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Court Limits Third-Party Text Message Ads

In the middle of the night, Laci Satterfield heard a beep. She picked up her cell phone and saw a new text message. "The next call you take may be your ... Join the Stephen King VIP Mobile Club at www.cellthebook.com," it read. Though the late night ring was something straight out of a King novel, Satterfield wasn't creeped out--she was mad.

Sometime before she received the text message, Satterfield had registered her son for a free ringtone from Nextones. To get the ringtone, Satterfield had to check a box on Nextones' Web site agreeing to "receive promotions from Nextones affiliates and brands." A separate company, Mobile Information Access Co., subsequently provided Internet-marketing firm ipsh!, which Simon & Schuster commissioned to handle the King promotional campaign, with phone numbers from 100,000 Nextones subscribers.

Satterfield sued Simon & Schuster, as well as ipsh!, alleging the two companies violated the Telephone Consumer Protection Act (TCPA) by using an automatic telephone dialing system (ATDS) to send the text message.

The district court granted Simon & Schuster summary judgment on the grounds that it didn't send the message via an ATDS and that Satterfield, by checking the Nextones' consent box, had agreed to receive promotional texts from a broad range of parties. The court didn't rule on the publisher's other argument that, as defined by the TCPA, a text message isn't a phone call.

The 9th Circuit reversed the lower court's decision in Satterfield v. Simon & Schuster June 19, ruling in line with the Federal Communications Commission's long-held position that a text message is a phone call and remanding the discussion of whether Simon & Schuster used an ATDS to the district court. If the district court finds Simon & Schuster sent the messages through an ATDS, the publisher faces damages between $500 and $1,500 per text. Class action certification is pending.

In its examination of the wording of Nextones' consent agreement, the 9th Circuit ruled a "brand "or "affiliate" must share ownership or control of the company offering the consent agreement. Simon & Schuster, however, had no clear business relationship with Nextones.

"Many companies that engage in text message-based marketing do so based on a similar type of consent: The user signs up to receive promotions from the marketers who ostensibly are allowed to send messages on behalf of third parties," says Venkat Balasubramani, principal of Balasubramani Law and author of the blog Spam Notes. "The court's resolution of the consent issue makes this a tricky proposition going forward."

Consenting Adults

Simon & Schuster tagged the King text message with the phrase, "Pwd [powered] By Nextone," which the company said explained where they got the cell phone number. But just explaining where the number came from doesn't mean the publisher had the right to use it.

"There was nothing [in Nextones' agreement] that made anyone realize they were going to get a book promotion from Simon & Schuster," says William Baker, a partner at Wiley Rein. "If a company is using its own brand to do stuff for its own promotions, it's more obvious who your user is expecting to get promotions from."

The decision hints that a contractual relationship might qualify two companies as affiliates, says Nancy Mertzel, director of Gibbons' intellectual property practice. However, no evidence suggests Nextones and Simon & Schuster had a contract.

A company can bypass legal uncertainty by more broadly defining who might send promotional messages, Mertzel says. "Include a definition of 'affiliate,' and make sure the consent extends to people acting on their behalf and on behalf of your affiliates and all their brands," she says. This provides a safety net for companies that may be several steps removed from the one that originally obtained the cell phone number.

This is key if a company delegates a promotional campaign to an outside group, Balasubramani says. When numerous companies become involved in a promotion, it can be difficult to ensure each follows proper protocol.

"Due diligence as to where companies market phone numbers--and where these numbers come from--is definitely well advised," he says. "It's not wise to rely on a third-party representation that the phone numbers were obtained from people who opted in."

Simon & Schuster stands behind the Stephen King campaign.

"We intend to continue fighting this case," says Adam Rothberg, a spokesman for Simon & Schuster. "Before we undergo any promotional campaign, we ensure it is in compliance with all relevant laws."

Called into Question

As Satterfield goes back to the district court, the mechanics of the system that sent the texts will be under scrutiny. Under the TCPA, advertisers cannot use an ATDS to dispatch text messages. An ATDS generates, stores and dials phone numbers from either a random or sequential list.

Although the device that sent the King text stored cell phone numbers and sent the texts without human intervention, experts offered conflicting testimony as to whether it was capable of randomly generating phone numbers.

"I would suspect that a lot of computers have the capacity to [generate numbers]," Mertzel says. If the district court decides the computer had the capacity to "store or produce telephone numbers using a random or sequential number generator," she says there will likely be a trend toward ruling the TCPA governs all computer-generated text messages.

Satterfield's attorney, John G. Jacobs of The Jacobs Law Firm, says he is encouraged as the case returns to the district court. "[Unsolicited text messages] need to be stopped," he says. "Clearly it's what Congress had in mind when it passed [the TCPA] with $500 penalty for each message."

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