Trademark Laws

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Google Comes Under Fire from Oracle in Patent Lawsuit

Posted: August 18th, 2010, 6:48pm EDT

On August 12, 2010, Oracle sued Google in U.S. District Court in San Francisco based on claims that Google’s Android operating system constitutes an infringement of Oracle’s patents and copyrights related to the Java software development platform. Oracle owns the intellectual property rights in Java following its acquisition of Sun Microsystems earlier in 2010, and in its lawsuit, it alleges that a Google-developed technology called Dalvik, which is integrated in the Android O/S, is a competitor to Java that infringes the various patents and the copyright in Java. In light of the massive resources Oracle and Google each are able to bring to bear in this fight, the outcome of the lawsuit is anything but certain. Google has countered that versions of Java have been licensed under open-source licenses for years and that Dalvik was developed under that kind of license. In addition, Sun Microsystems’ approach to Java patent matters historically was very permissive, which may call into question Oracle’s ability now to base a patent suit on rights that arguably may have been diminished through past inaction. However, one thing that is certain is that Oracle’s lawsuit will cause – and should cause – many software developers to think long and hard about the advisability of any long-term plans that depend on the open availability of Java as software development platform. As this case unfolds, developers should be prepared to carefully consider whether it represents a sea-change in Java-related IP enforcement, in which case it may make sense to start identifying appropriate alternatives to Java, or whether it is merely a case of one big fish going after another big fish in an effort to reach a joint-licensing or other context-specific outcome.

Many Cloud Computing Vendors Attempt to Avoid Regulatory Liability

Posted: August 18th, 2010, 6:47pm EDT

Both state and federal governments are seeking ways to ensure citizens’ personal information is secure and remains private, but the laws vary wildly and are sometimes frustratingly complex. For businesses, it is not always clear which laws, if any, the business is subject to. Once applicability of the law to a business is determined, the process of evaluating compliance of IT systems and policies can be time-consuming. Now imagine you are the vendor of software products that could potentially store statutorily protected data for your customers. You potentially have just inherited compliance evaluation projects for every one of your customers. For many vendors, such compliance demands are too burdensome, and a quick review of their cloud computing agreements shows that their methods for handling these requirements often consist of avoiding the subject altogether or by expressly absolving themselves of the responsibility. Many vendors attempt to avoid liability by including provision in their contracts disclaiming any liability for data breaches or compliance with data security regulations. Cloud customers that do not carefully evaluate cloud agreements can find themselves holding the bag for data breaches that may have been caused by their cloud vendors. Some statutes, such as the recently revised HIPAA rules, have addressed such contractual liability avoidance by specifying that business associates of companies covered by the statutes are also liable for data breaches. As the cloud computing industry matures, vendors will learn that they have to comply with statutory security requirements. During this maturation, new and possibly standardized methods to share responsibility for security of customer information will emerge. For now, customers should seek the advice of experienced counsel before entering into any cloud computing agreement to mitigate or eliminate vendor avoidance and to ensure the vendor will adequately protect protected personal information.

Lawsuits Against Gripe Sites Can Backfire

Posted: August 18th, 2010, 6:45pm EDT

Web sites catering to online reviews of businesses – including sites dedicated to reviewing (some might say attacking) only one business – have created public relations nightmares for many businesses. In some cases, the targeted businesses perceive the content of the gripe sites to be defamatory or infringing of the target’s intellectual property rights. However, while it may tempting to threaten legal action against these sites, companies are learning that such action may cost more than it achieves and may risk further bad publicity as a result of so-called oppressive prosecution. A good example is the recent case of Career Agents Network, Inc. v. CareerAgentsNetwork.Biz. Career Agents Network, Inc. (“CAN”) brought suit against a former customer, Lawrence White, who had developed a web site called careeragentsnetwork.biz solely to warn prospective customers against doing business with CAN. The lawsuit included claims under the Anti-cybersquatting Consumer Protection Act, alleging that White registered the web site in bad faith in an effort to profit from his use of CAN’s trademark. The complaint also included a more traditional trademark infringement claim under the Lanham Act. White prevailed, with the court finding that his site was simply meant as a forum to express dissatisfaction with CAN and not to reap profit by stealing potential customers from CAN. As a result, White not only succeeded in obtaining a dismissal of CAN’s claims but also received an award of attorney’s fees – the court determined CAN had brought the suit in an oppressive manner and that its claims were unfounded. The case should be viewed as a warning to businesses to think carefully before retaliating against gripe sites and online critics with legal action. Litigation is always an expensive proposition, but the costs in this kind of scenario are augmented by the reputational damage that can result even from sending a threatening letter to a targeted business. Such letters have a habit of being posted on the sites in question and of further exacerbating the existing publicity problem. A better solution, when possible, is usually to engage critics in an effort to resolve a negative experience through customer service efforts. Barring that, an effective search engine optimization strategy can help to bury search results pointing to gripe sites and to keep the majority of potential customers from encountering the negative content. A knowledgeable attorney can assist with those efforts and can provide an effective battle plan when informal efforts are found to be ineffective.

Proof of License in SIIA Software Audits

Posted: August 18th, 2010, 6:39pm EDT

Like all audits, success in a SIIA software audit depends less on what you own and more on what you can prove that you own. Although not required by law, the SIIA takes the position that a target company is out of compliance for each installation of SIIA member software products for which the target company cannot produce a dated proof of purchase. Many clients are dismayed to discover what does and does not constitute valid proof of purchase according to the SIIA. Not Considered Valid Proof 1. Copies of Checks to Software Vendors 2. Dated Purchase Orders 3. Undated Software Licenses 4. Credit Card Statements Evidencing Software Purchases 5. Certificates of Authenticity 6. Media, Manuals, or Key-Codes 7. Invoices Bearing and Entity Name Other than the Entity Named in the SIIA’s Initial Letter Valid Proof of Purchase 1. Dated Invoices in the Name of the Audited Entity 2. Soft Records (online account statements) from Recognized Resellers 3. Signed and Dated License Agreements 4. Soft Records from SIIA Member’s such as Microsoft Licensing Statements 5. Cash Register Receipts for Retail Sales where Product, Version, Quantity and Price Paid are Included. Understanding how the SIIA analyzes software audit materials is critically important to achieving the most favorable outcome. In our experience, it is the most time consuming and difficult part of the process for clients to handle on their own. Scott & Scott, LLP is not affiliated in any way with the SIIA.

AOL Loses Trademark Injunction Battle

Posted: August 18th, 2010, 6:38pm EDT

In Advertise.com, Inc. v. AOL Advertising, Inc., 2010 WL 3001980 (9th Cir. 2010), the Court of Appeals for the Ninth Circuit partially reversed a trial court decision granting AOL an injunction against Advertise.com. In August 2009, AOL – which owns the mark ADVERTISING.COM – filed a complaint and motion for a preliminary injunction against Advertise.com alleging that Advertise.com had infringed AOL's trademark rights. Advertise.com appealed the trial court's decision to grant the preliminary injunction, but it did not contest that part of the preliminary injunction that enjoined it from using any design mark that was confusingly similar to AOL's stylized marks. On appeal, the Ninth Circuit concluded the ADVERTISING.COM mark was generic . Generic terms are those that refer to the genus of which the particular product or service is a species, i.e., the name of the product or service itself. To determine whether a term is generic, a court determines whether consumers understand the word to refer only to a particular producer's goods or whether the consumer understands the word to refer to the goods themselves. On the other hand, a mark that is descriptive describes the qualities or characteristics of a product. Generic terms cannot be valid marks subject to trademark protection, whereas a descriptive mark can be valid and protectable if it has acquired secondary meaning. The Ninth Circuit first examined the component parts of ADVERTISING.COM and determined ADVERTISING and .COM were both generic terms. Merging the terms together yielded a generic term as well. The court indicated that AOL accurately could describe itself as an “advertising.com” or “advertising dot-com.” AOL’s references to cases in which a seemingly generic URL mark was ruled non-generic did not persuade the court. Additionally, the multitude of other domain names incorporating the word “advertising” (Advertise.com cited 32 such examples) convinced the court that AOL’s mark is generic. The court addressed AOL’s remaining arguments as inapplicable or unpersuasive and reversed the district court’s grant of an injunction against Advertise.com to the extent it enjoined Advertise.com from using the designation and trade name ADVERTISE.COM or any other designation or trade name that is confusingly similar to AOL's ADVERTISING.COM marks. If you require assistance navigating a trademark dispute or registering your trademark, you should consult counsel experienced in handling trademark matters

Patent Lawsuit May Cause Negative Feedback for eBay

Posted: August 10th, 2010, 1:31pm EDT

On July 13, 2010, online auction giant eBay, Inc. was sued for $3.8 billion in the United States District Court for the District of Delaware by XPRT Ventures, LLC, on claims that eBay incorporated XPRT’s patented business method processes in eBay’s payment processing technology and that eBay breached a confidentiality agreement that allegedly covered the processes in question. The viability of XPRT’s claims will depend on a number of factors that likely will be points of contention during the litigation. Those factors include the patentability of the processes in question (especially in light of the Supreme Court’s recent Bilski opinion regarding business method patentability), the degree to which the processes incorporated into eBay’s payment methods really are encompassed, if at all, within XPRT’s patent claims, and the enforceability of the confidentiality agreement referenced in (though not attached to) XPRT’s complaint, among others. Patent infringement claims – especially those involving patented business methods and processes – are fairly common, and especially so when a defendant, such as eBay, has deep pockets and a similarly deep dependence on technological innovation in order to remain competitive. XPRT’s claims are somewhat more incendiary than those involved in many such suits, in that they include allegations of intentional wrongdoing by eBay’s officers and attorneys. However, the case generally appears to fit within a fairly common paradigm of a relatively unknown patent holder making claims for significant monetary damages based on patented technology allegedly incorporated in some aspect of the defendant’s products or services. Microsoft’s litigation with i4i, Inc. regarding XML-related technology in its Word software is another noteworthy, recent example. The XPRT lawsuit also has the potential to be more of a news item than the average patent-infringement suit, because it alleges that the wrongdoing in question occurred during a period of time in which California gubernatorial candidate Meg Whitman was the CEO of eBay. Recent history shows that California politics – especially those involving contests for the Governor’s Office – almost always entail explosive political drama, so it would not be surprising if the lawsuit is used as a political weapon against Ms. Whitman in the run-up to the election. However, Ms. Whitman is not named separately as a defendant in the lawsuit, and there are no allegations in the complaint that she was directly responsible for any of the allegedly wrongful conduct. Technology-dependent firms of all types must be prepared to recognize patent exposure as a cost of doing business, and they must be ready to work closely with knowledgeable counsel to evaluate the integrity of any patents they hold as well as the validity of any patent claims with which they are presented.

Introducing The Copyright Troll — What He Is And How To Avoid Him

Posted: August 10th, 2010, 1:28pm EDT

A new type of copyright lawyer has arrived on the intellectual property scene—not terribly good news for bloggers or online media outfits. Righthaven LLC CEO Steve Gibson is on the attack, beginning a campaign this past March against bloggers and website operators who post articles from the Las Vegas Review-Journal, his first client. Righthaven has acquired copyrights to the LVRJ content and is filing suit against these operators for copyright infringement. According to a Wired.com article, Righthaven plans to continue targeting bloggers who repost entire articles without permission by filing hundreds of lawsuits by the end of the year. While there is clearly nothing improper about protecting intellectual property, some commentators are accusing Righthaven of “trolling,” a tactic known in patent law circles where a patent owner enforces its patents against an infringer, often in an aggressive manner, without any intention to actually market or develop the patented technology. In the case of Righthaven and LVRJ, lawsuits have been filed against bloggers with miniscule web traffic numbers, where the actual damages caused by the infringement are correspondingly minor. However, Righthaven uses the threat of statutory damages—which can range up to $150,000 per infringement—to scare the media outfit into settlement. For a blogger who receives notice of a lawsuit, often without first receiving a request to remove the infringing material, the prospect of a lengthy federal court battle is far too expensive. Righthaven apparently counts on such analysis to encourage quick, monetary settlement of these cases. The “copyright trolling” trend being pioneered by Righthaven likely will expand before any material reform to copyright law occurs. Regardless of whether this type of use (or misuse) of copyright law is appropriate, Internet media companies and bloggers must ensure that any use of third-party content is either properly licensed or falls within the safe harbors provided by the copyright law prior to publication.

Eating and Drinking Establishments Sued for Music Copyright Infringement

Posted: August 10th, 2010, 1:26pm EDT

The American Society of Composers, Authors, and Publishers (ASCAP) recently filed copyright infringement actions against 21 bars, nightclubs, and restaurants nationwide. ASCAP claims in its press release that the establishments “either publicly performed the copyrighted musical works of ASCAP’s songwriter, composer and music publisher members without obtaining a license from ASCAP to do so, or had signed a license agreement with ASCAP but failed to comply with the license's payment terms.” ASCAP claims that it gives each establishment an opportunity to license music and pay the appropriate fees and that it resorts to legal action only when amicable attempts at resolution to a licensing dispute have failed. Establishments that engage in copyright infringement are subject to significant liability if found guilty. ASCAP has the option of electing statutory damages of up to $30,000 per song infringed or up to $150,000 per song infringed if the conduct was considered willful. The exact amount of damages awarded is within the court’s discretion. Willful conduct often is defined as actual knowledge of infringement or reckless disregard that conduct constituted infringement. Willful conduct also does not need to be proven directly and may be inferred from the defendant's conduct. Some courts have presumed an establishment acted willfully if it fails to respond to a complaint or court order or if it fails to appear in court. Alternatively, ASCAP may elect actual damages, normally calculated with respect to its lost profits. The defendant also may be assessed ASCAP’s attorney’s fees in addition to paying its own fees. Music copyright infringement disputes with ASCAP, BMI, and other music copyright owners and royalty clearinghouses can become very expensive for bars, nightclubs, restaurants, and other establishments. If you are negotiating a license agreement with ASCAP, BMI, or a similar entity, or if you already are in a licensing dispute with the entity, you should contact counsel experienced with copyright law and license agreements.

Software Publisher Wins Injunction Against Cake Boss

Posted: August 10th, 2010, 1:25pm EDT

An Austin-area software publisher recently obtained a significant court order against Discovery Communications, Inc. related to the popular Cake Boss television show on TLC. The plaintiff, Masters Software, Inc., which consists of husband-and-wife team Kelley and Jon Masters, publishes a computer program called CakeBoss that provides office management functions for professional cake bakers. The Masterses learned about the Cake Boss program, which, for the uninitiated, is a reality-TV program centered around the New York-based cake-baking business of Bartolo “Buddy” Valastro, prior to its debut and contacted both Discovery and Mr. Valastro in an effort to keep the show from airing under the Cake Boss name. The show aired despite the Masterses’ complaints, and it since has become one of the networks more popular shows. After the show aired, the Masterses began receiving numerous inquiries and requests from people who mistakenly believed that they were associated with the show or with Mr. Valastro’s business, some of which overwhelmed the server hosting their web site. In addition, the Masterses entered into a licensing agreement in 2009 with a supplier to sell CakeBoss-branded cake decorating products, but the licensee stopped selling the kits after Mr. Valastro threatened it with legal action. The Masterses subsequently filed suit against Discovery in March 2010, seeking an injunction against its use of the term “Cake Boss.” In granting a temporary injunction against Discovery, pending a trial, the U.S. District Court for the Western District of Washington noted the actual confusion that had resulted as a result of Discovery’s heavy marketing of “Cake Boss” and held that there is “a substantial danger that Discovery's ability to saturate the marketplace will lead consumers to assume that CakeBoss is somehow associated with Cake Boss.” The Court also held that, though the products at issue – a software program and a television show – are not directly competitive, it is nevertheless “not a substantial leap for a consumer encountering CakeBoss software in the market place to imagine that Cake Boss might have an interest in selling or sponsoring cake bakery management software.” As a result, the Court issued an order prohibiting Discovery and its affiliates from using the name “Cake Boss,” either to identify the television program currently entitled Cake Boss, or in connection with the sales of merchandise related to the show, though the Court also delayed implementation of the order for Discovery to finish airing the first run of the show’s third season. Brand selection is a crucially important step when launching a new product line or a new business. Companies owe it to themselves to run thorough trademark screening searches to determine whether there is a likelihood that an initially favored brand may end up being the subject of a trademark dispute in the future, and they certainly should think long and hard before moving forward with a mark that they know, or should know, already is being used by another business in the same or a similar market. Knowledgeable IP counsel can provide valuable assistance with that analysis.

Beware “Document Soup” Software Licensing

Posted: August 10th, 2010, 1:22pm EDT

On July 22, 2010, software publisher AccuSoft sued Northrop Grumman Systems in federal court for breach of contract, copyright infringement and trademark infringement related to Northrop’s use of AccuSoft’s ImageGear and ImageTransport software. Northrop allegedly used and integrated AccuSoft’s products in the development of a paperless records information system it developed for the U.S. military. According to AccuSoft, Northrop failed, in particular, and in violation of applicable software license agreements, to provide the required periodic reporting regarding the number of end-user licenses for the AccuSoft products that Northrop had distributed. AccuSoft did not specify a damages claim in its complaint, though it did state that the unauthorized software distributions number in the “hundreds of thousands,” meaning that a decision in its favor potentially could entail a multi-million dollar penalty against Northrop. Northrop has yet to answer or to respond to the lawsuit, so its position with regard to AccuSoft’s factual claims has yet to be determined. However, the facts presented in the complaint appear to reflect the kind of dispute that often arises when one or both parties to a software licensing relationship do not have an accurate grasp of controlling license agreements. Especially with many larger enterprises, the business units responsible for software license negotiation and acquisition may lack sufficiently open lines of communication with production departments, resulting in internal confusion regarding what agreements have been signed, what agreements remain in effect, and what those agreements mean for the company’s day-to-day operations. Compounding the confusion is the fact that larger software license transactions often involve the execution of a master license or services agreement, to which other documents specifying discrete product or service orders are attached, as executed, as schedules or exhibits. Over time, the resulting “document soup” can become nearly impossible to manage unless the company’s has been diligent, in the interim, in tracking all material changes or amendments to the master agreement, all exhibits or schedules that have been executed since the beginning of the relationship, and the effects, if any, of those later instruments on earlier agreements. Where businesses fail to take pro-active, enterprise-wide, contract-management steps at an early stage, disputes such as the Accusoft v. Northrop litigation become almost inevitable, especially in an age where many publishers, such as Microsoft, IBM and Oracle, to name a few, are proceeding with software audit initiatives, in some cases across their entire customer bases, in order to ensure compliant software use and licensing. Businesses with a heavy reliance on software and technology licensing cannot afford not to work closely with counsel in reviewing the terms of all agreements that may affect their ability to use that software or technology in the way that their customers demand.

Victory for Consumers: Library of Congress and 5th Circuit Clarify Exceptions to DMCA

Posted: August 10th, 2010, 1:20pm EDT

The Library of Congress and the 5th Circuit Court of appeals both recently made significant strides in expanding and clarifying the exceptions to the anti-circumvention provisions of the Digital Millennium Copyright Act (“DMCA”). In its regular 3-year review of exemptions to the DMCA’s anti-circumvention exceptions, the Library of Congress, which includes the U.S. Copyright Office, added to the list so-called “jail breaking” of wireless telephones, most notably Apple’s iPhone. iPhone users are now able to modify, unlock, and use previously unauthorized applications on their cell phones. Apple had argued that modifications to its iPhones constituted unauthorized modification of its software. However, the Library of Congress emphasized that iPhone owners paid for the product and should have the right to modify their phone for their personal use. The new DMCA exceptions also include:

Circumvention of security measures in DVDs, when short portions of the content is to be used for “educational uses by college and university professors and by college and university film and media studies students
Circumvention of security measures in video games accessible on personal computers for certain testing and security-related operations
Circumvention of security measures in computer programs protected by out-of-date hardware-based security accessories (also known as “dongles”)
Circumvention of security measures in ebooks for the purpose of making the content accessible for readers with disabilities, provided that no other edition of the work allows accessibility-related modifications

In MGE UPS Systems Inc. v. GE Consumer and Industrial Inc., the 5th Circuit further clarified the overall scope of the DMCA’s anti-circumvention provisions in ruling that bypassing protections on copyrighted software in order to access or use the product does not necessarily trigger a DMCA claim. MGE had sued GE for copyright infringement, claiming GE hacked the software security key to access its copyrighted software. The Court held that simply viewing or using copyrighted software does not constitute unlawfully accessing copyrighted materials in violation of the DMCA, and that a copyright owner’s software security protections must protect against a right specifically granted Act. That holding also might be significant for some companies faced with allegations of unlicensed software use by organizations such as the Business Software Alliance (BSA) or the Software & Information Industry Associations (SIIA). The DMCA is multi-faceted legislation, with some provisions that historically have been good for small to medium-sized businesses and some that have been less positive. These recent developments represent a net improvement to the effect of the law for most consumers of digital media.

Legal Considerations in Software IP Issues - Damages

Posted: July 22nd, 2010, 5:10pm EDT

Software copyright plaintiffs typically seek both permanent injunctive relief as well as damages. Recovery of statutory damages under 17 U.S.C. § 504 often hinges on whether the copyrights claimed to have been infringed before or after discovery of the alleged infringement. However, plaintiffs in competing works litigation typically seek an actual damages award, because a potential actual damages recovery often is greater. In addition, the marginal costs of developing the necessary factual record to support an actual damages award are not significant, because the underlying elements of the claim already require the devotion of significant time and effort to evidence collection and presentation. Under 17 U.S.C. § 504, a plaintiff may recover the actual damages it suffered as a result of the infringement or any profits of the infringer attributable to the infringement. Under 17 U.S.C. § 504(b), the plaintiff could recover any profits of the infringer that are attributable to the infringement. Under the statute, “in establishing the infringer’s profits, the copyright owner is required to present proof only of the infringer’s gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.” Those damages could be substantial, depending on the amount of business and profit the plaintiff is able to demonstrate is attributable to use of its works. Claims for attorneys’ fees also usually are the norm, though, again, recovery may depend on whether the copyrights at issue were registered before or after discovery of the alleged infringement. Costs also may be recoverable. Competing works cases often involve one or more primary, individual alleged infringers as well as the corporate entities with which they are associated. If the plaintiff is able to establish any actual damages as a result of infringement, all defendants could be held jointly and severally liable for those damages. In addition, the plaintiff in the action may seek to hold the individual defendants liable for the “profits” they made independently as a result of the alleged infringement. Specifically, the plaintiff could attempt to recover a portion of the individuals’ income earned while developing and/or selling the competing work at issue. If you have received a notification from a copyright owner who is seeking damages against you, you should contact experienced counsel to preserve your legal rights.

David v. Goliath: Songwriter Wins Coca Cola Case

Posted: July 20th, 2010, 4:33pm EDT

In Vergara Hermosilla v. Coca-Cola Co., 2010 WL 2232657 (S.D. Fla. 2010), a U.S. federal court in Florida required Coca-Cola to post a conspicuous notice indicating Rafael Vergara Hermosilla’s (“Vergara”) contribution to a song Coca-Cola intended to use in its advertising during the 2010 World Cup soccer games. Vergara had been asked to translate into Spanish a portion of the lyrics to the song “Wavin’ Flag” by the artist K’naan and to mix and produce a newly recorded Spanish vocal track for the final mix. Vergara penned the Spanish lyrics of the song, sent rough vocal tracks demonstrating how the vocals should be sung to Universal Music Group (“Universal”), who had the contractual relationship with Coca-Cola, added backing vocals to the rerecorded Spanish track, and mixed and produced the final song. However, before Universal paid the invoice, it asked Vergara to sign a document indicating the work he completed was a work-for-hire under the Copyright Act. Vergara responded that he would not have gone forward with the project had he known it would be considered a work-for-hire, and he insisted that he receive credit for the production work and that, for the Spanish version of the song, his name appear next to the composer(s) of the original English version. Universal did not agree to Vergara’s proposed terms. In May, 2010, Vergara filed an action for injunctive relief seeking an order requiring that Coca-Cola cease advertising with or distributing the Spanish version of the song and that Coca-Cola make a public acknowledgement of Vergara’s contribution to the song. Coca-Cola argued it secured an implied and non-exclusive license to use the song, that the work was a work-for-hire, and that Vergara failed to obtain a copyright registration prior to filing the action, barring him from filing suit. The court rejected all of these arguments and issued an injunction prohibiting Coca-Cola from distributing the work without proper credit given to Vergara. If you would like to license or obtain rights to music, you should consult counsel experienced in negotiating agreements to help prevent disputes like the one described above. If you have already become involved in such a dispute, you should contact counsel to discuss your options to resolve the issues between you and the other parties.

Legal Pitfalls in the Cloud: Windows Azure License Agreements

Posted: July 20th, 2010, 4:28pm EDT

Microsoft’s cloud offering, Windows Azure, is a cloud services platform designed for software development, hosting and web service management. The platform includes a cloud-based operating system with pre-configured developer tools and other options available. The license agreements are available online here and here. So, how does the Microsoft cloud licensing model stack up to our concerns regarding cloud computing? The basic Azure agreement consists of two parts: a service level agreement (“SLA”); and an online subscription agreement (“OSA”). The SLAs are written in clear, layperson-friendly language, but may not adequately protect the customer from certain types of service outages. Also, the responsibility to monitor service levels and report outages remains wholly on the customer (something many cloud customers may want to try to avoid). The OSA provides some protections against third-party intellectual property infringement claims, but it also severely limits recovery on claims arising from any legal action, including breach-of-contract and negligence claims. These service and liability limitations are typical in low-transaction-cost offerings, and they are likely unavoidable for a product sold online and across such a broad user base. Of greater concern, however, is the fact that neither agreement addresses compliance or liability arising from federal and state privacy and data security statutes, (such as HIPAA and the new Massachusetts Standards for the Protection of Personal Information). HIPAA, in particular, imposes significant responsibility on third party vendors (“business associates”, under the language of the statute), that may house or transmit protected health information (“PHI”). A company storing PHI on Microsoft Azure servers without an agreement contemplating that type of data storage could be in violation of the law and subject to liability. Further, there are no provisions concerning ownership, use, or transfer of customer-owned data upon termination of the agreement. As is evident by the low cost of cloud-based solutions, the platform is the commodity and the only real value is in the data. Without specific language identifying data ownership and transfer upon termination, a company may be risking too much relative to any perceived cost or operational benefits. Microsoft likely will have to address these concerns as the legal issues associated with cloud computing become better understood. In the meantime, careful analysis of intellectual property and data security compliance risks should be undertaken to avoid the unforeseen liabilities and hidden costs present in many cloud computing agreements.

Facebook and Mark Zuckerberg Face Lawsuit Headache

Posted: July 20th, 2010, 4:26pm EDT

On June 30, 2010, a New York businessman named Paul Ceglia filed a lawsuit against Facebook, Inc. and its founder, Mark Zuckerberg, that has the potential to become a significant distraction for the social networking giant. In the state-court complaint, Ceglia claims he signed into a contract in April 2003 with Zuckerberg, in which Zuckerberg agreed to grant Ceglia a 50% stake in the business to be derived from the expansion of “the project [Zuckerberg] has already initiated that is designed to offer the students of Harvard university [sic] access to a website similar to a live functioning yearbook with the working title of ‘The Face Book.’” Based on that and other language in the contract, and on the completion date for an earlier Zuckerberg-authored site at thefacebook.com, Ceglia claims that he now is entitled to an 84% interest in Facebook. It is unclear whether the social networking technology Zuckerberg was developing in April 2003 is the same or even related to the technology that was the predecessor to Facebook as we now know it. In addition, Ceglia’s long delay in asserting his claim raises potential statute-of-limitations issues that may result in the claim being tossed out of court. Regardless, though, Ceglia was successful in New York State court in obtaining an order temporarily keeping Facebook and Zuckerberg from transferring or selling of their assets, stocks or bonds, pending a hearing. Facebook then removed the matter to a U.S. District Court in the Western District of New York, where the case currently remains, in an effort to have the state court order dissolved. Regardless of the hurdles Ceglia may need to overcome in order to prevail on his claim, this case serves as a powerful reminder to developers of protectable, original content that they should carefully consider all of the effects of any agreements related to future ownership of business ventures. Sloppy drafting may cause unintended consequences and could result in expensive litigation to resolve questions of ownership related to the business venture. In light of the risks highlighted by the Ceglia lawsuit, developers considering that type of agreement should consult with knowledgeable counsel before proceeding.

The Sneaky Chef Loses Appeal

Posted: July 8th, 2010, 2:55pm EDT

In Lapine v. Seinfeld, 2010 WL 1688713 (N.Y.C.A. 2010), plaintiff Missy Chase Lapine and The Sneaky Chef, Inc. (“Lapine”) appealed from a summary judgment awarded to defendants Jessica Seinfeld and others on plaintiffs' claims of copyright infringement, trademark infringement, and trademark dilution. The district court determined that Seinfeld’s book Deceptively Delicious: Simple Secrets To Get Your Kids Eating Good Food, was not substantially similar to plaintiffs' cookbook, The Sneaky Chef: Simple Strategies for Hiding Healthy Foods in Kids' Favorite Meals, released four months earlier. The court affirmed the district court’s findings. Lapine contended the district court erred when it decided Seinfeld’s book was not substantially similar to Lapine’s book. Both cookbooks provide information related to tricking children into eating healthy foods by including pureed vegetables in other foods. Lapine claimed the two works are substantially similar in their unique and innovative expression of the idea of sneaking vegetables into children's food by means of a cookbook containing comprehensive instructions for making and storing a variety of vegetable purees in advance, and then using the purees in specially created recipes for children's favorite foods. The court determined that the standard test for substantial similarity between two items is whether an ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard the aesthetic appeal as the same. When, as in this case, a work incorporates unprotected elements from the public domain, the court should apply a “more discerning observer” test, which requires substantial similarity between those elements, and only those elements, that provide copyrightability to the allegedly infringed work. The court stated that stockpiling vegetable purees for covert use in children's food is an idea that cannot be copyrighted. The Copyright Act does not protect ideas. It protects expressions of ideas. To the extent the two works have general and abstract similarities-including their vaguely similar titles and inclusion of illustrations of prepared dishes, health advice, personal narrative, descriptions of how to make purees, instructions for preparing dishes, and language about children's healthy eating-the district court correctly concluded that these elements do not raise a fact issue for trial because they are “scènes à faire,” or unprotectable elements that follow naturally from the work's theme rather than from the author's creativity. The two books lacked the substantial similarity required to support an inference of copyright infringement. Lapine also contended the district court erred by failing to apply an eight-factor test in Polaroid Corp. v. Polaroid Electronics Corp., 287 F.2d 492, 495 (2d Cir.1961) when it rejected Lapine’s trademark infringement claims. The court ruled that a district court need not slavishly recite the litany of all eight Polaroid factors in each and every case. The Court of Appeals considered the overall impression on a consumer and the context in which the competing marks are displayed and reached the same conclusion as the district court: the marks are not confusingly similar. Defendant’s cover art was much more detailed than plaintiff’s, though the two drawings incorporated similar themes. Additionally, Defendant Jessica Seinfeld’s use of the famous “Seinfeld” name reduces any likelihood of confusion with Lapine’s marks. The court affirmed the district court’s dismissal of Lapine’s trademark dilution claims for the same reasons. If you have been accused of copyright or trademark infringement, you should seek counsel experienced in resolving such disputes.

Dave & Buster’s Busted

Posted: July 8th, 2010, 2:54pm EDT

The FTC recently approved a settlement with Dave & Buster’s, Inc., a restaurant and arcade chain, for the largest recorded data breach of private credit card information. The hackers responsible for stealing credit card data from Dave & Buster’s gained access through an unsecured wireless Internet router, or wireless access point (WAP). The hackers had sought out businesses with no Internet security password and, after gaining access to the networks, had obtained credit card numbers and customer data in real time as the cards were swiped. There is a growing trend for the FTC to seek civil damages for lax Internet security in order to encourage businesses to provide additional protective measures for online data, including wireless Internet routers. In addition to the monetary damages Dave & Buster’s will pay to settle the claim related to this data breach, the company will be required to maintain an information security program and to have its security systems professionally audited semi-annually. Basic information security guidelines can help to prevent this type of breach. It is important to secure passwords, to enable firewall protection, and to institute additional, appropriate security safeguards to protect consumer information. This is especially important when dealing with sensitive financial data.

Microsoft v. Salesforce.com – Taking the Fight to the Cloud

Posted: July 8th, 2010, 2:52pm EDT

On June 24, 2010, Salesforce.com filed suit against Microsoft in a Delaware Federal court claiming Microsoft willfully infringed five Salesforce.com cloud computing-related patents. This is an apparent counter to a May 18th suit filed by Microsoft accusing Salesforce.com of patent infringement. Though Salesforce.com and Microsoft promote slightly different cloud computing models, each company claimed the patents infringed were significant components to their platforms, signifying that the fight over cloud market controls is ramping up. While the choice between pursuing a pure (Salesforce.com) versus hybrid (Microsoft) cloud computing platform certainly requires a thoughtful business decision, a choice in either direction involves identical legal issues. For instance, data security regulations must be addressed in either case. Companies in the healthcare industry are by now quite familiar with these requirements and with related demands on their third-party vendors, but data security regulations such as the recently enacted Massachusetts privacy law are implicating companies and industries that have not had the pleasure of interpreting statutory data security requirements. As a result, many of these companies may be unaware of the extent to which cloud computing agreements must address and protect the company with respect to all data-related regulatory requirements. Cloud computing platform agreements also must meet the needs of companies to locate, preserve and cull data to meet electronic discovery requirements. As more companies adopt cloud computing platforms to house not only e-mail, but other business records, courts increasingly will require companies to implement litigation holds and production from cloud sources in a manner identical to that which companies currently perform on their internal networks. When evaluating a cloud computing platform, take time to carefully review the agreement in as much detail as your business and IT decision-makers do when looking at software functionality. A cloud platform that is technically sound and functional remains a serious liability if the service agreement does not address these and other critical legal issues associated with cloud computing. When in doubt, seek the advice of an attorney who is knowledgeable regarding legal issues surrounding IT service providers.

Supreme Court’s Opinion in Bilski Leaves Questions

Posted: July 8th, 2010, 2:51pm EDT

On June 28, 2010, the U.S. Supreme Court issued its long-anticipated opinion in the case of Bilski v. Kappos, which, it was hoped, would at long last provide much-needed guidance for the U.S. Patent & Trademark Office and for practitioners on the subject of the patentability of business methods and other processes. However, other than rejecting the process-patentability test that had been proposed by the U.S. Court of Appeals for the Federal Circuit, the overall effect of the opinion is to re-introduce uncertainty into the question of what constitutes a patentable process and what does not. In its en banc opinion in this case, the Federal Circuit previously had affirmed the exclusive applicability of the so-called “machine or transformation test” to determine whether a process qualifies for patent protection under U.S. law. Under that test, “[a] claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” In re Bilski, 545 F.3d 943, 954 (C.A. Fed. 2008). The Supreme Court expressly rejected the machine or transformation test as the sole means to assess process patentability. However, other than identifying the test as a useful tool to make that assessment, the Court did not express any test or set of factors to provide any additional guidance on the subject. The Court, in fact, very clearly and expressly affirmed the unsettled nature of the law in this area, holding: It is important to emphasize that the Court today is not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection. This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck. While it also rejected the argument that methods of conducting business are categorically un-patentable, the Court nevertheless affirmed the rejection of the business-method patent application that was the subject of the case on the grounds that it was an improper attempt to patent what is merely an abstract idea. The Supreme Court’s opinion in Bilski likely will do nothing to help clarify the place of innovation in fields such as software development with respect to U.S. patent law, and it leaves the door open for enterprising patent collectors to perpetuate the same kinds of claims abuses that many had hoped Bilski would help to eliminate. Therefore, for the foreseeable future, software firms will need to continue to be prepared to recognize patent exposure as a cost of doing business in their industry, and they must be ready to work closely with knowledgeable counsel to evaluate the integrity of any patents they hold as well as the validity of any patent claims with which they are presented.

Sports Equipment Retailer Loses Trademark Dispute

Posted: June 15th, 2010, 6:38pm EDT

In New York City Triathlon, LLC v. NYC Triathlon Club, Inc., 2010 WL 808885 (S.D.N.Y. 2010), the court granted plaintiff’s request for an injunction against defendant barring defendant from using versions of “NYC Triathlon” in its name. New York City Triathlon, LLC (“NYC Triathlon”) sent a cease and desist letter to NYC Triathlon Club, Inc. (the “Club”) after the Club changed its name from SBR Multisports, Inc. to NYC Triathlon Club. The Club did not respond to the letter, and NYC Triathlon then filed its request for injunctive relief seeking relief to protect its trademark and goodwill pursuant to the U.S. Lanham Act and to the common and statutory laws of New York. The New York City Triathlon is a grueling and popular Olympic-distance triathlon offered every summer in New York, New York. Last year, 20,000 applicants vied for 5,600 race spots, and an estimated 250,000 spectators attend the event. The triathlon is sanctioned by USA Triathlon, the independent organization that governs triathlon racing in the United States. Numerous news and media outlets cover the race and it has received local coverage in nearly every U.S. State. Media outlets in Australia, India, and Great Britain also cover the triathlon. The Club is a retail outlet that sells triathlon equipment, and it was among the triathlon’s sponsors from 2005-2008. The court found that NYC Triathlon’s marks had acquired secondary meaning because they signified NYC Triathlon as the exclusive source of the services at issue to an appreciable number of consumers. “NYC Triathlon Club” was also confusingly similar to “NYC Triathlon,” “New York City Triathlon,” and “NYC Tri.” The court analyzed the proximity of the goods and services provided by the two entities and determined that NYC Triathlon and the Club operated in the same channels of trade and that consumers may mistakenly assume a common source of the goods and services. NYC Triathlon also was able to demonstrate actual consumer confusion by submitting emails it received indicating individuals assumed the two organizations were the same. The court found that the Club’s bad faith in using the NYC Triathlon’s marks was evident from its decision to change its name rather than pay NYC Triathlon a sponsorship fee, from its failure to respond to NYC Triathlon’s cease and desist letter, and from its history of attempting to trade on the goodwill of other sporting events, namely, the Ironman Triathlon, by creating what it called the “Iron Race.” The court also found that the Club‘s quality of products and services was inferior to those provided by NYC Triathlon. Though the consumers in the relevant market may be sophisticated, 56% of the race’s registrants identified themselves as first-time triathletes and may be confused by the similar names. The court therefore granted NYC Triathlon’s motion for an order enjoining the Club’s ongoing trademark and trade name infringement and other claims related to dilution, cybersquatting, unfair competition, and deceptive trade practices. If you suspect your mark is being misused or if you are concerned your mark may infringe another mark, you should contact counsel experienced with trademark and brand management.

Video Professor Learns Costly Lesson

Posted: June 15th, 2010, 6:33pm EDT

Many companies that market their products or services through distribution channels give their distributors licenses to use company trademarks and logos in order to facilitate marketing efforts. However, it is important for those companies to remain vigilant against overbroad license terms that may give the distributors rights in excess of what those companies may believe is reasonable or necessary to accomplish those ends. This consideration is doubly important when the distributor has substantially greater bargaining power than the manufacturer. Video Professor, Inc., the manufacturer of a collection of heavily advertised, self-paced, computer education videos, may have learned this lesson the hard way in forming a relationship with Amazon.com to market its videos online. At the outset of the relationship, Video Professor agreed to the terms of Amazon’s Vendor Manual. The Vendor Manual Video Professor signed included a license giving Amazon the right to use Video Professor’s trademarks, including its core, registered VIDEO PROFESSOR® mark. However, the terms of that license were surprisingly broad: Vendor [VPI] hereby grants to Amazon.com a non-exclusive, worldwide, perpetual, and royalty-free license to ... (c) use all trademarks and trade names included in the Product Information. Almost shockingly, the Vendor Manual also included language specifying that the license grant “will survive the termination of any or all of this Vendor Manual.” Video Professor terminated its agreement with Amazon in September 2008. However, from December 2003 through April 2009, Amazon placed bids with Google for paid advertisements linked to the “video professor” keyword, and Video Professor subsequently determined that links from some of those ads went not to Video Professor’s products, but rather to those of its competitors. Video Professor filed suit against Amazon in the Colorado U.S. District Court for damages related to infringement of its trademark. However, without reaching the substance of Video Professor’s trademark claims, the court granted Amazon’s motion for summary based on the license terms, holding that the “scope of the license in the Vendor Manual is plain and unambiguous, and Amazon's use of the mark “video professor” was within the scope of the license.” When a company gives any other party a license to use its trademarks or any other intellectual property, it is vital that the parties’ agreement specify that the license is revocable by the IP owner or that the license terminates upon termination of the agreement, if not sooner. It is equally vital that the scope of permissible uses of the subject IP be limited to the furtherance of the relationship contemplated by the agreement. Ideally, the agreement also will give the IP owner the right to injunctive relief to stop any misuse of the subject IP notwithstanding any other dispute resolution provisions in the agreement. A company’s intellectual property often is among its most valuable and important assets. Overbroad license terms can seriously diminish that value and may make it difficult to enforce the company’s IP rights in the event of misappropriation. When considering an IP license grant in favor of any party, a company should consult with counsel to ensure that the terms of that license do not run counter to the company’s plans and expectations.

Facebook Ruling - Social Media and e-Discovery

Posted: June 15th, 2010, 6:22pm EDT

On May 26, 2010, in the case of Crispin v. Christian Audigier, Inc. (C.D. Cal. Case No. No. CV 09-09509), Judge Margaret Morrow of the U.S. District Court of Central California issued a ruling in a copyright suit concerning, in part, the discoverability of private messages sent between users on MySpace and Facebook. This decision marks one of the first examinations of the applicability of federal e-discovery rules to social media site content. In her decision, the judge reversed a magistrate judge’s finding that private messages sent between users over social networking sites are public communications and quashed subpoenas that had been issued in an attempt to obtain copies of those messages. Elaborating on the differences among the various messaging options offered by social networking sites, Judge Morrow found that messages sent between users via Facebook and MySpace private messaging systems are no different than e-mail under the Stored Communications Act. Under the Act, a third-party company storing private electronic data is not required to turn over the private information unless presented with a federal criminal law warrant. However, the judge limited her decision to private messages sent on social media sites and left unanswered other questions, such as the issue of discoverability, through subpoena, of semi-private postings on user walls visible only to a select few. Increasingly, courts will be asked to interpret outdated discovery rules against new technologies and heightened public concern over online privacy. Following the recent furor over Facebook privacy settings in the press, we expect to see a court take on the task of a comprehensive examination of social media privacy concerns with respect to electronic discovery, similar to Judge Shira Scheindlin’s Zubulake opinion on general e-discovery issues, before the Supreme Court and Congress undertake revisions to the Federal Rules.

Take Action Against Domain Names that Infringe Your Trademarks

Posted: May 24th, 2010, 5:44pm EDT

U.S. businesses facing the misappropriation of their trademarks in the form of Internet domain names registered by third parties have a quiver-full of powerful remedies to obtain relief from such practices. In addition to “traditional” trademark actions in cases where the third party is using a confusingly similar domain name in connection with products or services similar to those offered by a trademark owner, U.S. law also offers significant ammunition against third parties who register names and then “squat” on them, without ever using the names in connection with the offering of any goods or services. Under the Anticybersquatting Consumer Protection Act (ACPA), trademark owners may sue such third parties in federal court to obtain both an injunction requiring the transfer or cancellation of the infringing domain name or names as well as actual damages or, at the mark owner’s election, statutory damages up to $100,000 per name, in the court’s discretion. However, in many cases the registrant of an infringing domain name may be located in a foreign country and not subject to the personal jurisdiction of a U.S. district court in an ACPA proceeding. Under those circumstances, the ACPA provides for proceedings in rem, which are, in effect, lawsuits against the domain names themselves. In that type of proceeding, the trademark owner files suit in the U.S. judicial district where either the domain name registrar (e.g., GoDaddy.com or Network Solutions) or the domain registry (e.g., VeriSign for .COM and .NET domains) is located. Following notice to the registrant and to the registrar or registry, the court then makes a determination as to whether the domain name infringes the trademark owner’s rights and, if the mark owner prevails, issues an order compelling the registrar or registry to cancel or transfer the name. In addition, the 9th Circuit Court of Appeals recently confirmed what appears to be the plain language of the ACPA by affirming that in rem actions pertaining to .COM and .NET addresses (which often are the top-level domains most frequently the subject of ACPA suits) may be brought in the Northern District of California, where VeriSign is located. This decision makes it easier for many trademark owners to consolidate their domain recovery efforts in one venue, rather than filing suit in districts where individual registrars may be located. If your business has discovered infringing uses of its trademarks in third-party domain names, you should consult with knowledgeable intellectual property counsel to determine whether one or more ACPA actions may be appropriate as part of a comprehensive IP enforcement strategy.

Three Critical Legal Protections for New Businesses

Posted: May 24th, 2010, 5:44pm EDT

If you have started a business and have not already formed an organizational entity or protected your business name, you should swiftly move to protect yourself and your business from unforeseen liability or loss of intellectual property. New business owners should form a legal structure to add additional protection against personal liability. Establishing a partnership, professional corporation, limited liability company, or corporation will add additional layers or protection against claims related to your business. Business of all types – retail, general services, medical, financial, technology, and media, to name a few – should form legal identities at the early stages of their existence. Compared to defending a claim against you or your business, setting up a legal entity is generally affordable and straightforward. A good rule of thumb is: If you have customers or clients, you could have a lawsuit. Don’t risk your business or your personal assets. Protect yourself. In addition, registering your core trademarks is something every entrepreneur should investigate. A trademark registered with the U.S. Patent & Trademark Office will establish your claim of right to a particular brand and will provide you with a stronger position when asserting or defending against infringement claims if another business contends you are improperly using their brand. Additionally, a registered trademark will enable you to pursue infringers with more confidence in achieving a successful result. A cease and desist letter accompanied with proof of a federal trademark registration is oftentimes all it takes to dissuade a would-be infringer from using your business name or a name similar to your business name. Preventing others from operating under business names similar to yours also will help you differentiate your business as a leader in your field and will ensure consumers do not confuse your products and services with those provided by business that may be offering inferior products and services. Finally, obtaining copyright registrations at the U.S. Copyright Office for any original content, whether written or electronic, that you own will provide you with a stronger claim of right over those materials. As with trademark registrations, copyright registrations also will prevent other business from taking your words and pictures and using them for their business. Obtaining a copyright registration for a website is often the first step a business takes in protecting its content. It also represents a strategic first copyright, because websites often include both textual descriptions of the business and images related to the business’ products and services. Obtaining a website copyright is advisable because it can protect a large amount of original material with one legal tool.

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