It’s been another busy year in social media, with an increasing number of high profile cases dealing with the new technologies, risks and opportunities offered by this medium of communication. A number of cases this year have been helpful in providing guidance on how social media will be dealt with by the law in the future. As the year draws to a close,
Piper Alderman’s social media team reviews the highlights of 2014, including the key legal moments for social media in Australia and the world.
$US80,000 down the gurgler after Facebook boast
In November 2011, Mr Snay, a former Head Master of Gulliver Preparatory, in Florida settled with his former employer, Gulliver Schools, after alleging that he was discriminated by his employer on the basis of his age. The settlement deal comprised of a settlement agreement with a payout to Mr Snay of $US10,000 for back wages,
$US60,000 for his attorney fees and
$US80,000 in damages. The settlement
agreement contained a fairly standard
confidentiality clause requiring that Mr
Snay (and his wife) keep the existence and
the terms of the settlement agreement
confidential. The settlement agreement
also provided that in the event of a breach
of confidentiality the $US80,000 damages
payout would be disgorged.
Within four days of signing the settlement agreement and before settlement amount had been paid, Mr Snay’s daughter shared with over a thousand of her nearest and dearest Facebook friends:
“Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.”
Not surprisingly, Gulliver Schools became aware of the post and refused to pay Mr Snay the $US80,000 damages payout on the grounds that Mr Snay had breached the settlement agreement by disclosing confidential information.
Mr Snay brought the matter to court and in first instance won an order from the Circuit Court to enforce the settlement agreement and receive the damages payout. Gulliver Schools appealed and Florida’s Third District Court of Appeals, in a succinct seven page judgment, reversed the Circuit Court’s decision
and upheld the retention of the damages payout. The Court held that as language of the confidentiality clause was clear and unambiguous:
“Snay violated the agreement by doing exactly what he had promised not to do. His daughter then did precisely what the confidentiality agreement was designed to prevent.”
lesson: Many agreements, and especially settlement agreements, will include confidentiality restraints of some form or another. Although a US decision, the US court’s interpretation of the confidentiality restraint could have been equally applied in Australia. Given the nature and reach of typical confidentiality restraints, legal advice is advisable prior to making disclosures on social media that may be actionable.
Think before you type (take six): Seafolly liable for retaliation
In 2013, we reported on the outcome of the Federal Court decision of Madden v Seafolly Pty Ltd, where Ms Leah Madden, principal and designer of the swimwear label White Sands, had created a Facebook album on her personal page titled “The most sincere form of flattery?” containing a series of composite photographs of White Sands’ swimwear and similar swimwear from Seafolly’s collection.
In addition to the images, Ms Madden posted various comments including:
- “Why allowing ‘buyers’ to photograph your collection at RAFW can be a bad idea.”
- “Ripping off is always going to happen, but sending in a dummy ‘buyer’ to get photos
is super sneaky!”
- “Seriously, almost an entire line-line rip-off of my Shipwreck collection.”
In response to Ms Madden’s Facebook posts, Seafolly issued two press releases which denied such copying and alleged that Ms Madden’s claims had been made maliciously.
The Federal Court held that Ms Madden’s conduct was misleading and deceptive
and constituted false representations in contravention of the Trade Practices Act 1974 (Cth) (TPA). Madden was ordered to pay Seafolly $25,000 in damages. Madden appealed the decision.
On appeal, the Full Federal Court, affirmed that Ms Madden’s conduct was misleading and deceptive and constituted false representations in contravention of the TPA (as applicable at the time), but revised the damages award of $25,000 to
$20,000 on the grounds that media articles that proceeded the Facebook posts got much wider readership than her Facebook pages and did not have the “underhanded” allegation. The Full Federal Court reversed the Federal Court’s initial decision in relation to Seafolly’s conduct and held that, as Ms Madden had believed in the truth of what she had published and did not knowingly make a false claim, Ms Madden’s conduct was not malicious and that Seafolly’s press releases alleging that Ms Madden’s claims
had been made maliciously were misleading and deceptive under the TPA.
On 12 September 2014, the Federal Court awarded $40,000 in damages (double
the amount of damages payable by Ms Madden to Seafolly) on the grounds that the allegations were:
- serious misrepresentations and went beyond that which was necessary to defend Seafolly against Ms Madden’s claims
- disseminated to the publishing and fashion industry
- published and remained published on Seafolly’s website until trial and
were read by potentially thousands of viewers.
Although the Full Federal Court gave an indication of the potential costs distribution, a seventh judgment is expected to determine final costs of the appeal, unless of course the parties can otherwise agree.
lesson: The saga serves as costly reminder that businesses need to be careful to ensure that statements made on
social media are correct and can be substantiated and that any responses to third party statements are also correct. Businesses should be aware of specific risks relating to social media: the ease by which comments can be hastily typed
without proper reflection and the consequent speed by which these statements can spread.
Search engine liability for defamation
In August 2014, the NSW Supreme Court (Justice McCallum) permanently
stayed proceedings brought by Mr Roland Bleyer against Google Inc LLC over 7 allegedly defamatory items published in Google’s search results.
In deciding the case, the Court noted that prior to any take down notification,
Google Inc had no editorial input into the search results (other than in the design
of the pre-programmed algorithms that crawl the web and repost text matches in response to search terms entered).
The Court’s approach differed from the view taken by the Victorian Supreme Court in the Trkulja v Google Inc case where Justice Beach found that the performance of the function of the algorithm was capable of establishing liability as a publisher at common law. The NSW Supreme Court’s approach is consistent with English authority to the
effect that at least prior to the notification of a complaint, Google Inc cannot be liable as a publisher of the search results produced by its search engine.
On the balance of probabilities “FRIENDBOOK” and “FACEMBA” is confusing with “FACEBOOK”
Facebook has successfully opposed the following trade mark applications in Australia:
- “FRIENDBOOK” for provision of consultancy services relating to social planning; and
- “FACEMBA” for provision of an Internet platform for social networking services.
Since 2013 the timeframes for opposing trade mark applications has been tightened. An interested party has only two months from the date a trade mark is advertised as accepted (with limited options to seek an extension of time) for filing oppositions to oppose a trade mark registration and must thereafter file a statement of grounds and particulars within one month. The trade mark applicant may elect to defend its trade mark application and failing to do so the matter will be heard by a hearing officer ex parte.
“Overall, I consider that, given the reputation evidenced by the opponent in its FACEBOOK trade mark both overseas and in Australia, a significant number of consumers would at the very least experience a reasonable doubt as to the existence of some sort of connection between the FACEBOOK trade mark and
the applicant’s FRIENDBOOK trade mark, particularly when these trade marks are applied to the same social networking services.”
In Facebook, Inc v FACEMBA, LDA  ATMO 83, in relation to the trade mark application for “FACEMBA”, the trade mark applicant elected not to participate in the hearing or provide any further evidence. The hearing officer held in its decision that:
“Consumers confronted with a social networking platform with the prefix FACE- would be caused to wonder if it was associated with the opponent. This would be particularly so given that the FACEBOOK services had
their origins in the area of university students. Consumers would naturally assume that the opponent might create a social network or offer other services directed to MBA students or graduates.”
In both cases the hearing officer was satisfied that the opponent’s
FACEBOOK trade mark had acquired a substantial reputation in Australia
in respect of social networking and other platform services and upheld Facebook’s claim, in accordance with section 60 of the Trade Marks Act 1995 (Cth), that deception or confusion
was likely and as such refused trade mark registration for both trade mark applications. The hearing officer also awarded Facebook costs in both cases.
In both cases, Facebook opposed the trade mark applications under section 60 of the Trade Marks Act 1995 (Cth) namely, on the grounds that the trade mark applications were likely to deceive or cause confusion with its own registered trade mark “FACEBOOK”.
In Facebook, Inc. v Northsword Pty Ltd  ATMO 74, the hearing officer held, in relation to the trade mark application for “FRIENDBOOK”, that although the trade marks were not the same when considered as a whole the trade marks
had “some striking similarities” and were in the same field of goods and services for which Facebook had demonstrated a very significant reputation.
lesson: When establishing a brand it is important to undertake
due diligence to ensure that the brand is not otherwise used or
protected by a third party. Given the tight timeframe for opposing
trade mark applications, it is important that brand owners keep an
active watch on trade mark registrations, in their field of goods and
services, to ensure that they are in a position to respond (if they
choose to do so) within the tight timeframe.
GST and crowd funding
“Crowd funding” is the popular concept by which the internet and/or social media is used to raise funds for specific business ventures. One of the most successful
examples of crowd-funding was the Pebble smartwatch, whose founders used the crowd-funding website Kickstarter.com
to raise over US$10,000,000 (notably, the company’s fundraising target was a mere US$100,000).
Crowd-funding typically operates whereby a promoter (or ‘founder’ or ‘inventor’)
of a project will engage an intermediary (Kickstarter.com in the above example)
to operate an online platform to allow the promoter/founder to connect with potential funders.
In November 2014, the ATO clarified its view on the GST treatment of crowd- funding activity (not that it contained any surprises – the document simply applies well established GST principles). According to the ATO document:
- The GST treatment for the promoter operating in Australia may vary according to:
- the model adopted and what supplies (if any) are made to the funder
- whether the promoter is carrying on an enterprise
- whether the promoter is registered for GST, or required to be registered
- whether the promoter makes supplies that are connected with Australia
- whether the funder is in Australia.
- The intermediary will have a GST liability for services to the promoter if:
- the intermediary is carrying on an enterprise
- the intermediary is registered for GST, or required to be registered
- the intermediary provides the services for consideration
- the services are connected with Australia.
The ATO document then goes on to give some examples of the models used by promoters and summarises the GST position for the promoter, as follows:
Here the funder makes a payment to the project and receives nothing in return. Generally no GST will apply.
Under this model the promoter provides goods, services or rights in return for payments (this was the model used in the Pebble campaign). The promoter will have a GST liability if all the requirements of a “taxable supply” are met in respect of the supply of the good, service or right to the funder.
Under an equity model, the funder makes a payment in return for an interest in the equity of the promoter (for example, the receipt of shares for payment). No GST will arise where the equity is shares, as the supply of shares is an input taxed financial supply.
Here the funder loans money to the promoter who agrees to pay interest on the loan. Both the funder and the
promoter are making input taxed supplies in this example, and no GST arises.
In all the above examples, the intermediary would still make a taxable supply of services it provides to the promoter, irrespective of whether the supplies to the funders are subject to GST. However, if the equity or debt model is used under which the founder is making input taxed supplies to the funders, the founder will only be able to claim input tax credits in respect of any GST it pays to make those input taxed supplies (e.g. the GST it pays to the intermediary for use of the website) if certain specific requirements are met.
Facebook “likes” do matter
While a company’s Facebook page may
be a great marketing tool for the company
to connect with their consumers, the
Full Federal Court has recently shown
that Facebook “likes” can also play an
important role in determining whether
a consumer is likely to be misled or
deceived by particular conduct.
In July 2014, the Full Federal Court’s dismissed Kosciuszko Thredbo’s (KT) claim, amongst others, that ThredboNet Marketing’s (TNM) use of the word “Thredbo” in domain names, as a
business name or on websites constituted misleading or deceptive conduct and passing off.
Thredbo, a popular destination for snow sports located in the Snowy Mountains of New South Wales, was nominally titled by KT in 1950s originally in respect of the
village managed by KT, but has since been commonly used to reference the general geographical region (including the village).
KT (and its related entity) held a lease
over land known as Threbdo and operated
resorts in the area. TNM sub-leased from
KT two properties within the village and
operated an online business for a number of
accommodation properties in Thredbo.
In deciding that the use of the word “Thredbo” did not constitute misleading and deceptive conduct nor passing off, the Court took into account Google search results and each party’s Facebook page and websites.
The Google search results for “Thredbo” and “Thredbo reservations” showed that, apart from the parties, many other websites used “Thredbo” in some form. This negated KT’s argument that they had established a distinctive secondary meaning for “Thredbo” so as to render TNM’s use of the word misleading or deceptive.
The Court also paid particular attention to each party’s Facebook page. Other than looking at the content, the Court took
into account the significant difference in the number of “likes” between the KT’s Facebook page and that of TNM’s. KT’s Facebook page had nearly 40,000 “likes”
whereas TNM only 160. The Court further stated that:
“[t]he difference in the “likes” for each Facebook page is the more telling, as that of [KT] was recorded at the peak of the
ski season during the period of the conduct complained of, while the desultory 106 likes for [TNM’s] Facebook page were the end product of that conduct recorded nearly four months later, during the trial.”
Based on the material presented, the Court concluded that while limited evidence of confusion existed, it was not widespread
or otherwise would not have caused an ordinary reasonable consumer to be misled or deceived.
lesson: This case demonstrates that Courts are willing to analyse the
consequences of social media usage to draw relevant factual findings. In the context of misleading or deceptive conduct and passing off claims, Facebook tools, such as the number of “likes” on a page, may be an indication of whether consumers are likely to be misled or deceived. Internet search results will also be relevant, as common
and frequent use of a word or phrase will support a finding that the word or phrase is not capable of being distinctive and therefore not misleading or deceptive.
Facebook bans “Like- gating”
In August 2014, Facebook changed its Platform Policy to stop administrators
of Pages from “like-gating”. “Like-gating” (or “fan-gating”) is when a Facebook page requires a user to “like” the page
in order to access certain content on the page (such as a game, a competition or other promotional offer). Of course, this is aimed at increasing the number
of likes, so as to increase the potential audience for future posts.
Facebook has published its reasoning behind the change:
“To ensure quality connections and help businesses reach the people who matter to them, we want people to like Pages because they want to connect and hear from the business, not because of artificial incentives. We believe this update will benefit people and advertisers alike.”
Facebook’s initiative is in line with ACCC’s focus on ensuring the accuracy of third party endorsements and testimonials on social media. In its Advertising and Selling Guide, ACCC notes that businesses can be held responsible for false or misleading posts or comments made by others.
lesson: Businesses will now need to work harder to win “likes”. Businesses should also regularly check Facebook’s policy changes, or risk being kicked off
altogether (and losing all your hard-earned Likes).
Privacy of social media accounts upheld
In January 2014, the Fair Work Commission upheld the privacy of social media conversations after it found that a human resources manager had been unfairly dismissed, after being critical of her boss,
a Mr Nixon, on Facebook in a personal message to the boss’ estranged wife.
The employee and the wife communicated via Facebook’s ‘private message’ function. They discussed Mr Nixon, and in particular the employee made comments regarding Mr Nixon’s treatment of her and other employees. Mrs Nixon said that her Facebook account was private. Mr Nixon
claimed that he had been given the password to his estranged wife’s Facebook account
and that he had not illegally accessed it. Mr Nixon submitted that the comments made by the employee on Mrs Nixon’s Facebook account had breached the employer’s social medial policy, which prohibited the making of offensive or derogatory comments about work colleagues. While the Facebook conversation was not a public post, the employer claimed that the conversation amounted to a breach of trust between the employee, a senior manager and Mr Nixon, the Dealer Principal of the employer. The employee’s conduct had therefore been incompatible with her obligation of trust and confidence.
It was held that while it may have been a breach of the employee’s duty of confidentiality for the employee to have
mentioned that she believed that Mr Nixon had taken a dislike to another employee, that breach was not particularly serious.
The statement was not made in public or to another employee or a customer of the employer and would have remained private to the parties to the conversation had Mr Nixon not accessed his estranged
wife’s Facebook account. Furthermore, the Commissioner was not satisfied that the employee had breached the employer’s social media policy.
The dismissal was deemed unfair, unjust and unreasonable, and compensation was awarded.
lesson: At least in an industrial relations context, some elements of social media platforms can remain “private”. It is important for employers to prepare comprehensive social media policies for employees.
2014 has seen international development in trade mark law relating to the use of “hashtags”.
In the UK, cheese company Wyke Farms
has registered as a trade mark “Free Cheese
Friday”, which has been used as a “hashtag”.
Wyke Farms claims it is the first UK brand to
register a trade mark linked to a social media
Wyke Farms has been making cheese in the UK since 1861. Four years ago, it started running a weekly competition on various social media platforms, where users can
use the hashtag “Free Cheese Friday” (for example, in a re-tweet) to win some cheese products. The competition has grown through use by consumers, and receives
over 25,000 entries per month (according to Wyke Farms).
To get a trade mark registered in Australia, a trade mark must be capable of distinguishing the foods and services associated with it. Evidence of use can be submitted to show that distinctiveness has been acquired. The UK trade marks office accepted that “Free Cheese Friday” had acquired distinctiveness through use of the trade mark. This may show a shift from the traditional form of evidence of use.
In the past, a brand owner might have shown use of a trade mark on
packaging and other product marketing, promotional material or websites, which would all constitute use by the brand owner. In the case of a hashtag, it is use by customers that may have been used to demonstrate customer recognition between the Wyke Farms and Free Cheese Friday.
The US Patent and Trademark Office has also released a guideline in relation to “hashtag marks”. It notes that an otherwise unregistrable mark will not be deemed registrable simply by adding the symbol “#” to the beginning of it.
The guideline also notes the importance of ensuring that trade marks “function
as source indicators for the goods and services”, as opposed to when a
hashtag is used “as merely a tag used to reference or organize keywords or topics of information to facilitate searching a topic”.
lessons: If you think you might want to use a hashtag as a trade mark, make sure it is sufficiently distinctive. Be aware that evidence of use may be required, and keep records of your use
and that of your customers. Include hashtag searches in your due diligence before launching a brand or competition.
Pictures tell a thousand words and can reach millions
Instagram is one of the most popular social networks for photo and short video clips but, until now, has not sought to raise revenue from users outside the US. However, with over 200 million users globally, of which 4 million believed to be
active Australian users, Instagram in October 2014 released paid advertising for Australia, Canada and UK.
Instagram’s business tools include:
- Account insights which allows
businesses to see how they’re increasing
brand awareness on Instagram through
impressions, reach, and engagement.
- Ad insights which shows the performance of paid campaigns with brand analytics (impressions, reach, and frequency) for each individual ad delivered to the target audience.
- Ad staging which allows advertisers (and their teams) to preview, save, and
collaborate on ad creative for upcoming campaigns.
As part of the Instagram business tools, advertisers will now have access to a real- time campaign summary and data showing how their target audience is responding to each of their sponsored posts.
McDonalds and Philadelphia Cream Cheese are among the some of the first brands
to jump on board for paid Instagram advertising.
Pinterest is also getting in on the act and released in March 2014 that it will be trialing paid advertising, US only at this stage. Pinterest is said to have 25 million active users globally, of which 350,000 are believed to be active Australian users.
Businesses may already set up business accounts to tap into Pinterest’s unique user demographics profile with:
- over 80% of Pinterest users believed to be women
- over 90% of Pinterest users aged between 25 to 44.
Pinterest Analytics collates referral links
back to your website and provides summary
information to businesses about users
- what users like or re-pin your pins
- who your Pinterest followers are including their gender, location and other interests
- what devices Pinterest users are using to access and pin.
7 December 2014
Instagram have indicated that all users will
see sponsored posts from time to time.
Tourism Queensland, Vegemite, Ben & Jerry’s, Toyota, Flight Centre, Audi, Lenovo,
Piper Alderman’s Social Media Team
t +61 2 9253 9913
t +61 8 8205 3477
t +61 3 8665 5526
t +61 8 8205 3415
t +61 03 8665 5547
t +61 2 9253 9936
t +61 3 8665 5511
t +61 8 8205 3468
t +61 8 8205 3450
t +61 8 8205 3446
t +61 2 9253 9924
www.piperalderman.com.au 8 December 2014