Contest Disasters – How to Anticipate Them and Deal with

Them

LexpertDecember 10, 2013Brenda Pritchard, Partner

Gowling Lafleur Henderson LLP

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Outline

1. Contest Disasters and How to Avoid Them

2. Bullet-Proofing Clauses You Need to Include

3. Consumer-Generated Content

4. “Surprise and Delight” on Social Media

5. Dealing with Cheaters and Voting Fraud

Contest Disasters and How to Avoid Them

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Intellectual Property Violations

The Problem: • Contest advertising or entries include intellectual property belonging to a

third party. • Your contest title includes a registered trade-mark and you get

sued for infringement.• Your winning user generated content video has Call Me Maybe

playing in the background, and you get a letter from the record company.

Contest Disasters - and How to Fix Them

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Intellectual Property Violations

How to Fix It:

• Trade-mark Trouble: • Try to work out a licensing agreement with the owner of the trade-mark. • This may be less costly than destroying and removing from the market all POS

material and/or product packaging.

• Copyright Crises: • Immediately remove the offending material, OR• Work out a licensing deal and release if possible

How to Prevent It: • Ensure that all contest material has been reviewed prior to release. • Ensure the rules prohibit the use of third party materials, and provide for the

removal and disqualification of entries that violate this at the Sponsor’s discretion. • Screen user generated contest entries for copyrighted/trade-marked material before

it appears on your site.

Contest Disasters - and How to Fix Them

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Intellectual Property Violations

However, be careful of disqualifying entrants for minor infractions

• Some contestants will seize on any breach of the rules by the winner to try and force their disqualification

• For example, the winner’s video includes a tiny logo of a third party on their clothing, and another contestant complains, saying the winner has violated the rules and should be disqualified

• Don’t want to have to disqualify for this• Allow the Sponsor to disqualify only in its absolute discretion for infractions

relating to the use of third party names or trade-marks• Important to consider the wording of anything that might disqualify

contestants

Contest Disasters - and How to Fix Them

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Caught by Technicalities

The Problem:• There’s a photo contest where entrants submit photos with the product in the

image, and a caption with a five-word maximum• The submission website is not designed to limit caption entries to five words• The winner is a photo with more than five words in the caption• Another entrant complains after the award has been publicly announced

Contest Disasters - and How to Fix Them

The Result: The original winner keeps the prize, and a second prize is awarded to an eligible entrant

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Caught by Technicalities

How to Fix It: • To avoid a PR disaster, consider providing the “winner by mistake”

with a second prize as a “gift”; • Explain to that person that the agency made a mistake by allowing their

entry to be posted in the voting round of the contest as it did not comply with the contest rules.

• Award the actual prize to the entrant with the second highest number of votes whose entry complies with the contest rules.

How to Prevent It: • Review and moderate all entries for compliance with the contest

rules before making them available for online voting. • Consider whether moderators should be allowed to contact entrants to

let them know why their entry did not comply with the rules, and then allow them to re-submit it after having corrected the problem, assuming you could reset the votes.

Contest Disasters - and How to Fix Them

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Contest Errors

• Your contest rules are perfect, but the technical

back-end or the administration goes wrong

An Example Problem:• The rules for your online contest state that you only allow one entry per

person, but the contest advertising implies unlimited entries per person• The contest entry page doesn’t prevent people from entering multiple times• Contestants begin calling, wondering whether you allow more than one entry,

and your data shows hundreds of people have entered more than once

How Prevent it:• Check and recheck the promotion before running by testing it• Contest Rules should include a clause allowing the sponsor to withdraw or

amend the contest in the event of an error or glitch

Contest Disasters - and How to Fix Them

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Contest Errors

How to Fix it• May have to be come up with creative solutions, such as splitting the

entrants into two groups and awarding two prizes! • Legal and PR costs can be enormous

Another example:• Pepsi ran a “Look under the cap to win” promotion intending to award ONE $50,000

prize, but a computer error caused 80,000 winning caps to be distributed to market• Lawsuits and riots erupted. The error cost Pepsi almost $10 million in goodwill

gestures and reputational damage was immeasurable• Moral: when technical or administrative errors result in too entries or prizes, not

even iron-clad rules can prevent massive PR problems

Contest Disasters - and How to Fix Them

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Who’s the Winner Again?

The Problem:• The wrong winner of the contest is announced online

before the judges have made their final decision because of beta testing of the site.

Contest Disasters - and How to Fix Them

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Who’s the Winner Again?

How to Fix it: • Be sure the results of any beta testing are kept

private• Remove any incorrect announcements as quickly

as possible. • Rely on the clause in the rules that provides that

the Sponsor is not responsible for errors, and providing that the decisions of the Sponsor with respect to the contest are final.

• Consider offering a consolation ‘gift’ to the incorrectly declared entrant. Obtain a release from them at this time.

• Award the contest prize to the winner under the rules.

Contest Disasters- and How to Fix Them

Australia’s Next Top Model announces the wrong winner on live TV

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Who’s the Winner Again?

How to Prevent it: • Ensure proper communication between all parties involved in the

development of your contest to avoid premature announcements.• Make sure all contest web postings are checked by marketing and

legal prior to posting.• Remember, the contest rules should be drafted to provide

contingencies in the event of errors, and to grant the Sponsor discretion over the operation of the contest.

Contest Disasters - and How to Fix Them

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Lost in Translation

The Problem:• The English version of the contest rules and advertising

states that the contest closes on December 31st 2013. The French version says the contest closes on April 30th 2014.

Contest Disasters - and How to Fix Them

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Lost in Translation

How to Fix it: • Contact the Régie.• Consider extending or amending the contest deadlines, to

conform to the latest date if permitted by the rules. • Permission from the Régie is needed to alter or amend

contests in Quebec.

Contest Disasters - and How to Fix Them

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Lost in Translation

How to Prevent it: • The importance of accurate translation cannot be

overstated. • Have a bilingual lawyer actually review the French rules

against the English rules. • Use either an “English version will prevail” or a “French

version will prevail” clause in the contest rules.

Contest Disasters - and How to Fix Them

Bullet-proofing Clauses You Need to Include

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Some Important Clauses:• Allow the contest sponsor to cancel the contest

in case of any problems or errors in running the contest, at the sponsor’s discretion

• Make sure contestants release the sponsor and their related agencies, officers, and employees from liability for participation in the contest

• Contestants should confirm they have read the rules and are over the age of majority in their province or territory of residence, or have the consent of a parent or guardian

• Include the “Kraft clause” if running an instant win contest• if, by error, more prizes are claimed than intended

to be awarded, the prizes available will be awarded by random draw from amongst the verified winners

Bullet-proofing Clauses

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Other Important Clauses:• Allow the sponsor to make prize substitutions for a prize of equal or

greater value, or for a cash equivalent, at the sponsor’s discretion• Allow the sponsor to give the winner permission to transfer the prize,

at the sponsor’s discretion• Allow the sponsor, at its absolute discretion, to change or cancel the

contest in case of any glitch or error affecting the running of the contest or awarding of prizes

• If the contest is open to Quebec residents, make sure to include the Régie’s required clause!

Bullet-proofing Clauses

Consumer-generated Content: Drafting Rules to avoid

problems (and to give you the tools to respond to them)

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Consumer-generated Content

The Typical Case:• Essay – “Tell us your story”• Photo – “Submit a photograph”• Video – “Create your own commercial”

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User Generated Content

Copyright (i.e. right of Sponsor to use, edit and own UGC without

infringing copyright)

Third party consent

Consent by minors

Responsibility – screening and editing

The Issues

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User Generated Content

The Tools• Contest rules:

• “by entering this contest, the entrant represents that the essay is original to him/her and that the entrant has all necessary rights in and to the essay to enter the essay in this contest”

• “entrants agree that the essay becomes the sole property of the Sponsor, who shall have the right to publish, display, reproduce, modify, edit or otherwise use the essay in whole or in part for advertising or promoting the contest or for any other reason”

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User Generated Content

Declaration and Release

• “. . . represent that the essay I submitted as my entry into the Contest is original to me, and that I own all rights in and to the essay for submission in the Contest”

• “. . . grant to the Sponsor the right in perpetuity to publish, reproduce, edit or otherwise use my essay, in whole or in part, along with my full name, in any advertising and promotion without further compensation”

• “. . . assign all intellectual property rights, including copyright, and waive all moral rights, in and to my essay, in favour of the Sponsor”

Don’t be Surprised by Your “Surprise and Delight”

Campaign

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“Surprise and Delight”

Is it a contest?• “Surprise and Delight” campaigns are those where individuals are

given promotional gifts arbitrarily in order to surprise and delight them

• These may or may not be a contest, depending on if and how the campaign is publicized, or if there is any rule-bound mechanism for awarding prizes – is there an implicit contract with consumers?

• If recipients are arbitrarily chosen by someone without prior notification, then may not be a contest and don’t need to follow normal contest laws

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“Surprise and Delight”

Examples:Example 1• Someone posts on your Facebook page saying they

had a bad day• You decide to give them a promotional gift• This is not a contest, and does not need rules or

prior disclosure

Example 2• You decide to give away prizes to the first 50 people

to like your Facebook page• This is a contest and will require rules and

disclosure• Failure to provide rules could lead to breaches of

contest law or lawsuits

An Escalating Arms Race: Dealing with Cheating and

Voter Fraud in Online Contests

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Online Cheating and Voter Fraud

Examples: • Thousands of entries or votes in your online contest that share the same I.P.

address• An entrant claims to have held a “party” where hundreds of people used their

computer to vote • Entrants set up multiple accounts to enter or vote for themselves • Entrants or voters reset their IP address by unplugging their modems or

seeking out unsecured Wi-Fi networks to enter or vote repeatedly• Entrant hires private company to recruit proxy votes• There was reportedly a case of a contestant who drove by another

contestant’s house, connected to their wi-fi, and voted repeatedly using their internet connection to try to get them disqualified!

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Cheating

Consider How You Can Protect Against Cheating• Limit the number of entries per person or email address• Prohibit proxy voting schemes, where entrants collect the personal information

of other people and vote for themselves on the other peoples’ behalf• Include a clause in the rules that prohibits “systematic” entering or voting from

the same computer/IP address, or automated entries/voting• Allow cheaters to be disqualified by Sponsor, in their sole disrection in the

contest rules• Tie online entries to a single email account

• May want to require them to click on a link in the email to finalize entry• If public voting, ensure there is no abuse of the voting mechanism

• Limit voting (may need to limit to one per computer); address systematic voting; CAPTCHAs; have judging after public vote

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WALL OF SHAME

Time to share your contest horror stories and how you dealt with them!

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Any Questions?

Brenda Pritchard

Gowling Lafleur Henderson LLPToronto Office

Phone: (416) 862-5716E-mail: brenda.pritchard@gowlings.com

THANK YOU!