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Will class-action lawsuit against Apple hurt mobile advertising?

If successful, a class-action lawsuit filed against Apple Inc., Pandora Inc., The Weather Channel, Dictionary.com LLC, Gogii Inc. and Backflip Studios Inc. would set an ominous precedent for the mobile advertising ecosystem.

Whether it was a coincidence or a direct result, the class-action complaint was filed in the United States District Court in San Jose, CA, just days after an alarmist piece was published in The Wall Street Journal entitled ?Your Apps Are Watching You.? Even though consumers must opt-in to give developers permission to access their personal data before downloading an application, that may not be enough to protect the defendants.

?With privacy and digital behavioral advertising at the forefront of several agenda, government and industry alike, reports such as these make a fairly strong argument for self-regulatory and/or legislative action in the areas of privacy and consumer data protection,? said Adam Snukal, senior associate at Reed Smith LLP, New York.

?The various actors within these ecosystems must also be mindful of their responsibilities and potential exposures,? he said.

?Even though Apple may have no knowledge of the illegal or unauthorized data-sharing that exists within or related to iPhone apps, that may not be enough to exculpate Apple from liability.?

A provision in Apple's user agreement that prohibits data transmissions and data sharing without a consumer's consent is not sufficient to get Apple out of the woods, if Apple fails to take steps to enforce these terms, per Mr. Snukal. 

Similarly, if the owners of platforms and content collection/distribution media?mobile Web sites, applications, etcetera?establish policies and then do not follow them, or allow transactions to occur that are in violation of such policies, these owners expose themselves to liability.

?It is not significantly more complicated than that,? Mr. Snukal said.

Please click here to view a copy of the complaint.

Please click here to view a copy of the docket.

Apple of attorney?s eye
Apple targets ads to iPhone and iPod touch users across the iAd network partly based on data it collects about them through its App Store and iTunes.

Apple claims that the targeting criteria it uses might include the types of songs, videos and applications a consumer downloads, with targeting categories such as karaoke, gospel music, Japanimation, business news, health/wellness, gaming and vampire movies.

Apple claims that it does not track what users do inside applications and that it offers iAd advertisers broad demographic data about consumers, not personally identifiable information.

In a patent application filed this past May, Apple mentions a framework for deploying and pricing ads based on a consumer's "Web history or search history" and "the contents of a media library."

The patent application also mentions the possibility of using the contents of a friend's media library lists to target ads.

The patent goes on to say that Apple could tap "known connections on one or more social-networking Web sites" or "publicly available information or private databases describing purchasing decisions, brand preferences," as well as other data.

Apple spokesman Tom Neumayr said that his company has created strong privacy protections for its customers, especially regarding location-based data, as quoted in the Journal. Privacy and trust are vitally important to Apple, per Mr. Neumayr.

However, those assertions may not be enough to avoid paying a significant settlement sum.

Looking at the bigger picture, a successful class-action lawsuit of this kind could open up a Pandora's Box of legal action against a host of players in the mobile advertising ecosystem.

And that could seriously impede the growth of mobile marketing as a whole, an industry that made such huge strides forward in 2010.

So what are the answers? What do marketers, developers, publishers and ad networks need to keep in mind to avoid such legal pitfalls?

?No. 1, know thyself and thy data, No. 2, keep abreast of self-regulatory and/or legislative developments in this area, No. 3, implement carefully thought-out policies, provisions and agreements that are crafted to address the actual situation on the ground, No. 4, establish systems that will facilitate and allow for adherence and compliance, and No. 5, do your best to enforce them,? Mr. Snukal said.

Final Take
Dan Butcher, associate editor, Mobile Marketer

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