and its new technology allowed it to sell new and used goods side by side, the deal originally went sour.

In 2004, Toys “R” Us sued. Amazon counterclaimed alleging that Toys “R” Us breached the contract by not having enough stock on hand. In November 2005, the case was tried. The judge ruled that the exclusivity was central to the contract and that Amazon breached the contract by expanding its sales of toys and baby products, by failing to keep track of how many “exclusive” items were sold by other parties. These actions breached the “implied covenant of good faith and fair dealing.”

Amazon appealed and the New Jersey Appellate Division Affirmed on March 24, 2009. It sent the case back to the trial court to determine the amount of damages. Toys “R” Us claimed that it had paid $65 million for the exclusivity and had also lost sales.

On June 11, 2009, the parties settled for $51 Million. This settlement also resolved another lawsuit between the parties in King County Washington over unpaid service payments.

Tags: Amazon.com, Toys “R” Us