A Step-by-step guide for NYC Tenants to Challenge Rent Hikes

The rent is too damn high! What else is new in NYC? Landlords in New York City and its boroughs of Brooklyn, Queens, the Bronx and Staten Island have been going on a rent raising spree in what is already the most expensive city in the country. With the increase of venture capital real estate firms buying up properties at record pace, this problem does not seem to have an end in sight.

Often tenants feel as though they are subject to the whims of their landlords when it comes to lease renewals and rent regulations. Either consent to another 20% raise in rent or look for someplace new along with all the expenses and stress that come along with it. Some people are even getting priced out of the city permanently.

This is true to an extent, particularly if you live in an apartment that is not subject to any rent control or stabilization. However, you should check on your apartment’s rent history first because you may have some leverage of your own.

Most apartments in NYC used to be rent stabilized at some point, meaning that rents could only be raised by a very small percentage per year, along with many other protections and benefits for tenants. In order to be removed from rent stabilization certain thresholds needed to be met. Surprisingly, or perhaps unsurprisingly, landlords often disregarded these thresholds and simply deregulated the apartments illegally, thinking nobody would catch on. However, thanks to the recent Housing and Stability Act of 2019 tenants have more power than ever to challenge their landlords in these kinds of matters.

Below I’ve put together a step by step list of actions that a tenant can take to determine if their apartment was illegally deregulated at some point, and what they can do about it if it has been. Also, keep in mind that this only applies to buildings with 6 or more units. Anything less has a different set of rules.

Step 1 – Order your apartments rental history through the Division of Housing and Community Renewal (DHCR) website. It will be mailed to the apartment. The landlord will not be notified that you made a request.

You can request your apartment’s rental history here: https://portal.hcr.ny.gov/app/ask

Step 2 – After you review the rental history you will be able to see if and when your apartment was deregulated. There will also be a reason provided for the deregulation. In this article we are going to be talking specifically about the most common deregulation called “High Rent Vacancy Deregulation”.

The DHCR has a fact sheet describing what this means here: https://www.msnhlaw.com/docs/fact_sheet_36_20140416125149.pdf

You will also want to know what the rent threshold for deregulation was at the time the apartment was deregulated. That information can be found here: https://hcr.ny.gov/system/files/documents/2020/11/fact-sheet-36-02-2020.pdf

Step 3 – Determine how much money worth of improvements needed to be performed by the landlord to raise the value of the rent to qualify for deregulation. To do this you will subtract the last legal regulated rent contained on the rental history you received from the DHCR from the threshold rent listed on the historical deregulation chart. Then you multiply that number by the appropriate multiplier depending upon the date of deregulation and size of the apartment building.

If your apartment was deregulated before 2011 then the multiplier is 40x. This means that to increase rent by $1,100 per month then the landlord needed to perform $41,000 worth of improvements. ($1,100 x 40).

If your apartment was deregulated between 2011 and 2019 then the multiplier is 40x (for buildings with 35 or less units) or 60x (for buildings with more than 35units).

If your apartment was deregulated after June 24, 2019 then the multiplier is 168x (for buildings with l35 or less units) or 180x (for buildings with more than 35 units).

Another way to state it is that a landlord can only increase monthly rent by 1/40 (or 1/60, 1/168, 1/180) the amount of the total cost of improvements.

Links with this information can be found at:

May 2016 Operational Bulletin - https://hcr.ny.gov/system/files/documents/2020/02/operational-bulletin-2016-1_0.pdf

February 2020 Operational Bulletin - https://hcr.ny.gov/system/files/documents/2020/02/operational-bulletin-2016-1_0.pdf 

For example, if an apartment was deregulated in 2014 then the deregulation threshold is $2,500. If the last legal listed rent was $1,400 then the landlord would be seeking a rent increase of $1,100 per month. If the apartment is located within a building with 35 units or less then the landlord would have needed to provide improvements to the apartment costing at least $44,000 ($1,100 times 40X multiplier).

Step 4 – Determine if there is a paper trail of work performed by the landlord.  

You can look up if permits for any construction at the apartment were applied for by the landlord through the DOB Building Information Search - https://a810-bisweb.nyc.gov/bisweb/bispi00.jsp. Often the permits will list an estimate of the cost of work to be performed. If there are no permits then it may be more difficult for the landlord to prove that work was done. Almost all work that would qualify for rent deregulation would require the landlord to obtain a permit. If there is no permit, then the landlord likely did something wrong.

Step 5 – If you do find permits for renovation to your apartment occurring around the time the unit was deregulated the next thing you want to do is obtain the plans for those permits through the DOB. This will require you to first make a request for the plans from the DOB website and then go to the DOB in person to retrieve the plans. A guide for how to schedule a plan examination can be found here: https://www1.nyc.gov/assets/buildings/pdf/appointment_guide.pdf

Step 6 – Develop your strategy.

What we are trying to do here is determine if we can craft an argument that the apartment was deregulated illegally. So, sticking with the example above we know that the landlord needed to provide $44,000 in improvements to the apartment to legally deregulate. At all times the burden is on the owner to prove that the work was performed and for the cost needed to deregulate. The types of documents a landlord would have to provide to prove this include: Cancelled checks contemporaneous with the completion of work, Invoice/Receipt marking the work as paid in full, signed contract agreement, contractor’s affidavit, and potentially additional information.

Additionally, there are certain types of work a landlord can perform that will not count toward an improvement. This is when a landlord performs work this is considered normal maintenance and ordinary repairs, and tries to pass it off as improvements to the unit. These things include, but are not limited to, scraping, plastering, sanding, priming and painting walls, scraping, sanding and polishing floors, removing rotten beams, partial rewiring, etc.

Before you confront your landlord, you want to make sure you have a clear understanding of the position you want to take. You may also wish to consult with an attorney. Here is a link to our contact form HERE.

There are many other factors to consider before determining what the next step should be. These factors include the thoroughness of your research, the severity of the discrepancies between improvements provided and rent added, your risk tolerance, your financial situation, and many others, making it impossible to provide a one size fits all solution.

The best thing you can do is reach out to an attorney after you’ve completed as much information gathering on your own as possible. They will be able to help assist you in evaluation your claims. Generally, our office offers free initial consultations which will include a review and analysis of all documents collected by a tenant. In addition, should we determine that filing a lawsuit is the appropriate course of action we make sure that every tenant gets the legal help they deserve, regardless of their financial situation.

What happens if the apartment was illegally deregulated?

This is the answer, I presume, you’ve been looking for. In the event that a tenant is able to prove, in court, that an apartment was deregulated illegally then there are a great deal of benefits granted.

First, the apartment will be returned to its status as a rent stabilized apartment, and the landlord will be required to offer you a rent stabilized lease. The biggest benefit of a rent stabilized lease is that it limits the amount a landlord can increase your rent each year (usually 1-4% per year) plus a lot of other great protections.

Second, the rent will be reduced to the level that it was prior to being illegally deregulated plus additional legal rent raises that the landlord would have otherwise been entitled to. Let’s take the example we’ve already been talking about. The landlord needed to provide $44,000 in improvements to deregulate the apartment. The tenant brings the landlord to court and the landlord can only prove that he spent $22,000 on improving the apartment. That means that the landlord can only claim $550 in rent increases (22,000/40). This brings the legal regulated rent to $1,950. In this case the tenant will receive a rent stabilized lease with a base rent of $1,950.

Third, the tenant will be awarded damages equal to three times the rent overcharged by the tenant. Let’s keep working with our example. Let’s now assume that the tenant had been paying a rent of $2,600 for the past 12 months. In this case, the amount of monthly rent overcharge would be $650 per month ($2,600 - $1,950) with a total 12-month overcharge of $7,800. Therefore, the tenant would be awarded damages in the amount of $23,400.

Fourth, the landlord will be required to pay the tenant’s legal fees, or reimburse the tenant if the tenant already paid the fees.

A landlord stands to lose a lot should a tenant successfully show that an apartment was illegally deregulated. Often times this proves as a great negotiation chip to get a landlord to agree to a fair lease.  I would recommend every tenant in New York obtain their DHCR rental history to ensure they are being treated legally and fairly by their landlords.

The Basic Legal Documents Every Online Business Needs

***This article was created for education/informational purposes and should not be considered legal advice. For specific legal questions concerning yourself or your business you should contact an attorney. 

If you think that your business needs one or more of these documents visit www.DigiMarketingLaw.com for affordable legal solutions.

1.     Terms of Use/Privacy Policy – While technically these two documents are separate, they really do go hand in hand. The Terms of Use will spell out to visitors to your website the rules they are expected to abide by, and what they can expect of you in return. A Privacy Policy lets site visitors know exactly how you will be collecting, using, disclosing, and managing the information they submit. Many business simply copy and paste these documents from other similar websites, but this is a very dangerous practice, and not only because you have no idea how the business you copied got those documents in the first place. No two businesses are exactly the same, so there are bound to be some inconsistencies between what is in the documents you copied, and what you’re actually doing. And… if a consumer ever makes a complaint against your website/business and you aren’t following your Terms of Use and Privacy Policy 100%, you could find yourself with a hefty amount of legal trouble.

2.     Proper Disclaimers -  If you have any kind of sales pages or sales materials on your website then it is essential that you use proper disclaimers in your advertising. The Federal Trade Commission (FTC) is the government agency that looks out for false or misleading advertising, and using proper disclaimers is one of the best and easiest ways to keep them off your back. The types of disclaimers you need depend entire on the type of products/services you offer, the industry you are in, and what is said in your advertisement itself. Penalties for failing to use proper disclaimers start at a minimum of a hefty fine, and in some cases could result in your business being shut down.

3.     Independent Contractor Agreements – As an online business, chances are you aren’t hiring too many full-time employees. When a task comes up that you can’t perform yourself, you’ll probably look to hire someone to perform that task, and nothing else. In a perfect world, we’d love to have simply handshake agreements and not have to worry about it. Unfortunately, we don’t live in a perfect world, and we need to protect ourselves and our businesses. A good independent contractor agreement spells out exactly what service is being performed, how long it is supposed to take, and the pricing. Also, if someone is creating something for your business you will want to make sure that you retain all intellectual property rights. The default rule is that if some makes something for you, they get to keep the rights. It’s up to you to make sure the agreements states that your business is the one who keeps the rights instead.  

4.     Non-Disclosure Agreements – To grow our businesses, we often talking to others about potential opportunities. Sometimes these talks resulting is something significant, sometimes they don’t. Almost all the time these discussions involving talking about information that is very important to your business, and would be harmful if your competitors found out. When entering these kinds of talks it becomes very important that each party signs a non-disclosure agreement. This agreement will ban someone from discussing your private business information from anyone else, and if they break the agreement they will be subject to substantial penalties.

5.     Customer Agreements -  No matter what you’re selling, and especially if you’re selling online, you will need to have an agreement between yourself and the customer. The agreement will set forth exactly what services you are providing, and will spell out the rights of you and your customer. With such an agreement, an unhappy customer is free to make any claims and drag you through the mud. No matter what you’re doing, all sales should be in writing. This applies to everything, including coaching, consulting, advising, information products, physical products, SaaS, software products and freelancers.

6.     Affiliate Agreement – Selling through affiliates is one of the most popular methods of getting your product in front of as many potential customers as possible. Far less popular are adequate affiliate agreements. A good affiliate agreement will make it clear to each party what they are putting in and what they can expect to get out. If there is a disagreement then the answer will in the agreement itself, saving everyone time and money. A well written agreement will also help avoid lawsuits from those particularly unscrupulous people.

***Note: One of the biggest complaints I hear from people is that they recently performed work for someone, but haven’t been paid, and the person or business who owes them money is nowhere to be found. This is such a common problem and it can be easily solved by a well drafted contract. When the terms of a contract are clear, and one party violates those terms, then having that issue remedied becomes easy. There is no need for a long and costly lawsuit, instead you can get a simple order from a judge instructing them to pay. Any business that ignores an order like that from a judge probably won’t be in business much longer. 

Trademark Rip-Offs to Avoid

***This article was created for education/informational purposes and should not be considered legal advice. For specific legal questions concerning yourself or your business you should contact an attorney.

1.    Beware of services with low initial charges and inflated fees afterwards

·      Responding to office actions

·      A thorough registerability search

·      Correcting errors

·      Requesting extensions

·      Reporting actions from the examining attorney

·      Status checks

·      Reporting a Notice of Allowance

2.    Responses to Office Action not-included in price

·      Over 70% of trademark applications require a response to an office action.

·      An office action is a request by the USPTO examining attorney for additional information and often includes legal arguments as to why your trademark should be registered.

·      A response often entails legal research, the drafting of legal arguments and specific responses to legal issues raised by the examining attorney.

·      Low-fee services do not include responding to office actions in their services, and will subject you to inflated hourly rates to do so.

3.    Beware of services that will file applications for unregister-able trademarks

·      The “searches” these companies perform are often so basic and bare-bones that they will file a trademark application that is almost certain to be denied.

·      They don’t care à their fee is nonrefundable and then they can charge you to file a new application

4.    Make sure your service or firm offers a money back guarantee

·      After conducting our search (which is free) we will assign your trademark a grade in terms of how likely it will receive registration

                                      i.     “D” – registration is a long shot so if you decide to go through with the registration we will not offer any refund if it gets denied

                                    ii.     “C” – registration is plausible but there are significant challenges in the way. We will offer a 25% refund if the application is denied

                                   iii.     “B” – Registration is likely but there are some minor issues. We will offer a %50 refund if the application is denied

                                   iv.     “A” – Registration is extremely likely. We will offer a 75% refund if the application is denied. 

Myths of Trademark Registration

***This article was created for education/informational purposes and should not be considered legal advice. For specific legal questions concerning yourself or your business you should contact an attorney.

Myth #1: I’m just a small business and we’re just getting started

When it comes to Trademarks, and most business decisions for that matter, you should be making decisions based on the premise that your business will be successful. If you wait too long to trademark your brand someone else might beat you to the punch. Ask yourself, would you be OK losing your brand and having to rebrand to something else? Think about how devastating that would be to your business. Would you be OK with your competitor using your brand to advertise their stuff? Without a Trademark registration, you would have to fight them in court, and that would cost you tens of thousands of dollars.

***Also, you don’t want to build up a brand only to later on find out itsnot registerable.

Myth #2: I don’t need a Trademark because I’ve already registered my company’s business name

This a pretty common misconception. People think that since they’re company is registered or incorporated it means their brand is completely protected. But this is inaccurate for two reason. 1) Your company name is only registered in the state in which it is incorporated, and so people can open similar, or even identically named companies, in other states. 2) Brand names and company names are not the same thing.

For example, you can own a skydiving company called Free Falling, Inc. However, there could have also been a company registered as Skydivers, Inc. and this company could advertise their skydiving company as “Free Falling Skydivers”. In this case, if Skydivers, Inc. trademarked “Free Falling Skydivers” then the company Free Falling, Inc. probably wouldn’t even be able to brand or advertise using the Free Falling brand. Thank of it this way, Coca-Cola sells Dasani water. You might be able to register Dasani, Inc. as a company in some states, but even if you did, you wouldn’t be able to sell beverages under the brand name Dasani.

Myth #3: My brand name should accurately describe my products and services

Another popular misconception. Let’s use another example to illustrate why this is a bad idea. Joe is an electrician and wants to use the brand name, “Best Electrician Services”. This is what is known as a descriptive mark and it is extremely unlikely that the trademark application would ever be approved. In addition, a mark is best used when it can distinguish you from your competitors, and this mark just doesn’t get the job done when it comes to that.

Think about the best and most recognizable brands in the would. McDonalds doesn’t call itself “delicious hamburgers” for a reason. Same goes for Microsoft not calling itself “the best computer chip company”. The list goes on and on. Great marks, and the most protectable marks, are original and distinguishing, not descriptive.

Myth #4: Because a mark is usable, it is registerable

False. Look back at the example of “Best Electrician Services”. You can use that mark in your advertising, but you would never be able to register that mark.

Myth #5: If a mark is registerable, I can use it

At first glance, this not might make sense, but it is very important when selecting a brand name. Let’s say you are able to register the mark “Cloud Dream Mattresses”. However, what if there are mattresses companies in different geographic areas of the United States using “Cloud Dream Mattresses”. Even though they never registered their trademarks these companies could still challenge your ability to use the “Could Dream Mattresses” mark in their areas. You may or may not win that fight, but it’s going to end up costing you time and thousands of dollars defending your right to use the mark.

This is why a preliminary search that goes deeper than simply finding out if a mark is registerable is necessary. You need to search state databases and also just businesses in general to see if anyone is using your mark.

Myth #6: Trademarking is expensive

First things first – obtaining federal trademark rights for your brand typically costs anywhere from $1,000-$2,000. To some that seems expensive, to others it doesn’t. However, there is no argument that these things are incredibly for expensive -1) Having to re-brand your company after spending years building it up -2) Losing your brand entirely – 3) Going to court to fight for your right to continue to use your brand. If you decline to trademark your brand, chances are you are going to end up kicking yourself sometime down the road.

Myth #7: Trademarking is quick and simple

The trademarking process is not like selecting a domain name or even registering a company name. The trademarking process is a legal proceeding and takes a long time. It can take anywhere from 6 months to a year, sometimes even longer.

Myth #8: I can do it myself

Yes, technically you can. There is no law or rule preventing someone from going through the trademarking process by themselves.  You can also give yourself a haircut or set your broken a bone back in place, that doesn’t mean you are going to do it. Like I mentioned earlier, the trademarking process is a legal proceeding that takes time. If you end up doing it wrong, not only will you end up not getting your trademark, but you’ll also lose out on the months or even years of time lost and not to mention the non-refundable government fees.

Myth #9: I just want the lowest price, all trademarking services are the same

When it comes to trademarking services, you get what you pay for. Keep in mind that these “low fees” are just for filling out and submitting your application. They don’t cover any of the follow up work essential to get your trademark registered and navigate through the application process. After getting your initial “low fee” these companies will then ramp up the charges for all the additional work needed and wind up costing way more than you would pay to a transparent all-inclusive firm. 

Trademarks and Copyrights: Do you own what you think you own?

***This article was created for education/informational purposes and should not be considered legal advice. For specific legal questions concerning yourself or your business you should contact an attorney.

One of the challenges many small business owners face is understanding when and how to use Copyrights and Trademarks to protect their intellectual property. Many people do not even understand the difference between a Copyright and a Trademark. In this article we will dive into the world of copyrights and trademarks, how to set them up, and how to use them in order to protect your business and intellectual property.

What Exactly are Copyrights and Trademarks?

Copyrights and Trademarks are often confused because they both are used to protect intellectual property. In addition, once they are properly set up, they essentially prevent others from using the copyrighted or trademarked materials. The biggest difference between copyrights and trademarks are which types of intellectual property they apply to.

Copyrights apply to books, movies, music, software, choreography, architectural works and other tangible things. Copyrights do not protect facts, ideas, systems or methods of operations. Trademarks are the primary tools for protecting your brand. Trademarks are available for anything that signals to the public/customers what or whom the source of a product is. Trademarks are most commonly used to protect brand names, logos, and slogans. Trademarks are meant to protect consumers from being taken advantage of by imposter brands.

Setting Up Your Intellectual Property Protection

Many people already know that the instant you create an original work a copyright automatically attaches to that work. In a perfect world, nothing else would need to be done, and your work would be completely protected. However, this simply is not the case. For the best available protection to apply to your original work you must federally register your copyright through the United States Copyright Office.

While federally registering your copyright takes extra work and typically requires the assistance of an attorney, it provides substantial benefits which more than make up for the hassle. These benefits include:

1)    Allows you to receive statutory damages from those who infringe on your copyright, including attorney’s fees

2)    Makes it easier to determine who the true copyright owner in the case of a dispute, as the registration creates a paper trail

In contrast from copyrights, trademarks do not automatically attach to brand names, logos and/or slogans. The first step is to make a “use in commerce” of the desired trademark. This means using the mark in the ordinary course of business such as advertising materials, on packaging, or on a website. Once the mark has been used on commerce you may submit a trademark application to the United States Patent and Trademark Office to have the mark federally registered. Similar to copyrights, federally registering a trademark offers several advantages:

1)    Gives the trademark user national priority

2)    Provides evidence of ownership during disputes and/or litigation

3)    Provides enhanced remedies such as triple damages and attorney’s fees

How to determine who owns a copyright if more than one person contributed to a work?

 One of the biggest misconception businesses make is that they automatically own the copyright to every work created under the business, or by someone hired by the business to create the work. These works include advertising copy, photographs, website content or any other work that is subject to copyright laws.

On the one hand, any work created for the business by an EMPLOYEE of that business is owned by the business. Thus, the business will own all copyrights for that work. However, issues can arise when business contract with third parties to create works for the business. In this instance the default rule is that whoever created the work owns the copyright. Therefore, if a business hires an independent contract to create advertising materials, then the independent contractor will own the copyrights to the advertising materials.

If you wish to own the work, then you must have an agreement in writing which identifies who will own the copyright to the work. The agreement must specifically state that the business, and not the independent contractor, will own the copyrights to the work. In this case the independent contractor will be considered work-for-hire. Again, this agreement must be in writing and signed by all parties.

The Limits on What You Can Trademark

There are five different levels of trademarks. The top level is the strongest while the bottom level consists of words/phrases that cannot be trademarked at all. You should consider these levels when deciding on a brand name or slogan as some names will be able to obtain stronger trademarks than others.

1)    Fanciful Trademarks (Strongest) – This consists of newly coined terms that are completely original. Examples include Google, Hulu, Spotify.

2)    Arbitrary Trademarks – This consists of dictionary words that are being used in an original way. Examples include Apple, Amazon, Penguin Books

3)    Suggestive Trademarks - this consists of dictionary words being used to suggest something about the product. Examples include Playboy (brand in general), Greyhound (bus), Jaguar (car)

4)    Descriptive Trademarks – These are dictionary words that describe something about the products attributes. Examples include Toys “R” Us, or a slogan that describes ice cream as “cold and creamy”

a.     **It must be noted here that in order to be protectable, a descriptive trademark must achieve “secondary meaning”. This occurs when consumers believe a descriptive term refers to only one product in the marketplace.

5)    Generic Terms – These are completely generic words that cover an entire class of products and in no way could be trademarked to just one product. An example would be using “salt” to refer to sodium chloride

What Constitutes Copyright Infringement?

Copyright infringement generally requires that two conditions be met. The first condition is that the person you are claiming committed the infringement had access to the protectable work. The second condition is that the work that is claimed to be infringing on the copyrighted work must be “substantially similar” to the copyrighted work. This essentially means that a normal, reasonable person, would believe that the work was copied.

There are certain circumstances where a copyrighted work may be used without fear of an infringement claim. These situations include when the copyrighted work is used for education, criticism, news reporting, commentary or scholarship. This is known as “fair use”.

In addition, the FTC has generally supported the use of copyrighted works for the purposes of comparative advertising. However, the line between comparative advertising and copyright infringement is not completely clear and you should consult an attorney who specializes in this area if you intend to go down this path.

What Constitutes Trademark Infringement

Trademark infringement occurs when one person/company uses the trademark of another in the course of commerce, therefore creating the likelihood of consumer confusion. Essentially, mentioning another’s trademark in your ad copy will almost certainly be considered use in commerce.

Just as with copyrights, there are certain instances where you may use the trademark of another without it being considered infringement. You may use another’s descriptive trademark to describe your own product. This is known is descriptive fair use. For example, if a frozen yogurt company used the trademarked slogan “Tastes Like Ice Cream, Feels Like Healthy”, a competitor would still be able to run an advertisement that stated “Our frozen yogurt is just as tasty as ice cream, but it will leave you feeling healthy”.

There are also certain circumstances where you may use another’s trademark for comparative advertising, just like with copyrights. In this instance, Company A (or person A) uses Company B’s trademark in order to refer to Company B or its products. Again, if you are considering using another’s trademark you should consult with an attorney with expertise in this area.

Ambush Marketing

During highly publicized events (such as the Super Bowl), the event coordinators will create and then sell advertising opportunities to sponsors. These opportunities allow the sponsors to take advantage of the media coverage of the event. Commonly, these sponsors will be labeled the “Official Sponsor of the Super Bowl” or the “Official Beer of the World Cup”.

Ambush marketing occurs when advertisers try to take advantage of the publicity of the event without paying the premium for the “Official” designation. An example of this may be a sports drink company running advertisements leading up to the Super Bowl. The ads would depict football players but make no direct reference to the Super Bowl of the National Football League. Some more aggressive marketers may even have a slogan stating “The official sponsor of the ‘big game’” of “the official sponsor of you-know-what”.

For the most part, Ambush Marketing is not illegal so long as it does not use the trademarks or make explicit reference to the publicized event. However, if an ad toes the line these large companies may decide to make legal claims against the advertiser, even if no law was actually broken.

Registering a Domain Name Containing Some Else’s Trademark

Merely registering a domain name which contains the trademark of another does not generally amount to trademark infringement. However, doing anything else with the domain will open up liability such as publishing a website or even putting the name up for sale. Essentially, these acts amount to “use in commerce” and that is what triggers trademark infringement.

 Use of Trademarks in Keyword Advertising

As this method of advertising is relatively new, the law has not yet fully evolved in making an official determination.

The issue here is when competitors bid on keywords that contain the trademarks of another.  While courts are still exploring this subject, the general direction seems to be that it is very difficult to win a trademark infringement case against a competitor for using their trademark for the purposes of keyword advertising.

Legal Trends of Truthful Online Advertising

***This article was created for education/informational purposes and should not be considered legal advice. For specific legal questions concerning yourself or your business you should contact an attorney.

The Federal Trade Commission (FTC) is an independent agency of the United States government. They are tasked with consumer protection, and this includes the regulation of advertisers. Over the past 7 years or so the FTC has developed standards for online advertisers, and has been regularly increasing its activity in enforcing these standards. As anyone with experience will tell you, getting on the bad side of the FTC can be a death sentence for your online business, especially those just starting out. In addition to levying fines (up to $1,600 per violation) the FTC has also been known to follow lawsuits against individual businesses and has successfully frozen assets or even had entire businesses shut down.

In this article, we are going to discuss some of the most common errors made by small online businesses and how to avoid them. We will also discuss the latest set of guidelines set forth by the FTC called “.COM DISCLOSURES”.

Truth in Advertising Overview

When it comes to regulating advertisements, the FTC is primarily with ads that are unfair or deceptive. An advertisement is “unfair” if an advertiser does something that is likely to cause harm to a consumer. A “deceptive” advertisement is an advertisement that is misleading, or likely to confuse, a consumer. Advertisements may not contain statements that are untrue – “false advertising”.  Thus, an advertiser should be able to back up anything it claims in an ad. This is known as “substantiation”.

How does the FTC decide who to come after?

The FTC is a complaint driven organization. This means that they accept consumer complaints and act on them. They also accept complaints from competitors. 1.8 million consumer complaints were filed in 2011 alone. In addition, once the FTC begins an investigation they might also decide to look at other participants in the same or similar industry to determine if a certain deceptive tactic is rampant industry wide. This is how many relatively small businesses wind up getting in trouble with the FTC. The recent trend has been that the FTC is upping its efforts to reel in online businesses.  From 1978-1988 there were 138 proceedings related to false advertising. From March 2010 to April 2011 there were 110 proceedings, with vendors paying out a total of $368 million.

Understanding Disclaimers and Disclosures

Obviously, there are limitations as to the amount of factual information that can be included in an advertisement. One response to this is the use of disclaimers. The purpose of disclosures is to avoid misleading customers. While it is common, and most times acceptable to generally advertise your strengths without mentioning your weaknesses, there does come a point where certain information must be provided to avoid misleading a consumer.

For example: there was an instance in which eBay was advertising that Tiffany jewelry was sold on its website and eBay made statements that all the Tiffany jewelry was authentic. However, eBay knew that much of the jewelry was fake. This is a case of false advertising. First, since eBay knew that some of the jewelry was fake it was not allowed to advertise that ALL of it was authentic. Second, even if eBay didn’t mention anything about the jewelry being authentic, it still should have had a disclosure stating that some of the jewelry might be fake.

Two of the most common disclosures required are called “Earnings Disclaimers” and “Testimonial Disclaimers”.

Earnings Disclaimers come into play when you are offering a product to purports to improve the financial situation of the customer. This may be training programs that teach people how to get clients, or promotes some other product or service that provides an opportunity for a consumer to make money. At the very least, a proper earnings disclaimer should inform the customer that their level of financial success is dependent of several factors that are out of the advertisers control such as the amount of work they out in, their skill level, their personal network, and other various economic factors like market fluctuations.

Testimonial Disclosures are needed when you use endorsements or testimonials from others in promoting your own product. The general rule is that these endorsements must reflect the honest experience or opinion of the endorser. In addition, endorsements can NOT contain representations that would be deceptive or unsubstantiated as if the advertiser made them himself. In many cases an advertiser will select most positive reviews he has gotten from his customers if order to present her product or service in the best light. In these situations, your disclosure should make it clear that those testimonials represent a best-case scenario and do not indicate the average customer experience.

In addition, many advertisers will provide products to people for free in exchange for positive endorsements or testimonials. In these situations the advertiser is required to disclose that the person providing the endorsement received the product for free, or received some other benefit in exchange for providing an endorsement. Further, a person providing an endorsement for your product on their own blog or website should disclose that they received the product for free, or other benefit, at the top of the web page before the endorsement. Please note that these disclosures are not required when an endorser purchases your product with their own money and then decides to provide a testimonial after the fact.

How is the FTC currently regulating online advertisers/marketers?

As we previously discussed, the FTC has been cracking down on deceptive marketing practices online. Over the past several years they have released certain guidelines for internet marketers on how to advertise properly and how to effectively use disclaimers and endorsements.

The FTC reminds the internet marketing community that the three basic principles of advertising law are, 1) Advertising must be truthful; 2) Advertisers must have evidence to back up their claims, and; 3) Advertisements cannot be unfair.

The FTC has expended a lot of energy clarifying is stance on disclosures and how they should be presented. The safest way to provide a disclosure, from an advertiser’s perspective, is to put the disclosure/disclaimer right there in the ad copy, right next to the triggering claim. (** A “triggering claim” is a statement made in an advertisement that prompts the need for a disclosure). Furthermore, the disclosure should be clearly identifiable. This means no fine print. This could mean that the disclosure should be a different color from the ad text and it should contain the proper information needed to make the advertising claim complete.

It is often the case that a complete disclaimer would not fit into an advertisement. In this case many advertisers prefer to create hyperlinks and send consumers to a different page where the entire disclosure is spelled out. For many years the typical practice has been to provide a link at the bottom of a sales page with the link simply stating “disclosure”. This is not considered acceptable by the FTC. Firstly, the disclaimer or the link must be in very close proximity to the triggering claim. Secondly, the link must be clear that it is a link to a disclaimer and alert the consumer to the nature of the disclaimer.

Let’s take the example of an advertisement that makes the claim that a certain pet shampoo “eliminates the risk that your pet will ever get fleas”. However, the truth that the product only reaches that level of effectiveness when used a certain way and combined with other products/materials. This claim would obviously require a disclosure. There are two ways this disclaimer could be made. The first would be simply stating that information right under the triggering claim. However, for many reasons the advertiser may wish to provide a link to another page with a complete disclaimer and instructions on how to get the best use. Simply putting a link titled “disclaimer” next to the triggering claim is not acceptable. Instead, the link should state something along the lines of “In order to achieve the full effect of this product it must be used in a very specific way. Click here for more information”.

Another example would be a company selling digital home security cameras. The advertisement shows a picture of the camera and lists the price of the camera to be $99. However, the ad does not state that there is a $9 monthly service fee associated with the camera, and without the service the cameras are basically useless. In this case the service fee information should be clearly stated in close proximity to the camera picture and price. Advertisers should also understand that they may be required to make similar disclosures multiple times throughout their advertisement. The general rule is that each time the same triggering claim is made, the same disclosures must be made.

*** There are numerous ways in which one can advertise and thus the different types of advertisement claims that may trigger the need for a disclosure/disclaimer are limitless. If you are not sure whether or not your advertisements are legally complaint it is recommended that you obtain the services of an attorney.