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  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.
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  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.
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  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.