September 2018 Business Newsletter

Buying Followers? You May Want to Focus on Your Brand Instead

In this modern world of “influencers” and social media fame, it can be hard for brands and businesses to compete with those ranked in the top spots.  Recently, some brands are fighting back against those brands using tactics such as sneaky algorithms and buying followers to stay in the top spots.

In June 2018, Unilever announced it will no longer work with brands or influencers who buy followers and has made a promise to never buy followers, and prioritize those of its partners who increase their transparency and work to eradicate bad business practices throughout social media.  Further, L’Oreal, eBay, and Samsung were all in agreement, as this is something they have been trying to figure out their own solutions to.

The biggest issue is fake accounts set up for influencers to “buy,” thus boosting their social media presence and gaining new consumers.  However, this will prove to be a daunting task as estimates show as many as 15% of Twitter’s 'users' may be fake while up to 60 million Facebook accounts are bots.

Companies will shell out thousands to influencers who have a certain number of followers just for mentioning their brand or product in a post, and while the Association of National Advertisers found that 75% of marketers currently work with influencers, only 36% said they judged their influencer marketing efforts as effective. 

So what exactly is the problem?  On platforms such as Instagram, a single day’s worth of posts tagged using the recommended hashtags #sponsored or #ad were 50% fake engagements and over 40% of total comments were made by bots- not real consumers, not actual people interested in the brand or product.  Those fake engagements might be driving likes and views, but they are not driving the brand.

Unless the individual platforms step up, there is not much that can be done at the moment to decrease these sketchy practices.  However, on an industry wide-level, the Internet Advertising Bureau updated its Good Practice Guidance on Disclosure earlier this year to include influencer marketing to help both advertisers and influencers understand what the rules are and how to comply with them.

The ultimate goal with social media platforms should be rewards based on creativity and professionalism, not likes and followers.

The Arc of Erie County to pay $200,000 settlement with the state Attorney General

The agency, formerly known as Heritage Centers, which caters to children and adults with developmental disabilities, confirmed in March that it had notified families and federal regulatory officials about a coding issue on its website.  This issue exposed Social Security numbers and diagnosis codes of nearly 4,000 individuals.

Not only was personal information exposed in violation of HIPAA, but the information had been exposed for years.

The cyber breach was discovered February 2018, when the agency received a tip from the public that its clients’ personal information was on its website.  This information included full names, social security numbers, gender, race, diagnosis codes, IQs, insurance information, addresses, phone numbers, dates of birth and ages.

A subsequent report by a forensic investigator showed the information was publicly available from July 2015 to February 2018 and affected over 3,500 clients. This internal webpage was supposed to be protected by a log-in requirement. Additionally, the report found that unknown individuals outside the country accessed the information on many occasions.

The agreed to settlement requires The Arc to conduct an analysis of security risks and vulnerabilities of all electronic equipment and data systems, review its policies and procedures, and pay a $200,000 penalty.

Disney's Summary Judgment Motion Shot Down

On August 10, 2018, a New York federal judge refused to grant summary judgment in favor of Disney in an ongoing case against Nick Sarelli, who has been accused of running a "knock-off business ... built upon the infringement of Plaintiffs' highly valuable intellectual property rights."

More specifically, District Court Judge Daniels threw out most of Disney's trademark claims against Sarelli.  Mr. Sarelli runs a business where he sends out individuals dressed as "The Princess" (i.e. Leia) or "Big Hairy Guy" (i.e. Chewbacca) for special events.  Most important, Judge Daniels recognized some similarity between the characters and the made up names, but does not agree with Disney that Sarelli competes in the same business, or that any customers of Sarelli would ever be confused that he is associated with Disney. 

Judge Daniels points to the glaring fact that it is adults who plan for this entertainment, and not the children.  Further, looking at customer reviews, none of them “suggest the slightest sign of confusion as to the origin, source, affiliation, or sponsorship […], likely to produce 'a diversion of sales, damage to goodwill, or loss of control over reputation.’”  Not surprisingly, the fact Sarelli has been providing these character-for-hire services since 2012 with no recorded instance of confusion, shows there is no likelihood of consumer confusion.

Judge Daniels ultimately granted a motion from Sarelli to reject claims of trademark infringement, unfair competition and false designation of origin, but he did note there may be an issue of dilution.  Daniels found a genuine issue of fact as to whether the use of Disney's marks in connection with a character-for-hire business tarnishes their marks.

What does this mean for similar character-for-hire businesses?  Right now you may defeat a summary judgment motion, but you will likely pay the price in settlement on dilution claims.  Disney Enterprises, Inc. et al v. Avi Lieberman et al, 1:16-cv-02340 (SDNY 2018).
Chelus, Herdzik, Speyer & Monte, P.C., Main Court Building, 438 Main Street, Tenth Floor, Buffalo, NY 14202

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