Phillips & Sutherland, LLP

What’s in your customers’ shopping cart?

Holiday shopping is getting into full swing as we are only a few days away from Black Friday, and perhaps more importantly, Cyber Monday.  This season, Digital Law Group wants to make sure consumers are buying your products, and not counterfeits or knock offs from third party websites.

Sales platforms such as Amazon, eBay and Alibaba are great channels to sell products to the masses; however, unless monitored on a regular basis, these sites enable third-party sellers of counterfeit, and in some cases, damaged or expired goods, to cut into your profits.

Alibaba should be of particular concern for many sellers because counterfeit goods are sold on a colossal scale.  For example, consumer electronic sellers (e.g., Bose, Beats by Dre) can easily have tens of thousands of counterfeit listings on Alibaba.  This not only makes it difficult for consumers to identify who the underlying seller is and whether the product is legitimate, but it also makes it difficult for you to know whether your authorized distributor is behind the listings.

Policing the sale of your goods online can be daunting and time consuming if your product is being heavily infringed upon. It also doesn’t help that each marketplace has a different system, some more user friendly than others, for reporting and ultimately removing counterfeit goods, and at times, storefronts.

This holiday season, make sure your customers are buying from you or your authorized sellers.  Digital Law Group has extensive takedown experience and knows how to most efficiently navigate each platform’s reporting system.

Love and deception

Online dating has become such the norm these days that meeting a potential partner through a friend or at a bar almost seems old fashioned.  However, the online dating game comes with certain risks; most commonly, perhaps, is misrepresentation – e.g., profile pictures are outdated and profiles misleading.  While this may be frustrating to someone who is looking to find Mr. or Ms. Right, it is not illegal.  However, when JDI Dating (UK based operator of 18 dating sites) created fake, computer generated profiles and then messaged users from those accounts, a line was certainly crossed.  Many users signed up for the paid membership so that they could respond to the messages.  Then, as if that wasn’t bad enough, without informing users, JDI immediately began charging monthly subscription fees.

JDI Dating has entered into a settlement order that prohibits them from selling or benefiting from customers’ personal information, and to refund fees to the duped daters.

This case highlights two important issues that the FTC does not hesitate to prosecute: negative option marketing and violation of privacy policies.

Negative Option Marketing is where a seller automatically signs the consumer up for a product or service with a recurring fee, unless the consumer chooses not to receive the offer. The law states that before charging a consumer for any goods or services sold in an internet transaction via a negative option feature, the person/company must:

-provide text that clearly discloses all material terms of the transaction before obtaining the consumer’s billing information;

-obtain a consumer’s express informed consent before charging the consumer; and

-provide a simple method for a consumer to stop recurring charges.

Privacy:  JDI’s practices make us question whether its use of consumer information was disclosed in its privacy policy.  It is necessary to accurately disclose to consumers how you will use their information and whether it will be shared with third parties.

Contact Digital Law Group if you need assistance with your billing and privacy practices.

Caffeine in your undies got ya jumpy?

As some of you may know, FTC investigations are commonplace in the consumer product industry. What you may not know, is complaints by consumers that the product did not perform as expected are oftentimes the trigger for these investigations.  Most recently in the hot seat, Wacoal America, Inc. and its caffeine-infused underwear, iPant.  The iPant promised that the caffeine would pass through the skin leaving users with lasting slimming results.  The FTC found the product claims to be unsubstantiated. Not only will Wacoal pay over one million dollars in consumer refunds, but they have become the butt of many coffee-related jokes.

Although many companies make an effort to play by the rules, some have no reason to.  Selling for up to $80.00 each, Wacoal likely still came out on top financially; despite the fines.  However, this is not the case for all.  Some companies cannot afford the risk of walking the fine line between clever and deceptive advertising.  So what do you do?  We advise that you keep your potential enemy close – when in doubt, get an advisory opinion from the FTC.

The FTC provides opinions to companies and industry organizations on a vast array of issues, including product claims.  Although they are only “advisory,” and not binding on the FTC, the opinions provide insight as to whether your proposed practices or claims may lead to consumer complaints and an FTC investigation down the road.  The bottom line is, it could save you a lot of money in the end to ask for a little guidance in the beginning.

The FTC attorneys only consider the facts presented to them in your inquiry.  This means that it is critical to include all of the relevant rules and regulations, as well as all of the facts.  Digital Law Group can help you determine what issues to present to the FTC, draft your inquiry letter and evaluate the issued opinion.

Battle of the trolls

No, we are not talking about Middle-earth (sorry nerds). We are talking about an industry nuisance – the patent troll. Now, the image that may come to mind for you upon hearing the term “patent troll,” is one of a gnarly, greenish creature under a bridge sketching indecipherable images. The funny thing is, actual patent trolls are not that far off.

A patent troll, or a non-practicing entity (NPE), is an individual or company that acquires overly broad patents for the sole purpose of extorting licensing fees from legitimate creators. Today, more than half of patent infringement claims are brought by trolls, and software patents account for the majority of recent filings due to the formerly relaxed standards that made it easy for trolls to obtain them. These slimy practices are often rewarded due to the high costs of litigation.

Patent litigation is so expensive that it is considered the sport of kings. Many companies are not up to the fight and choose to cave in to the demands for licensing or “royalty” fees rather than spend hundreds (yes, hundreds) of thousands of dollars in legal costs. The good news is, times are changing, so don’t bust out that white flag just yet.

In June 2013, President Obama issued executive orders “to protect innovators from frivolous litigation.” In June 2014, the United States Supreme Court handed down a ruling that significantly heightened the standards for software patents, which should limit the number of patents obtained by trolls. Additionally some state courts have taken action as well, including most recently, North Carolina, whose governor just two weeks ago signed the Abusive Patent Assertions Act, which aims to penalize patent trolls for sending “bad faith” demand letters.

While a great deal more is needed to stop patent trolls from extorting money and curbing innovation, we are seeing a good pattern here. Owners of valid patents should no longer quickly settle and give into these trolls. If you find yourself at the receiving end of a patent infringement demand letter, here are some things you should do:

-Do not ignore the notice

-Contact an intellectual property attorney who can assist with the “infringed” patent[s]

-Team up with other named defendants

-Strategize with your attorney on the best/most cost effective way to respond to the demand

Digital Law Group can help you navigate the patent process with ease – from provisional filings to defense.  Contact us today to schedule your free consultation.


Act now…this offer is available for a limited time only!

Did we get your attention? Good. That was the point. The subject line of this newsletter, much like many of those limited time offer claims you see on tv, was used purely to elicit an immediate response. Just like this email will be available in your inbox any time you want to read it, those “limited time offers” are available any time a consumer calls or places an order online – not just in that 10 minute time period as many ads suggest. Soliciting a response from a consumer in this way may seem harmless enough, but this common practice could land you in hot water.

Although the use of these messages in infomercials has been standard industry practice for some time, many states’ Attorneys General are making moves to change the direct response industry. Maximizing consumer protection is the driving force behind these changes, and hefty penalties (up to $10,000 per violation) are being utilized to ensure compliance.

In addition to misleading limited time offer claims, there several other practices in infomercials and on product websites that are being scrutinized right now, including:

1. Inconspicuous shipping and handling charges
2. BOGO offers that do not clearly disclose additional P&H charges
3. Lack of return / refund policies
4. Pre-selected quantities on checkout pages
5. Lack of product order summary / confirmation

These are just a few examples of routine practices that many state AGs are going after right now. In order to avoid finding yourself on the expensive end of an investigation, be sure to seek the advice of a qualified attorney who has handled these matters and can help you minimize your risk of exposure.