Social media sites are transforming not only the daily lives of consumers, but also how companies interact with consumers. Here at Morrison Foerster, across all of our practice groups, we are seeing complex, cutting-edge legal issues arising out of social media. As with the Internet boom during the mid-to-late 1990s, social media is generating new legal questions at a far faster pace than the law’s ability to provide answers to such questions. In an effort to stay on top of these emerging issues, and to keep our clients and friends informed of new developments, Morrison Foerster publishes this blog devoted to the law and business of social media.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.Aaron’s practice focuses on advising both established and emerging companies in a variety of data- and technology-intensive sectors, including software, SaaS, cloud-based technology, digital media (social media, AR/VR, gaming, streaming media, AdTech), AI, healthcare, consumer electronics, e-commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on branding and marketing, trademark licensing, and content-related transactions, as well as the intellectual property aspects of mergers, acquisitions, asset spin-offs, and private equity investments.He has represented clients such as Autodesk, Meta, OpenAI, Splunk, Konami, Kaiser Permanente, SoftBank, Visa, and Yahoo, among others.Aaron has been recognized by numerous publications for his work on market-defining technology transactions. He is currently ranked by Chambers USA for “Technology Transactions.”Aaron also serves as co-editor of Socially Aware, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics. Aaron is also a sought-after speaker on new and emerging areas of law, and is a frequent presenter and panelist at conferences and legal services programs. In addition to his active practice, Aaron regularly provides pro bono assistance to various nonprofit and charitable organizations such as Common Sense Media and the Starlight Children’s Foundation. He is a member of the board of directors of California Lawyers for the Arts.While in law school at the University of California, Berkeley, Boalt Hall School of Law, Aaron served as executive editor of the California Law Review and was elected to the Order of the Coif. Following law school, Aaron served as law clerk to the Honorable William H. Orrick and the Honorable Martin J. Jenkins, both United States District Judges for the Northern District of California.

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Aaron is the chair of our Technology Transactions Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals. Aaron’s practice focuses on advising both established and emerging companies in a variety of data– and technology–intensive sectors, including software, SaaS, cloud computing, AR/VR, AI, gaming, healthcare, consumer electronics, social media, e–commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on the intellectual property aspects of mergers, acquisitions, asset spin–offs, and private equity investments.

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Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.Lawrence focuses his practice on technology transactions and licensing matters. His diverse experience includes advising on SaaS agreements, cross-licensing agreements, research and collaboration agreements, development agreements, and distribution agreements. He counsels a broad range of companies across the software, hardware, life sciences, biotech and FinTech spaces, as well as other entities including universities.He advises clients in connection with general corporate matters including contract negotiations, and leasing and technology placement agreements.Lawrence also serves as co-editor of <a href="https://www.sociallyawareblog.com/" target="_blank">Socially Aware</a>, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics.Prior to joining the firm, Lawrence was counsel at another major law firm. Before earning his law degree, Lawrence was a web consultant, project manager, and web developer in Portland, Oregon, where he managed and consulted on projects using industry methodologies and performed custom development and integration of content management systems.Lawrence was named a Super Lawyers “Rising Star” in 2015 and 2018–2022, and is licensed in both California and New York. Lawrence earned his J.D. from the University at Buffalo School of Law, where he was the electronic systems editor for the Buffalo Law Review and awarded the ABA-BNA Award for Excellence in the Study of Intellectual Property Law.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster.Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions. His clients include technology, digital media and content for television and music, financial services, and communications companies with diverse intellectual property assets and issues.His practice focuses on the legal aspects of developing, licensing, and commercializing technology and intellectual property, as well as negotiating general commercial contracts, including outsourcing transactions, as well as content and data licenses. He regularly assists clients with legal issues relating to licensing and commercialization of digital media and content, digital content that is distributed over the Internet or streamed, mobile applications and social media, as well as the licensing of recorded music for distribution via digital platforms. Anthony is also experienced with issues relating to open-source software, software development, artificial intelligence and machine learning, cloud-based technology, and protection of proprietary information.Anthony has extensive experience working on matters involving disruptive technologies, such as blockchain. He has helped fintech clients with general intellectual property issues in connection with terms of service for online financial products and services.Anthony is an integral part of the outside pro bono legal team for nonprofit organizations based in New York, including advising clients on legal issues regarding entertainment, social media, privacy rights, and the negotiation of outsourcing and service agreements. Anthony received his J.D. from the University of Michigan Law School in 2009. He received his B.S. from Cornell University in 2004.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. He advises clients on general commercial and transactional matters. His clients include technology, media, and communications companies with considerable intellectual property assets. His practice focuses on the legal aspects of licensing and commercializing technology and intellectual property, as well as negotiating general commercial contracts. He also regularly assists clients with legal issues relating to mobile applications and social media.

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Socially Aware is devoted to the law and business of social media, proactively addressing emerging issues and keeping our clients informed of new developments. We cover fields such as artificial intelligence, privacy and data security, Section 230, intellectual property, and much more.

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Socially Aware is devoted to the law and business of social media, proactively addressing emerging issues and keeping our clients informed of new developments. We cover fields such as artificial intelligence, privacy and data security, Section 230, intellectual property, and much more.

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The FTC has released its much anticipated <a href="http://www.ftc.gov/system/files/documents/reports/federal-trade-commission-staff-report-november-2013-workshop-entitled-internet-things-privacy/150127iotrpt.pdf">report</a> on the Internet of Things (“IoT”) – a topic that has been top-of-mind for many companies. The FTC’s report, “Internet of Things: Privacy & Security in a Connected World” (the “Report”), discusses the benefits and risks associated with IoT, and addresses the privacy and data security measures the FTC recommends for consumer-facing IoT products and services [The FTC’s discussion of IoT within the report, consistent with the FTC’s jurisdiction, is limited to such devices that are sold to or used by consumers, and not devices sold in a business-to-business context or broader machine-to-machine communications]. While the Report is not legally binding, it provides a strong and valuable indication of the positions that the FTC may take in enforcement actions related to IoT.WHAT IS THE INTERNET OF THINGS?According to the FTC, IoT refers to “‘things’ such as devices or sensors – other than computers, smartphones, or tablets – that connect, communicate or transmit information with or between each other through the Internet.”FTC RECOGNIZES BENEFITS AND RISKS OF IOTThe Report acknowledges that Internet-connected devices offer numerous benefits, many of which remain untapped. In the health arena, connected medical devices allow patients to more efficiently communicate with their physicians to manage their medical conditions. In the home, smart meters enable energy providers to analyze consumer energy use, identify issues with home appliances, and enable consumers to be more energy-conscious. On the road, sensors on a car can notify drivers of dangerous road conditions, and software updates can occur wirelessly. And these applications are just the beginning.On the flip side, however, the FTC cautions that IoT may present a variety of potential security vulnerabilities that could be exploited to harm consumers. First, as with computers, a lack of security could enable unauthorized access and misuse of personal information. This risk is heightened in the IoT world by the plethora of devices to be connected and secured. Second, security vulnerabilities in a particular device may facilitate attacks on the consumer’s network to which it is connected, or enable attacks on other systems. Third, the FTC notes that IoT may present a heightened risk of harm to personal safety. For example, the Report describes an account of how it may be possible to hack remotely into a connected medical device and change its settings, impeding its therapeutic function.According to the FTC, these risks are exacerbated by the fact that companies entering the IoT market may not have experience in dealing with security issues, or may be creating inexpensive devices for which it may be difficult or impossible to apply a patch for a security bug.SECURITYIn light of these increased risks, the FTC asserts that “inadequate security presents the greatest risk of actual consumer harm in the Internet of Things.” As such, it recommends that companies focus on security when developing connected devices. The FTC acknowledged that what constitutes reasonable security for a given device will depend on a number of factors, including the amount and sensitivity of data collected, and the costs of remedying the security vulnerabilities. However, the staff did offer approaches that it encourages companies to adopt when developing their products:<ul><li>Building security into their devices at the outset, by conducting an initial privacy or security risk assessment, considering how to minimize the data collected and retained, and testing security measures before launching the product.</li><li>Training all employees about good security, and ensuring that security issues are addressed at the appropriate level of responsibility within the organization.</li><li>Retaining service providers that are capable of maintaining reasonable security and providing reasonable oversight.</li><li>Implementing a defense-in-depth approach for systems that involve significant risks, considering security measures at several levels.</li><li>Imposing reasonable access control measures to limit the ability of an unauthorized person to access a consumer’s device, data, or network.</li><li>Continuing to monitor products throughout the life cycle and, to the extent possible, patch known vulnerabilities.</li></ul>In sum, devices that collect sensitive information, present physical security or safety risks (such as door locks, ovens, or medical devices), or connect to other devices or networks in a manner that would enable unauthorized access to those devices, may require heightened consideration of security measures.DATA MINIMIZATIONThe Report emphasizes the FTC’s view that companies should reasonably limit their collection and retention of consumer data, including in the IoT context. The FTC believes that these practices, known as data minimization, will help guard against two privacy-related risks: first, larger data stores present a more attractive target for data thieves; and second, if a company collects and retains large amounts of data, there is an increased risk that the data will be used in a way that departs from consumers’ reasonable expectations.At the same time, the Report acknowledges concerns that data minimization requirements may curtail innovative uses of data. Accordingly, the FTC proposes a “flexible” approach to data minimization that gives companies a variety of options: they can decide not to collect data at all, collect only the fields of data necessary to the product or service being offered, collect data that is less sensitive, or de-identify the data they collect. The FTC also suggests that if none of these options work, a company can seek consumers’ consent for collecting additional, unexpected data.NOTICE AND CHOICEThe FTC acknowledges that notifying consumers of privacy principles and offering them a way to meaningfully choose privacy settings may be more difficult in the context of connected devices, which may not have a screen with which to communicate with consumers. However, the report makes clear that the FTC does not believe it will be sufficient for IoT companies to simply have a privacy policy available on their website, and expect consumers to find that policy. Rather, the FTC recommends that a company find ways to present meaningful privacy notices and choices to the consumer, including in the set-up or purchase of the product itself. The Report suggests creative solutions to this issue, including:<ul><li>Offering video tutorials to guide consumers through privacy settings.</li><li>Affixing a QR code that, when scanned, would take the consumer to a website with information about privacy practices.</li><li>Offering a set-up wizard that provides information about privacy practices.</li><li>Allowing users to configure devices, such as home appliances, so that they receive information through emails or texts.</li><li>Creating a user experience “hub” that stores data locally and learns a consumer’s privacy preferences based on prior behavior.</li></ul>Companies may also want to consider using a combination of approaches. Of course, whatever approach a company decides to take, the FTC expects the privacy choices to be clear and prominent, and not buried within lengthy documents.LEGISLATIONLast but not least, the FTC reiterated its recommendation for Congress to enact strong, flexible, and technology-neutral legislation to strengthen the Commission’s existing data security enforcement tools, and require companies to notify consumers when there is a security breach.CONCLUSIONAs the FTC describes, “in the future, the Internet of Things is likely to meld the virtual and physical worlds together in ways that are currently difficult to comprehend.” As a result, companies should consider guidance offered by the FTC and other regulators, and evaluate what steps they can take to mitigate those risks in the privacy and data security context.

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FTC Issues Landmark Report on Internet of Things

“Firsts” for the World of Virtual Currencies

The FTC has released its much anticipated report on the Internet of Things (“IoT”) – a topic that has been top-of-mind for many companies. The FTC’s report, “In

FTC Issues Landmark Report on Internet of Things

The Federal Trade Commission (“FTC”) has once again made good on its promise to enforce against deceptive advertising under Section 5 of the FTC Act, regardless of the media in which the advertising appears:  Its <a href="http://www.ftc.gov/news-events/press-releases/2014/11/sony-computer-entertainment-america-provide-consumer-refunds" target="_blank" rel="noopener">recently announced </a>proposed complaint and draft settlement with the advertising firm Deutsch LA, Inc. involves endorsements posted by social media users.  The action unmistakably signals to companies that advertise through social media—especially by leveraging user-generated content—that they need to comply with Section 5’s disclosure requirements.As discussed below, not only is it deceptive to post bogus endorsements, but a clear and conspicuous disclosure of any material connection between an endorser and the advertising company is necessary in order to avoid a charge of deception.Online Advertising Disclosure Requirements Under Section 5 of the FTC Act Section 5 of the FTC Act bars “unfair or deceptive acts or practices.”  This prohibition extends to advertising, marketing and other promotional activities, including the use of endorsements.  The FTC’s <a href="http://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-publishes-final-guides-governing-endorsements-testimonials/091005revisedendorsementguides.pdf" target="_blank" rel="noopener">Guides Concerning the Use of Endorsements and Testimonials in Advertising</a> (“Endorsement Guides”) represent the FTC’s interpretation of the application of Section 5 to the use of endorsements and testimonials in advertising.  See 16 CFR § 255.  In other words, they explain how an advertiser using endorsements can avoid engaging in deceptive practices.The FTC defines an “endorsement” as an advertising message that “consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser.”  See id. at § 255.0(b).  According to the Endorsement Guides, a customer endorsement must be from an actual, bona fide user of the endorsed product or service.  In addition, if there is any material connection between the endorser and the advertiser that consumers would not reasonably expect—such as payment or other exchange of consideration, or an employment relationship—then that connection must be clearly and conspicuously disclosed.  Because such information is likely to affect the weight or credibility that consumers will give to an endorsement, a failure to clearly and conspicuously disclose it is deceptive.The FTC staff has provided guidance on how to effectively make clear and conspicuous disclosures in online advertising.  When the staff initially released its Dot Com Disclosures guidance in 2000, it affirmed that Section 5 applies to online advertising, just as it applies in the brick-and-mortar world.  In 2013, the FTC staff released updated Dot Com Disclosures, specifically addressing how to make appropriately clear and conspicuous disclosures online, including on mobile devices.  The guidance reaffirmed that disclosures that are required to avoid deception or to otherwise comply with the law must be presented in a clear and conspicuous manner—no matter the media in which they appear—and asserted that, if an advertiser cannot make a required disclosure effectively in a particular medium, then it should not run the ad in that medium.The Deutsch LA Endorsement Action The proposed settlement with Deutsch LA arose out of the advertising firm’s alleged activities relating to the promotion, on behalf of its client Sony, of the PlayStation Vita handheld gaming console.  (The FTC also reached a <a href="http://www.ftc.gov/news-events/press-releases/2014/11/sony-computer-entertainment-america-provide-consumer-refunds" target="_blank" rel="noopener">proposed settlement with Sony</a>.)  The gravamen of the FTC’s complaint related to allegedly deceptive advertising claims about the console’s technological capabilities.  The FTC also, however, included a count relating to the advertising firm’s use of Twitter to promote its client’s console.  Specifically, the <a href="http://www.ftc.gov/system/files/documents/cases/141125deutschcmpt.pdf" target="_blank" rel="noopener">complaint</a> alleged that Deutsch LA employees responded to a request from an assistant account executive to use their personal Twitter accounts to post positive comments about the Sony console, using the same “#gamechanger” hashtag.  The complaint includes examples of the employees’ tweets, such as “One thing can be said about PlayStation Vita…it’s a #gamechanger.”The FTC alleged that the employees’ tweets were deceptive because they falsely purported to be endorsements from actual users of the Sony gaming console.  Moreover, the fact that the tweets were written by employees of Sony’s ad agency would have been material to consumers in making decisions about whether to purchase the console.  For this reason, the tweeters’ failure to disclose their connection to Deutsch LA (and, in turn, to Sony) was allegedly deceptive.In light of both the Endorsement Guides and the revised Dot Com Disclosures guidance, this FTC enforcement action is not surprising.  The Endorsement Guides establish that the failure to disclose a material connection is deceptive, and Dot Com Disclosures affirm that the FTC’s rules on necessary disclosures apply to any message, whatever the medium, and expressly including even “space constrained ads,” such as tweets.What’s Next?The Deutsch LA proposed <a href="http://www.ftc.gov/system/files/documents/cases/141125deutschagree.pdf" target="_blank" rel="noopener">consent order</a> bars the company from representing that an endorser of a product is an independent user or ordinary consumer of the product, if that is not the case, and it requires the ad agency to make clear and prominent disclosures of any material connections between an endorser and Deutsch LA and/or entities on whose behalf it promotes a product or service.  The action thus reaffirms that individual endorsements that appear in social media must clearly and conspicuously disclose any material connection between the endorser and the advertiser of the endorsed product or service.The FTC has brought cases based on deceptive endorsements before.  For instance, in 2010, <a href="http://www.ftc.gov/sites/default/files/documents/cases/2010/11/101126reverbcmpt.pdf" target="_blank" rel="noopener">In re Reverb Communications</a> (also an advertising agency), the FTC alleged that Reverb’s employees posted reviews in iTunes about the agency’s clients’ gaming applications, without disclosing their relationship to the agency or its clients.   Deutsch LA, however, appears to be the first time that it has brought an enforcement action against endorsements made on social media.  Now that the FTC has followed through on its Dot Com Disclosures guidance that tweeted ads are just like any other advertisements—and thus require the same clear and conspicuous disclosures as in any other media—the obvious question is, what’s next?  Now that social media is multimedia (see, for example, Instagram and Pinterest, which let users post photos and videos), brands are likely to leverage users to incorporate promotions into their personal feeds.For instance, if a brand discovers that a popular Instagram user takes compelling pictures that meld with the brand’s image, the brand might engage that user to produce content on behalf of the brand and to use a hashtag or some other means to promote the brand organically in the user’s feed.If the brand does not require the user to disclose—clearly and conspicuously and in each picture, tweet or other post—that he or she has a material connection to the company, then both the company and the user run the risk of being subject to a charge of deception.

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Clients seek out Julie because of her practical advice on cutting-edge issues at the intersection of privacy and consumer protection laws. She provides clients with practical solutions to compliance c

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FTC Enforcement Action Confirms That Ad Disclosure Obligations Extend to Endorsements Made in Social Media