User generated content (UGC) is a rapidly growing phenomenon on the Internet. Popular social networking sites that rely on UGC for content include YouTube, MySpace, Facebook, Friendster, just to name a few. Generally, UGC refers to various kinds of media content produced by regular, every-day people (as distinguished from traditional media producers).

But UGC is not just for social networking sites anymore. It's now moved into online advertising, but there's a catch -- claims for false advertising.

In a recent case, Subway sued its competitor, Quiznos, claiming false advertising. This case may offer some valuable insight into pitfalls to avoid.

UGC Offers Business Opportunity For Small Online Businesses

One way for small online businesses to create inexpensive advertising is to let your customers do it for you -- through UGC.

Quiznos is one of several companies that have extended UGC to advertising; however, a recent suit by competitor Subway reveals pitfalls involving false advertising claims. Doctor's Associates, Inc. v. QIP Holders, LLC, 2007 WL 1186026 (D. Conn. April 19, 2007).

Subway v. Quiznos

As part of a nationwide call for user-generated ads, Quiznos posted 3 user-generated examples of ads that compared its prime rib cheese-steak sandwich to Subway's competing sandwich. Subway complained that the ads contained false and misleading statements and sued Quiznos for false advertising under the federal Lanham Act.

Quiznos filed a Motion to Dismiss the false advertising claim based on 47 U.S.C. Sec. 230 ("Section 230") which immunizes internet service providers and website operators, from being liable for what their users post. The U.S. District Court in Connecticut ruled that Section 230 was not appropriate for a Motion to Dismiss, but that Quiznos could still raise it later as an affirmative defense.

While the highly technical distinction made by the Court is of little interest to Internet marketers, the important question is whether Quiznos will actually succeed with a Section 230 defense later. The Court pointed out in a footnote in the ruling that Subway would be authorized to learn through Discovery the extent to which Quiznos was involved in the user's videos. It would appear that Section 230 would shield Quiznos from liability even if Quiznos provided some technical input for the videos, but probably not if Quiznos went beyond technical input to participation in the statements at issue.

An additional issue regarding the applicability of Section 230 to this case is whether Subway's claim is an "intellectual property" claim. Section 230 expressly provides that it is not available as a defense to an "intellectual property" claim.

Conclusion

We won't know whether Section 230 will be a defense to liability for Quiznos until the case is fully adjudicated. This future ruling promises to be of significant interest to Internet marketers, particularly small businesses.