Commentary Addressing Risks and Opportunities Through the Lifecycle of Data, Technology, Advertising and Innovation

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<i>In this five part series, originally published in the Summer 2014 edition of the Media Law Resource Center Bulletin,<b>[1]</b> we take an in-depth look at the native advertising phenomenon and the legal issues surrounding the practice.  After canvassing the many faces of native advertising and the applicable law, the series ultimately examines the pervasive assumption that all native advertising is, and should be regulated as, “commercial speech.”  This assumption presumes that all native advertising is equal under the eyes of the law, and we come to the conclusion that it probably isn’t. Native advertising that is closer to pure content than pure commercial speech may deserve greater or even full First Amendment protection, which would carry significant implications for government regulation<b>[2]</b>. </i>

<a href="#Part1">Part 1: Introduction to Native Advertising</a>

<a href="#Part2">Part 2: Early Native Advertising and the Current FTC Regulatory Landscape</a>

<a href="#Part3">Part 3: Evolution of the Commercial Speech Doctrine</a>

<i><span style="text-decoration: underline">Part 4</span> below examines the important legal distinction between “Commercial Speech” and “Non-Commercial / Inextricably Intertwined Speech”  </i>
<p align="center"><b>—PART IV—</b></p>

<h2>Commercial and Noncommercial Inextricably Intertwined Speech</h2>
The <i>Bolger</i> court found that the mailings constituted commercial speech “notwithstanding the fact that [informational pamphlets] contain[ed] discussions of important public issues.”[3] Advertising that “links a product to a current public debate” is not automatically transformed into constitutionally protected noncommercial speech.[4] This is because “a company has the full panoply of protections available to its direct comments on public issues, so there is no reason for providing similar constitutional protection when such statements are made in the context of commercial transactions.”[5] And in that circumstance, “advertisers should not be permitted to immunize false or misleading product information from government regulation simply by including references to public issues.”[6]<b></b>

But by the same token, the Supreme Court has clearly held that when commercial speech is “inextricably intertwined with otherwise fully protected speech,” courts “cannot parcel out the speech, applying one test to one phrase and another test to another phrase.”[7] In those cases, the Court applies its test for fully protected speech.[8] For instance, in <i>Riley v. National Federation of the Blind of North Carolina</i>, the Court held that paid professional charity solicitations were fully protected First Amendment speech because the commercial aspects of the solicitations could not be disentangled from the content of the charitable program.[9] As the plurality explained in <i>44 Liquormart v. Long Island, </i>when striking down a State’s ban on liquor advertising, a “State’s power to regulate commercial transactions justifies its concomitant power to regulate commercial speech that is ‘linked inextricably’ to those transactions.”[10] But the “State retains less regulatory authority when its commercial speech restrictions strike at the ‘substance of the information communicated’ rather the ‘commercial aspect of [it]….”[11]
<h3 align="left">Combined Commercial Speech</h3>
In applying <i>Bolger</i>’s three part commercial speech test and “inextricably intertwined” commercial and noncommercial speech precedent, lower courts have focused on whether the noncommercial aspect is insignificant at best, or masquerades as commercial speech at worst. In <i>United States v. Bell</i>, the Third Circuit rejected a defendant’s attempt to “packag[e] a commercial message with token political commentary” to avoid criminal liability.[12] The defendant’s website advocated several legal theories on why Americans are not obligated to pay income taxes,[13] while offering fraudulent and illegal tax advice and services. The website’s illegal promotion of tax evasion was not inextricably intertwined with Bell’s political tax views as the website was nothing more than “the internet version of a television infomercial made to entice visitors to join Bell’s organization and pay him for tax advice.”[14]

The Virginia Supreme Court recently rejected a similar argument in <i>Hunter v. Virginia State Bar</i>, finding that while an attorney’s blog contained some political commentary posts, the blog on the whole was commercial speech as it was economically motivated, advertised his past legal success, and promoted his legal services.[15] “Unlike situations where the subject matter is inherently, inextricably intertwined, [the Hunter defendant] chose to comingle sporadic political statements within his self-promoting blog posts in an attempt to camouflage the true commercial nature of the blog.”[16]

In <i>Downing v. Abercrombie &amp; Fitch</i>, the Ninth Circuit found that the unauthorized use of several photographs of surf legends in an Abercrombie clothing catalog was commercial, notwithstanding that the images were employed to illustrate the catalogue’s underlying surf theme.[17] The Ninth Circuit stated that the photographs were mere “window dressing” to the catalog’s surf motif and ultimately were exploited to promote Abercrombie’s clothing line.[18] Likewise in <i>Native American Arts, Inc. v. Earth Dweller, Ltd</i>, the court focused on the “primary purpose” of defendants’ representations of association with the Native American community as a mechanism to attract customers and sell products, holding that the advertising and promotional materials were thus commercial speech and subject to regulation under the Indian Arts and Crafts Act (“IACA”).[19]
<h3 align="left">Non-Commercial / Inextricably Intertwined Speech</h3>
Courts have also applied <i>Bolger</i> and its progeny to find commercial aspects of speech so inextricably intertwined with protected speech that the overall speech is not commercial. In <i>City of New York v. American School Publishers</i>, the New York Appellate Division struck down New York City’s denial of a permit to distribute a magazine through New York City street dispensers on the grounds that the publication was a “mere advertisement.”[20] The magazine featured various stories, articles, and reviews related to education, as well as advertisements for the publisher’s school courses.[21] Relying on <i>Bolger, </i>the court rejected the City’s denial of the permit, holding that neither an economic motivation nor the fact that something is an advertisement is sufficient to render speech commercial.[22] The Court reasoned that “[i]n fact, all publishers have an economic motivation to a greater or lesser extent, those of the <i>New York Times </i>and <i>Washington Post</i> no less than those of the <i>Learning Annex Magazine.”</i>[23] Regulating defendant’s publication stricter than other newspapers and magazines was not only unfair in this case, but unconstitutional.[24]

Similarly, in <i>Hoffman v. L.A. Magazine</i>, L.A. Magazine successfully defended a commercial misappropriation claim by Dustin Hoffman on First Amendment grounds. [25]  The subject of the lawsuit was a doctored image that appeared in L.A. magazine imposing Hoffman’s head on a female model in a "butter-colored silk gown by Richard Tyler" for a fashion article that spoofed iconic movie scenes.[26] Despite ties between the model’s clothing and ads in the magazine, the court found that, viewed "as a whole", the article was a "combination of fashion photography, humor, and visual and verbal editorial comment on classic films and famous actors." [27] The magazine’s use of Hoffman’s image was not commercial speech due to the fact that “[a]ny commercial aspects are inextricably intertwined with expressive elements, and so they cannot be separated out from the fully protected whole." [28]

The Southern District of New York came to a similar conclusion in <i>Gorran v. Atkins</i> <i>Nutritionals, Inc.</i>,[29] where a dieter sued the publisher of the Atkin’s Diet book and website after undergoing an angioplasty to unblock an artery.[30] Atkins argued that the book and website—providing information on the Atkin’s Diet—were noncommercial speech fully protected by the First Amendment.[31] The court agreed, finding that even though the website at issue contained some commercial speech, i.e. an e-commerce store, it was separable from the editorial content of the site.[32] The court emphasized that “[i]t is well settled that the mere fact that there is an underlying economic motivation in one’s activity does not turn that activity into commercial speech.”[33] Thus, the presence of an online store selling defendant’s products was insufficient to render all of defendant’s dieting advice “commercial.”[34] In another more recent website case, the Fourth Circuit found that a website recounting the author’s trademark trials and tribulation against Skippy was of a “primarily informational purpose, not a commercial one,”<b> </b>and was thus distinguishable from other “inextricably intertwined” cases where the court found speech to be commercial because they “involved commercial speech supplemented by comments related to the marketed products.”[35]

Although most lower courts apply the three <i>Bolger </i>factors in greater or lesser extent to determine whether speech is commercial, others have developed their own commercial speech tests.  In one of the most prominent of these cases, <i>Kasky v. Nike, Inc.</i>, the California Supreme Court in finding Nike’s speech commercial, looked at three factors: (1) the speaker; (2) the intended audience; and (3) the content of the message (i.e. is the representation about a “fact of a commercial nature”).[36] Notwithstanding that the court found these factors consistent with <i>Bolger </i>and other precedent[37], the court appeared to adopt a much more expansive definition of commercial speech than <i>Bolger </i>would allow[38]—finding that Nike’s speech was commercial largely because it had a tangential profit motive, and defending its labor practices concerned “factual representations about [Nike’s] business operations.”[39] Accordingly, although an important case for California law, we view <i>Kasky</i> as largely inconsistent with Supreme Court precedent.[40]

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[1] The MLRC has graciously allowed republication of this article. For more information on the MLRC check out www.mlrc.org.

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[2] Disclaimer – the MLRC Journal is a legal journal. With that in mind, we give the caveat up front that our writing style here is going to be a little less loose and little more dense that our typical blog.

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[3]<i> Bolger, </i>463 U.S. at 67-68.

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[4]<i> Id. </i>at 68 <i>citing Central Hudson</i>, 447 U.S. at 563.

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[5]<i> Id.</i&gt;; <i>see also Virginia Pharmacy</i>, 425 U.S. at 761-62 (“No one would contend that our pharmacist may be prevented from being heard on the subject of whether, in general, pharmaceutical prices should be regulated…”)

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[6]<i> Bolger, </i>463 U.S. at 68.

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[7]<i> Riley v. National Federation of the Blind of North Carolina, Inc.</i>, 487 U.S. 781, 796 (1988).

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[8]<i> Id</i>.

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[9]<i> Id.</i>

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[10]<i> 44 Liquormart, Inc. v. Rhode Island</i>, 517 U.S. 484, 499-500 (1996).

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[11]<i> Id.</i>

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[12]<i> Bell</i>, 414 F.3d at 480.

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[13]<i> Id. </i>at 475.

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[14]<i> Id. </i>at 479.

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[15]<i> Hunter v. Virginia State Bar</i>, 285 Va. 485, 497-498 (2013).

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[16]<i> Id.</i> at 498.

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[17]<i> See Downing v. Abercrombie &amp; Fitch</i>, 265 F.3d 994 (9th Cir. 2001).

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[18]<i> Id. </i>at 1002.

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[19]<i> See Native American Arts, Inc. v. Earth Dweller, Ltd.</i>, 2001 WL 910394 (N.D.Ill. Aug. 10, 2001).

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[20] 119 A.D.2d 13, 15 (Sup. Ct. App. Div. 1st Dept. 1986).

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[21]<i> Id. </i>at 14.

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[22]<i> Id. </i>at 18.

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[23]<i> Id. </i>

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[24]<i> Id. </i>at 19.

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[25]<i> Hoffman v. L.A. Magazine</i>, 255 F.3d 1180 (9th Cir. 2001).

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[26]<i> Id.</i>, at 1188.

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[27]<i> Id.</i> at 1185.

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[28]<i> Id. </i>(internal citations omitted).

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[29]<i> Gorran v. Atkins Nutritionals, Inc.</i>, 464 F.Supp.2d 315 (S.D.N.Y. 2006), <i>aff’d</i> 279 Fed.Appx. 40 (2d Cir. 2008)

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[30]<i> Id.</i> at 321-22.

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[31]<i> Id. </i>at 327.

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[32] Because the plaintiff’s claims were not predicated on the content of the online store, finding the online store to be commercial speech had no impact on the decision. <i>Id.</i>

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[33]<i> Id.</i> at 327 <i>citing Bolger, </i>463 U.S. at 67.

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[34]<i> Id. </i>at 328.

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[35]<i> CPC International v. Skippy, </i>214 F. 3d 456, 462 (4th Cir. 2000) <i>citing Bolger, </i>463 U.S. at 67-68; <i>Board of Trustees of the State University v. Fox</i>, 492 U.S. 467, 474-75.

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[36]<i> Kasky v. Nike</i>, 27 Cal.4th 939, 960 (2002).

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[37]<i> Id. </i>at 960-61.

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[38]<i> See </i>William Warner Eldridge IV, <i>Just Do It: Kasky v. Nike, Inc. Illustrates That it is Time to Abandon the Commercial Speech Doctrine</i>, 12 Geo. Mason. L. Rev. 179, 180 (2003) (“[California Supreme Court’s] test has the potential to broadly sweep into its purview speech that is noncommercial.”); <i>see also </i>Brody &amp; Johnson, §2:3 at 23 ([California Supreme Court] “introduced a new and extraordinarily broad definition of commercial speech.”)<i></i>

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[39]<i> Kasky</i>, 27 Cal.4th at 963.

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[40]<i> See </i>Eldridge IV, <i>supra </i>note 142 at 180.

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All Native Advertising is Not Equal: Why that Matters Under the First Amendment and Why it Should Matter to the FTC – Part IV