1. Contest Disasters – How to Anticipate Them and Deal with Them Lexpert December 10, 2013 Brenda Pritchard, Partner Gowling Lafleur Henderson LLP

2. 2 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

3. Contest Disasters and How to Avoid Them

4. 4 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

5. 5 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 Sponsors discretion. Screen user generated contest entries for copyrighted/trade-marked material before it appears on your site. Contest Disasters - and How to Fix Them

6. 6 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 winners 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 Dont 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

7. 7 Caught by Technicalities The Problem: Theres 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

8. 8 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

9. 9 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 doesnt 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

10. 10 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

11. 11 Whos 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

12. 12 Whos 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 Australias Next Top Model announces the wrong winner on live TV

13. 13 Whos 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

14. 14 Lost in Translation The Problem: The English version of the contest rules and advertising states that the contest closes on December 31 st 2013. The French version says the contest closes on April 30 th 2014. Contest Disasters - and How to Fix Them

15. 15 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

16. 16 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

17. Bullet-proofing Clauses You Need to Include

18. 18 Some Important Clauses: Allow the contest sponsor to cancel the contest in case of any problems or errors in running the contest, at the sponsors 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

19. 19 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 sponsors discretion Allow the sponsor to give the winner permission to transfer the prize, at the sponsors 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 Régies required clause! Bullet-proofing Clauses

20. Consumer-generated Content: Drafting Rules to avoid problems (and to give you the tools to respond to them)

21. 21 Consumer-generated Content The Typical Case: Essay – Tell us your story Photo – Submit a photograph Video – Create your own commercial

22. 22 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

23. 23 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

24. 24 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

25. Dont be Surprised by Your Surprise and Delight Campaign

26. 26 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 dont need to follow normal contest laws

27. 27 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

28. An Escalating Arms Race: Dealing with Cheating and Voter Fraud in Online Contests

29. 29 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 contestants house, connected to their wi-fi, and voted repeatedly using their internet connection to try to get them disqualified!

30. 30 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

31. 31 WALL OF SHAME Time to share your contest horror stories and how you dealt with them!

32. 32 Any Questions? Brenda Pritchard Gowling Lafleur Henderson LLP Toronto Office Phone: (416) 862-5716 E-mail: brenda.pritchard@gowlings.com THANK YOU!