Attorneys

Rachel Hirsch Senior Associate

/ P (202) 524-4145

LinkedIn connect on LinkedIn / Twitter @TheRealMsHirsch

  • Attorney Rachel Hirsch

In each client engagement she undertakes, Rachel strives to achieve the best results possible while managing costs along the way. But, equally as important to her clients, is the strong rapport that she develops with them. From their first interaction, Rachel takes the time to get to know her clients, making it clear that they are truly important to her. Part of this relationship building is evident in her dedication to responding quickly and efficiently to client inquiries, without ever sacrificing the quality or thoughtfulness of her response. It’s this reputation for service and skill that sets Rachel apart.

Rachel focuses her practice on complex business transactions and litigation.  Specifically, she approaches her work in the online advertising and iGaming spaces with an enthusiasm and drive that mirrors these rapidly evolving, cutting-edge industries. Rachel’s professional career has developed alongside these industries, so when clients call her about an issue, she understands their needs like few others. She speaks their language, deeply understands their businesses and has likely already worked with clients to resolve similar challenges. Navigating the complex regulatory and legal issues of affiliate advertisers and iGaming platforms is second nature to Rachel and she knows what it takes to resolve business interruptions and get her internet-based business clients back up and running.

Rachel’s experience focuses on all areas of Internet advertising and marketing; examples of her work include:

  • Advising e-commerce merchants on issues relating to structuring their business partnerships in ways that minimize liability while maximizing revenue through reviewing their terms, creating privacy policies and, dealing with privacy issues
  • Drafting network and affiliate agreements to ensure compliance with FTC Guidelines
  • Developing and negotiating contracts and handling contract disputes
  • Defending against class action lawsuits.
  • Addressing issues relating to copyright, trademark, and trade dress infringement from both a defensive posture as well as from an enforcement perspective
  • Conducting compliance reviews of sales pages and advertising and promotional materials (including T.V. and radio spots) to ensure compliance with applicable state and federal rules, regulations, and guidelines
  • Responding to consumer complaints that are issued through state Attorney General’s offices

As the iGaming industry has entered the legal spotlight, Rachel has followed its developments closely, regularly publishing articles on the dynamic iGaming landscape in the U.S. She applies her knowledge of iGaming regulation to her clients’ litigation needs, having written winning motions related to antitrust and RICO issues, conducted discovery, and been involved in class actions brought by players. In the courtroom, clients can rely on Rachel to know the facts of a case in such detail that she can advance arguments quickly and think on her feet when responding to arguments presented by opposing counsel. By combining her solid understanding of the industry with her ability to overcome challenging legal issues in order to identify legal grounds that work in her clients’ favor, Rachel is able to meet her clients’ high-stakes needs.

Rachel is a member of the board of the Maryland Defense Counsel, where she currently serves as program co-chair and formerly held the positions of products liability chair and sponsorship co-chair. She began developing her trial skills in the product liability defense and general commercial litigation practice at Venable LLP. Rachel strengthened these skills at Meyers, Rodbell & Rosenbaum, P.A., where she represented insurance companies in lead paint litigation.

Awards + Recognition

  • Named to The Daily Record's 2015 VIP List, Successful by 40 Honoree

Professional + Community

  • Programming Co-Chair, Maryland Defense Counsel
  • Board Member, Baltimore Women’s Bar Association (2009-2010)
  • Member, ABA
  • Member, Maryland State Bar Association
  • Member, Defense Research Institute
"The Big Debate," EGR North AmericaJune 2015
"Lessons From Recent FTC/State AG Collaborations," FeedFront MagazineJuly 2015
"Advertising and Marketing News from Ifrah Law’s FTCBeat.com, Volume 6," July 1, 2015
Speaker, Rachel Hirsch, "Regulatory and Legal Trends in Advertising" COMPLY 2015, The PerformMatch User Summit & Marketing Compliance Conference, New York, NYJune 10, 2015
Rachel Hirsch, Speaker, "Don’t Become A Fly-By-Night Business," Performance Marketing Summit 2015, Boca Raton, FLMay 18, 2015
"Lurking in the Shadows – Dual Agency Enforcement of Affiliate Marketers," Response Magazine, DRMAApril 7, 2015
Co-Presenter, Rachel Hirsch, "Compliant Lead Generation For Medicare: Does It Exist? Is It Scalable?," Medtrade Spring 2015, Mandalay Bay Convention Center, Las Vegas, NVMarch 30, 2015
"Legislating Through Litigation: Why ROSCA Suddenly Matters," Response Magazine, DRMAMarch 3, 2015
Rachel Hirsch, Speaker, "The Best Defense is a Good Offense – Managing Legal Risk," Affiliate Summit West, Paris Resort and Hotel, Las Vegas, NVJanuary 20, 2015
Rachel Hirsch, "The Future of Mobile Gaming in the U.S.," iGaming Business North AmericaOctober/November 2014
Rachel Hirsch, "Shape Up or Ship Out: NJ’s New Affiliate Guidelines," iGaming Business North AmericaAugust/September 2014
Rachel Hirsch, Speaker, "Calls and Compliance-TCPA Expert Panel Session" LeadsCon 2014, Marriott Marquis, New York, New YorkAugust 13, 2014
Rachel Hirsch, Speaker, "Mo Money, Mo Problems – Scrutinizing FTC Settlements," Affiliate Summit East, Marriott Marquis, New York, New YorkAugust 12, 2014
"Don’t Be Penny Wise and Pound Foolish," FeedFront MagazineMay 2014
Rachel Hirsch, Moderator, "Revisiting TCPA: Staying Compliant While Addressing the Challenges and Complexities," LeadsCon 2014, Mirage Hotel in Las Vegas, NevadaMarch 26, 2014
"US State Regulation – The Next in Line," iGaming Business North AmericaMarch 2014
Rachel Hirsch, Speaker, "Affiliate Compliance: It’s Not Just the Message, It’s the Messenger," Affiliate Management Days, The Marriott Marquis in San Francisco, CAMarch 20, 2014
Rachel Hirsch, Speaker, "Why Compliance is a Tough Pill to Swallow – Nutraceuticals," Affiliate Summit West, Paris Hotel in Las Vegas, NVJanuary 13, 2014
"When the Government Comes Knocking," FeedFront MagazineJanuary 2014
"Taking the ‘Affiliate’ out of Affiliate Marketing," FeedFront MagazineOctober 2013
"Inter-State Gaming Agreements," iGaming Business North AmericaDecember 2013
"Inter-State Deal Making: Nevada and New Jersey Look to Compact," iGaming Business North AmericaOctober 2013
Rachel Hirsch, Presenter, "On the Line – Consenting To A New Way Of Lead Generation Under The TCPA," LeadsCon WebinarSeptember 2013
Rachel Hirsch, Speaker, "TCPA Regulatory Issues," LeadsCon 2013, Hilton Hotel in New York, NYAugust 15, 2013
"King Bill Looks to Take Crown in Federal vs State Online Supremacy," iGaming Business North America MagazineAugust 2013
"State of Union for the Gaming World in 2013," iGaming Business North America MagazineJuly 3, 2013
"Hedging Bets: Affiliates and the Unregulated Markets," FeedFront MagazineApril 2013
"Pioneering a New iGaming Frontier to New Jersey and Beyond," iGaming Business MagazineMarch/April 2013
"Monopoly or fair game? Google’s FTC settlement," E-Commerce Law & PolicyMarch 2013
"Raising the Stakes for iGaming Regulation in the US," iGaming Business Magazine November/December 2012
"DC Folds a Good Hand," iGaming Business MagazineMarch/April 2012
"Nevada: The Game Changer," iGaming Business MagazineMay/June 2011
"Circuits Split Over Securities Fraud Sentencing," The National Law JournalJuly 19, 2010

Delivering a One-Two Punch to Simultaneous Gambling-Loss Recovery Cases

A plaintiff’s law firm brought two gambling-loss recovery cases against our client, PokerStars, in the United States District Court for the Southern District of Illinois. The first case addressed alleged gambling losses sustained as a result of playing on the Full Tilt Poker (FTP) website. Our client was implicated in the case through the addition of Rational FT, which the plaintiff alleged acquired the assets of FTP. The second case dealt exclusively with alleged gambling losses sustained while playing on the PokerStars websites.

Both cases were instituted by a third-party – the mothers of players who allegedly suffered these losses. And in both instances, the courts ruled in favor of our clients after Ifrah won numerous motions that caused the defendants to amend their ultimately unsuccessful complaints.

After nearly three years, the judge brought finality to these proceedings by granting Ifrah’s last-filed motions to dismiss (which had been pending since mid-2014) and ordering the dismissal of both cases with prejudice. The judge’s orders in both cases were nearly identical.

(Sonnenberg v. Oldford Group, Ltd., Rational Entertainment Enterprises, Ltd., Case No. 3:13-cv-00344-DRH (U.S. District Court Southern District of Illinois))

(Fahrner v. Bitar et al, Case No. 3:13-cv-00227 (U.S. District Court Southern District of Illinois))

 

Defense of Retaliatory Discharge Case Results in Precedent-Setting Ruling

Ifrah’s defense of its clients, Torres Advanced Enterprise Solutions LLC (“TAES”) and Scott Torres, who were charged in a retaliatory discharge case, not only turned out to be a victory for the defendants, but it was also a resounding victory for employers and the court system. The ruling, made in the United States District Court for the District of Columbia, set important precedent regarding federal pre-emption in worker’s compensation issues overseas and retaliatory discharge charges.

Two former employees of Ifrah’s clients claimed that they were improperly discharged in retaliation for filing a workers’ compensation claim under the Defense Base Act (“DBA”) and Longshore and Harbor Workers Compensation Act. They were working for TAES at Forward Operating Base Shield in Iraq when they were discharged.

Ifrah argued that the DBA provided the exclusive remedy for the plaintiffs’ causes of action and otherwise preempted their case. In a 26-page opinion, the judge dismissed all four counts of the First-Amended Complaint, agreeing with Ifrah’s argument. She further held that plaintiffs’ remaining common-law causes of action, including breach of contract, were preempted under the DBA. Specifically, she noted in her opinion that federal courts across the country have found that the DBA expressly preempts other remedies state law affords to similarly-situated plaintiffs. Accordingly, the doctrine of conflict preemption barred plaintiffs’ common-law claims and mandated their dismissal.

Despite the lack of clear precedent on the issue, the opinion clearly establishes as the law of Washington, D.C. that employees subject to a federal workers’ compensation plan must exhaust their administrative remedies first before filing an action in court. The decision will result in the saving of time and expenses related to litigating complex retaliatory discharge claims that can otherwise be resolved more efficiently in the administrative context.

(Sickle et al v. TorresAdvanced Enterprise Solutions, LLC et al., Case No. 1:11-cv-02224 (U.S. District Court, District of Columbia))

 

Protecting an Advertiser from an Affiliate Marketer’s Actions

Sometimes, even a company’s best efforts to comply with the law can’t protect them from liability. This was the case for our client, an advertiser, which promoted its own e-cigarette offer. An internet-based affiliate marketer who marketed our client’s products sent an unsolicited text message to a consumer. Our client our client recognized the potential legal problems associated with the affiliate’s actions and immediately shut down the relationship. Nonetheless, the affiliate’s action exposed our client to liability in the form of a putative class action lawsuit that was filed in U.S. District Court, Northern District of Illinois. This class action lawsuit, brought under the TCPA, had the potential to cost our client a significant amount of money.

Ifrah Law knew we needed to act quickly, before the case escalated into a class action that would be large enough to bankrupt our client. We were able to demonstrate that the third party vendor’s actions were not authorized or condoned by our client and therefore, we were able to resolve the matter for very little money, before ever answering the complaint. To avoid these types of problems in the future, we subsequently drafted strong contract and terms and conditions for our client’s third-party publishers, which would indemnify our client from future liability for its affiliate’s unauthorized actions.

 

Representing an Online Poker Operator in Nevada Federal Court

When a leading online poker company was sued in Nevada by a prominent poker professional and former company endorser, the company put all their chips on the experience of Ifrah Law.

The plaintiff was one of the first women to place highly in a poker tournament. She claimed that during the online company’s early years she was offered a one percent ownership in the firm in exchange for her promotional efforts as a “celebrity player.”

She also claimed that the ownership stake was worth $100,000 a month for every month that the company was making distributions. She sued for breach of contract, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, unjust enrichment, and fraud. Her attorneys estimated damages to be $40 million, with the additional possibility of punitive damages.

Ifrah Law won a dismissal in the trial – and won three more move to dismiss orders in subsequent actions. The initial motion to dismiss contained allegations that the player’s “typhoon of litigation” was fueled by a “thirst for publicity.”

(Cycalona Gowen v. Tiltware LLC, et al. – Case No.: 2:08-CV-01581-RCJ-RJJ (United States District Court for the District of Nevada))

 

Obtaining Dismissal of Fraud Claims Against Online Gambling

In the first class action suit brought by former U.S. poker players, Ifrah Law went all in and won a big pot on behalf of an online poker company and individual poker pros that were defendants.

The suit involved complex fraud issues arising out of claims of Racketeer Influenced and Corrupt Organizations Act (RICO) violations. These issues resulted from the plaintiff’s demand for return of U.S. player funds held in online gambler accounts after Black Friday. On that day in 2011, the U.S. government shut down the three most popular online poker sites. More than two million citizens were playing our national card game online, and they were confronted by the seals of the FBI and Department of Justice and a notice of domain name seizure as well as blocked access to each player’s account balance.

The lawsuit demanded return of plaintiff’s money under a conversion claim, and also accused the defendants of racketeering, which would have entitled the plaintiffs to three times the damages owed.

In a closely watched argument in the U.S. District Court for the Southern District of New York, Ifrah Law held all the right cards and won a dismissal of all claims against the poker pro defendants, as well as all RICO claims against the corporate defendants. The
judge’s order was a big win for the individual defendants in this case, but also a victory
for individual defendants in other class action cases pending in New York.

(Segal et al v Bitar et al. 1:11-cv-04521-LBS (S.D.N.Y.))

 

A Favorable Settlement for an Online Merchant

A dispute arose between an e-commerce merchant and an interactive advertising agency
involving over $2.5 million in damages. The merchant retained Ifrah Law and we utilized
our experience representing individuals and corporations in the online marketing arena to
negotiate a favorable settlement for the e-commerce merchant and obtain a dismissal of
the case.

The ad agency was a large network that rolled out a sales campaign for the merchant’s
product. They claimed they were owed commissions from the merchant’s sales and
brought a case against our client and sued the individuals associated with the company, as
well.

We argued that they you couldn’t assess liability against individuals for the liability of
the company unless there was a specific basis to do so and we moved to dismiss. The
advertising agency challenged us, and we won a judgment for the plaintiff as well as for
our attorney fees.

Then the advertising agency litigated that result – and lost. The judge found our legal fees
to be fair and reasonable.

By the time this wrangling was completed, Ifrah had won a judgment of $250,000 before
the actual case had even started. Normally, it’s impossible for a defendant to win legal
fees – but not with Ifrah Law.

 

Celebrity Endorsements, Online Poker and the FTC

celebrity igaming

Last week, without much attention, four new regulations affecting online gaming operations in New Jersey became effective under the authority of the Division of Gaming Enforcement. The rules include changes to directives on funding from social games, requirements for exclusivity, and operator server locations.

However, the fourth rule is an addition which deals specifically with celebrity endorsements. What is most notable about this tenet is not the content, but the fact that regulators in New Jersey believe that iGaming will soon become an industry that uses celebrities to promote and market itself to consumers.

Because we’re lawyers, here is the actual language of Rule 13:69O-1.4 (u.):

Internet gaming operators may employ celebrity or other players to participate in peer to peer games for advertising or publicity purposes. Such players may have their accounts funded in whole or in part by an Internet gaming operator. An Internet gaming operator may pay a fee to the celebrity player. If a celebrity player is employed and the celebrity player generates winnings which he or she is not permitted to retain, such winnings shall be included as Internet gaming gross revenue in a manner approved by the Division.

It may be argued that the word “celebrity” is being used loosely in this context, as there isn’t exactly a line of blockbuster A-listers or superstar athletes waiting for their chance to be the face of online poker. Yet the addition of this specific provision importantly points to the fact that the Gaming Division not only anticipates a future where iGaming will carry big name endorsers, but that it wants to encourage effective advertising and publicity for the industry, which has had a slow start in its first year since becoming legal in the state.

Regulators looking to update this rule in the future should consider adding language geared toward consumer protection – namely, prohibitions against the use of celebrity endorsements in a deceptive or misleading manner.  Last year, the FTC updated its advertising guidelines to account for the use of celebrity endorsements in advertising, specifically in the context of paid social media endorsements.  Those guidelines provide, among other things, that celebrity endorsements must be truthful and accurately reflect the opinions of the celebrity, that paid celebrity endorsements must be adequately disclosed, and that the celebrity be a bona fide user of the product or services he/she is endorsing.

These guidelines should equally be applied by regulators in the context of iGaming, where increased competition, as more operators come on board, may lead operators to one up each other by throwing money at celebrities to endorse their games.  The key to effective iGaming regulation is not just limited to overseeing how the game is played, but also to ensuring that the operators don’t play games that would unfairly hurt the competition and mislead the playing public.  Updating these regulations so they are more inline with the FTC’s advertising guidelines will further these goals.

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Report from an Energized Brand Activation Association Marketing Law Conference

Group Of Multi-Ethnic People Social Networking

Ifrah Law is a proud member the Brand Activation Association (“BAA”). This week, we attended the BAA’s 36th annual BAA Marketing Law Conference in Chicago.  Just as “Mad Men” reflects the 1960’s era advertising business, this year’s BAA conference demonstrated this generation’s marketing dynamic – where mobile is key, privacy concerns abound, and the Federal Trade Commission (“FTC”) and other agencies are watching and enforcing. Other key “take aways” from the conference are that sweepstakes, contests, and other promotions remain hugely popular via mobile devices and social networks.

Digital Rules

Advertisers representing top brand names made clear that companies must reach consumers through various digital devices.  Smartphones, tablets, and wearable technologies each represent ways to advertise a product or service.  Today’s consumers, especially younger consumers, rely extensively mobile devices. Many actually welcome behavioral and other advertising.  Consumers in the U.S. and abroad have shown receptiveness to “flash sales,” instant coupons and other deals, including those geared to their geo-location.

Emerging Privacy and Consumer Protection Trends

While advertisers interact with consumers and many consumers welcome offers and information, regulators’ and individuals’ concerns with the privacy of personal information dominate the landscape.  Almost a year after the notorious Target data breach, and with the holiday shopping season approaching, all stakeholders are understandably cautious about how to utilize various methods of marketing while securing consumer information.  Even assuming a network is secure, the FTC, state attorney generals, foreign regulators, consumer advocacy groups and consumers want to know how personal data is being collected, utilized and shared.  In the consumer protection context, the FTC actively enforces the Federal Trade Commission Act’s prohibition on “deceptive acts and practices,” requiring that advertisers have substantiation for product claims.

Two Significant Forces – the FTC and California’s Attorney General

Top representatives from the FTC and the California Attorney General presented at the conference.  Both representatives asserted their agencies remain active in enforcing their consumer protection and privacy laws, especially as to certain areas.  Jessica Rich, Director, Bureau of Consumer Protection at the FTC, discussed the agency’s focus on advertising substantiation, particularly as to claims involving disease prevention and cure, weight loss, and learning enrichment (such as the “Your Baby Can Read “ case).

On the privacy side, Ms. Rich also noted the FTC’s specialized role in enforcing the Children’s Online Privacy Protection Act (“COPPA”).  The FTC’s recent action against Yelp demonstrates that the FTC will not hesitate to enforce COPPA even where a website is not a child-focused website, per se. If a website or online service (such as a mobile app) collects personal information from children under 13, it must comply with COPPA’s notice and consent requirements. The agency is also exploring the privacy and consumer protection concerns associated with interconnected devices, known as “the Internet of Things.”

The representative from the California Attorney General’s office noted that California has a keen interest in mobile apps, as demonstrated by its action against Delta for allegedly failing to have a privacy policy available through its mobile app.  California is also gearing up for its “Eraser Law,” set to go in effect on January 1, 2015. This law provides an opportunity for young people under 18 to “erase” embarrassing or damaging content they posted online, including on social media.

Promotions – Sweepstakes, Contests, Games

While some may think sweepstakes and contests are outdated, the opposite is true. Companies are utilizing mobile and social networks to engage with consumers through promotions.  Facebook and Pinterest-based sweepstakes and contests continue to grow in popularity. Advertisers also increasingly look to “text-based” offerings.

These promotions can generate great marketing visibility and grow consumer relationships. However, advertisers need to be aware of many legal minefields.  First and foremost is the federal Telephone Consumer Protection Act (“TCPA”), which requires prior express “written” consent for advertisements sent to mobile phones via text or calls utilizing an autodialer or prerecorded message.  Plaintiffs’ lawyers continue to file hundreds of TCPA class actions based on texts without consent.  Second, the social networks have their own policies. For instance, Facebook now bars advertisers from requiring consumers to “like” a company Facebook page in order to participate in a promotion.

Take Aways

BAA conference sessions were packed – many standing room only.  The popularity of programs about comparative advertising, native advertising, sweepstakes and contests, and enforcement trends demonstrates that advertisers are finding innovative ways to reach consumers across devices. These marketing initiatives face a host of federal, state, and international laws and regulations, as well as restrictions imposed by social networks and providers.  It’s an exciting and complex juncture in global marketing.

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New Year Brings New Plans by the FTC to Take Down Deceptive Weight Loss Advertisers

New year, new resolutions.  Yesterday, the FTC announced a resolution of its own: to undertake a nationwide enforcement effort to protect consumers against deceptive weight loss claims.  Dubbed “Operation Failed Resolution,” the FTC’s latest enforcement effort seeks to protect consumers who face a barrage of “opportunistic marketers” promising quick ways to shed pounds. According to the FTC, these marketing tactics cause millions of dollars of consumer injuries and encourage people to postpone important changes to diet and exercise.

To announce this new initiative, the FTC held a press conference in which it identified four significant enforcement actions: (1) Sensa – a flavored powder that claims to cause weight loss when sprinkled on food; (2) L’Occitane Inc.– a skin cream that promised to shave inches off consumers’ bodies; (3) HCG Diet Direct – a product based on the human chorionic gonadotropin hormone; and (4) LeanSpa – a dietary supplement. Collectively, these four enforcement actions total $44 million in potential recovery for consumers.

All four enforcement actions shared one common thread – claims of quick and easy weight loss that were not supported by evidence.  Many of the ads in question touted substantial weight loss without diet or exercise simply by using the product alone.  Although some of these marketers cited clinical studies that supported their claims, the FTC said that the so-called “independent” studies were largely fabricated. The FTC also took issue with consumer endorsements, which failed to disclose that the consumers were paid for their testimonials or that the consumers were related to the owner.  The FTC also scrutinized so-called physician endorsements.  According to the FTC, marketers failed to disclose that their endorsers were compensated to the tune of $1,000-$5,000 and free trips.

Yesterday’s press conference is not the first time that the FTC has taken action against deceptive weight loss claims.  In 2011, we reported on 10 lawsuits filed by the FTC against marketers behind the ubiquitous “1 Tip for a Tiny Belly” ads, which the FTC claimed were a scheme by marketers of diet and weight loss products to grab consumer credit card information and pile on additional, unapproved charges.

Although deceptive weight loss claims are not a new phenomenon, the FTC announced yesterday that it is taking a new approach to cracking down on these types of ads. The FTC is now encouraging media outlets that run these ads to conduct a “gut check” and turn down spots with bogus claims. Yesterday’s press conference was a call to action for both consumers and media outlets to help the FTC track down deceptive weight loss marketers, which can mean only one thing – more widespread enforcement efforts against marketers of dietary supplements. The FTC does not comment on non-public investigations and would not comment on whether these enforcement efforts would result in criminal enforcement from other agencies. One thing is for certain, however: If you make a claim about your weight loss product, you’d better be able to back it up.

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Botnet ZeroAccess Hit With Complaint by Microsoft, but Will This Slow the Malware Industry Down?

ZeroAccess is one of the world’s largest botnets – a network of computers infected with malware to trigger online fraud.  Recently, after having eluded investigators for months, ZeroAccess was disrupted by Microsoft and law enforcement agencies.

Earlier this month, armed with a court order and law enforcement help overseas, Microsoft took steps to cut off communication links to the European-based servers considered the mega-brain for an army of zombie computers known as ZeroAccess. Microsoft also took control of 49 domains associated with ZeroAccess.  Although Microsoft does not know precisely who is behind ZeroAccess, Microsoft’s civil suit against the operators of ZeroAccess may foreshadow future enforcement efforts against operators alleged to have illegally accessed and overtaken people’s computers.

ZeroAccess, also known as max++ and Sirefef, is a Trojan horse computer malware that affects Microsoft Windows operating systems.  It is used to download other malware on an infected machine and to form a botnet mostly involved in Bitcoin mining and click fraud, while remaining hidden on a system.  Victims’ computers usually fall prey to ZeroAccess as the result of a drive-by download or from the installation of pirated software.   Essentially, ZeroAccess hijacks web search results and redirects users to potentially dangerous sites to steal their details.  It also generates fraudulent ad clicks on infected computers then claims payouts from duped advertisers.

The Microsoft lawsuit, originally filed under seal in Texas federal court, alleges, among other things,  violations of the Computer Fraud and Abuse Act  (“CFAA”) (18 U.S.C. §1030), the Electronic Communications Privacy Act (18 U.S.C. §2701), and various trademark violations under the Lanham Act (15 U.S.C. §1114 et seq.).  Microsoft secured an injunction blocking all communications between computers in the U.S. and 18 specific IP addresses that had been identified as being associated with the botnet.  The company also took control of 49 domains associated with ZeroAccess.  Microsoft took action against ZeroAccess in collaboration with Europol’s European Cybercrime Centre, the FBI, and other industry partners.  As Microsoft enacted the civil order obtained in its case, Europol coordinated law enforcement agency action in Germany, Latvia, Luxembourg, the Netherlands and Sweden to execute search warrants and seize servers associated with the fraudulent IP addresses operating within Europe.

The federal statutes on which Microsoft relied in its lawsuit may be broad enough to capture the gravamen of the complaint here.  For example, the CFAA was enacted in 1986 to protect computers that there was a compelling federal interest to protect, such as those owned by the federal government and certain financial institutions. The CFAA has been amended numerous times since it was enacted to cover a broader range of computer related activities and there has been recent discussion on Capitol Hill of amending it further. The CFAA now prohibits accessing any computer without proper authorization or if it is used in a manner that exceeds the scope of authorized access. The law has faced steep criticism for being overly broad and allowing plaintiffs and prosecutors unfettered discretion by allowing claims based merely on violations of a website’s terms of service.  In those cases in which ZeroAccess has accessed a user’s computer entirely without permission, there will likely be no dispute about whether the CFAA applies; however, in any follow-on cases in which the authority to access the computer was less clear, Microsoft may have more difficulty in relying upon this statute.

According to Microsoft, more than 800,000 ZeroAccess-infected computers were active on the internet on any given day as of October of this year.  Although the latest action is expected to significantly disrupt ZeroAccess’ operation, Microsoft has not yet been able to identify the individuals behind the botnet, which is still very much intact. Microsoft’s attack is noteworthy in that it represents a rare instance of significant damage being done to a botnet that is controlled via a peer-to-peer system.  But ZeroAccess has come back to life once before after an attack on it, and it would not be surprising if it recovered from this attack as well.  Unless Microsoft or Europol can identify the “John Does 1-8”referenced in the complaint, this and other botnets will keep on operating without fear of reprisal.

The big question at this point is whether Microsoft’s actions will have an enduring impact beyond ZeroAccess.  Will Microsoft’s actions spur other private companies to take steps of their own to stop malicious software?  That answer remains to be seen.

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A Report From Affiliate Summit East, 2013

Since 2003, online marketers and merchants have been gathering twice a year to take part in the Affiliate Summit Conferences. In recent years, Ifrah Law has become a fixture at these shows, and our associate Rachel Hirsch is not only widely recognized as the face of the Ifrah Law Power Booth station, but also as a well-respected and preferred attorney counseling online advertisers on compliance-related matters and representing them in nationwide litigation.

After Rachel recently returned from this year’s Affiliate Summit East conference in Philadelphia, we interviewed her about new and emerging trends at this conference and in the industry.

Q. What struck you about the crowd at the conference this year?
A. In addition to the new venue, there were plenty of new faces at the conference this year. Surprisingly, however, despite the conference’s name, there weren’t as many affiliates there as there have been in the past. Traditionally, affiliates, sometimes known as “publishers,” are independent third-parties who generate or “publish” leads either directly for an advertiser or through an affiliate network. This year, with a reported crowd of about 4,000 people, the conference included more individuals representing networks, brokers, and online merchants than affiliates. (Official conference statistics bear this out. Only 29 percent of attendees were affiliates.)

Q. What about vendors?
A. According to the organizers, one out of every 10 people there was a vendor. The term “vendor,” however, is something of a misnomer. A vendor can be another term for an online merchant – someone who is actually selling a product on the market – or it can be a generic category for marketers who do not fit into the traditional categories of affiliates, merchants, or networks.

Q. What new industry trends did you notice?
At every conference, one or two markets always seem to have a dominant presence. At the Las Vegas conference in January, there was a large turnout of marketers in the online dating space. This year, two different markets emerged– diet/health and downloads.

Some of the exhibitors this year were manufacturers of neutraceuticals, which can include weight-loss products or testosterone-boosting products. The trend seems to be for online marketers to “white label” or “private label” neutraceuticals from bigger manufacturers. What this means is that online marketers or advertisers actually attach their brand names to a product and product label that they purchase from a manufacturer, either based on their own formulations or based on the manufacturer’s product specifications. Well-known products that would fall into this category include Raspberry Ketone, Green Coffee Bean, and Garcinia Cambogia.

There were also a lot of individuals and companies there in the so-called “download” space. This often means the use of browser plug-ins that the consumer can download himself or herself. These can install targeted advertising (often pop-ups or pop-under ads) on an existing web page.

Q. Are there any risks involved in private labeling?
A. Definitely. If your name is on the label, it doesn’t matter that you didn’t manufacture the product. Your company and your label are subject to FTC scrutiny to the extent that you make claims about the product that you cannot substantiate. And beyond that, the Food and Drug Administration will also flex its enforcement power to the extent you or your manufacturer fail to institute good manufacturing practices, or “GMPs.” While many companies claim that they are GMP-certified, many do not have practices and processes in place to account for defective product batches, serious adverse events resulting from product use, or product recalls.

Q. What are some other hot areas of enforcement by the federal government?
A. Well, how you market your product may be as closely scrutinized as the underlying message. Online marketers who make outbound calls to consumers, or who engage third-party vendors (such as call centers) to make these calls can run afoul of the Telephone Consumer Protection Act. Under the TCPA, anyone who calls customers without their express advance consent, or who hires anyone else to do so, can be hit with a $500 fine for each violation. That adds up, and the TCPA can be enforced by the Federal Communications Commission or by private plaintiffs. Upcoming changes in the TCPA, which will be effective in October 2013, make it even harder to stay on the right side of the law.

Q. How would you put it all together as far as the legal issues?
A. It’s not just the FTC any more. These days, online marketers need to be aware of other agencies with broad enforcement powers, such as the CFPB, the FDA, and the FCC. And don’t forget about the threat of private consumer litigation.

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