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John Farmer's Column: 2006
Published in the Richmond Times-Dispatch Questions and Answers About Online Music Downloading Through casual conversations, I’ve discovered that lots of folks have questions about what’s legal and illegal when downloading music online. Here are answers to some frequent questions: Q: How do I know if a music download site is offering legal or illegal music? A: You can find a partial list of legal sites at MusicUnited.org. Popular legal services include iTunes, Rhapsody, Napster, Wal-Mart, and Yahoo! Q: What about sites that make claims such as “free unlimited music”? A: Beware of offers that are too good to be true. Expect to pay close to a dollar for a permanent download of an individual song, or anywhere from $5 to $15 per month for a monthly music subscription service. If the listed price is only a few pennies per song or the equivalent, be wary. Q: What about sites that tout that their music download software is “100% legal” and can be used to download free, unlimited amounts of music? A: Such sites often are being deceptive about legality. Using their peer-to-peer (P2P) download software by itself isn’t illegal, but it can be used for illegal purposes. It’s almost always copyright infringement to use P2P software to download copyrighted music. On the other hand, it isn’t copyright infringement to use such software to download a copy of an old, public domain item, such as a Shakespeare play. Q: Is there some sort of “Good Housekeeping” seal that identifies legitimate music download sites? A: Not yet, but there may be in the future. Q: I want to watch my teenager. What are the sites commonly used for illegal music downloading? A: Again, the P2P software offered by various sites has hypothetically legal uses, but such software frequently is used for illegal music copying. Popular sites for obtaining P2P software include KaZaA, LimeWire, BearShare, Morpheus, Gnutella, eDonkey and BitTorrent. Q: I know lots of folks who download music with such P2P software and nothing’s happened to them. Can’t I get away with this? A: Take your chances if you wish. The music industry has sued thousands of folks for illegally downloading music. It has sued Virginians as recently as the end of November 2005. In December 2005, it announced that it was suing about another 750 more people. An appellate court recently upheld a damages award of $22,500 against someone who illegally downloaded 30 songs. Q: Can I be held liable for illegal downloading by my teenager or someone else using my computer? A: Whoever owns the Internet access account is the one who will be sued. Music labels watch for the IP addresses of computers engaged in illegal music copying, issue a subpoena to the relevant Internet service provider (such as Comcast or Verizon) to discover the identity of the person holding that Internet access account, and sue the account holder. If your teenager is using your ISP account for illegal downloading, you’ll be the one sued. Even if you could pass off liability to your teenager, which may not be entirely doable, would that really solve your problem? Q: How do I know if a song still is under copyright? A: There is no easy way to tell. I’d assume any music recorded since the 1920’s is copyrighted unless I saw a strong reason to believe otherwise, such as a credible statement that the song had been released to the public domain, as some artists do sometimes for promotional purposes. Q: Does a P2P music download site become legal because it’s located outside of the U.S.? A: It does not to a U.S. user. If you are located in the U.S. and use the software to download a copy of a copyrighted song without permission from the copyright owner, you’re engaging in U.S. copyright infringement regardless of the location of the source of the P2P software or of the source of the song you copy. By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. __________________________________________________________________________________ Published in the Richmond Times-Dispatch Blackberry Battle Part of Larger Patent Injunctions War The headline-making patent case involving Research in Motion Ltd. (maker of the Blackberry) and NTP Inc. highlights a crucial element of patent law that may change soon. Under current U.S. patent law, if you prove infringement of your patent in a final decision, you are entitled to an injunction against continuing infringement absent extraordinary circumstances. Such an injunction might shut down a product or even the company that makes it. The law views a patent as a property right and a right to exclude others from using your property. Yet, scenarios abound in which many question the policy of almost reflexively granting an injunction to a patent holder:
Under the present law, none of the conditions listed above generally will block a patent holder from obtaining a permanent injunction. In the Blackberry case, the inventor of the technology at issue founded NTP, the plaintiff. Yet, NTP doesn’t make any product itself. Its primary business is extracting license fees under at least an implied threat of a patent infringement lawsuit, although, in fairness, all intellectual property licensing is under this implied threat. NTP has licensed its patents to at least two other businesses. Richmond federal judge James R. Spencer presently is scheduled to hold a hearing on the injunction issue in the Blackberry case on February 24, 2006 – a few days after this writing but three days after this column will have run. He could rule on an injunction on the spot. Regardless of his ruling, this is a hot issue in Congress, with technology companies and in the intellectual property community. Congress is considering whether to eliminate the strong presumption that an injunction should issue if infringement is proven, in order to allow for a court to weigh the equity of granting an injunction in each circumstance. Congress also is considering whether an injunction against patent infringement should always be stayed long enough for a specialized appeals court to review the providence of the injunction. The Supreme Court may weigh in soon in a case it accepted between eBay, Inc. and Merc-Exchange LLC. The Court is expected to rule on whether the current patent law concerning injunctions as applied by the courts is right. This case is awaiting oral argument and should be decided by the end of June 2006. Business groups are fighting furiously on this issue. Pharmaceutical companies and independent inventors argue in favor of the present law. They argue that a patent will cease to be exclusive property if, in effect, anyone can infringe it and pay a license fee once nailed for infringement. They also worry that eliminating the presumption of getting an injunction will shift too much power in settlement negotiations to infringers. In the other corner, computer technology companies contend that, in the scenarios listed above, it goes too far to stop the sale of an infringing product and, in many cases, to put the maker out of business. They argue that many plaintiff patent owners want only to coerce the largest monetary settlement possible and that such owners otherwise aren’t interested in excluding anyone from using their patent rights. They pejoratively call folks who sue on patents without making products using the patents “patent trolls.” Based on instinct alone, I predict the Supreme Court will use the eBay case to make the issuance of an injunction less automatic. The law is fairly uniform, so the Court didn’t need to take the case to resolve a rift in the law. Thus, I suspect the Court isn’t happy with the current state of the law. I also predict that Congress will continue to dither. Once the Supreme Court has taken a case on an issue, Congress tends to wait on the ruling. Once the ruling comes down, it takes a while for the business and legal community to digest it and for interests favoring and opposing legislative change to get rolling. Also, for technology law matters, Congress tends to do nothing unless and until the stakeholders present a consensus proposal. By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. __________________________________________________________________________________ Published in the Richmond Times-Dispatch Google Image Search Mostly Survives Challenge A case filed by a purveyor of adult pictures recently tested the copyright legality of Google’s Image Search program. Google mostly passed the test, although the court’s decision identified a legal obstacle Google must surmount. How it works Google Image Search allows you to look for images on the Web, such as pictures. You can find this search function on Google’s home page. As with Web searching, type in a prose description of the desired image and Google displays results in the order of relevance as determined by Google. The search results are a grid of “thumbnail” pictures – small, low-resolution images. If you click on a thumbnail, Google shows a picture of the Web page from which the image came, plus a link to that Web page and link that enables you to see just the full-sized image. Google hosts this thumbnail picture on its own computer servers. Google doesn’t host the other content contained in the individual search results. Google’s computers instruct the Web surfer’s browser to get this other content directly from the Web site on which the image was found. Google causes your Web browser to pull this content, such as a picture of the Web page containing the image, into a Web page your browser address window says is from “images.google.com.” To do this, Google uses a Web-page creation technology known as “framing.” For fun, to see how folks play political games with Google searches, try an image search for “George W. Bush” or “Teddy Kennedy.” Big wins and a loss Perfect 10 sells pictures of nude women and the like. Perfect 10 has a problem with folks copying pictures from its subscriber-only areas and reposting them elsewhere. Such unauthorized reposting generally is an infringement of Perfect 10’s copyrights to its pictures. Some illegal repostings of Perfect 10’s blue pictures could be found by Google Image Search. Perfect 10 sued Google in federal court in California, contending Google was infringing Perfect 10’s copyrights by displaying thumbnails of Perfect 10’s pictures, by using framing to display full-sized versions in individual search results and by linking to sites that reposted Perfect 10’s pictures without authorization. In mid-February, the California court issued an extensive opinion on Perfect 10’s infringement claims in response to a motion by Perfect 10 for a preliminary injunction against Google Image Search pending the full litigation of the case. In a nutshell, Google won the biggest legal issues but also lost an important one. As for what Google won, the court ruled Google didn’t infringe the copyright to the full-sized images belonging to Perfect 10 because Google didn’t host those full-sized images on Google computers. Google merely linked to those postings, and such linking didn’t make Google liable, even though Google used framing to have those full-sized images appear on Web pages that identify Google in the browser address window. The court also found Google shouldn’t be held liable for the copyright infringement of others in wrongfully reposting Perfect 10’s pictures. The court differentiated what Google does from the conduct of past, famous copyright-infringement facilitators, such as the original Napster music-copying service. Those wins for Google are huge. Had the rulings gone the other way, they might have killed the Image Search program altogether and cast a cloud over all of Google’s Web search functions. As for Google’s loss, the court ruled Google infringed Perfect 10’s copyrights by posting thumbnail images (which form the grid of initial search results) of illegally reposted pictures found on the Web, but only because Perfect 10 had a deal to license thumbnails of their pictures for use on mobile-phone displays. The court said mobile phone users might use Google to find those phone images for free rather than paying Perfect 10’s business partner to obtain them. Future of image searching As for the loss over Google’s posting of thumbnails, my instincts are Google will find a way to manage this problem while still keeping Image Search useful. If it doesn’t have one already, Google will need a substantial staff to process complaints about Image Search results displaying copyright-infringing images. Also, perhaps Google will deploy some technology to make the thumbnail pictures hard to copy or undesirable for reuse, in order to obviate any other claims that the existence of the thumbnails undercuts some market for the licensing of thumbnail versions of the same pictures. Also, looking at the bigger picture, Google will continue to face many novel claims of copyright infringement, and perhaps trademark and patent infringement, too. The combination of its large cash flow and technological innovation will keep it the target of entrepreneurial plaintiffs’ attorneys and of those who seek to solve their Web piracy problems by attacking them at the search engine juncture. After all, if Google doesn’t report your existence, do you really exist? By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. __________________________________________________________________________________ Published in the Richmond Times-Dispatch Tips for Securing the Value of Negotiated Contracts Okay, you just negotiated and signed a contract. Now what? Companies and individuals often incur substantial legal fees and undergo great stress to negotiate a fair written agreement. Yet, afterward, they often fail to use the contract to govern the relationship with the other party. Excuses galore You hear all sorts of excuses for not keeping the parties’ relationship aligned with the contract.
The problem If you allow the parties’ relationship to drift away from the contract’s terms, eventually the contract will not protect you. You wouldn’t be able to get a court to enforce its written terms. If that happens, you may have wasted all of the management time, stress and legal fees that went into negotiating the contract. You will be proceeding on trust alone, as if you never had a written agreement. As for those outside-the-contract oral promises, don’t rely on them for legal protection. Assume that, if a term is not part of the written agreement, it’s not a part of the deal you could enforce. Tips for keeping contracts effective Here are some things you can do to get value out of negotiated contracts:
By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. ___________________________________________________________________ Published in the Richmond Times-Dispatch Supreme Court Makes a Mess Out of Patent Injunctions Rule The Supreme Court just issued an opinion in a patent case that could have determined whether “patent trolls” should be entitled to injunctions against patent infringers. Unfortunately, the court made the law muddier. The uncertainty this case creates will spawn additional, expensive litigation. The case, eBay Inc. v. MercExchange LLC, addressed whether an injunction should be issued nearly automatically against someone found to be a patent infringer. In other words, if I prove your product is using my patented technology without my permission, should I be able to get a court order shutting down your manufacturing and distribution, at least until you either stop using my technology or buy a patent license from me? Before this Supreme Court case, the rule was that the patent holder almost always got an injunction. Many questioned whether that result is equitable when the plaintiff is a “patent troll.” Patent Trolls A patent troll is a person or company whose only business is to own patents and to license these patents to companies purportedly using the patented technology. Sometimes the troll is the inventor who created and patented the technology. Increasingly the troll is a company that invented nothing and buys patents from others. Such companies seek patents that might cover existing products on the market, especially where it would be hard to change those products to avoid the patents. Trolls can extract large license fees from targets due to the threat that, after winning a patent infringement lawsuit, the troll may be able to obtain an injunction shutting down the target’s product or service. With such leverage, the license fee logically will be based upon the value of keeping the product or service at issue in the marketplace, instead of being based on the value the patented technology contributed to the infringing product or service. For example, NTP obtained a king’s ransom in its suit against RIM, the maker of the Blackberry, based upon the threat that a federal court would force RIM to shut down its Blackberry service and stop selling the devices. “Patent troll” is pejorative slang, and I don’t mean to cast trolls as evil. They have been making money exploiting the rule favoring injunctions in patent cases. The question is whether the patent injunctions rule improperly favored the patent trolls. New Rule Poorly Defined The Supreme Court unanimously held that the Federal Circuit was wrong in holding that an injunction should be issued in patent infringement cases in all but exceptional circumstances. Instead, the court said lower courts should apply a four-factor test for whether to issue injunctions – the same four-factor test used to evaluate whether to issue an injunction in all sorts of legal cases. In total, those four factors essentially ask: “Is an injunction a fair outcome in this case?” That test leaves the patent injunction decision up to the subjective view of the judge, at least until appellate court decisions once again define what subjective views are acceptable. I call such a multi-factor, subjective legal test the “What Did the Judge Eat for Lunch Test?” due to its lack of guidance. In its unanimous opinion, the Supreme Court raised the issue of patent trolls and then ducked. It said you could not determine categorically whether a troll should be able to obtain an injunction – it’s a case-by-by case analysis. The unanimous opinion offered no further guidance on the issue. Worse yet, the justices split badly in concurring opinions that further addressed the issue. No one’s position got a majority of votes. Chief Justice Roberts, joined by Justices Ginsburg and Scalia, implied that patent injunctions should continue to be the usual outcome in patent cases. Roberts emphasized that a patent is the power to exclude others from using your patented technology without permission. He didn’t address trolls, but his view favors them. Justice Breyer, joined by Justices Stevens, Souter and Kennedy, expressed skepticism about awarding injunctions to trolls. Breyer mentioned that trolls can use the power of potential injunctions to extract “exorbitant fees” from target companies. Legal Uncertainty Will Cost Us The business of being a patent troll just got riskier, because a troll now cannot be confident of getting an injunction. That increased risk will affect the settlement value of cases. Still, the continued prospect of big financial prizes is enough to keep many trolls in the game for now. Uncertainty about legal rules breeds litigation, because such uncertainty makes claims hard to value and settle. Because of this lack of clarity, I believe hundreds of millions of dollars, perhaps billions, will be spent in legal fees in patent trolling cases. This vagueness also makes uncertain the value of patents and the value of businesses that have patented technology as key assets. Increasingly, our technology-driven economy depends upon intellectual property, such as patents, as a wealth generator. It’s a disservice to our economy to have the rights associated with patent ownership defined so vaguely. By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. ____________________________________________________________ Published in the Richmond Times-Dispatch Challenges to Gripe Web Sites Produce Inconsistent Results If you don’t like this column, would it be legal for you to register the domain name LeadingEdgeLawSucks.com and put up a Web site there to air your beef? The answer depends upon what you put on your Web site. Unfortunately, because court decisions in this area are contradictory, it also depends on what court tries your case. Most gripe sites come from disgruntled former employees, dissatisfied customers and political activists. For example, an important legal case arose when an activist put up a site criticizing Jerry Falwell’s views on homosexuality at the domain name Fallwell.com. The activist capitalized on a common misspelling of Falwell’s last name and survived the legal challenge. Trademark Trouble A gripe site can get into trademark infringement or cybersquatting trouble if its domain name includes the trademark of the target. If the gripe site loses such a suit, the court usually awards possession of the offending domain name to the target. Of course, a gripe site wants to use a target’s trademark in its domain name to wave a bloody flag in the face of the target’s customers or constituents. The classic test for trademark infringement is whether your use of someone else’s trademark is likely to confuse consumers as to the source of your goods or services. For example, I can’t call my hamburger stand “McRonald’s” because some folks might mistake it for the real thing. It’s tough to apply trademark law to gripe sites, because their purpose is to tear down the target, not to compete with it. Nevertheless, the courts routinely take away the domain names of gripe sites if the gripe sites sell or advertise any goods or services. The courts say such sales are illegally derived from the drawing power of the trademark being ridiculed. For example, if someone ran a Web site at WalmartSucks.com and accepted paid advertising from Target, a court would hold that such person committed trademark infringement and transfer the domain name to Wal-Mart. Indeed, most courts hold that even the sale of protest goods is enough to make the domain name usage illegal. One couldn’t sell “Stop Wal-Mart” t-shirts on WalmartSucks.com without risking the loss of that domain name to Wal-Mart in court. Inconsistent Decisions Unfortunately, the courts have contradicted themselves in gripe site cases that raise freedom of speech concerns. What if a gripe site doesn’t advertise or sell anything? In some cases, courts nevertheless have taken away the domain name where it matches the target’s trademark. For example, People for the Ethical Treatment of Animals recovered the domain name peta.org from a critic who sold nothing and called his site “People Eating Tasty Animals.” While the courts’ reasons for taking such domain names vary, the most popular rationale is that it’s unfair to block a trademark owner from using an obvious domain name for its Web site. In a few cases, the courts even have taken away a “sucks” domain name when the target wasn’t using it to advertise or sell anything. Vivendi Universal recovered the domain name VivendiUniversalSucks.com in such a situation. In my view, trademark law doesn’t support taking such domain names because they aren’t being used for commercial purposes. Also, the First Amendment protects truthful gripes. Reasons for Inconsistency There are many reasons why courts rule inconsistently in this area. In some cases, judges decide based upon what strikes them as fair rather than on what the law is. In addition, special laws targeted at cybersquatters get incorrectly applied. An international arbitration scheme exists for domain name disputes called the “Uniform Dispute Resolution Policy,” or “UDRP” for short. There also is a U.S. law called the “Anticybersquatting Consumer Protection Act” or “ACPA” for short. Essentially, each law outlaws registering, using or trafficking in domain names with bad faith intent to profit from someone else’s trademark. These laws take aim at classic cybersquatting – obtaining a domain name matching a valuable trademark and trying to sell it to the trademark owner at a markup. Arbitrators who apply the ACPA and courts that apply the UDRP sometimes lose sight of the requirement that, to take away the domain name, the holder must have made a wrongful attempt to cash in on the target’s trademark. Also, with the UDRP, arbitrators often are not U.S. attorneys. A lot of inconsistent rulings come from those arbitrators. For example, on the same day, one arbitrator ruled that the domain name AmericanEagleStores.com must be handed over to American Eagle Outfitters while another arbitrator ruled that this merchant couldn’t wrestle away the domain name AmericanEagleStore.com. Hopefully, appellate courts will become clear and consistent in their legal rulings in this area, thereby forcing trial courts and arbitrators to apply the law uniformly. Regardless, before you get any crazy ideas, I already registered LeadingEdgeLawSucks.com. By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. ____________________________________________________________ Published in the Richmond Times-Dispatch Google’s AdWords Program Rolls in the U.S. but Suffers Legal Setbacks Abroad Some recent court decisions show that Google’s popular and lucrative advertising program, AdWords, continues to dodge legal bullets in the U.S. but sometimes is getting shot down overseas over trademark problems. AdWords is the program under which you can buy advertisements on Google search results pages that are triggered by search keywords you select. For example, I could buy ad for my law firm triggered by the search string “Richmond intellectual property lawyer.” The AdWords ads appear either to the right of the search results or in a blue box above the search results. In either place, a “Sponsored Links” heading appears above the ads. An advertiser plays a per-click fee for the ad. Ad placement is determined by how much the advertiser chooses to pay per click and how often Web surfers click the ad. Things sometimes get contentious when a company wants to use someone else’s trademark to trigger its ad. For example, the luxury goods maker Louis Vuitton successfully sued Google in France on its claim that Google’s selling the “Louis Vuitton” trademark as an AdWords-triggering search term constituted trademark infringement under French law. At the end of April, a French appellate court upheld that decision. It ordered Google to pay the equivalent of about $460,000 in damages and to deploy technical solutions to block further use of the “Louis Vuitton” trademark to trigger ads. Google’s Success in the U.S. Back in the U.S., Google hasn’t yet lost any trademark suit over its AdWords program, and its legal success has emboldened Google to maintain a more aggressive AdWords policy on trademarks in the U.S. and Canada than in the rest of the world. In the most important case, Google went through significant litigation with GEICO and substantially won about a year ago. The court held that Google could trigger AdWords ads off of the GEICO trademark. The court did find some potential liability to Google for AdWords ads that had “GEICO” in the body because of the possibility that some consumers might mistakenly believe that GEICO was affiliated with those ads. That was a consolation-prize result for GEICO, and the parties settled that case soon thereafter. Elsewhere in the U.S., others have sued Google over permitting the use of their trademarks to trigger AdWords ads, but no one has beaten Google yet. Some cases against Google are still in litigation. Interestingly, some trademark owners have been suing the AdWords advertiser rather than Google itself. Changing the target to the advertiser shouldn’t affect the legality of the advertising under trademark law, so perhaps aggrieved trademark owners are just looking for defendants with smaller war chests. Because of this U.S. success, Google has maintained a policy that it will permit AdWords ads to be triggered by someone else’s trademark even if the trademark owner objects. Yet, Google will pull the AdWords ad if the trademark is used in the body of the AdWords ad and the trademark owner objects. Mixed Results Overseas Yet, mixed results overseas have required Google to use a more restricted policy there. For trademark rights established in countries other than the U.S. and Canada, Google will block the sale of a trademark as an AdWords-triggering search term if the trademark owner objects. In addition, as in the U.S. and Canada, Google also will block use of the trademark in the AdWords ad if the trademark owner objects. To show the difference between the policies, consider this example: Suppose Target wanted to run AdWords ads to point out that it sells online some items also carried by luxury retailers. For the U.S. market, Target could buy an AdWords ad that keys off the search term “Nordstrom” and advertise its bargain prices. Yet, it could not run an AdWords ad keyed off the name of the premium French department store Le Bon Marche if that retailer objected. This policy difference arises from the losses Google has suffered overseas. By my count, Google has lost three cases over AdWords in France and has suffered mixed results in German courts. Given geolocation technology (using Internet protocol addresses to guess a Web surfer’s general location) and Google’s ability to cater to the censoring wishes of China, I surmise that Google has the technological ability to maintain a permissive AdWords trademarks policy in the U.S. and Canada and a more restrictive one for the rest of world. Yet, such a restriction of Google’s ad sales overseas crimps Google’s ad revenue. Regardless, Google appears to have a sense of humor about its program. If you Google “Google AdWords,” you’ll find several AdWords ads offering services to game the AdWords system. Perhaps Google laughs all the way to the bank, because these folks are paying Google a per-click AdWords fee to run their ads. By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. ____________________________________________________________ Published in the Richmond Times-Dispatch Court Uses Peek-a-Boo Pants to Set Important Precedent In my professional reading, I recently found a case that puts me in a dilemma. It’s an important legal development but also a product I hope my daughter never discovers. Flash Dare! Sportswear, Inc. makes a line of clothing called “Flash Dare!” The company sells jeans and capri pants, and might make other bottoms in the future. The signature element of Flash Dare! clothing is that, on the back, where the garment covers the buttocks, there is a flap on each side that folds open and is buttoned in that position. The open flaps reveal the underwear in two places, one on each buttock. Modesty isn’t an option, as there are no buttons for closing the flaps. These pants don’t show more than an average bikini, and you can see more underwear in newspaper ads. Still, these pants send an “open for business” message that my daughter better not send until she’s married and about 35. Now for the part you really seek – the sexy legal analysis. The company applied to register with the U.S. Patent and Trademark Office (“USPTO”) the trade dress for this clothing line – the symmetrical buttoned-open flaps with the “Flash Dare!” label positioned in between. The USPTO rejected the application. The company ultimately appealed to the Court of Appeals for the Federal Circuit, a court just below the Supreme Court, and lost in a recent decision. That decision clarifies a rule for trade dress protection that’s important to consumers and competitors far beyond the realm of sluttish clothing. First, a little background: Trade dress is the distinctive and non-functional elements of a product or its packaging that make that product or packaging distinguishable in the marketplace and serve as an indicator of source to consumers. For example, the curvy shape of the famous Coke bottle is the trade dress property of the Coca-Cola Company. Trade dress is an intellectual property right. The product maker can sue someone who uses a confusingly similar trade dress for the same or similar goods. If you sell soda in a curvy bottle suggestive of the shape of the Coke bottle, you will hear from Coke’s lawyers. In 2000, the Supreme Court issued a landmark decision about legal protection for trade dress. In order to register your trade dress with the USPTO or to sue someone successfully for copying it, you have to establish that your trade dress is distinctive – that consumers recognize the non-functional design as an indicator of source. (Again, think of the familiar shape of the Coke bottle.) The Court held that, if you are talking only about the packaging for a product, as opposed to the product itself, the court can presume in some cases that some trade dress is “inherently distinctive” – that just looking at the packaging demonstrates that the trade dress elements stand out as a source indicator, just like a product name or logo. Yet, the Court held that the trade dress of a product itself, as opposed to its packaging, is never inherently distinctive. The court won’t presume it, so the party claiming the trade dress property right has to prove that the trade dress is distinctive to consumers. That’s hard to do. Proving that the public recognizes your trade dress as a source indicator can require years of extensive advertising or producing expensive-to-create consumer survey evidence. Also, it takes time – you can’t get legal protection for your trade dress until you show public recognition. Yet, innovative product makers want to protect their trade dress from the beginning, before big companies notice and mimic the design wrinkle. Back to the peek-a-boo pants: The federal appeals court held that, even if you have a trade dress element that you repeat in different products (e.g. pants, capris, shorts) and even if it’s only one element of the whole product (just the flaps, not the styling of the whole garment), the product maker still has to prove distinctiveness to have trade dress protection. Distinctiveness can’t be presumed. So, what does this decision mean for consumers and product makers? First, it makes it tough, but not impossible, to create a monopoly on the non-functional styling of a product. This shifts power in the marketplace from product style innovators to mass-producing product imitators. This means lower prices but less incentive to innovate. Second, it causes innovative product makers to fish around for other means of protecting the non-functional, signature elements of new products. In some cases, design patents and copyrights might help, but both have significant limitations. A design patent can be difficult, expensive and time-consuming to obtain. Copyrights often provide only thin protection against mimics. Third, this decision should push sellers to make product packaging distinctive. Both the USPTO and courts still can presume that product packaging, but not just the product itself, is inherently distinctive. Thus, make the packaging something the consumer recognizes and craves, like the famous Tiffany blue box. The third point means having an open mind to product packaging ideas. And I’m fine with that, as long as you keep any flaps on the back of your pants closed. By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. ____________________________________________________________ Published in the Richmond Times-Dispatch Ideas for Protecting Trade Secrets and Other Confidential Information It’s back-to-the-basics time. Below is a non-exclusive list of ideas for protecting your company’s trade secrets and other confidential information. First, a little terminology: A trade secret is information that has value to a business because outsiders don’t know it. To make information a business’ trade secret, a business must expend reasonable (but not necessarily perfect) efforts to keep the information secret. Examples of potential trade secrets include unpatented inventions, customer lists, internal processes and internal financial information. Confidential information is information you keep confidential due to a governmental obligation (like health data of insureds) or because you signed a confidentiality agreement requiring you to do so. Collectively, the list below sets a high standard. You must decide what level of protection fits your situation. This decision depends upon the nature and sensitivity of the information, the nature of your business and how certain you want to be about having trade secret legal status. Your selected protocols might be less than, more than or different than this list:
By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. ____________________________________________________________ Published in the Richmond Times-Dispatch New Law Increases Protection for Famous Trademarks On October 6, President Bush signed a bill that makes a huge change in federal trademark law. I’m surprised the mainstream media didn’t give much publicity to the new law because it shifts a lot of power to large companies. To understand the change, consider this hypothetical question: Could I make and sell running shoes under the brand GOOGLE without Google’s permission? Before the new trademark law, the answer probably was “yes, at least for a while, in some states,” provided I could afford to pay lawyers to fend off Google’s inevitable, high-powered legal attack. After the new law, the answer almost certainly is “no, they’ll shut you down tomorrow.” The new law, called the “Trademark Dilution Revision Act of 2006,” changed the rules regarding “famous” trademarks. A little background is necessary. Generally speaking, a trademark is any indicator of the source of a good or a service, such as a manufacturer’s logo or product name. Consumers see zillions of them every day. Trademark infringement law protects the owner of a trademark only from others who might adopt an identical or confusingly similar mark to brand the same kind of goods or services or closely related ones. For example, this law would keep anyone other than General Motors from marketing a line of cars called SHEVY. Yet, trademark infringement law doesn’t prevent someone from capitalizing off the fame of a household-word trademark by putting that brand on completely different goods or services. I call this “free riding.” Thus, trademark infringement law would not stop me from putting the brand GOOGLE on running shoes. That’s because no one would think that the search engine company made those shoes. It’s not in the shoe business. In trademark-speak, there is “no likelihood of confusion among consumers,” which is the cornerstone element of a trademark infringement claim. In 1995, Congress tried to create a remedy against such free riding on famous brands. It passed a law giving special protection to “famous marks” – household-name marks such as COCA-COLA and MCDONALD’S. In theory, this law was supposed to give owners of famous marks a way to stop free riders from putting these famous marks (or close imitations of them) on unrelated goods or services without permission. The legal thinking behind giving special protection to famous marks is that they could be damaged by unauthorized use on unrelated goods or services. Specifically, such use could “blur” the distinctive power of a famous mark by associating it with a new kind of goods. Or the use could “tarnish” the famous mark by associating it with low quality or morally questionable goods. The law calls this “dilution.” Yet, as courts began interpreting the federal anti-dilution law, they found what I consider to be a major drafting error. Courts began to hold that the owner of a famous mark had to wait until its mark was suffering real damage from free riding (from either blurring or tarnishment) before it could get legal relief. The owner of the famous mark couldn’t get an injunction stopping the free rider when the free rider first began selling its wares. In theory at least, that rule made proving a dilution claim difficult for owners of famous marks. It’s hard to show that your famous mark has gotten blurred or had its reputation tarnished. Some famous mark owners still found success in swatting free riders simply through spending more on lawyers than the opponent could bear. And some states (but not Virginia) have anti-dilution laws that are more favorable to famous marks than the old federal law. Still, if you owned a famous mark and wanted to provide strong, nationwide protection for your brand, free riders were a major problem. Under the recently enacted federal law, the owner of a famous mark now can win an injunction against the mark copycat as long as the famous mark owner can show a “likelihood” of dilution. Thus, as soon as the free rider appears, the famous mark owner can swat him immediately. Admittedly, it’s a fuzzy legal test to determine when the use of a famous mark such as GOOGLE on unrelated goods or services is likely to blur or tarnish that mark. Nevertheless, under this expanded anti-dilution law, I expect courts won’t think deeply before shutting down anyone who tries to sell goods such as Honda aspirin or Patagonia computers. Ultimately, this new law increases the value of famous trademarks because it creates a power to crush free riders as soon as they appear. The law doesn’t really affect consumers, aside perhaps from guarding the psychic pleasure of owning an expensive, name-brand good. After all, would you enjoy your new Lexus as smugly if LEXUS also was the name of a new deodorant? By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. ____________________________________________________________ Published in the Richmond Times-Dispatch Blogging isn’t a copyright-free zone. Here are tips on how to deal with the copyrights of others when blogging. Q: Do I need permission to block quote from someone else’s work, such as from a news article or book? A: You don’t need permission, but getting permission takes care of copyright concerns. Without permission, you have to employ copyright’s fair use doctrine to determine how much of the targeted work you can quote legally. Q: When I block quote from someone else’s work without permission, how much of that work can I quote? A: There is no bright line or even a quantitative guideline to follow. The fair use doctrine allows you to use some part of a copyrighted work without permission for some purposes. Even copyright lawyers can’t agree on the precise contours of what is fair use, and the analysis is case-specific. Most blogs engage in a type of use of another’s copyright property that could be fair use, such as commentary, parody or satire. For commentary, don’t quote more of the targeted work than necessary to make your point. Only rarely can you quote all of someone else’s work to comment on it. Also, consider whether the extent of your quotation makes reading the quoted work unnecessary because you will reproduce the part the public will seek. If it does, your use probably isn’t fair. Paraphrase instead of quoting when you can, because copyright doesn’t protect ideas or pure facts, just original expressions of them. Q: If something on the Internet doesn’t have a copyright notice, does that mean it’s in the public domain so I can use asmuch of it as I want? A: No. All the copyright notice does is put the world on notice of the author’s copyright. The effect of the notice is to create a floor on the kind of damages the author might collect. An author owns a copyright on a work he creates even if he omits the copyright notice, and even if he doesn’t register the copyright. Q: What attribution do I have to give to my source for a block quote or picture? Do I have to post a link to the source? A: Copyright law does not require that you cite your source or provide a link to it. If you are using content by express permission, that permission might require such attribution. Some contend that a concept called “moral rights” requires attribution to the author even when you don’t get permission and rely on fair use rights. While that contention is legally shaky, it’s good blog etiquette to cite and link to your source. Q: Do these limits apply to government documents? A: The federal government cannot assert copyright rights to works its employees create, so you can reproduce these entirely. In some cases, the government can own and assert a copyright transferred to it by a private contractor. State and local governments can claim copyright ownership although they rarely assert such rights. Q: Can I post a copy of a picture or graphic I found elsewhere on the Internet? A: Technologically, there are two ways to do this: (1) copy the image onto your server and serve it directly to the Web surfer, or (2) use “in-line linking” to cause the Web surfer’s browser to pull that image from another site directly into a frame you create on your Web site. Following the latter method makes the picture look like it comes from your site when it actually is loaded into the surfer’s browser from someone else’s server. Copying the image onto your server could be copyright infringement. It isn’t clear yet whether in-line linking avoids liability. A recent trial-court decision involving Google approved of in-line linking, but the case is on appeal and is attracting lots of friend-of-the-court briefs from opposing viewpoints Q: How much trouble am I in if I accidentally cross a copyright line? A: It depends on the nature of the copyright owner. You might pay substantial monetary damages if the author feels motivated to sue you and if the author registered his copyright either prior to your infringement or within 90 days of when that author first published his work. That author might be able to recover damages up to $150,000 in the case of a willful copyright infringement, or even higher damages if the author can prove them. Still, this outcome is unlikely in most blog copyright cases. A lot of material posted on the Web isn’t copyright registered, and that removes a lot of the money damages threat. Also, the wronged author would have to decide to pay substantial attorneys’ fees to go after you when the recoverable damages might be zero. In many instances, the wronged author will just complain and the courteous blogger will assuage the author. By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. __________________________________________________________ Published in the Richmond Times-Dispatch Record Labels Battle “TiVo” for Your Satellite Radio It was only a matter of time before someone created a TiVo-like service for satellite radio. Now the also-inevitable battle over its legality has begun. Earlier this year, XM Satellite Radio released a new receiver called the “Inno.” In addition to being an XM receiver, this portable unit can record and store up to 50 hours of XM programming. Three additional features make it sexy. First, it breaks down recorded music by artist and title. You can go through your recorded music, keep only the songs you want, and even create playlists out of them, just as you can with iTunes. Second, the Inno builds up a 10-minute buffer on the station to which the user is listening. Thus, if you are listening to a song and want to record it, you can capture the song from the beginning because the Inno continuously stores the previous 10 minutes of transmission. Third, in addition to programming captured from XM, you can load into the Inno music from your CDs and music you purchase on the now-legal Napster download service. Thus, it adds adding satellite recording to the traditional iPod usages. Yet, the Inno has limitations. It buffers and records only on the XM station currently selected on the receiver. It has a function that will scan all of the XM channels for a desired artist and alert you when that artist is being played, but you have to change the channel manually. Because the Inno buffers only the channel to which you have been listening, you can’t jump to a White Animals tune on another channel and capture it from the beginning. Ultimately, the Inno doesn’t replace iTunes. You can’t grab off of satellite radio any tune you want on demand. But it permits you to build a library of tunes tailored to your tastes without paying per-song download fees. The Record Labels’ Challenge The record labels are attacking XM and the Inno in the courts and Congress. As usual, the fight isn’t over whether the labels will permit the technology. It’s over money. The record labels are steamed because it sees the Inno and its ilk as a threat to iTunes and similar music download services. The record labels get substantial revenue from such download services, and it receives fees from them on a per-download basis. XM Radio pays the record labels a recording-device license to make and sell the Inno – the same kind of license the maker of a CD burner would buy. Yet, XM declined to pay the record labels for a more expensive music distribution license – a license like Apple purchased for iTunes. XM’s competitor, Sirius, chose to pay for a music distribution license to offer Inno-like devices, such as its “Stiletto" line. When XM balked at paying for a distribution license and launched the Inno anyway, the record labels sued XM in federal court, essentially claiming the Inno makes XM a copyright infringer. The copyright legal world for things such as satellite radio and iPods is complex, so I won’t try to explain it here. But, in the early briefing in the case, the battle focuses on whether a federal law called the Audio Home Recording Act (“AHRA”) provides a legal safeharbor for the Inno. The AHRA, enacted in 1992, creates a shelter from copyright infringement liability for makers of home music-recording devices – such as cassette recorders and CD burners. Such a shelter was needed because consumers regularly use these devices to make copies of copyrighted programming, such as modern music. This fight is over whether the AHRA covers the Inno. The court hasn’t yet ruled on this issue. XM argues it designed the Inno to stay within the AHRA safeharbor. Of course, XM tried to push as far as possible toward iTunes-like song selection without leaving the safeharbor, so the question is whether XM went too far. The record labels contend that, while the Inno is a consumer recording device, you can’t ignore the fact that the Inno’s maker, XM, also is the music provider and that XM meshes its satellite radio functionality and the Inno’s recording capability in a powerful way. They say the XM-Inno combination is a de facto download service – a poor man’s iTunes. One wonders how much faith the record labels have in the strength of their lawsuit. The record labels didn’t seek a preliminary injunction stopping distribution of the Inno pending the outcome of the case. A copyright infringement plaintiff with a strong case almost always will do this. Also, simultaneously, the record labels are pressing Congress to pass legislation called the “Perform Act.” It would force XM to buy the more-expensive music distribution license to sell devices such as the Inno. So, TiVo for your satellite radio is here. Now the industry has to resolve how the financial pie will be cut. By John B. Farmer © 2006 Leading-Edge Law Group, PLC. All rights reserved. ____________________________________________________________
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