Sunday, September 16, 2007

Advertising Law and the High Tech Startup

Whenever one of our clients is about to go to commercial release on a product or service, we take them out for a beer (okay, three, but the last two are always Coors light, which is hardly beer at all). The purpose is to review with them our pre-launch checklist of legal issues. Beer tends to make this exercise go down easier. Last, but not least on that list is a discussion of the content of their go-to-market materials for the new product and their compliance with advertising laws.

For those who doubt the relevance of advertising laws, I point to the case of Symbol Technologies (now part of Motorola). At the height of the telecom boom, Symbol was successfully sued by a competitor, Telxon Corporation, for making false and misleading statements about (a) the interoperability of its wireless LAN products with other 802.11 compliant products and (b) Symbol's conformance to 802.11 standards.

The statements themselves were, as one of my Nortel colleagues noted at the time, really half truths at best rather than falsehoods. Nonetheless, the court noted that:

1. The 802.11 standard had not yet been finalized, so compliance was a premature claim.

2. Compliance with 802.11 would not automatically result in interoperability, as the standard itself did not include specifications for communications between wirelss access points.

In this case, Symbol was required to issue a retraction. Long term, the company did not suffer (in fact, it acquired Telxon in 2000 and earlier this year, was acquired by Motorola for $3.9 Billion). Had the complaint come from a customer, the resulting damages could have cost the company far more.

The lesson? Scrub your press releases and marketing collateral carefully so that your competitors don't steal your thunder at launch. Make sure you prouct/service descriptions are equally scrubbed so your customers can't scream fraud.

A related lesson? If as part of your launch you want to give away swag in exchange for customer surveys or registrations, you need to talk to your lawyer about that, too, and your compliance with contest laws. It wouldn't hurt if you sprang for soe nachos, too.

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