Addressing legal issues with the latest technological developments and social media trends.
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The use of mobile applications on smartphones continues its trend of strong growth.  According to a recent press release, users of Apple’s App Store have downloaded over 40 billion apps, with over two billion downloads occurring in the month of December alone.  According to Apple, nearly 20 billion of the 40 billion downloads occurred in 2012.  Apple’s App Store first opened in July 2008; thus, users downloaded nearly the same number of apps in the last year as the combined total in the two and a half years before that.

mobile-app.pngWith numbers like these, it is clear that consumers are embracing the use of mobile apps at an ever growing rate.  To meet this demand, developers are responding with a large selection of apps.  As reported in an article written by InsideMobileApps, last October, Apple and Google, creators of the two largest mobile application marketplaces, reported that they were hosting approximately 700,000 applications each.

However, as the use of mobile applications continues to grow, it is important to consider the legal implications of creating and releasing apps.  App developers must not only conform to the relevant law in their own jurisdiction, but they must also consider the law in the jurisdiction of the users of the apps as well.

For example, the California Attorney General’s Office recently established a Privacy Enforcement and Protection Unit to ensure that information collected on the state’s residents conforms to state statues such as the California Online Privacy Protection Act (OPPA).  In late 2012, California’s Attorney General has also specifically targeted mobile app developers and operators.  Mobile app developers and operators collecting the personal information of California residents must have a conspicuously posted privacy policy that describes clearly and completely how personal data is collected, used, and shared.  Without such a privacy policy in place, mobile app developers and operators could face fines.  To better assist developers in understanding these requirements, the Attorney General has published a set of privacy guidelines recommending some best practices.  While these guidelines provide a general idea of the steps a developer can take to conform to the requirements of the statutes, they may not provide the detailed analysis needed to make informed business decisions.

If your company has released a mobile application or is planning on developing one, be sure to seek solid advice.  Contact us for additional information.

 

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On January 10, 2013, the President signed the Video Privacy Protection Act Amendments Act of 2012 into law. The 2013 Act amends the Video Privacy Protection Act of 1988 (18 USC 2710), which prohibited the sharing or disclosure of video rental history.

aj-simple-vhs-tape-clip-art.jpgThe 1988 Act was prompted due to the release of then Supreme Court nominee Robert Bork’s video rental history. Although there was nothing illicit in Bork’s video rentals, Congress noted the ease with which the information was located and disclosed.

The 1988 Act did not allow for the customer to consent in advance to the disclosure of rental history, rather, informed, written consent had to be obtained each and every time “at the time” of the disclosure.

The New Act now allows sharing of video rental history as long as informed, written consent is received from the customer, including by electronic means such as over the Internet. Notably, this consent must be in a “distinct and separate” form from any other legal or financial obligations. The consent may be given in advance and for a period of up to 2 years, or until it is withdrawn from the consumer.

The enforcement provisions of the 1988 Act remain in full force. Thus, any failure to properly follow the new informed consent requirements could lead to statutory damages of not less than $2,500 per person, attorneys’ fees and costs, punitive damages, and equitable relief.

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MP900449113.JPG  A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

 

 

USPTO Dives Into Software Patent Debate With New Group
Amid a growing chorus of criticism that software patents are too vague and can hinder innovation, the U.S. Patent and Trademark Office on Thursday announced plans to create a new group to work with the software community to improve patent quality.

The Hidden Risks Behind Facebook’s Login Tools: Part 1
Recently, a federal judge reportedly indicated tentative approval of Facebook’s offer to settle a class action claim arising from its use of individuals’ names and likenesses in connection with Sponsored Stories, a service it rolled out in January of 2012.

Ex-Zynga Software Engineer Sues Over Unpaid OT
Zynga Inc. was hit with a proposed class action Monday in California federal court by a former software engineer at the social media gaming firm accusing it of failing to give engineers proper overtime pay by misclassifying them as exempt from such wages.

Google Declares War on the Password
Want an easier way to log into your Gmail account? How about a quick tap on your computer with the ring on your finger?

Investment In Social Gaming Drops By $1 Billion In 2012
As recently as 2011, the expectation was that the social gaming industry was the future of big money in video games. Companies like Zynga were valued in the billions. In 2013, not so much. Investment in social game companies dropped by $1 billion in 2012.

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poker images.jpgAs real money online gambling remains bogged down in the legislative and regulatory morass, social gaming applications have been on a tear. As we have previously reported, major players are leveraging social gaming applications in preparation for the legalization of online gambling. One of the emerging leaders, Caesars Interactive Entertainment recently acquired Playtika and Buffalo Studios. Casino equipment manufacturer IGT acquired Doubledown, a Facebook casino app developer a year ago for a reported $500 million. Social game giant Zynga has announced that it is preparing to enter the online gambling world.

These games typically do not involve real money gambling. Often either the user can play for free or buys chips or credits but can not cash them out. These games leverage what we refer to as “gamblification” to create a simulated experience that leverages the fun aspects of gambling without legally constituting gambling.

While this trend is great for social game companies that are leveraging this phenomena, not everyone is happy about this. In Australia,
Senator Nick Xenophon reportedly intends to introduce legislation to prevent such “gambling apps.”  As reported by The Sydney Morning Herald, a virtual poker-machine game that children and teenagers can easily access was the highest-grossing phone and tablet app in Australia, prompting outrage from gambling critics and the established “pokies” industry (as they call it down under).

Such games have escaped gambling classification because even though users pay real money to but credits, they cannot cash out any winnings. Similar models are widely used by many social gaming applications such as Zynga Poker and many other such games.

In most jurisdictions, these types of games are not specifically covered by the gambling laws and are typically legal if certain precautions are taken in the business model. Perhaps Australia will change that. Stay tuned for further developments.

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User endorsements are becoming a more and more popular form of “advertising” as the use of social media and user-generated content continues to increase.  These endorsements often take the form of reviews via blogs or Yelp, but can also include other less conspicuous communications. These endorsements can be quite powerful. As a result some companies will compensate users for giving them.  In some cases, the compensation can bias the endorsement. While this is not illegal, it creates issues that need to be considered.

In some cases, user endorsements leverage social media features.  For example, a company’s website may include a button that, when clicked by a user, causes a positive message about the company to be posted via the user’s Facebook, LinkedIn, Twitter, or other social media account. When there is compensation for that endorsement–even soft compensation such as through loyalty program points or virtual goods–federal laws may come into play.

The Federal Trade Commission’s endorsement guidelines impose requirements on both the endorser and the advertiser if there is a “material connection” between the two parties.  A material connection exists when there is a commercial link that consumers would not expect.  A commercial link may arise when an endorser is compensated for the endorsement, for example, by payment, free samples, coupons, or other benefits.  Several factors must be considered when determining whether there is such a consumer expectation to trigger the FTC requirements.

One of the requirements identified by the FTC is that any material connection must be “clearly and conspicuously” disclosed.  The advertiser has affirmative duties to advise the endorser regarding the disclosure requirement and to have procedures in place to monitor compliance by the endorser.  While both the endorser and the advertiser are subject to liability, the FTC has indicated that its enforcement activities will generally focus on advertisers.

Contact us for more information on compliance with the FTC guidelines.

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According to a report on Inside Social Games, Caesars Interactive Entertainment has acquired Buffalo Studios LLC, a social and mobile games developer most known for its Bingo Blitz and Bingo Rush. The terms of the deal were not disclosed.

caesers interactive ent.jpg“The Bingo Blitz business represents a unique opportunity for Caesars Interactive Entertainment to add to our portfolio of social and mobile game assets and to grow our market share across all interactive platforms,” said Mitch Garber, Chief Executive Officer for Caesars Interactive Entertainment.

This acquisition comes on the heels of CIE’s acquisition of Playtika and its vow to be Number 1 in the space. According to its website, CIE is actively pursuing further expansion and acquisitions to build upon its capabilities and product portfolio.

 

 

buffalo studios.jpgThe intersection of gambling and social games remains a growing area as the legislation to permit real money gambling in the U.S. crawls along at a snail’s pace. Check out our previous posts on this topic.

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twitter phone dog.jpgWe previously reported on the lawsuit over ownership of Twitter followers, when an employee left PhoneDog and changed the twitter handle of an account that had been used to tweet to PhoneDog customers. That case has now settled on confidential terms, but it appears the employee came out ahead. According to a statement from the employee, Noah Kravitz: “I’m very glad to have worked this out between us,” Kravitz said in a statement. “If anything good has come of this, I hope it’s that other employers and employees can recognize the importance of social media … good contracts and specific work agreements are important, and the responsibility for constructing them lies with both parties.”

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According to a recent report, Instagram lost nearly 25% of its users (as tracked by AppData) nearly overnight. The cause is believed to be due to a very unpopular change to its Terms of Service. Prior to this, Instagram was one of the most popular and fastest growing social media sites. 

Many companies overlook the importance of terms of service. They are, and always have been, critically important from a legal perspective. But so too are they important from a customer relations perspective as the Instagram incident illustrates. Many companies (and their lawyers) bank on the fact that most users do not read the terms of service.  The problem with this approach is that some users DO read them. And more frequently, consumer watchdog groups do as well.

When someone flags a problem or change as occurred here, then the issue goes viral in a hurry. Ironically, the same advantages of the virality of social media that helped Instagram with its meteoric growth, were disadvantages when this news broke and apparently lead to an immediate 25% decline in users.

This is not the first company, and likely will not be the last, to have a fiasco due to issues with its terms of service and/or privacy policy. If you want to avoid being one of these companies, do it right! Get solid legal advice on your TOS and Privacy Policy and make good business choices that do not offend your customers. Contact us for additional information.

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Binary world  A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

 

 

Union Facebook Page Not Picket Line Extension: NLRB Judge
A National Labor Relations Board judge ruled Wednesday that federal labor law did not require a union to disavow statements posted on its Facebook page by its members that threatened workers who chose to continue to work during a strike.

Parody New York Times Twitter Account Restored
You can’t keep a good Twitter account down, it seems. According to Politico, the micro-blogging site has restored a New York Times parody account one day after it was pulled amidst complaints from the paper.

How to Account for a Virtual Good
U.S. market regulators are demanding more details about how companies account for virtual goods — the virtual clothing, food, tools or powers sold in online or in social media networks and games.

Zynga Takes Gambling Step in Nevada
Zynga Inc. has taken its first official step toward offering real-money gambling games in the U.S. by filing preparatory paperwork in Nevada, as the embattled firm maneuvers to take advantage of a shifting legal landscape.

In D.C., Social-Media Surveillance Pays Off
The local government in the nation’s capital is paying hundreds of thousands of dollars to a startup to gather comments on Twitter, Facebook and other online message boards as well as the government’s own website. The data help form a letter grade for the bureaucracies that handle drivers licenses, building permits and the like.

Zynga to Bundle Games with Cable TV
Social-games provider Zynga Inc. and Synacor Inc. reached an agreement to make Zynga game currency available to pay-TV and high-speed internet providers as part of their consumer bundles, a move that could reduce Zynga’s heavy dependence on Facebook Inc.

Study Points to Videogame Popularity Among Boomer Women
A new study of more than 32,000 videogame players has found that women make up a solid majority of “baby-boom” gamers, aged 50 or more, and they spend far more time playing than their younger counterparts.

Netflix CEO Hastings Faces SEC Action Over Facebook Post
Netflix Inc. (NFLX) and Chief Executive Officer Reed Hastings said they may face a U.S. Securities and Exchange Commission civil claim over a July Facebook post that coincided with the stock’s biggest gain in almost six weeks.

PokerStars In Talks to Buy Atlantic City Casino
Online poker company PokerStars is in talks to buy the troubled Atlantic Club Casino Hotel in Atlantic City, N.J., just four months after forking over $731 million to the government in order to settle fraud allegations, according to Friday news reports.

Facebook Says Teens Have No Personal Claims In Game Suit
Facebook Inc. on Thursday said a proposed class action alleging the company improperly profited from game credits unknowingly purchased by minors with their parents’ credit cards should be tossed because the minors want to recover money paid from their parents’ accounts but aren’t seeking a remedy of their own.

FTC looks at mobile apps firms over child privacy concerns
An agency report shows that a majority of app developers may have violated laws aimed at kids’ apps.

Opponents say ITU treaty threatens Internet freedom
The United States joined 20 other countries in refusing to sign a treaty that the objectors say will harm Internet freedom. The proposal was hammered out at an international communications conference that ended Friday in Dubai.

Guardian nixes its Facebook social reader, regains control over its content
After a year-long experiment that saw its Facebook “social reading” app gain more than six million monthly users – and then lose more than half of those after the network changed the ways those apps work – the Guardian has decided to take back control of its content.

 

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Resolving a conundrum faced by every business that has entered the world of consumer texting, the FCC has ruled that businesses are not violating the federal Telephone Consumer Protection Act (“TCPA”) by sending a confirmation text to consumers who have just opted out of receiving further texts. However, the FCC did impose limitations on the content of such confirmation texts to ensure compliance with the TCPA. The threshold requirement is that the purpose of the reply text be solely to confirm to the consumer that the opt-out request has been received and will be acted on. The FCC then enumerated several additional requirements that businesses must observe when sending confirmation texts to avoid violating the TCPA. For those affected, which is pretty much every business that uses texts to communicate with the public, we have released an FCC Ruling Client Alert on Texting Opt-Outs.

To many, sending a confirmation text to a consumer who has previously opted in to receiving a company’s text messages would appear to be nothing more than good customer service and an extension of the common practice of sending a confirmatory email message when a consumer has chosen to unsubscribe from an email list. Indeed, many wireless carriers and mobile marketing and retail trade associations have adopted codes of conduct for mobile marketers that include sending confirmation texts to consumers opting out of future text messages.

However, the TCPA, among other things, makes it illegal to make a non-emergency “call” to a mobile telephone using an automatic telephone dialing system or recorded voice without the prior express consent of the recipient. The FCC’s rules and a decision in the U.S. Court of Appeals for the Ninth Circuit define a “call” as including text messages. As a result, many businesses have had class action lawsuits filed against them by consumers arguing that, once they send a text message opting out of receiving future texts, their prior consent has been revoked, and the business violates the TCPA by sending ANY further texts, even in reply to the consumer’s opt-out text.

Seeking to avoid facing such lawsuits and the potential for conflicting decisions from different courts, businesses sought the FCC’s intervention. After reviewing the issue, the FCC rejected the fundamental argument raised by the class action suits, noting that the FCC has never received a single complaint from a consumer about receiving a confirmatory text message. The FCC did note, however, that it had received complaints from consumers about not receiving a confirmation of their opt-out request. The Commission therefore held that when consumers consent to receiving text messages from a business, that consent includes their consent to receiving a text message confirming any later decision to opt out of receiving further text messages.

To avoid creating a loophole in the TCPA that might be exploited by a business, the FCC proceeded to set limits on confirmation texts designed to ensure that they are not really marketing messages disguised as confirmation texts. First and foremost, the implied permission to send a confirmation text message only applies where the consumer has consented to receiving the company’s text messages in the first place. Next, the confirmation text message must be sent within five minutes of receiving the consumer’s opt-out request, or the company will have to prove that a longer period of time to respond was reasonable in the circumstances. Finally, the text of the message must be truly confirmatory of the opt-out and not contain additional marketing or an effort to dissuade the consumer from opting out of future texts. You can read more about the FCC’s decision and these specific requirements in the firm’s Client Alert.

By providing clarity on the relationship between confirmation texts and the TCPA, the FCC’s ruling provides marketers and other businesses with some welcome protection from class action TCPA suits. In an accompanying statement, Commissioner Ajit Pai stated that “Hopefully, by making clear that the Act does not prohibit confirmation texts, we will end the litigation that has punished some companies for doing the right thing, as well as the threat of litigation that has deterred others from adopting a sound marketing practice.” Businesses just need to make sure they comply with the FCC’s stated requirements for confirmation texts to avail themselves of these protections.

Please see the original post on Pillsbury’s CommLaw Center blog.