Legislators Introduce Bill Calling For Nationwide Ban On Non-Disparagement Clauses

from the the-'KlearGear-Law' dept

Non-disparagement clauses are one of the stupidest things any company can enact. In most cases, it's almost impossible to enforce them, no matter how artfully crafted. Most aren't. Most non-disparagement clauses found lying around the internet have been lazily copied and pasted from pre-existing bad ideas instituted by other companies.

On top of the legally-dubious aspects, there's the potential for severe backlash -- something that completely underscores the futility of these half-assed gag orders. Instead of heading off criticism, these clauses tend to invite negative reviews, often from internet denizens who've never patronized the company they're bashing at multiple review sites.

But still, these clauses persist. Up until recently, the court of public opinion has had to do most of the heavy lifting when it came to the enforcement of these clauses. Last September, California became the first state in the nation to ban non-disparagement clauses, threatening violators with fines up to $10,000 (for repeated violations).

Now, the federal government is taking another swing at bad companies hiding behind worse legal language.

Today, Representatives Darrell Issa, Eric Swalwell, Blake Farenthold, and Brad Sherman (two Democrats and two Republicans) jointly proposed in Congress the Consumer Review Freedom Act of 2015, which would ban non-disparagement clauses nationally. We at Public Citizen have litigated cases against the use of such clauses (for instance in the KlearGear case, as well as the Cox case). The proposed bill, which is similar to one introduced last session (by Democrats only), also prohibits a business from imposing a clause requiring consumers to sign away their intellectual property rights in communications about the business. We've challenged that type of clause, too. Today's bill authorizes enforcement by the Justice Department and by state attorneys general.

The proposed law includes fines that could add up to real money fairly quickly.

The Attorney General shall bring an action against any business who violates subsection (d) for a civil penalty of not more than $16,000 for each day that the business so requires the use of such a contract by a distinct person.

No company will be penalized for existing clauses but will be expected to remove them as soon as possible. One year after the bill's enactment, any clauses still in existence (or new clauses enacted past this point) will subject companies to daily fines.

As noted above, the bill would also prevent IP landgrabs by companies that allow them to issue DMCA takedown notices targeting critical review they now "own" thanks to the fine print on Terms and Conditions pages.

How effective a law like this will be in keeping the KlearGears of the nation in line is open to debate. Some shady companies may maintain their US "presence" for only as long as it remains beneficial to them. In the wake of the default judgment against KlearGear for its bogus non-disparagement clause, the company -- which had claimed to be located at multiple locations throughout the US over the past several years -- suddenly revealed itself to be a very French corporation and thus out of reach of the $350,000 fee.

Hopefully, the law -- if implemented -- will deter future companies from ambushing unhappy customers with egregious fees and damaged credit records. The fines mooted here should act as a deterrent, especially when pursuing these fines doesn't appear to hinge on the enforcement of these questionable clauses, but rather their mere existence.

Filed Under: blake farenthold, brad sherman, congress, darrell issa, eric swalwell, free speech, gag clauses, non-disparagement clauses, reviews
Companies: kleargear

Federal Legislation Introduced To Strengthen Consumer Free Speech Rights Online

from the about-time dept

Last week, Tim Cushing wrote about California's new law that outlaws consumer-silencing non-disparagement clauses. Apparently momentum is on consumers' side, as Rep. Eric Swalwell, along with Rep. Brad Sherman, introduced similar federal legislation this week to protect all consumers from this shady tactic.

The bill, cited as the "Consumer Review Freedom Act of 2014," voids any provision of a contract that:

1. prohibits or restricts the ability of a person who is a party to the form contract to engage in a covered communication;
2. imposes a penalty or fee against a person who is a party to the form contract for engaging in a covered communication; or
3. assigns or provides an exclusive license, or requires a person who is a party to the form contract to assign or provide an exclusive license, to any business, other person, or entity any intellectual property rights that such party to the adhesion contract has or may have in a covered communication.

The bill later defines "covered communication" as "a person's written, verbal, or pictorial review, performance assessment of, or other similar analysis of, the products, services, or conduct of a business which is a party to the form contract."

While the bill does not specify fines for violations like California's new law, it is still a step in the right direction (and better than nothing).

In his press release following the introduction, Swalwell said, "No country that values free speech would allow customers to be penalized for writing an honest review. I introduced this legislation to put a stop to this egregious behavior so people can share honest reviews without fear of litigation. I look forward to advancing this in a bipartisan manner, and protecting the right to speak one's mind."

Swalwell also cited Palmer v. Kleargear.com in his press release (the case involving a couple from Utah who was fined $3,500 by KlearGear for violation of a non-disparagement clause after they posted a negative review online about their experience with the company).

Palmer is just one example of recent headlines that shed light on the problem of non-disparagement clauses. From a hotel in New York that threatened to charge guests $500 for posting negative reviews online, to a contractor who voided his client's warranty because of a negative online review, numerous examples over the past few years have shed light on this shameful practice by businesses.

Though this is not an entirely new phenomenon. Consumers have been getting hit with Strategic Lawsuits Against Public Participation (SLAPPs) for years, where a plaintiff files a meritless lawsuit against a consumer for posting a negative review online. Yet, now businesses are attempting to avoid having to file a SLAPP by burying non-disparagement clauses in the fine print of consumer contracts.

Both tactics by businesses are aimed at chilling the First Amendment rights of consumers. Here's hoping Rep. Swalwell's bill becomes law and that federal anti-SLAPP legislation follows suit.

Evan Mascagni is the Policy Director of the Public Participation Project (www.anti-slapp.org), a nonprofit organization dedicated to enactment of strong federal and state legislative protections against SLAPPs.

Filed Under: brad sherman, consumer review freedom act, eric swalwell, free speech, non-disparagement clauses, reviews

Surprise: Two Of Hollywood's Favorite Representatives, Howard Berman & Mary Bono Mack, Defeated

from the he-can-go-hang-out-with-rick-boucher dept

While people who just got into Congressional issues during the SOPA fight may have thought that Rep. Lamar Smith was Hollywood's favorite representative, that honor much more likely fell on Rep. Howard Berman -- who, for many years was Hollywood's guy in Congress (somewhat literally, as parts of Hollywood were covered by his district). There was, of course, no chance that Lamar Smith was going to lose his re-election campaign, as there were no serious challengers, but Berman was definitely a different story. Due to redistricting, his district was merged with another longterm Congressional Rep., Brad Sherman -- and the two had to face off. It turns out that Berman lost and Sherman won. Sherman, not surprisingly, also tends to support the entertainment industry's position on a lot of things, but never quite to the level of Berman over the years.

Another longterm favorite of the entertainment industry, Rep. Mary Bono Mack, who ushered in the ridiculous Sonny Bono Copyright Term Extension and has been a regular supporter of the entertainment industry's crazier plans, has lost out in a very tight race.

As for Smith, he won his election to no one's surprise -- but the margin was actually a lot lower than I expected. He took it with 60% of the vote. In 2008 he had 80% of the vote and in 2010, 69% of the vote. It may not have been enough to tip the election, but perhaps young people in his district voted for internet freedom.

Filed Under: brad sherman, congress, copyright, hollywood, howard berman, lamar smith, mary bono mack