The Top 20 Legal Mistakes Affiliate Businesses Make

The Top 20 Mistakes Affiliate Businesses

Make

1953 Gallows Road, Suite 650 | Tysons Corner, VA 22182(703) 288-2800 | www.fednexuslaw.com

Tuesday August 12th from 2:00 – 3:00

Eric S. Crusius, Esq.Partner at Fed Nexus Law

[email protected]


Those who cannot remember the past are condemned to repeat it.

-George Santayana in 1905


But….


You are not doomed.


Let’s learn from the past.


These are the Top 20 Legal Mistakes Affiliate Marketers Make


Mistake #1: Not treating your business like a business.

The Fix: incorporate. For a small sum, incorporation usually allows an individual to escape liability.

Caveat: Treat your business as a separate entity. If not, courts may still hold you personally liable.


Mistake #2: Not having the right contracts.

The Fix: • Affiliates should have contracts with their networks to understand

the parameters of what they can do. • Networks should have contracts that protect them from affiliates

(not that they need it!) • Do not be afraid to negotiate and make sure every contract is

read to ensure there are no trap doors.

Caveat: Each situation is different, so it may make sense to have your contract reviewed by a lawyer.


Mistake #3: Affiliate Networks operating without contracts.

The Fix: Affiliate networks should have three categories of contracts in place:1. Website contracts that outline terms and conditions and

privacy policy;2. Contracts with merchants that outline use of merchant’s

intellectual property – how and when merchant’s text, photos, logos, etc. can be used; try to avoid blame for legal wrongs by affiliates; set payment conditions; and

3. Contracts with affiliates that ensure there is no liability for affiliate wrongs; pass down terms from merchants; govern how affiliates advertise.


Mistake #4: Affiliates operating without contracts.

The Fix: Affiliates should have three categories of contracts in place:1. If applicable - website contracts that outline terms and

conditions and privacy policy;2. Contracts with networks that governs how affiliates

can utilize intellectual property – how and when text, photos, logos, etc. can be used; network/merchant may try and obtain indemnification for legal wrongs; set payment conditions; and

3. Contracts with 1099 workers or consultants.


Mistake #5: Failing to understand proper trademark use.

The Fix: Take a crash course in what trademarks are and what they mean and how to use them. 1. Network/Merchant – Affiliate contracts should have

how and when to use the trademark; and2. Affiliates should review their contracts to ensure

they are using trademarks properly. A Deeper Look: trademarks include logo, name, and trade dress. Violating a trademark can lead to significant statutory damages.


Mistake #6: Failing to understand proper copyright use.

The Fix: Take a crash course in what copyrights are and what they mean and how to use them. 1. Network/Merchant – Affiliate contracts should have how

and when to use text and pictures; and2. Affiliates should review their contracts to ensure they

are using text/pictures properly. A Deeper Look: copyrights are text, pictures, images, etc. Significant statutory damages available though work is considered copyrighted upon creation; easy to register a copyright; beware of DMCA Takedown Notices.


An important reminder...

Intellectual property is everywhere. Every word written and every photograph taken is automatically and instantaneously protected by copyright.

Whether registered or not, logos could be protected by copyright law.


Mistake #7: Not being honest with advertising.

The Fix: Carefully vet claims (and venue of claims) made with advertisements. Otherwise the FTC may take notice.

Among other things, the FTC monitors advertising claims made by affiliates, networks, and other marketers.

Avoid trouble – no deceptive formats (fake news stories), no false endorsements, no unsubstantiated claims.


Mistake #8: “Free” Trials

The problem: often state attorneys general get complaints about free trial “scams.” There are 50 state AGs out there, so beware.

The Fix: Carefully and boldly lay out free trial terms and conditions. Is a return necessary to avoid a credit card charge? Is it easy to return a product? Are toll free lines staffed adequately?


Mistake #9: Spamming

The Fix: The CAN-SPAM Act has certain requirements that need to be followed. The FTC seeks out CAN-SPAN violators and “damages” can be extensive.

CAN-SPAM requirements include accurate subject lines, the ability to opt-out, and using e-mail addresses to send obtained with false information.


Mistake #10: Bad AdWord Campaigns

The Fix: AdWords have been the subject of a lot of confusion. Be sure not to use another’s TM when drafting AdWords and other similar advertisements.

The Caveat: some courts have ruled using a TM as a keyword is okay. Check with your attorney prior to doing that, however. One thing that is not right: using another’s TM in your advertisement.


Mistake #11: Using Another’s Photos

The Fix: Use your original photos or get permission from another to use their photos.

Additional Background: photographers and copyright holders are aggressive. Straight product photos are often copyrightable. Violations of the Copyright Act can result in statutory damages and attorneys fees.


Mistake #12: Merchants that do not understand their risks

The Risks:• Networks and affiliates violate various laws• Networks and affiliates misappropriate merchant’s IP• Networks and affiliates draw the ire of the FTC• Product does not function properly• Product does not work in accordance with claims made by advertisers

The Fix:• Have iron-clad contracts with networks and/or affiliates. Include

indemnification if possible (though may not be effective).• Monitor networks and affiliates to ensure they are compliant with

various laws and are in compliance with agreements. • Research in who is used as network partner. Do they have a good

compliance history?


Mistake #13: Networks that do not understand their risks

The Risks:• Networks are sometimes caught in the middle and catch the worst of

both worlds.• Affiliates can violate various laws• Affiliates can misappropriate merchant’s IP• Affiliates can draw the ire of the FTC• Merchant’s product does not function properly• Merchant’s product does not work in accordance with claims made by

advertisersThe Fix:• Have iron-clad contracts with merchants and/or affiliates. Include

indemnification both ways if possible (though may not be effective).• Monitor affiliates to ensure they are compliant with various laws and

are in compliance with agreements. • Research in who is used as affiliate. Do they have a good compliance

history?


Mistake #14: Affiliates that do not understand their risks

The Risks:• Unaware of federal and state laws that govern permissible actions• Can unwittingly misappropriate merchant’s IP• Can unwittingly draw the ire of the FTC• Merchant’s product does not function properly• Merchant’s product does not work in accordance with claims made by

advertisersThe Fix:• Understand contract signed with merchants and networks. Have a list

of what you can and cannot do. • Evaluate a contract before signing it. Would you prefer tow walk

away?• Try to negotiate “terms of contention.”• Ensure product claims are accurate.• Evaluate each advertisement to ensure compliant with best FTC

practices and CAN-SPAM practices.


Mistake #15: Protect yourself from the enemy within

The Risks: companies of all shapes and sizes are vulnerable to rogue workers or even business partners. For instance, Rogue employees and business partners who steal trade secrets (NDA), attempt a “corporate takeover,” engage in cyber attacks and hacking, try to misappropriate corporate property, and go loco.

The Fix: be vigilant and have the proper agreements in place.


Update!!!


Update!!!


Mistake #16: Protect yourself from the external enemies

The Fix: Yelp! And other review websites provide ample opportunities for those to lodge complaints. Monitor those websites and others in addition to performing vanity searches. The $$$ Fix: some website such as Rip-Off Report require payment of $$$ to investigate claims that can result in a softer edit of the complaint. Attempts to sue ROR have been unsuccessful.




Mistake #17: Not paying attention to Google Auto-

Complete


Mistake #18: Watching for dedicated “hate” websites


Mistake #19: Not utilizing best practices

• Train your employees• Register your name at social media websites• Register your name for common TLD

extensions• Register your copyrights and trademarks• Monitor Google and other search engines• Engage with complaint websites


Mistake #20: Being afraid to ask for help

Most lawyers will talk to you for free to help you scope out a

problem. Take advantage of that!


Just do it -

• Check the claims that are being made – are they accurate;

• Monitor compliance by upstream and downstream partners/parties;

• Do random Internet searches;• Ensure how claims are framed does not run afoul of

the spirit of the FTC regulations;• Handle defamation on the Internet immediately;• Check to make sure IP is being respected;• Have agreements with all partners;• Check rights and responsibilities in all contracts and

make cheat sheet bullet list to use on daily basis; and• Check state regulations – there are 50 state AGs!


Fed Nexus Law f/k/a Centre Law Group1953 Gallows Road, Suite 650

Vienna, Virginia 22182(703) 288-2800

Website: www.centreinternetlaw.comBlog: www.internetlawforbusinesses.com

E-Mail: [email protected]! @InternetBizLaw

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The Top 20 Legal Mistakes Affiliate Businesses Make