Articles Posted in Consumer Law

In these days, many people spend time on their electronic devices to become members of internet dating services. Many companies are now providing online dating services to their members. In general, the online dating services require their members to submit a profile, which may include personal information (e.g., name, email address, date-of-birth, and photos). As a result, the internet dating service may be sued by its members or third parties for various legal claims.

What Are the Typical Legal Claims Against Internet Dating Services?

In recent years, the internet dating services have been targets of lawsuits.  In some cases, the internet dating service may facilitate sexual encounters between its members, which can lead to its member being arrested for having sex with a minor.  In other cases, the members defame, harass, stalk, or bully each other.  In these cases, the courts have enforced or dismissed the civil claims against the internet dating service for various reasons.  The typical claims against the internet dating service may be for breach of contract, negligence, deceptive trade practice, Lanham Act violation, failure to warn, invasion of privacy, defamation, or fraud.  It is important to note that each of the aforesaid claims requires specific elements and supporting evidence to pass muster in court.  See The Perils and Pitfalls of Online Dating for more information.

The purchase of commercial general liability and umbrella insurance policies are ways to protect your business from liability. However, these types of policies have not adapted to protect policyholders from certain types of cyber liability.  This issue was recently exposed in a case against Urban Outfitters, Inc., and its subsidiary, Anthropologie, Inc. (collectively “Urban Outfitters”). Urban Outfitters found itself with no suitable insurance coverage when facing several lawsuits for privacy infringement that resulted from credit card transactions. Many businesses collect customer data and infringements of customer privacy may not be covered by traditional insurance policies. Do you run a business that collects consumer data? Are you unsure how far your insurance coverage extends in protecting against consumer data breaches? If so, then you may contact us to speak to an attorney about whether you should obtain cyber liability insurance.

What Was the Issue in the Urban Outfitters Case?

In OneBeacon America Insurance Company v. Urban Outfitters, et al., Urban Outfitters was sued in three different states for consumer privacy breaches. Urban Outfitters was sued because of its practice of collecting consumer zip code information when processing credit card transactions. This practice violated multiple consumer privacy laws. Urban Outfitters then looked to its insurance company to defend the multiple lawsuits. However, the insurance company claimed that its general liability policy did not cover that kind of privacy breach. The federal court in Pennsylvania agreed, and held that the insurance company was not obligated to defend Urban Outfitters in any of the lawsuits. The general liability policy only covered “oral or written publication of material that violates a person’s right of privacy,” and even though Urban Outfitters violated consumer privacy, it never published that material.

In recent years, social media has allowed users to instantly communicate with each other. Social media also provides a low cost and high-yield forum for communications. Because of these effects, social media is becoming the preferred way for advertisers to reach customers. A marketing campaign that includes social media can greatly enhance a company’s brand exposure.  However, there are several legal and regulatory issues that arise when using social media for advertising. When using social media tools like hashtags and facebook pages, advertisers should monitor their copyrights and trademarks and comply with state and federal regulations.  Is your company beginning a new social media advertising campaign? Are you trying to brand your company with hashtags and handles?  If so, then you should contact us to discuss the legal issues.

What is a Hashtag and How Is It Used in Advertising?

A hashtag is a form of metadata made up of a word or phrase that is prefixed with the symbol “#” used by a social media site to create a searchable keyword. Hashtags are commonly used to direct potential customers to others discussing the same hashtag. Any user could create a hashtag with your company’s name or one that infringes on your intellectual property. Most social networks have policies that prohibit trademark and copyright infringement. Be sure to check these policies and the procedures for reporting abuses. Yet, not every third-party use of a trademark is necessarily an infringement if done under the fair-use standard. If a third-party is using a hashtag or handle that refers to your trademark, it may not be an infringement if used only to join a conversation, and that user is not claiming to be the owner of the trademark. Further, you can actually trademark a hashtag with the United States Patent and Trademark Office for additional protection. A mark including the “#” symbol can be registered as a trademark if it functions as an identifier of a good or service.

As mobile technology improves, we all do more on our mobile devices—e.g., banking, shopping, and gaming are just a few examples.  The Wall Street Journal estimates the mobile apps market as a $25 billion industry.  New businesses and entrepreneurs may want to jump into this growing market. When new developers enter the market they must consider the privacy rights of users.  The law protects consumers and their privacy from intrusion, and there are even stricter guidelines for apps used by children.  Are you interested in starting a mobile app business?  Are you ready to begin marketing your new mobile app?  If so, then there are steps you must take to ensure you are in compliance with the law and respecting the privacy rights of your customers.

What Is a Mobile Application?

A mobile application is software that can be downloaded and accessed using a mobile device, such as a smartphone or tablet. Apps can be paid or free.  Developers of free apps usually make a profit through advertisements, in-app purchases, and/or paid versions that offer more features than a free trial or “lite” version. Further, apps may collect data from the user.  Apps can access a user’s contacts, call logs, internet data, calendar, and device location.  Usually, this data is collected so that the app can perform what it is designed to do, such as make a bank transfer or direct the user to a destination through GPS.  Data collection must conform to consumer protection guidelines and developers will be held responsible to those guidelines.

Computers are learning to do it all—even surf the Web. These computers, or programs, explore the World Wide Web, gathering information and processes for use in other forums. This technology, which is known as “web scraping” may also threaten website and consumer privacy concerns. Indeed, websites have a proprietary interest in their content and others are not authorized to access and reuse this information. Consumer information that is available online is not necessarily available for any use.  As such, web scraping has become a concern as regulators attempt to outline the parameters. Do you operate a website? Are you a consumer with personal information available over the Internet—such as your name, address, salary, or work history?  Do you have an interest in gathering information from various sites for your personal use? Do you wish to revise your terms of service in light of these advancements? If so, web scraping is relevant to your business and privacy concerns.

What Is Web Scraping?

Web scraping is the process of using computer software to extract information from websites. Usually, this type of software simulates web browsing that is performed by a human. This technique is used to automatically gather information from various websites. This is an effective tool in several fields such as online price comparisons. Often, the aggregate website will have agreements with other websites allowing web scraping to gather pricing data. Additionally, web developers often use this technique to copy website content and reuse it when designing a new site. However, this process can also be used in ways that press against privacy concerns. For example, web scraping can be used to gather a consumer’s personal information. This includes contact information, personal websites, and professional histories. Web scraping can also gather an online user’s comments on discussion boards. All such information is valuable to businesses that want to know how consumers feel about their products or services. Web scraping has increased drastically over the last few years. In 2013, web scraping made up 23% of all online browsing traffic.

Where you visit online seems to say a lot about you. Online privacy has been in the spotlight recently, as consumers come to terms with the reality that their online tracks define who they are to marketers and government agencies.  By studying this data, third parties can paint a picture about consumers—i.e., where they go, what they do, their preferences, and even any illegal conduct.  Now, data brokers can also compile and study large bodies of data to find patterns in behavior. While this carries huge potential for technological advancement, it also comes with greater threats to consumer privacy.

What Is Data Mining?

Data mining is the intricate process whereby data brokers collect, store, and study large sets of data for patterns.  The data includes everything from shopping habits, healthcare records, online practices, and public records (e.g., court and property records). This data is then used in a variety of fields, including intelligence gathering, statistics, database systems, and machine learning. Usually, data mining is used to compile lists for targeted marketing purposes—such as lists of diabetics, smokers, and political affiliations. However, recent reports indicate that data mining has been used to compile more personal lists—rape victims, addicts, and AIDS victims. The U.S. government has used data mining in various surveillance projects. These projects were ultimately terminated because of rising concerns that they violate the Fourth Amendment protection against unreasonable searches and seizures. It is most shocking that the subjects never know they are victims to data mining. At a glance, most of these categories seem harmless. However, the underlying threat is that data brokers conduct mining projects without notifying consumers and without obtaining consent.

In recent years, consumers have received numerous emails from merchants, all trying to sell a service or a product. While marketing and commercial activity is central to the American economy, the recipients of these emails must also enjoy their privacy. In an effort to protect against these disruptive emails, the California Legislature passed anti-spam laws in order to regulate commercial email activity. In addition, a recent district court opinion further clarified the types of emails that are implicated by these statutory standards.

What Are California’s Anti-Spam Laws?

In general, California’s anti-spam laws are codified under Business & Professions Code sections 17529 et seq. First, commercial email advertisements must come from a domain name registered to the sender. Commercial email advertisements include any email sent for the specific purpose of selling or advertising a product or service. The purpose of these laws is to limit promotional emails with false or misleading subject information. These laws apply to any U.S.-based company that sends emails to California consumers. It does not matter whether the sender is located in California. In fact, it may not even matter whether the sender knew the recipient was in California. Furthermore, California’s anti-spam laws provide a greater degree of protection than their federal equivalent—i.e., Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CAN-SPAM”). For example, CAN-SPAM requires that each email contain an “opt-out” option that allows consumers to quickly unsubscribe from future emails. The sender must comply with such a request within ten business days. In California, there are no such requirements. Indeed, the recipient can collect these emails and sue the sender for up to $1,000 per email.  So, the charges can quickly add up. If the sender of commercial emails is faced with a lawsuit, it bears the burden of proving that it was in compliance with both the state and federal standards.

When a person harms another, the harmed party has the option of filing a lawsuit to seek damages. However, certain harms affect large groups of people, sometimes reaching into the thousands. In these cases, state and federal civil procedure rules provide for class action lawsuits. A class action lawsuit is brought by a group of parties who have all suffered a similar harm from a defendant’s actions. The defendants can also make up a class where several defendants contributed to the harms at issue. In 2005, in an effort to provide greater protection for harmed plaintiffs, Congress passed the Class Action Fairness Act (“CAFA”) revolutionizing class action procedures.

What Are the Terms of the Class Action Fairness Act?

First, CAFA dramatically expands federal jurisdiction to include a larger body of class action claims. There are two federal class action jurisdiction requirements. First, the case must be for more than $5 million. Second, at least one plaintiff must be from a different state than one defendant. There are exceptions to the second requirement. For example, if at least two-thirds of the plaintiffs are from the same state as the main defendant, federal courts may not have jurisdiction. By expanding jurisdiction, CAFA changed the class action landscape. In turn, this led to several ambiguities in the case law. This also meant that attorneys skilled in traditional class action procedures had to reinvent their practices to comply with CAFA’s new requirements. The American Bar Association provides resources to demonstrate the applications of CAFA.

Identity theft and personal privacy are major issues, as more information is available over the Internet and linked together through social media networks.  However, even as early as the 1970s, legislatures were taking steps to protect personal information from public exposure and marketing schemes.  For example, California’s legislature has passed the Song-Beverly Credit Card Act.   In essence, this law prohibits retailers from collecting personal identification information during a credit card transaction from consumers for marketing purposes.  As the market for consumer goods spreads to the Internet, courts must decide how far protection of personal information will extend.

What Are the Provisions of the Song-Beverly Act?

The Song-Beverly Act is intended to protect consumers from unwanted marketing efforts.  This protects privacy and personal information.  More specifically, retailers are not allowed to request and record customers’ email addresses to complete a credit card transaction.  Furthermore, these retailers cannot later use these addresses for marketing purposes.  However, according to recent case law, this law only applies to “brick and mortar retailers,” or retailers that maintain a physical presence.  As such, the statute only applies to in-store transactions and not web transactions.  This is an important distinction in light of the fact that an increasing number of purchases take place online.

In recent years, electronic spam has become a public nuisance. In response, several states, including, but not limited to, California, have enacted statutes to prevent electronic spam. As with most legislation that deals with the constantly-changing nature of the web, these statutes struggle to define the extent of their application while staying current with trends. Therefore, courts are charged with the responsibility of interpreting the intent of these laws.

What Are The Provisions of California’s Anti-Spam Statute?

In fact, California’s Business and Professions Code section 17529.5 prohibits any person or entity from sending commercial email advertisements, or spam, in three defined circumstances. First, spam is prohibited if an email advertisement uses a third-party domain without the third-party’s permission. Second, the statute prohibits email advertisements that use misrepresented information in the header. Finally, it is unlawful to use a subject line that is reasonably likely to mislead a recipient about the content or subject of the message. This section applies if the email is sent from California or if it is sent to a California email address. Accordingly, the reach of California’s legislation into other jurisdictions is also an issue for courts to interpret. Furthermore, a party bringing suit may recover both actual damages and liquidated damages. Liquidated damages are limited to $1,000 for each unlawful email and may go up to $1,000,000.