ReedSmith The business of relationships.SM Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon Third Edition US_ADMIN-78068775.33 ReedSmith Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon — PREFACE — 3rd 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 second edition added Europe. This third edition is a major update and covers virtually every aspect of social media and the law on a global basis. 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. 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 Paul Matulac at [email protected] Thank you. Gregor Pryor Douglas J. Wood and Stacy Marcus Editor, Europe Editors, United States April 21, 2014 reedsmith.com i– Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon ReedSmith Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon — EDITORS — Gregor Pryor – [email protected] Douglas J. Wood – [email protected] Stacy K. Marcus – [email protected] — TABLE OF CONTENTS — Introduction .................................................................................... 1 Advertising & Marketing ............................................................... 4 Brand Protection & Reputation Management ........................... 23 Copyright (EU) ............................................................................. 37 Copyright (U.S.) ........................................................................... 40 Data Privacy & Security .............................................................. 43 Employment Practices ................................................................ 54 Food and Drug Administration ................................................... 63 Government Contracts & Investigations ................................... 74 Insurance Recovery ..................................................................... 77 Litigation, Evidence & Privilege ................................................. 82 Product Liability ........................................................................... 87 Securities (UK) ............................................................................. 90 Securities (U.S.) ........................................................................... 97 Trademarks ................................................................................ 110 The U.S. Patent Minefield .......................................................... 119 Biographies of Authors and Editors ........................................ 123 Guide to Social Media Terminology and Websites ................ 136 Endnotes .................................................................................... 146 reedsmith.com ii Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon ReedSmith Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon Welcome to the New World 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. What is Social Media and What Does it Mean to Business? Everyone has heard of Facebook, LinkedIn, YouTube, and Twitter. 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, YouTube channels, Twitter handles and much more. 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. In less than nine months, Facebook added 100 million users.1 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 and services.2 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 reedsmith.com Introduction 1 Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon ReedSmith Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon 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— 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 negative responses flowing in, people posting racist and rude comments. Our contact center was monitoring this, and they were crying, waiting for a positive comment to come in.” The racist and negative responses posted by purported “fans” were so bad that the site was shut down, with a spokesperson noting, “We have to learn how to respond when negative comments are coming in.”3 United Airlines broke a passenger’s guitar. They handled his complaint through traditional procedures, eventually refusing to pay for $1,200 in repairs. In response, the passenger posted a humorous music video to draw attention to United’s consumer support incompetence on YouTube. 4 To date, there have been nearly 6 million views of the video. After two other videos, and after United donating the cost of the guitar repairs to charity per the musician’s requests, United managed to lose the musician’s bags, an event that was reported to millions in the blogosphere.5 The story was a lead story on CNN’s Situation Room, reported by anchor Wolf Blitzer.6 As a result, United’s stock value fell considerably.7 To add insult to injury, the incident is impacting the law. U.S. Sen. Barbara Boxer (D-Cal.) is championing the Airline Passenger Bill of Rights Act of 20098, citing the United debacle.9 We can’t help but wonder if United would have fared better if it had discarded the old way and instead engaged in the conversation using the same social media platforms that were used to attack its brand. For at least one major company, engaging made all the difference. Two employees of Domino’s Pizza posted a disgusting video on YouTube in which they adulterated the chain’s food. In addition to reporting the video to the police,