NEW FEDERAL LAW TARGETING JUNK E-MAIL (a/k/a "SPAM")
WILL IMPACT BROAD RANGE OF BUSINESSES

by Paul S. Weidlich

If you, your company or your clients use e-mail as a marketing or advertising tool, a recently-enacted federal statute may require you to change the way you have been using commercial e-mail.

On December 16, 2003, President Bush signed into law the "Controlling the Assault of Non-Solicited Pornography and Marketing Act" or "CAN-SPAM Act of 2003." º  This is the first federal law drafted to regulate the junk e-mail commonly referred to as "spam".  The CAN-SPAM Act of 2003 will require significant changes in how all businesses send commercial e-mail to customers and potential customers.  Because it preempts any state law that "expressly regulates" electronic mail, this new federal law will have a major impact on how existing state spam laws will be treated in the future.  While the Act will not entirely eliminate the escalating problem of unwanted spam, it does represent a critical first step in the process.  The Act became effective on January 1, 2004.

Significant Provisions of the CAN-SPAM Act of 2003
In general, the Act imposes certain restrictions and obligations on companies that send commercial e-mail, including provisions that:

• Apply to almost all commercial e-mail, with narrow exceptions for "transactional or relationship" e-mail¹ 
• Require all commercial e-mail to provide:  (a) a "clear and conspicuous" identification that the message is an "advertisement" or "solicitation" if prior affirmative consent to receive the e-mail is not present; (b) "clear and conspicuous" notice of the recipient's opportunity to opt out of further e-mails from the sender; and (c) a valid "physical postal address" for the sender
• Require all commercial e-mails to have a functioning return e-mail address or Internet-based opt-out mechanism that:  (a) an e-mail recipient can use to "opt out" of receiving further commercial e-mails; and (b) remains functional for at least 30 days after transmission of the original e-mail
• Require that opt-out requests be honored within ten (10) business days of their receipt²
• Prohibit supplying false or misleading header information (i.e., sender information) or deceptive or misleading subject headings
• Prohibit senders from engaging in e-mail address "harvesting" or "dictionary attacks"
• Provide cell phone users with an opportunity to "opt out" of receiving commercial "text messages"
• Require warning labels on e-mails containing "sexually-oriented material"
• Prohibit the use of another's computer or e-mail account to send commercial e-mail
• Provide for potential jail time and multimillion-dollar fines for online marketers who violate the law.

In addition, the CAN-SPAM Act of 2003 authorizes, but does not require, the FTC to implement a "do-not-spam" registry similar to the "do-not-call" telemarketing registry recently implemented by the FTC.  The responsibility for enforcing the Act is delegated primarily to the FTC, but the U.S. Attorney General and State Attorneys General also have enforcement responsibilities under the Act.

The Practical Impact of the CAN-SPAM Act of 2003
While the Act will not completely put an end to unwanted e-mails, it does impose significant restrictions on the use of commercial e-mails in the United States.³  The Act is also significant because it is the first federal legislation aimed at regulating e-mail and represents a statement that regulation of the Internet in the form of uniform national standards is appropriately reserved for the federal government.  The effectiveness of the Act in stemming the flow of spam, however, will depend largely on the willingness of federal and state governments to devote the resources necessary to enforce it. 

Companies that distribute commercial e-mails should immediately familiarize themselves with the requirements of the Act, review how they use e-mail and take steps necessary to protect themselves.  Companies should develop standards to determine whether a particular e-mail is advertising a commercial product or service, or whether it is a "transactional" or "relationship" message.  Companies should decide how to characterize their commercial solicitations.  Companies should also review their existing opt-out procedures and develop new procedures and notices, if necessary, in accordance with the Act.  Companies should also carefully scrutinize the actions of third parties that are involved with the distribution of company e-mails.  This review should include all joint marketing partners and third parties that are involved in the distribution of e-mails on behalf of the company.  Possible protective measures may include indemnification clauses requiring joint marketing partners and third parties to indemnify the company in the event of a violation of the Act. 

If you have any questions regarding this article or would like additional information about the CAN-SPAM Act, please contact a member of our Intellectual Property Group.

ºThe entire text of the "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003",  S. 877, 108th Cong. (2003), may be found at http://thomas.loc.gov/.

¹"Transactional or relationship" e-mail is e-mail that has the primary purpose of (a) facilitating, completing or confirming a previously agreed-upon commercial transaction; (b) providing warranty, product recall, or safety or security information; (c) providing a notification concerning a change in the terms or features of, or recipient's status with respect to, a subscription, membership, or other comparable ongoing commercial relationship; (d) providing account balance information about a current subscription, membership or other comparable commercial relationship; (e) providing information relating to a current employment relationship or related benefit plan; or (e) delivering goods or services, including product updates or upgrades, under the terms of a previously agreed-upon commercial transaction.  Section 3(17).

²Section 5(a)(4).  The Federal Trade Commission may modify the 10-day period by rule based on what would be a "reasonable" period of time (Section 5(c)).

³It should be noted that the Act does not prohibit or regulate e-mail that is generated in a foreign country or e-mail that is generated in the United States and then channeled through a foreign conduit back into the United States. 

This is an advertisement. Certification as a Specialist in Intellectual Property Law by the Tennessee Commission on Continuing Legal Education and Specialization is not currently available.  None of the attorneys listed in this communication are certified in any area of Specialization.

© 2004 Chambliss, Bahner & Stophel, P.C.