(Second Edition) – 1 – US_ADMIN-78068775.15 — PREFACE — 2nd Edition In October 2009, we published the first edition of this White Paper, focusing primarily on social media issues in the United States. The response was overwhelming and far beyond our expectation—clients, friends, press and social-media communities became engaged with what we had to say. A conversation began that has yet to subside. The issues we uncovered relating to social media run far deeper than first meets the legal eye. Nonetheless, companies and employees continue to populate social media sites in droves, all too often oblivious to those risks. But as important as the issues are in the United States, the legal challenges posed by social media know no boundaries. They are truly global. Hence this second edition of the White Paper expanding coverage to Europe. In the future, we’ll be expanding further with more editions. Much has happened in the social media field since the release of the U.S. edition. The CEO of Sun Microsystems resigned on Twitter, and Facebook’s privacy settings are now often the subject of front page news. Services like FourSquare are leading the charge into real-time, location-based networking and entertainment, combining the virtual world and the real world. And while the technology advances at an unstoppable rate, the law often lags far behind. Special thanks also go to the following people, the Social Media Task force members in the United States: Eric Alexander, Jesse Ash, Sara Begley, Paul Bond, Maureen Cain, Samantha Clancy, Darren Cohen, Eugene Connors, Kimberly Craver, Colleen Davies, Rita DeCaria, Gerry DiFiore, Michael Golebiewski, Amy Greer, Daniel Herbst, Mark Hersh, John Hines, Andrew Hurst, Tony Klapper, Janice Kubow, Areta Kupchyk, Kevin Madagan, Leah March, Stacy Marcus, Mark Melodia, Andrew Moss, Amy Mushahwar, Kathyleen O’Brien, Meredith Pikser, Joe Rosenbaum, Carolyn Rosenberg, Rachel Rubin, Casey Ryan, Nancy Schulein, Amber Spataro, Sandy Thomas, Lois Thomson, Jacob Thride, and Anthony Traymore. In Europe, thanks go to our members of the Reed Smith Social Media Task Force: Louise Berg, James Boulton, Carl De Cicco, Peter Hardy, Alexander Klett, Emma Lenthall, Paul Llewelyn, Nathalie Marchand, Michaela McCormack, Cynthia O’Donoghue, Stephen Edwards, Marina Palomba, Sachin Premnath, Laurence G. Rees, Stephan Rippert, Nicolas Sauvage, Katharina Weimer and Michael Young. Contributors are listed alphabetically according to title in each chapter section. Most importantly, this White Paper remains a living document as we add more chapters and update those we have, making sure it continues to be the definitive source for legal issues in social media. You can access this document by visiting http://www.legalbytes.com/articles/social-and-digital-media-law/HU .UH We welcome your ideas and comments as well. If you have anything you’d like to share with us—good or bad—please send it to [email protected] .UH Thank you. Gregor Pryor Douglas J. Wood Editor, Europe Editor, United States – i – Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon — EDITORS — GregorHU Pryor UH – [email protected] U JosephHU I. Rosenbaum UH – [email protected] U DouglasHU J. Wood UH – [email protected] U StacyHU K. Marcus UH – [email protected] U — TABLE OF CONTENTS — IntroductionU U.............................................................................................. 1 AdvertisingU & MarketingU ......................................................................... 4 CommercialU LitigationU ........................................................................... 16 CopyrightU (EU)U ....................................................................................... 29 CopyrightU (U.S.)U ..................................................................................... 32 DataU Privacy & SecurityU ........................................................................ 39 EmploymentU PracticesU .......................................................................... 48 FoodU and Drug AdministrationU ............................................................. 57 GovernmentU Contracts & InvestigationsU ............................................. 62 InsuranceU RecoveryU .............................................................................. 64 Litigation,U Evidence & PrivilegeU ........................................................... 68 ProductU LiabilityU .................................................................................... 72 SecuritiesU (UK)U ....................................................................................... 74 SecuritiesU (U.S.)U ..................................................................................... 81 TrademarksU U ............................................................................................ 88 BiographiesU of Authors and EditorsU .................................................... 95 GuideU to Social Media Terminology and WebsitesU ........................... 108 EndnotesU U .............................................................................................. 118 – ii – Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon Welcome to the New World Introduction0B Introduction Social media is a revolution in the way in which corporations communicate with consumers. This White Paper will help you to maximise the huge potential benefits of this revolution and protect against the inherent legal risks surrounding social media. In this document, you will find practical, action-oriented guidelines as to the state of law in the United States and Europe in the following areas: Advertising & Marketing; Commercial Litigation; Data Privacy & Security; Employment Practices; Food & Drug Administration, Government Contracts & Investigations; Insurance Recovery; Litigation, Evidence & Privilege; Product Liability; Securities; Copyright & Trademarks. As we continue to expand the White Paper, we will add additional chapters as well as updates. So be sure to bookmark http://www.legalbytes.com/HU UH and subscribe to the Legal Bytes blog. What is Social Media and What Does it Mean to Business? Everyone has heard of Facebook, YouTube, and MySpace. These are just the tip of the iceberg. There are thousands of social media sites with billions of participants. And it’s not just individuals. Multinational companies and their CEOs are increasingly active in the social media space via blogs, Facebook fan pages, and YouTube channels. Everyone is a user and, as with every new communication channel—billboards, radio, television, the Internet—there is huge potential, and huge potential risks. The speed of development in social media outstrips corporate risk management capability. It took radio 38 years to reach 50 million listeners. Terrestrial TV took 13 years to reach 50 million users. The Internet took four years to reach 50 million people. 1 In less than nine months, Facebook added 100 million users.D It’s All About the Conversation One-way communications with advertising, press releases, labels, annual reports, and traditional print media is going the way of the dinosaur. We no longer just listen. Audiences are not static. We now engage in a conversation. What was said in the living room is now published on Facebook. What we do in public and private is now broadcast on YouTube. What employees talked about at the water cooler now appears as tweets on Twitter. All of it memorialised in discoverable form. All of it available to millions with the simple press of “post.” Social media is about “changing the conversation”—getting people to say the right things about your company and its products 2 and services.D D A Shift in Media Values Broadcasters have now caught on to the idea that social media fundamentally affects the presentation and even the content of their product. The music industry now embraces social media, using it as a valuable promotional tool. Even the movie industry get in on the act, perhaps even earlier than intended, with the phenomenal success of the online marketing program for the “Blair Witch Project.” At the time of its release, the “Blair Witch” site was in the top 50 most-visited sites on the Internet, creating a vibrant “word-of-mouth” campaign that ultimately helped a $750,000 film gross revenues of $250 million. Social media represents a huge opportunity for media and entertainment companies. They can engage with their audience in ways that were previously impossible, and can leverage that engagement with commercial opportunity. However, with this opportunity comes a threat— Introduction 1 Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon YouTube allows everyone to be a broadcaster. As our chapter about copyright demonstrates, social media strikes at the very heart of the proprietorial foundation upon which traditional media campaigns are built. Managing Reputation – The Asymmetrical Consumer Relationship Historically, brand owners were able to determine the relationship that consumers had with their brand. Now, thanks to social media, consumers are the ones who increasingly define how the brand is perceived. A major retailer asked a simple question on its Facebook page—”What do you think about offering our site in Spanish?” According to its Senior Director, Interactive Marketing and Emerging Media, the response “…was a landmine. There were hundreds of