Questions Up Front -- Guidance In The Back

1. Protecting and Promoting Your Company in the Viral Age of Social MediaA presentation by DELVACCA in conjunction with its Litigation CommitteeSeptember 23, 2010Ben Barnett Dechert LLPGeoffrey Beauchamp Delaware Valley Municipal Management Association

2. Questions Up Front --Guidance In The Back • Does your company use Social Networking sites? • Do your employees use Social Networking sites? • How much do you really know about these sites? • Does your company have current policies as to what employees can and cannot do on such sites? • Are those policies tied to your business plan for Social Networking sites?

3. Program Agenda • Provide some high-level overview of Social Network sites (“SNS”) • Information on SNS you need to know • Summary of current regulatory environment for SNS • Identify how businesses are using SNS (rewards) • Identify potential problems with SNS (risks) • Overview of SNS in litigation • Developing or updating your company’s own SNS policy

4. Facebook • Facebook's mission: to give people the power to share and make the world more open and connected • One million websites have implemented tools Facebook makes available to engage users and to make their sites more social and relevant • More than 500 million monthly active Facebook users spending 700 billion minutes per month • More time spent on Facebook than Google • New Feature -- Facebook Places: allows you to see where your friends are and share your location in the real world

5. Social Networks: Twitter • Twitter is an information network made up of 140-character messages called Tweets. It's a new and easy way to discover the latest news (“what’s happening”) related to subjects you care about • “Like being delivered a newspaper whose headlines you’ll always find interesting” • Since Twitter began there have now been over 20 billion Tweets

6. Social Networks: Trends • As of June 2010, social networking accounted for 22.7% of all activity on the Internet • More than 5 percent increase from June 2009 (15.8%) • Among Americans age 12 or older, awareness of Twitter has grown from 5% in 2008 to 87% in April of 2010 • 51% of active Twitter users follow companies, brands, or products on SNS Sources: Nielsen Wire, What Americans Do Online: Social Media and Games Dominate Activity, August 2, 2010; http://blog.nielsen.com/nielsenwire/online_mobile/what-americans-do-online-social-media-and-games-dominate-activity/ Edison Research; Twitter Usage in America: 2010; http://www.edisonresearch.com/twitter_usage_2010.php

7. The Mobile Factor • Advent of “Smart Phones” Have Also Facilitated The Growth of Social Media • End users now creating content on the fly • May 2010: 10.70% of Mobile Internet Time Spent on Social Networking • Mobility Continues to Dissolve Line Between Professional and Personal Lives Source: http://blog.nielsen.com/nielsenwire/online_mobile/how-americans-spend-mobile-internet-time-a-new-look/

8. Facebook : Privacy Policies • Generally defaults to making data available • Name and profile picture do not have privacy settings (although you can affirmatively shield them from public search engines) • Gender and birth date must be given (but can be concealed) • Picture tagging – requires affirmative removal Source: http://www.facebook.com/privacy/explanation.php#!/policy.php

9. Facebook: Potential Privacy Concerns • If something is updated to Facebook with metadata, the metadata is uploaded and available as well • Defaults to storing payment source account number (can opt-out) • Use of “cookies” to improve advertising and monitor how people interact with various features • Data sharing with advertisers • A number of applications are run by third parties with minimal monitoring by Facebook • Friends can use third party applications and export data indicated as “friends only” • Even actively removing information does not guarantee 100% deletion of data previously shared with others Source: http://www.facebook.com/privacy/explanation.php#!/policy.php

10. Twitter: Polices & PotentialPrivacy Concerns • “When using any of our Services you consent to the collection, transfer, manipulation, storage, disclosure and other uses of your information as described in this Privacy Policy. Irrespective of which country that you reside in or create information from, your information may be used by Twitter in the United States or any other country where Twitter operates” • “We may share or disclose your non-private, aggregated or otherwise non-personal information, such as your public Tweets or the number of users who clicked on a particular link (even if only one did)” • Use contact information to send information about services or to target market • Use a variety of third party hosting services which also collect information sent by your browser as part of web page requests Source: http://twitter.com/privacy

11. Facebook & Twitter: Unintended Consequences • Numerous examples of individuals losing their jobs over Facebook, Twitter, and Blog postings • Examples: • High School Teacher in Cohasset, Massachusetts • Forced to resign for referring to students as “germ bags” and parents as “snobby” and “arrogant” • Pizza Restaurant Waitress in North Carolina • Complained about $5 tip and called the couple who left it “cheap” on Facebook after having sat in the restaurant for three hours and causing her to stay an hour late • Microsoft Employee Fired for Taking Pictures of On-site Apple Computers • Posted Pictures of Apple Computers Being Delivered to Microsoft campus and added the caption: “It looks like somebody over in Microsoft land is getting some new toys” Sources: ABC News, Teacher Loses Job After Commenting About Students, Parents on Facebook, Aug. 19, 2010; The Guardian, Waitress Sacked for Facebook Gripe Over Tip, May 17, 2010; Seattle PI, Todd Bishop, Microsoft fires worker over weblog, Oct. 30, 2003

12. Evolving Regulatory Framework • Three federal agencies currently assessing SNS • No comprehensive regulations at this time • Federal Trade Commission (FTC) • Securities and Exchange Commission (SEC) • Food and Drug Administration

13. Regulatory Framework: FTC • FTC – Limited Action To Date • October 1, 2009 - FTC 16 CFR Part 255: Guides concerning the use of endorsements and testimonials in advertising • Discusses consumer generated content as an “endorsement” within the meaning of the guides • Key issue is whether statements can be considered “sponsored” by the manufacturer • Fact specific inquiry • Looking at whether employment status of poster is disclosed • Transparency is important; do not want advertisers masquerading as independent third parties

14. Regulatory Framework: SEC • Limited action to date • SEC has addressed use of company websites and closed forums • August 7, 2008: 17 CFR parts 241 and 271 • Essentially current rules apply -- cannot release information to shareholders with access to shareholder-only forums before public

15. Regulatory Framework: FDA • Held town hall meeting • No formal comprehensive policy yet • Solicited written comments to form a more coherent policy • Selective enforcement has occurred • Position that company created online content must adhere to same rules as any other advertising • Including social media sites and “widgets”

16. Evolving Regulatory Framework • Take away point: • The regulatory environment is still evolving, but the trend appears to be to try and treat internet and SNS in the same fashion as traditional marketing and advertising • Current approach to regulated advertising/promotional activities should be considered when assessing “New Media Marketing”

17. Social Media: Business Opportunities • Build/reinforce public image and company loyalty • Responding immediately to customer complaints • Improving customer service • Getting ahead of potentially negative press reports • Targeted advertising

18. Company Groups on Facebook Examples: • General Electric: 51 • Wal-Mart: 259 • Siemens: 164 • Hewlett-Packard: 49 • IBM: 362 • Verizon: 179 • BASF: 25 • Panasonic: 88 • Sony: 302

19. Social Networks and Corporations Proudly (more or less) member of the huuuge General Electric family Facebook User Comments from GE Group Pages: “We need to bring our jobs back over the U.S….We need more manufacturing done right here…” “The best part about GE is that it makes you so competent that you are bound to outperform others anywhere!!”

20. Social Networks and Corporations This is a closed group. Members must be invited or approved by an admin.

21. Twitter: Improving Client Relations • Airlines follow passenger Twitter accounts to address problems immediately and keep customers informed • Southwest response to fuselage hole • Virgin Atlantic response to food complaint • Hotels Track Twitter • Some hotels actively track guest complaints • Guest tweeted “At the Orlando Marriott World Center for RIM WES 2010 [a technology conference]. But I have the crappiest room in the hotel” had an offer to switch rooms the next day Source: N.Y. Times, Nicola Clark, Airlines Follow Passengers Onto Social Media Sites; July 29, 2009; Wall Street Journal, Sarah Nassauer, 'I Hate My Room,' The Traveler Tweeted. Ka-Boom! An Upgrade!, June 24, 2010

22. Toyota Recall: Impact of Social Media • Initial “Damage Control” was Poor • Little response to social media reports • Steve Wozniak, co-founder of Apple Viral Video • Multiple web-sites containing recall information • No control of the dialogue • Eventually Establish “Listening Post” called “Toyota Conversations” • Started a web site to aggregate all recall news and company communications onto one web site • Dialogue improved for Toyota after they did so Sources: http://commetrics.com/articles/weak-performance-by-mr-toyoda-at-us-senate-hearing-further-damages- reputation-for-quality/; http://www.vancomm.com/insites/2010/03/using-social-media-as-a-listening-post-during-brand-crises

23. Potential Business Risks Posed by Social Media • External Risks: • Disclosure of confidential company information to competitors and public • Few rules • HR risks (including risk to key personnel) • Negative impact on corporate image • May create fertile ground for litigation • Potentially costly target of discovery in litigation • Regulatory violations

24. A Growing Problem • Greater opportunity for inadvertent disclosure of confidential information

25. Potential Business Risks Posed by Social Media • External Risks: • Disclosure of confidential company information to competitors and public • Few rules • HR risks (including risk to key personnel) • Negative impact on corporate image • May create fertile ground for litigation • Potentially costly target of discovery in litigation • Regulatory violations

26. Potential Business Risks Posed by Social Media • Internal Risks • Not necessarily understood by senior management • Drain on productivity • Potential forum for whistle-blowers • Investment in transient technology may provide limited returns • Costs associated with creating policies, training, and compliance

27. Impact of Social Media in Litigation • Social media is being used to drive and create litigation • McDonald’s Shrek Cup Controversy • Voluntary recall driven by a consumer products attorney blogging on claims made in an e-mail from a consumer who conducted a bogus test for cadmium in the cups • CSPC initiates investigation and determines there was no violation • Pampers Dry Max Diapers • Online movement alleging a link between the diapers and chemical burns • Sparked by a Facebook Group • “The new Pamper Dry Max is giving babies everywhere chemical burns. And instead of helping to solve the problem, refunding money, and getting to the heart of the issue, Pampers is claiming parents of babies with chemical burns are 'being neglectful.‘” • http://dirtydiaperlaundry.com/pampers-new-dry-max-causing-severe-rashes/ • Class Action Suit Filed on May 11, 2010 (In re Dry Max Pampers Litigation, et al, No. 1:10-cv-00301-TSB, S.D. Ohio) • CSPC eventually determines there is no link Sources: Law 360: The Importance of Monitoring Social Media August 23, 2010

28. SNS - New Way to Litigate - Case Study: Westwood College Inc. v. Estes • Westwood College is a for profit network of colleges offering nationally accredited degrees • Florida law firm files four class action law suits against Westwood (California, Colorado, Texas, & Wisconsin) • Class recently decertified in Colorado on August 3, 2010 • Law Firm Creates a Facebook page, call themselves consumer advocates, and create a web site wholly dedicated to the law suit (first post on August 4, 2009) • http://westwoodscammed.me/ • Video messages from firm lawyers on website make allegations against westwood • Also started a Twitter Account “westwoodscammed” and allegedly sent unsolcited tweets to Westwood students. • No indication as to law firm affiliation on Twitter page

29. SNS - New Way to Litigate - Case Study: Westwood College Inc. v. Estes • Westwood Responds by Filing a Defamation Suit on March 17, 2010 against the firm and other individuals • Accuses firm of portraying themselves as a consumer advocacy group as opposed to a plaintiff’s law firm • Lawsuit is still in its relatively early stages • http://westwoodscammed.me/ is still operating and has even added an update this week

30. Other SNS Considerations in Litigation • Coverage of Litigation • “Company” statements in public domain • New front in discovery wars • Data preservation issues • Confidentiality • Defensive discovery • EEOC v. Simply Storage Mgmt. • Privacy Settings Deemed Largely Irrelevant • Affirmative discovery

31. Social Media as Litigation Tool • Can be Used as a Highly Useful Tool to Ferret Out Information • Voir Dire • Jury Selection • Rapidly Find Out About Potential Jurors • Witness Preparation/Investigation • Find out useful information about witnesses for cross-examination • Voir Dire • Carino v. Muenzen, 2010 WL 3448071 (N.J.Super.A.D. Aug. 30, 2010) • Attorney ran Google searches in the courthouse with their wireless card • Judge prohibited the practice but was overruled on appeal • Witness preparation • Philadelphia Bar Association Ethical Opinion 2009-02 (March 2009) • Unethical to have a third party “friend” an adverse witness on Facebook for purpose of gaining additional information about the witness • Even if only truthful information is used to obtain the friend • Inappropriate under P.R.P.C. 4.1, 5.3, and 8.4

32. SNS: Practical Steps to Protect Your Company Now • Identify stakeholders • Business Assessment of SNS • Drafting SNS Policy • Management Approval • Education and Training • Documentation, Compliance and Monitoring • Re-evaluation

33. Identify Stakeholders • Senior Management • Marketing • IT • Legal • Human Resources

34. Business Assessment of SNS • How are you currently using SNS • Level of understanding of SNS • How are competitors using SNS • Understanding of rewards/risks • Budget limitations • Staffing and resources • Commitment to comprehensive policy

35. Drafting SNS Policy • Should be part of “Suite” of Company Policies Addressing Use of Technology • Ownership and Use of Company Data and Equipment • Internet • Texting • Personal or Third Party E-mail • Mobile Devices • Must provide clear guidance in non-tech speak • Must provide clear penalties for non-compliance • Needs to be drafted with eye towards potential disclosure

36. Education and Training • Develop Training Around Policy • Roll-out Training • New Employees • Current Employees • Annual training • Periodic reminders • Consider annual certifications

37. Documentation, Compliance and Monitoring • Provide resources so that employees can answer their own questions • But also provide back-up – Legal or Compliance • Consider how compliance fits within your culture • Evaluate whether and how to monitor compliance

38. Re-evaluation • SNS continue to rapidly evolve • Static policies will not serve their overall purpose – protect company • Establish regular schedule for re-evaluating and revising SNS policy

39. Wrap-up Questions?