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Sixth Circuit adopts broad view of trade secret preemption

The Sixth Circuit Court of Appeals recently took a broad view of preemption under the Uniform Trade Secrets Act (UTSA) and held that Ohio’s version of the UTSA preempted state-law claims for tortious interference with prospective business relationships and conspiracy to misappropriate trade secrets because those claims arose from the same set of facts as a trade secret misappropriation claim. Stolle Machinery Co., LLC v. RAM Precision Industries, No. 13-4103 (6th Cir. Mar. 16, 2015). In reaching its holding, the Sixth Circuit noted that federal and state courts across the nation are divided about the scope of trade secret preemption under the UTSA, and the Supreme Court of Ohio has not yet addressed this issue.

The UTSA provides for damages and injunctive relief to a plaintiff whose trade secrets have been misappropriated. The UTSA contains a preemption clause that preempts “conflicting tort, restitutionary and other laws” of a state which provide civil remedies for misappropriation of a trade secret.…

Online advertiser denied immunity under Section 230 of the CDA for permitting use of fake news sites by affiliate marketers

A federal court recently agreed with the Federal Trade Commission (FTC) that an advertiser should be held accountable for the deceptive acts and practices of its affiliate marketers, and ordered that the advertiser disgorge the entire $11.9 million in payments it received. The court held that the advertiser violated Section 5 of the Federal Trade Commission Act (FTC Act) as a matter of law because its affiliate marketers used “fake news sites” to promote products sold online. According to the court, “no reasonable jury could deny” that the advertiser “both participated in, and had the authority to control, the affiliate marketers conduct in so far as it related to the fake news sites.” The court also held that the advertiser was not entitled to immunity under Section 230 of the Communications Decency Act (CDA). Federal Trade Commission v. LeanSpa, LLC, No. 3:11-CV-1715 (D. Conn. Mar. 5, 2015).

The advertiser, LeadClick Media, Inc. (LeadClick), “fiercely disputed” that it had the authority to control the affiliate marketers, and that it was responsible for creating or developing the deceptive content provided on the fake news sites. Even though LeadClick did not create the fake news sites, the court denied LeadClick Section 230 immunity because LeadClick knew that its affiliate marketers used fake news pages, had communications with these affiliate marketers regarding what products to advertise, screened advertisements according to merchants’ preferences, and provided affiliate marketers with a way to direct consumers from genuine news sites to fake news sites.…

Ad agencies: If you want to say something nice, don’t not say anything at all (about your relationship with the company or product you are praising)

As we discussed previously, the Federal Trade Commission’s Endorsement Guides apply not only to bloggers who receive promotional merchandise, but also to contest promotions and corporate social media advertising. A recent FTC action confirms that advertising agency staffers cannot casually tweet nice things about their clients without disclosing their relationship. The FTC finalized a consent order with Sony Computer Entertainment America LLC (“Sony”) earlier this month regarding charges that it deceived consumers with false advertising claims about the “game changing” technological features of its PlayStation Vita handheld gaming console during its U.S. launch campaign in late 2011 and early 2012. The FTC’s complaint against Sony charges that some of the claims made by Sony regarding the PS Vita’s “cross platform gaming” or “cross-save” feature were misleading. As part of its settlement with the FTC, Sony is barred from making similarly misleading advertising claims in the future, and will provide consumers who bought a PS Vita gaming console before June 1, 2012, either a $25 cash or credit refund, or a $50 merchandise voucher for select video games and/or services.…