Regulatory Rumblings
Industry and Lawmakers Take Steps to Battle Patent Trolls
Posted: Jul 30, 2013 2:00pm ET
In a time when the Congress too often looks like it cannot agree on anything, one issue seems to be gaining both momentum and increasing bipartisan support. That issue is combating the growing business of patent trolling and the legislative proposals to curb it.
When used properly, patents foster innovation by granting limited exclusive rights to inventors. The public is served by the advent of newer and better technologies and products, and producers benefit by reaping rewards for expensive research and development. However, if abused, patent rights serve only to stifle growth and hinder economic progress.
In recent years, a growing number of patent infringement claims have been filed by patent assertion entities, also called “patent trolls.” They exist not by producing or manufacturing patentable products themselves, but instead by purchasing numerous patents with broadly defined terms and then filing infringement suits against manufacturers and service providers with deep pockets. The trolls also attack numerous end users like small businesses or advertisers with shallower pockets, but far less ability to fight extortionist demands.
The White House recently released a report showing that as many as 100,000 companies were threatened with litigation by patent trolls in the last year and that these suits inflict significant harm on both companies and the economy. Given the immense cost of patent litigation, most businesses settle with these trolls, even though the trolls would likely lose at trial. The trolls grow further energized and enriched and are only incentivized to repeat the process over and over again with new claims.
Members of Congress on a bipartisan basis have shown their mounting frustration with these practices with a burst of legislative initiatives just this year:
- H.R. 2766, co-sponsored by Representatives Darrell Issa (R-CA) and Judy Chu (D-CA) would amend the Leahy-Smith Investments Act to expand the US Patent and Trademark Office’s post-grant review authority for business method patents (those commonly used by patent trolls). Currently, only business method patents related to “financial services” are subjected to this stricter review. A similar bill, S. 866, was introduced by Senator Chuck Schumer (D-NY).
- H.R. 2639, introduced by Representatives Hakeem Jeffries (D-NY) and Blake Farenthold (R-TX) would require heightened pleading standards in complaints for patent infringement suits with regard to the identity of the party bringing the suit and the actual infringement alleged. Further, it would allow for suits against end users to be stayed until suits against the manufacturer have been resolved.
- H.R. 2024, introduced by Representative Ted Deutch (D-FL) requires the owner and any other parties with interests in a patent to disclose themselves to the US PTO when the patent is filed. Should the patent owner change, the new owner must likewise disclose all parties with interests. The collection of damages in a suit is barred if entities have not complied with these requirements.
- H.R. 845, co-sponsored by Representatives Peter DeFazio (D-OR) and Jason Chaffetz (R-UT) would allow for the recovery of legal fees in any wrongful patent infringement suit.
- Senator Patrick Leahy (D-VT) and Congressman Bob Goodlatte (R-VA), the chairmen of the Senate and House Judiciary Committees respectively, released draft legislation in May incorporating many different approaches to diminishing patent trolling.
The White House, in June, announced seven legislative recommendations, as well as five executive directives, designed to combat abusive practices by patent trolls. Federal Trade Commission Chairwoman Edith Ramirez said in a June speech that she believes the FTC should use its investigative authority (basically, subpoena powers) under Section 6(b) of the FTC Act to investigate these practices. And the Attorney General of Vermont recently filed suit against an alleged patent troll that had sent demand letters to a number of Vermont organizations, including non-profits.
ANA is working as a part of several coalitions to address these abusive and economically damaging actions. We are focusing on indemnity issues, as well as proposed legislative fixes. We signed a letter to congressional leadership, along with more than 50 others organizations from nearly every sector of the economy, encouraging legislative action against patent trolls. We are working to collect data on demand letters and the numbers of suits threatened against our members.
There is serious momentum to address this problem. Advertisers need to step up to fight these entities in order to protect themselves and the consumers they ultimately serve. Please let ANA know if your company is confronted with patent troll issues so we can effectively stay on top of trends in this area and help combat these problems.
Digital Advertising Alliance Releases Guidelines for Expansion of Self-Regulatory Principles to Mobile Media
Posted: Jul 24, 2013 12:00pm ET
The Digital Advertising Alliance (DAA), of which ANA is a founding member, released guidelines today for expanding its self-regulatory program of consumer choice to the mobile environment. These guidelines cover cross-app, personal directory, and precise location data in mobile apps.
The release of these mobile guidelines is critically important given the explosion of the mobile environment as a major point of contact with consumers and the enormous number of activities that are now carried out with the use of mobile devices. These guidelines demonstrate that the DAA is the real mechanism for true consumer choice in the online world.
ANA President and CEO Bob Liodice said, “The DAA program is not only global, but now also mobile. The expansion of the DAA program into the mobile realm is an extraordinarily important development. Mobile is, by far, the fastest growing media category. Half of all U.S. adults now have a connection to the web through either a smartphone or tablet, so it’s all the more critical that they have control over how they receive advertising on their mobile devices. The DAA mobile guidelines give them that control.”
The full press release can be found here. For more information about the DAA program, visit http://www.aboutads.info.
Pressure Continues on Food Companies – At Home and Abroad
Posted: Jul 17, 2013 2:00pm ET
Last week, the House Appropriations Subcommittee for Financial Services and General Government renewed a provision in the appropriations bill barring the FTC from releasing a final Interagency Working Group (IWG) Report until a cost-benefit analysis is performed. But recent developments have not all been good news for food advertisers. Domestically, obesity was officially named a disease by the American Medical Association in June, which will certainly change the way that the medical community and policy makers view the obesity epidemic in the U.S.
Internationally, things have been heating up as well. Just recently, a new law has come into effect in Chile that places significant restrictions on the advertisement of foods considered high in calories, fat, salt, or sugar content. Under this law, foods in these categories must be labeled as such, and such products may not be sold in primary or secondary schools in Chile. There is an absolute prohibition on advertisements of these products targeted to children under the age of 14, and any use of so-called toys or prizes in connection with the sale of such products is banned. The Health Ministry of Chile must issue guidelines to determine which products qualify to be covered by the law before the law can be fully enforced.
In June, WHO Europe issued a report recommending increased restrictions on the marketing of foods high in fat, salt, and sugar (“HFSS”) to children. This report stated that a majority of advertisements in Europe are for HFSS foods and said there is a direct link between food advertising and obesity. WHO Europe also called industry efforts insufficient.
And the National Assembly of Ecuador recently passed a law with significant restrictions on all advertisements, including those for food products. Under the Ecuadorian law, all foreign ads (those for companies without a majority of the stockholders being Ecuadorian nationals or legal residents and those ads which do not have 80 percent or more of those contributing to the ad being Ecuadorian nationals or legal residents) will be banned. Any advertisement, including food advertisements, that will be shown during children’s programming must be approved by the country’s Health Ministry. The law also states that ads for any products whose regular use may “harm” the health of consumers (including alcoholic beverages, tobacco, and potentially some foods) are prohibited.
Also in June, back home at the federal level, Senators Richard Blumenthal (D-CT), Tom Harkin (D-IA), Richard Durbin (D-IL), and Jay Rockefeller (D-WV) sent a letter to Nickelodeon and Viacom urging them to ban advertisements for “unhealthy food” on the network. And in a separate press release about the letter, Senator Rockefeller called for the elimination of the advertising tax deduction for marketing of such foods.
Nevertheless, the food and beverage industry has a very positive story to tell. The industry has been proactive through its self-regulatory efforts, such as the Healthy Weight Commitment Foundation and Children’s Food and Beverage Advertising Initiative (CFBAI), in cutting more than a trillion five hundred million calories out of foods in just the last couple of years and in shifting the mix of food advertising directed to children 12 and under to healthier foods. As successful as these efforts have been, the pressure on governments to “do something” in response to the obesity problem will only continue to grow. It is our responsibility to help educate policymakers that we are working diligently to be part of the solution.
Ad Tax Storm Clouds on the Horizon Again
Posted: Jun 28, 2013 2:00pm ET
As long expected, it appears the Senate Finance Committee is ramping up efforts on tax reform. On Thursday, Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) of the Senate Finance Committee have released a “Dear Colleague” letter, asking for proposals for tax reform. Their letter states that they will start with a “blank slate,” and so-called “special provisions” will be assumed eliminated, unless it is shown that those provisions: “1) help grow the economy, 2) make the tax code fairer, or 3) effectively promote other important policy objectives.”
They ask for legislative language describing expenditures that meet these tests, as well as other provisions that should be added or repealed in an ultimate tax reform bill. The Senators also make clear in their letter that every expenditure added back to their “blank slate” will reduce the amount by which corporate and individual income tax rates could ultimately be lowered. They state that they will give extra attention to any proposals that are bipartisan in nature.
Advertising expenditures, which are fully deductible as a necessary and ordinary business expense in the year they are made, clearly meet these tests and should be kept. A study by IHS Global Insight in 2010, developed by Nobel Laureate in Economics Lawrence Klein, demonstrates that advertising is responsible for $4.1 trillion in economic output and directly supports more than 15 million jobs in the United States annually. In a time of recovery from an economic downturn, advertising clearly provides a powerful engine of economic growth.
The taxation of advertising is counterproductive when trying to generate economic activity and jobs. It would be totally counterproductive to impose extra costs and burdens on advertising. Such a step would only serve to weaken economic growth, and ultimately, tax revenue.
Now begins a period of great challenge. In a time when everyone will be jockeying to be the expenditure or deduction that is not targeted, advertisers must be ready and willing to show why ad deductibility needs to be supported rather than undermined.
Advertising Industry Addresses Childhood Obesity Challenge
Posted: Jun 24, 2013 10:30am ET
Last week, the World Health Organization’s Europe office called for tighter controls on the marketing of food to children in order to fight childhood obesity. At the same time, the American Medical Association officially recognized obesity as a disease while a few U.S. Senators are pressuring Viacom to follow Disney’s lead to no longer accept advertisements for unhealthy foods. As momentum continues to regulate advertising directed towards children, the advertising community, which firmly believes that childhood obesity is a serious national challenge, has taken proactive measures to address this epidemic and encourage children to lead healthy and active lifestyles.
In 2009, the industry came together to form the Healthy Weight Commitment Foundation, a CEO-led coalition designed to help reduce obesity – especially childhood obesity – by 2015. The coalition, which includes more than 230 retailers, food and beverage companies, restaurants, sporting goods companies, professional sports organizations and others, made a pledge in 2010 that its member companies will collectively cut 1.5 trillion calories from their products by the end of 2015.
This initiative has been extremely successful. In March of this year, the Foundation announced that it had exceeded the goal of reducing 1.5 trillion calories in the U.S. marketplace two years ahead of schedule. Companies met this goal by offering low calorie options of products, changing product recipes to allow for lower calorie counts, and reducing portion sizes of single-serve products.
The Foundation has also been working alongside First Lady Michelle Obama on her “Let’s Move” Initiative. The Ad Council was chosen by First Lady Michelle Obama to produce a series of public service ads to promote the initiative. According to studies conducted by The Ad Council, with the support of the Robert Wood Johnson Foundation, the campaigns are having a significant impact on attitudes and behaviors. Significant numbers of respondents report that their eating habits and activity levels are much healthier. Media companies, including broadcast, cable, online, print and outdoor, have donated millions of dollars in public service advertising time and space to this effort.
Proactively, the advertising industry also created a self-governing program, the Children’s Food and Beverage Advertising Initiative (CFBAI). The voluntary commitment of the 17 member companies – companies that carry out more than 80 percent of all food, beverage, and restaurant advertisements directed to children under the age of 12 in the United States – has significantly changed the landscape of children’s advertising. Major quick service restaurants now advertise kids’ meals with apple products and low fat milk. Other participating food manufacturers have significantly lowered sodium or sugar content of the products they advertise to children and some major confectionary and soft drink manufacturers have voluntarily committed not to advertise on child-directed media.
The CFBAI reports that over 80 percent of its members’ products now being advertised on child-directed media are a good source of nutrients that children do not get enough of in their diets, including calcium and fiber. As of 2010, all participating companies are required to direct advertising toward children under the age of 12 to products that are healthier. These significant and voluntary efforts undertaken to improve the food advertised to children have been a major step forward in the fight against childhood obesity.
The advertising industry has made tremendous strides to voluntarily address childhood obesity – through its support of the Let’s Move effort, participation in the Healthy Weight Commitment Foundation, and voluntary efforts limiting the types of ads that appear on children’s programming. As public officials and medical professionals continue to tackle childhood obesity, so too will the advertising industry, as it continues to play a major role in helping people to lead healthier and more active lives.
FTC Commissioner Ohlhausen Applauds Industry’s Successful Self-Regulation Privacy Program
Posted: Jun 11, 2013 10:45am ET
Last week, technology and policy leaders from across the country gathered in Washington for a Summit to discuss the role of effective self-regulation in ensuring the future of advertising-supported Internet content. Convened by the Digital Advertising Alliance (DAA), of which the ANA is a member, the Summit largely focused on enhancing transparency and ensuring that consumers are aware of the choices they have with respect to the manner in which they receive advertising.
During the Summit, the industry’s efforts were recognized by U.S. Federal Trade Commission (FTC) Commissioner Maureen K. Ohlhausen, who applauded the industry for its privacy opt-out program, which she said has “been one of the success stories in the space.”
She noted that the industry has moved quickly to meet privacy challenges and alleviate the concerns of Internet users who have become increasingly concerned about their online privacy. Ohlhausen called the Advertising Option Icon, the icon that consumers can click to easily find information about interest-based advertising, “an innovative way to reach consumers about their privacy options.”
In her remarks, she said that self-regulation works best when it is supported by compliance and tough enforcement and recognized DAA for “making enforceability a reality.” She was encouraged by DAA’s work to ensure that “companies live up to the promises they make” and help correct issues before they become serious problems for consumers. Already the enforcement arm of the DAA self-regulatory program has successfully finalized 19 cases.
Ohlhausen further remarked that she does not see a present need for Congress to pass new laws to protect consumer’s Internet privacy. She stated that she believed the FTC’s Section 5 false, deceptive, and unfair acts or practices authority was sufficient to regulate the marketplace. It is clear that DAA’s self-regulatory program that provides consumers with broad choice and control over how and whether they receive interest-based advertising is working.
The industry is constantly striving to adapt and keep up with the fast moving technology landscape. To that end, DAA will soon release guidelines for the use of advertising on mobile devices, another area of broad discussion at the Summit. These new guidelines will no doubt be a game changer for the industry and mobile users alike.
Finally, there were important panels at the DAA Summit on the key role Online Behavioral Advertising was playing in helping to create a more efficient, effective, and relevant Internet. Additionally, a panel on Internet self-regulatory efforts described how the DAA program has now been established in almost 30 countries. Clearly, the DAA has had an extraordinary reach in its less than 3 year existence.
ICANN Fails to Address Key Concerns About New Top Level Domain Names
Posted: May 16, 2013 1:35pm ET
ICANN (the Internet Corporation for Assigned Names and Numbers) in late April announced that it would push back the date of the rollout of as many as 1,400 new Top Level Domain (gTLD) web site suffixes. It did so to address the numerous concerns raised by many organizations, including law enforcement agencies and its own Governmental Advisory Committee (GAC), which have called attention to the significant threat these new general top level domain names (TLDs) could pose to brands and consumer protections without adequate protective mechanisms being put in place. Unfortunately, ICANN continues to fall short of truly addressing these concerns as the new web site suffixes have now precipitously been rescheduled to roll out in June and to begin to be put into the root system of the Internet beginning in August.
The Association of National Advertisers (ANA), representing the interests of major global advertisers, along with major companies like Verisign and PayPal, has long expressed concerns about the rush to deploy these gTLDs before ICANN has adopted sufficient trademark and security and stability protections for consumers and brandholders.
This week, ANA filed comments with ICANN to its proposed Registrar Accreditation Agreements (RAA). ANA recommends that in order to ensure that ICANN can manage registrations for TLDs effectively, the organization must finalize the accreditation agreements with registrars that will manage the domain names before any new gTLD contracts are approved and hold these registrars responsible for applicants complying with the RAA. In addition, we remain very concerned that ICANN’s compliance department still hasn’t been augmented sufficiently or that fully automated systems have been put in place to meet the expected increased compliance demands creating serious potential gaps in enforcement.
ICANN’s premature launch of gTLDs will also increase the threat of cybersquatting and phishing, among many other potential cybercrime threats that jeopardize brand and consumer protections. The law enforcement community has made several important recommendations to ICANN, including more robust verification of WHOIS information. These are highly valid concerns and it would be seriously premature for ICANN to rush ahead before fully heeding these warnings from law enforcement.
ANA also filed comments this week regarding the GAC advice given to ICANN in the Communiqué delivered at ICANN’s Beijing meeting last month. ANA called on ICANN in particular to reconsider its earlier decision that allows for the singular and plural forms of suffixes (e.g., “.coupon” and “.coupons,” and “.auto” and “autos.”), which ICANN so far seems to believe will somehow not confuse consumers. It is unquestionable that consumers will find it difficult to identify the difference between these website when they are searching for suffixes that are practically identical. These virtually identical suffixes could lead enterprising applicants to apply for the plural (or singular) forms of popular TLDs intending to mislead or otherwise harm consumers.
In addition, ICANN continues to adhere to an overly aggressive timetable with regard to the public comment period regarding the GAC Advice and thereby has not provided adequate time to satisfactorily respond to all the important public interest issues raised. Furthermore, we believe that the concerns raised by Verisign and PayPal about the potential clash between internal and external TLDs are profoundly serious and must be satisfactorily addressed before the roll out, if we do not want to create major increased cybercrime threats to the Internet.
It is clear that ICANN has not taken the necessary steps to protect Internet users. The Internet is too valuable and important to consumers, brandholders and the global economy for ICANN not to address the issues raised. ANA urges ICANN to extend the time to truly consider these concerns before rolling out these TLDs that could permanently change the face of the Internet.
ANA Files Comments on ICANN Governmental Advisory Committee (GAC) Communiqué
Posted: May 14, 2013 4:00pm ET
Today, ANA filed detailed comments on the Governmental Advisory Committee (GAC) Communiqué, supporting most of its proposals. ANA particularly noted that ICANN should reconsider its earlier decisions in regard to singular and plural forms of generic Top Level Domain strings (e.g. .COUPON and .COUPONS). ANA pointed out that ICANN's timetable to consider the comments in regard to the GAC Advice was overly aggressive and fails to provide adequate time to satisfactorily respond to the public interest issues that have been raised.
ANA Files Comments on ICANN’s Proposed New Registrar Accreditation Agreements
Posted: May 13, 2013 4:50pm ET
ANA has filed comments with ICANN in regard to its proposed new Registrar Accreditation Agreements (RAA). The RAA is the agreement that ICANN has with operators of Top Level Domains. In particular, we pointed out that a strong compliance process must be an integral part of the new RAA program for these changes to provide effective protection on the Internet. The comments can be found here.
The Tax Fight Is Not Over
Posted: Apr 12, 2013 10:55am ET
In recent weeks, advertisers have seen some important positive developments in regard to state ad tax proposals. A number of major state tax reform proposals that imposed major burdens on advertisers have been revamped or scrapped. In early March, Minnesota Governor Mark Dayton announced that he was backing off from his plan to expand the state sales tax to most business services. A sales tax on advertising had been included in his original proposal.
Earlier this week, Louisiana Governor Bobby Jindal (who had proposed eliminating the state income tax, raising the sales tax, and expanding the sales tax to a number of services including ad agency services) said he would defer tax reform initiatives to the state legislature rather than pushing his own proposal. Jindal’s proposals had been receiving significant political flack and criticism before he backed away. And on Tuesday, the Ohio House of Representatives stripped Governor John Kasich’s plan to expand the state’s sales tax to cover almost all business services, including advertising, out of its budget bill.
The threat, however, is far from over. Governor Jindal has told the state legislature that he expects a tax proposal to phase out the state income tax. Should the legislature accept this challenge, inevitably they will have to look elsewhere to fill the revenue gap. Advertisers, therefore, could still find themselves in the line of fire. Also, in Ohio, the Senate has not yet come forward with a plan.
And then there is the Congress. The House Ways and Means Committee (the House tax writing committee) has divided its membership into eleven working groups, which have been tasked with reviewing current tax laws. On Monday, Senate Finance Committee Chairman Max Baucus (D-MT) and House Ways and Means Committee Chairman Dave Camp (R-MI) co-authored an article in the Wall Street Journal saying that tax reform was “alive and doable” and said they would look to close “tax loopholes.”
The real crunch will come when the Congress tries to determine what qualifies as a “loophole.” We have heard from various sources on the Hill that “everyone will have to be ready to give something.” In the past, too often we have seen advertising looked to as a potential source for new revenue. These tax proposals have been targeted at both specific so-called “controversial categories,” as well as on an across-the-board basis.
To respond, we have been proactively meeting broadly with Hill leadership. In doing so, we are relying on a major study carried out by the noted economic research group IHS Global Insight. That study demonstrates that advertising is responsible for $4.1 trillion in economic output and directly supports more than 15 million jobs in the United States annually.
Advertising, throughout the existence of the U.S. income tax code, always has been treated as an ordinary and necessary business expense. It has never been treated as an exception to or a special provision of the tax code. When business is still struggling to bounce back from the long economic downturn, now is certainly not the time to place additional tax burdens on advertising, one of the major economic engines of our economy!
