Technology & Marketing Law Blog

June 03, 2013

Vermont Enacts The Nation's First Anti-Patent Trolling Law (Forbes Cross-Post)

By Eric Goldman

Efforts to crack down on patent trolling are escalating.  Just a couple of years ago, Congress passed a major amendment of the Patent Act (the America Invents Act) with the hope that it would curb some abusive patent assertions.   Some members of Congress aren't satisfied with the results of that amendment, so three different bills (the SHIELD Act, the Patent Quality Improvement Act and the End Anonymous Patents Act) have been introduced that would further restrict patent trolling [note: since I initially wrote this, the number has grown to 5].  While most folks are focusing on the Congressional debates, Vermont quietly enacted a first-in-the-nation law to combat patent trolling.  It's not clear whether Vermont has the legal authority to regulate patent activities, but even if not, its efforts foreshadow a coming legislative crackdown on patent trolls.

Vermont's Law

Vermont's law (H.299, to be codified at 9 V.S.A. §§ 4195-4199) is entitled "Bad Faith Assertions of Patent Infringements."  However, it doesn't define "bad faith patent assertion."  Instead, it enumerates factors to help judges distinguish legitimate from illegitimate patent assertions.  Factors that suggest a bad faith patent assertion include not identifying the patent(s)-at-issue, the patent owner, and exactly how the recipient's behavior violates the patent; demanding too quick a response or too much money; and making deceptive or meritless assertions.  Factors that suggest a legitimate patent assertion include commercializing the patented invention; being either the original inventor (i.e., not having bought the patent for assertion purposes) or an educational institution; and having successfully enforced the patent in court.

Unfortunately, I'm skeptical of this attempt to distinguish legitimate from illegitimate patent assertions.  The enumerated factors reflect some of abusive practices we currently see from patent trolls, but as trolling tactics inevitably will evolve over time, the factors progressively will become useless.  We saw a similar dynamic with the 1999 Anti-Cybersquatting Consumer Protection Act (ACPA), which targeted domain name cybersquatting as it was conducted in the 1990s.  While the law squashed those practices, domain name squatters quickly changed their practices to avoid the law, so the ACPA is largely ineffectual at curbing modern domain name cybersquatting practices.

When there's a bad faith patent assertion, the statute provides for:

Lawsuit.  Victims of bad faith patent assertions can file a lawsuit against the patent asserter.  The judge may award equitable relief (perhaps including an injunction against the patent asserter making further patent assertions against it), actual damages plus "exemplary" damages of the greater of 3x actual damages or $50,000, and attorneys' fees.

Attorney General Enforcement.  The statute authorizes Vermont's attorney general to bring civil enforcement actions against bad faith patent asserters.  Interestingly, the Vermont attorney general sued an alleged patent troll under consumer protection laws.  The implications of this lawsuit are murky.  It may show that the attorney general doesn't need the new law because it already had adequate enforcement tools; another possibility is that the new law will make it easier for the Vermont attorney general's office to bring cases, and the office might emerge as a leading crusader against patent trolls.

Bond.  A victim of a bad faith patent assertion may require the patent asserter to post a bond of up to $250,000 in case the victim is awarded its attorneys' fees in litigation.  The court can deny the bond if the victim doesn't have "available assets" equal to the bond amount.

The bond provision is odd, and I don't see its point.  In theory, having to post a bond increases the asserter's costs and administrative hassles.  However, companies who don't have at least $250,000 in "available assets" aren't prime targets of patent litigation; impecunious defendants aren't likely to want to spend even a small extra money to get the bond; and defendants rarely get their attorneys' fees in patent cases (something the SHIELD Act would address), so payouts from bonds will be rare.

Implications

A Move Towards "Threats Actions"?  Vermont's law creates what is called a "threats action," a cause of action that the recipient of a legal threat can bring against the asserter for wrongfully asserting legal rights.  Threats actions are uncommon in the United States (a rare example is 17 U.S.C. 512(f)), but they are well-known in the United Kingdom and other Commonwealth countries.

In the US, most litigation reform efforts target lawsuits that have been already filed.  Threats actions push litigation reform earlier into the litigation process, before the parties have reached the courthouse.  This has at least two advantages.

First, the litigation process is like a pyramid, with a large base of legal disputes, a smaller middle of disputes where a lawsuit is filed, and a tiny apex of lawsuits that reach a final judgment on the merits.  Litigation reform post-lawsuit-filing affects only a small percentage of the overall disputes, while pre-filing litigation reform targets the pyramid base, i.e., the vast majority of disputes that never produce formal litigation.

Second, letters asserting rights have significant implications for both individual letter recipients and society at large, even if those letters don't actually lead to lawsuits.  The letters, by design, get many recipients to change their behavior.  In some cases, recipients are so intimidated by the legal threats that they will immediately surrender.  In other cases, the recipients know the assertions are bogus, but they aren't willing to spend the time and money to prove that in court.  A generic run-of-the-mill lawsuit, even if unmeritorious on its face, requires a defendant to spend thousands of dollars and many hours of time to dismiss (and that's not counting the stress and aggravation). A patent lawsuit is even more pernicious; quick wins are rarely possible, and vigorous patent defenses can require millions of dollars.

Given these implications, it makes sense to regulate the pre-litigation assertion of patent rights.  A threats action, like Vermont's, allows a letter recipient to go on the offensive, not just remain in limbo waiting to see if the asserter ever pursues its threats.  Furthermore, the risks that a patent asserter will find itself subject to a lawsuit and potential damages just for sending an assertion will encourage patent asserters to do their homework before firing off letters.  This should mean fewer assertion letters are sent, and the ones sent should be more meritorious.  This is one of the main reasons I've long supported a threats action both for trademark claims.

Federal Law Preemption?  While I think Vermont's approach is promising, I don't think state-level regulation is the right solution to patent trolling.  First, due to federal preemption doctrines, states cannot enact their own patent laws, and that preemption principle may apply to this law.  As just one example, federal courts have exclusive jurisdiction to determine patent validity and infringement, but Vermont courts effectively would have to make these determinations to decide if a patent assertion was in bad faith.

Second, even if the law isn't preempted by federal patent law, I don't favor state-by-state development of intellectual property doctrines for numerous reasons: it would be troublesome if states adopt inconsistent or different legal standards for threats actions; it becomes exponentially more expensive for IP owners to enforce their rights when they have to research and comply with multitudinous state laws; and business activities routinely cross state borders (especially with respect to the Internet), making it hard to determine which state's laws apply.  I would enthusiastically favor a nation-wide threats action--and I'd favor it for all of the intellectual properties, not just patents.  However, if the choice is between no threats action at all versus state-level threats actions, I might favor the former to avoid the inevitable problems that accompany state-by-state regulation.

[UPDATE: At Patently-O, Camilla Hrdy explains why she disagrees with my discussion about state regulation of IP.]

Patents Have an Image Problem.  Patents used to be viewed favorably as an essential tool to spur innovation, but increasingly, patents are now viewed as anti-innovation killers of start-up companies and jobs.  As the statute says:

Not only do bad faith patent infringement claims impose a significant burden on individual Vermont businesses, they also undermine Vermont’s efforts to attract and nurture small and medium sized IT and other knowledge based companies. Funds used to avoid the threat of bad faith litigation are no longer available to invest, produce new products, expand, or hire new workers, thereby harming Vermont’s economy.

There is growing consensus that patent law is miscalibrated.  It's great to see increasing efforts to strike a balance that results in the socially optimal level of innovative activity.  The Vermont law is just an early step in a lengthy regulatory arc to restore this balance.
___

You might be interested in my related blog posts on software patents:

* The Problems With Software Patents
* Two Challenges to Fixing Software Patents
* How to Fix Software Patents

[Photo Credit: Group of pirates trying to push a young man over a plank // ShutterStock]

Posted by Eric at 08:44 AM | Patents | TrackBack

January 11, 2013

Top Ten Internet Law Developments of 2012 (Forbes Cross-Post)

By Eric Goldman

I'm pleased to share my list of top 10 developments of 2012:

#10: The Push Towards Anti-Class Action Arbitration Clauses.  In 2011, the U.S. Supreme Court ruled in AT&T Mobility v. Concepcion that businesses may be able to adopt mandatory arbitration clauses that ban customer class-action lawsuits.  The ruling was hardly crystal-clear, but in its wake, many websites adopted such clauses.  Nevertheless, as the Zappos decision points out, these clauses must be adopted according to the laws governing contract formation and amendment, or they will fail in court.

#9: General Patraeus/Paula Broadwell Imbroglio.  On the surface, it's just your typical Washington DC sex scandal.  However, it had several interesting cyberlaw angles, including the attempts to hide digital conversations and Ms. Broadwell's alleged cyberharassment of Jill Kelley.  My biggest takeaway: If the CIA Director can't keep the FBI from reading his email, what chance do you or I have?

#8: Do-Not-Track Meltdown.  Everyone hoped that industry would come up with a do-not-track (DNT) standard rather than kicking the issue to Congress or the FTC.  Then, it all went to heck.  Microsoft announced it would turn on DNT by default in its browser, which prompted Internet publishers to threaten to ignore Microsoft's DNT signal.  Meanwhile, Internet publishers and others adopted a narrow definition of "do-not-track," arguing it meant no-tracking for advertising purposes, but tracking for other purposes was still OK.  The effort then devolved into acrimonious recriminations and left open the possibility that government regulators will fill the gap--to everyone's detriment.  (For what it's worth, I take a very dim view of technological do-not-track efforts for reasons I explain here).

#7: Social Media Exceptionalism.  In 2012, regulators eagerly sought to "fix" social media through regulation, but their efforts will fail because no one can precisely define social media as a subset of Internet activity.  For example, California's recent attempt to curb employers' attempts to obtain employees' social media passwords led to the astounding definition that "social media" means all digital data, whether online or off.

#6: Megaupload.  The US government proudly touted its takedown of Megaupload as a victory for Internet copyright enforcement.  Unfortunately, it appears that takedown involved an enforcement action where it appears the US government repeatedly ignored or broke the law.

#5: Software Patents/Smartphone Wars.  The smartphone industry has ushered in a glorious era of innovation, but it's also highlighted how patents can hinder, not spur, innovation.  Smartphone players have spent (wasted?) billions of dollars on patents with the hope that they can operate without restriction from other players' patents, and many tens of millions of dollars have been spent (wasted?) on legal fees as the players sue each other for patent infringement and defend against interlopers with weak/bogus patents hoping for a little taste of the action.  See my essay on software patents:

#4: Europe Hates Silicon Valley.  I'm surprised whenever I read about a new European ruling that's adverse to a Silicon Valley company, because at this point I assume that everything Silicon Valley companies do in Europe is already illegal.  Google, Facebook and other Silicon Valley players are under constant legal attack in Europe on countless fronts.  Everyone might be happier if the Silicon Valley players just got out of Europe altogether.

#3: Google and Antitrust.  The FTC largely dropped its antitrust investigation against Google, and dropped it completely with respect to Google's search engine practices.  (Technically the denouement rolled out on January 3, 2013, but I'm still counting it as a 2012 development).  This is an important development for several reasons.  First, the FTC--which makes its living by bringing enforcement actions--admitted it had no reason to complain about Google's search engine practices.  Second, the scuttlebutt all throughout the investigated suggested that the FTC was committed to busting Google, and Google turned that situation around 180 degrees.  Third, not intervening into the operation of Google's search algorithm is a logical decision, but one still worth celebrating.  This was a great resolution for Google, a complete rejection of the concerns raised by Microsoft and other Google-haters, and due to the FTC's non-involvement, ultimately a big win for Google's users.

#2: ITU/WCIT's Attempted Internet Takeover.  I really didn't understand what happened in Dubai at the ITU/WCIT meeting.  All I know is that nothing good could have happened there, so preserving the status quo is a win, as ironic as that sounds.

However, there has been some teeth-gnashing that the meeting exposed looming fault lines between pro-censorship and anti-censorship governments.  I don't understand that angst for at least two reasons.  First, all governments are pro-censorship, and that certainly includes the United States.  Indeed, the US has exhibited some awkward duality as it rails against foreign attempts to censor the Internet even as both Congress and the Obama Administration exhibit a never-ending pursuit of controlling the Internet themselves.

Second, the Internet has already fractured into multiple "Internets."  The Internet in the United States increasingly bears little resemblance to the Internet in foreign countries, both because local regulators simply block certain websites and because websites localize their services to accommodate local regulation.  Plus, it's been proven that countries can simply "unplug" from the Internet.  Thus, we don't have a single unified Internet; we have many partially-overlapping Internets.  I will say more about this in a future post.

#1: SOPA's Failure.  The failure of SOPA/PIPA is not the watershed event for our republican democracy that we wished it would be.  Citizen-driven rejection of special-interest Internet legislation will not happen very often.  But as a David-and-Goliath story--the uncoordinated and oft-ignored Internet user community rising up against a well-oiled and undefeated copyright lobby--it doesn't get any bigger than SOPA.  Also, we learned something really important: American voters will acquiesce to a lot of bad and self-interested decisions by their elected officials, but voters will grab the torches and pitchforks if they think the Internet is threatened.

Honorable Mentions

Some other developments of note:

* despite the Fourth Circuit's rekindling of the Rosetta Stone case before it settled, the decade-long keyword advertising litigation battles against Google are basically over with a big win for Google and other keyword advertising vendors.  I also think we'll see trademark owner-vs-advertiser lawsuits tapering off too.

* app cloning is a big business, and we're seeing increasing lawsuits in the area, including the EA v. Zynga and TripleTown cases.

* the application of the Computer Fraud & Abuse Act is being dialed back in the employment context (see the Nosal and WEC cases).

* Oracle v. Google gave us one of the cleanest rulings to date that software APIs are not copyrightable.  The case was also interesting for the judge's investigation into the paid advocacy efforts of both Oracle and Google.

* the images of Marilyn Monroe and Albert Einstein are moving closer to the public domain.

* the IB v. Facebook ruling could be a watershed decision in spurring class action lawyers to make a buck in the name of "protecting the kids" in court.

* Web publishers can improve their defamation defenses by hyperlinking to original sources.

Most Interesting Cases

I read a lot of cases in 2012, and some of the most interesting cases I saw this year:

* Erickson v. Blake.  Music composers can create copyrightable compositions by equating the digits of the number "pi" (π) to musical notes, but they can't stop others from creating their own musical compositions based on pi's digits.

* Bland v. Roberts.  Two government employees "liked" their boss' opponent in an upcoming election; after the boss won reelection, the employees allegedly got fired for their divided loyalties.  The court (mistakenly, in my opinion) said that "liking" an item on Facebook isn't constitutionally protected speech.

* Scott v. WorldStarHipHop.  A classmate posted a video of Scott fighting with an ex-girlfriend.  Scott obtained the copyright to the video from his classmate and, as the new copyright owner, sent copyright takedown notices in an effort to scrub the video from the Internet.  This copyright acquisition scheme basically converts copyright law into a "right to forget."  In 2013, expect to see even more plaintiffs acquire copyright ownership as a way to suppress/control unflattering content about them.

* In re Heartland Payment Systems.  This is a settlement of a data security breach class action lawsuit with 130M class members.  The parties spent $1.5M to encourage class members to tender damage claims and another $270k to process the tendered claims.  A total of 290 claims were tendered, of which 11 were valid, with a maximum payout per valid claim of $175.  So the parties incurred $1.75M in transaction costs to award about $2k in damages.  Interesting.

* Augstein v. Leslie.  If you post a YouTube video promising $1M for the return of your laptop, you could actually owe $1M if someone returns your laptop.

* Olson v. LaBrie.  Facebook should bring families closer together, but in one family, photo tagging plus a snarky comment prompted a lawsuit for a restraining order.

Lists from Previous Years

Previous top 10 lists from 2011, 2010, 2009, 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

[Photo Credit: Top Ten Key // ShutterStock]

Posted by Eric at 07:25 AM | Content Regulation , Copyright , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Marketing , Patents , Privacy/Security , Publicity/Privacy Rights , Search Engines , Trademark , Trespass to Chattels | TrackBack

January 08, 2013

Q4 2012 Quick Links, Part 1 (IP Edition)

By Eric Goldman

Copyright

* Author’s Guild v. HathiTrust, 1:11-cv-06351-HB (SDNY Oct. 10, 2012). James Grimmelmann's take.

* Hillicon Valley: ‘Shell-shocked’ lawmakers shy away from online piracy in new Congress

* Ars Technica: Voters boot three SOPA-sponsoring Hollywood allies from Congress

* Triple Town/Yeti Town cloned game app lawsuit settles. Prior blog post.

* Righthaven, LLC v. DiBiase, 2012 WL 5868154 (D. Nev. November 16, 2012). Shawn Mangano is substituted out as counsel in this case, replaced by Michael Mushkin. Bold move by Mushkin to walk into this shitstorm.

* Ricchio v. Amazon.com Inc., No. 12-332 (E.D. Wis. Oct. 12, 2012): "I find plaintiff has failed to state a claim for copyright infringement. He alleges defendant is again allowing third-parties to sell copies of his book without plaintiff’s authorization, but he does not claim that any of the books being sold on defendant’s website are counterfeit copies. Plaintiff claims only that defendant is allowing third parties to re-sell copies of his book without compensating him. However, under the “first sale” doctrine, plaintiff is not entitled to profit from the resale of his book."

* TorrentFreak: Google Removed 50 Million “Pirate” Search Results This Year

* PeerMusic, III, Ltd. v LiveUniverse, Inc., 2:09-cv-06160-GW -PLA (C.D. Cal Oct. 9, 2012). Awarding $12,500 per song in a default judgment against lyrics website, for a total of $6.6M.

* Time: How Microsoft’s Copyright Claim Went Awry

Trademark

* Split ruling on Google’s motion to dismiss in Home Decor Center v Google. Prior blog post.

* John Crane Production Solutions, Inc. v. R2R and D, LLC, 861 F.Supp.2d 792 (N.D. Tex. March 21, 2012):

JCPS is essentially concerned about initial interest confusion. A claim for trademark infringement can be based not only on whether purchasers are confused as to the source of the product at the time of the sale, but also based on “confusion that creates initial consumer interest, even though no actual sale is finally completed as a result of the confusion.” Elvis Presley Enters., 141 F.3d at 204 (internal quotation marks and citations omitted). Some courts have concluded that the fact that purchasers are sophisticated does not foreclose a finding of initial interest confusion if products and marks are sufficiently similar. Others have held that the character of a given market, including the sophistication of potential purchasers, is enough to overcome a likelihood of initial interest confusion. Compare Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d 254, 260 (2d Cir.1987) (holding there was likelihood of initial interest confusion “even though defendant's business is transacted in large quantities only with sophisticated oil traders”) with Checkpoint Sys., 269 F.3d at 285 (holding no likelihood of initial interest confusion, in part because purchasers were sophisticated and exercised high degree of care) and Rust Env't & Infrastructure, 131 F.3d at 1217 (holding no likelihood of initial interest confusion, in part because purchasers were sophisticated and market was small). Because even a sophisticated purchaser can be subject to initial interest confusion, the court will weigh this digit and the potential for initial interest confusion along with the other digits in determining whether a likelihood of confusion exists.

Yet, the plaintiff still lost the case. Why not just give up the "initial interest confusion" charade?

* Paramount Farms Intern. LLC v. Keenan Farms Inc., 2012 WL 5974169 (C.D. Cal. November 28, 2012): "Ms. Hodari testified that the Wonderful Pistachios brand has a Facebook page with almost 300,000 “likes.” While the Facebook recognition of the brand does not conclusively demonstrate actual recognition of the associated trade dress, it lends credence to the other evidence that the trade dress has become famous. Accordingly, the Court finds there remains a triable issue whether the Claimed Trade Dress is famous."

* Google's algorithmic changes are curtailing demand for domain names.

* Robert G. Bone, Taking The Confusion Out Of “Likelihood Of Confusion”: Toward A More Sensible Approach To Trademark Infringement, 106 Nw. U. L. Rev. 1307 (2012).

* Latest round in Nextdoor.com and Raj Abhyanker.

* Stipulated contempt finding in the North Face v. South Butt case.

Patents/Trade Secrets

* Project DisCo: One In Six Active U.S. Patents Pertain To The Smartphone

* NDSL, Inc. v. Patnoude, 2012 WL 6096584 (W.D. Mich. December 7, 2012): "Patnoude's November 12, 2012, generic LinkedIn invitation is not sufficient to establish that Patnoude has solicited NDSL Customers in violation of subparagraph 9.a(2). NDSL has not established that Patnoude has solicited any NDSL Customer."

* Skyhook Wireless, Inc. v. Google Inc., 2012 WL 5309755 (Mass. Superior Ct. Sept. 28, 2012). Granting summary judgment to Google.

Posted by Eric at 12:06 PM | Copyright , Domain Names , Patents , Trade Secrets , Trademark | TrackBack

Let's Stop Using the Term “Soft IP”

By Eric Goldman

You may have heard--or even used--the phrase “soft IP.” I'm not a fan of it, and I think we should retire the term.

The term "soft IP" is inherently ambiguous. Sometimes, people use "soft IP" to refer to “copyrights and trademarks;” other times, the term is intended to cover all IP other than patents--presumably publicity rights, trade secrets, etc. I especially cringe when I hear students tell me they are looking for a "soft IP" job. Typically, that's a reliable tipoff that the students don't know what kind of IP job they want; they just know they don't want to be (or aren't eligible to become) a patent prosecutor. That lack of clarity in the student's mind is rarely an asset to their job search.

I've had difficulty tracing the term's etymology. I searched several online databases looking for early uses and I found published references as far back as 1998, but my vague recollection (corroborated by others) is that the term goes back well before then.

As a term establishing a classification of IP, “soft IP” implies an antonym--presumably, “hard IP.” I don’t hear people use the term "hard IP," but given that soft IP always excludes patents, presumably patents are part of the antonym.

I can think of a few explanations for a hard/soft distinction among intellectual properties. First, patents often cover physical devices, so they often have a physical tangibility, while copyrights, trademarks and other IPs may be more intangible by comparison (even though patents protect "ideas," which is as intangible as they come).

Second, the hard/soft distinction might imply some difference in the degree of the practice's difficulty, i.e., the perception that patent law, and any associated technology, are complicated and “hard,” while other IPs are relatively easy and "soft" by comparison. People rarely articulate this relative value judgment explicitly, but I'm sure some patent practitioners believe that what they do is more challenging than the work of other IP practitioners; and I'm even more confident (because I've seen it repeatedly) that some patent practitioners feel comfortable "dabbling" in other IPs on the grounds that if they can do patents, they are well-qualified to handle other IPs.

It's true that patent prosecution requires passage of a separate bar exam, which in turn requires a technical background, so in that sense becoming a patent practitioner is "harder" than becoming an IP practitioner generally. Still, there is a certain implicit arrogance in this line of thinking.

Although I concede that patent law has plenty of arcane and baffling rules, I think patent practice is demonstrably not “harder” than other IP practices. I invite any patent practitioner--or, for that matter, any lawyer--who thinks that non-patent IP is "easy" to: walk me through 17 USC 114 (the music streaming provisions); calculate a pre-1976 copyright term duration; tell me what the term "use in commerce" means in trademark law; or walk me through the multitudinous ICANN procedures for objecting to or challenging gTLDs. And while historically the biggest bucks were in patent litigation, we're seeing big bucks across the IP spectrum, such as Oracle's $1.3B copyright damages award in the SAP case and Google's $100M+ defense costs in Viacom v. YouTube. (As I explain to my Internet Law class, $100M of legal fees is like the cost of *twenty* typical patent lawsuits!) And patent cases don't have a monopoly on hard technological questions; think about the technological sophistication to resolve Oracle v. Google, the Cablevision case or the Goforit case (just to pick three examples off the top of my head). Not only would it be condescending to say or imply that non-patent IP is "easy" or fluffy, I don't think it's remotely supportable factually.

A third hard/soft distinction is in the phrase “hard sciences,” although we rarely hear the antonym "soft sciences" (presumably social sciences). Because a technical background is required for patent prosecution, perhaps “hard IP” implicitly cross-references “hard sciences.” The thing is, there are several paths to qualify for the patent bar that don't require a “hard” science background, so that linkage would be odd.

In conclusion, I see at least three problems with the term “soft IP”:

1) It has at least two different definitions, making the term ambiguous.
2) It establishes an implicit hierarchy between different IP practices, which is potentially condescending and factually unsupportable.
3) It might imply an linkage with “hard sciences” that isn't necessarily true.

OK, so what should we use instead of the term "soft IP"? I don't have a great answer. The reality is that the IPs being lumped together under the "soft IP" appellation don't have enough commonalities to support the linkages--other than that they aren't patents. So we could use the term "non-patent IP" as the antonym to a patent practice. You probably like the term "non-patent IP" as much as I do (i.e., not much). My only other suggestion is to skip any effort to combine IPs in a single term and instead specify which IPs you are referring to. For example, if you're using "soft IP" to copyrights and trademarks, just say "copyrights and trademarks."

[I'm deliberately sidestepping the broader debate about the legitimacy of the term "IP"/"intellectual property," although I think that topic deserves additional discussion given some people's intrinsic absolutism towards "property" rights.]

Precise nomenclature is especially crucial for students in their job searches. If you aren't interested in a patent career, that's fine; but it's not a strong sales pitch to tell employers what you're *not* interested in, and the requirements and expectations of a trademark practice are quite different than a copyright practice (and different still from other IP niche practices). In reality, the best thing to students can do is to match their search criteria with the way employers structure the jobs. Few employers recruit for a "copyright" lawyer; typically, they are looking for a software licensing attorney or an entertainment attorney or an IP litigator knowledgeable in copyright law. My recommendation to students: figure out what employers are looking for, assess how the requirements of the job match against your skills and interests, and proceed accordingly. If you haven't gotten to the point where you can avoid the term "soft IP," your job search process probably still needs more cultivation, no matter how much effort you've invested in it to date.

[Photo credit: illustration depicting a sign post with directional arrows containing a choices concept // ShutterStock]

Posted by Eric at 08:51 AM | Copyright , Patents , Publicity/Privacy Rights , Trade Secrets , Trademark | TrackBack

January 06, 2013

In Its Rush to Fix Patent Reform, Congress Didn't Fix Its Biggest Error (Forbes Cross-Post)

By Colleen Chien and Eric Goldman

Congress passed the Leahy-Smith America Invents Act (AIA) (S.23), commonly referred to as "patent reform," in September 2011.  The AIA is widely acknowledged as the most important change to U.S. patent law since 1952.  The AIA took years of legislative wrangling to pass, and it went through many, many iterations.  The resulting law is a voluminous 59 PDF pages with 37 sections.

As it turns out, not only was this bill quite important, but for its length, it was quite buggy.  With so many words and moving parts in the enacted law, it's not surprising that some errors crept into the final version.

More than a year after its passage, Congress has just begun fixing the bugs. H.R. 6621, styled as a bill of "technical corrections," was introduced in the House on Nov. 30 and was approved on December 18 on a super-fast-track (on a motion to suspend the rules).  As introduced, the bill had fourteen separate sections of legislative fixes, ranging from corrections of clear typographical errors to provisions that were quite substantive and potentially contentious. Amidst the frantic end-of-year efforts to avoid the fiscal cliff, the Senate approved the House bill with one change (involving pending patent applications filed before 1995).  Late last night, the House concurred to the Senate's modified version, sending the bill to the White House, where it undoubtedly will be signed.

What’s most noticeable about H.R. 6621, however, isn't what it does, but what it didn’t do.  As one of the AIA’s main architects recently said: “There are a few minor errors in the bill and one major error in the bill." Yet the technical corrections bill, which made 14 fixes to the AIA, didn't tackle this major error.

The error relates to the scope of estoppel in a procedure called post-grant review (PGR).  By way of background, one of the AIA’s goals was to drive more fights over patent validity into administrative proceedings run by the U.S. Patent & Trademark Office (PTO), rather than have those battles take place in federal court.

One of the centerpieces of this effort is PGR, which allows third parties to challenge patents within the first 9 months of their life. PGR was meant to improve upon pre-AIA proceedings by allowing administrative patent challenges on more grounds and decreasing the challenger’s risk of being estopped from raising any issues later, in litigation, that “could have been raised” in the PGR.  The same "could have been raised" estoppel standard had discouraged patent challengers from bringing administrative challenges under prior PTO rules (see former legislative counsel Joe Matal’s authoritative guide to the AIA, which describes how the earlier procedure was lightly used).

By all accounts, in the AIA, Congress intended to remove the “could have been raised” language and provide a narrower estoppel for PGR proceedings.  As the Congressional committee report explains, the PGR was designed to “remove current disincentives to current administrative processes.”  But something funny happened on the way to the Congressional floor, and the problematic “could have been raised” language was inadvertently inserted into the bill.

We’re not the only ones to recognize the error. House Judiciary Chairman Lamar Smith referred to the AIA's PGR estoppel standard as “an inadvertent scrivener’s error.” Senate Judiciary Chairman Patrick Leahy, in advocating that the Senate adopt the technical corrections bill, said the PGR estoppel standard in AIA was "unintentional," and it was "regrettable" the technical corrections bill doesn't address the issue.  Sen. Leahy expressed "hope we will soon address this issue so that the law accurately reflects Congress's intent."  The PTO also thinks Congress made a mistake, saying “Clarity is needed to ensure that the [PGR] provision functions as Congress intended.”

Yet, even with such apparent consensus, the technical corrections bill—which found 14 other errors to fix—perplexingly bypassed the issue.  The next time Congress revisits the AIA to fix the remaining bugs, we hope it will finally get its PGR estoppel standard right.

[Colleen Chien and Eric Goldman are professors at Santa Clara University School of Law. We thank Paul Steadman, a litigation partner in Kirkland & Ellis' Chicago and Washington, DC offices, for his help explaining post-issuance PTO procedures.]

Posted by Eric at 10:12 AM | Patents | TrackBack

December 18, 2012

How to Fix Software Patents (Forbes Cross-Post)

By Eric Goldman

There has been a lot of angst about software patents, and I've already posted about some of the problems software patents create and some of the challenges trying to fix those problems.  Unfortunately, the rhetoric about software patents tends to devolve into a black-or-white debate: are software patents good for society, or should we kill them?

I want to move past that binary--and irresolute--discussion.  Last month, at Santa Clara University, we held a conference entitled "Solutions to the Software Patent Problem" that assumed, without debating, that software patents were a problem.  With that premise, conference participants could focus their attention on thoughtful and creative ways to redress the problems created by software patents.  Undoubtedly, some of the speakers and attendees favored killing software patents outright, but most speakers and attendees supported more nuanced and implementable approaches could fix the problems of software patents without resolving the question of whether software patents are good or bad.

At the conference, we heard a lot of different proposals (nearly two dozen) from experts in the field.  I thought all of them had promise (that's why we put the presentations on the agenda in the first place), but here's a recap of some of my personal favorites:

* Prof. Mark Lemley (Stanford).  Prof. Lemley argued that many software patents use "functional claiming," which is patenting a software function (basically, the problem that needs to be solved) rather than a specific way to implement that function (the innovator's solution to the problem).  For example, currently we allow patent claims in the form “a computer programmed to achieve this result” or “a computer programmable/capable of achieve a result” (his research identified 11,000 patents using the "capable of" language).  Prof. Lemley argued that we should prevent functional claiming in software, allowing patents only on methods of achieving the function, not the function itself.  For more on Prof. Lemley's solution, see his Wired Opinion and Wisconsin Law Review articles.

Prof. Lemley's proposal squarely attacks the breadth of software patents.  By limiting software patents to their specific way of accomplishing a function, other innovators can develop alternative solutions without infringing the patent.  Further, courts and the Patent and Trademark Office (the PTO) can execute this solution without legislative changes by changing the way they apply existing laws.  Thus, this solution could be implemented immediately.

* Prof. Arti Rai (Duke).  Prof. Rai noted parallels between software patents and patents on bioinformatics--basically, software applied to biopharmaceuticals--which are handled in PTO Art Unit 1631.  In art unit 1631, the PTO implemented a more stringent non-obviousness review of applications, requiring patent applicants to provide better written descriptions of the patents and more definite claims.  Due to the heightened scrutiny of these patents, a noticeably higher percentage of applications were rejected on non-obviousness grounds.  Prof. Rai argued that software could be subjected to similarly higher scrutiny, something that (like Prof. Lemley's solution) the PTO and courts could implement immediately under existing law.  On the other hand, changing the PTO's evaluation of software patents doesn't address the perniciousness of legacy software patents that never should have issued.  For more on Prof. Rai's solution, see her Wired Opinion article.

* Prof. John Duffy (Virginia).  Prof. Duffy took a more conceptual approach than Profs. Lemley or Rai.  He argued that patent law's non-obviousness requirement should screen out innovations that multiple inventors identify around the same time.  While perhaps counter-intuitive, simultaneous invention happens often--enough to have a Wikipedia page,  a Malcolm Gladwell article and a Mark Lemley article.  The point is that if multiple inventors achieve the same solution around the same time, then the innovation apparently was obvious to the relevant experts and therefore doesn't deserve the patent reward.  For more on Prof. Duffy's solution, see his Wired Opinion and Yale Law Journal articles.

Though the approach isn't limited to software patents, it would help with software patents--which are also the subject of simultaneous invention--and it could be implemented by the PTO and judges without new legislation.  However,  I'm concerned about the adjudication costs to figure out if multiple inventors made the same  innovation around the same time.  Furthermore, I would expect patent applicants in some non-software disciplines--notably, pharmaceuticals--may resist this approach, potentially even seeking Congressional intervention.

* Prof. Sam Vermont (University of Miami).  Prof. Vermont noted that in some cases, the research costs to find and diligence precedent patents might be more costly than just independently inventing the innovation.   This is especially true with software innovations, as discussed in this 2010 post by Brad Burnham (who spoke at the SCU conference)  Thus, Prof. Vermont proposed a defense when the "defendant’s costs to find the patentee’s version of the invention beforehand were greater than the defendant’s costs to invent it on his own."  In some sense, this situation is a damning indictment of those patents; if it's cheaper to recreate the innovations than to find their patents, why did we give those innovations a patent reward in the first place?  For those reasons, I like Prof. Vermont's suggestion, but it would require new legislation to implement, making it potentially more of an insightful thought exercise than a practical near-term solution.

* Maintenance Fee Reform, advocated by Prof. James Bessen (Boston University) and Prof. Brian Love (SCU).  Prof. Bessen analogized patents to pollution because both produce negative externalities.  To internalize the externality, Prof. Bessen argued for Pigouvian taxes in the form of increased maintenance fees (ongoing payments to maintain the patent in effect).  By his estimate, the maintenance fees should increase 10x to reflect the patents' true social costs; and he would further adjust maintenance fees to reflect the likelihood of patents being asserted, which would result in even greater increases for software/business method patents.  See Prof. Bessen's Wired Opinion article.

My colleague Prof. Brian Love has written about how some of the lowest-merit patent lawsuits come near the end of a patent's term.  We could mitigate those suits by truncating the patent term, but that's not likely.  Nevertheless, we can achieve a similar result by changing the maintenance fee structure to cause some weak patents to lapse early, including increasing maintenance fees as the patent ages and adding new late-term payment periods.  See Prof. Love's essay explaining this point and his University of Pennsylvania Law Review article.

Economic theory supports modifying maintenance fees by getting patent owners to internalize the costs of their actions.  In particular, I was particularly persuaded by Prof. Love's analysis that we should have at least one more maintenance fee payment period later in the patent term; the last maintenance fee payment date comes too early in the patent term.

However, tinkering with maintenance fees could produce unexpected results.  This Vanderbilt Law Review paper suggests the PTO may adjust its patent issuance rate to maximize its revenue.  Reducing the PTO's maintenance fee revenue by lapsing more patents might cause the PTO to issue more patents to increase revenues from patents before they lapse.  Similarly, increasing the maintenance fees-per-patent could cut in different directions: the PTO might reject weak patents because of increased revenues from issued patents, or the PTO might be issue more weak patents in a pure revenue grab.  It might be possible to ameliorate these unwanted budget-driven decisions, but before we tinker with maintenance fees, we better understand all of the dynamics, not just how patent owners will respond.

* Prof. Jennifer Urban (UC Berkeley).  Prof. Urban, along with Prof. Jason Schultz (also of UC Berkeley), proposed the Defensive Patent License (DPL).  Patent owners can opt-into the DPL, in which case they agree to license their patents royalty-free to everyone else who has opted into the DPL.  In effect, everyone participating in the DPL agrees not to sue each other for patent infringement.  This gives companies substantial incentive to opt-into the DPL; by doing so, they eliminate the potential patent risk from dozens, hundreds or even thousands of other industry participants.  This solution nicely responds to the prisoner's dilemma by increasing the payoffs from defanging patents.

However, the DPL has some obvious limitations (among others): (1) it does not affect patent trolls who never participate in the DPL, (2) it assumes enough players join the DPL to make other companies want to join the network (i.e., the DPL exhibits network effects), and (3) it assumes that DPL participants bring enforcement actions against non-DPL participants; otherwise, the non-participants can free-ride off the network without paying the costs.  I think the DPL is a brilliant concept, but it remains to be seen how effective it will be in the marketplace.  Read Profs. Urban and Schultz's explanation of the DPL.

Ben Lee of Twitter introduced a related idea, the Innovator's Patent Agreement (IPA), where Twitter unilaterally promises that it will not assert specific patents offensively.  This promise principally targets Twitter's own employees, who don't have to fear that their innovative work lead to socially harmful patent lawsuits.  The IPA doesn't rely on network effects, so any company can adopt it unilaterally; but for the same reason, adoptions may be slow and possibly de minimis.

Other Ideas.  Two other solutions to software patents that came up throughout the conference:

1) The SHIELD Act.  The SHIELD Act would make it easier for successful defendants in weak computer patent cases (both hardware and software) to get their attorneys' fees.   The fee-shift only benefits defendants; successful plaintiffs wouldn't be any more likely to get their attorneys' fees covered.  As a result, the SHIELD Act would increase plaintiffs' anticipated costs of litigation and thus discourage weak computer patent cases from being filed.

We didn't have anyone at the conference expressly advocate for the SHIELD Act, although Google's ($GOOG) Kent Walker (and others) did express support.  See Kent Walker's Wired Opinion article.  Like all legislative solutions, the odds that the SHIELD Act will pass are low, at least in the near future.

2) An Independent Invention Defense.  Independent invention--i.e., innovators developing the same innovation without reference to each other's work--occurs all the time, especially in the software community.  Unlike the other main intellectual properties, patent doctrine does not have a general-purpose independent inventor defense [FN].  Why do we treat patents differently?

FN: Independent invention is a complete defense to trade secret misappropriation, although a person actually exposed to trade secrets is effectively barred from later claiming independent invention of those ideas.  Independent creation is also a defense to copyright infringement; but like trade secrets, a person exposed to a copyrighted work can't claim independent creation, and furthermore, we inferentially presume copying rather than independent creation in some situations where the defendant could have been exposed to the work.  Trademarks aren't infringed merely by copying, so independent development of an identical trademark does not contribute to trademark infringement   However, intent to copy a third party trademark is a factor that weighs against defendants, and proving good intent goes a long way towards a successful defense.

An independent invention defense to patent infringement poses some practical problems.  First, it will be asserted by most (if not all) defendants, increasing patent adjudication costs.  Second, the evidence to prove or disprove independent invention often will be self-serving, like asking engineers to self-report what material they reviewed to achieve their goals.  Third, the defense will give inventors even more incentive not to research the patent database (for fear of seeing patents and thus losing the ability to claim independent invention), further undermining the public disclosure benefits of patents.

These problems highlight the strength of Prof. Duffy's suggestion.  Rather than trying to investigate what was independently invented and what wasn't, we could use that same fact (that multiple inventors reached the same solution) to support a non-obviousness objection--and, unlike an independent invention defense, we could achieve that result without any legislative changes.

What Next?

Our November conference attracted 250+ people--most of whom came because they want to fix the problems with software patents.  It was a remarkably large and enthusiastic crowd, and there was palpable energy to fix software patents.  It's clear that the Silicon Valley community, and many other technology communities, are experiencing a lot of pain from software patents.

Even so, I remain bearish on legislative solutions--even relatively minor changes like the SHIELD Act--at least in the next few years.  Congress made some big moves with the America Invents Act (AIA), and cleaning up the bugs in the AIA will consume whatever remaining time and appetite Congress has for patent issues.

As a result, I'm more optimistic about solutions that the PTO or judges can unilaterally and immediately implement without any statutory changes.  I think a combination of Profs. Lemley's, Rai's and Duffy's proposals are especially promising.  By re-characterizing the appropriate level of acceptable abstractness, requiring more proof from patent applicants, and then screening out innovations that multiple inventors all achieve around the same time, the PTO would kill most of the least appropriate patents, and judges could finish off any unmeritorious patents that somehow get through the PTO.  I also think marketplace solutions, like the DPL and IPA, hold promise, but they aren't likely to solve the problems on their own.

Ultimately, the single most important thing we can do is to keep identifying problems (like my colleague Prof. Chien's research on Startups and Patent Trolls and Reforming Software Patents) and researching and publicly debating solutions.  By continuing to shine the spotlight on the issues, the issue will remain impossible for policymakers and judges to ignore--as evidenced by a recent speech by PTO Director Kappos shortly after the SCU conference, where he simultaneously (and quite defensively) decried critics of software patents and outlined the many steps the PTO has taken handle software patents better.  Perhaps it's so obvious that it need not be said at all, but the many criticisms levied against the PTO have helped drive some of the PTO's improvements.  Simply discussing software patent issues publicly makes a difference.  Let's continue this conversation in comments to the Wired Opinion articles and at the EFF's website, Defend Innovation.

[Photo credit: Solutions Ahead Sign // ShutterStock]

Posted by Eric at 08:43 AM | Patents | TrackBack

December 17, 2012

Two Challenges to Fixing Software Patents (Forbes Cross-Post)

By Eric Goldman

Software patents play a huge--and controversial--role in our economy.  In a recent post, I explained some of the unique problems that software innovations pose to the patent system.  This post extends that discussion by exploring two structural hurdles to addressing those problems: (1) the challenge of defining "software," and (2) which regulatory institution(s) can implement any fixes.  In a subsequent post, I will conclude this three-part series of posts by exploring specific ideas to fix software patents.

Can “Software” Be Defined?

In my previous post, I argued that, functionally, software gathers, manipulates or displays data.  We may know software when we see it, but can we define “software” precisely enough to subject it to different treatment under patent law?

Consider the recently proposed bill, the SHIELD Act, which uses the following definition for software patents:

a patent that covers--
‘(A) any process that could be implemented in a computer regardless of whether a computer is specifically mentioned in the patent; or
‘(B) any computer system that is programmed to perform a process described in subparagraph (A).’

This definition isn't very satisfying.  First, the term "computer" doesn't have a natural boundary.  The statute also defines "computer," but the reality is that it may cover almost every electronic device--many of which now have computer-like functions and are networked.  Second, I don't know what a "process" means in this context, and the broad language "could be implemented" is uncomfortably capacious too, because just about anything can be implemented via software.

In theory, we can distinguish software from physical devices (e.g., “hardware”).  Even if we do, innovators can often replicate software functionality by designing hardware to incorporate the functionality directly.  In this sense, hardware and software are partial substitutes for each other.  In fact, before patent law clearly allowed software patents, innovators (especially IBM ($IBM)) routinely obtained "software" patents by patenting hardware designed to perform the software-like function.  So any special rules for software patents will just push innovators and their patent lawyers to seek patent protection for hardware that achieves the same outcome, obtaining the synthetic equivalent of a software patent.  In that case, we aren't making much progress.

Crafting special rules for software patents raises another concern.  We have entered into international treaties that mostly require us to treat all patentable innovations consistently, rather than providing heterogeneous protection for different innovative activity.  Thus, trying to fix software patents might cause us to violate our international treaty obligations.  Fortunately, my colleague Prof. Colleen Chien (SCU) has shown how we could implement software-specific fixes consistent with our treaty obligations.  Indeed, we've already created different rules for different innovations, such as special rules for business methods, surgical methods, tax strategies and others.

So, fixing software patents is tricky.  It may not be possible to define software patents precisely, it may be easy for patent applicants to game any software-specific rules, and we have to find a way to remain in compliance with our treaty obligations.  On the other hand, if we avoid software patent-specific fixes and instead try to make changes across all patents, that would dramatically increase the number of potential opponents to the change--and reduce the odds of success.

Who Can Fix the Problems?

Whether we decide to change software patents specifically or all patents categorically, the other major threshold question is who can implement a fix.  The main options are Congress, the courts, the Patent & Trademark Office (PTO) and market solutions/industry self-regulation.

Congress.  In general, the most elegant solutions to software patents involve changes to the patent statute, although most advocates are reluctant to explore this route.  After all, it took years to get the America Invents Act (AIA) through Congress, and the result was significantly watered down from its starting point (and note the surprisingly long punchlist of mistakes in Congress' final output).  Congress probably doesn't have a lot of enthusiasm right now for tackling big structural revisions to patent law, and there's always the possibility of further paralysis from pharma, trolls or the few software industry players who are OK with software patents.

As an intermediate compromise, at the SCU conference Prof. Christal Sheppard (Nebraska) suggested that Congress could pass more resolutions stating the sense of Congress. Although the resolutions don't have binding force as law, they nevertheless could provide helpful guidance to the courts more quickly and without the typical bruising fights.

The Courts.  Law professors often prefer making the courts into agents of change.  Common law courts have the inherent power to evolve the law, and judicial evolution sidesteps the messy legislative sausage-making process.  But judges can only color within the lines laid for them by Congress (or, rarely, invoke Constitutional considerations), so courts can't solve all of the problems themselves.  Judges also address the disputes on their desk, not broader social issues, and often don't seek out information not provided by the litigants fighting those disputes, so it's not especially easy to educate judges and get them to reflect broader social concerns in their rulings.

PTO.  As the government agency that manufactures patents, the PTO has a lot of power to control its manufacturing process.  However,  as I mentioned in my prior post, the PTO generally leans pro-patents and therefore may lack enthusiasm to fix any problems that result in over-patenting.  The PTO also must color within the lines established by Congress and the courts.

Self-Regulation.  For many software industry participants, software patents create a type of prisoner's dilemma.  If the industry could find a way to avoid software patents, the overall industry would be better off.  However, so long as any company can obtain patents, it's in that company's best interest to do so either for offensive or defensive purposes.  The result is that each company in the industry acquires patents solely to maximize its individual welfare, but the net result is that the entire industry is worse off.   A successful market-based approach would change companies' payoffs so they no longer face a prisoner's dilemma.  This is easier said than done.

In all likelihood, we may need participation from each institution to fully redress the problems with software patents.  In the next part of this series on software patents, I'll recap some of my favorite proposals for fixing software patents and discuss where we should go next.

[Photo credit: Capitol Building // ShutterStock]

Posted by Eric at 09:14 AM | Patents | TrackBack

December 04, 2012

The Problems With Software Patents (Forbes Cross-Post)

By Eric Goldman

The U.S. patent system largely treats all innovations equally, but innovation often works quite differently in different industries.  In particular, the software industry differs from other major innovative industries--such as computer hardware and biotech/pharmaceuticals--in several key ways, and those differences can create (and have created) significant friction for the patent system.

Software patents have also created big--and expensive--problems for companies throughout all sectors of our economy.  Pretty much as soon as they get venture financing, start-up companies are getting approached by "patent trolls" with offers they can't refuse: pay me now or pay your lawyer many times that amount to prove you don't have to pay me.  And large companies, especially in the smartphone industry, are paying literally billions of dollars to acquire patent portfolios to keep those portfolios from falling into the wrong hands and with the hope that large patent portfolios will fend off competitor threats (i.e., provide the company freedom to operate its business without interference from competitors' patents).

This post is the first of a two-part series recapping a conversation we had earlier this month at Santa Clara University entitled "Solutions to the Software Patent Problem."  In this post, I'll explain how innovation in the software industry differs from other industries and some of the resulting problems associated with software patents.  In a subsequent post, I'll talk about possible fixes.

What's unique about software?  Three main differences:

1) Software Has Short Innovation Cycles

Software iterates quickly.  Most software programs, and features of those programs, have an effective commercial life of only a few years.  Then, new software developments quickly render prior innovations obsolete .  Contrast this with mechanical innovations, some of which may have commercial lives of decades, and pharmaceutical innovations, which may retain commercial value indefinitely.

Some implications of the short innovation cycles in the software industry:

Software Has Significant First Mover Advantages.  Software innovators can recoup some of their R&D investments simply through de facto marketplace exclusivity from being the first mover.  An example: assume that a particular software innovation has a two-year commercial lifecycle and it takes competitors 6 months to bring a matching product to market.  In a situation like this, the first mover gets 1/4 of the maximum useful exclusivity period simply by being first to market.  In some cases--many cases?--the exclusivity period provided by the first mover advantage is more than enough to motivate software R&D without any patent protection.

Software's Lifecycles End Before Patents Issue.  As a practical matter, the commercial lifespan of a software program or feature (before being mooted by new innovations) is usually shorter than the time it takes the U.S. Patent & Trademark Office to resolve a patent application--a process that often takes 4 years or more.  So invariably the patented innovation will be obsolete by the time the Patent Office decides if it's worthy of a patent.

2) Software Will Be Produced Without Any Patent Incentive

We principally justify patent law on utilitarian grounds: that social welfare improves by providing innovators with an economic reward in the form of a limited-term marketplace exclusivity.  The utilitarian argument leads to patent's "quid-pro-quo": society gives innovators something really valuable--monopoly-like rights to exclude competition--in exchange for a number of socially valuable deliverables from innovators: investments in R&D, public disclosure of those R&D results, and eventually the unrestricted rights to replicate the innovation.

It's great when the quid-pro-quo model works as designed, but that's not always the case.  One way the quid-pro-quo model breaks down is if we give up the quid (the rights to exclude) when we would have gotten the quo (the R&D investments and public disclosure) in any case.   In those circumstances, society "overpays" for the innovation.

There are several reasons to believe that society overpays when it provides patent protection for software.

Copyrights and Trade Secrets Provide Adequate Production Incentives.  Multiple aspects of software can qualify for copyright protection: the source code, the compiled code, the visual layout, the documentation, possibly even the aggregation of menu commands (the "structure, sequence and organization" of the software).   Copyright only protects the expression of ideas, not the ideas themselves, so the ideas may be freely reused by competitors and others.  However, the line between ideas and expression in copyright is hardly clear (see, e.g., my posts about EA v. Zynga and the Spry Fox v. Lolapps disputes), giving even more berth to copyrights' scope.

Trade secrets also protects software source code and sometimes other aspects of software, such as proprietary limited-distribution documentation.  While trade secrets won't prevent copying of widely available software, even in that case it can still slow down the competition (and thereby extend any first mover advantage) by preventing the competitors from obtaining shortcuts to facilitate knockoffs.

Thus, even if it's not complete protection, the combination of copyright and trade secrets can provide substantial intellectual property protection for software.  Historically, this combination has provided adequate incentives for the software industry.  During the first several decades of the software industry--a period which saw explosive industry growth--software patents were rarely obtained and even more rarely enforced.

Software Vendors Can Restrict Competition Without Patents.  Software can have substantial lock-in effects that can thwart competition without patents.  For example, software users may become locked into one vendor's offerings due to proprietary file formats, the difficulty of learning/re-learning menu commands or keystrokes, a developer community that creates valuable apps specific to the software, and user investments in their own proprietary customizations (such as the infamous example of macros in Lotus 1-2-3).  We might lament the competitive distortions associated with these lock-in effects, but so long as the software vendor doesn't break the law, they represent a crucial explanation for software innovation without patent incentives.

Software Gets Produced Without Any IP Incentives at All.   The free and open source software community provides another example of software's quo without patent's quid.  In those communities, people work collaboratively without any individual contributor getting any intellectual property protection for their contributions.  In many cases, this is because the contributor has other ways of monetizing their efforts, such as offering maintenance or customization services or building a reputation for programming expertise that leads to job offers.  (I explore these alternative monetization methods in my article comparing Wikipedia and the FOSS community).  Further, some free and open source software contributions are purely altruistic, made without any financial expectations at all.  Collectively, the free and open source software community has proven that lots of software--even large-scale enterprise-class software--will be produced without any patent incentives.

3) Other Problems

Software Gets Patented at Too High a Level of Abstraction.  Stripped to its basics, software gathers, manipulates or displays data.  There may be novel ways of accomplishing those goals, but the true novelty typically is limited to some arcane implementation in the software code, not the concept of gathering, manipulating or displaying data.  Unfortunately, too many software patents claim protection at the highest level of abstraction (i.e., "moving data on a network"), not at a lower level like the more mundane implementation of that concept.

The result is overbroad software patents that overclaim their true novelty.  The overclaiming should lead to patent application denials on numerous grounds, including failure to enable, failure to satisfy the written description requirement, and obviousness.  But if the PTO doesn't aggressively screen the patents on those grounds, bogus patents get through the system.  That's happened way too often.

The USPTO Mishandled Software Patent Applications.  Furthermore, for a long time--a decade or more--the PTO did not adequately research the prior art applicable to software patents.  Patent examiners typically focus their prior art searches on the database of existing patents.  This means that when there's a watershed technological change--like the initial wave of software patent applications--the examiners don't see a lot of applicable prior art in their existing patent database.  Therefore, they grant patents that don't deserve protection.  Eventually the patent database becomes rich enough with prior art to reach an equilibrium, but the errors in the interim produce a batch of legacy patents that never should have issued.

Software Is Too Hard to Describe Precisely.  Related to the abstraction problem, the boundaries of many software "innovations" are too hard to describe precisely.  (In contrast, the specific implementation methods would be much easier to describe).  Because of the semantic challenges, the resulting patents are so opaque that no one can understand what they mean.  This also means that the patent owner can adopt expansive interpretations of the patent boundaries and then use the threat of patent litigation over those ambiguous borders to extract cash from potential defendants--even those who would ultimately be outside the patent's scope if they invested in challenging the patent owner.

Patent Research by Subsequent Innovators Is Too Costly.  In theory, product developers can check the patent database to see if they are transgressing someone else's patents.  In practice, this doesn't work in the software industry for at least two reasons.  First, as mentioned, the imprecision of software patents makes it hard for developers to realize that the patent owner thinks the patent covers the developer's efforts.  Second, large software programs may have millions of lines of code, while it's possible to obtain patents for functionality that can be expressed in only a few lines of code.  The result is that a single software program could potentially implicate thousands, or even tens of thousands, of patents.  The costs to find these patents, research their applicability, and then where appropriate negotiate licenses to even a small fraction of those patents, would vastly exceed the potential economic returns from most software applications.  Thus, software developers rationally choose not to research the patent database at all and instead "fly blind."

There are even more problems with software patents, but this brief summary lays the foundation for part two of this series, where I will examine some possible solutions to the problems associated with software patents.

Posted by Eric at 11:50 AM | Copyright , Patents , Trade Secrets | TrackBack

November 14, 2012

Preview of Our "Solutions to the Software Patent Problem" Conference

By Eric Goldman

On Friday, we're having our big academic conference of the semester, "Solutions to the Software Patent Problem." At the conference, experts will propose their ideas of how to fix software patents. Ultimately, we hope there will be enough enthusiasm among the participants to coalesce around one or more proposals and see if we can actually make progress.

In preparation for the conference, we held a "preview" for the students so that they would understand the conference background better. Without previews like this, students often don't get as much out of the conference because so much of the discussion goes over their heads. Colleen Chien was supposed to do the preview but she had a major conflict, so I stepped in. Below, I've included my talk notes. If you're really interested, I've also posted the audio from the talk. I hope to see you on Friday!
_______

Solutions to the Software Patent Problems Preview

1. The case for patents

* Patents = legally constructed right to exclude competitors. 20 year right to exclude = powerful sledgehammer to control markets.

* Why do this? Counterintuitive solution! By giving monopolies, we improve social welfare by preserving innovators’ ability to recoup R&D costs.

* How? Quid pro quo: in exchange for right to exclude, we get innovations now + information disclosure now + unrestricted innovations into public domain in the future.

2. Problems with the patent story

* Empirical Q: do we get the quid pro quo? No way to prove that we’ve calibrated patent law properly. Tempting to think that because patents are good, more patent rights are better! Patents are faux metrics of innovation. Plus, patent owners have incentives to vitiate the quid pro quo.

* High transaction costs + deadweight losses from monopoly

* Public choice/rent-seeking

* PTO doesn’t do great job of protecting public interest.
- APA puts burden on examiners to disprove applications, and then patents born with presumption of validity
- PTO examiners focus on prior patents as prior art and ignore applicant-submitted prior art, so undeserving applications can get through
- PTO is in patent manufacturing business, so they are designed to make more patents.
- Office incentives don’t reward rejections
- Patent applicants are PTO’s paying customers
- Employees don’t join PTO if they are anti-patent (+ socialization)

Field effect #1: prisoner’s dilemma. Hardware/software companies don’t want patents, but they aggregate defensive patent portfolios as threat of mutually assured destruction if competitors sue. In these cases, patents aren’t about the quid pro quo; instead, companies acquire patents solely to procure freedom to operate. This may be socially wasteful activity. Companies allocate their scarce capital from R&D to buy more freedom + create rights thickets for others.

Field effect #2: opportunists (“trolls”) use legal enforcement to extract payments from operating companies. Predictable consequence of any scheme that creates payoffs from legal enforcement, and complaints about patent trolls in other art units go back decades.

3. The case against software patents

* Software doesn’t need patents to recoup R&D costs
- copyright and trade secret offer substantial protection for software innovations
- quick innovation cycles = significant first mover advantages (new innovation may moot old innovation before competition catches up) + patent prosecution process take too long to protect software innovations
- software has other lock-in effects that reduce value of copying ideas
- significant software production even with no IP rights, i.e., open source/free software

* Software “ideas” may be harder to describe than physical devices
- software innovations may be too “abstract”
- claims are metes and bounds of excludability, but without physicality, those metes and bounds are less precise
- trolls can use claim scope ambiguity + asymmetrical litigation costs to enforce beyond the patent's claims

* Patent examiners didn’t know how to identify patentable innovations
- systemic problems: examiner incentives + inadequate consultation of prior art
- short term problem: backlog of thousands of bogus software patents that were granted in the past 15 years

* aggregated effect of patents may create unworkable rights thickets
- estimate that smartphone has 250k patents covering it [contrast pharma, where chemical compounds may be covered by <10 patents]

4. What to do about software patents?

Background on the conference:
- Sept 2011: AIA = compromise that left few people happy, but also means little enthusiasm for further reform in near future
- Nov 2011: Patent Defense 2.0: how has patent defense management changed in light of trolls
- This year's conference not trying to debate the software patent issue
- instead, bring together hand-picked experts to pitch their fixes, ranging anywhere from legal “nudges” to abolishing software patents
- audience should include decision-makers who can help assess the best ideas and perhaps marshal resources to support them.
- online component at Wired.com to evangelize the issues to larger audience

Key Q: is it possible to codify software exceptionalism? Fine line between hardware/software, and software is everywhere (ex: millions of lines of software code in cars). If we can’t carve off software from universe of patentable innovations, then changes to patent system must be uniform, bringing in more opponents to any change. Colleen's research shows that broad systemic changes to the patent system rarely are possible.

But our only option isn’t to kill software patents altogether, although some favor that. Other vectors of attack:

* patent eligibility
- change contours of patentability. Ex: expanded notions of what constitutes abstract ideas
- tighter review of software patents in PTO—better training, more rigorous prior art reviews, more rigorous claims review, more rigorous non-obvious standards
- require physicality for patentability

* change financial calculus
- higher patent application fees
- higher patent maintenance fees
- change damages calculations [but needs to be coupled with injunction reform; otherwise, injunctions can still force defendants to pay up]
- change attorneys’ fees calculations, such as the SHIELD Act

* change scope of rights
- independent invention defense
- shorter duration

* self-regulation
- Ex: Twitter’s “Innovator’s Patent Agreement” = voluntarily defang patents

[Photo credit: troll warning sign / Shutterstock]

Posted by Eric at 09:16 AM | Patents | TrackBack

October 08, 2012

Q3 2012 Quick Links, Part 1 (Trademarks/Domain Names, Patents, Trade Secrets)

By Eric Goldman and Jake McGowan

Trademarks/Domain Names

* AdAge: “Consumers Don’t Really Know Who Sponsors the Olympics.” This reminds us that trying to protect against "sponsorship confusion" is futile. For example: 16% believed Google sponsors the Olympics; and of those, 60% feel more positively towards Google because of that (factually faulty) perceived sponsorship.

* Suntree Technologies, Inc. v. Ecosense Intern., Inc., 2012 WL 3832458 (11th Cir. Sept. 5, 2012):

"Because Suntree failed to present evidence of an intent to mislead or confuse, or of actual confusion, we need not reach the question whether initial interest confusion is actionable in the Eleventh Circuit"

You know where I stand on that question!

* Diller v. Barry Driller, Inc. 2012 WL 4044732 (C.D. Cal. Sept. 10, 2012):

Defendants have not successfully parodied Plaintiff and they cannot defeat likelihood of confusion on that basis. First, nothing on Defendants' website itself sets up the “clear distinction” required by Dr. Seuss between Plaintiff on the one hand and “Barry Driller” on the other to convey to the reasonable viewer that the use of “Barry Driller” is a parody of Plaintiff. Second, even if a parody of Plaintiff, Defendants are using “Barry Driller” purely commercially as a source identifier to sell their internet-streaming television service, and their use therefore falls within the Lanham Act, as in White. Finally, as in Doughney, when a visitor initially sees the “barrydriller.com” domain name, he or she does not see any other information to suggest that the website might be a parody of Plaintiff."

* Teachbook gives up against Facebook and renames itself TeachQuest. Prior blog post.

* Lens.com v. 1-800 Contacts (Fed. Cir. Aug. 3, 2012):

"LENS mark is used only in connection with the sale and transportation of contact lenses via the Internet. Although the ordering service is facilitated through software, the record does not indicate that consumers have any reason to be aware of any connection between the LENS mark and Lens.com’s software."

Prior blog post.

* If you're selling domain names that have been blocked by Google, you really ought to disclose that. Then again, if you’re buying domain names, you really should ask about that.

* More Congressional questions about ICE’s domain name seizures.

* The Saudi government objects to numerous new gTLD proposals on moral grounds.

Patents and Trade Secrets

* Judge Posner: Why There Are Too Many Patents in America

* The proposed SHIELD Act, Saving High-tech Innovators from Egregious Legal Disputes. It’s a proposal to monkey around with fee-shifting in patent law to suppress trolling. One of the many topics at our November conference, Solutions to the Software Patent Problem.

* American Chemical Society v. Leadscope: Ohio Supreme Court Affirms $26.5 Million Award [to the Defendant] for Malicious Trade Secret Litigation.

* Bloomberg BNA (BNA paywall): "A review and analysis of the more than 120 [Economic Espionage Act] prosecutions suggests that neither government, nor industry is doing enough to protect against the theft of trade secrets by foreign entities and unscrupulous competitors. The Department of Justice must substantially increase the number of EEA prosecutions if the EEA is to truly serve as a deterrent against thefts."

* Protecting American Trade Secrets and Innovation Act of 2012. A proposal to create a federal civil cause of action for trade secret misappropriation, including a provision for ex parte seizures. I don't know who's advocating for something as ridiculous as this, but we need vigilantly guard against unneeded and dangerous expansions of trade secret law.

* Solicitor General decides not to file appeal in United States v. Nosal. Prior blog post.

* Wired: Incompetent or Shrewd? 7 Tech Companies That Leaked Their Own Secrets

Posted by JakeMcGowan at 02:13 PM | Domain Names , Patents , Trade Secrets , Trademark | TrackBack

October 01, 2012

Do You Think Software Patents Are a Problem? Then Come to This Conference, SCU, Nov. 16

By Eric Goldman

I'm sure you are feeling the ongoing angst associated with software patents. In the past few months, Google, Judge Posner, and the opinion pages have all expressed dismay about software patents and how they’re being used. Ancedotally, everything I'm seeing and hearing indicates that software patents remain a significant problem, even after the America Invents Act (AIA).

There's plenty to discuss, but it's also time for action. To catalyze action, the High Tech Law Institute is organizing a full-day program, entitled "Solutions to the Software Patent Problem," November 16 at SCU. Our goal is to bring together the community of people interested in software patents, discuss possible fixes to the problems of software patents, and then see if consensus emerges about actions we should pursue.

Thus, this conference looks a little different than our normal conferences. Rather than debate the problem, we start with the premise that software patents are problematic. Then, in order to catalyze the community, we’ve structured the event to look more like a VC pitch conference than an academic conference. In rapid-fire succession, experts will present their favored proposal--legislative, administrative, judicial, or market-based--to redress the problems with software patents. We'll have experts on the panels to help critique the proposals. To further extend the discussion, we will also have an online symposium of short essays at Wired.com pitching some of the conference proposals to a lay audience.

In the end, it will be up to the audience and the software patent community generally to decide what, if any, action to take regarding the proposals. If everything goes as we hope, the conversation at the conference and online will produce demonstrable efforts towards fixing the problems with software patents.

We are co-sponsoring this event with our friends at the Berkeley Center for Law & Technology, the EFF, units of IEEE and Cooley LLP. By bringing together disparate participants in the software patent ecosystem, we anticipate the audience will learn as much from each other as from the presenters. As usual for our events, we've kept admission costs reasonable, and lots of folks can get in for reduced rates or even free. Our main goal is to get the community together in one room so we can vet the issue and the solutions and make real progress. I hope you can part a part of that endeavor.
____

The detailed schedule (subject to change):

8:50 – 9:00 Welcome/Introduction

9:00 – 9:40 Keynote #1: What is the Problem?
Moderator: Andrew Chin, University of North Carolina
Richard Stallman, Free Software Foundation
Kent Walker, Google

9:40 – 10:50 Panel #1: Legal Reform, Part 1
James Bessen, Boston University School of Law
Brian Love, Santa Clara University School of Law
Christal Sheppard, University of Nebraska College of Law
Colleen Chien, Santa Clara University School of Law
Commenters: Michael Meurer, Boston University School of Law/Jason Mendelson, Foundry Group

10:50 – 11:05 Break

11:05 – 12:15 Panel #2: Agency Reform
Peter Menell, UC Berkeley School of Law
Arti Rai, Duke Law School
John Allison, McCombs School of Business, The University of Texas at Austin
Michael Risch, Villanova Law School
Commenters: Amy Landers, McGeorge College of Law/Christina Mulligan, Yale Law School

12:15 – 1:00 Lunch

1:00 – 2:00 Keynote #2: Views from the Trenches
Moderator: Kristen Osenga, University of Richmond School of Law
Drew Hirshfeld, United States Patent and Trademark Office
Honorable Edith Ramirez, Federal Trade Commission
Honorable Paul Grewal, Northern District of California

2:00 – 3:10 Panel #3: Legal Reform, Part 2
Mark Lemley, Stanford Law School
John Duffy, University of Virginia School of Law
Ted Sichelman, University of San Diego School of Law
Samson Vermont, University of Miami School of Law
Commenters: Suzanne Michel, Google/Heidi Keefe, Cooley LLP

3:10 – 3:30 Break

3:30 – 4:40 Panel #4: Self Help
Keith Bergelt, Open Innovation Network
Jennifer Urban, UC Berkeley School of Law
Dan Ravicher, Public Patent Foundation
Wendy Seltzer, Yale Law School
Commenters: Brad Burnham, Union Square Ventures/Ben Lee, Twitter

4:40 – 5:20 Keynote #3
Moderator: Nair Flores, Facebook
Pam Samuelson, UC Berkeley School of Law
Julie Samuels, Electronic Frontier Foundation

5:20 Conclusion

5:30 – 6:30 Reception

Posted by Eric at 09:47 AM | Patents | TrackBack

August 25, 2012

Google Tries Again to Respond to Judge Alsup's Shill Disclosure Order. Now, How About Oracle?

By Eric Goldman

Oracle America, Inc. v. Google Inc., 3:10-cv-03561-WHA (N.D. Cal. Aug. 24, 2012)

In the ongoing saga about Judge Alsup's requests that Oracle and Google disclose possible shills, Google filed a supplemental disclosure that listed 13 individuals/organizations. There's not much in Google's disclosure that I didn't already know, and I wonder if the judge has finally gotten whatever he's looking for. Google has a better basis to argue that it properly responded to the judge's request, but I still have no idea how the judge will respond.

Some mildly interesting points about Google's supplemental disclosure:

* Google disclosed William Patry this time, but baffingly, Google did not identify him as a treatise author. Given that the judge has made his interest in treatise authors quite clear, I don't understand why Google didn't explicitly close this loop.

* Google cited a tweet by its employee, Tim Bray. Google didn't include the tweet's contents in the filing (or that it got retweeted 575 times!), but it's worth including here:

"Speaking only for myself as an individual of course: Fuck Oracle."

It's a little hard to characterize this as a "comment" on the case!

* Google disclosed Bruce Perens as a consulting expert. Normally, consulting experts aren't disclosed to a litigation opponent or the public at large unless they become testifying experts. I haven't checked to see if his involvement in this case was previously disclosed. If not, Oracle may have learned something new.

* Google lists Mike Masnick because a Google-funded organization (CCIA) paid him to write his The Sky is Rising report. I don't understand why this is on Google's list, as Judge Alsup's order clearly said he only was interested in "employees" of Google-funded organizations. Ditto for Google's disclosure of Michael Barclay, an EFF fellow.

Overall, Google's disclosure list disclosed, or name-checked, many well-known figures in the cyberlaw community, including the people I've already mentioned plus Mark Lemley, Paul Levy, Timothy B. Lee, Julie Samuels and others. If we got all of the referenced folks together in one room (and hid the knives), it would be a pretty cool party.

My biggest question: Why didn't Oracle supplement its initial disclosure in light of the judge's clarification? I can't believe Oracle has not provided any money to organizations whose employees commented on the case. So how about it, Oracle? Plead a mea culpa to the judge for blowing off his deadline and provide a more complete disclosure.

Our prior posts on this matter:

* Judge Alsup Tells Google to Try Harder With Its Shill Disclosures
* Oracle and Google Make Unenlightening Disclosures of their "Shills"
* Judge Alsup Tries to Out the Shills in Oracle v. Google
* Java APIs Aren't Copyrightable--Oracle v. Google (Guest Blog Post)

Posted by Eric at 10:12 AM | Copyright , Evidence/Discovery , Patents | TrackBack

August 21, 2012

Judge Alsup Tells Google to Try Harder With Its Shill Disclosures

By Eric Goldman

Oracle America, Inc. v. Google Inc., 3:10-cv-03561-WHA (N.D. Cal. Aug. 20, 2012)

I can't imagine Google is surprised that Judge Alsup did not like its response to his request that Google and Oracle disclose potential shills in Oracle v. Google. After all, Judge Alsup's order instructed both Oracle and Google to name names, and Google's response didn't name a single name while Oracle named three names (Mueller, an employee blogger, and Goldstein). Judge Alsup's quick response, only one business day after Oracle's and Google's disclosures, has almost a pleading tone to Google:

Please simply do your best but the impossible is not required. Oracle managed to do it.

Judge Alsup's follow-on order attempts to clarify his initial request, but amazingly it still does not tip Judge Alsup's hand about what exactly is bothering him. Judge Alsup reiterates that he meant what he said earlier: he wants to know bloggers who (a) covered the case, and (b) got money from Oracle or Google, not just bloggers who got paid to cover the case (a "quid-pro-quo" situation). As I pointed out before, to do this properly, Google should have to screen its thousands of vendors to see which of them covered the case. To speed this up, Judge Alsup specifies a few categories that don't need disclosure:

* AdSense publishers
* experts already disclosed
* university recipients. Excluding universities is a little odd, as universities are hardly above the fray when it comes to being influenced by corporate money.

In the end, the clarifications don't really doesn't narrow down Google's task very much. In particular, Judge Alsup reiterates that he wants Google to disclose organizations it has supported if "one of its employees was a commenter." Given organizations typically speak through their employees, Google will have to go through all of its supported organizations.

The judge also says:

Just as a treatise on the law may influence the courts, public commentary that purports to be independent may have an influence on the courts and/or their staff if only in subtle ways. If a treatise author or blogger is paid by a litigant, should not that relationship be known?

This is odd because judges and their clerks should be resistant to external influences like blogger coverage of the case. We understand that jury members (with their limited experience in the litigation process) might not be so disciplined, but judges and their clerks are trained professionals. Even so, judges and their clerks could be confused when a litigant cites a source when that source was on the litigant's dole--in those cases, it's possible the source changed his/her words to suit the benefactor, thus undermining the source's credibility in ways that may not be apparent to the reader. Oracle has tried to allege that Google did that by citing Jonathan Band's work, but Band didn't receive money from Google directly, and so we might debate if Band's words were tainted.

It's noteworthy that Judge Alsup keeps harping on treatises. Of course Google has William Patry, a copyright treatise author, on staff, but I am not yet aware that either party cited Patry's treatise (Please let me know if I missed something). [I forgot that Oracle did cite Patry, as reported in this article.] Perhaps Judge Alsup wants every litigant in every case to disclose which treatise authors are on a litigant's dole, just in case one of his staff consults that treatise independently. Diminished credibility could be a problem when treatise authors become hired guns--especially if that's not disclosed either in the treatise or in a court filing--because a treatise writer could actually edit the treatise to reflect the interests of his/her clients. (I don't know if this has ever actually happened, so this might be a purely hypothetical discussion).

Perhaps one lesson to take away from all this: if you're a litigant and your filings cite a published work by your expert/consultant, maybe you need to disclose that. But in this case, if Alsup's clerks are traipsing through the treatises independently, surely they will discover Patry's affiliation with Google (I don't have a copy myself, but I assume Patry discloses it on the title page). As a result, there may be less risk of unintended treatise taint from Patry than from other treatise authors who become hired guns.

Perhaps as a sign of the judge's exasperation, the judge only gives Google until this Friday at noon to make its updated disclosure. I imagine a lot of Google's lawyers will burn the midnight oil--and rack up a lot of billable hours--this week. Per the judge's near-begging, Google can always claim that it "did its best" but wasn't able to do the "impossible." However, I wouldn't rely on that. I imagine any defects in its next disclosure will infuriate the judge, so I don't think it actually has the luxury of "only" trying its best in the time allotted. Google (or Oracle for that matter) could also challenge on the judge's order, which becomes increasingly likely as the parties realize the difficulty in complying with it.

Oracle may feel a little vindicated that Judge Alsup is hammering Google while giving Oracle a pat on the head, but this order isn't good news for Oracle either. Although it named three names, Oracle didn't come anywhere close to satisfying the judge's order. I expect Oracle will stand pat on its prior disclosure, but Oracle should be furiously scrambling right now too. I wonder if Google will try to drag Oracle down if Oracle doesn't update its disclosure.

Our prior posts on this matter:

* Oracle and Google Make Unenlightening Disclosures of their "Shills"
* Judge Alsup Tries to Out the Shills in Oracle v. Google
* Java APIs Aren't Copyrightable--Oracle v. Google (Guest Blog Post)

Posted by Eric at 07:28 AM | Copyright , Evidence/Discovery , Patents | TrackBack

August 17, 2012

Oracle and Google Make Unenlightening Disclosures of their "Shills"

By Eric Goldman

In Oracle v. Google, Judge Alsup recently ordered the parties to:

[f]ile a statement . . . identifying all authors, journalists, commentators or bloggers who have reported or commented on any issues in the case and who have received money (other than normal subscription fees) from the party or its counsel during the pendency of [the] action

As we previously wrote, this order is incredibly broad, which meant neither party could reasonably comply with its literal terms. As a result, initially I expected the parties to push back on the judge's request; but when they announced they both intended to comply, clearly there were going to make some limiting assumptions.

The statements are filed, and not surprisingly, they are dull. They don't tell us anything we didn't already know.

Oracle's statement discloses the following:

* Florian Mueller, who had previously disclosed his Oracle relationship.
* "certain Oracle employees" who blog. They specifically reference Hinkmond Wong.
* Stanford Law professor Paul Goldstein, who writes a copyright treatise and is of counsel at MoFo, Oracle's law firm in this case. Oracle says Goldstein hasn't commented on the case, but I haven't had a chance to confirm if Oracle cited his treatise in the case and disclosed his MoFo affiliation when doing so. Scott Graham's Recorder article notes that Google cited to Goldstein in its trial brief but didn't note any similar citations in Oracle's papers.

Google's statement doesn't name any names at all. Instead, Google explains to the judge that the literal terms of his order sweep in various categories of folks, and it asks the judge to speak up if he wants more information about folks in those categories. The categories:

1) Universities and non-profits
2) organizations that Google belongs to or contributes to, including political organizations and trade associations. With respect to these first two categories, Google notes that it publicly discloses its relationships (see also its supported academics). I'm curious if other companies make equally robust disclosures of their affiliations and supported researchers? Nevertheless, these lists may not be comprehensive (they have weasel words in the intro, and the academics list doesn't include competitively allocated research grants).
3) AdSense publishers (one of the disclosure categories I harped on--fortunately I wasn't on the list!)
4) Google employees, vendors and contractors
5) Expert consultants in this case. Confusingly, Google claims they are outside the order's scope because the experts only said what they were paid to say. This response would make more sense if we knew the identity of all such experts, but Google didn't offer a list here and could very well have experts that it didn't disclose to Oracle or the court. So it seems like Google may be cutting corners by not disclosing now any expert consultants who hadn't been previously disclosed, or confirming that no such folks exist.
6) Witnesses identified for trial. Google may also be cutting some corners here, saying that these folks were already identified in the litigation record. That's true, but Google didn't disclose which of those folks it paid, either for their testimony or for commenting on the case separately.

Perhaps fearing that Google wouldn't make adequately fulsome disclosures, and even though the judge didn't ask the parties to rat each other out, Oracle tries to "help" Google by anticipatorily naming some names for Google. Oracle calls out:

* Ed Black of the Computer and Communications Industry Association, which Oracle says is "funded in large part by Google." Oracle cites this Forbes post by Black.
* Jonathan Band, who wrote a book cited by Google, and whom Oracle says is indirectly funded by Google through Google-supported trade associations.

More generally, Oracle complains that "Google maintains a network of direct and indirect “influencers” to advance Google’s intellectual property agenda." I couldn't tell if Oracle was complaining out of concerns about the corrosive effect on society that such networks could have, or if it's simply jealousy that Google's influence network is better than Oracle's. I think this whole inquiry raises some very important social issues about credibility, transparency and the corrosive effects of money in our policy-making process, but I don't think we're likely to make real progress on any of those heady topics in this forum.

The parties' submissions now force Judge Alsup's hand. Did he really want the broad disclosure he ordered? If so, I wouldn't be surprised if a benchslap were in the offing for the obviously laconic disclosures. Or, is he going to accept these unenlightening filings and move on? In the former case, we're likely going to find out what was bothering Judge Alsup enough to start this inquiry. But if he doesn't force the parties to do more work, we may never know what started this.

Posted by Eric at 03:25 PM | Copyright , Evidence/Discovery , Patents | TrackBack

August 13, 2012

Request for Help: Fill Out a Short Survey on Entrepreneurs' Handling of Patent Demands

By Eric Goldman

While we may have some voyeuristic fun watching a high-profile patent trial like Apple v. Samsung, patent litigation isn't always a "sport of kings." To shed some light on these less-publicized aspects of patent enforcement, my colleague Colleen Chien [follow her at Twitter!] is conducting a survey about how small companies deal with demands by patent holders. If you work at a startup or small company, I would be so grateful if you would fill out this survey (or ask the person in your company handling patent demands to do so). Even if your company has not (yet) received a patent demand, your feedback would help. The survey is quick (2-15 minutes), and individual responses will be kept confidential unless you say otherwise. Colleen will publish the results, and I expect her report will improve the patent policy-making discussions based on what's taking place in the patent enforcement world outside the media glare. Thanks in advance for your help.

Posted by Eric at 03:18 PM | Patents | TrackBack

July 04, 2012

H1 2012 Quick Links, Part 1 (Trademarks/Domain Names, Patents, Trade Secrets, IP)

By Eric Goldman

[Eric's note: I had an incredibly busy travel schedule since late March. My destinations included Akron, NYC, Seattle, Concord (NH), Boston, Chicago, Vancouver, the California Channel Islands (a blog post is coming later this week about that trip on my Goldman's Observations blog), San Diego, Houston, Belgium (a blog post is coming about that trip too, eventually), Lansing (MI), Healdsburg (CA), Napa, Berkeley and Northridge. It's been great for my frequent flier miles and lousy for my ability to maintain my "quick links," which ballooned to hundreds of items over the past 4 months. As a result, I'm going to be posting the backlog over the next few days and then reassessing how I approach blogging these second-tier items to develop a more sustainable system. As always, thanks for reading.]

Trademarks/Domain Names

* Another trademark case turns on relative search engine placement: Hasbro, Inc. v. Asus Computer International, Inc., CV 11-10437 PSG (C.D. Cal. March 23, 2012):

Hasbro points to the fact that a Google search for “optimus prime tablet” picks up Asus’s “Transformer Prime” tablet, a search for “Transformer prime” causes Amazon to search its own site for “Asus transformer prime,” and that a search for “transformers prime” returns “several Asus hits and Transformers Prime hits.”…According to Hasbro, this “overlap in search results is bound to cause confusion.”…The Court disagrees. First, for the most part, the Google search for “Transformer Prime” returns results related to Asus’s products, while the results generated by the “Transformers Prime” search relate to Hasbro’s animated series…. Second, although the “Transformers Prime” Google search results offered by Hasbro show hits relating to the Transformers Prime animated series and the Eee Pad Transformer Prime tablet, Hasbro makes no argument that these products are related…. Furthermore, any concern that a consumer using Hasbro’s mark to search for Hasbro’s product might be confused by a results page that shows both Hasbro’s and Asus’s product is ameliorated when the sources of the respective products are clearly identified…. The nature of Asus’s product also supports this finding, as buyers of high-end computer products are even less likely to be flummoxed by search engine results than the general population.

* John Crane Production Solutions, Inc. v. R2R and D, LLC, 2012 WL 951723 (N.D. Tex. March 21, 2012): "even a sophisticated purchaser can be subject to initial interest confusion...The court finds that the purchasers of fiberglass sucker rods exercise a high degree of care and sophistication in making their purchases. This factor weighs heavily in favor of a finding of no likelihood of confusion." Another example of IIC’s irrelevancy to a case's ultimate outcome.

* Fancaster, Inc. v. Comcast Corp., 2012 WL 815124 (D.N.J. March 9, 2012). Abandoning a trademark doesn’t divest the trademark owner of ACPA standing for past statutory damages. Prior blog post.

* Two Plus Two Pub., LLC v. Boyd, 2012 WL 724678 (D. Nev. March 1, 2012). The domain name twoplustwopoker.com constituted an ACPA violation of plaintiff's "Two Plus Two" trademark in publishing poker-related materials. Prior blog post.

* Ron Paul drops unmasking effort. Prior blog post.

* Bogoni v Gomez, 2011 WL 6957599 (S.D.N.Y. Dec. 28, 2011) and Bogoni v. Gomez, 2012 WL 745548 (S.D.N.Y. Jan. 6, 2012). Man wins cybersquatting claim against a “friend” who registered his name as a domain name and then tried to sell it back to him. NY Times coverage.

* John Ottaviani reports on a lawsuits against JC Penney for buying keyword ads triggered by brand name of goods it didn’t sell.

* Update on the Lens.com v. 1-800 Contacts antitrust lawsuit. Prior blog post.

* Spanish keyword advertising ruling goes against the defendant.

* Facebook is now claiming trademark rights in "Face" and "Book" in its Statement of Rights and Responsibilities (SRR).

* Facebook’s lawsuit against Faceporn dismissed for lack of jurisdiction. Prior blog post.

* NY Times: Nutsonline.com switched to Nuts.com at a very high price, yet traffic and sales plummet for months.

* Gibson v. Bordelon, 2011 WL 7763787 (N.D. Tex. October 31, 2011). A para-trademark case. A Texas statute prevents usage of a combination of the word “Texas” in conjunction with the words “Workers' Compensation” or “Workers' Comp.” This may prevent a lawyer from running a website/blog at the domain name “texasworkerscomplaw.com.”

Patents

* Washington Post: “In the smartphone market alone, $15-20 billion has already been spent by technology companies on building defenses, says Stanford Law School professor Mark Lemley…. Lemley estimates that more than $500 million has been squandered on legal fees.”

* Twitter's Innovator's Patent Agreement. WSJ coverage. An interesting idea. I see this as much more about recruiting new engineers than about reforming the entire patent ecosystem. As such, it’s a potentially very effective differentiator, even if Twitter never actually files for patents under the scheme.

Note the alternative: Twitter could simply not file for the patents at all. The fact that Twitter will still seek patents, while voluntarily defanging them, is a damning indictment of the patent system. Twitter clearly doesn't want the patents to restrict competitive imitation, but it's still spending tens of thousands of dollars per patent on the hope that the patents might help it achieve freedom to operate. This phenomenon is one of the reasons we're holding our "Solutions to the Software Patent Problem" conference at SCU in Fall (registration now open!).

* Wired takes a look at how the Nortel patents have been deployed for trolling.

* Brad Burnham: The Freedom to Innovate

* Patent “troll” is going after city bus systems. Who pays for this? Taxpayers.

* TechCrunch: Facebook countersues Yahoo for patent infringement using a patent by an employee now at Yahoo.

* Inside Higher Ed: Universities don’t want to talk about their relationships with Intellectual Ventures.

* Hollywood Reporter: U.S. Patent Examiner Cites Borat's Famous Swimsuit in Rejecting Claimed Invention

Intellectual Property and Trade Secrets

* Bill Gallagher, Trademark and Copyright Enforcement in the Shadow of IP Law. An interesting ethnographic study of how IP lawyers ply their craft.

* Everything you need to know about the Trans-Pacific Partnership (TPP) and IP

* From the USPTO: Intellectual Property and the U.S. Economy: Industries in Focus

* From the White House: IPEC 2011 Annual Report on Intellectual Property Enforcement

* Trade Secret Litigator: Non-compete restricting on-air radio personalities from working at other nearby radio stations doesn’t restrict them from broadcasting via Internet radio.

* WSJ: Litigation battles over the Pepsi cola formula.

Posted by Eric at 10:03 AM | Patents , Trade Secrets , Trademark | TrackBack

March 08, 2012

Jan.-Feb. 2012 Quick Links, Part 2 (Trademarks, Patents, Trade Secrets, Innovation Edition)

By Eric Goldman

Trademarks

* Naked Cowboy v. CBS, 2012 WL 592539 (S.D.N.Y. Feb 23, 2012). The court rejects the trademark claim for CBS buying "Naked Cowboy" keyword advertising to promote the YouTube video for lack of use in commerce, citing Merck v. Mediaplan, which I thought was dead after Rescuecom. CBS's reference to "Naked Cowboy" in its YouTube video title was a non-trademark use. Rebecca's coverage.

* Lovely Skin, Inc. v. Ishtar Skin Care Products, LLC, 2012 WL 379930 (D. Neb. Feb. 6, 2012). Lovely Skin sued Livelyskin for trademark infringement. Livelyskin claimed unclean hands because Lovely Skin bought Livelyskin as keyword ad triggers. The court refuses summary judgment and holds the issue over for trial.

* Neeley v. NameMedia, Inc., 2012 WL 470155 (8th Cir. February 15, 2012). Affirming dismissal of this odd case.

* Paul Keating rips a UDRP ruling over hardwareresources.org.

* Louis Vuitton sent an ill-advised and condescending cease & desist letter to University of Pennsylvania's IP students for using a parody LVMH logo to promote their fashion law conference. UPenn told LVMH to pound sand. Law.com coverage. Jonathan Pink’s analysis (with a funny Star Wars reference).

* TechCrunch: New Trademarkia Feature Exposes Biggest Trademark Bullies; Apple, Zynga Among Top Five

* Trademark Reporter published my remarks about trademark law's past/future. Prior blog post.

Patents

* Who's most excited about Facebook's IPO? Patent lawyers!

* Is Microsoft laying down its patent weapons?

* We've just hired a new patent professor at SCU, Brian Love. In an op-ed, he explains why university patent portfolios are a bad deal for everyone--including the university!

Trade Secrets

* Aqua Connect, Inc. v. Code Rebel LLC, No. 2:11-cv-05764-RSWL-MAN (C.D. Cal. Feb. 15, 2012). User downloaded trial software and agreed to a EULA restricting reverse engineering. The user reversed engineered anyway. The court dismissed the trade secret misappropriation claim, but the breach of contract claim remains.

* SocialApps, LLC v. Zynga, Inc., 2012 WL 381216 (N.D. Cal. February 6, 2012). Lawsuit that Zynga ripped off app developer mostly survives a motion to dismiss.

* All Things D: Raj Abhyanker (of Trademarkia infamy) dropped his idea theft suit against Nextdoor.

* Salon: The Internet makes magic disappear.

Innovation

* My colleague Kyle Graham has posted a really interesting article on how tort law responds to technological innovations: "Of Frightened Horses and Autonomous Vehicles: Tort Law and its Assimilation of Innovations"

* NYT: Apple's success has translated into manufacturing jobs overseas. As Steve Jobs answered to Pres. Obama when asked about getting those jobs into the US, “Those jobs aren’t coming back.” Instead, as we transition to a knowledge economy, the US has to develop a skilled labor force that can add enough value to justify the high cost-of-living here.

* William M. Fischer, The Utah Bioprospecting Act of 2010: (Unintentional) State-Level Implementation of the United Nations Convention on Biodiversity, Journal on Telecommunications & High Technology Law, Winter 2012. Prior blog post.

* NYT: Bell Labs as an exemplar of the value of "slow" development cycles. Some of its strengths: face-to-face interactions of cross-disciplinary teams of experts, a building designed to get people to encounter each other, an emphasis on applied research, physical proximity of researchers to the manufacturing facilities to facilitate two-way learning, and sufficiently long innovation timelines.

* WSJ: Target is trying to fight showrooming by having manufacturers create Target-specific brands, a technique that has worked to curb price comparisons in some categories, like mattresses and tires. Will Target's move lead to product proliferation? Or will some entrepreneur simply help link the retailer-specific items so that they can be easily price-compared? FWIW, I rarely worry about price comparison at Trader Joe's, even with respect to private-labeled goods, because they have repeatedly proven to me that they give me good value. If Target isn't working to ensure good value for consumers from product differentiation, I don't see how their move will help.

Posted by Eric at 09:36 AM | Patents , Trade Secrets , Trademark | TrackBack

January 27, 2012

Top Internet Law Developments of 2011

By Eric Goldman

As usual, I'm running late with my year-end recap. This post begins with my countdown of the top 5 Internet Law developments of 2011, then it lists other interesting developments and cases. It concludes with some of the most linked posts and then my editor's choice of some posts in 2011 that might have been a little overlooked. As usual, thanks for reading the blog in 2011!

Countdown: My Top 5 List of Developments in 2011

#5: Righthaven Implodes. Since the beginning, I've been skeptical of Righthaven's business model. Seriously, who else thinks it's a good idea to sue small-time mom-and-pop bloggers and non-profits on a one-by-one basis? However, even I had no idea that Righthaven would accelerate their own demise by routinely making basic litigation errors. A sketchy business model + a litigation shop that isn't very good at litigation = one dead start-up. It's always fun (in a bloodsporty way) to watch hubristic bullies get their just desserts, but watching the Randazza firm school the Righthaven litigators in Litigation 101 has been amazing. THAT'S how you litigate.

Righthaven lost often in 2011 (see my August reset). They lost fair use rulings (e.g., CIO, Choudry). They lost on standing grounds (e.g., Democratic Underground, Wolf). They were hit with sanctions. They were hit with hundreds of thousands of dollars of attorney fee shifts (e.g., Leon, Wolf, DiBiase). They even lost their domain name in an auction--a delicious irony given that Righthaven's complaints improperly demanded its defendants' domain names on the theory that it might need the domain name to satisfy a judgment against the defendant, when in fact it was Righthaven's domain name that was used to help satisfy a judgment against it!

Righthaven ended 2011 on death's door, but the trend of newspapers trolling for copyright litigation isn't going away. I'll be watching NewsRight closely in 2012.

#4: Medical Justice Gives Up. Speaking of hubristic bullies... You recall Medical Justice, the organization that helped doctors and other medical service providers take copyright assignments from patients in their as-yet-unwritten reviews so that the doctors could expeditiously remove unwanted reviews by sending 512(c)(3) takedown notices to review sites. It's an interesting legal hack, but it has some bad side-effects, including the fact that patients hated it, the copyright assignments almost certainly were void (for public policy reasons and others), doctors were hurting themselves by discouraging patient reviews (patients prefer to choose doctors when there's a critical mass of patient reviews), and (as our research uncovered) most consumer review sites ignored the doctors' 512(c)(3) takedown notices. Obviously, with those defects, Medical Justice wasn't exactly adding a ton of value to its clients. Medical Justice finally gave up, but too late to prevent a lawsuit against one of its clients and a complaint to the FTC. Chances are Medical Justice will be living with a long-term hangover from this entrepreneurial foray.

Seeing Medical Justice stop peddling anti-patient review tools was slightly satisfying, but that result was always a fait accompli. The reason Medical Justice's change of heart matters is that shady or clueless vendors keep developing new ways to suppress unwanted consumer reviews, and I hope Medical Justice's experiences will discourage other vendors from trying the copyright hack. I talk about these dynamics more in my paper on regulating reputational information.

#3: gTLD Expansion. It remains unclear exactly what ICANN's rollout of unlimited top level domains will do. Due to the expansion of new namespaces, brand owners face a long list of complicated--and potentially expensive--choices to make. Unfortunately, these choices don't really benefit society; instead, the gTLDs tax businesses while the benefits accrue to a small number of service providers (and, of course, ICANN itself). I think many businesses will reserve their name in multiple new gTLDs to prevent squatting--with the net effect that businesses will spend more money just to preserve the status quo. Meanwhile, most consumers are likely to be bewildered by the unlimited number of TLDs, which is just going to increase their tendency to rely on search engines and link directories rather than domain names to navigate to their desired destinations.

#2: Internet Consumer Privacy Lawsuits Tank. 2011 initially looked like the year of the Privacy Plaintiff. A torrent of privacy lawsuits had been filed, plaintiffs had wrested a few important and lucrative settlements, and Internet companies continue to make questionable privacy decisions that create a steady supply of potential new lawsuits.

But the path to riches didn't materialize. Instead, 2011 emerged as the year when privacy class action lawsuits mostly failed miserably. Courts principally rejected the lawsuits on standing grounds for lack of cognizable harm, but plaintiffs failed on other related grounds, such as a lack of damages negating the prima facie case. There were some exceptions where plaintiffs made a little progress (see, e.g., Claridge v. RockYou, Anderson v. Hannaford, Fraley v. Facebook). I'm sure the privacy plaintiffs' bar will be studying those rare successes to formulate a better battle plan--and to better prepare their cases and find strong named plaintiffs, a recurring omission that hasn't gotten a lot better over the year. However, for now, it's clear that the privacy plaintiffs' bar can't just show up in court and hold out their hands for a payday.

#1: Regulators Broke the Internet. We've always known that regulators could combat bad online activity by working "up the chain," i.e., by making upstream service providers liable for the bad acts or obligated to cut off the activity. However, for the most part, we've shared a tacit understanding that systematically going up the chain was a "nuclear" option--it would fix the specific problem but only at significant collateral cost that, on balance, makes the option unattractive.

I think we'll look back at 2011 as the year that tacit understanding broke down. In 2011, regulators around the world showed a seemingly insatiable demand for working up the chain. Although we in the USA like to think we're different from other repressive regimes, the evidence suggests otherwise. Some examples of "up the chain" activity in 2011:

* Arab Spring. Repressive regimes got local Internet access providers to turn off Internet access in the country.
* Operation in Our Sites. The Immigrations and Customs Enforcement (ICE) agency keeps seizing domain names of suspected foreign rogue websites on an ex parte basis, making errors and breaking the law in the process. Mike Masnick blew open the story on Dajaz1.com, which ICE seized on an ex parte basis, conducted secret proceedings for a year, and then gave back the domain name with no explanation.
* Graduated Response. Copyright owners got Internet access providers to voluntarily (?) agree to restrict, and eventually terminate, their users' accounts.
* Secondary liability against intermediaries. Rightowners keep expanding their intermediary targets, including lawsuits against ad networks and SEOs/web designers. To be fair, some of these lawsuits aren't going very far, and expansive secondary liability theories aren't new in 2011.
* Ex Parte Seizures. Rightsowners are asking for the moon against third party service providers in ex parte proceedings, and courts are giving it to them because the third parties aren't there to represent their own interests. We recap this epidemic in this post.
* SOPA and PIPA. These proposed bills were the finest examples of rightsowners pursuing the nuclear option regardless of the collateral damage. The bills' basic architecture was to attack a wide range of intermediaries for third party actions--domain name registrars, search engines, payment service providers, ad networks. By seeking to deputize the intermediaries, the bills sought to instantiate "up the chain" duties across virtually the entire Internet. Putting aside their other policy deficiencies, I think we should resist all laws predicated on that fundamental assumption of intermediary deputization. See my post on the OPEN bill for why I reject the compromise "follow the money" solution. Sadly, I stand virtually alone in my stance.

Other Interesting Developments.

Some other interesting developments this year:

* Patent Reform. The America Invents Act is the most dramatic patent reform bill in years, and it has many provisions that may affect Internet companies, including the joinder standards, the prior user defense, and the novelty/priority standards. The law doesn't fix the overall problems with bad Internet patents or unmeritorious assertions of those patents, but it nevertheless could make some dramatic changes in what Internet companies do.

* Google and Antitrust. Google has become the incumbent in search, and all of its rivals--especially the companies Google is disintermediating--are desperately seeking to knock it off its perch. I believe Google and antitrust was the #1 topic prompting reporter phone calls to me in 2011. We are waiting to see what comes from the FTC investigation into Google's practices, and the list of Google-haters keeps growing daily. At the same time, the anti-Google forces made surprisingly little actual progress in 2011, including suffering a conspicuous (and not even close) loss in the myTriggers case. See my paper on why I am so over the Google antitrust battles.

* DC's Obsession with Busting Silicon Valley Companies. Sometimes, it feels like DC insiders wake up in the morning and wonder, "What Silicon Valley company do I feel like busting today?" Drive down the 101 from San Francisco to San Jose and play the "Spot the FTC/DOJ Bust" bingo game. Some of DC's targets in 2011: Google Buzz, Twitter (finalized in 2011), Facebook, Google pharma ads, Apple and others for no-poaching restrictions, and others. Good times!

* Judges Order Litigants to Hand Over Passwords to Social Networking Sites. This year, several judges ordered litigants to turn over their Facebook passwords to their litigation opponents for discovery purposes. See, e.g., Zimmerman v. Weis (which I added to my Internet Law reader this year). In 10 years, we'll look back at this mini-trend and shake our heads at the judicial cluelessness. Social networking sites contain a mix of public and private information, and letting a litigation opponent root around the account is just as objectionable as making a litigant hand over the keys to his/her house so the opponent can rummage around.

Other Key Court Rulings in 2011

Some other interesting court decisions this year:

* Author's Guild v. Google. The court rejected the Google Book Search settlement agreement for good reasons, but it sent the parties back to square 1. Why the parties haven't been able to broker a legislative compromise is beyond me.

* Barclays v. theflyonthewall. The Second Circuit took a big bite out of the hot news doctrine. Unfortunately, the Second Circuit didn't kill the hot news doctrine outright, but the opinion leaves open very little room for hot news plaintiffs.

* Network Automation v. Advanced System Concepts. The most important keyword advertising ruling to come out in several years. While the ruling itself was a mixed bag for the litigants, the opinion tore down a number of crusty plaintiff-favorable legal doctrines that had cluttered up trademark jurisprudence for years--including virtually mooting the initial interest confusion doctrine and killing the "Internet trinity" bypass to the standard multi-factor likelihood of consumer confusion test. I've noticed that the opinion has already noticeably tilted courts towards more defense-favorable rulings.

* Betty Boop case (Fleischer Studio v. AVELA). For a few months, it looked like the Ninth Circuit had eliminated trademark merchandising rights in characters that were out-of-copyright. Then it changed its mind; but still it liberated Betty Boop to the world.

* PhoneDog v Kravitz. An interesting battle over ownership of a Twitter account.

* Levitt v Yelp/Ascentive v. PissedConsumer. 47 USC 230 still works really, really well as an immunity. In Levitt, Yelp got a 230 dismissal that Yelp had tried to get advertisers to pay to manage consumer reviews. In Ascentive, the court rebuffed a plaintiff's effort to use a trademark infringement claim against a consumer review website to work around 230.

* Habush v Cannon. Buying a person's name as the trigger for keyword advertising doesn't violate their publicity rights.

* UMG v. Shelter Capital. While everyone waits for the Second Circuit's decision in Viacom v. YouTube, the Ninth Circuit stole some of that thunder with a powerful endorsement of the 17 USC 512 safe harbor. Too bad Veoh didn't live long enough to enjoy the win.

* In re Rolando S. Rolando was convicted of felony identity theft for taking a classmate's Facebook page for a joyride. My vote for the most interesting Internet Law case of 2011, and an instant cyberlaw classic. I've already added it to my Internet Law reader, and the students seemed to enjoy discussing the case.

Some of the Most Linked Blog Posts in 2011 (Per Topsy)

* New Advertising & Marketing Law Casebook Available for Review
* Court Orders Plaintiff to Turn Over Facebook and MySpace Passwords in Discovery Dispute -- Zimmerman v. Weis Markets, Inc.
* "App Store" Isn't Generic, But Apple Can't Enforce Its Purported Trademark in the Term--Apple v. Amazon (Apple legal issues are always good link bait)
* Twitpic Modifies Terms and Claims Exclusive Rights to Distribute Photos Uploaded to Twitpic
* Republishing Entire Newspaper Story is Fair Use--Righthaven v. CIO
* Court Rules That Instant Message Conversation Modified the Terms of a Written Contract -- CX Digital v. Smoking Everywhere (the most popular post of the year by far--a modern Contract Law classic)
* Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices--Amaretto Ranch Breedables v. Ozimals

Favorite "Overlooked" Posts

A few posts that maybe got overlooked a little:

* Cyberbullying and Restorative Justice [a Long-Delayed Post on DC v. RR]
* Racy Teen Photos Posted to Facebook Are Constitutionally Protected Speech--TV v. Smith-Green
* Marijuana Activist Can't Change His Name to "NJWeedman.com" -- In re Forchion
* Free-to-Consumers Ad-Supported Website Isn't Illegally Priced--Cammarata v. Bright Imperial
* What Would a Government-Operated Search Engine Look Like in the US?

Lists of Yore

Previous top 10 lists from 2010, 2009, 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

Posted by Eric at 09:45 AM | Copyright , Derivative Liability , Domain Names , Evidence/Discovery , Internet History , Patents , Privacy/Security , Search Engines , Trademark | TrackBack

January 03, 2012

Nov.-Dec. 2011 Quick Links, Part 2 (Extended IP Edition)

By Eric Goldman

Copyright

* Costco v. Omega (E.D. Cal. Nov. 9, 2011). On remand after the disappointing non-result from the Supreme Court in this case, the district court gives Costco a decisive win, holding that Omega engaged in copyright misuse:

Omega concedes that a purpose of the copyrighted Omega Globe Design was to control the importation and sale of its watches containing the design, as the watches could not be copyrighted. Accordingly, Omega misused its copyright of the Omega Globe Design by leveraging its limited monopoly in being able to control the importation of that design to control the importation of its Seamaster watches.

The net effect is that Costco violated copyright law's importation clause but Omega's copyright misuse makes the importation not actionable. This is one of the most significant copyright misuse decisions we've seen. Assuming it goes to the Ninth Circuit again, it will be interesting to see what they do with it. If this latest ruling stands, Omega's legal hack will be decisively shut down; and other manufacturers trying to use copyright to control their channels for non-copyrightable articles will want to reevaluate their approach.

* The Righthaven debacle continues to wind towards its messy but inevitable conclusion. Some of the items from the last couple months that caught my attention:

- Every time Righthaven's lawyers whine about opponents' unfair litigation tactics, I'm dumbstruck by the duplicity.

- Stephens Media dropped its efforts to contest that Democratic Underground made a fair use by republishing a newspaper article excerpt.

- Righthaven v. Wolf: "The Court admonishes Mr. Mangano regarding his lack of civility. The motion for reasonable attorney's fees in the amount of $32,147.50 and costs of $1,000.85 is GRANTED."

- Righthaven LLC v. Newsblaze LLC, 2011 WL 5373785 (D. Nev. Nov. 4, 2011). Yet another dismissal for lack of standing.

- the auction for Righthaven.com is going on right now. Current high bid is $1,900.

* C-70/10, Scarlet Extended SA v. Societe Belge des auteurs, compositeurs et editeurs (SABAM) (ECJ Nov. 24, 2011). Some interesting quotes from an ECJ opinion:
- "EU law precludes the imposition of an injunction by a national court which requires an internet service provider to install a filtering system with a view to preventing the illegal downloading of files"
- "The filtering system would also be liable to infringe the fundamental rights of its (Scarlet's) customers, namely their right to protection of their personal data and their right to receive or impart information"
- “E.U. law precludes an injunction made against an Internet service provider requiring it to install a system for filtering all electronic communications passing via its services, which applies indiscriminately to all its customers, as a preventive measure, exclusively at its expense, and for an unlimited period”

* Brownmark Films LLC v. Comedy Partners, 2011 WL 6002961 (E.D. Wis. Nov. 30, 2011): In awarding a fee shift to defendants, "the Court finds that Brownmark's legal positions were also objectively unreasonable, and thus their position was frivolous. To this Court, there is little that could justify the plaintiff's stated view that the South Park version was not parody....given the transformative nature of the use and the lampooning Brownmark's original received, there is ample reason to believe that South Park's use would have greater spurred the market for the original. In the internet era, with information freely and quickly accessible, viewers interested in South Park's version could turn to the internet to find a copy of the original. And any confusion over which version was the original could be supplied to online viewers through a statement at the video's web page. For all of these reasons, the Court finds that Brownmark was objectively unreasonable in its position that South Park's use was not fair." Wendy Davis' writeup.

* Carolyn Wright, a/k/a PhotoAttorney, who helps photographers enforce their copyrights, got side-swiped in a misguided enforcement action and had her photo site mistakenly taken offline by a DMCA takedown notice (not surprisingly, GoDaddy was in the middle of this).

* UC Berkeley revamps its policies about student note-taking and recordings of classes. It seems a little odd to encourage faculty members to be sending 512(c)(3) takedown notices freely. James Grimmelmann has more criticisms.

* Gibson v. Amazon (C.D. Cal. Sept. 8, 2011). The court rejected a copyright infringement case against Amazon, Urban Dictionary and others. Gibson is appealing to the Ninth Circuit.

* RIAA is in pre-litigation enforcement mode against ReDigi for reselling digital files.

* The Zynga-Vostu litigation settled.

* Ars Technica: Warner Bros: we issued takedowns for files we never saw, didn't own copyright to

* Megaupload brought a 512(f) suit against UMG for wrongfully taking down a promotional video. The complaint. The contract. James Grimmelmann's comments.

* The economics of the record label-online music site deals look very, very bad for the music sites.

* Techdirt: Congressional Research Service Shows Hollywood Is Thriving

* David v. CBS complaint. Tertiary infringement re-redux: Download.com sued again for secondary copyright infringement for distributing LimeWire and BitTorrent clients.

* A Singapore newspaper sued Yahoo News for copyright infringement.

* An analysis of the Trans Pacific Partnership (TPP).

Trademark

* 1-800 Contacts, Inc. v. Lens.com, Inc., 2011 WL 5403368 (D. Utah Nov. 4, 2011). The court denies 1-800 Contacts' motion for post-judgment relief based on newly discovered evidence. This case could be a textbook case of trademark bullying--remember, 1-800 Contacts has spent well over $650k on this case and Lens.com made $20 (not a typo) of profit directly from its keyword ads based on 1-800 Contacts' trademarks. Prior blog post.

* Speaking of trademark bullying, does an "Eat More Kale" t-shirt infringe any IP rights that Chik-fil-A has in "Eat Mor Chikin"? See the 2011 C&D letter, the 2006 C&D letter and the 2006 C&D response. I assume most kale eaters don't overlap with Chik-fil-A consumers. But, Paul Levy explains why there should be a pox on both parties' houses.

* Lovely Skin, Inc. v. Ishtar Skin Care Products, LLC., 2011 WL 6055489 (D. Neb. Dec. 6, 2011). In a trademark lawsuit, the defendant asked for:

REQUEST NO. 32: All documents referring or relating to purchasing of keywords, “Ad Words,” “sponsored links,” or other advertisements for search engines and any efforts to achieve search prominence on search engines, including but not limited to Your purchase, or consideration to purchase, the name “Lively Skin” or the URL www.livelyskin.com.

REQUEST NO. 37: Documents referring or relating to communications with Google to purchase “lively skin” and “livelyskin.com” as keywords or “Adwords.”

The court says (cites omitted):

In support of its motion to compel, Ishtar states that Lovely Skin's production of documents in response to these requests are “deficient for two reasons.” First, the Google information lacks the dates that the keywords were used, which are necessary to establish “(1) whether Lovely Skin's marks had achieved secondary meaning when Ishtar entered the market; and (2) the extent of Lovely Skin's inequitable use of the term “livelyskin” in its keyword advertising campaigns.” Second, Ishtar claims that as a result of its recent Internet searches, Ishtar has learned that “Lovely Skin possesses additional information regarding keyword purchases made by Lovely Skin through other search engines.” The Court finds that the information sought by Ishtar is relevant to its affirmative defenses of the claims made against it by Lovely Skin.

* Partners for Health and Home, L.P. v. Seung Wee Yang, 2011 WL 5387075 (C.D. Cal. Oct. 28, 2011):

Defendants have infringed Plaintiff's Perma–Life trademark by each of the following acts, taken either individually or as a whole:

a. Registering the domain www.perma-life.co.kr and using it to promote their competing Pearl Life cookware;

b. Applying the metatags “perma life” and “permalife” to the website at www.perma-life.co.kr through which they sold their competing Pearl Life cookware;

c. Applying the term “permalife” as visible video tags (indexes) on videos promoting Pearl Life cookware which they posted on the Internet at video sharing websites YouTube (www.youtube.com) and Tag Story (www.tagstory.com), and on the “blog” site Daum (www .daum.net).

d. Purchasing the term “permalife” as an Internet search engine advertising keyword to direct Internet users to their website at www.pearllife.com at which they advertised their Pearl Life cookware.

* Foreword Magazine Inc. v. Overdrive Inc., No. 10-1144 (W.D. Mich. Oct. 31, 2011). Offering to sell a domain name after getting a C&D can't be introduced as evidence of bad faith in the resulting ACPA suit.

* Weather Underground v. Navigation Catalyst (E.D. Mich. Nov. 9, 2011). Typosquatters' liability for ACPA violations must be evaluated on a domain name-by-domain name basis, not based on the defendant's entire portfolio; and ACPA bad faith cannot be established on a "willful blindness" standard.

* iYogi Holding Pvt. Ltd. v. Secure Remote Support, Inc., 2011 WL 6291793 (N.D.Cal. Oct. 25, 2011). A default judgment against a competitor who created fake reviews bashing the plaintiff.

* Fordham sent a trademark demand letter to Texas Wesleyan for using the acronym "CLIP" to describe its IP center, which garnered derision from many other IP professors. The demand letter (currently set to private; I'm trying to fix that).

* Multi-Time Machine v. Amazon complaint. A watch manufacturer sues Amazon for trademark infringement based on Amazon's internal search engine's results.

* Night Owl Games v. Zynga complaint. Another game developer seeks a declaratory judgment against Zynga over the -ville trademark, this time "Dungeonville."

* Harvard spikes a Yale t-shirt making fun of it.

* Rebecca provides three updates on Southern Snow Manufacturing Co. v. Sno Wizard Holdings, Inc. (see my prior blog post on the case): insurer had duty to defend, a baffling battle over false trademark marking, and a further rejection that metatags matter.

Patents/Trade Secrets

* The Trade Secret Litigator: The America Invents Act: What Will the Impact of the New Patent Law's "Prior Commercial Use" Defense Have on Trade Secret Protection?

* Coca-Cola turns the vault for its secret formula into a tourist attraction.

* The producers of the Bachelor/Bachelorette sued Reality Steve for inducing show participants to leak spoilers. Reality Steve’s response.

* Are strict limits on e-discovery coming for patent cases?

* All Things D reports on Abhyanker v. Benchmark Capital, an idea theft lawsuit against a VC fund involving the entrepreneur who also is behind Trademarkia.

Posted by Eric at 01:05 PM | Copyright , Domain Names , Evidence/Discovery , Patents , Trade Secrets , Trademark | TrackBack

October 31, 2011

Notes from HTLI Conference on Defending Against Patent Risk

By Eric Goldman

A couple weeks ago, the High Tech Law Institute and the Berkeley Center for Law & Technology co-sponsored a major conference on the evolving patent ecosystem, called “Defense 2.0: New Strategies for Reducing Patent Risk.” We had this conference in the works long before Google started spending like a drunken sailor to buy up patent portfolios, but Google’s recent acquisition binge provided dramatic evidence that perhaps we needed to discuss the phenomenon.

Companies in the computers/software space—especially the smartphone industry—face an daunting risk of patent lawsuits, which has prompted them to spend a LOT of money on patent portfolio acquisition for the sole purpose of securing their “freedom to operate.” Companies amortize the cost of buying their freedom to operate by baking it into their prices, so we as consumers effectively pay the incremental amount--which flows as a lump sum acquisition price to a small number of patent portfolio owners. If society is getting commensurate incremental benefits from these patent portfolio owners, then the patent system is working just fine; but if we aren't getting that benefit, and instead this tax is incurred because of the costs of litigating patents, then the system is very deeply broken.

This conference was unusual in that it was focused almost entirely on defense-side considerations (the lunch panel was the main exception). Most academic conferences seek “balance” in the form of intellectual diversity; i.e., for every plaintiff expert, there is a defense expert intended to counterbalance the plaintiff perspective. We take balance very seriously at our conferences, but this time we suspended the rule because of the complexity of the defense-side issues and the import of defensive perspectives to the Silicon Valley community. In fact, very few geographic communities could support a defense-focused patent event, but we had a strong showing of about 200 people attending.

Although I was an enthusiastic supporter of this conference, the real “brains” behind it were Robert Barr of BCLT and especially my colleague Colleen Chien, who is doing important and fresh work in this area. See her SSRN page, and follow her at Twitter.

This post provides my notes from the day. As usual, these are not verbatim transcripts, they are my impressions of the speaker’s remarks. Please confirm any statements before relying on them or attributing them to the speakers. We will be posting a video recording from the conference so you can enjoy the event yourself if you missed it.

Robert Barr (UC Berkeley). To talk about Defense 2.0, we need to define Defense 1.0. Defense 1.0: companies file lots of patents either for cross-licensing or mutually assured destruction. Companies built their portfolios with little supplemental buying of patents. Litigation between operating companies remains a big deal, but NPEs/PAEs have emerged as well.

Laura Sydell (NPR).

She’s not opposed to patents, and she doesn’t want to blow the whole system up. Yet, when she would say “patents” around people in the tech world, people would grimace. Many Silicon Valley people don’t seem to like them.

Intellectual Ventures lab is an amazing company. When it said that best inventors may not be best businessmen, this message resonated with her; it parallels her experiences with artists, who may be gifted artistically but not with business acumen. So she asked IV for an example of success story, and they mentioned Chris Crawford. Her response to investigating him “shocked” her.

Crawford’s patent was messy. NPR had 3 patent attorneys review it (not all of that got mentioned in her story). Their response: this patent wasn’t novel. Then, IV sold the patent to Oasis Research (but retained a cut) and sued lots of cloud companies, and all of the defendants seemed to settle because it was cheaper to license than sue.

Laura and her peer went to visit Oasis Research in Marshall, TX and found an empty office. That didn’t jibe with her thoughts about “innovation.” But it was hard to get anyone to talk due to NDAs. Plus, IV is feared in industry. Inventors feel they don’t pay well.

Laura was struck that the Crawford patent wasn’t a unique story. Instead, there appears to be a whole industry built around similarly weak patents.

Since her story aired, issue has exploded. Companies are spending billions of dollars to defend against lawsuits. The patent reform bill didn’t solve any problems.

Q: how did inventors feel about her piece? A: inventors have been mostly positive. Inventors don’t like IV. Most criticisms about the story came from lawyers instead.

Colleen Chien (Santa Clara University)

Patent litigation by the numbers:

* 250,000: patents covering smartphones
* $12.5B: Google’s purchase for Motorola Mobility
* $2.5B/$29B: $29B = Google’s revenue in 2010. Android revenue = $2.5B.
* 10+: different graphic depictions of the smartphone wars
* 19%/28%: distribution of patent lawsuits. Sport of Kings suits (28%) (big co v. big co).
* 15%: new law jobs requiring patent specialists. Is this a good trend?

Consumer perspective

* 3/20+: 3 different iPhone models available on Amazon. 20+ Android devices.
* 500k+/300k: 500k iPhone apps; 300k Android apps
* Free/$60: Google’s desired price of Android = free. Android handset maker estimate of royalties = $60.
* 0%/26%: Apple makes 0% of iPhone components. Samsung supplies 26% of iPhone components.

Investor perspective

* 380+/14+: 380+ NPEs tracked by Patent Freedom. 14+ NPEs are publicly traded.
* 48: Acacia employees. 300+ lawsuits (many more defendants). 1000+ appreciation since 2008. 38% of Acacia's revenues goes back to inventors; 50% go to lawyers.
* 10 universities invest in IV. 18 tech companies invest in IV.

Panel 1: New Challenges in Defensive Portfolio

Lisa McFall (Ovidian)

We’re experiencing a tectonic shift. We had a patent market and it was growing, but the mobile industry has accelerated the issues. Mobile wars + increasing patent liquidity has encouraged companies to revisit their portfolios. Are the portfolios robust enough? If the portfolios are strong, should they sell or enforce?

Purchasing patents is a quicker way to fill portfolio gap than filing new patent applications. Buyers can use brokers, but brokers have limited selection, buyers can’t trust broker’s motivations (they also dealing with NPEs), and the brokered patents are crappy (making them more valuable to NPEs because of litigation ambiguity). Buying directly from sellers: buyers can take advantage of information asymmetry and find highly useful patents, but it can take more effort.

HP, IBM, AT&T have active patent sales programs, but their patents are encumbered with existing licenses and other restrictions. Some Korean/Japanese companies won’t sell at all.

Jeff Draeger (Intel)

Bah humbug. When it comes to patents, the mobile industry is special compared to other industry niches. We’re not seeing the same activity in other industry sectors. Mobile: has big new winners and losers. Wireless patent mania will be waning—the wireless connection isn’t the biggest value-add to the mobile devices, and big players have already made their key purchases.

No rational valuation based on royalties to justify purchase prices. NPEs were at the Nortel auction, but the price got too high. In contrast, operating companies feel huge pain with an injunction against their products.

There are a lot of portfolios on the market. NPEs will be buying at inflated prices and then hitting up operating companies to get paid. But with trends in damages, injunctions and joinder, NPEs won’t be able to recoup their money.

Industry détentes may get destabilized if the companies have a different revenue position or liquidate their patents to NPEs. Companies can’t assume any more than sleeping dogs will lie.

Eugene Kim (Zynga)

Smaller companies need to be strategic about which organizations to join. Patent prices are going up across the board. Valuations were striking about Nortel/Motorola Mobility. There isn’t a magic formula for valuating patents. Over time, finance/accounting people are going to demand information about ROIs. Patent litigation avoidance is difficult to quantify.

Xiang Wang (Orrick China)

Chinese companies are filing more patent lawsuits, but damages are much less than US. Companies will inevitably face Chinese patent lawsuits.

Panel 2

Paul Roeder (HP)

HP is defending 80 patent cases, almost all by NPEs/trolls.

1) Fed Cir is demanding “sound economic damages”—junk arguments don’t work. Defendants should be proactive about computing damages. There’s no separate damages “team” among defense lawyers—everyone should be on the team. Discovery needs to consider damages. Defendants should be attacking damages on summary judgment.

2) Apportionment of damages. Defendants should focus on incremental value added from the patent. To get around this, the plaintiffs are turning to the ITC because damages are irrelevant there. But he thinks most cases in ITC shouldn't have jurisdiction for lack of domestic activity.

3) Prior licenses as market comps must be analogous.

Karen Boyd (Turner Boyd)

Defendants can consider reverse bifurcation. When a small defendant tried to accelerate its damages calculation, the plaintiff instantly dropped the case against that defendant.

Small defendants shouldn’t just rely on the bigger defendants. There’s value to being a leader in the defense group. Incentive for plaintiff to settle with that defendant because the joint defense group might fall apart. But many small defendants can do some coattailing on the smart lawyers who are part of the joint defense group.

Small defendants can challenge personal jurisdiction.

In ND Cal, take a look at Local Rule 3.2. Corporate disclosure rule. It requires disclosure of all parties that have an interest in the litigants. Small defendant can use this rule to its benefit.

Luftman comment: in media industry (as opposed to tech industry), there’s less of a lone wolf mentality in joint defenses. The media companies tend to stick together.

Michael McCoy (Appsterdam)

European software developers are being approached by patent trolls. Some developers are considering avoiding the US market—it’s only 25% of the market for some of them. Patent trolls are like the Mafia—you get a knock on the door, and they get too involved in the target’s business.

Appsterdam’s goal: open source the prior art research.

There has be a change legislatively, such as exclusions against small business defendants, or limits on damages for patentholders who aren’t practicing. Right now, patents are just a tool to build a business around litigation.

Q: do NPEs ever have a gem patent? McCoy’s answer: Probably not.

Roeder comment: get off the issue of patent quality. Fight the battle on other grounds. We need a system that recognizes that if there are 10k patents on data mirroring, none of them are worth squat.

Q: will open sourcing prior art increase risk of willful infringement rulings? A: that’s a risk.

Q: what effect of AIA joinder requirement? Boyd A: it will provide evidence of just how much NPE litigation is taking place. Luftman A: joint defense collaboration is going to be much harder. Defense lawyers are going to have to step up their game. If competitor gets sued, don’t assume you dodged the bullet; you may need to get involved at that point, even before you get sued.

Lisa Buccino (SAP)

If defendant fights, NPEs sense opportunity to get a win. If defendant loses, NPEs can capitalize on the fear of another loss. Finding ways to reduce litigation costs is an effective response to NPEs—“I don’t mind being sued because it won’t cost me a lot.” Ex: sole-source all patent defense to one firm for fixed fee. Then, each NPE’s suit doesn’t have a marginal cost of defense.

Roeder comments: having large docket makes budgeting easier to manage. They study the data that hourly billing creates—study task codes and compare among firms. It becomes a quality measure for firms. Quality isn’t just having a good argument. Luftman: he appreciates when firms demonstrate their project managing skills, including a dedicated case administrator.

Q: defense contingency arrangements? Buccino A: can set up bonuses for achieving dismissals at certain milestones.

Doug Luftman (CBS)

Settlements with NPEs make matters worse for the tech industry. In other industries, defendants focus more on reducing defense costs than taking easy settlements.

Bring reexaminations before you get sued. This means you need to keep track of what’s coming through the system. Problem: too many patents to track. Solutions: outsource to third party vendors.

Another idea: offer a bounty for busting patents, such as by paying for prior art. (Article One).

Lunch Panel

Joff Wild (IAM Magazine): Acacia’s huge stock price rise reflects their decision to stop partnering with operating companies.

Europe has NPEs, such as IPCon. European courts generally are more willing to give permanent injunction than US courts; it’s automatically given when patent owner wins. If this becomes the EU-wide standard, it will give huge leverage to NPEs—they can wipe out the entire European market for their defendants.

In Asia, Asian countries have companies that buy patents that could be asserted against local companies.

Jim Peacock (NociMed): he can’t remember last time when big companies looked like victims. NPEs need better branding to be treated more charitably.

It takes $25M to get to market, and patents are essential to get return on that investment. Emerging companies may decide to partner with an enforcer such as Acacia. This provides a financing source, and it’s a good alternative to a contingency litigation enforcement.

Wild: Micron bitched about NPEs and then sold 20% of their portfolio to NPEs. It’s overly simplistic to say operating companies = good, NPEs = bad. There are too many linkages between the two communities.

Ewing: proposed the term “privateer” = good guy pirates.

Peacock: he’s OK with getting a reasonable royalty instead of an injunction. 25% rule was too high; he never saw royalties like that in the field.

Wild: Europe isn’t an inventor’s paradise. There are plenty of factors why the innovation environment is better in US. China is on a buying binge to purchase patents.

Q: Does the NPE liquidity market encourage inventors to do more research? Tom Ewing: do inventors think they are getting a fair share? Does it encourage the right innovation? Wild: small inventors aren’t driving patent filings; it’s the big companies doing it. Big companies are flooding the PTO with applications, which has actually hurt the patent quality review. Peter Menell: mutually assured destruction got everyone into patent game; but once folks built expensive defense-oriented patent portfolios, they realized that they needed to monetize. Could we jack up the maintenance fees to clean out junk patents?

Ewing: about 30% of world’s active patents are in US = oversupply of patents? European countries may have relative undersupply.

Peacock: biggest concern as entrepreneur is the maintenance fees he faces in Europe.

Market Solutions Panel

Jason Schultz (Berkeley)

He’s developing a scheme for defensive patent licensing. Companies would make a commitment not to sue if licensees make the same commitment back. This would prevent these patents from being sold to trolls. Analogous to open source licensing programs.

Dan Lang (Cisco)

How to get around prisoner’s dilemma? Industry-wide collective responses better than individual responses. So the industry should try to head off bad patents before they hit the market.

Tom Ewing (Avancept)

We use too many military metaphors in patent discourse! Industry groups can file oppositions to all patents that read on the industry.

Kim Cauthorn (Duff & Phelps)

Patent insurance isn’t magic bullet. The patent insurance industry is taking a while to develop due to a lack of data; insurers can’t build full actuarial tables. NPE settlement experience actually helps quantify the risk. Further, patent insurance isn’t a must-have, unlike car insurance. Ironically, D&O insurance is popular even though D&O lawsuits are far rarer than patent litigation.

Q: how does antitrust apply? Schultz: antitrust challenges to open source provide some guidance. The contract is bilateral even if there are benefits for the industry, so no collusion.

Ewing: valuation problem comes from lack of data. If we could get the data, there are plenty of people who can crunch those numbers.

Becky Eisenberg (University of Michigan)

Maybe the costs in the patent system aren’t inherently bad. They force patent owners to make their choices wisely.

Different patent universes:
Notional: everything that could be patented
Nominal: technology that’s actually covered by patents
Effective: patents that are actually asserted/licensed

Due to costs, nominal < notional and effective < nominal.

But costs imposed on non-patent owners. Perhaps nominal > notional because PTO does a bad job and defers to court.

Technology users: incur costs to research/diligence patents and deal with assertions against them.

Plaintiffs can get economies of scale from enforcement. Surprising that NPEs didn’t arise earlier. Pressures to change cost allocations.

Data-Driven Risk Management Panel

Josh Walker (Lex Machina)

Hypothesis: predictive modeling will transform how finance looks at litigation. Based only on knowing the parties, lawyers, venue, etc., Lex Machina could predict the outcome of a case with 64-85% accuracy.

Mike Mazzeo (Northwestern Business School)

Predicting Patent Infringement Awards: 8 largest damages cases were 47-48% of total damages awarded in 340 cases over 13 years. Top 2 most impactful factors (slide went too fast!):
• case decided in Court of Federal Claims
• Awards decided at jury trials

Colleen Chien (Santa Clara University)

Predicting Patent Litigation. Patents in litigation look different than patents that don’t. Factors more prevalent with litigated patents: transfer, setting change, reexam, maintenance, securitization, forward cites. Lesson: there need to be a sorting mechanism between patents that may be litigated or not.

Mallun Yen (RPX)

RPX looks for patents that may be litigated and buys them up before they’ve been asserted. NPE litigation activity is on the rise: 15% from 2005-10. Expected increase 36% in a year. Total defendants—expected to increase 20% in a year.

Mark Lemley (Stanford Law)

AIA started out to curb litigation abuse, but 9 years later, what resulted does very little towards that. Import of Patent Reform for litigators (see his full article):

* Effectively eliminates patent marking suits
* Tax strategy patents: automatically not novel. Bypass: people will argue they merged a tax strategy with a computer, but that can’t be what Congress meant. So perhaps will this take a bite out of business method claims more generally.
* Effectively eliminates best mode requirement. PTO can reject for lack of best mode, but this is highly unlikely to occur.
* Joinder changes. Parties/courts can’t join multiple defendants or consolidate trials unless the parties have common issues of facts, and violation of the same patent isn’t a common issue of fact. This raises the plaintiffs’ costs. But will courts relate cases together? Only if they’re in the same district, but cases are going to scatter on jurisdictional bases. If the cases aren’t related, then plaintiffs are subject to multiple jeopardy (they have to defend their patent in every case or res judicata will kill the patent for good). Interesting strategic choices for defendants: do I want to go first? If I want, I hope the other defendant wins, in which case I get to free ride. But if first trial isn’t with strongest defendant, I might be disadvantaged by going second. Complicates joint defense agreements—lawyers may be arguing the same case in different jurisdictions, and there may be more conflicts between defendants. [Eric's note: big-scale products liability lawyers have been dealing with these who-goes-first tactical issues for decades. Patent litigators are going to have to learn a thing or two from them.]
* Exclusive federal court jurisdiction even for counterclaims. Reverses Holmes v. Vornado. Some cases in state courts (over, say, license or malpractice) can be brought into federal court.
* Prior user rights. Current provision never has been used. Now it’s expanded. Interesting Qs about exhaustion and the implications for company M&A. Mark thinks it will apply in a small set of cases.
* Can change inventorship at any time; errors in inventorship not a ground for invalidity or inequitable conduct
* Supplemental examination to fix any inequitable conduct during prosecution.
* Advice of counsel/inducement. Failure to obtain advice of counsel can’t be used as evidence of willful infringement or inducement. Effective date for patents filed after September 2012, so this won’t be relevant for many years.

Many thanks to all for a terrific conference!

Posted by Eric at 09:23 AM | Patents | TrackBack

October 15, 2011

Q3 2011 Quick Links, Part 5

By Eric Goldman

See the other quick links posts in this series:

* Q3 2011 Quick Links, Part 4
* Q3 2011 Quick Links, Part 3
* Q3 2011 Quick Links, Part 2 (Trademarks/Domain Names Edition)
* Q3 2011 Quick Links, Part 1 (Copyright Edition)

Trade Secrets

* Congressional proposal to add a private cause of action to the federal Economic Espionage Act. David Almeling supports the general idea. My take from an email list:

I don't understand the incremental value of a federal private cause of action beyond the current state laws for the described situations. I also wonder if this is the beginning of the end for federal deference to state regulation of trade secrets. If the amendment get adopted, it would be entirely logical to see the restrictions relaxed over time to make it into a general-purpose private right of action for any trade secret misappropriation. For an analogous regulation, see the significant expansion of the CFAA over the past quarter-century, and especially the growing number of cases involving CFAA violations because former employees continued to access their former employees' hardware (and, presumably, misappropriate trade secrets).

* Mattel's lawsuit against MGA over the Bratz dolls has gone sour for Mattel in a big way. It was hit with another $225M in damages, bringing the amount it owes MGA to $310M. Oops.

* Probation for two individuals in the first lost iPhone prosecution, but no charges against Gizmodo. Yet, somehow, Apple apparently lost yet another "priceless" iPhone prototype at a bar.

Patents

* Bessen et al, The Private and Social Costs of Patent Trolls:

In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives.

* Joe Mullin is blogging again on patent matters, especially NPE issues! From his blog, check out his co-blogger's post on Innovatio, which is sending licensing demands to hundreds of companies who are offering industry-standard wi-fi to consumers.

E-Commerce

* After tossing its CA affiliates aside like rag dolls, Amazon and CA struck a deal on sales taxes that reinstated its CA affiliates (1, 2).

* Businesses using Groupons may be getting lower Yelp reviews.

* Dan Ariely deconstructs online retailers and websites to show how they are using psychological forces to get us to do what they want.

* Earll v. eBay, 5:11-cv-00262-JF (N.D. Cal. Sept. 7, 2011). eBay could be exposed to claims under the Disabled Persons Act and the Unruh Act.

* Foley v. JetBlue Airways (N.D. Cal. Aug. 3, 2011). Federal aviation law preempts California law regarding disability accessibility to airline website.

* Weinstein v. eBay. StubHub wins an anti-scalping case under New York law.

* NYT: Good example of how a properly managed consumer review website can improve marketplaces.

Contracts

* David Stebbins is at it again. He sued Google to enforce his purported $500 billion arbitration win. The magistrate recommended dismissing the case as frivolous. Stebbins sued Microsoft too; see the long interview with him and a link to his video.

* Davis v. Avvo, 8:10-cv-02352-JDW-TBM (M.D. Fla. Sept. 13, 2011). Forum selection clause in Avvo’s user agreement upheld.

* Fusha v. Delta Airlines (D. Md. Aug. 30, 2011). Venue selection clause in check-the-box user agreement upheld.

* TradeComet.com LLC v. Google, Inc., 2011 WL 3100388 (2nd Cir. July 26, 2011): "a district court is not required to enforce a forum selection clause only by transferring a case pursuant to § 1404(a) when that clause specifies that suit may be brought in an alternative federal forum. Rather, in such circumstances, a defendant may seek to enforce a forum selection clause under Rule 12(b)."

A separate summary order upheld the applicability of Google's forum selection clause against TradeComet. The court says Google's clause doesn't overreach because "Google unquestionably holds a ‘special interest’ in making sure that it is not subject to suit in numerous different fora for claims arising from its agreements with over a million advertisers."

* Marso v. United Parcel Service, Inc., No. 09 CVS 2582 (N.C. App. Ct. Sept. 20, 2011). UPS required customers to go through a mandatory clickthrough agreement on computers in its store, but...

plaintiff asserts that defendant's employee entered the information into the computer, and that "[n]o one advised [plaintiff], orally or in writing, about any UPS Tariff, waybill, or service guide," or advised him that he could request a copy of the same….plaintiff suggests by his argument that he did not assent to the terms of service identified in the UPS Tariff, which would limit defendant's liability for the fraudulent cashier's check collected by defendant upon delivery of plaintiff's package to Mr. Thompson, and instead asserts that he formed an oral contract with defendant's employee which obligated defendant to be liable to plaintiff for $12,145.00 without limitation. Thus, there appears to be a genuine issue as to whether plaintiff assented to be bound by the limiting terms of the UPS Tariff, and whether defendant presented plaintiff with actual or constructive notice of the terms set forth by the UPS Tariff.

* Truong v. eBay, Inc., 2011 WL 3716999 (Cal. App. Ct. Aug. 24, 2011). This is a busted eBay Motors transaction where eBay warned the winning buyer not to complete the transaction and the seller sued for tortious interference with contract:

eBay raised the immunity provision of the federal Communications Decency Act (47 U.S.C. § 230). As appellant pointed out to the trial court, and as that court ruled, the pertinent provision of that statute makes the law applicable to an action taken by an internet service provider to restrict access to or availability of material that is obscene, harassing, “or otherwise objectionable.” The conduct alleged against eBay was not editing or policing content of items posted on its marketplace, but interfering with a contract. (See 47 U.S.C. § 230(c)(2)(A).) eBay does not urge this ground in its respondent’s brief.

* Added to my RSS feed: The Tech Contracts Blog by David Tollen.

Miscellaneous

* ABA Journal on electronic service of notice.

* James Grimmelmann's Internet Law casebook.

* On TWiL in late August, I discussed privacy and MP3Tunes with Denise Howell, Evan Brown and David Snead. The recording.

* Top 15 most popular "Damn You Auto Correct" postings of all time. Hilarious.

* Good news: I will receive the 2011 "IP Vanguard Award" (in the Academic/Public Policy category) from the California State Bar's IP Section.

Posted by Eric at 07:02 AM | E-Commerce , Licensing/Contracts , Patents , Trade Secrets | TrackBack

September 12, 2011

Patent Conference Announcement, SCU, Oct. 14 (July-Aug. 2011 Quick Links, Part 3)

By Eric Goldman

Over the past few months, we've seen some dramatic--and expensive--evidence that the patent system is out-of-control. Feeling outgunned in the smartphone space by big players with larger patent portfolios, Google has been on the prowl for bulk patent portfolios to supplement its own. First, Google bid for the Nortel patent portfolio but got aced out after a consortium of competitors bid a breathtaking $4.5B for the portfolio. Then, Google bought a patent portfolio for IBM.

But I think the message really hit home when Google sought to buy Motorola Mobility for $12.5B, in which the prize asset is a portfolio of 17k patents. See the merger agreement.

Investors in Motorola Mobility might be cheered, but there's no good news in this acquisition. The Nortel auction showed that a company can be worth more dead than alive because its death unlocks its patent portfolio without putting at risk a company's ongoing revenue stream. Once the patent portfolio is on the open market, potential buyers include NPEs looking to unleash a wealth-draining litigation frenzy (where the NPEs get rich by pulling cash out of companies actually engaged in productive activities) or operating companies buy the portfolios as a way of deterring competitors from initiating a patent armaggedon. In the latter case, the acquirer pays a steep premium to improve its freedom to operate--it has higher costs to do the same level of innovation, and we as end consumers ultimately pay for this. As a a result, the winners from this developing market for bulk patent portfolios are the high-volume patent prosecutors, the deceased company's creditors (and perhaps stockholders), the plaintiff-side patent litigators, the NPE investors, and any brokers in the system. Everyone else--including consumers--is a big loser from these transactions, which demonstrates that the patent system isn't motivating the kind of social welfare improvements it putatively was designed to facilitate.

Meanwhile, a growing number of persuasive voices are expressing skepticism about the state of the patent industry. Laura Sydell of NPR kicked off the trend with "When Patents Attack," a great investigative story on Intellectual Ventures and its potentially detrimental effect on our economy. This was followed up with a number of stories in leading publications like the Wall Street Journal, the New York Times and the Economist, all questioning the patent industry. Some of the articles that caught my attention:

* NYT: A Bull Market in Tech Patents
* Forbes: my colleague Colleen Chien wrote how to "Turn the Tables on Patent Trolls."
* NY Observer: Anatomy of a Patent Troll
* PC World: It's Clear Why Software Patents Need to Disappear
* Reuters: Apple uses courts to buy time to secure iPad's market share

Unfortunately, the patent reform legislation does not help with this situation. The tweaks aren't terrible, but they leave most NPE-related issues untouched.

Until Congress or the courts fix the problems doctrinally, what are operating companies supposed to do to prevent being undeservedly subverted by third party patents? Get into a bidding war with Google or other incumbents to buy up the remaining bulk patent portfolios? Tell their patent prosecutors to get busy with large numbers of new applications? Cross their fingers and hope they don't get noticed by plaintiffs?

In a stroke of propitious timing, for the past several months the High Tech Law Institute, working with the Berkeley Center for Law & Technology, has been cooking up a major conference entitled "Defense 2.0: New Strategies for Reducing Patent Risk." The event will be on October 14 at SCU, and we have a terrific lineup of experts. The conference will explore cutting-edge and cost-effective strategies for companies to improve their freedom to operate--without fear of innovation-destroying patent litigation. Although there will be an opportunity to hear from the other side, this conference is all about patent defense, a topic of vital importance to the Silicon Valley. The registration fees are a bargain (and free for many categories of attendees). I hope you will consider joining us.

Posted by Eric at 09:20 AM | Patents | TrackBack

March 23, 2011

Judge Rader Talk Recap

By Eric Goldman

Last week, we had Chief Judge Rader of the Federal Circuit on campus for a lunchtime talk to a capacity crowd. Judge Rader is always an entertaining speaker, and he is typically more willing to publicly discuss doctrine and to self-evaluate than most judges. The theme of this particular talk was international issues.

Judge Rader always makes it clear that he is speaking with his "academic" hat on rather than his official judge's hat. Further, as usual, these notes are my impressions, not verbatim transcriptions. We will be posting the video shortly so you can watch the talk first-hand.

He started by saying that we have much to learn from the rest of the world. We're leaders in patents but our patent laws aren't the best. He gave two examples: best mode (which he called a trap for the unwary) and inequitable conduct (which has morphed from a fraud prevention rule into a disclosure requirement).

Regarding patent litigation discovery, he said that we've taken meritorious principles and stretched them out of proportion. Discovery is now an excuse to bombard the other side with discovery requests to increase their costs. He said "I believe in a little injustice," by which he meant that he'd be willing to cut off some discovery even if it may result in some erroneous outcomes at the margins. He's working on model rules for discovery limits. This would be a good deal if we can get a more efficient systems. His guiding philosophy: judges need to facilitate, not frustrate, the international marketplace.

He favors our system to the specialized courts in Germany (where different courts hear infringement and validity claims). However, we're moving closer to that model with re-exams. If re-exams become a full-fledged validity evaluation, we will become a two track system.

He noted that we're the only country in the world that involves juries in patent cases. I think he is wary of juries' contributions to the process, even as he acknowledged they are involved in only a small number of cases. He believes that summary judgment is key to our system. He pointed out that one notorious district court doesn't work because they don't use summary judgment enough--they believe in trying cases, inferentially to the system's detriment.

Prof. Chien asked him about the ITC. Judge Rader said it's not surprising when two Taiwanese companies square off in the ITC because we're a unitary global market. Because the ITC is an administrative procedure, not a court, it's OK if they have a different standard for injunctions than the eBay standard.

Judge Rader spoke about Chinese patent issues. His message to China: you need to act like a leader in IP. Chinese judges have circumscribed independence compared to our judges; they are officers of the state, which means they must carry out state policy and put China first.

He thinks it won't be long before Chinese IP laws dictate terms to the world. We'll be listening.

Regarding NPEs, Judge Rader thinks the court system has addressed a lot of issues. WRT damages, it's harder for NPEs to reap windfalls. The courts have also cut back on willfulness. He had sharp words for patent marking cases. He said it's non-productive litigation and isn't facilitating innovation. It's a burden on the system, and the Federal Circuit is raising the bar. However, he also thinks judges shouldn't make judgments based on the litigant's identity.

Judge Rader is still grousy about eBay. He said its a sad misapplication of an effort to deal with the NPE problem. His biggest disappointment is seeing the Supreme Court move from law to politics. eBay was a policy-oriented result and an overreaction to NPEs. His academic concerns: IP is property, but eBay doesn't treat patents like property. Trial judges have always been able to consider the public interest before granting an inunction, such as health/safety issues.

He gave a big shoutout to Peter Lee's Patent Law and the Two Cultures.

Many thanks to Judge Rader for yet another insightful and enjoyable romp through patent law!

UPDATE: Judith Szepesi's coverage of the talk.

Posted by Eric at 10:51 AM | Patents | TrackBack

March 03, 2011

Jan.-Feb. 2011 Quick Links, Part 4

By Eric Goldman

Internet Freedom

* The EFF points out the inconsistency between Hillary Clinton's speech championing Internet freedom abroad when our own US government has gone rogue on its own citizens, including unlawful domain name seizures and an obsessive vendetta against Wikileaks.

* Fast Company: Why Twitter stood up for its users against the "secret" Wikileaks subpoena when other sites didn't.

47 USC 230

* Fleming v. Duncan: Yahoo wins 47 USC 230 motion to dismiss in Georgia state court.

* Neeley v. NameMedia, Inc., 2010 WL 5677069 (W.D. Ark. Dec. 16, 2010). 47 USC 230 preempts "outrage" claim over displaying nude photos in search results. A complementary follow-up ruling: Neeley v. NameMedia, Inc., 2011 WL 336174 (W.D. Ark. Jan 31, 2011).

* Several professors contributed essays to a book critical of 47 USC 230. Paul Levy takes them on.

* Jonathan I. Ezor, Busting Blocks: Revisiting 47 U.S.C. § 230 To Address The Lack Of Effective Legal Recourse For Wrongful Inclusion In Spam Filters, Richmond Journal of Law and Technology (Fall, 2010).

Spam

* Facebook, Inc. v. Fisher, 2011 WL 250395 (N.D. Cal. Jan. 26, 2011). Facebook gets $360M default judgment against spammers.

* Goodmail shutting down.

History

* Antone Johnson on the dot-com hangover of 2000-2002.

* 25 Best Startup Failure Post-Mortems of All Time.

Miscellaneous

* You can watch video from Next Digital Decade event. More on that event: 1, 2, 3. If you haven’t looked yet, you should check out the book.

* Unique Products Solutions v. Hy-Grade Valve (N.D. Ohio Feb. 24, 2011). Patent false marking qui tam process is unconstitutional.

* Shrader v. Biddinger, 2011 WL 678386 (10th Cir.(Okla.) Feb 28, 2011). In this Internet jurisdiction case, the Tenth Circuit adopts ALS Scan v. DSC as its test rather than Zippo.

* FairSearch.org has a new partial rival, Faretransparency.org, the web front for the Open Allies for Airfare Transparency, "a coalition representing all of the stakeholders in the travel booking industry, works to promote price transparency and full access to airline pricing and fee information." It's chaos in the online travel booking industry right now!

* Very useful table: State Cyberstalking, Cyberharassment and Cyberbullying Laws

* Evony sues its user for automated mapping of its site.

* ABA Journal: "For Federal Plaintiffs, Twombly and Iqbal Still Present a Catch-22"

* Direct Marketing Association v. Huber, No. 10-cv-01546-REB-CBS (D. Colo. Jan. 26, 2011). Judge strikes down Colorado's attempt to impose an "Amazon" tax as unconstitutional. My previous reference to the law.

* In the Silicon Valley, being the "Craigslist Congressman" might be considered a compliment. Unfortunately, that term will now be pejorative.

* Segal v. Amazon, 2:11-cv-00227 (S.D. Fla. Feb. 4, 2011). Amazon's participation agreement's venue selection clause upheld.

* Rep. Matheson wants to require age authentication to access online porn. Been there/done that 13 years ago with COPA. Lest you forget, it was unconstitutional.

Funny Stuff

* French second-graders are shown items like an old Fisher Price record player and 3.5 and 5 inch floppies and are totally baffled by them. Funny video.

* Great Dilbert strip riffing on the old joke of how you know if a lawyer is lying.

Posted by Eric at 11:53 AM | Content Regulation , Derivative Liability , Internet History , Patents , Spam | TrackBack

October 18, 2010

First Sale and Exhaustion Doctrines in IP Conference, Nov. 5, SCU

By Eric Goldman

I've mentioned our First Sale and Exhaustion in IP conference before, but now it's less than 3 weeks away. If you were thinking about coming, now is a good time to confirm your spot.

As regular readers know, first sale issues are swirling around us. On the copyright front, we are working through a troika of Ninth Circuit cases in Vernor v. Autodesk (now subject to an en banc hearing request), UMG v. Augusto and Blizzard v. MDY. I've also blogged about some transborder importation cases involving cheap textbooks (e.g., Pearson v. Liu). On the importation topic, the US Supreme Court granted cert in another Ninth Circuit case, Costco v. Omega, and oral arguments are imminent. [UPDATE: I've been informed the oral arguments will be on Nov. 8, just a few days after the conference!] And many folks continue to lament the absence of a first sale doctrine for digital files.

On the trademark front, we've discussed how manufacturers are battling back against unwanted eBay sales (see Mary Kay v. Weber and Beltronics v. Midwest). Simultaneously, manufacturers are embracing minimum resale prices following the Supreme Court opinion in Leegin. We haven't blogged too much on patent exhaustion, but the recent Quanta v. LGE Supreme Court ruling casts a large shadow over both patent exhaustion as well as other types of exhaustion. Interwoven into all of these topics are questions about whether statutory first sale/exhaustion rights are waivable or conditionable by contract.

As you can see, we have a lot to talk about.

I'm particularly excited about this conference because that we won't look at IP exhaustion principles in doctrinal "silos." Instead, we've taken an holistic approach to the topic, so that we can see how the exhaustion principles might be similar and different across the various IPs. We hope this will yield some powerful insights that otherwise would be lost in a silo-by-silo analysis.

Our agenda for the day:

8:15 – 8:45 Registration

8:45 – 9:00 Welcome Remarks

9:00 – 10:20 Justifications for the First Sale/Exhaustion Doctrines
Moderator: Lee Ann Lockridge, Louisiana State University Law Center
Vince Chiappetta, Willamette University College of Law
Anne Layne‐Farrar, LECG
Rahul Telang, Heinz College, Carnegie Mellon University
Molly Shaffer Van Houweling, UC Berkeley School of Law

10:20 – 10:40 Break

10:40 – 12:00 Channel Management Issues
Moderator: Mark P. McKenna, Notre Dame Law School
Dale D. Achabal, Santa Clara University
Mary Huser, Bingham McCutchen
Ariel Katz, University of Toronto
Catherine Sandoval, Santa Clara University School of Law

12:00 – 1:10 Lunch
12:40 Mark A. Lemley, Stanford Law School

1:20 – 2:40 Transborder and Comparative Issues
Moderator: Colleen Chien, Santa Clara University School of Law
Frederick M. Abbott, Florida State University College of Law
John A. Rothchild, Wayne State University Law School
Irene Calboli, Marquette University Law School
Cynthia Ho, Loyola University Chicago School of Law

2:40 – 3:00 Break

3:00 – 4:20 Copyright Issues
Moderator: Brian Carver, UC Berkeley School of Information
Neel Chatterjee, Orrick, Herrington & Sutcliffe LLP
Raymond T. Nimmer, University of Houston Law Center
Tyler T. Ochoa, Santa Clara University School of Law
Jason Schultz, UC Berkeley School of Law

4:20 – 4:30 Closing Remarks – Eric Goldman, Santa Clara University School of Law

4:30 – 5:30 Reception

Please register at the conference page. Hope you can join us on Nov. 5.

Posted by Eric at 09:15 AM | Copyright , E-Commerce , Licensing/Contracts , Patents , Trademark | TrackBack

March 10, 2010

Utah Passes Nation's First (?) Bioprospecting Regulation

By Eric Goldman

The Utah legislature has passed SB 51, the "Utah Bioprospecting Act," which requires a government-issued license (which presumably will include a royalty cut for the state) before engaging in bioprospecting on government lands not owned by the federal government. The law is awaiting the governor's signature. If enacted, I believe this will be the nation's first state law regulating bioprospecting.

What is Bioprospecting?

Bioprospecting is the process of looking for naturally occurring animals or plants that have commercial utility. The issue is quite hot in many developing countries, which are rich in biodiversity but may be underdeveloped in research and commercialization capabilities. As a result, foreign researchers come to the country to investigate the biodiversity, identify a commercially useful native species, and then commercialize that species elsewhere without any clear compensation to the source country. We might debate the fairness of this situation, but I know that some folks have strong feelings that bioprospecting is illegitimate.

One of the main challenges with regulating bioprospecting is simply defining it. Take a look at this law's messy definition:

(1) (a) "Bioprospecting" means the removal from a natural environment for research or commercial use of: (i) a naturally occurring microorganism, plant, or fungus; or (ii) information concerning a naturally occurring microorganism's, plant's, or fungus' physical or genetic properties.

(b) "Bioprospecting" does not include: (a) horticultural cultivation, except for horticultural genetic engineering conducted in a manner otherwise constituting bioprospecting; (b) an agricultural enterprise; (c) a forest and range management practice; (d) invasive weed management; (e) Christmas tree and related sales; or (f) incidental removal of a microorganism, plant, or fungus while engaged in bona fide research or commercial enterprises.

What??? What does that mean? I think any law that has to say that it's simultaneously trying not to govern weed removal or Christmas tree farming is overly broad by definition. But look at the drafters' failed efforts to draw non-overlapping Venn diagrams. In (b)(a), how can the exclusion cover activity "conducted in a manner otherwise constituting bioprospecting"? Isn't that circular? And doesn't the (b)(f) exception swallow up the whole?

More generally, look at (1)(a)(ii). The law doesn't just regulate the removal of physical specimens, but it regulates any commercial use of information about a specimen. Huh? Does that mean that I can't publish a picture of Utah plants on state lands without the government issued-license? I wonder to what extent the contemplated licensing requirement to disseminate information about plants runs into Constitutional and federal preemption issues.

Why Did Utah Enact a Bioprospecting Law?

In the mid-2000s, Hawaii considered enacting a law about bioprospecting. I can understand this, as Hawaii is a globally leading biodiversity hotspot. Plus, there remains continuing local unrest about Hawaii's status as a state and the fate of native Hawaiians.

But Utah? I don't think of Utah either as a biodiversity leader or a self-perceived victim of colonialism or imperialism. Instead, for me, Utah's main leadership role is as the nation's leader in state legislative incompetence. While this particular law is not per se stupid (in contrast with many of Utah's efforts to regulate the Internet), this law makes some of the systematic errors I've seen from Utah laws.

First, as indicated above, the law is poorly drafted and ambiguous. I have no idea what it covers. I have the same reaction to most of Utah's efforts to regulate the Internet.

Second, I don't understand why this law rose to the top of the legislative priority queue. Part of that is because I have no idea who is bioprospecting in Utah. Are there flinty old bearded codgers, riding burros overburdened with pick axes, steel canteens and blankets, muttering to themselves that "there's biogold in them thar hills"? If not, then who's doing it, and how will this regulation affect them? Note that the Utah legislature only meets a couple of months out of the year, so they have limited space to produce laws. Given all of the other obvious legislative needs, why spend time on this law?

Third, like many other Utah laws, the law reflects an unstated assumption that if outsiders are coming into Utah to make money, the Utah government coffers deserve a little taste of the action. This brought to mind Utah's deplorable "don't spam the kids" registry, which really was just a backdoor way for Utah to try to tax out-of-state email senders. That efforts was a financial failure; I expect this law to be a financially poor decision as well.

On that point, I was shocked to see the fiscal note that this law had no appropriations and "this bill likely will not result in direct, measurable costs and/or benefits for individuals, businesses, or local governments." Really? First, if there's no law enforcement, I imagine most folks will ignore the law. Second, the state will undoubtedly incur some costs to promulgate the statute's contemplated regulations and to negotiate individual licenses with registering bioprospectors. Third, the imposition of the licensing scheme constitutes a transaction cost that discourages some of the regulated activity from occurring in the first place. Some might conclude that outcome is ultimately a good thing, but it almost assuredly has economic consequences. I cannot figure out how this bill got such a clean financial report. Given the Utah legislature's sensitivity to costs, I bet a more thoughtful fiscal report would have slowed (and probably scuttled) the bill's passage.

Posted by Eric at 10:50 AM | General , Patents | TrackBack

October 18, 2009

Q3 2009 Quick Links, Part 4

By Eric Goldman

Spam

* Ars Technica: "a disturbing number of e-mail users respond to spam, and not just because they're dumb—some of them did so because they were actually interested in the product or service." I collected some empirical research establishing this point in 2004.

* SpamFighter: Software Creator Admits to Aiding & Abetting Spam

Fraud

* Reuters: A virtual bank rips off depositors in EVE Online.

* Click fraud concerns at Facebook: TechCrunch; Unified ECM v. Facebook complaint (one of at least three pending).

* There can be legitimate circumstances where it makes sense for a vendor to automatically pass a user's credit card number to another vendor, but the practice seems ripe for regulation.

Contracts

* BNA: End of the Notice Paradigm?: FTC's Proposed Sears Settlement Casts Doubt On the Sufficiency of Disclosures in Privacy Policies and User Agreements (BNA Subscription required)

* In August, the NYT interviewed David Vladeck, who suggests that the FTC v. Sears settlement could signal a changing of the guard at the FTC.

* Jonathan Ezor on common drafting mistakes in privacy policies.

* Hines v. Overstock.com, Inc., 2009 U.S. Dist. LEXIS 81204 (E.D.N.Y. Sept. 4, 2009). Browsewrap terms aren’t enforceable “because the website did not prompt her to review the Terms and Conditions and because the link to the Terms and Conditions was not prominently displayed so as to provide reasonable notice of the Terms and conditions.”

* Timothy D. Cedrone, Morals? Who Cares About Morals? An Examination of Morals Clauses in Talent Contracts and What Talent Needs to Know, Seton Hall Journal of Sports & Entertainment Law. I have given my first year contracts students an exercise involving morals clauses that I think worked pretty well (see the links on this page under the "endorsement contract" bullet).

Miscellaneous

* The USPTO has not renewed the peer-to-patent program.

* ABA Journal: E-Discovery is $4B/yr industry but is experiencing consolidation.

* Paul Ohm's paper on re-identification of putatively anonymous databases. This may be one of the more important privacy law papers in some time, as it indicates that we cannot meaningfully distinguish between personally identifiable and non-personally identifiable information.

Posted by Eric at 02:43 PM | E-Commerce , Licensing/Contracts , Patents , Privacy/Security , Spam , Virtual Worlds | TrackBack

August 19, 2009

"Sources of Uncertainty in Patent Litigation" Conference, SCU, Sept. 25

By Eric Goldman

I'm pleased to announce the upcoming conference, Sources of Uncertainty in Patent Litigation, co-sponsored by the High Tech Law Institute and the Federal Circuit Bar Association. The conference will be September 25, 1:00-6:15, on the SCU campus. This timing should allow you to get a half-day of work done while still enjoying the conference.

As you can see, the speaker list is first rate. Judges Linn and Rader will be joining us from the Federal Circuit, federal district judges Fogel and Whyte are coming (and we hope to add at least one more district court judge) and the other speakers are leaders of the patent bar and academic community. The conference theme (uncertainty in patent litigation) is probably going to reach non-obviousness, claim construction and remedies, but the speakers have a lot of latitude to take the conversation in interesting directions.

We anticipate a full house for this event, so we encourage you to register quickly. Hope to see you there.

Posted by Eric at 02:04 PM | Patents | TrackBack

August 06, 2009

State of the Net West Recap

By Eric Goldman

Yesterday, the High Tech Law Institute and the Advisory Committee to the Congressional Internet Caucus co-sponsored the Third Annual State of the Net West event at Santa Clara University. The featured participants were 3 members of Congress (Boucher, Goodlatte and Lofgren) and the White House CTO Aneesh Chopra, supplemented by 8 distinguished discussants. In a jam-packed morning, we covered a lot of interesting and important ground on broadband, privacy, antitrust, immigration and open government. This blog post recaps some highlights from the discussion.

Boucher on Broadband

Rep. Boucher emphasized the importance of broadband availability to economic activity and expressed concern that the US wasn't keeping up with broadband deployment (he said, "we can do better"). He offered three policy proposals for ways the federal government could help:

* revise the Universal Service Fund to allow dollars to be spent on broadband deployment; and require USF fund recipients 5 years from now to be offering broadband or be cut off from USF
* federally preempt state laws prohibiting municipal broadband offerings (which about 25 states have)
* get the FCC to develop a broadband deployment plan

He expressed disappointment with the guidelines that NTIA and the Department of Agriculture have adopted to give away the $7.2B broadband fund that was part of the stimulus package. It appears he will be encouraging both entities to rethink their guidelines.

My colleague Al Hammond was the broadband discussant. Al made a number of good points, including noting that broadband deployment is both a rural and low-income issue (Boucher appeared to be focusing more on the former) and raising concerns about municipalities not playing fair and the FCC overcounting actual broadband availability.

Boucher on Privacy

Rep. Boucher also gave a preview of the privacy bill he is planning to introduce next month. He started off by saying he likes ad targeting, especially first party targeting (he said he buys items based on customized recommendations). So he wants to encourage "appropriate" ad targeting, not eliminate it. His bill is expected to contain the following elements:

* websites collecting data will be required to post a prominent privacy policy
* users can opt-out of first party targeted ads. This also includes data sharing necessary to enable first party ads
* websites that want to share data with unaffiliated third parties will need opt-in. However, behavioral ad networks can proceed on an opt-out basis if they allow users to see and edit their behavioral profile, except for sensitive information categories that would always be opt-in
* both the FTC and state AGs would have enforcement authority

To the extent that the mandatory privacy policy and opt-out options codifies existing industry practices, this proposal generally seems benign but not worth the effort--the costs of the inevitably poor statutory drafting outweighs any benefit we might get from regulatory codification. Requiring opt-in would likely eliminate third party behavioral ad networks, which (as I've discussed before) is more likely to be a detriment than a win.

I was especially intrigued by the proposal that behavioral networks can flip from opt-in to opt-out by letting users access a user profile. I need to see more details about Boucher's thinking, but doesn't this superficially sound crazy? The most obvious problem is authentication of the user before seeing his or her profile. How would this be done? The networks usually don't know the identity of the specific individuals they are profiling, so they can't authenticate identity. And just tying profile access privileges to a cookie or machine sounds like a recipe for disaster for all shared computers. Plus, a web interface seems to increase the security risks that the bad guys can see profiles they shouldn't be able to see. On first blush, it sounds like this part of Boucher's proposal may need a complete rewrite, with unknown consequences for the entire structure of his proposal.

Mike Hintze of Microsoft was the privacy discussant. He espoused Microsoft's standard line that there should be a comprehensive privacy law.

In the Q&A, Boucher appeared willing to consider concurrent privacy enforcement authority by self-regulatory organizations, so long as they enforced the law's minimum requirements. But any self-regulatory effort wasn't a substitute for other aspects of his bill.

Lofgren on Antitrust

Rep. Lofgren said that if the Bush administration did too little on antitrust enforcement, the Judiciary committee is now concerned that Obama and Varney will do too much. Lofgren is particularly focused on the chilling effects of the mere threat of antitrust scrutiny, not just the actual successful prosecution in court of cases. Thus, an "informal" DOJ expression of interest can deter innovative activity by high tech companies.

She also expressed skepticism that antitrust laws remain effective at protecting technology markets, which are marked by fast innovation and low barriers to entry. (I believe her exact words were "traditional antitrust measures of marketplace behavior might no longer work.") At minimum, any technology-related antitrust enforcement actions should be focused on improving innovation rather than trying to manage current marketplace prices.

Finally, she said that copyright restrictions should be considered in antitrust inquiries. Mike Masnick has more to say on this.

Michael Katz of UC Berkeley was the most colorful respondent. He shared Lofgren's concern that antitrust law may be counterproductively squelching innovation, especially when companies try to capture antitrust enforcers to hassle competitors. He had especially harsh words for the FCC, calling it much less disciplined than the DOJ and observing how the FCC can blackmail companies using its leverage. He also complained that the FCC's review of mergers takes too long, and as an example of their lack of discipline, the FCC will impose merger conditions that have nothing to do with the merger.

Tim Bresnahan of Stanford and my colleague Cathy Sandoval were the other respondents.

At the end of her talk, Lofgren praised the Google Book Search settlement, saying that in some ways it lowers barriers to entry. She also said she was grateful that Google appears to have found a back-door way to liberate orphan works given that she wasn't able to pass an orphan works bill. I'm all in favor of orphan works reform, but a class action settlement seems like a weird way to get there.

Chopra on Open Government

Aneesh Chopra is the new White House CTO, a role that never existed before, which puts Chopra at Obama's elbow on all technology issues. This was Chopra's first Silicon Valley trip since he undertook his new role. His first talk was on Tuesday night at a Churchill Club event; we were his second. Lots of people were very interested in learning more about him. He was the big draw for the press, and we got an unprecedented number of walks-in based in part (we think) on his talk. He was also mobbed before and after his talk--everyone seemed to want a piece of his attention (then again, I'd love to have a chance to kick some stuff around with him one-on-one myself!).

It's easy to see why Chopra sparks such curiosity. My impressions were that he was genuinely affable, smooth without being slick, substantive without being bookish, a big fan of crowdsourcing and an even bigger fan of assessment and measurement of outcomes.

He started off by discussing the importance of technology and how the US's rate of technological performance is lagging against other countries. He then identified three ways to "turn the ship around":

1. invest in innovation building blocks, such as a smart/secure infrastructure, more R&D and improved workforce expertise
2. healthcare reform, especially improvements to the information technology side of healthcare delivery
3. an improved education system, including distance learning and more emphasis on lifelong learning

He then discussed open government issues and gave examples of ways technology can facilitate participatory governance.

Goodlatte and Discussants on Immigration

Rep. Goodlatte laid out the Republican's high tech agenda, which includes:
* skilled workforce, including immigration reform
* patent reform
* trade issues
* taxation, including efforts to define when activity in a state triggers tax obligations
* net neutrality (don't regulate but improve antitrust enforcement)
* privacy (opt-out except for sensitive information)

The panel then drilled down on immigration reform. I was really excited to have this panel because workforce issues are so central to the Silicon Valley's "secret sauce" and yet I couldn't recall a time that the HTLI had sponsored a discussion about them. Obviously immigration issues are age-old and are well-trodden, but I nevertheless found the discussion helpful--with the one caveat that everyone on the panel agreed with everyone else, so there was a lot of preaching to the choir. I learned an interesting factoid that both Reps. Goodlatte and Lofgren were formerly immigration attorneys, so they have some front-line domain expertise in this area.

First discussant was AnnaLee Saxenian of UC Berkeley. She talked about how skilled immigrants have fueled innovation in this country. She gave a number of stats in support of this, including that a majority of Silicon Valley engineers are foreign-born, and a high percentage of technology entrepreneurs and patent applicants are foreign-born individuals. She also noted that foreign-born skilled works create net new jobs and also help build better ties to their home country.

We benefit from the best and the brightest from around the world, who come to the US because of our higher education system and historically have chosen to stay. However, she is concerned about this retention because of bureaucratic barriers. She is also concerned that companies, frustrated by their lack of access to development talent, will offshore their R&D.

Finally, she pointed out that immigration discussions kludge together the issues of skilled and low-skilled workers, even though their issues are very different.

Keith Wolfe of Google reinforced many of AnnaLee's points from Google's specific experiences.

My colleague Deep Gulasekaram was the last discussant. He pointed out that free marketplaces may require free movement of labor, which isn't consistent with our current immigration policy. He raised concerns about state and local anti-immigration policies and the negative consequences of tying foreign workers to specific jobs (by linking their visa to the job).

Rep. Lofgren added a few remarks:
* Obama told her that it's time for comprehensive immigration reform. [This led to a polite back-and-forth between Lofgren, who favors comprehensive reform, and Goodlatte, who would settle for piecemeal immigration reform]
* Immigration reform is not a substitute for educating the US workforce
* We should give permanence to people we want to keep (i.e., not keep them on some treadmill with the possibility of a forced exit, which prevents their long-term life planning)
* We need to address the family of skilled immigrants, not just the immigrants themselves

More Coverage of the Event

* ABC 7 News
* KCBS radio
* Zusha Ellison of the Recorder
* Joyce Cutler of BNA (BNA subscription required)
* Mike Masnick
* Joel West
* Colette Vogele
* Warren's Washington Internet Daily also ran a story (not web-linkable) "Boucher Promises Online Privacy Bill Draft Soon"
* The extensive Twitter discussion at hashtag #sotnw. Twitterers included @ipolicy, @caminick, @persistance, @miss_eli, @techpolicygirl, @cathygellis, @mmasnick, @nextgenweb, @marianmerritt, @larrymagid, @christinela, @mblatkin, @seangarrettnow, @vogelelaw (who didn't always use the hashtag--we will try to publish a standardized hashtag at future events). Whew! Apologies if I missed anyone. I can't recall seeing more Twitterers in an audience--everyone seemed to have their Twitter page up constantly. As usual, I didn't turn on my computer at the conference (I take notes by hand and blog them later), so my comments seem woefully out-of-date already!

We plan to post the event audio soon so you can listen for yourself. I'll announce the audio posting at my Twitter account when it's live.

UPDATE: Audio now available: Download (item 27) or Stream

Posted by Eric at 10:54 AM | Adware/Spyware , Copyright , E-Commerce , General , Internet History , Marketing , Patents , Privacy/Security | TrackBack

July 07, 2009

June 2009 Quick Links, Part 2

By Eric Goldman

State Regulation of the Internet

* iAWFUL, the Internet Advocates Watchlist for Ugly Laws

* Texas HB 2003. Part of the anti-cyber-harassment mania. Very broad statute with lots of room for prosecutorial mischief.

* BNA (BNA subscription required): "State Legislatures Consider Criminal, Civil Restrictions on Ticket Purchasing Software": "At least six state legislative bodies are considering bills this session that would place restrictions on the use of “ticket bots.""

* Because states are embracing the Amazon affiliate tax, the online affiliate industry is shrinking as we speak (1, 2, 3). But in one of his rare good moves, Schwarzenegger has vetoed CA's attempt to impose the Amazon tax.

* Clive Thompson in Wired: "By severing the link between location and geography, the internet turned everything upside down. Now mobile phones are inverting everything again, in the other direction — because your location becomes most important thing about you. So how is the return of geography going to change our lives?" My previous commentary on geolocation and the law.

Blogs/Social Networking Sites

* Yath v. Fairview Clinic, 2009 WL 1751767 (Minn. App. Ct. June 23, 2009). Posting illegitimately obtained health information to a MySpace page qualified as “publicity” for purposes of an invasion of privacy claim. The court says: “Yath's private information was posted on a public MySpace.com webpage for anyone to view. This Internet communication is materially similar in nature to a newspaper publication or a radio broadcast because upon release it is available to the public at large.” As a result, the publication qualified as “publicity” even if the material was posted for less than 48 hours and the plaintiff could only prove that a small number of folks actually saw it. Compare the Moreno v. Hanford Sentinel case, where republication of information the plaintiff voluntarily published on her MySpace page could not support an invasion of privacy claim.

Nevertheless, the defendants were excused because they had not created the MySpace page, even though they had supplied the information republished on the MySpace page.

* Richerson v. Beckon. Ninth Circuit upheld reassignment of teacher-mentor based on negative blog comments. My blog post on the district court opinion.

* Kaufman v. Islamic Soc. of Arlington, -2009 WL 1815641 (Tex. App. Ct. June 25, 2009). An online-only journalist qualified as a "member of the electronic or print media" for purposes of an interlocutory appeal statute.

* After von Brunn committed his hate crime outside the US Holocaust Museum, a bunch of his digital trails went dark as websites newly realized his vitriol was posted there.

* If you're looking for a paper topic, here's one: the use of MySpace, Facebook and other social networking sites in family law disputes, especially over child custody. I'm seeing cases every week where social networking site postings are being introduced to corroborate or contradict testimony about a parent's fitness.

Security

* FTC v. Pricewert. The FTC takes down an allegedly rogue Internet access provider. To the extent that the IAP is engaged in criminal activities, no problem; but it's less clear to me if the FTC can get a civil injunction under its Sec. 5 authority to stop the IAP from serving its putatively illegal customers. Such an action could be preempted by 47 USC 230. The FTC, in its brief, says the IAP fits into a Roommates.com exception, an argument presumably bolstered by their 10th Circuit win in FTC v. Accusearch.

* Johnson v. Microsoft Corp., 2009 WL 1794400 (W.D. Wash. June 23, 2009). This is a putative class action over Microsoft’s use of Windows Genuine Advantage (WGA) to validate copies of Windows XP. In this ruling, Microsoft gets SJ on the claim alleging that the contract prevented Microsoft from doing WGA validation. Especially interesting is the court’s conclusion that IP addresses are not personally identifiable information.

* Microsoft v. Lam. Microsoft brings a lawsuit against alleged click fraudders who caused Microsoft to issue $1.5M in credits to advertisers. The NYT article.

* EFF on the most recent amendments to the Computer Fraud & Abuse Act.

Miscellaneous

* Expedia tagged for $184M in damages for improperly marking up its service fees.

* In re Jamster Mktg. Litig., 2009 U.S. Dist. LEXIS 43592 (S.D. Cal. May 22, 2009). Wireless carriers aren’t liable under RICO and false advertising laws for various deceptive practices by wireless content providers.

* New unmeritorious patent lawsuit trend: lawsuits over patent markings for expired patents.

* NYT: Investing in Lawsuits, for a Share of the Awards

* Oddee: 15 geekiest license plates:

Posted by Eric at 09:18 PM | Content Regulation , Derivative Liability , E-Commerce , Licensing/Contracts , Marketing , Patents , Privacy/Security , Publicity/Privacy Rights , Search Engines | TrackBack

June 09, 2009

May 2009 Quick Links Part 2

By Eric Goldman

Blogs and Boards

* WSJ: Bloggers, Beware: What You Write Can Get You Sued

* j2 Global Communications v. Zilker Ventures, CV 08-07470 SJO (AJWx) (C.D. Cal. April 22, 2009). A consumer review website can putatively qualify for anti-SLAPP protection, but not in this case because the plaintiff established its prima facie case.

* Biggs Cardosa Associates Inc. v. Bradbury, 2009 WL 1508703 (Cal. App. Ct. May 29, 2009). Here's another one for all of you Rip-off Report fans. A former employee lost a jury trial (and was hit with over $100,000 of damages) for breaching a "non-disparagement" clause in his separation agreement by posting negative comments about his former employer and colleagues on a variety of online fora, including numerous posts on the Rip-off Report.

* Houston Chronicle article on a lawsuit against a website operator for a user post saying that a woman has herpes when she, in fact, does have herpes. She is claiming public disclosure of private facts. [Stupid Houston Chronicle expired the article and moved it to its archives, breaking a number of links throughout the web. Here's a short recap of the article.]

* Stengle v. Office of Dispute Resolution, 2009 WL 1138119 (M.D. Pa. April 27, 2009). The contract of an independent contractor government "hearing officer" was non-renewed because she blogged on the topics of her hearings, raising questions about her impartiality. As the court says in dismissing the resulting lawsuit from the hearing officer:

To reiterate, this Court fully recognizes the cherished right of free speech, as well as the commendable goals of the RA. But these cannot wash away the bona fide concerns that arise when a judicial officer elects to disseminate her opinions in cyberspace with little or no restraint. Because of her position, Plaintiff's attempts to qualify her stances as solely her own were entirely ineffectual. With particular jobs come certain precise responsibilities. In Plaintiff's case, one of these included avoiding even the appearance of bias via extra-judicial comments. Plaintiff's deep concerns about the special education issues and the resulting creation of her blog ultimately caused her to face a dilemma that she alone created. The choices she freely made thereafter led to her non-renewal, and as aforestated we do not find any of the Defendants' conduct actionable under the circumstances.

This case reminded me some of Richerson v. Beckon from last year.

* JuicyCampus redux: People's Dirt. Let the angst over anonymous online forums begin anew.

* Doe v. Ciolli, 2009 WL 1204361 (D. Conn. April 30, 2009). In the AutoAdmit lawsuit, the court rejected Matthew Ryan's (aka ":D") motion to dismiss for lack of jurisdiction.

* Facebook v. Power Ventures, Inc., 2009 WL 1299698 (N.D. Cal. May 11, 2009). Largely following the troublesome Ticketmaster v. RMG case, Power Ventures' motion to dismiss Facebook's copyright and DMCA claims was denied. (Other claims survived too). Comments from Jeff Neuburger and Tom O'Toole.

Miscellaneous

* Colleen Chien, Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High-Tech Patents, North Carolina Law Review, Vol. 87, 2009

* Mazur v. eBay Inc., 2009 WL 1203937 (N.D. Cal. May 5, 2009) Class certification denied. My blog post on this case’s more troubling ruling about 47 USC 230.

* Riggs v. MySpace, Inc., 2009 WL 1203365 (W.D. Pa. May 1, 2009). Venue selection clause in MySpace user agreement upheld.

* Salter v. State, 2009 WL 1409484 (Ind. App. Ct. May 20, 2009). Saving pornographic photos of a minor to a CD does not constitute the "creation" of child porn, even though a new "copy" has been created.

* State v. Bell, 2009 WL 1395857 (Ohio App. Ct. May 18, 2009). MySpace chat sessions aren't MySpace "business records" for hearsay purposes.

* Forbes: the Hidden Costs of Privacy. This article has been written, and written again, many times in the last decade; yet the regulatory dynamics have not improved.

Posted by Eric at 10:35 AM | Content Regulation , Copyright , Derivative Liability , Patents , Privacy/Security , Publicity/Privacy Rights | TrackBack

January 12, 2009

Shifting Strategies in Patent Law Conference Announcement

By Eric Goldman

[Eric's note: this is a popular annual event--last year's symposium drew over 200 attendees. This year should also be popular due to the timely topics and impressive speaker's list. Should be a great event. Hope you can make it.]

Santa Clara Computer & High Technology Law Journal presents:

Shifting Strategies in Patent Law: How the ITC, Non-Practicing Entities, and Inequitable Conduct Are Changing the Patent Arena. The glossy brochure.

January 30, 2009, 9:00 am - 5:00 pm
The Tech Museum of Innovation (San Jose, CA)

Come hear Judge Randall R. Rader, of the United States Court of Appeals for the Federal Circuit, keynote this symposium, and many other distinguished speakers.

In need of Ethics and/or General MCLE Credit? Take advantage of the "Early Registration Special" now! Learn more and register for this event.

Posted by Eric at 09:37 AM | Patents | TrackBack

December 11, 2008

Patent Lawsuit Filed Over Google Reader--Priest v. Google

By Eric Goldman

Priest v. Google, 1:2008cv12056 (D. Mass. complaint filed Dec. 11, 2008). The Justia page.

I normally try to stay away from patent lawsuits, and frankly so many are filed against the major search engines that it would be impossible for me to keep up. However, I got such a good laugh out of this complaint that I had to share it with you.

The lawsuit alleges that Google, and in particular Google Reader, infringes two patents, #5,167,011 and #5,829,002. I have no opinion on the merits of the lawsuit. It appears that the lawsuit was filed pro se, and I can't remember the last time I saw a pro se patent lawsuit. Maybe that explains the strangeness of the complaint.

The complaint tells the story of how the plaintiffs approached Google in 2007 about the patents by emailing Google's bizdev email account. The complaint suggests that in March 2008, Google sent a nice "buzz off" email. The complaint then indicates that the plaintiffs were scared to engage Google in further discussions due to the 2007 SanDisk v. STMicroelectronics Federal Circuit ruling, which held that plaintiffs' stronger assertions of its patent rights might create the basis for Google to file a declaratory judgment--something the plaintiffs apparently really, really wanted to avoid. Therefore, the plaintiffs decided to let their complaint do the talking from there.

But now that the complaint has been filed in their home court and it will be difficult for Google to usurp jurisdiction, the plaintiffs want to keep talking with Google. So, in their complaint, they write (para. 15):

Further, as Priest & Morris, in good faith, only wish that the invention be used to its fullest potential, and have a strong wish that precious court and corporate resources be conserved, the plaintiffs prefer reaching this fair settlement through friendly appreciation and negotiation. In any event, we encourage defendant to not view this complaint as 'litigious behavior' and to view it in respective good faith and action.

I'm not exactly sure what planet these plaintiffs are from, but here on Earth, we tend to view the filing of a lawsuit as "litigious behavior." Further, given that the typical cost to defend a patent lawsuit is around $5M, it's a little hard to see how Google will interpret this lawsuit as a friendly gesture.

Posted by Eric at 02:45 PM | Patents , Search Engines | TrackBack

October 28, 2008

Federal Circuit Comes to Santa Clara University Next Week

By Eric Goldman

Next week, a three judge panel of the Federal Circuit Court of Appeals will be visiting Santa Clara University and hearing oral arguments in four cases. You can read the briefs of the cases to be heard. (I've attached a summary of the non-patent cases at the bottom of this post.) We have three open events that we invite you to attend.

Case Previews
November 3, 2008
Time: 12 p.m. to 1 p.m.
Bannan 127

A preview of the cases to be heard on the 4th will be given by Santa Clara Law faculty as well as attorneys from Blakely Sokoloff Taylor & Zafman; McDermott Will & Emery; Orrick, Herrington & Sutcliffe; and Cooley Godward Kronish. Lunch will be served. Admission is free, and everyone is welcome (RSVPs not required).

Oral Arguments
November 4, 2008
Time: 10 a.m. to 12 p.m.

The Federal Circuit Court of Appeals will sit at Santa Clara Law on November 4, 2008. A panel of three judges will hear cases from 10 a.m. to noon in the Law School's moot court room. Seating in the moot court room is by invitation only. The oral arguments will also be simulcast to the de Saisset Museum on campus. Seating at the Museum is free and open to the public; no RSVPs required. If you do not have a seat reserved in the Moot Court Room, please go directly to the de Saisset Museum. Read the briefs of the cases to be heard.

Lunch with the Judges
November 4, 2008
Time: 12 p.m. to 2 p.m.

Sponsored by the High Tech Law Institute and the Silicon Valley Intellectual Property Law Association.

Following oral arguments, lunch with the judges will be held in the Mission Room of the Benson Center on campus. Towards the end of lunch, there will be short remarks from the presiding judge followed by a 30 minute question and answer period. The cost for this lunch is free to HTLI benefactors and $50 for everyone else. Registration is required; we will not be able to accommodate walk-ins. Register here.

I want to mention a fourth event, although the event is full:

The Federal Circuit Visits the Valley – Discourse and Dinner
November 5, 2008
Four Seasons, Palo Alto
Time: 2 p.m. to 9 p.m.

On November 5, 2008, the Stanford Program in Law, Science and Technology, the High Tech Law Institute, the Berkeley Center for Law & Technology and the Federal Circuit Bar Association will host a program titled "The Federal Circuit Visits the Valley - Discourse and Dinner" at the Four Seasons Hotel in East Palo Alto. This event is now full.
______

A short preview of the non-patent cases:

Rancher v. Peake

The Board of Veterans' Appeals denied the appellant's claim to establish an earlier effective date for her 100% rating for her service-connected schizophrenia. The Board also found that she withdrew her claim seeking a total disability rating based upon individual unemployability (TDIU). The case was appealed to the U.S. Court of Appeals for Veterans Appeals, which declined, based upon a lack of jurisdiction, to consider the appellant's earlier effective date argument. The Court also affirmed the board's finding on the withdrawal of the TDIU claim. The decision has now been appealed to the Federal Circuit Court of Appeals on these two issues.

Hooker v. U.S.

This case is appealed from the U.S. Court of Federal Claims. The appellant claims that the U.S. Government is liable for breach of contracts for trapping beavers and hogs at the Department of Energy's Savannah River Site in South Carolina. At trial, the appellant alleged that a contract modification extended the hog contract and that the Government breached the contract by hindering his performance of the contract. He also alleged that work on the beaver contract exposed him to radioactive contamination about which the Government failed to inform him, and that the trial court should reform the beaver contract to reflect what he would have bid had he known of the alleged contamination. Finally, the appellant argued that the Government acted in bad faith by reducing his work orders and attempting to induce him to abandon his contracts. The trial court held that the appellant abandoned the hog contract and did not attempt to perform additional work; that the appellant did not produce any evidence to show he had suffered damages as a result of the Government's alleged failure to inform him of the contamination and, therefore, there would be no remedy available even if his allegations were true; and that the Government did not act in bad faith in its administration of the beaver or hog contracts. This decision has now been appealed to the Federal Circuit.

Hartland v. U.S.

The appellant is a LLC from Virginia. In its complaint, the appellant states that a valid predecessor of the LLC entered into a contract with the U.S. Department of Agriculture for the sale of a hydroelectric power plant in Vermont. The appellant sued for damages under the Tucker Act for breach of contract. At some point, between the date of the contract and the filing of the suit, the appellant sold the company that was party to the contract that the appellant claims the Government breached. The Court of Federal Claims dismissed the complaint holding that the appellant lacked the privity of contract with the Government that was necessary to establish that the court possessed subject matter jurisdiction to entertain the breach of contract claims. This issue is now on appeal to the Federal Circuit.

Posted by Eric at 05:40 PM | Patents | TrackBack

July 01, 2008

June 2008 Quick Links

By Eric Goldman

Trademarks/Domain Names

* Utah Lighthouse Ministry v. Foundation for Apologetic Information and Research, 2008 WL 22043807 (10th Cir. May 29, 2008). CMLP writeup. Nice 10th Circuit win for a gripe site against trademark infringement and cybersquatting. This case, plus the SKI VAIL case, indicate that the 10th circuit is making progress undoing the harm it created in the Australian Gold v. Hatfield case.

* Georgia has a new anti-phishing law (16-9-109.1) that acts as a para-trademark law. See my comments on the analogous California anti-phishing law.

* After initiating a trademark lawsuit against a consumer review site and soundly losing in court, Lifestyle Lift paid $17,500 to settle its own lawsuit and avoid claims for legal fees under Rule 11 and the Lanham Act.

* Marty reports on a German case saying that white-text-on-a-white-background is a trademark use.

* Update on the battle over the trademark registration for "SEO."

* Will TLD proliferation lead to a new open era in domain name administration, or will the resulting anarchy just reinforce that top search engine placement is the really important online real estate? It seems like the currently limited number of TLDs has some benefits from a bounded rationality standpoint, and those benefits will be lost in a cacophony of unknown TLDs.

Patents

* My colleague Colleen Chien has posted "Patently Protectionist? An Empirical Analysis of Patent Cases at the International Trade Commission" (forthcoming William & Mary Law Review). She empirically demonstrates that the ITC mostly involves disputes between two domestic litigants, making it a redundant battleground with federal district court but nevertheless an attractive venue for plaintiffs due to a number of procedural advantages. She makes a number of recommendations to eliminate the litigation gamesmanship offered by having parallel venues. Check it out.

Search Engines

* Udi Manber, chief algorithm keeper for Google, reiterates why it's silly for lawyers and judges to put too much legal emphasis on the relative placement of search engine results, saying "it's definitely the case that if you do the same search on a different cluster, you may get slightly different results at a given time. It's also the case that if you do the same search on different days you may get different results, because some of the results are things we indexed five minutes ago."

(Over)Regulation

* In response to an enforcement effort by the NY AG's office, several Internet access providers have blocked access to newsgroups that are putatively sources of child pornography. See the NYT story and the NY AG press release. In practice, this means wholesale takedowns of newsgroups that may have nothing to do with child porn. For example, Verizon is killing all USENET hierarchies except comp.*, misc.*, news.*, rec.*, sci.*, soc.*, and talk.*. Wired suggests this is the death of online intermediary freedom as conceptualized in 47 USC 230. Of course, 230 never protected intermediaries from criminal exposure for child porn, and this isn't the first time that an access provider has knuckled under to the NY AG's office. See the BuffNet enforcement action from 2001.

* Ohm, Paul. The myth of the superuser: fear, risk, and harm online. 41 UC Davis L. Rev. 1327-1402 (2008). A neat article on how regulators manufacture a fake bogeyman, the unbeatable "superuser," as a justification for expansive regulatory power.

* No evidence that data breach disclosure laws actually help reduce identity theft. Surprised?

* The FTC wants civil enforcement authority for spyware actions. Haven't they heard that the adware battle is already over...and they won?

Contracts

* Mark Radcliffe expresses concern about the ALI's proposed software licensing project on open source licenses.

* Sarah Bird on a messy contract lawsuit involving an SEO contractor.

Anonymity

* Tendler v. www.jewishsurvivors.blogspot.com, 2008 WL 2352497 (Cal. App. Ct. June 10, 2008). A subpoena request to identify a blogger doesn't support an anti-SLAPP cause of action.

* In the AutoAdmit lawsuit, Doe 21's motions to squash the subpoena and proceed anonymously were both denied. David Hoffman provides an update on the case.

Event Tickets

* Chicago has moved against eBay for reselling tickets in violation of its amusement tax law.

* The Ticketmaster v. RMG case ended with a default judgment granting a permanent injunction and $18.2M in damages.

General

* Vanity Fair: How the Web Was Won.

* Paul Levy blogs about a plaintiff's effort to bypass 230 by suing the authors of complaints about the vendor and then joining the consumer complaint site as a necessary party as a cost-increasing tactic.

* BusinessWeek on emerging technological tools to protect workers' attention against unwanted/untimely interruptions.

* Text message-savvy kids educate the North Carolina DMV about the meaning of the term "WTF," which was used on a license plate example on the DMV's website.

* I have one free pass to OMMA Behavioral in San Francisco July 21. First person to send me an email asking for the pass gets it.

Posted by Eric at 12:32 PM | Adware/Spyware , Content Regulation , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Patents , Privacy/Security , Search Engines , Trademark | TrackBack

June 02, 2008

May 2008 Quick Links, Part 1 (Trademarks/Domain Names Edition)

By Eric Goldman

* Syncsort Inc. v. Innovative Routines Intern., Inc., 2008 WL 1925304 (D.N.J. April 30, 2008). Including a third party trademark in a keyword metatag qualified as nominative use. (Along the same lines, see the Designer Skin case that I will blog about later this week).

* Punch Clock, Inc. v. Smart Software Development, 2008 WL 936889 (S.D. Fla. April 7, 2008). In a default judgment, a judge awarded the trademark owner the right to obtain 7 years of corrective advertising (a total of over $1M), calculated by what it would take for the trademark owner to buy the top spot in Google AdWords. Tom O'Toole sorts through this mess.

* A new ruling in the V Secret v. Moseley case. Rebecca puts it in context.

* Matthew Nelson, Comment, Utah's Trademark Protection Act: Over-Reaching Unconstitutional Protectionism or Decisive Clarifying Legislation?, 2007 Utah L. Rev. 1199. A couple of months after the Utah legislature repealed the Utah Trademark Protection Act, a Utah law student says the law is unconstitutional. His conclusion:

The Utah Trademark Protection Act places an undue burden on interstate commerce and the courts should find it unconstitutional under the dormant Commerce Clause using the Pike balancing test. Apart from the constitutional problems, the Act is bad policy for Utah businesses and Utah consumers. Although the unpredictability that currently exists in the courts makes it difficult for Internet advertisers and advertising sellers to mitigate risks and set efficient policy, these risks are far outweighed by costs to consumers and business. The Act sacrifices fair use, comparative advertising, and noncommercial use to gain certainty. These trademark functions are more important than the additional protections afforded mark holders under the law, protections that go too far and encourage anticonsumer policy rather than furthering the competitive environment trademark policy seeks to create.

Uses of keywords to trigger advertising that are unfair, deceptive, and contrary to trademark policy can still be pursued under the current common law. Trademark law is effectively evolving to handle these new challenges. If there should be legislation, it should be at the federal level because this issue so profoundly affects interstate commerce. The refining process that is occurring in the courts will provide Congress, should it choose to act, with valuable insight into how to handle all the competing interests in the rapidly growing area of Internet advertising.

* Tdata Inc. v. Aircraft Technical Publishers, 2008 WL 2169353 (S.D. Ohio May 21, 2008). Initial interest confusion does not substitute for actual confusion when considering if damages are appropriate under the Lanham Act. See my prior post on this case. See also the related Gibson Guitar case.

* I'm not exactly sure what's going on in France, but a French court has asked the European Court of Justice to opine on the legitimacy of keyword advertising.

* Verisign has obtained a patent for its defunct SiteFinder tool. Domain name wildcarding was taking place for years before VeriSign tried it, so I wonder about the prior art to this patent.

* NYT: Can a Dead Brand Live Again? This article discusses the development of a secondary market for well-recognized but defunct brands. Says the market maker: "We're taking consumers' memories and starting entire businesses."

* Todd Davies, A Behavioral Perspective on Technology Evolution and Domain Name Regulation, PAC. MCGEORGE GLOBAL BUS. & DEV. L.J. 21, 1-25 (2008). See my previous blog post about this paper.

Posted by Eric at 10:36 AM | Domain Names , Patents , Search Engines , Trademark | TrackBack

March 02, 2008

Feb. 2008 Quick Links

By Eric Goldman

Advertising

* BusinessWeek: Monetizing social networking sites isn't as easy as everyone had hoped, clickthrough rates are through the floor (0.04%!), and ad proliferation on the sites is driving users away.

* Wilbur, Kenneth C. and Zhu, Yi, "Click Fraud" (January 2, 2008). This paper appears to argue that search engines can increase their profits by failing to disclose the true rate of click fraud on their network.

* In re Miva, Inc. Securities Litigation, 2008 WL 450037 (M.D. Fla. Feb. 15, 2008). This lawsuit alleges that Miva and some associated individuals understated or misreported Miva’s reliance on click fraud, spyware and third party distributors in its public statements and thus inflated the company's stock price. Last year, the court dismissed many of the allegations but let a couple survive. In this ruling, the court dismisses a few more defendants from some statements and lets the rest of the case proceed.

* Going-out-of-business sales are often just another scam. (HT ContractsProf). Note this is completely consistent with economists’ theoretical predictions of final-period behavior of trademark owners.

Google

* Google's stock has lost $70B in market cap in 7 weeks. Oh darn. Clickz offers some theories about why Google's clicks are declining. Could lower rates of click fraud be part of it?

* Hal Varian, Google's Chief Economist, argues that Google's marketplace success is solely due to its "secret sauce" (i.e., the advantage of learning by doing) rather than any defects in the marketplace.

Spam

* Jaynes v. Virginia (Va. Sup. Ct. Feb. 29, 2008). By a 4-3 vote, the Virginia Supreme Court upheld Jeremy Jaynes' 9 year sentence for violating Virginia’s spam law.

* Silverstein v. Experienced Internet.com, 2008 U.S. App. LEXIS 3364 (9th Cir. 2008). Ninth Circuit dismissed a CAN-SPAM lawsuit for lack of jurisdiction when the defendants attest that they didn't send the message and aren't local.

Domain Names

* NSI has been sued for its practice of grabbing pre-registration domain names based on WHOIS searches. The complaint. Good luck defending those practices, NSI!

* Two more breathy articles about the economics of domaining from the New York Times and Network World.

47 USC 230

* Johnson v. Barras, 2007 CA 001600 B (DC Superior Ct Feb. 1, 2008). Court dismisses a lawsuit against a website for republishing a defamatory story per 47 USC 230.

* Yet another doomed lawsuit against MySpace for facilitating communications between an adult male and an underage female that led to sex. Sam Bayard's comments.

Pornography

* NY Lawyer (login required): "Defense Bar Sees Growing Practice in Internet Sex Crimes"

* A federal obscenity prosecution for publishing graphic short stories (without pictures) on the Internet? As Tim Wu says, "astonishing."

* The Utah legislature is considering entering the marketplace again, this time through a certification mark program for Internet access providers who are willing to combat porn. See HB407. Of course, the Utah legislature has had terrific success in the past creating successful new business opportunities that the marketplace has overlooked.

User-Generated Content

* Nick Carr: "What we've seen happen with self-regulating communities, both real and virtual, is that they go through a brief initial period during which their performance improves - a kind of honeymoon period, when people are on their best behavior and rascals are quickly exposed and put to rout - but then, at some point, their performance turns downward. They begin, naturally, to decay." Like, I think, Wikipedia.

* Slate on the top-heavy nature of contributions to Wikipedia and Digg.

* Christian Science Monitor: Teachers Strike Back at Students' Online Pranks.

* Sam Bayard on a motion to quash in the AutoAdmit case.

Reputation

* eBay no longer lets sellers leave negative/neutral feedback for buyers. This putatively stops sellers from retaliating against buyers who leave legitimate complaints, but it also skews the database towards only positive reviews, which ultimately undercuts its credibility.

* In India, where courtships remain very brief by US standards and grooms can be paid dowries by the bride's families, there is an emerging trend for brides to hire "wedding detectives" to ferret out the scoop on grooms and whether their representations are correct.

* Funny article on being a secret shopper for Consumer Reports.

* Dan Solove's book, The Future of Reputation, is now available online for free. Ethan's review of the book.

Patents

* Six years later, eBay finally buys it now: eBay v. MercExchange settles with eBay buying out some of MercExchange's patents and licensing others.

* Mike Masnick: "Psst! Patent Examiners Do Not Scale"

Copyright

* Mike Masnick: “Why We Should All Want Politicians Who Plagiarize.”

* Do Not Resuscitate...My Copyrights (funny).

Miscellaneous

* Citizen Media Law Project has a useful discussion on getting insurance for cyberlaw risks.

* People v. Fernino, 2008 WL 382348 (N.Y. City Crim. Ct. Feb. 13, 2008) (woman violated a no-contact order when sending a MySpace message to the person).

* Mike Masnick: "We Need A Broadband Competition Act, Not A Net Neutrality Act"

* A retrospective on some of the leading dot-coms from the 1990s.

Posted by Eric at 05:32 PM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Marketing , Patents , Privacy/Security , Search Engines , Spam , Trademark | TrackBack

September 06, 2007

August 2007 Quick Links, Part I

By Eric Goldman

Search Engines

* Google extended its ad serving technology to consider a user's past search phrases in addition to their current search term.

* Greg Linden: "Google is teasing too many lions."

* BusinessWeek: Some VCs are cranky that Google is competing with them by actively investing in start-up deals.

* From Answers.com's press release in August: "Answers Corporation (NASDAQ: ANSW) announced today that, due to a search engine algorithmic adjustment by Google, Answers.com has seen a drop in search engine traffic starting last week. As a result, overall traffic is currently down approximately 28% from levels immediately prior to the change...This change only demonstrates the sound business rationale behind our agreement to purchase Dictionary.com, because it underscores a primary motivation for the deal: to secure a steady source of direct traffic and mitigate our current dependence on search engine algorithms."

Intellectual Property

* Question: Any theories why the Copyright Office hasn't yet issued "final" regulations for the DMCA 512 registration of an agent for notice...9 years after the DMCA passed?

* From the EFF: RIAA v. the People: Four Years Later. A terrific overview/recap of the RIAA's campaign against online dissemination of music. I'm planning to assign this report to my Cyberlaw students when we discuss file-sharing.

* New York Mercantile Exchange v. Intercontinental Exchange, No. 05-5585-cv (2d Cir. Aug. 1, 2007). Second Circuit says that mercantile exchange settlement prices are not protectable due to the copyright merger doctrine. It would have been better if the court had said that prices aren’t copyrightable, but perhaps we should take our victories where we can find them. HT Patry.

* Bensbargains.net, LLC v. XPBargains.com, 2007 WL 2385092 (S.D. Cal. August 16, 2007). Plaintiff aggregated various "deals" into a website and claimed a copyright in the aggregation. Defendant took the deals and integrated them into its website. Copyright infringement? The judge sets an arbitrary cutoff: "there is insufficient similarity to survive summary judgment where either the percentage of Plaintiff's deals that were copied or the percentage of Defendants' deals that were derived from Plaintiff's website is less than 70%." Evan has more.

* Lennar Pacific Properties Management, Inc. v. Dauben, Inc., 2007 WL 2340487 (N.D. Tex. August 16, 2007). Trademark owner gets an ex parte TRO against a domainer. More from Evan.

* WSJ: The KSR case has noticeably improved prospects for patent defendants.

* The EFF is challenging UMG's practice of stamping a "promotional use only, not for resale" label on promotional CDs.

Marketing/Advertising

* NYT on car ad-wrapping. See my previous post where I proclaimed ad wrapping as a relic of the dot com boom. It looks like the practice still lives! Open invitation: anyone who would like to pay me $800/mo to wrap my car, please call me! For that amount of cash, I'll drive the ugliest ad imaginable.

* There was a new ruling in NetQuote v. Byrd, which I styled as the “lead fraud” case. Rebecca recaps the action.

* Apparently, in Florida, a lot of senior citizens dining out at restaurants will ask for some lemon wedges and a glass of water, then add a few Sweet-and-Low packets to create their own tableside-brewed lemonade for free instead of ordering a drink off the menu. One restaurant owner got fed up and charged a diner $1.29 for the unadvertised menu item of self-brewed lemonade. Now, the sparks are flying!

* More unfortunately placed ads.

Contracts

* Cohn v. TrueBeginnings LLC, No.B190423 (Cal. Ct. App. July 31, 2007). Another court upholds a mandatory clickthrough even when the actual terms are hyperlinked. Tom O'Toole comments and provides screenshots.

* Ken Adams demonstrates, step-by-step, how he edits a contract.

Lexicon Watch

* New word alert: "bacn" = transactional email from websites you have a relationship with. Personally, I think we need to get off the meat metaphors.

* William Gibson says the prefix "cyber" is passe.

Posted by Eric at 04:27 PM | Copyright , Domain Names , Licensing/Contracts , Marketing , Patents , Search Engines , Trademark | TrackBack

July 31, 2007

July 2007 Quick Links, Part I

By Eric Goldman

Search Engines

* According to this study, up to 40% of search queries are "re-finding queries" (i.e., the searcher is trying to re-find previously viewed information). The implication: "Because people repeat queries so frequently, search engines should assist their users by providing a means of keeping a record of individual users' search histories, perhaps via software installed on the user's own machine." As I've said before, search engines necessarily will need client-side software to see more consumer behavior if they want to improve relevancy for consumers. HT Greg Linden.

* People are spoofing the Googlebot.

* Hal Varian, a first-rate scholar at Berkeley's SIMS, is now Google's chief economist. I don't know how many other Internet companies have economists-on-staff, but I could see this as a growth area.

Intellectual Property

* Prediction: at least one person will go to jail for prereleasing the new Harry Potter book. It's just too conspicuous for the feds to ignore. Indeed, at this point, it seems unavoidable that every launch of an eagerly anticipated copyrighted work will also involve criminal prosecutions for unauthorized prereleasing (see, e.g., this post). Meanwhile, BusinessWeek is marveling at how many websites are now cooperating with copyright owners rather than fighting them.

* Capitol Federal Sav. Bank v. Eastern Bank Corp., 2007 WL 1885134 (D. Kan. June 29, 2007). Kansas TM owner lacks jurisdiction in Kansas over New England bank allegedly committing TM infringement, even though the New England bank bought keyword ads on the trademark (but, those ads were geo-targeted to Massachussetts). Along the way, the court (as usual) cites to Zippo but rejects the "website doing business" prong, instead requiring the plaintiff to show that the website was doing business in the forum jurisdiction.

* Masterson Marketing, Inc. v. KSL Recreation Corp., 2007 WL 1975425 (S.D.Cal. April 13, 2007). Oh man, what a crazy lawsuit. Freelancer takes product shot of hotel and licenses photo to hotel. Hotel then provides photo to third party websites (such as Expedia) as a way of promoting the hotel. The freelancer claims the hotel breached the license and proceeds to sue what seems like every website in the travel industry. This case is now going on 5 YEARS...over a product shot. (Disclosure note: I worked a little on the case when I was affiliated with Epinions, which is one of the defendants. Yes, it's that old). This ruling deals with the hotel's attempt to recreate the product shot with a different photographer. The court grants SJ to the defendants on the copyright infringement of a recreated shot (per ETS-Hokin). The court also makes it clear that the plaintiff isn't going to get any of the plaintiff's profits, which I assume means the plaintiff is going to get bubkus damages (plaintiff isn't eligible for statutory damages).

* From the NY Times: Mr. Skin is a website that provides subscribers with access to pictures and videos of naked actresses taken from movies. Mr. Skin doesn't normally get permission from copyright owners, seemingly making it a prime target of a business-ending copyright lawsuit. It tries to justify the wholesale republication of clips and stills under the guise of fair use because it claims to be a movie review site, but I doubt that many judges would find that argument very persuasive. However, movie studios have realized that promotion via Mr. Skin increases demand for the movies ("sex sells"), even if Mr. Skin is already showing the "money shot" on its site. As a result, instead of getting lots of C&D letters, Mr. Skin gets lots of promotional copies from movie studios.

* Microsoft is trying to patent what Ars Technica describes as the "mother of all adware." Microsoft is also trying to patent a system for tracking people to deliver relevant advertising. People may find these patents a little creepy, but I see them as both inevitable and ultimately a good thing.

* Washington Post: a new website is trying to position the purchase and resale of exclusively branded fashion items (e.g., Birkin purses) as an investment. And to stabilize the investment decisions, the website screens out the knock-offs and certifies authenticity.

* Domaining to become a $4B/year industry?

Posted by Eric at 12:40 PM | Copyright , Domain Names , Internet History , Patents , Search Engines , Trademark | TrackBack

July 17, 2007

Patent Contingency Fee Agreements

By Eric Goldman

Patent litigation is hot, but I rarely see much discussion about the fee agreements used by patent litigants. So I was very interested to hear Stephen Susman (from the well-known Susman Godfrey firm) speak at the May UT Austin Technology Law Conference about fee agreements for patent contingency work--a topic he knows well, as he said he spends 70% of his time on such matters.

Plaintiff-side patent contingency cases pose a number of unique challenges to lawyers. Most obviously, the cases represent a major upfront investment by the law firm. Susman said his baseline is $3M of attorney time to complete a trial, plus $2M of out-of-pocket expenses (mostly) for experts. Further, these investments are subject to significant risk by the rapidly evolving patent jurisprudence; any defense-favorable Supreme Court opinions (such as the AT&T v. Microsoft case) mid-stream can eviscerate a case's economic value.

To reduce these risks, Susman Godfrey does the following:

* the firm invests significant money (he estimated $100,000) diligencing a potential case, including getting validity and infringement opinions. During this diligencing phase, Susman Godfrey enters into a “standstill agreement” to freeze the client from going to a different lawyer. Susman didn’t provide a copy of the standstill agreement, but I would love to see it! An agreement getting clients to temporarily restrict their choice of counsel and forebear their litigation rights should raise particularly interesting and complicated professional responsibility issues. (Sounds like an excellent exam question!)

* the firm only takes on cases that receive a majority vote of all of the firm’s lawyers (with every lawyer, from associate to senior partner, receiving an equal vote). This reminds me a little of the Wisdom of Crowds approach to decision-making.

* the firm joins forces with a patent firm for each case. Susman’s view is that it’s better to have 50% interest in two cases than 100% interest in one.

Given the significant dollar values of a patent judgment, there is a higher-than-average risk of litigation between lawyer and client when it comes time for fee payoffs. Plus, it can be difficult to value patent settlements, which might include cross-licenses, running royalties, equity investments or obligations to purchase future widgets. Thus, when negotiating a patent contingency fee agreement, Susman strongly encourages clients to get their own independent counsel to review the agreement as a way of increasing the agreement’s likely enforceability.

Susman Godfrey’s fee agreement includes a provision allowing the firm to unilaterally terminate a representation if the firm decides the case is a loser. The goal of this provision is to address the moral hazard risk in contingency fee cases where clients feel no economic disincentives to pursue a case to trial even if there’s a low chance of victory, but the firm wants to cut its losses. Susman acknowledged that this clause would be difficult to enforce in court, but he said that the firm included the provision after their ethics professor/expert concluded that the provision wasn’t likely to jeopardize the enforcement of the other provisions even if the judge tossed that provision out.

Susman said that his firm never initiates any settlement/licensing talks with defendants before the firm files a case in a favorable forum. This prevents the defendant from initiating a declaratory judgment action in an unfavorable (to the plaintiff) forum, but it also struck me as crummy that no deal is discussed before the case consumes court resources. This may be another good reason to include venue limitations in any patent reform bill.

Susman said that the firm’s malpractice carrier would prefer that the fee agreement’s dispute resolution provision specify a non-jury trial to preserve the ability to appeal, but the firm has chosen to specify mandatory arbitration to help preserve client confidentiality, a particularly important issue when patents (and trade secrets) may be on the line.

Susman didn’t discuss typical contingency fee percentages, but he did say that typically the percentage increases at various milestones. For example, the percentage bumps up 60 days prior to trial because of the major ramp-up in work starting then. He also said that if the firm advances expenses for the client, the percentage is typically 5% higher to compensate for the extra risk (the expenses may be recouped before the remainder is split). The downside is that if the client doesn’t have any skin in the game, they may be unreasonable about settlements. That’s why he said patent trolls make good clients; they are sophisticated players that evaluate settlement offers rationally (he described them as “professional gamblers, not casual gamblers”).

I haven't seen the Susman Godfrey fee agreement form online in total, but you can see the first couple pages here.

Posted by Eric at 09:49 AM | Licensing/Contracts , Patents | TrackBack

April 09, 2007

March 2007 Quick Links Part 2

By Eric Goldman

Yesterday I posted the Google edition of my list of interesting items from March. Today I post the remainder of items that caught my eye last month.

Trademarks/Brands

* Bosley Medical Institute v. Kremer, 2007 WL 935708 (S.D. Cal. Mar. 22, 2007). On remand from the Ninth Circuit, the district court denies Kremer's motions to dismiss/for SJ. Michael Atkins recaps the ruling and case's history.

* Milbank Tweed Hadley & McCloy LLP v. Milbank Holding Corp. d/b/a Milbank Real Estate Services, No. CV 06-187-RGK (JTLx), (C.D. Cal. Feb. 23, 2007). After passage of the Trademark Dilution Revision Act, the court rejects the existence of "niche fame" as support for a dilution action. I’m a little surprised that this plaintiff would bring this losing argument.

* ICANN votes down a .XXX TLD. Again.

* NYT on the increasing challenges of creating a unique global brand in very crowded namespaces.

* Trademarked Sentences: A tool that helps you generate poetry by mixing trademarked slogans.

Blogs/UGC

* BidZirk v. Smith, No. 06-1487 (4th Cir. March 6, 2007). The Fourth Circuit, in a non-substantive opinion, denied a company's request for an injunction against a griping blogger's use of its trademarks. My initial write-up of the case. With this loss, the plaintiff's ill-advised decision to appeal the case is now even more clearly a complete waste of the plaintiff's money and our judicial resources.

* Chapman v. Merchandise Mart Properties, 2007 WL 922258 (D. Vt. Mar. 23, 2007). Woman tries to get TRO against physical-space trade show based on trademark interests in the term "GreenStyle," which is her blog’s title. The court rejects the request, but interestingly doesn't seem fazed by the argument that she may have a trademark interest generated from her blog name. Blog names can be trademarkable with sufficient use in commerce, a factor the court ignored completely.

* Sifry: "70 million weblogs. About 120,000 new weblogs each day, or...1.4 new blogs every second."

* A nice retrospective on the history of blogging.

* Wikipedia is requiring some credentialing after getting burned by a pseudonymous contributor who falsely claimed he was a professor.

* Ed Felten has some terrific observations about building distributed reputation systems like Digg (and, for that matter, Epinions). Ed is 100% correct that reputation systems need substantial stabilization; they don't just work deus ex machina.

Contracts

* Dorr v. Yahoo, No 3:07-cv-01428-MJJ (N.D. Cal. complaint filed March 7, 2007). Yahoo offered a premium subscription service allowing users to send email without Yahoo's ads attached. Then, allegedly, they changed the service's terms, and some of the paying customers were unilaterally bumped to a tier where Yahoo's ads were again attached to their email. Steve Bryant has more. In general, if people pay to eliminate ads, during that period of time, Yahoo should not be able to unilaterally amend the terms so that the user is paying but still getting ads.

* Ken Adams blogs on Affinity Internet, Inc. v. Consolidated Credit Counseling Services, Inc., 920 So. 2d 1286 (Fla. Dist. Ct. App. 2006), where the court held that a contract clause saying "This contract is subject to all of SkyNetWEB's terms, conditions, user and acceptable use policies located at http://www.skynetweb.com/company/legal/legal.php" was insufficient to incorporate an arbitration clause contained in the referenced document. Ken's suggested fix: "The SkyNetWEB user agreement located at http://www.skynetweb.com/company/legal/legal.php constitutes part of this agreement."

Government Agencies

* The National Do Not Call Registry: Annual Report to Congress for FY 2006 Pursuant to the Do Not Call Implementation Act On Implementation of the National Do Not Call Registry (April 2007): "The Commission believes that the fundamental goal of the National Do Not Call Registry — to provide consumers with a simple, free, and effective means to limit unwanted telemarketing calls — has been realized." My curmudgeonly take on why the do-not-call registry isn’t great policy.

* Implementing the Children's Online Privacy Protection Act: A Federal Trade Commission Report to Congress (February 2007). The FTC remains pretty pleased with itself about COPPA, but it's worried about social networking sites and the continuing lack of age verification technology. I'm not as impressed with COPPA as the FTC is; see here and here. In any case, if you're doing COPPA research, this report helpfully recounts the 12 COPPA enforcement actions to date.

* Hard to believe, but payola busts are still being made. The latest: a $12.5M settlement. See the NYT and WaPo .

* Terrific post by the EFF’s Seth Schoen about a misguided report on P2P file sharing by the USPTO and the issues with empowering users to control their computers. A must-read.

Miscellaneous

* ACLU v. Gonzales, No. 98-559 (E.D. Pa. March 22, 2007). On remand from the Supreme Court, the court once again holds that the 1998 Child Online Protection Act is unconstitutional.

* CRS Report for Congress: An Overview of Recent U.S. Supreme Court Jurisprudence in Patent Law, March 16, 2007, discussing the last 8 Supreme Court patent cases.

* We've all heard about the magic of network effects. But as this Mercury News article explains, when an Internet start-up company's network takes root principally overseas, it can leave the company with a large audience of unmonetizable users.

* Jacob Loshin, Property in the Horizon: The Theory and Practice of Sign and Billboard Regulation, 30 Environs 101 (2006). A thoughtful discussion of the history of billboard regulation and some regulatory considerations.

* Coca-Cola's launch campaign for "Coke Zero" is premised on the idea that the executives of Coca-Cola want to sue the executives of Coke Zero (i.e., other executives within the same company) for "taste infringement" because the taste is so similar. Personally, I find commercials about faux lawsuits HILARIOUS. Ha ha ha. Except...if there isn't currently a cause of action for "taste infringement," with the expansion of IP rights, it may only be a matter of time... This turns the joke about how hard it would be to establish taste infringement on its head. Ironically, the commercial features Coke's actual lawyers. Yet more on this sorry story.

Posted by Eric at 09:14 AM | Content Regulation , Copyright , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Patents , Privacy/Security , Trademark | TrackBack

March 07, 2007

University Report on Tech Transfer and the Public Interest

By Eric Goldman

Twelve academic institutions have released a white paper entitled In the Public Interest: Nine Points to Consider in Licensing University Technology. The report purports to articulate "best" practices by universities in the technology transfer business. The report contains pearls of wisdom such as "it reflects poorly on universities to be involved in 'nuisance suits'" (true, but this statement applies to all plaintiffs, not just universities!) and "universities would better serve the public interest by ensuring appropriate use of their technology by requiring their licensees to operate under a business model that encourages commercialization and does not rely primarily on threats of infringement litigation to generate revenue."

Generally draped in high-minded rhetoric (e.g., "Universities have a social compact with society"), the report reads more like the kind of pronouncements that a cartel would issue to conform the behavior of rogue constituents--complete with example licensing provisions that are designed to become industry standards. Nevertheless, it's a implicit admission from universities that they can do serious violence to social innovation when they engage in regressive and rent-seeking licensing practices. But so long as universities view tech transfer as an important revenue source that's not dependent on capricious legislators or government bureaucrats, what incentives will university tech transfer offices have to fold public interests into their licensing or enforcement equations?

Posted by Eric at 09:43 AM | Licensing/Contracts , Patents | TrackBack

March 01, 2007

February 2007 Quick Links

By Eric Goldman

* The California Highway Patrol (which, for reasons unclear to me, has investigatory power here) has concluded that the Angelides campaign did not break any laws when they reverse-guessed URLs on Schwarzenegger's website and found an unrestricted page with a video of the Gov wondering about Assemblywoman Bonnie Garcia's "hot'' temperament because of her mixture of "black blood'' and "Latino blood'' and referring to Assembly Republicans as a "wild bunch." The CHP did recommend that Schwarzenegger's team tighten up their website security. Silly reminder: if you really want keep information a secret, don't put it on a website without password protection.

UPDATE: Greg Haverkamp points me to this document, which explains that the CHP has enforcement power over Penal Code 502 violations involving state computers. Interesting. In my mind, I see Erik Estrada revving up his PowerBook to bust some baddies...

* Voda v. Cordis Corp., 2007 WL 269431 (Fed. Cir. Feb. 1, 2007). Patent owner can't litigate infringement of foreign patent rights in US court as part of supplemental jurisdiction over a US patent infringement claim. Patry's writeup.

* NYT on how YouTube indirectly motivates teens to deliberately do stupid things just for the opportunity to post them and perhaps get notoriety. I had a first-hand observation of this when I trolled through YouTube looking for a Listerine commercial that I might show in class while teaching a case involving Listerine. A search for the word "Listerine" in YouTube produces video after video of people doing stupid things with Listerine, like eating big stacks of their breath film or snorting the breath spray and then writhing in pain. Watching video after video of people repetitively doing stupid stunts, I felt like shouting to these people: "IF YOU'RE GOING TO DO SOMETHING STUPID ON YOUTUBE, AT LEAST BE ORIGINAL!"

* From Steve Bryant at eWeek: Shannon Stovall sues Yahoo for including her photo in Yahoo's welcome email, claiming Yahoo violated her rights of publicity/privacy to the tune of $10M compensatory damages and $10M punitive damages.

* Digg users may mark content they don't agree with as "spam." The most recent example is Danny Sullivan's post on SEO, which got Dugg and then was eliminated when anti-SEO Digg users flagged it as spam. If a website defers content grading to its users, it has to trust that they are reporting their feedback accurately. If they aren't, the whole user grading process breaks down. And speaking of breakdowns, there is an active secondary market for Digg votes--check out how Annalee Newitz bought front page placement on Digg for about $100.

* The always-colorful Chris Hoofnagle has released a new paper, "The Denialists' Deck of Cards: An Illustrated Taxonomy of Rhetoric Used to Frustrate Consumer Protection Efforts." By his standards, I suspect I've dealt a full house with some of my rhetoric! Now, I wonder if he's going to create a complementary deck for bogus rhetorical tactics used by consumer protection "advocates"?

* From the EFF: "Debbie Foster, a single mom who was improperly sued by the RIAA back in 2004 for file sharing, has won back her attorneys' fees." Capitol Records v. Foster, No. 04-1569-W (W.D. Okla. Feb. 6, 2007). Unfortunately, that hasn't stopped the plaintiff from advancing nonsense arguments in the case, including the specious argument that a computer owner is automatically responsible if third parties use the computer to infringe copyrights. Fred at the EFF rightly debunks this argument.

* Wikipedia article: "Wikipedia is Failing." Your perspective about success or failure may be influenced by the impressive traffic gains that Wikipedia is experiencing--Wikipedia is now one of the top 10 most trafficked websites. Most of that traffic is coming from Google.

* Doe v. Josef Silney & Assoc., No 07-04167CA15 (Fla. Cir. Ct. complaint dated Feb., 13, 2007). Golfer Fuzzy Zoeller sues an alleged vandal of his Wikipedia page for defamation and related torts. Fortunately, he left Wikipedia out of the suit. However, he only knows the IP address of the person who modified the page, and that IP address is registered to the defendant. Is owning the IP address enough to establish liability? Or is this like an RIAA blunderbuss sue-first, ask-questions-later approach? It seems like the lawsuit should have been against a Doe, with a subpoena to find out who actually edited the page using that IP address.

* US v. Twombly, 2007 U.S. Dist. Lexis 12664 (S.D. Cal. Feb. 22, 2007). A spammer challenges some criminal provisions of CAN-SPAM as vague and overbroad, but the judge has no problems reading the statute to facilitate sending spammers to the slammer. Venkat's writeup.

* CDT groks (and mostly bashes) a variety of online kid-protection bills proposed in Congress.

* From the NYT: Nancy Pelosi posted some videos from C-SPAN to her blog. The Republicans immediately attack her for "pirating" the videos. Turns out that those videos were actually recorded by the government, so they are in the public domain. Whoops! The Republicans had to issue a mea culpa retraction. However, Nancy did grab a C-SPAN-owned video elsewhere which she had to take down. If our legislative leaders can't figure out what video they can recycle, how in the world can less-trained lay people do so? Patry has more.

* A bearish view on domain name speculation from CircleID. I share the sentiment that domain names don't matter, so domaining and typosquatting strike me as a short-term arbitrage opportunity that inevitably will be mooted by a variety of forces. Thus, the idea of paying 40 or 60 years worth of revenue for a domain name is laugh-out-loud funny to me.

* The Long Tail notes that some brands, trying to build a more esoteric image, try to hide their ownership by mainstream mass-market brands, a phenomenon he calls "brand dis-synergy." Examples: Dagoba Organic Chocolate, Joseph Schmidt, Cacao Reserve and Scharffen Berger chocolates (all owned by Hershey) and Converse (owned by Nike).

* Veritas busted for manufacturing revenues via round-tripping with AOL (Veritas bought AOL ads and AOL bought Veritas software; each at inflated prices).

* What does "or" mean? According to the 8th Circuit, it can mean "and." Ken Adams is on the case.

* Ricky Hoggard Holman, a 18 year old high schooler in Sudbury, Canada, correctly blogged all 24 of the American Idol finalists. How? Online research, such as researching the MySpace pages of contestants and emailing their MySpace friends. He also talked to some of the booted final 40 contestants, a few of whom broke their punitive-laden confidentiality agreement to dish some dirt. Maybe he wasn't studying, but clearly he's learned a few things about the power of good old-fashioned research. (The article says he's a straight A student, so he clearly can balance many things). Nice job, Ricky!

Posted by Eric at 12:03 PM | Content Regulation , Copyright , Derivative Liability , Domain Names , Licensing/Contracts , Marketing , Patents , Privacy/Security , Publicity/Privacy Rights , Search Engines , Spam , Trademark | TrackBack

December 22, 2006

Top Cyberlaw Developments for 2006 – Part 2

By John Ottaviani

(Eric Goldman is away until the New Year. He left me the keys to the blog. I warned him that this may be like leaving the teenagers the keys to the house when the parents go away for the weekend!)

As Eric pointed out, our “Top Ten Cyberlaw Developments for 2006” list left out several notable developments. Here are a few more that were “near misses” for the list. In no particular order of importance:

· Electronic Voting – There was a lot of buzz about electronic voting and the perceived failures of the various systems. Given the proliferation of machine-human interfaces that we encounter on a daily basis, it is difficult to comprehend why problems continue to plague this industry.

· Apple v. Does – A California state appeals court held that online journalists had the same right to protect the confidentiality of their sources as offline reporters do under California’s reporters’ shield law. This result is not surprising, but it appears to be the first formal confirmation that courts would apply the same rules to traditional and online reporters. In addition, the court ruled that the federal Stored Communications Act does not permit a civil subpoena of stored e-mail from a service provider, only direct subpoenas from the account holders.

· Snow v. DirecTV – In June, the 11th Circuit held that, in order to be protected by the Stored Communications Act, an Internet website must be configured in some way as to limit ready access by the general public. An anti-DirecTV activist had created a public bulletin board, with a banner containing purported terms of service forbidding DirecTV representatives from entering the site or using its message board. However, the site was configured such that anyone in the public (including the DirecTV representatives) could enter the site, create a profile and use the message board. The court recognized Congress’s intent not to criminalize or create civil liability for acts of individuals who “intercept” or “access” communications or websites that otherwise readily are accessible by the general public. The court suggested that even a statement in the complaint that a plaintiff screens the registrants before granting access may have been sufficient to infer that the site was not configured to be readily accessible to the general public. However, in the absence of any such statements, the court granted DirecTV’s motion to dismiss for failure to state a claim. As a result, website operators who want to take advantage of the provisions of the Stored Communications Act must take some affirmative actions to be able to demonstrate that the website was not configured to be readily accessible to the general public. Relying on those who are not the website’s intended users to voluntarily excuse themselves will not be sufficient.

· eBay v. MercExchange – In May, the U.S. Supreme Court ruled that, once a patent is found valid and infringed, an injunction does not automatically have to be issued. Trial judges are free to weigh competing factors, including the effect of enforcing a patent on the public interest, as the trial judges do in other injunction proceedings. The case revolved around eBay’s “buy it now” feature, which allows customers to purchase items without participating in an auction. In 2003, a jury found that this feature infringed on two of MercExchange’s patents. The Supreme Court’s decision requires the patent owners show “irreparable injury” resulting from defendant’s infringement in order to receive injunctive relief. While this standard should be relatively straightforward for patent owners who practice their technology, the decision may lessen the ability of patent owners who don’t practice their inventions to obtain an injunction (or threaten to obtain one as a negotiating tool).

If anyone else has any Cyberlaw developments that they feel should be on the “Top Ten” list, please feel free to let us know!

Our list of “Top Cyberspace Intellectual Property Cases” for 2006 will be available in January.

Posted by John Ottaviani at 12:18 PM | E-Commerce , Patents , Privacy/Security | TrackBack

November 29, 2006

Nov. 2006 Quick Links

By Eric Goldman

My monthly roundup of noteworthy tidbits:

* Yesmail, an email outsource vendor, was busted by the FTC under CAN-SPAM for failing to honor opt-out requests because Yesmail's incoming email filters blocked those opt-out requests as spam. This strikes me as a particularly messy technological dilemma--even email outsource vendors need spam filters, but if those filters nab opt-out requests, the FTC isn't showing any sympathy. So it looks like email outsource vendors will need to use less vigilant spam filters or find some way to direct opt-out requests to a non-filtered email server.

* Best Western Int'l Inc. v. Doe, No. 06-1537 (D. Ariz. Oct. 24, 2006): griper defeats trademark infringement and dilution claims due to the lack of "use in commerce in connection with goods or services." (HT: BNA's E-Commerce and Tech Law Blog).

* Simmons v. Florida, SC04-2375 (Fla. Sup. Ct. Nov. 16, 2006). Very troubling ruling from Florida upholding the criminal conviction of a defendant for disseminating harmful to minors material online. First, breaking with an unbroken string of cases dating back to 1996, it upholds the state law prohibiting the dissemination of harmful to minor materials over the Internet from a Constitutional challenge. In the past, these laws uniformly have been struck down under the First Amendment or the Dormant Commerce Clause (or both). Second, the statute applies only to email, but it was used to bust someone communicating via instant message. These types of technology-specific statutes create these odd silos that create too much ambiguity. Declan's writeup.

* McDonald's is seeking a patent on using a "sandwich delivery tool" to deliver filling (like ham) to a "bread component." This could be the greatest thing since sliced bread!

* From Greg Linden's blog: Google surveys its users and they say they want more results per page. So Google tests a search results page with 30 results/page. The result? A 20% drop in traffic! Note that a 10-result page takes 0.4 seconds to load, while a 30-result page takes 0.9 seconds, so the working theory is that an extra 0.5 second latency deterred a lot of searching. This may give a little insight into why Google is fighting so hard on net neutrality. If Google does get relegated to a slow lane, it may lose lots of searches.

* A band called Bones registers a MySpace account at http://www.myspace.com/bones and, over the course of 2 years, accrues 2,100 friends. Fox, the owner of MySpace, decides that it would prefer to have that URL for its TV show Bones, so it boots the band and puts up a page for the TV show. Can Fox do this legally? It all depends on the contract (but I'm skeptical that the contract was this broad). For some background on taking virtual assets, see my prior discussion on the sex.com litigation and account ownership in virtual worlds. In any case, Fox relented and gave the URL back to the band. But this is a good reminder that, if you care about your web presence, don't build up goodwill in a URL controlled by someone else.

* FTC busts Guidance Software for inadequate security. According to Internet News: Guidance's privacy policy said it "takes every precaution to protect our users' information," "your information is protected both online and offline" and it protected data "with the best encryption software in the industry – SSL." Yet, Guidance suffered a security breach that resulted in the leak of 4,000 credit card numbers; and the breach wasn't detected for 3 months. I'm not entirely sure what to make of this--was this enforcement action based solely on overstatements in the privacy policy, or was it based on poor security practices regardless of the privacy policy? My vote is that it's the latter based on the BJ's Wholesale Club precedent.

* A consumer group filed a complaint against Zillow for doing a lousy job of providing valuation estimates. While Zillow's estimates may be poor, this complaint raises some troubling concerns about the liability associated with any web-based price estimate service. Could developments in this matter affect Google's PageRank as a valuation of the worth of web pages?

* Ted Leonsis, vice chair of AOL, didn't like the search results when he vanity searched. So he vowed to improve his Google profile, launching a high volume blog that helped drive preferable results to the top of the list. My advice to Ted: enjoy the favorable placement while it lasts; you're only one Googlebomb away from disappointment.

* We are generally conditioned to think that every searcher gets the same search results for the same search. This model is progressively breaking down due to personalized search and other innovations. A catalog of reasons why search results vary for searchers. I eagerly await the time when courts recognize this fact when dealing with search engine cases!

* A DoubleClick study claims that 30% of consumers admitted that they sometimes click on banner ads, but 61% of consumers said that at least sometimes they made a mental note of the advertisers and followed up with them later. If true, this means that banner ads generate a lot more value than is measured by clicks alone. However, I wonder if this result should be chalked up to the "talk is cheap" category?

* It's like a well-worn joke: if you'll believe that, I've got a bridge to sell you. But no joke: they may be selling the Golden Gate Bridge--well, at least, corporate sponsorships for it. Of course, the bridge is so iconic that a brand owner could get significant goodwill from being associated with it. On the other hand, it's the world's leading suicide destination; not exactly the best corporate tie-in for many brands.

* According to one anti-spam vendor, "9 out of 10 emails now spam." At this rate, pretty soon it will be 11 out of 10 emails.

Posted by Eric at 11:47 AM | Content Regulation , Marketing , Patents , Privacy/Security , Search Engines , Spam , Trademark | Comments (4) | TrackBack

October 20, 2006

Patent Policy in the Supreme Court and Congress--October 27, 2006

By Eric Goldman

The High Tech Law Institute at Santa Clara University School of Law is co-sponsoring, with the Berkeley Center for Law and Technology, a conference on Patent Policy in the Supreme Court and Congress. This event will bring together over two dozen of the leading patent thinkers throughout the country to discuss patent reform in Congress and the patent jurisprudence of the Supreme Court and the Federal Circuit. This is a first-rate group of patent scholars discussing the latest cutting-edge issues, so it should be a can't miss event for anyone interested in patent policy. The details:

Date: October 27, 2006, 8:15-5:30
Location: Santa Clara University School of Law, Bannan 127
Registration Fee: Free, but registration is required

I'm sorry for the late notice of this event. It looked like we were going to have a full house, but we've made a last minute switch in venues that has opened up some new seats. I look forward to seeing you there!

Posted by Eric at 09:30 AM | Patents | TrackBack

October 01, 2006

Sept. 2006 Quick Links

By Eric Goldman

Some stories that caught my eye in September:

* Digg users are gaming the Digg algorithm. Greg Linden's take. Naturally, Digg is fighting back by tweaking its algorithm to reduce the effect of gaming and preserve some editorial integrity to its results. Hmm...this sounds familiar. As I've argued, users inevitably will game algorithms, websites will tweak the algorithms, and the cycle will repeat infinitely. It is the Law of Algorithms. For a user revolt/algorithmic assault that I "enjoyed" first hand, see here.

* Rebecca blogs on "mocketing," the process where brand owners pay people to parody their brands, and its potential implications for trademark law.

* Starbucks emails employees a coupon for a free drink and encourages them to forward the email coupons on to friends and family. A few trillion emails later, Starbucks realizes that it made a horrible mistake and dishonors the coupons. Now, they're staring down a $114M class action lawsuit. See the coupon and more details here. Practice pointer for marketers: NEVER EVER encourage email recipients to forward the emails on to friends and families, especially if some benefit putatively will attach. It's a sure-fire way to become an instant urban legend, and some variation of these emails will still be making the forwarding rounds in the year 2525. Tsan offers some more practice pointers.

* BusinessWeek recaps the social science literature on how eBay sellers can maximize revenues. Recommendations based on the literature: set low starting prices; don't use reserves; use photos; don't flood the market; spell check; use hype; hold longer auctions; watch the auction's ending time; don't overcharge for shipping; and avoid negative feedback.

* About 1 of every 2 searches involves "pogo-sticking" (reviewing a search results page, investigating a search result and back-buttoning to the search results page). Yet more social science demonstrating the junkiness of the initial interest confusion doctrine--consumers have figured out how to investigate search results and back out if they are not relevant.

* In a default judgment, an Illinois judge ordered UK-based Spamhaus, one of the email blocklist maintainers, to pay e360 Insight LLC $11.7M in damages for blocklisting them and to post a note acknowledging that they aren't spammers. However, it remains unclear how e360 can enforce this ruling.

* Google lost a Google News copyright case in Belgium. For a critical view of this case, see Ross Dunn's take. Google's official statement.

* Lengthy NYT article on Marshall, TX, with the second-largest patent docket in the country. Why? Fast trials, plaintiff-favorable results (78% pro-plaintiff instead of a national average of 59%), and Texas-sized damages. More on Marshall as patent litigation capital available here.

* AOL has been sued for its release of search data. Danny's take. Two things: (1) I can't see the ECPA claim at all. A search request is a communication between party A (searcher) and party B (search engine). There's no ECPA violation when either A or B discloses the contents of that communication. However, I think search engines make their life harder when they take the position that they make the factually unsupportable argument that they are just passive conduits between searchers and web publishers (see Field v. Google). (2) the complaint takes the position that AOL is continuing to disseminate the search data because it continues to display search results linking to the data. I think this argument has lost all credibility in the copyright arena; it seems equally bogus here.

* A three year old kid knows how to "buy it now."

* NYT on "orphan brands"/"dormant brands" and efforts to license and revive these brands.

* The US officially joined the Council of Europe (COE) Convention on Cybercrime. It becomes effective Jan. 1, 2007.

* My colleague Tyler Ochoa explains the fallacies of Huntington Beach's trademark claims for the phrase "Surf City USA."

Posted by Eric at 11:07 AM | E-Commerce , Marketing , Patents , Privacy/Security , Search Engines , Spam , Trademark | TrackBack

August 08, 2006

Blackboard Patent Suit Stirs Up Academic and Open Source Hornet's Nests--Blackboard v. Desire2Learn

By John Ottaviani

Blackboard, Inc. v. Desire2Learn Inc., No. 9:06-cv-00155-RHC (complaint filed July 26, 2006)

Although this story does not seem to have hit the mainstream press yet, there has been a firestorm in the academic and open source communities since Blackboard filed a patent infringement lawsuit against one of its competitors, Desire2Learn, in the Eastern District of Texas a couple of weeks ago.

For those who are not familiar with Blackboard, the company is a leading provider of learning management systems for colleges and universities. Blackboard's annual report claims that it has more than 2,200 clients in about 60 countries at the end of 2005. Blackboard's Internet-based systems typically permit instructors to post content and announcements for courses and communicate with students, and allow students to collaborate and communicate with each other and instructors.

On July 26, Blackboard announced that the United States Patent and Trademark Office had issued U.S. Patent No. 6,988,138 for an "Internet-Based Education Support System and Methods." On the same day, Blackboard filed its complaint against Desire2Learn. The complaint simply alleges that Blackboard's patent is valid and that Desire2Learn's products and services infringe the patent. Blackboard has also tossed in a claim that Desire2Learn contributes to and/or induces infringement of Blackboard's patent.

The academic community is outraged at the lawsuit. Most of the venom has been directed at the perceived breadth of the patent, which many feel is so broad as to cover any course-based on-line learning management system, including those in existence since the early 1980's. A number of efforts have already sprung up to identify so-called "prior art" (other learning management systems that were in existence prior to 1999 when Blackboard first filed its patent application), to prove that Blackboard did not invent what it has claimed (see examples here and here).

Blackboard claims simply that it is trying to protect its own innovations, not e-learning or course management systems in general. In a letter to Blackboard's clients, Michael Chasen, BlackBoard's President and CEO, states that "The Blackboard CMS patent covers only specific features and functionality contained in the Blackboard system that were developed by the Blackboard team. We certainly did not invent e-learning or course management systems, and I am personally embarrassed that this is what some people thought Blackboard was claiming."

Desire2 Learn has been circumspect in its response. In an e-mail circulated at its User's Conference in early August, John Baker, Desire2Learn's President and CEO stated "We are disappointed that Blackboard turned to the court system before discussing its claims with us. We intend to defend the action vigorously, but because we just received notice two business days ago, we are unable to comment further at this time."

Certainly, Blackboard must have anticipated the anxiety and resentment that its lawsuit has generated in the academic learning community. What Blackboard may not have anticipated, however, is the very negative reaction that the lawsuit has produced in the open source community. The lawsuit is perceived as threatening open source learning management projects such as Moodle and Sakai. Even if Blackboard does not sue these projects, Blackboard can use the threat of infringement to persuade colleges and universities not to consider these systems as competitive options to Blackboard's systems.

My take
Blackboard's patent is written broadly, but contains 44 claims. We will need to wait for the court to decide how many of those claims are valid, but some of them may very well turn out to be valid. I expect that the valid claims will relate primarily to innovations Blackboard may have brought to existing learning management systems. Blackboard has every right under the patent system to protect its innovations against infringement by its competitors. But Blackboard does not have a right to stifle innovation and competition by trying to enforce invalid patent claims. Whether we ever find out which claims are valid and which are not may depend whether Desire2Learn has sufficient financial resources to defend the litigation. To this end, there appear to be a number of entities that have a stake in helping Desire2Learn defend the lawsuit, and that are willing to provide assistance. Perhaps this will turn into a collaborative defense project in the open source tradition.

More resources:

Blackboard's Patent Page
Desire2Learn's Patent Page
Discussion on Stephen Downes' blog
Moodle discussion board

Posted by John Ottaviani at 08:14 PM | Patents | Comments (1) | TrackBack

April 26, 2006

Employee Blogging Risks

By Eric Goldman

A couple of weeks ago, I spoke at the North Carolina Journal of Law & Technology's symposium called "Attack of the Blog: Legal Horrors in the Workplace." (I definitely did not pick the name!) In the morning, I spoke about the risks that companies face when their employees blog. I see blogging as a subset of Internet communications generally, so I'm not sure these risks are limited to blogging. Nevertheless, the following risks are possible:

Non-Legal Risks

* Employee relations risk. A personal dispute between employees could be taken online, triggering a flame war or exposing the personal dispute to a broad audience within and outside the company.

* Customer relations risk. Employees could make disclosures that undermine customer confidence in the company's products by revealing too much about the company's inner workings or by disparaging the company's products. Employees could also oversell customers by making overstated claims about the products.

* Reputational risk. Employees might make personal disclosures about other employees/stakeholders that degrade the overall public perception of the company.

Legal Risks

* Admissions. Blog posts could be party admissions. Even if not, they could be adverse evidence introduced in litigation.

* Trade Libel. Employees could actionably disparage competitors' products.

* Disclosure of Non-Public Information. There are several ways that employees could convert non-public information into public information in ways that have legal significance.

- If the company is publicly traded, these disclosures may manipulate the stock price or constitute securities fraud
- Employees could undermine the company's position by tipping off competitors about plans in the works. If the employee publishes company trade secrets to the blog, in most cases that information will be irretrievably lost as a trade secret.
- Employees might disclose third party trade secrets, which could lead those third parties to bring a trade secret misappropriation claim.
- Employees might disclose patentable information that jeopardizes the company's ability to obtain a patent using that information. For example, a blog post should start the 1 year clock ticking under 102(b). Similarly, if the foreign patent applications have not yet been filed, the blog post should negate the company's ability to seek foreign patents on the published information. This is a real gotcha that may catch some unsuspecting companies.

Conclusion

Just to be clear, I'm not convinced these risks are all that serious. The emergence of blogs might lower the guard or caution of employees, but all of these risks would exist even without blogs, and most employees will make good choices. Even so, some employees will make poor choices, and thus companies who are concerned about employee blogging might choose to address blogging as part of an overall policy on Internet usage or disclosure of company information. At the same time, employee blogging can be a significant asset to the company, so companies might look at employee blogging as an resource to nurture rather than risky behavior to squelch.

Posted by Eric at 08:05 PM | General , Patents , Trade Secrets

March 28, 2006

Animal-Related Patent Trends

By Eric Goldman

Wired runs an article on Patently Silly, one of the blogs tracking goofy patents. The article notes the implicit contradiction in the trends for patenting pet pampering products and patenting new and more effective ways of producing meat. Basically, inventors are working hard both to make pets lives more cush and make it more profitable to chop up livestock for food. As the article quotes:

"If you're a dog, you get umbrellas and all kinds of good things," notes Wright. "But if you're a cow, you get stuck in an MRI that'll tell you how good your meat is going to taste...."

For more rants about our inconsistent attitudes towards animals and about vegetarianism generally, see my vegetarian category page on my other blog.

Posted by Eric at 02:18 PM | Patents | Comments (1)

February 21, 2006

Top Cyberspace IP Cases of 2005

By John Ottaviani (with help from Eric)

Cyberspace continues to present fascinating and novel intellectual property issues. What follows is our attempt at identifying some of the more significant “Cyberspace Intellectual Property” decisions of 2005. Once again, it was quite a year, with the Supreme Court’s decision in the Grokster case heading the list. (The Grokster case is the only one to make our “Top 10” list in each of 2003, 2004 and 2005!) Cyberspace intellectual property law is maturing, as evidenced by the fact that among our top ten cases are one U.S. Supreme Court and five U.S. Circuit Court of Appeals cases. And we are also seeing the courts struggling with the boundaries of trademark law, as they recognize that not every use of someone else’s trademark in Cyberspace provides a basis for an infringement claim.

Here are our “top ten” cases (thirteen, actually), followed by other cases which we felt are significant enough to mention. This list is not meant to be exhaustive, nor are the cases presented in any particular order of importance.

1. Supreme Court Finds Grokster Liable For Inducing Copyright Infringement “On A Gigantic Scale”

• Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., ___ U.S. ___, 125 S. Ct. 2764, 162 L. Ed. 2d 781 (2005). Leave it to the U.S. Supreme Court to figure out a way to find Grokster liable for inducing copyright infringement “on a gigantic scale” without overturning or affirming the 1984 Sony decision. The Supreme Court’s unanimous holding is pretty succinct: “We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.” The Court also limited the Sony decision to situations where a claim of liability is based solely on distributing a product with alternative infringing and non-infringing uses, with knowledge that some users would follow the unlawful course. The concurring opinions analyze the case in terms of Sony, with Justice Ginsberg concluding that ten percent non-infringing use probably would not be enough to avoid liability, while Justice Breyer concludes that ten percent probably would qualify as substantial non-infringing use.

2. Not Seeing Eye-to-Eye – Use of Trademark in Directory That Triggers Pop-Up Ads Is Not Trademark Infringement

• 1-800 Contacts, Inc. v. WhenU. Com, Inc., 414 F.3d 400 (2d Cir.), cert. denied, 126 S.Ct. 749 (2005). The owner of a website and the mark “1-800 Contacts” sued a competitor and WhenU.com, to enjoin them from delivering to computer users competitive “pop-up” Internet advertisements, in violation of federal and state copyright, trademark, and unfair competition laws. As reported in our list of Selected 2003 Cyberspace Intellectual Property Cases, the District Court held that: (1) 1-800 Contacts failed to establish a likelihood of success on its copyright claims, but (2) 1-800 Contacts established a likelihood of success on its trademark infringement claims.

On appeal, the Second Circuit threw out the trademark claims: “We hold that as a matter of law, WhenU does not “use” 1-800’s trademarks within the meaning of the Lanham Act, 15 U.S.C. §1127, when it: (1) includes 1-800’s website address, which is almost identical to 1-800’s trademark, in an unpublished directory of terms that trigger delivery of WhenU’s contextually relevant advertising to [computer users]; or (2) causes separate, branded pop-up ads to appear on a [computer user’s] computer screen either above, below or along the bottom edge of the 1-800 website window.” This brings the Second Circuit law in line with that of other federal courts that have found that WhenU’s use of the trademarks in a database that is not seen by the computer user is not a “trademark use.” See U-Haul International, Inc. v. WhenU.com, Inc., 279 F. Supp. 2d 723 (E.D. Va. 2003); Wells Fargo & Co., Inc. v. WhenU.com, Inc., 293 F. Supp. 2d 734 (E.D. Mich. 2003), (both of which appeared in our list of Selected 2003 Cyberspace Intellectual Property Cases).

Disclosure Note: In the Second Circuit appeal, Eric filed an amicus curiae brief on behalf of the Electronic Frontier Foundation urging reversal of the district court decision.

3. When Will It All End? – Maintaining An Index of Infringing Works, Without More, is Not Distribution of Infringing Works.

• In re Napster, Inc. Copyright Litigation, 377 F. Supp. 2d 796 (N.D. Cal. 2005). After the “old” Napster was shut down for infringing the record companies’ copyrights, the record companies have continued to pursue the entities that invested in Napster before it ceased operations. The record companies have alleged that, by investing in Napster and assuming control of the operation of the Napster file-sharing network, the investors contributorily and vicariously infringed the record companies’ copyrights.

In order to find the investors liable for contributory or vicarious infringement, the record companies first have to prove that there was an act of direct copyright infringement. The record companies have offered three theories of direct infringement as a basis for their secondary claims against the investors: (1) the Napster users who uploaded and made MP-3 files available on the Napster network engaged in the unauthorized distribution of the record companies’ copyrighted works in violation of Section 106(3) of the Copyright Act; (2) the downloading of MP-3 files by Napster users infringed the record companies exclusive rights to reproduce their copyrighted works under Section 106(1) of the Copyright Act; and (3) that Napster itself violated the record companies exclusive distribution rights under Section 106(3) by indexing MP-3 files that its users posted on the Napster network.

In this decision, Judge Patel shot down the third theory. The record companies relied primarily on the Fourth Circuit’s 1997 decision in Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199 (4th Cir. 1997), pointing to language that a copyrighted work is “distributed” within the meaning of Section 106(3) whenever it is “made available” to the public without authorization of the copyright owner. Judge Patel distinguished Hotaling, because the infringing works in this case never resided on the Napster system, while the library in that case had possession of the infringing copies in addition to listing them in its index. Interestingly, she went on to find that, to the extent that the Hotaling decision suggests that a mere offer to distribute a copyrighted work gives rise to liability under Section 106(3), that view is inconsistent with the text and legislative history of the Copyright Act. As a result, maintaining an index of infringing works, without more, is not “distributing” the infringing works. The case proceeds with further discovery on the “uploading” and “downloading” theories, however, so stay tuned next year for updates.

Editorial Note: John has never liked the Hotaling decision so he hopes Judge Patel’s decision stands.

• In re Napster Copyright Litigation, No. M:00-CY-61369-MHP, slip op. (N.D. Cal. May 11, 2005). Prior to deciding the summary judgment motion, Judge Patel denied the record companies’ leave to file a supplemental memorandum in opposition to Napster’s summary judgment motion, arguing that the recently passed Artists’ Rights and Theft Prevention Act of 2005 (“Art Act”) supported their argument that maintaining the index of downloadable files does infringe the distribution right under §106(3) of the Copyright Act. Judge Patel ruled that the record companies could not file the supplemental brief, because she found that the Art Act did not change anything as to how §106(3) should be interpreted.

4. Incredible Hulk Rescues Paragon City! Use Of Comic Book Character Names By Players For Video Game Characters Is Not Trademark Infringement.

• Marvel Enterprises Inc. v. NCSoft Corp., 74 U.S.P.Q. 2d 1303 (C.D. Cal. 2005). NCSoft creates, markets, distributes and hosts “City of Heroes”, a computer video game that allows players to play online and create characters that are virtually identical in name, appearance and characteristics to the comic book characters owned by Marvel. There are a number of procedural motions dealt with in this opinion, but the interesting discussion is the court’s dismissal of the contributory trademark infringement and vicarious trademark infringement claims. Although game users create character names that are the same as Marvel’s registered trademarks, the court concludes that the game users are not using these names in commerce in connection with any “sale or advertising of goods and services.” Thus, there is no “use in commerce” of the marks, so there is no direct trademark infringement on the part of the game users for which NCSoft could be contributorily or vicariously liable, and these claims were dismissed. Marvel was allowed to proceed on its contributory and vicarious copyright infringement claims theories.

• Marvel Enterprises Inc. v. NCSoft Corp., No. CV 04-9253-RGK (C.D. Cal. Aug. 22, 2005). In a later ruling, NCSoft’s claims that Marvel sent bogus takedown notices under the false DMCA notification provisions of 17 U.S.C. §512(f) survived a motion to dismiss. The court also rejected Marvel’s argument that a “service provider” under Section §512(f) has to be “passive” and “innocent.” Among other things, NCSoft alleged that Marvel employees created the infringing knock off characters that Marvel then demanded be removed from NCSoft’s network.

• The case settled in December 2005. The terms of the settlement have not been publicly reported.

5. Making a Mark – Patent Marking Statute Applies To Websites

A pair of patent cases illustrates how the traditional patent concept of “marking” should be applied in Cyberspace. Under 35 U.S.C. §287(a), one who owns a patent is entitled to recover damages from the time when it actually notifies the infringer of its infringement, or when it begins marking its products with a patent notice containing the number of the patent and otherwise complying with §287(a), whichever is earlier. This “marking statute” does not apply to patent claims that are addressed to a method of doing something (as opposed to a tangible article or apparatus), because ordinarily there is nothing to mark. When a patent contains both method and apparatus claims, the patent owner is required to mark “to the extent that there is a tangible item to mark by which notice of the asserted method claims can be given.” Am. Med. Sys., Inc. v. Med. Eng. Corp., 6 F.3d 1523, 1537 (Fed. Cir. 1993).

• Soverain Software LLC v. Amazon.com, Inc., 383 F. Supp. 2d 904 (E.D. Tex. 2005). In this case, Soverain alleged that Amazon.com infringed three patents owned by Soverain covering a network based sales system that included a buyer computer, a selling computer, a payment computer and virtual shopping cart. All of the patents contained both method and apparatus claims. Amazon moved for partial summary judgment to limit its damages, claiming that Amazon did not have notice of the alleged infringement until the suit was filed because Soverain did not comply with the marking statute. The court rejected Soverain’s argument that a website is an intangible object for which marking is not required. The court took notice of numerous websites that contain patent notices, and found in favor of Amazon on this issue.

• IMX, Inc. v. Lending Tree, LLC, No. Civ. 03-1067-SLR, 2005 WL 3465555 (D. Del. Dec. 15, 2005). IMX alleged patent infringement against Lending Tree for infringement of a patent owned by IMX for a method and system for trading loans in real time and placing loan applications up for bid by a plurality of potential lenders. The patent was implemented through software that was accessed through an Internet website, but the website itself was not part of the patent claims. Information on the website talked about “patented technology,” but one reached the patent number and a copy of the patent only after a number of obscure links. Lending Tree moved for partial summary judgment limiting damages, due to IMX’s failure to comply with the patent marking statute. IMX tried to distinguish Soverain by arguing that the website itself was not the patented invention, and did not practice the patent, but was just a means through which the public and the brokers accessed the patented technology. The court, however, found that the website is “intrinsic to the patented system and constitutes a tangible item to mark by which notice of the asserted method can be given,” and granted Lending Tree’s motion.

6. GripeSites I – Use of Expressive Domain Names That Are Unlikely to Cause Confusion Is Not Trademark Infringement

• Faegre & Benson, LLP v. Purdy, 367 F. Supp. 2d 1238 (D. Minn. 2005). Yet another chapter in the long-running saga between the Minnesota law firm and an anti-abortion activist, who is of the opinion that Faegre & Benson is supporting abortion and is attempting to silence his speech criticizing his alleged support of abortion. Purdy typically posted his opinions on a webpage that mimics Faegre’s webpage, generally with a disclaimer such as “Official Faegre Website Parody” or similar language. The source code of his counterfeit pages also contained metatags, including the trademarked term “Faegre & Benson” and some meta-descriptions taken from Faegre’s webpage. Faegre & Benson obtained a preliminary injunction in January 2004. After Mr. Purdy continued his behavior, Faegre & Benson filed a motion for contempt. After reviewing the situation, the court found: (1) there is no trade dress infringement because of the overall dissimilarity of the webpages and the clear disclaimer; (2) that Purdy has the right to use “expressive domain names that are unlikely to cause confusion” (such as faegre-law-love-democraticjudgemichaeldavis-judgeanmontgomery.com), even if they include the term “Faegre” or “Faegre & Benson,” because this constitutes a statement of Purdy’s opinion rather than a bad faith intent to profit from Faegre’s protected mark; and (3) that Purdy could legitimately use Faegre’s trademarks in the metatags for his webpages in order to refer to Faegre and to describe the content of his website (but not in order to divert Internet users from Faegre’s website).

7. Yes, Virginia, Unauthorized Downloading Of Copyrighted Music Does Constitute Copyright Infringement

• BMG Music v. Gonzalez, 430 F.3d 888 (7th Cir. 2005). Ms. Gonzalez downloaded more than 1,370 copyrighted songs during a few weeks and kept them on her computer until she was caught. She tried to argue that, despite the assumption in Grokster and Aimster that people who download music are primary infringers, her activities were protected by the “fair use” defense under the terms of 17 U.S.C. §107. With respect to 30 songs in question in this lawsuit that she downloaded, played and retained on her hard drive (and which she did not previously own), the court rejected her fair use argument. In doing so, the court noted that there are various alternative ways for Ms. Gonzalez to have sampled songs for purchase on an authorized basis, including radio, streaming Internet radio, iTunes, and other Internet licensing intermediaries such as Yahoo!, Real Rhapsody and SNOCAP.

8. Avalanche! Software Developers Contracted Away Their Right To Reverse Engineer Blizzard’s Games

• Davidson & Associates d/b/a Blizzard Entertainment, Inc. v Jung, 422 F.3d 630 (8th Cir. 2005). Blizzard creates and sells software games for personal computers, and operates “battle.net”, a 24-hour online gaming service available exclusively for purchasers of its computer games via the Internet or local area networks. In order to play the game contained on a CD-ROM, a user must first install the game onto a computer and agree to the terms of an end-user license agreement and terms of use, both of which prohibit reverse engineering, by clicking on an “I agree” button during the installation process. First time users of battle.net are also shown terms of use which, among other things, prohibit reverse engineering. The outside of the package for the game contains a statement that use of the game is subject to the end user license agreement and that use of battle.net is subject to the terms of use. The defendants are lead developers for a volunteer project that developed a service that emulates the battle.net service and permits users to play on line without use of battle.net. The developers attempted to mirror all of the user visible features of battle.net. In order to make its service compatible with battle.net and Blizzard’s game software, defendants used reversed engineering to learn Blizzard’s protocol language and to make sure the new service worked with Blizzard games.

After the parties settled a number of claims, the district court granted summary judgment for Blizzard and determined that: (1) Blizzard’s software end-user license and terms of usage agreements were enforceable contracts; (2) the defendants waived any “fair use” defense; (3) the agreements did not constitute misuse of copyright; and (4) the defendants violated the anti-circumvention and anti-trafficking provisions of the Digital Millennium Copyright Act.

On appeal, the Seventh Circuit rejected the defendants’ argument, relying upon Vault v. Quaid Software Ltd. 847 F. 2d 255 (5th Cir. 1988), that the state breach of contract claims were preempted by federal copyright law, The Seventh Circuit distinguished the Vault decision because the state contract law in Blizzard neither conflicted with the interoperability exception of the DMCA (17 U.S.C. §1201(f)), nor restricts rights given under federal law. Citing Bowers v. Bay State Technologies, Inc., 320 F. 3d 1317 Fed. Cir. 2003), the Seventh Circuit stated that private parties are free to contractually forego the limited ability to reverse engineer a software product under the exemptions of the Copyright Act. By agreeing to the terms of use under the end user license agreements, the court concluded that the defendants expressly relinquished their rights to reverse engineer.

The Seventh Circuit also affirmed that the defendants’ reverse engineering violated the anti-circumvention and anti-trafficking prohibitions of the DMCA, and were not protected by the “interoperability” exception because the circumvention in this case constitutes infringement.

9. GripeSites II – Another Gripe Site’s Prayers Are Answered

• Lamparello v. Falwell, 420 F.3d 309 (4th Cir. 2005). Lamparello registered the domain name www.fallwell.com after hearing Reverend Jerry Falwell give an interview in which he expressed opinions about gay people and homosexuality that Lamparello considered offensive. The site contained in depth criticism of Reverend Falwell’s views. The home page prominently stated “this website is not affiliated with Jerry Falwell or his ministry” and provided a hyperlink to Reverend Falwell’s website. Lamparello never sold goods or services on his website. After receiving cease and desist letters from Reverend Falwell, and losing a UDRP arbitration proceeding over the domain name, Lamparello filed an action seeking a declaratory judgment of non-infringement in order to avoid losing the domain name. The District Court granted summary judgment to Reverend Falwell on his claims of trademark infringement, false designation of origin, federal and state unfair competition and violations of the Anti-cybersquatting Act.

On appeal, the Fourth Circuit reversed. The Fourth Circuit found that Lamparello’s use of Reverend Farwell’s name was not likely to cause confusion as to the source of the website and found that www.fallwell.com did not infringe. Important factors in the court’s decision were: (1) the websites looked nothing alike; (2) Lamparello clearly created his website intending only to provide a forum to criticize Reverend Falwell’s ideas, not to steal customers; (3) Reverend Falwell and Lamparello offer opposing ideas and commentary, not similar goods and services; and (4) anecdotal evidence indicated that those searching for Reverend Falwell’s site and arriving at Lamparello’s site quickly realized that Reverend Falwell was not the source of the content.

In an interesting discussion, the Fourth Circuit expressly refused to adopt “the “initial interest confusion” doctrine and interpreted the use of that doctrine by the Ninth Circuit as applying only in cases involving one business’s use of another’s mark for its own financial gain, not in cases involving gripe sites. The Fourth Circuit also rejected the ACPA claim because Reverend Falwell could not demonstrate that Lamparello “had a bad faith intent to profit from using the www.fallwell.com domain name, citing TMI, Inc. v. Maxwell, 368 F.3d 433 (5th Cir. 2004) and Lucas Nursery and Landscaping, Inc. v. Grosse, 359 F3d 806 (6th Cir. 2004) [both of which appeared in our list of Selected 2004 Cyberspace Intellectual Property Cases].

10. GripeSites III – Bosley Medical Scalped By Ninth Circuit

• Bosley Medical Institute, Inc. v. Kremer, 403 F.3d 672 (9th Cir. 2005). Mr. Kremer was dissatisfied with the hair restoration services provided to him by Bosley Medical Institute. To get even, Mr. Kremer started a website at www.bosleymedical.com, which was uncomplimentary of Bosley. Shortly after registering the domain name, and before posting its content, Mr. Kremer went to Bosley’s office and offered Bosley an opportunity to discuss the issue but did not mention domain names or make any references to the Internet.

The Ninth Circuit held that Kremer’s use of “Bosley Medical” in the domain name was non-commercial and unlikely to cause confusion, and affirmed the dismissal of Bosley’s trademark infringement and dilution claims. “We hold today that the noncommercial use of a trademark as the domain name of a website---the subject of which is consumer commentary about the products and services represented by the mark---does not constitute infringement under the Lanham Act.” The court found that Congress intended that the Lanham Act and the Federal Trademark Dilution Act apply only to marks used “in connection with the sale, offering for sale, distribution, or advertising of any goods or services”. The court found that Kremer’s website contained no commercial links and at no time offered for sale any products or service, nor contained paid advertisements from any other commercial entity. The Ninth Circuit also rejected an argument that one could reach a discussion group site, which in turn contained advertising, by following links from Kremer’s website as being “too attenuated”. The Ninth Circuit also rejected Bosley’s claims that Kremer used the mark in connection with Bosley’s goods and services, because Kremer’s use of Bosley’s mark was in connection with the expression of his opinion about Bosley’s goods and services, not in connection with the sale or advertising of goods and services. The court also reversed the dismissal of the ACPA claims because the ACPA did not contain a commercial use requirement and remanded this claim to district court.

Here are several other cases that did not make the “top 10” but are also of interest:

American Girl, LLC. v. Nameview, Inc., 301 F. Supp. 2d 876 (E.D. Wis. 2005) (domain name registrar who simply accepts the registration of a domain name generally is not liable for trademark infringement or dilution, unfair competition or ACPA violations) (citing several other cases with consistent holdings).

Egilman v. Keller & Heckman, LLP, 401 F. Supp. 2d 105 (D.D.C. 2005) (accessing a computer system through unauthorized use of validly created user name and password does not “circumvent a technological measure” in violation of anti-circumvention provisions of DMCA).

Century 21 Real Estate Corp. v. Lending Tree, Inc., 425 F.3d 211 (3d Cir. 2005). Third Circuit joins Ninth Circuit in expressly adopting “nominative fair use” defense to trademark infringement claims. See New Kids on the Block v. News America Pub. Inc., 971 F.2d 302 (9th Cir. 1992). Third Circuit adopted a two-part test: (1) first, a plaintiff must prove that confusion is likely due to the defendant’s use of plaintiff’s mark; (2) then the burden shifts to the defendant to show that its use of the plaintiff’s mark is nonetheless “fair.” Relevant factors for the second step are: whether use of the plaintiff’s mark is necessary to describe plaintiff’s and defendant’s products and services; whether only so much of plaintiff’s mark was used as is necessary to describe plaintiff’s products and services; and whether defendant’s conduct or language reflect the true and accurate relationship between plaintiff’s and defendant’s products and services.

SMC Promotions, Inc. v. SMC Promotions, 355 F. Supp. 2d 1127 (C.D. Cal. 2005). License agreement that allows a wholesaler’s retail customers to download wholesaler’s copyrighted product images and descriptions onto the retailers’ websites, was not broad enough to cover the retailers’ practice of engaging a third party vendor to download images on the retailers’ behalf as part of the process of creating websites for the retailers.

Posted by Eric at 07:07 AM | Copyright , Domain Names , Patents , Trademark

November 25, 2005

Wheel PTO Examiner Profiled

By Eric Goldman

Washington Post runs an amusing but surprisingly insightful story about the PTO's chief examiner of wheel and axle patents, Russell Stormer. One would think that after 5,500 years, there would be few new inventions in the world of wheels. However, the article points out that the PTO received about 350 applications in these categories last year, and has approved 30,000 wheel patents in total since 1790. Stormer himself reviews 124 wheel-related patents a year and approves about 90 of them (around 75% approval). At 124 applications a year, Stormer averages about 15 hours of attention on each patent application.

Posted by Eric at 10:18 PM | Patents

September 08, 2005

Madison on Drafting Local Court Rules for Patent Cases

By Eric Goldman

Michael Madison gives an interesting account of his experiences drafting local court rules for patent cases.

While the idea of creating some incentives for parties to engage in forum-shopping may sound good in theory, I wonder how much local court rules can affect that decision--especially in patent cases where the where-to-sue decision is complex, high-stakes and potentially very costly. Michael ultimately suggests that concern by noting the limitations of how much local court rules can affect the case.

For me, the more interesting aspect of his post is his narrative of a rule-making process. Michael's post exposes the complex balancing act:

* how to implement a broad social goal (lure patent litigation into Pittsburgh, and help patent litigants resolve their disputes in a satisfactory manner)

* how to allocate policy benefits/detriments to the players (i.e., the local court rules might be plaintiff-favorable or defendant-favorable...who should we favor, and why?)

* who should participate in the rule-making process (in this case, not the public at large)

Deconstructed in this fashion, Michael's write up is a good narrative of the strengths--and dangers--of our current rule-making systems.

UPDATE: A former student sent Minnesota's effort to develop local patent rules.

Posted by Eric at 06:22 PM | Patents

August 11, 2005

Can Congress Provide Copyright Protection to Software?

Aharonian v. Gonzales, No. 04-05190-MHP (N.D. Ca.).

This case got some press when it was first filed. The plaintiff's basic contention is that it is unconstitutional for Congress to provide copyright protection for software. This is a pretty wacky claim, and I doubt the plaintiff has a very good chance of success.

In any case, I'm resurfacing it because in June, the DOJ filed a motion to dismiss that lays out its basic defense. If you've ever wondered to yourself where Congress gets its authority to protect software under copyright law (I know, not the first thing I think of when I wake up in the morning either!), the DOJ brief lays it out for you.

Posted by Eric at 08:40 PM | Copyright , Patents

July 28, 2005

Patent Reform Act of 2005--July 26 Draft

A new draft of the Patent Reform Act of 2005 (HR 2795) has been circulated. Among other noteworthy aspects, this draft drops the limitations on injunctive relief--perhaps expedient to move the bill forward, but a disappointing omission IMO nonetheless. At the same time, if you missed it, eBay is seeking certiorari in the MercExchange lawsuit regarding the grant of injunctions while cases are on appeal. So we may see this injunctive relief issue pursued simultaneously in the courts and in Congress.

While I still think there's merit to Patent Reform Act, its scope is being progressively narrowed through negotiations. In my opinion, this undercut the overall merit of the amendments.

Posted by Eric at 09:16 AM | Patents

June 13, 2005

Patent Reform Act of 2005 Introduced

The Patent Reform Act of 2005 has been introduced. The bill itself is fairly complicated. Rep. Lamar Smith's press release summarizes the key features:

"· Provides that the right to a patent will be awarded to the first inventor to file for a patent who provides an adequate disclosure for a claimed invention;

· Simplifies the process by which an applicant takes an oath governing the particulars of an invention and the identity of the rightful inventor;

· Deletes the “best mode” requirement from §112 of the Patent Act, which lists certain “specifications” that an inventor must set forth in an application;

· Codifies the law related to inequitable conduct in connection with patent proceedings before the PTO;

· Clarifies the rights of an inventor to damages for patent infringement;

· Authorizes courts with jurisdiction over patent cases to grant injunctions in accordance with the principles of equity to prevent the violation of patent rights;

· Authorizes the PTO to limit by regulation the circumstances in which patent applicants may file a continuation and still be entitled to priority date of the parent application;

· Expands the 18 month publication feature to all applications;

· Creates a new post−grant opposition system;

· Allows third-party submission of prior art within six months after the date of publication of the patent application."

While I don't think this law represents a wholesale reform to patent law (which might not be a bad thing), this law certainly would represent a major tuning of current patent law. I'm still trying to grok the particulars, but everything I've seen suggests that most of these proposals are meritorious and would significantly improve existing law. I think we should give positive strokes when due (especially given how much legislator-bashing I do on this blog!), so I'm hopeful that we can encourage Smith and others to see a version of this reform through adoption.

Posted by Eric at 09:33 AM | Patents | Comments (4)

May 12, 2005

Patent Act of 2005 Proposed Draft

The "Committee print" version of the proposal is available here. Prior comments here.

Posted by Eric at 10:53 AM | Patents

April 24, 2005

Patent Act of 2005

Matthew Buchanan of Promote the Progress has assembled some source material regarding the proposed Patent Act of 2005, a surprisingly broad proposal to reform patent law. Among other significant changes, it proposes to scrap the first to invent standard in favor of a first to file standard. Other notables include imposing a rigorous duty of candor on applicants, limits on damages/injunctions and new standards for anticipating prior art. My initial cursory read suggests that there could be some merit to this proposal. Now, we need to see if it will gather any momentum.

Posted by Eric at 07:43 PM | Patents

April 11, 2005

Slate Exhibit on Breast Enhancement Patents

Slate has a “revealing” (sorry) look at patents related to breast enhancements throughout history. We tend not to think of the patent database as a great porn resource, but there's plenty of titillation for those who know where to look. As the patent database confirms, human ingenuity knows no bounds!

(Thanks to Steve Nelson for passing this along)

Posted by Eric at 11:58 AM | Patents