Regulatory Rumblings

ANA Helps Defeat “Local Choice” Threat to Broadcast Advertisers

Posted: Sep 10, 2014 12:00am ET

A recent proposal that would require an a la cart approach to broadcasting and that would have adversely impacted advertisers was successfully combatted this week.  On September 8th, ANA joined with the 4A’s and AAF to send a letter to Sen. Jay Rockefeller (D-WV), the Chairman of the Senate Commerce Committee, and the Ranking Minority Member of the committee, Sen. John Thune (R-SD).  The letter questioned their “Local Choice” proposal as part of the Satellite Television Access and Viewer Rights Act (STAVRA).  Local Choice is the popular name for the effort that would allow individuals to opt-out of paying for TV station signals, in effect creating an a la carte regime for broadcasting, but not for cable channels.

In our letter, we raised many concerns about the impact of this proposal on the longstanding local broadcast model, which ensures free over-the-air broadcast television for all Americans.  

Through the Communications Act of 1934, individuals receive free local news, weather, sports, and entertainment which are paid for by advertising revenues.  Getting rid of a universally free broadcast system would greatly threaten advertisers who participate in the “up fronts” and otherwise support broadcasting through advertising.  

Advertisers see the value in supporting broadcast programming and would likely be unfairly harmed if the Local Choice proposal eroded the economics of the current system.  

With the push provided by our letter and additional opposition from several other groups, the Senate Commerce Committee has called off plans to vote next week on the Local Choice proposal.  According to National Journal, a Commerce Committee aide explained that the proposal needs “more discussion and a full consideration” before it will be introduced again.  

The committee still plans to move forward with a reauthorization of the satellite TV legislation without the Local Choice provisions.  While we are very pleased with this recent turn of events, there is a possibility the proposal will also come up next year as Congress begins to rewrite the Communications Act.  If this attack resurfaces, we will again urge lawmakers to proceed with extreme caution and seek out the views of the advertising community to better understand how Local Choice would affect the financial support for programming.

gTLD Update: The GAC and the Future of the Internet

Posted: Sep 5, 2014 12:00am ET

By Brad R. Newberg, Reed Smith LLP

In shorthand, the Internet Corporation for Assigned Names and Numbers (“ICANN”) is the entity that controls the rules of the road when it comes to the Internet.  For the most part, it decides how registries and registrars must operate, what kind of disputes can be resolved and how, and – in the case of the new gTLD program – when and how to expand the domain name system.

It would take far more detail than a blog post to go into how ICANN comes to its decisions and how the organization is structured, but suffice to say that ICANN operates in what is known as a “multi-stakeholder” system, where various interested parties such as registries, registrars, governments, intellectual property holders, and segments of the public each have a say.  As has been lamented in the past, interests are often aligned against intellectual property owners, who have a relatively small say in any issue, but that is not the topic of this post.

Recently, there have been questions about the future of ICANN, including whether the United States government will continue to have some oversight over ICANN (whose power currently stems, in part, as the result of a contract with the United States).  But a different government-related question is presently far more pressing, and that question has to do with the Governmental Advisory Committee within ICANN, also known as the “GAC.”

Already perhaps the most powerful segment of the ICANN community, the GAC has been seeking to make its influence known and increase its power of late.  The GAC is a committee of many national governments (more than 100), although it also has some observer members, which include UN agencies and other multi-national organizations.

The GAC typically meets face-to-face in closed meetings at ICANN’s own large public meetings, which happen three times a year, and any “advice” to ICANN that results from those meetings is released soon thereafter.  However, that advice usually takes the form of a short “Communiqué” that often does not state its rationale or any back-and-forth in positions or votes that resulted in the advice—in fact, GAC can list its advice as the “consensus” of GAC, even if only a couple of countries vote and the rest abstain (as might have happened with the .AMAZON issue described below).

The GAC is a powerful entity because its advice, under ICANN’s bylaws, must be taken into consideration, and where ICANN’s Board proposes actions inconsistent with GAC advice, it must give reasons for doing so and work with the GAC to reach a mutually acceptable solution.

Because of the political and private nature of the GAC, some advice is released with seemingly no rationale whatsoever.  For example, Amazon applied for dozens of gTLDs, but the cornerstone of all its applications was .AMAZON.  The .AMAZON application passed its initial evaluation and was ready to be accepted when Brazil and Peru were able to get GAC “consensus” advice that .AMAZON should not be allowed.  This was the case even though the river and its region are not even known as “Amazon” in those countries (but rather Amazonia), and neither country had applied for a community TLD for that string.  It is possible that few or even no other countries voted on the issue.  However, ICANN accepted the GAC advice to reject the .AMAZON application.

How far GAC members will go with this sort of advice is unknown.  It is possible that the GAC might want ICANN to go a step further and start reviewing and potentially eliminating second-level domain names, the identifier to the left of the dot in the overall domain name (e.g., the “ANA” in ANA.NET) in existing and future TLDs, where the second-level domain name has a string that could potentially be the same as a geographic region.

There is no question that there may be limited instances where governments have specific expertise and interest and, perhaps in those areas, the GAC should get extra credence: for instance, security issues.  But it does not appear that ICANN has done any analysis regarding when the GAC advice should outweigh the rest of the multi-stakeholder system, and, instead, seems willing to give GAC carte blanche on any issue the GAC wants to address.

In addition, while the GAC already wields significant power, ICANN has recently proposed an amendment to its bylaws that would force ICANN to adopt all GAC advice unless two-thirds of ICANN's non-conflicted board members vote to oppose the advice (and since many board members do have conflicts, some GAC advice would require a near-unanimous vote of the ICANN board to reject).  ICANN is accepting the first round of public comments on this proposed change until September 14, 2014, and reply comments until October 6.  Comments can be sent to comments-bylaws-amend-gac-advice-15aug14@icann.org.

ICANN appears to be moving very quickly on this issue, especially given its possible dramatic effect, with little time for opposing views or analysis.  This proposed change, if it were to be accepted, would be quite fundamental, so companies or their associations may wish to weigh in on this significant matter.  In addition, brands and others may wish to get educated on the changes going on within ICANN and how those changes could affect the future of the Internet.  As always, you should consult your internal experts and, if necessary, outside counsel, to come up with the right approach for your brand.

Update on the Status of Already-Launched gTLDs: Is Anyone Out There?

Posted: Aug 14, 2014 12:00am ET

Because of the explosive growth of the top level domain and secondary level domain system managed by the Internet Corporation for Assigned Names and Numbers (ICANN) and the potential impacts it may have on trademark holders and advertising, we have asked our general counsel’s office at Reed Smith LLP to provide us periodic updates on the status of developments in this area.  ANA continues to strongly believe that ICANN’s activities are extremely important and deserve the focus of the ad community.  

Below you will find the first of these periodic reports.  If there are issues you wish for us to particularly focus on in the future, please let me know at djaffe@ana.net.

ICANN Report by Brad R. Newberg, Reed Smith LLP

As you are likely already aware (but only if you are part of the subset of society at which this post is aimed), ICANN’s program to greatly expand the top-level domain name system by many multiples more than the previous 22 "generic" gTLDs (.com, .org, .net, .info, .biz, etc.) is well underway.  Under the new system, entities located anywhere in the world were able to apply to operate a gTLD corresponding to just about any word or phrase, including an organization's name or brand, although the vast majority of TLDs that have launched so far have been strings corresponding to a generic word (“gTLDs”), such as .BIKE or .CLOTHING.

As you also may be aware, this program has caused a great deal of (pragmatic and reasonable) consternation among brand owners who were worried that the new gTLD program would lead to rampant cybersquatting.  Future posts will have more about that, but this post asks the question: Putting aside cybersquatters, domainers (those who speculate in domain names for profit), and in-house counsel at brandowners, when it comes to the public at large, if a TLD launches in a forest and no one is there to hear it, will it make a sound?

A Quiet Entry and Exit?  ICANN’s purported reason for launching the new TLD program was to open up domain names in non-Latin characters (through new TLDs in Arabic, Chinese, etc.), foster competition, increase consumer choice, and offer alternatives to individuals and businesses who might have been shut out of their preferred .com name.  However, the actual launch of these TLDs has seen practically no advertising, resulting in a collective yawn from the general public—most of whom are blissfully unaware that any new TLDs exist.  In fact, given the registration numbers, it is hard to imagine that most of the already-launched TLDs will still be around in two years.  None has failed so far, but it is possible that the first TLD to close its doors will start a domino effect.

A Look at the Numbers  Almost 200 new gTLDs have launched, passed through sunrise (the period where only trademark owners could register second level domain names), and are in the general availability phase (where anyone can register a domain name).  Some have been in general availability for more than six months, although for almost all of the gTLDs, a significant portion of their registrations came in the first few days of general availability.  According to the statistics, approximately 1.8 million domain names have been registered across those 200 domains, for an extremely low average of 9,000 domain names per gTLD.  But those numbers are misleading as the actual number of registrations is far lower.  Many gTLD registries have taken to reserve names in dummy registrations either to sell them later for premium prices or to pump up their numbers, or they have given domain names away for free just to make the gTLD seem popular.  For example, the #1 gTLD registry right now is .XYZ with a staggering 25 percent of all registrations (almost 450,000).  However, only a small fraction of those domains have been paid for by actual end-users or even domainers investing in the name—some have stated that .XYZ appears to have a goal of getting to a million registrations whether those registrations are paid for or not.  Even where the numbers have not been artificially inflated by the registries, many of the domain names were bought early by domainers hoping to flip the name for profit.  When one looks at the actual number of end-user registrants—importantly, they are the registrants likely to actually renew registrations when they come due (typically in a year)—it is hard to imagine the total actual number being outside the mid six-figures (and probably far lower), for an average of closer to 3,000 registrations per gTLD.  .BERLIN, .CLUB, and .GURU are the only gTLDs above 50,000 registrations, and only 35 gTLDs have more than 10,000 registrations (regardless of who owns them—domainers, end-users or otherwise).  The gTLD that went into general availability first (by a day), the Arabic word for .WEB, has registered fewer than 2,000 domains in six months.  By contrast, .COM has 114 million domain registrations and still nets (new registrations minus discarded registrations) almost a million each month.

Success May Depend on the Big Brands  Given that the gTLDs have been launched for profit—as opposed to supporting brands—one would think that there is a profitability threshold well above 10,000 names.  It is possible that many of the gTLDs will do their best to stick around for a year after launching general availability, see what their renewal figures are, and then close shop if the numbers do not meet whatever threshold they have set for themselves.  Ironically, their survival might depend on the success of the .BRAND TLDs, almost none of which has launched yet.  The large brands that have applied for TLDs have the money to market their new TLDs if they so choose and make their new TLDs a key part of their marketing strategy.  If they do, and if the public latches on, perhaps that will fuel interest in the non-brand gTLDs.  If not, the whole system could fail and few will have the stomach to apply for more gTLDs when the second round comes around.

Brand Protection  In terms of brand protection, brandowners have different options.  Some companies have taken a wait-and-see approach given that this territory is uncharted—especially as opposed to the costly approach of blanketing the gTLD landscape with defensive registrations.  Some companies have taken a mix and match approach to the following options:  1) paying approximately $3,000 for a block across the gTLDs run by the registry “Donuts,” since Donuts operates a significant number of TLDs and $3,000 is less than what it typically costs to go through a Uniform Domain-Name Dispute-Resolution Policy (UDRP) proceeding; 2) putting important marks on the Trademark Clearinghouse List (TMCH), and responding to the TMCH notices when a threat arises and monitoring for cybersquatting and typosquatting as usual; and, 3) registering domain names for important marks during the Sunrise period for gTLDs associated with a company’s particular industries.  You should consult your internal experts and, if necessary, outside counsel, to come up with the right approach for your brand.

Time for Data Security Law is Now

Posted: Aug 13, 2014 12:00am ET

Data security is an increasingly important issue for advertisers around the globe.  On a virtually weekly basis, there are media reports telling of new instances of hackers stealing important consumer information from vulnerable companies and government agencies.  These hacking attacks have been the largest in history.  The attack on Target, for example, affected 40 million credit cards and over 70 million records were stolen.  Just last week, a private security company issued a report stating that Russian hackers collected roughly 1.2 billion online usernames and passwords.  And on top of this, the ability of typical passwords to provide a strong baseline of security has come into question.

This ongoing theft of valuable private information has raised many important issues about how to better secure this information and protect consumers.  It also poses the question of who is to blame.  In a recent push, the FTC is looking to place that blame squarely on the company which leaves the information available to theft.  The FTC already has brought 50 major data security cases and is currently in the process of suing Wyndham Hotels and Resorts LLC for data security breaches that led to more than $10.6 million in payment card fraud losses.  

The FTC claims that firewalls, data encryption, or other “reasonable” security measures to protect consumers' financial information were not used by Wyndham.  Earlier this year, a U.S. District Court Judge ruled that the FTC has enforcement authority in the realm of data security and that the agency could proceed with the lawsuit.  In her ruling, Judge Esther Salas stated that the FTC has authority under the unfairness prong of Section 5 of the FTC Act to bring data security enforcement action, and that the FTC doesn’t need express authority from Congress to take that action under the FTC Act nor does it need to promulgate prior data security regulations.

At the end of July, the Third Circuit Court of Appeals granted a hearing of Wyndham’s appeal to dismiss the FTC data security enforcement action.  Members of the business community across the country are carefully watching for the decision in this case.  

At the same time, the Department of Health and Human Services (HHS) is expected to issue a rule in the near future regarding the compensation owed to individuals who have had their health information stolen.  Currently the precedent is that, unless a victim can show that material harm resulted from the theft of their data, no monetary compensation is rewarded.  However, HHS is considering whether a loss of privacy itself is a sufficient harm to award patients a portion of penalty settlements paid by health care providers who violate the Health Insurance Portability and Accountability Act (HIPAA).  This decision could have far reaching precedential impacts.  If the loss of any personal information alone can trigger the need for individual monetary settlements, even if the data is never used to take money from or otherwise harm the individual, all collectors of data including advertisers will be facing far greater financial risks.   

In May, ANA joined with fifteen other industry groups to call for Congress to pass federal data breach legislation this year.  ANA firmly believes the time for Congressional action is now.  A unified, federal law that preempts the patchwork of 47 inconsistent state laws would help businesses better comply with data breach standards and ensure the safety of customer data.  Advertisers are fully on board with complying with a well-crafted federal standard.  However, the government must be careful to avoid consumers being bombarded by insignificant breach notifications by assuring that the standard focuses only on significant breaches that can cause real harm to consumers.

The Fight against Amortizing Advertising

Posted: Aug 5, 2014 12:00am ET

The House Ways & Means Committee’s Subcommittee on Select Revenue Measures held an important hearing last week to discuss the proposed tax reform plan from Committee Chairman Dave Camp (MI-4).  The hearing was directed to investigating “The Dynamic Analysis of the Tax Reform Act of 2014,” and what impacts the proposal will have on tax revenue, job generation, and economic activity.

Chairman Camp’s plan has many laudable goals, including decreasing the corporate tax rate from 35 to 25 percent to make the United States more competitive with foreign tax regimes.  The plan, however, also includes a proposal to amortize 50 percent of advertising expenses over a period of 10 years, radically breaking from the way businesses have historically been able to deduct the full cost of advertising on an annual basis.  This proposal has been estimated to impose on the ad community an additional $169 billion in taxes over 10 years.

During last week’s hearing, we were very pleased that the amortization of advertising expenses was not swept under the rug during discussion of the macroeconomic impact of Camp’s tax plan.  Curtis Dubay, a research fellow at the Heritage Foundation, testified during the hearing that the amortization proposal would increase the cost of capital and ultimately be a drag on the economy.  In his written testimony, he stated, “This would deny businesses the ability to deduct these routine business expenses and thus overstate their taxable income.”  

In addition to Mr. Dubay’s testimony, The Advertising Coalition (TAC), which includes beyond the ANA the American Advertising Federation (AAF), the American Association of Advertising Agencies (4A’s), the Grocery Manufacturers Association (GMA), and the National Association of Broadcasters (NAB), has submitted a statement to be made part of the record of the hearing.  In TAC’s statement, the Coalition points out that the amortization proposal would have severe adverse impacts on job generation and economic activity in the United States.  The letter also cites the IHS Global Insight study which estimates that advertising expenditures account for $5.8 trillion in economic output in the United States.  This is equal to 17.2 percent of the $33.8 trillion in total U.S. economic output in 2013.  Furthermore, advertising helps support 21.7 million jobs, or 16 percent of the jobs in our country annually.  The Coalition urges the Committee to remove the proposed limits on the tax deductibility of advertising as it moves forward on the tax reform package.

Together with TAC, ANA will continue to work toward removing the advertising amortization proposal from any upcoming tax reform legislation.  It is vitally important that everyone involved in advertising work together as a united front to secure the protections our industry was granted over 100 years ago when the federal tax code was first established.  Legislators should know that their unprecedented actions would have a severe negative impact on our country’s economy moving forward.

Comprehensive Tax Reform More Likely Now Than Ever Before

Posted: Jul 25, 2014 12:00am ET

Corporate tax inversions are grabbing headlines.  Inversions are an international tax strategy where a company relocates its headquarters to a lower tax nation while maintaining its primary operations in a country with a higher tax burden.  The U.S. tax code allows for an inversion if the acquired foreign company maintains a 20% interest in the U.S. acquiring company.  More and more prominent U.S. companies, such as drug-maker AbbVie and medical device maker Medtronic, are making multi-billion dollar purchases of foreign competitors and re-incorporating abroad.  Walgreens is also considering an inversion, and recently Pfizer made an unsuccessful bid for foreign based Astra-Zeneca.  There were 47 tax inversions in the last decade – twice as many as in the previous two decades – and the trend is accelerating.

The uptick of inversions now has caught the full attention of policymakers in Washington.  This week, the Senate Finance Committee, led by Chairman Ron Wyden (D; OR), held a major hearing focused on improving the current U.S. system of international taxation.  The United States currently has a nominal corporate tax rate of 35%, which is the highest compared to other major industrialized countries.  

President Obama and a number of members of the Senate Finance Committee expressed outrage that corporate inversions are occurring at such a rapid pace.  As Chairman Wyden put it, inversions are a “virus” that seems to “multiply every few days.”  The Senate Finance Committee, however, was split over whether immediate remedial legislation would be effective or was an appropriate response to the inversion challenge.

All of the Senators in attendance and the witnesses on the panel, nevertheless, wholeheartedly agreed that comprehensive tax reform is critical to the continued success of the United States as a global competitor and making sure the impact of inversions is nullified.  

Chairman Wyden stated that he is committed to working on a bipartisan basis, with particular support from Ranking Member Orrin Hatch (R; UT), to rapidly overhaul the tax code and reform the system.  As he stated, “The longer we wait, our tax base will keep eroding, cash piles overseas will continue to grow, and investment dollars will be driven overseas.“

In another signal that tax reform efforts are starting to be reenergized, the House Ways and Means Committee’s Subcommittee on Select Revenue Measures (Tax) has announced a hearing on the economic impact of Chairman Camp’s tax reform proposal.

Clearly, a major tax reform push is appearing increasingly inevitable.  What the ad community needs to continue to be on guard against is that, in the effort to cure the inversion threat and other tax problems, the healthy parts of the tax code, like the ad tax deduction, which has been estimated to promote as much as $5.8 trillion in economic activity and to generate 21.1 million jobs annually in the U.S., are not severely harmed.

Proposals to amortize 50% of advertising expenses over five or ten years continue to be pending in both the House and Senate tax committees.  It has been estimated that this amortization proposal would cost the ad community more than $169 billion in additional taxes over 10 years.  These proposals would not further the expressed goal of strengthening the economy and bolstering companies in the United States.  By substantially increasing the cost of doing business and burdening the selling process, amortization would defeat the clear purposes of comprehensive reform.

At ANA, we believe that overhauling the tax code to lower corporate tax rates is extremely important and must be accomplished as quickly as possible.  This effort must be done, however, with great care and forethought.  Any proposed legislation must not undermine economic activity and the selling effort in the United States by threatening the viability of advertising in the tax code.

Bot Fraud: Scamming Advertisers and Damaging the Internet

Posted: Jul 17, 2014 12:00am ET

On Monday, ANA announced the launch of a major new industry push to reduce bot (web robot) fraud.  For this new initiative, ANA is partnering with White Ops, a fraud detection firm, to conduct a study of over 30 member companies’ advertising campaigns.  By analyzing these campaigns, clearer data will be available to help advertisers reduce bot fraud and improve marketing ROI.  The companies in the study make up “The Marketers’ Coalition,” which will gain insights from a wide range of industries and brands and provide a clearer picture of the status of bot fraud and its impacts on the advertising business.  

Bots — computer-generated signals designed to mimic human web traffic in order to trick advertisers to pay for phony visits to websites — are a significant problem for digital marketers.  They cause serious damage in terms of CPM, revenue, and reputation.  Bots find their way onto premium content Internet sites and into premium content ads.  These sites and networks are the most severely injured by this fraud.  However, bots are not evenly or predictably distributed, making them exceedingly difficult to track. The most sophisticated bots which cause the most damage cannot be caught by traditional methods.  It has been estimated that as much as 25-50% of money spent on digital advertising is wasted because of these criminal bots, translating into multi-billions of dollars of wasted expenditures annually.  

In May, ANA held a legal and regulatory webinar on bot fraud.  For that webinar, Michael Tiffany, cofounder and CEO of White Ops, spoke about the dangers bots pose to advertisers.  Many advertisers don’t realize the severity of the bot fraud issue, and if they do, they don’t necessarily believe the problem applies to them. However, as was discussed in this webinar, all advertisers need to be aware of this issue and actively work to combat bots to protect their money and their brands.

To highlight the unfortunate significance bots have in today’s world, the Senate Judiciary Committee held a hearing on Tuesday on botnets and cybercriminals.  As if the destruction bots cause to the advertising industry was not enough, bots are also used by criminals to take over individual computers using malware.  Once the malware has been installed, criminals set up networks of bots which gain access to personal information and bank accounts, completely shut down business operations, and even use webcams to spy on individuals.  

Tuesday’s hearing was led by the Chairman of the Crime and Terrorism Subcommittee, Sen. Sheldon Whitehouse (D, RI), who has taken a key role in the push to eradicate cybercrime and cyberterrorism.  During the hearing, the witnesses from the Department of Justice and the Federal Bureau of Investigation stated that improved laws are needed to adequately take down bots.  The laws in place today are antiquated and have not been revised to keep up with the exponential growth of these new technologies.  Witnesses from the private sector noted that the Internet of Things is presenting additional challenges to those trying to combat bots.  Mobile phones and other devices that can access the Internet are turning into the newest hot spots for bots, but the current efforts by law enforcement are still mainly geared toward desktop computers.  Sen. Whitehouse, along with Sen. Lindsey Graham (R, SC), stated a firm commitment to either crafting new legislation or improving the current laws to make the take down and prosecution of cybercriminals operating bots a more seamless and effective process.

As can be seen from the new ANA initiative and the Senate Judiciary Committee hearing, bot fraud is gaining heightened attention across the board.  That attention is well deserved.  Around the world, the Internet is used daily by billions of people who trust that what they say or do while online is safe and protected.  However, it is increasingly coming to light that this is not the case.  It is essential – especially for online advertisers – for these fraudulent bots to be taken down so the Internet can continue to flourish and maintain its reputation as a safe and lucrative place to conduct business.  The ANA initiative will assist in this effort by helping to develop means to dry up a significant portion of bot fraud funding presently being siphoned from the advertising community.  The damage from bots will continue to occur unless a substantive method for combatting this fraud is generated and the business community fully gets on board to tackle this growing challenge.

The Bumpy Road to Patent Troll Reform

Posted: Jul 11, 2014 12:00am ET

The effort to combat patent trolls, until recently, has been one of the few bipartisan initiatives in the Congress this year.  There has been general consensus that Patent Assertion Entities (PAE’s) often dubbed patent trolls, who do not produce or manufacture products, increasingly have been asserting broad and often highly questionable patent infringement claims that cost large and small companies across the U.S. multi-billions of dollars annually.

Earlier this year, the House of Representatives passed a bipartisan anti-patent troll bill with a vote of 325-91.  The bill required patent holders to disclose more information in their demand letters and provided defendants greater tools to combat patent trolls during litigation.  The Senate Judiciary Committee then also took up a broad patent troll bill.  The Judiciary Committee held hearings and again, bipartisan support emerged.  However, as the Committee prepared to move the bill forward for a vote, it was suddenly taken off the table.  This shift in momentum stunned many lawmakers and sent a clear message that the many stakeholders involved were no longer fully in consensus.   

Yesterday, the House Energy and Commerce Committee’s Subcommittee on Commerce, Manufacturing and Trade passed a far more limited and focused proposal 13-6 that specifically addresses issues posed by demand letters from patent trolls.  

This most recent bill, titled, “Targeting Rogue and Opaque Letters (TROL) Act of 2014”, is sponsored by the Chairman of the Subcommittee, Rep. Lee Terry (R, NE).  It states that certain types of patent demand letters that fail to have adequate specificity are unfair or deceptive acts or practices under the FTC Act.  It also clarifies the authority of the FTC and state attorneys general to prosecute those sending abusive demand letters, while preempting the increasing number of patent troll state laws already in place.  

Yesterday’s Subcommittee vote highlighted a seeming growing split between Republicans and Democrats on this issue.  One main point of contention is the preemption of current state laws.  Rep. Welch (D, VT), during the debate on the bill, asserted that the Attorney General’s office in his state uses a stricter set of laws than this new bill would provide, and therefore preemption should not be required.  Another issue Democrats on the Subcommittee stressed is their claim that the FTC, state AG’s, and other relevant stakeholders were not fully invited to participate in discussions on the final version of the legislation.  However, those on the other side of the aisle, in particular the Chairman of the Subcommittee, Rep. Terry, maintained that this bill is the product of very divergent interests coming together to solve the problem.  It now remains to be seen whether the full committee will act on the bill.

The ANA believes that the patent troll issue needs to be resolved quickly.  The ANA has many members who are the largest patent holders in the U.S.  Many of our members also have been the victims of patent trolling, highlighting the need for balance in this process.  The ANA is working with the SPAN (Stop Patent Abuse Now) Coalition, particularly focusing on the issue of demand letters.  Through this industry coalition, we are seeking to find consensus in this area to assure that legitimate patent holders’ rights are protected, while developing means to combat patent trolls.  Also, the ANA and the American Association of Advertising Agencies (4A’s) are working together on a program that gives our members the opportunity to confidentially come to us if they are facing problems from a patent troll.  The Patent Assertion Information Aggregation and Dissemination Program (PAID) aggregates and combines the information from members and relevant marketing-related patent information. This information is then disseminated to members of the marketing community via periodic Patent Assertion Landscape Summary (PALS) updates. These updates provide association members with a strategic advantage in monitoring and assessing patent assertion demands by Patent Assertion Entities (PAEs).  ANA and 4A’s members can monitor PALS information updates by going to the 4A's Patent Forum Website.

We also have launched a series of meetings to be held all across the country to provide a forum for our members and hear their stories on patent issues.  Through these efforts, the ANA will continue to work toward a consensus that can provide clarity for lawmakers in the policymaking process.

Proof that Facts are Needed in the Discussion on Obesity and Advertising

Posted: Jun 25, 2014 12:00am ET

Last week, Mark Bittman wrote an article in The New York Times titled, “Parasites, Killing Their Host.” (6/17/14) The article hurls a wide range of serious charges at the food industry and its advertising.  Bittman claims that, “Even a mindless parasite knows that if it kills its host the party’s over, and by pushing products that promote ‘illth’ — the opposite of health — Big Food is unwittingly destroying its own market.”  

Yesterday, The New York Times ran a letter to the editor I wrote in response to this article, because Bittman’s totally unsubstantiated assertions deserve to be addressed.  

For starters, it is a widely accepted fact that there are multiple causes driving obesity in the United States.  Bittman unfortunately ignores this reality to solely focus on advertising.  One of these key factors is geographic location within the country.  According to CDC data from 2012, there was a 14.2 percentage point difference between the states with the highest and lowest obesity rates.  Colorado was the lowest with a 20.5 percent obesity rate and Louisiana was the highest at 34.7 percent.  The states with the highest rates were found in the South and the Midwest.  If, as Bittman claims, food advertisers actually were only in the business of hurting their customers for profit, there would be evidence that they are using different advertisements to target the consumers in these areas with the highest obesity rates.  However, this is simply not the case.

The CDC has also released data that suggests the obesity epidemic is getting better for at least one age group.  In a recent study, the numbers showed that obesity rates had dropped 43% among children 2-5 years old.  This progress was praised by many, including First Lady Michelle Obama.  This step forward was especially lauded because children under the age of 5 who are overweight are five times as likely to be overweight or obese when they become adults.  If it were true that advertising was the driving cause of obesity, then this shift should not be taking place.  Advertising is not generally directed to children of this age group and parents clearly are making the purchasing decisions.  

Another key piece of evidence Bittman chose to belittle is the force of the marketplace.  Bittman states, “Some profitable corporations nibble at the edges of [change] already, but — as a piece in the current Harvard Business Review points out — American capitalists have become poor innovators.”  Clearly Bittman is blind to all of the innovations food companies have carried out recently to provide a vast array of new and improved products consumers want to buy.  

In response to a call for healthier offerings, food companies in the last few years have made over 20,000 reformulations to products to make them lower in calories, fat, sugar and sodium.  

The food industry has also taken on major self-regulatory efforts to address concerns about advertising to children.  The Children’s Food and Beverage Advertising Initiative (CFBAI) shifted the content of ads directed to children 12 and under to better-for-you food offerings.  The 17 participants in the CFBAI represent over 80% of child-directed TV food advertising.  The FTC has supported the industry’s self-regulatory efforts and in a 2012 report commended the industry for making improvements.  Bittman claims that, “Only the naïve, however, would believe that Big Food is generally working toward [change].”  But only those who willfully ignore the billions of dollars spent in the effort by the food industry to meet consumers’ demands in regard to healthier food offerings and the major changes in advertising to children could possibly make these patently false changes and allegations.  

Food Advertising Under Attack Yet Again

Posted: Jun 20, 2014 12:00am ET

Recently, there has been a major resurgence of efforts to substantially change the status quo of food advertising in the U.S.  In mid-May, Senator Richard Blumenthal (D-Conn.), Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Senator Tom Harkin (D-Iowa) introduced the Stop Subsidizing Childhood Obesity Act of 2014.  This legislation would end the federal tax deduction for advertising foods of “poor nutritional quality” to children, “children” being defined in the bill as anyone under 14 years of age.  The change would include marketing for beverages, candy and chewing gum, along with other foods.  The bill would also require the Institute of Medicine (IOM) to develop procedures to identify which foods and brands should be included under the new limitation.

This effort would be in addition to proposals pending in both the House and Senate tax writing committees to amortize 50% of all advertising expenses for either 5 or 10 years.  This one-two advertising tax punch would clearly have a devastating impact on food, beverage, and restaurant marketers.

If this new effort was not enough, a recently released documentary entitled “Fed Up” attempts to uncover why generations of American children will now live “shorter lives than their parents.”  The film, led by TV journalist Katie Couric, producer Laurie David (who also produced the Academy Award-winning film “An Inconvenient Truth”), and director Stephanie Soechtig, claims the food industry is almost single-handedly responsible for America’s obesity epidemic due to advertising of sugar-laden foods.  It suggests that people will stop trusting advertisements once they become aware of what manufacturers are actually putting in food.  What “Fed Up” fails to acknowledge are recent CDC studies that found that obesity for children under 5 years of age has been reduced by as much as 43 percent.  

All of the attacks also ignore several positive initiatives by the food advertising industry to combat obesity.  The industry, for example, has cut more than 6.4 trillion calories from foods in the last four years.  Many major companies have reformulated 20,000 products and now offer lower calorie, lower fat, lower sodium, or lower sugar options.  The self-regulatory efforts of the Children’s Food and Beverage Advertising Initiative (CFBAI) have shifted the content of ads directed to children 12 and under to healthier foods.  The 17 participants in the CFBAI represent about 80% of child-directed TV food advertising. Healthy meals and products with lower sodium, sugar, or fat content are now the focus of the majority of advertising on child-directed media.

Obesity, especially childhood obesity, is a major problem.  Fortunately, the food and ad communities are systematically carrying out major programs to combat these dangers and provide healthy options for consumers.

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About This Blog

Focuses on all federal and state government and legal initiatives that threaten national advertisers' freedom of commercial speech. The blog is penned by Dan Jaffe, the ANA's Group Executive Vice President, Government Relations, who also heads the trade association's Washington office.