ECTA European Communities Trade Mark Association 26 th Annual Meeting in DEAUVILLE

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1 ECTA European Communities Trade Mark Association 26 th Annual Meeting in DEAUVILLE PRODUCT PLACEMENT Irene Braam Dear Ladies and Gentlemen, good morning. First I would like to thank ECTA for the invitation. I am here to speak about the recent developments around Product Placement, which as some of you might know, has been a hot topic of discussion in the European Union the last few months. Before looking at the legal situation of PP the first question which needs to be answered is what is PP exactly? There is no standard PP definition but one can describe PP as The intentional use of a third party s intellectual property right in any non-commercial communication space designed for entertainment PP is an increasing popular way to advertise and establish trademarks. BUT ALSO An additional source of income for movie and television production. Nowadays (PP) appears in plays, films, television series, music videos, video games, reality shows and even books PP has been around a very long time in the US and can be traced back to at least 1944 when in the thriller Laura, one of the main characters drinks an imaginary brand of whiskey called Black Poney. The brand was promptly and successfully launched in real life. The following year, product placement of the existing brand Jack Daniels occurred in the movie Mildred Pierce. As from the 1980s, PP became more common and numerous examples, some of which very famous, can be given. Such as the movie Risky Business in which Tom Cruise wore Ray Ban sunglasses which provoked a real revival of the sunglasses for Ray Ban. Although at the beginning PP was mostly used in movie productions it slowly found its way into popular television programmes such as soap series when the television screens entered the family homes. Over the years PP has been used in an ever growing range of programme formats. Recently PP was used in popular reality shows such as the Apprentice or American Idol, but also in

2 computer and video games. This expanding use of PP in non traditional and new media will trigger new legal questions. One can identify several reasons for the rising popularity of PP: First of all there has been an increased demand for paid product placement from the producers side as movie and television production costs have significantly increased. Producers therefore had to start looking for additional ways of financing their productions. Besides the channel zapping attitude, new ad-skipping technologies such as the personal video recorder enable the viewer to skip the advertising break while watching their favourite programme. An accelerating audience fragmentation in addition have led marketers to look for other ways to advertise. Furthermore PP is a relatively cheap way to market and promote a brand and history has proven that it can have a significant impact. The most famous example is the 1982 movie ET which included a product placement of Reese s Pieces. Sales were said to be increased by as much as 80 percent thanks to the movie. PP IS ADVERTISING PP is a form of advertising which integrates the advertiser's product into a television show or movie thereby giving clear visibility to the product but not the focus. HOWEVER it is important not to confound PP with other advertising techniques such as sponsoring and brand integration whereby the advertiser s product is central to the program s plot line and even sometimes becomes one of the main characters of the programme. Some of you might remember the US series Knightrider where David Hasselhof drove a speaking Pontiac. We can identify three major types of PP: 1. PP arranged by the advertisers and producers in return for a financial compensation. 2. PP arranged by the advertisers and producers but without financial compensation as the product serves as compensation these are the so-called barter deals. 3. PP which has not been arranged by the advertiser. The producer nonetheless decides to include the branded product with the aim to strengthen the plot or a character no financial compensation is given in return and no contractual relationship exists between the producer and IP owner. The evolution of PP spending is quite revolutionary. According to the 2007 PQ Media Study, companies worldwide paid nearly $3.4 billion last year to have their products appear in movies and television programmes. In 2006 the PP spending was increased by 37 percent compared to the previous year and this figure is expected to rise even further by 30% according to PQ Media. More than 50% of the PP spending is found in 4 marketing categories: Transportation, clothing & accessories, food & beverages and travel & leisure Other categories such as: electronics & technology, toys & sporting goods and media & entertainment are expected to increase their PP spending in the coming years. Before giving an overview of the current legal situation in the EU, I will first briefly summarize the US situation.

3 PP has been largely unregulated in the US due to the fact that it has its roots in the movie industry which has been an unregulated industry by tradition. PP which appears on broadcast television or radio is covered by the Federal Communications Commission (FCC). The FCC does not prohibit product placement in radio and television broadcasting. BUT Section 317 of the 1996 Telecommunications Act requires on-screen disclosure of product placement arrangements. All matters broadcast by any radio station for which any money, service or other valuable consideration is directly paid, or promised to or charged or accepted by, the station so broadcasting, from any person, shall, at the time the same is so broadcast, be announced as paid for or furnished, as the case may be, by such person The EU situation has been rather confusing up till now. While the Unfair Commercial Practices Directive describes PP as a legal business activity the current EU legal framework (the 1989 Television Without Frontiers Directive) does not explicitly address PP but contains an implicit prohibition if it is considered to be surreptitious advertising. PP is therefore covered by the EU-wide definition of surreptitious advertising if three cumulative conditions are met: 1. it must be shown that the television broadcaster s action is deliberate; 2. the broadcasters action must be intended to produce an advertising effect; and 3. there must be the risk of the public being misled as regards the purpose of mentioning or showing the product. Up till now product placement is taking place in Europe in a grey area of the law. This situation is worsened by widely differing national regulatory approaches. Most EU countries do not have any legislation on product placement and leave the assessment to the broadcasters themselves and any legal decisions to the national courts this leads to a different interpretation of what should be understood under product placement Example: In Germany PP is prohibited but is permitted to make products available provided no payment is made to get them used (known as Produktbeistellung ). UK has a ban on Product Placement while in Austria PP is authorised under certain conditions. This has lead to the use of fake products in European audiovisual productions while PP is a reality on the European television screens as it is a much used practise in US imported films and series. According to the European Commission, this discrepancy between the EU Member States is leading to legal uncertainty and is putting the European industry at a disadvantage in comparison with the US market. The EU Commission therefore attempted to clarify the position of PP in the Audiovisual Media Services directive (AVMS). The initial Commission proposal dates back to December Following an intensive discussion, the EU Media Ministers adopted a Common Position on May 24 th of this year, thereby backing the new Audiovisual Media Services Directive. The Directive will now be formally adopted by the European Parliament after which the EU Member States have 2 years to implement these new rules on national level. With this new directive the EU allows for the first time product placement.

4 Article 1 (k) of the AVMS directive defines PP as: any form of audiovisual commercial communication consisting of the inclusion of or reference to a products, a service or the trademark thereof so that is featured within a programme, in return for payment or for similar consideration According to article 11 of the AVMS Directive PP is authorised in films, televised series, sport emissions and light entertainment programmes UNLESS a Member State decides otherwise. No PP is allowed in children programmes, news and current affairs programmes, religious programmes and documentaries. The use of PP is subject however to certain conditions: The viewer should be informed about the fact that a programme contains PP by a signal at the start and the end of the programme and after commercial breaks (in respect of acquired programmes Member States have the option to waive the identification requirements as those acquiring the programmes do not control the content); The content and scheduling of PP programmes shall not be influenced in such a way as to affect the responsibility and editorial independence of the media service provider, thereby prohibiting product/brand integration; PP programmes shall not directly encourage the purchase or rental of goods and services; No undue prominence shall be given to the product in question and No PP of tobacco and specific medicinal products is allowed. It is too early to say which EU Member State will finally allow or prohibit PP. WHAT ARE THE IP OWNER S RIGHTS NOW EXACTLY? In the early days of PP, the IP owner did not restrict or review the use of their property in the movie or television programme. The IP owner should protect his rights contractually and take the following issues into account when entering into a contractual relationship: PP can influence the personality of a trademark and the IP owner should ask himself the question how and when is my trademark exhibited? He should retain the right to review and approve the final version of the use of the intellectual property Furthermore one should take into account that PP is still perceived as a way of advertising and the norms and general principles therefore apply in absence of specific legislation What can the IP owner do when his IP is used without consent? In the US the use of the trademarks of other parties that is likely to cause confusion, mistake or to deceive as to the origin or sponsorship or approval of is or her goods by another, are an act of infringement of the trademarks in question according to the Lanham Act, 15 U.S.C 1127, 114 and 1125 (a). Such an infringement is often difficult to establish. According to my knowledge there has been no successful legal case establishing trademark infringement so far. Fair use and Freedom of Speech limit further the IP owner s possibilities to successfully attack the unauthorised use of the IP for PP. In the EU the IP owner has an exclusive right to authorize the use of his IP. Due to the unclear legal situation on PP in the EU so far not many cases of unauthorized uses of IP in PP have occurred until this day.

5 Irene Braam, 2007

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