Intellectual Property and Technology NewsPERSPECTIVES • ANALYSIS • VISIONARY IDEAS

Augmented reality and virtual reality: IP considerations

DLA Piper launches global Artificial Intelligence practice

ITC update

Supreme Court Corner

The Russian Supreme Court clarifies IP legislation

ISSUE 43 / Q3 2019 / ATTORNEY ADVERTISING

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Frank RyanPartnerGlobal Co-Chair and US Co-Chair, Intellectual Property and Technology

Ann K. FordPartnerGlobal Co-Head, Sectors, US Co-Chair, Intellectual Property and Technology

Helping you embrace the changing marketplace

Editor’s Column

Matt GruenbergPartnerIntellectual Property and Technology

Artificial intelligence, virtual reality, augmented reality, digital assets, and blockchain are among the new technologies we discuss in this issue, each of them requiring regular review and analysis of current laws and sometimes new laws to ensure appropriate protection.

We are here to help you embrace the changing marketplace while protecting your digital assets and intellectual property. Whether it’s helping you overcome legal challenges in the age of digitization or protecting your intellectual property concerning a virtual reality, we have the legal experience you need. We’re proud of our 34 lawyers in 9 countries who were ranked by the IAM Patent 1000 as some of the top patent professionals in the world. The members of our team, among them the authors in this issue, strive to stay at the cutting edge of IPT business law. Our global footprint can help you manage your operations in important geographies around the world, online, and in the virtual space.

To learn more about how DLA Piper can help you, please contact any member of our team.

frank.ryan@dlapiper.com ann.ford@dlapiper.com

We are excited to bring you this 43rd issue of IPT News. Inside are thought-provoking articles about ITC Section 337, intellectual property rights in augmented and virtual reality, and two cases we are following in the Supreme Court – Iancu v. Brunetti, which held that the Lanham Act’s prohibition on the registration of “immoral or scandalous” trademarks violates the First Amendment, and Return Mail Inc. v. USPS, which held that the federal government is not a “person” capable of filing a covered business method review petition under the America Invents Act.

You will also find an article about Ruling No. 10, in which the Russian Supreme Court has clarified its IP law, and a look at potential “influencer” liabilities arising from promotions on Instagram.

As a firm, DLA Piper is proud to announce the launch of a new global practice group focused on artificial intelligence. And, adding depth and strength to our West Coast patent practice, we welcome two new patent prosecution partners to IPT in Silicon Valley: Christopher Mooney, who focuses on strategic patent counseling, patent prosecution and patent litigation, and Maria Swiatek, who focuses on cross-border prosecution and portfolio management for high technology, energy and life sciences clients.

I hope you will enjoy this issue of IPT News.

matthew.gruenberg@dlapiper.com

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DLA Piper’s new Artificial Intelligence practice aims to assist companies as they navigate the legal landscape of AI’s emerging and disruptive technologies.

The launch responds to the rapidly evolving needs of clients who work with and in technology. In recent months, the firm also established practices dedicated to blockchain and digital assets, proptech, and fintech.

Larissa Bifano, co-chair of the AI practice, commented, “Artificial intelligence and automation are changing the way we do business, and organizations across a wide range of industries are deploying machine learning technologies to automate and optimize processes in almost every facet of their operations.” She adds, “Our global platform provides us with a broad base of sector-focused practitioners to respond to the wide range of legal challenges across jurisdictions, especially in areas such as regulatory compliance, privacy and ethics.”

See more at: dlapiper.com/en/us/focus/artificial-intelligence

DLA Piper launches global Artificial Intelligence practice

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Supreme Court Corner Cases we are following By Stan Panikowski and Brian Biggs

Patent prosecution capabilities grow on the West Coast

Christopher Mooney Maria Swiatek

Patent prosecution partners Christopher Mooney and Maria Swiatek have joined the firm’s Intellectual Property and Technology practice in Silicon Valley.

Chris focuses on strategic patent counseling, patent prosecution and patent litigation. He is often consulted by clients to help them monetize, enforce and build high-quality portfolios in a number of sectors, among them technology, artificial intelligence, manufacturing and life sciences. He received his J.D. from Franklin Pierce Law Center, his M.S. from the University of Texas at Dallas and his B.S. from Texas A&M University.

Maria focuses on the cross-border prosecution and portfolio management of high technology, energy and life science clients. She is often sought out by emerging growth companies that are seeking to offer new and innovative devices or methods in markets around the world. Maria received her J.D. from the University of the Pacific, McGeorge School of Law, and her B.S. from California State Polytechnic University, Pomona.

Learn more about Christopher Mooney at: dlapiper.com/en/us/people/m/mooney-christopher

Learn more about Maria Swiatek at: dlapiper.com/en/us/people/s/swiatek-maria

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Supreme Court Corner Cases we are following By Stan Panikowski and Brian Biggs

Partner Stan Panikowski, based in San Diego, focuses on IP, antitrust, appeals and other areas of business litigation. Reach him at stanley.panikowski@dlapiper.com.

Associate Brian Biggs, based in Wilmington, Delaware, represents clients across many technical fields in patent litigation. Reach him at brian.biggs@dlapiper.com.

Iancu v. BrunettiTRADEMARK – DECIDED: JUNE 24, 2019Holding: The Lanham Act’s prohibition on registration of “immoral or scandalous” trademarks violates the First Amendment

Section 2(a) of the Lanham Act permits the USPTO to refuse a trademark if it “comprises immoral, deceptive, or scandalous matter…” 15 U.S.C. § 1052(a). Erik Brunetti has used the mark “FUCT” for his clothing line since 1990, only applying for federal registration in 2011. Citing § 2(a), the USPTO refused registration as “scandalous.” The TTAB affirmed the mark as vulgar and unregistrable in light of the “strong, and often explicit” imagery in the apparel’s promotional material. Brunetti appealed to the Federal Circuit.

During the appeal, the Supreme Court issued its opinion in Matal v. Tam, 137 S. Ct. 1744 (2017), finding the Lanham Act’s disparagement clause an unconstitutional viewpoint-based restriction of speech. In light of Tam, the Federal Circuit reversed, deeming the registration bar on “immoral” or “scandalous” marks facially invalid.

In a 6-3 opinion by Justice Elena Kagan, the Court postulated, “[t]he government may not discriminate against speech based on the ideas or opinions it conveys.” When the PTO disapproves marks that some may find offensive, it infringes the First Amendment. In dissent, Justice Sonia Sotomayor contended Brunetti’s mark should be rejected, opining one could read “scandalous” narrowly to mean “vulgar” or “obscene,” which is viewpoint-neutral and thus does not violate the First Amendment.

In a win for free speech, Brunetti reaffirms that restrictions on the content of a trademark must be viewpoint-neutral. But four justices (Justice Samuel Alito in concurrence and Chief Justice John Roberts and Justices Stephen Breyer and Sonia Sotomayor in dissent) expressed concern that the Court’s decision would open the door for obscene trademark applications – and recent reporting shows that concern is being realized. Practitioners should watch this space, including whether the PTO rejects offensive or vulgar marks under other provisions in the Lanham Act or whether Congress amends the Lanham Act, to more narrowly prohibit obscene marks.

Return Mail Inc. v. United States Postal ServicePATENT – DECIDED: JUNE 10, 2019Issue: The federal government is not a “person” capable of filing a covered business method review petition under the Leahy-Smith America Invents Act.

The AIA allows a “person” to challenge a patent’s validity through a covered business method (CBM) review before the Patent Trial and Appeal Board (PTAB). AIA §18(a)(1)(B).

When patent-holder Return Mail’s attempts to license a patent to USPS were unsuccessful, Return Mail filed suit in the United States Court of Federal Claims. Then USPS filed a CBM petition with the PTAB. In its final written decision, the PTAB rejected Return Mail’s argument that USPS lacked statutory standing to file a CBM suit and invalidated all of the challenged claims as drawn to ineligible subject matter under 35 U.S.C. § 101.

In a 6-3 opinion by Justice Sonia Sotomayor, the Court held the AIA excludes the Postal Service and other federal agencies from the definition of “person.” There is a “longstanding interpretive presumption that ‘person’ does not include the sovereign.” The Court rejected the Postal Service’s arguments to overcome the presumption, finding no evidence that Congress intended to allow a federal agency to file an adversarial challenge like a CBM review petition.

In dissent, Justice Stephen Breyer found the presumption is overcome because the Postal Service can apply for, obtain, and maintain a patent; sue others for, be sued for, and assert defenses to patent infringement; and invoke and defend against other administrative procedures for challenging patents.

Return Mail restricts the federal government’s ability to challenge a patent – even one asserted against it in a patent infringement lawsuit – through the AIA’s streamlined, post-issuance review procedures. Patent holders, particularly those considering suit against a federal agency, will see this as a win, but they should also note the Court’s opinion does not restrict a federal agency’s ability to petition for ex parte reexamination or for Congress to clarify the AIA’s definition of “person.”

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Electronic signature leader Margo H.K. Tank

named to the National Law Journal’s Technology Law Trailblazers list

The Recorder names Mark Radcliffe to 2019 California Trailblazers list

Margo H.K. Tank, US Co-Chair of the firm’s Financial Services sector and co-leader of the new Blockchain and Digital Assets group, has been named to the National Law Journal’s list of Technology Law Trailblazers. The editors recognized Margo for her efforts enabling “the use and acceptance of electronic signatures” and noted her prediction that “in the next decade we will continue to see the intersection of technology and law in every sector.”

The journal also highlights Margo’s advocacy to establish a baseline and legislation for the use of electronic signatures, along with her work advocating for the passage of the Electronic Signatures in Global and National Commerce Act.

Reach Margo at margo.tank@dlapiper.com.

Silicon Valley-based partner Mark Radcliffe was recently named to The Recorder’s 2019 list of California Trailblazers. In highlighting Mark’s career, the editors noted Mark’s work with technology companies and companies that use leading technologies around the world, including blockchain and digital asset deployment.

The editors of The Recorder noted that, in a career that “has undergone continual reinvention,” Mark has been a leader from the “open-source software revolution to the emergence of cryptocurrencies and blockchain technology.”

Mark is a co-leader of the Blockchain and Digital Assets practice. Reach him at mark.radcliffe@dlapiper.com.

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34 DLA Piper lawyers in 9 countries ranked among The World’s Leading Patent Professionals

IAM Patent 1000: The World’s Leading Patent Professionals 2019 has named 34 DLA Piper lawyers from 9 countries to its list of top patent professionals – representing an increase for the firm in numbers of both lawyers and countries. IAM identifies leading professionals based on 1,800 interviews with lawyers and in-house counsel to determine those with “exceptional skill sets and profound insights into patent matters.”

John AllcockUnited States

Aleksandra BaczykowskaPoland

Philipp CeplGermany

Dan ChristenburyUnited States

Sean CunninghamUnited States

Ron DimockCanada

Michael DoughertyUnited States

Gualtiero DragottiItaly

Ryan EvansCanada

William (Skip) FisherChina

Mark FowlerUnited States

Markus GamppGermany

John GuaragnaUnited States

Lisa HaileUnited States

James HeintzUnited States

Denise Seastone KraftUnited States

Ewa Kuroska-ToberPoland

Joe LavelleUnited States

Dale LazarUnited States

Alan MacekCanada

Gianni MinutoliUnited States

Steven ParkUnited States

Tony PezzanoUnited States

Mark RadcliffeUnited States

Paul ReeskampNetherlands

Johan RenesNetherlands

Robynne SandersAustralia

Matthew SatchwellUnited States

Paul SteadmanUnited States

Bruce StrattonCanada

Richard TaylorUnited Kingdom

Alexander TsoutsanisNetherlands

Nicholas TyackeAustralia

Roberto ValentiItaly

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The augmented reality (AR) and virtual reality (VR) market forecast for 2019 is $16.8 billion and is expected to expand dramatically in the coming years, with market forecasts for 2023 eclipsing $160 billion. As new AR and VR technologies emerge, so do legal questions arising from their use. This article examines certain intellectual property considerations for publishers and users venturing into this space in the United States.

Augmented reality and virtual reality: IP considerationsBy Tom Ara, Katherine Imp and Erica Dixon

Defining AR and VR technology Augmented reality is a technology that overlays virtual content on the real-world environment. Marker-based AR requires a marker (eg, an image) that users can scan with their smartphone camera to bring the virtual content to life. Location-based AR overlays virtual content based on a user’s location (using GPS). Examples of existing AR systems include Nintendo’s Pokémon Go app, IKEA’s Place app and photo and video filter apps like Instagram and Snapchat.

Virtual reality is a technology that immerses users into a completely virtual environment. Examples of existing VR systems include the Oculus Rift, PlayStation VR and HTC Vive.

Mixed reality combines AR and VR technology, allowing users to simultaneously interact with both real-world and virtual environments.

In the AR and VR realm, intellectual property rights are commonly divided into two categories: (1) use of real-world intellectual property in the virtual world; and (2) use of virtual intellectual property in the real world.

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Use of real-world intellectual property in the virtual worldUnder US intellectual property laws, use of trademarks, such as names and logos of products or brands, and use of copyrightable materials, such as photographs, text, video and music, require permission from the owner of the trademark or copyright regarding applicable rights.

However, to prevail on a claim of trademark infringement under federal law, a plaintiff must establish that the defendant used the same or a similar mark “in commerce” in connection with the sale or advertising of goods or services without the plaintiff’s consent. Thus, the user of a real-world trademark in an AR or VR environment may attempt to escape liability under federal law by claiming that the “in commerce” prong of the trademark infringement test cannot be satisfied.

Similar problems arise for an aggrieved party faced with the fair use defense available to the public under US copyright laws. Under the Copyright Act, the copyright owner has the exclusive right to reproduce, distribute, perform and prepare derivative works based on the copyrighted work. However, under the doctrine of fair use, the user of a real-world copyright in an AR or VR environment could potentially escape liability if the four fair use factors are satisfied. Arguably, the most important factor would be whether the allegedly derivative work is transformative, which is determined by analyzing whether the copyrighted material has been transformed through the addition of new original material and whether the new material adds value to the original.

Use of virtual IP in the real world Similar infringement claims (and similar defenses to such claims) arise with the use of virtual IP in the real world. In the AR environment, publishers incorporate the real world into the AR environment generated for its users. This means that IP in the real world may be incorporated into the AR environment, giving rise to infringement claims, particularly where AR replicates, distorts or replaces trademarked or copyrighted works.

For example, copyright infringement could occur if the AR environment encourages users to take pictures of an artistic work, or trademark infringement could occur if the AR environment utilizes third-party logos captured on a smartphone camera to trigger features within the AR environment. This type of technology could also lead to a business being tagged with undesirable or misleading content (and the creators of such tags could escape liability using the defenses set forth above). On the other hand, this type of technology could change the face of marketing campaigns by making such advertisements as movie posters, storefronts or billboards more interactive, offering businesses new opportunities to connect with consumers.

As the law evolvesThere are enormous possibilities in what AR and VR technology can do to enhance existing forms of entertainment, social media and advertising. AR and VR technology offer users an immersive experience, allowing them to connect with their environments, and the movies, TV programming, brands and products in their environments, in an unprecedented way. As these new AR and VR experiences and uses continue to develop, publishers and users of AR and VR technology must consider the legal implications on their IP rights and the IP rights of others while the laws governing such media also continue to evolve.

“Use of trademarks… and use of copyrightable materials… require permission from the owner of the trademark or copyright regarding applicable rights.”

Tom K. Ara is the co-chair of DLA Piper’s Entertainment Finance and Entertainment Transactions practices. In 2019, Hollywood Reporter named him to its 2019 Power Lawyers list, which highlights the 100 top attorneys in Hollywood. He is based in Los Angeles and Shanghai. Reach Tom at tom.ara@dlapiper.com.

Katherine Imp is a senior associate in the Entertainment Transactions practice and based in Los Angeles. In 2019, Variety named her to its 2019 Legal Impact Report “Up Next” list, which highlights the top up-and-coming attorneys in the entertainment business. Reach her at katherine.imp@dlapiper.com.

Erica Dixon is an associate in the Entertainment Transactions practice. Recently joining the team, she is based in Los Angeles. Reach her at erica.dixon@dlapiper.com.

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The Plenum of the Russian Supreme Court’s 2019 Ruling No. 10, “On the Application of the Fourth Part of the Civil Code,” is a comprehensive explanation of the statutory norms of the Fourth Part of the Russian Civil Code related to intellectual property.

Such rulings by the Supreme Court are always high-profile news because clarifications from the Supreme Court have a significant impact on the development of court practice in Russia, providing direction to the lower courts to ensure a unified and accurate application of laws.

Ruling No. 10 contains 182 items addressing different areas of intellectual property legislation, including copyrights, trademarks, patents, know-how, appellations of origin, commercial designation, and company names.

In this article, we review eight general, top-level provisions of Ruling No. 10. For a more thorough review, please see:

In Ruling No. 10, the Russian Supreme Court clarifies intellectual property legislationBy Roman Golovatsky

1. DEFINITIONSThe Supreme Court gives lower courts advice on terminology: “intellectual property” should only be applied to results of intellectual activities and means of identification (such as trademarks, services marks, appellations of origin, commercial designation, and company names); it does not cover rights to these objects. Rights to intellectual property should be defined as “intellectual rights.”

Intellectual rights include the exclusive right, which is an economic right, and moral rights (such as paternity rights, rights to names, withdrawal rights, and integrity rights).

2. JOINT OWNERSHIP OF THE EXCLUSIVE RIGHTThe exclusive right to the results of intellectual activities and means of identification (except for a company name) may jointly belong to several holders, and this rule also applies to the inheritance of IP. The Supreme Court pointed out, however, that this does not mean the holders may split the exclusive right and obtain shares in it. The Court has therefore ended the long-running debate as to whether it is possible in Russia to split an exclusive right and define shares, explicitly stating it is not possible.

Relations of the holders of the exclusive right among themselves should be regulated by mutual agreement.

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3. DISPOSAL OF AN EXCLUSIVE RIGHTThe Supreme Court clarified that if the assignment agreement imposes any limitations on a successor of the right regarding the use of a result of intellectual activity or means of identification (for example, in terms of territory, term or methods of use) or stipulates a particular term of this agreement, it can be reclassified by a relevant court as a license agreement. If, however, there is no legal possibility to reclassify such agreement, then it will be deemed invalid, in full or in part.

4. FORMAT; STATE REGISTRATIONAs a general rule, an assignment agreement must be executed in writing. A license agreement must be in writing unless otherwise stipulated by the law. Non-compliance with this rule invalidates the relevant agreement. In some cases, the assignment of an exclusive right or a license is subject to obligatory state registration with the Russian patent authority (Rospatent). This rule mainly applies to trademarks and patents.

5. TERMS AND CONDITIONS OF THE LICENSE AGREEMENTThe Supreme Court explained that a license agreement with a term exceeding the term of the duration of the relevant exclusive right will be deemed concluded for a term equal to the term of the exclusive right. If the exclusive right is renewed after the conclusion of the license agreement, then the agreement’s duration will be determined on the basis of its conditions and the new term of the exclusive right. If the license agreement does not stipulate that there is a royalty-free license, and it does not contain any provisions on license fees, it will then be deemed non-concluded.

6. PLEDGE OF THE EXCLUSIVE RIGHTA right holder may dispose of an exclusive right by means of a pledge. Enforcement of the exclusive right and legal action against infringers can only be initiated by the pledgor. The pledgee is not granted such possibility.

Roman Golovatsky is a Legal Director of DLA Piper’s Intellectual Property and Technology group and is based in St. Petersburg. He helps IP owners develop and implement measures to protect their IP rights in Russia and the CIS, including patent, copyright and trademark litigation, and measures to combat illegal imports of counterfeit goods. Reach him at roman.golovatsky@dlapiper.com.

7. DISPOSAL OF THE EXCLUSIVE RIGHT FOR OBJECTS TO BE CREATED IN THE FUTUREThe Supreme Court clarified that it is possible to conclude an assignment agreement or a license agreement for results of intellectual activity or means of identification that are expected to be created in the future. The exclusive right or license will be deemed transferred/granted at the moment defined by the agreement, but not earlier than the moment the exclusive right arises.

8. ENFORCEMENT OF INTELLECTUAL RIGHTSFinancial sanctions: right holders have a variety of options to impose financial sanctions on infringers in the areas of copyright, trademark and patent. The Supreme Court clarified that such compensation cannot be claimed together with damages; a right holder must choose one or the other.

Plurality of infringers: in case of subsequent infringements of an exclusive right by several infringers, each bears a separate responsibility. If the infringement has been done jointly, the infringers are jointly liable.

Parallel import: existing law considers parallel imports (“grey” imports of genuine branded goods avoiding official supply channels) to be a type of infringement. In 2018, the Constitutional Court found the ban on parallel imports does not violate Russia’s Constitution. In Ruling No. 10, the Supreme Court found that genuine goods imported by parallel importers, unlike counterfeits, cannot be seized and destroyed. However, the Court emphasized this does not prevent the right holder from using other remedies to stop the circulation of such goods.

Website owners: for situations where infringing materials are posted on a website, the Supreme Court explained that a website’s owner determines the way the website is used. In the absence of evidence that infringing materials were posted by third parties, it should be presumed that the website owner posted them.

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ITC Section 337 Update

Expect heavy emphasis on public interest in pharma/medical device investigationsBy Tony V. Pezzano and Michael P. Dougherty

The principal form of relief for patent infringement available in the ITC is an exclusion order barring the importation of the infringing product into the US. Before issuing an exclusion order, the International Trade Commission must consider the effect of the order on (1) the public health and welfare; (2) competitive conditions in the US economy; (3) the production of like or directly competitive articles in the US; and (4) US consumers. While these public interest factors rarely present an obstacle to the grant of an exclusion order in typical investigations involving consumer electronics and the like, they can raise difficult issues when the product sought to be excluded is a potentially life-saving drug or medical device.

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Consider, for example, an accused biologic drug approved for the treatment of certain types of cancer. How would the Commission evaluate the public interest if the alternative products on the market were approved for the same indications, but were somewhat less effective, or had equal efficacy but more side effects? What if they were equally effective but the noninfringing alternative had to be intravenously administered three times per week, while the accused product required infusion only once per week, potentially reducing the threat of infections from repeated IV dosing and improving patient lifestyle? What if switching from the new product to an alternative could cause unwanted immune responses in some patients? Should differences in insurance coverage be considered?

The Commission recently identified such issues in Certain Recombinant Factor VIII, Inv. No. 337-TA-956, in which the accused product (Novoeight) was a recombinantly engineered analogue of the blood clotting protein used to treat hemophilia. The Administrative Law Judge recommended a limited exclusion order and cease and desist order if a violation were found. The ALJ further recommended, however, that those orders should not apply to importations for clinical trials within

the scope of the safe harbor of 35 USC §271(e)(1), and that patients now taking Novoeight be given until 60 days after the conclusion of the presidential review period to transition to alternative products.

The Commission initiated a review of this recommendation and solicited comments from the parties and the public on several issues, including:

• Alternatives to the accused product, and what criteria should be used to identify them

• The likelihood that a patient who has insurance coverage for Novoeight will also have coverage for a comparable alternative

• The costs patients will incur in switching from Novoeight to an alternative

• The therapeutic and safety advantages, if any, of Novoeight over an alternative

• Whether the Commission should consider hemophilia patients’ fear of developing an inhibitor upon switching medications

• Whether any remedial order should be tailored to allow patients currently using Novoeight to continue using it

• Whether patients being treated for the first time should have access to Novoeight if the alternatives are not suitable

After receiving comments from the parties, patients, physicians and hemophilia treatment centers, the 956 investigation was terminated, settling before the Commission addressed these issues. Nevertheless, at least two things are clear from the Commission’s questions. First, the public interest inquiry in pharmaceutical/medical device investigations may be extensive and potentially require input from many different sources besides the parties, including patients, physicians, hospitals and insurance companies. Second, any exclusion order is likely to be tailored to the needs of the affected patients, eg, by allowing patients who respond better to the accused product to continue receiving it, and/or providing safeguards allowing an orderly transition to noninfringing alternatives.

With pharmaceuticals and medical devices already making up the second largest category of ITC investigations by subject matter (after computer/telecommunications products), and with further growth on the horizon as increasing numbers of biosimilar medicines are imported, we expect that public interest considerations will take on growing importance in the Commission’s efforts to fashion remedies for infringement.

Tony Pezzano is a partner in the IPT group and based in New York. In his almost 30-year career as a patent litigator, he has tried numerous cases involving technology innovation. Reach him at tony.pezzano@dlapiper.com.

Michael Dougherty is a partner in the IPT group and based in New York. Representing brand pharmaceuticals in suits against generic drug companies under the Hatch-Waxman Act is a cornerstone of his 30-year career. Reach him at michael.doughtery@dlapiper.com.

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With great influence comes great responsibilityPotential liabilities in the growing influencer marketplaceBy Tamany Bentz and Carolina Veltri

“You guys...@flattummyco just dropped a new product. They’re Appetite Suppressant Lollipops and they’re literally unreal,” gushed Kim Kardashian in a now-deleted Instagram caption. Below a photo of herself with a lollipop in her mouth, Kim urged her 110+ million Instagram followers to use her unique promotional code on their purchase so they, too, could curb their food cravings at a discount.1

Sponsored social media posts like this are ubiquitous, showcasing a wide array of products and raising issues beyond the irony of an appetite-suppressing dessert. What responsibility, if any, falls on the influencer for these endorsements?

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Like the efficacy of Flat Tummy Tea lollipops, the answer has yet to be elucidated. Both government and private plaintiffs have tried to sue celebrity endorsers directly for false or deceptive advertising, but with mixed results.

According to the Federal Trade Commission’s website, “FTC law applies to endorsers and influencers, too.” In 2017, the FTC issued its first charges against social media influencers for deceptive endorsements for failing to conspicuously disclose a material connection between the influencer and the company – in this case, that the influencers also owned the online gaming service they promoted.2 While this case, like many, ultimately settled without court review, it suggests that the FTC will enforce regulations against influencers. Courts, however, have yet to apply a theory of “endorser liability” to an influencer.

In 2004, the FTC took the rare step of suing a celebrity endorser under a theory of “endorser liability” for false advertising and misrepresenting the results of a dietary aid.3 The case reached the Ninth Circuit, but the court held that the spokesperson at issue did not meet the FTC’s own standard for liability because he was not “recklessly indifferent to the truth or falsity of a misrepresentation, or had an awareness of a high probability of fraud along with an intentional avoidance of the truth.” 4

Similarly, private plaintiffs have attempted to sue celebrity endorsers, but again, courts have yet to definitively hold that such endorsers can be liable to consumers. Investors in what turned out to be a Ponzi scheme brought suit against an actor who had appeared in commercials endorsing the “investment opportunity” in In re Diamond Mortgage Corp.5 In denying the actor’s summary judgment motion, the court held that as an endorser, the actor “had a duty pursuant to the FTC Guides to substantiate the truthfulness of the endorsements and obtain independent and reliable information regarding the financial stability” of the endorsed investment.6 The case later settled and the question of whether this duty had been breached was never answered.

Other cases facing this question have side-stepped it, with courts instead rendering the issue of endorser liability moot by finding that the celebrities in question were not endorsers.7 Still more cases settle and avoid court decisions on this issue altogether.8

But as influencers’ pockets are deepening and celebrity marketing is capturing ever more interest from consumers and the FTC, it is highly likely that the issue of endorser liability will steadily move to the fore of advertising law.

Tamany Bentz, a partner in the IPT group and based in Los Angeles, focuses on intellectual property litigation, with particular experience in federal litigation. You may reach her at tamany.bentz@dlapiper.com.

Carolina Veltri is an associate in the IPT group and is based in Los Angeles. She focuses on trademark, copyright and media. You may reach her at carolina.veltri@dlapiper.com.

1 huffingtonpost.co.uk/entry/kim-kardashian-west-slammed-for-promoting-appetite-suppressant-lollipops_uk_5afbfc1be4b0a59b4dff0a27

2 ftc.gov/news-events/press-releases/2017/09/csgo-lotto-owners-settle-ftcs-first-ever-complaint-against

3  F.T.C. v. Garvey, 383 F.3d 891, 901, 903-04 (9th Cir. 2004)

4  Id. at 901

5 118 B.R. 575 (Bankr. N.D. Ill. 1989)

6  Id. at 583.

7  See, eg, Luman v. Theismann, 647 Fed. Appx. 804 (9th Cir. 2016); Kramer v. Unitas, 831 F.2d 994 (11th Cir. 1987).

8  See, eg, Brady v. Basic Research, LLC, No. 13-cv-7169 (SJF) (E.D.N.Y. Dec. 21, 2016).

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