Look in the dictionary under ‘imperfect science’ and you will find Assessment of Legal Risk in Marketing Situations.

Today’s marketer faces risks of civil suits ranging from product liability to a multi-million-dollar soundalike action.

Quasi-criminal prosecutions for misleading advertising with potential prison terms also loom in the background.

Staggering costs

The potential costs are staggering and often disproportionate to the gains made by ‘taking the legal risk.’

Marketers must take a hard look at their insurance, legal counsel, advertising agency agreements and management strategies and put solid risk management plans into place to keep up with the increasingly litigious Canadian climate.

Case in point. A large, apparently deep-pocketed, advertiser produces a short-life radio campaign using a celebrity soundalike of a well-known singer with a distinctive voice.

Although a synchronization licence is obtained for the underlying copyright in the song, the singer, when approached, is not interested in rerecording a jingle version of the song or allowing use of his sacrosanct original.

Soundalikes

Recording studios are full of talented Canadian singers who can mimic artists with a skill that would fool their mothers and a ‘soundalike’ version is created for a fraction of the cost of negotiating with the artist.

What results is a multi-million dollar lawsuit against the advertiser, the advertising agency and the jingle house.

Not to mention a furious client, a frustrated advertising agency, a regrettably self-insured jingle house and several busy litigation lawyers.

Another case in point.

Widget marketer becomes aware that one of the ingredients in its children’s toy is potentially toxic. Its label does not address the potential product liability issue.

The harm is not life-threatening and the losses to be incurred in recall or relabelling will surely cripple the company. The marketer decides to keep silent.

The result – a multi-million-dollar lawsuit for damages for product liability, a government recall of the product and a public relations nightmare.

My examples are fictitious but they parallel real-life situations that are before the courts.

What, then, should a product marketer do to responsibly weigh and prevent risk?

The definitive answer is elusive, but to assist you in your search I have compiled a list of do’s and don’t’s, which is a starting point for risk management.

1. do ensure that your insurance coverage extends to copyright and trademark infringement, breach of privacy, misappropriation of personality and product liability, as well as the usual Errors and Omissions coverage.

2. do ensure that the letter of terms between the advertiser and the agency clearly sets out the respective responsibilities both legally and practically for legal risks.

3. do ensure that your advertising counsel reviews all packaging and labelling and advertising copy before production.

4. do put a system in place with approval stamps to ensure that proper approvals are secured before production.

5. do not assume that the government, broadcaster or caf preclearance stamps absolve you from all legal responsibility relating to your advertising. They do not.

6. do bring consumer complaints or laboratory findings that involve any potential product liability hazard to the attention of legal counsel immediately.

7. do not assume that by copying a competitor’s labelling your labelling will be legally correct.

8. do not assume that ads or labels used in the u.s. will be legally acceptable in Canada.

9. do ensure that you are kept up to date on the changes and proposed changes to all laws and guidelines which apply to the marketing of your products.

Recent cases

10. do ask your marketing counsel to keep you up to date on all misleading advertising, misappropriation of personality and marketing practices cases.

11. do ask your agency or its legal counsel for an assessment of risk in grey areas of the law with suggestions for alternative creative solutions to the legal issue.

12. do, where possible and appropriate, ask the agency to create and produce ‘safe’ versions of risk-prone materials to substitute if needed to avoid ‘dead air’ or space.

13. do seek legal counsel before meeting with government officials regarding a potentially misleading ad or label. Misleading advertising is a quasi-criminal offence.

Competitors

14. do be aware that risk increases where a competitive neck-to-neck market situation (e.g. Coke vs. Pepsi/Labatt vs. Molson) exists.

15. Finally, do recall that assessing risk in marketing is an imperfect science, so definitive risk assessments will not always be practical unless you are willing to accept ‘no.’

Brenda Pritchard practises exclusively in the area of advertising and marketing law and is a partner in the law firm of Gowling Strathy & Henderson.