Homeland Security Gets Kansas City Panties In A Knot.

You might know that it would take an article on unmentionables to get me back on the blog horse. Well, thanks DHS, for just such a push. It is reported that Homeland Security raided a Kansas City store and confiscated several dozen pairs of panties with the Kansas City Royals trademark on them.

OK, several questions: (i) Panties?; (ii) Homeland Security?; and (iii) Why Kansas City and not my Cardinals in the World Series? Oh, and what does this have to do with law and technology? More on that later.

First, Panties? A Kansas City shop had hand drawn the KC logo and a crown and printed them on ladies panties. Apparently, it was too similar to the actual Kansas City logo and this brought down the wrath of Major League Baseball, which manifested itself in a raid by a division of Homeland Security set up to police intellectual property right infringements. In the past this has sometimes been handled on a local basis by interdictions on the part of local or state police on tee shirt sales at concerts or illegal use of music in bars. However, apparently this is now a national security matter.

You may ask if counterfeit drawers are of such importance that it justifies a diversion of resources such as this. I might ask the same thing. DHS has a division set up to police this type of thing, primarily at the behest of the movie industry. It would have made more sense if the panties were Ebola laden or carried the ISIL logo. Anyway, a word to the wise. If panties can be confiscated, it is apparent that software or hardware and bio-medical equipment or compounds, whether carrying a trademark or not, could become subject to this treatment. That's when technology and law intersect and you don't want to be in that collision.

Interfaces ("APIs") Are Subject To Copyright. No, They're Not! Are Too! Courts Continue To Muddy Up The Water.

There are a mere 37 pieces of computer code that are the subject of this face off between the tech titans, Oracle and Google.  We have followed this case since its inception and you can review the history here, here and here.

In the latest installment, Oracle appealed a lower court ruling that held that application programming interfaces ("APIs") were not subject to copyright.  We thought that the issue might be settled.  Not so fast, my friend.  A three judge panel in the United Court of Appeals for the Federal Circuit has reversed and held that such APIs are indeed subject to copyright protection and the only question is whether Google's use is allowed under the "fair use" exception.  The panel remanded the case to the lower court for a determination of the possibility of such fair use.

After reading the very detailed opinion, the main facts to be gleaned are there was 7,000 lines of code involved, there were 37 different interfaces and the opinion is 69 pages in length.  There is much good discussion regarding the application of copyright law to interfaces and the fair use doctrine.  You should read it.  The law the court cites is extensive but some quibble with the application of such law.  Given past performance, the odds are even that the result will change on appeal.

Updates and Breaking News on Gene Patents, PHI in the Cloud, Class Actions on ClickWraps and SEC Disclosures On Cybersecurity.

Some recent developments in the great, wide world of technology include:

(i)  The Supremes, in a unanimous decision (what?) ruled that naturally occurring genes could not be the subject of patent protection.  However, if you can create a gene artificially, you might still qualify.  Therefore, the creative force described in the Hebrew bible, missed his or her chance when on the sixth day, he or she created all those man genes.  Further, the one year bar and the first to file things have cluttered up the claim.  Also, since man was supposedly created in the image of the creator, there's that pesky prior art issue.  See Assn. for Molecular Pathology v. Myriad Genetics, Inc

(ii)  The recently released rules under HIPAA provide that entities that store protected health information ("PHI") for a covered entity are business associates even if the storage provider does not routinely access the information.  [See 45 CFR Parts 160 and 164 IV(3)]On the other hand, a data transmission organization (such as the U.S. Postal Service or internet service providers) that serve as a mere conduit are not business associates even if they do access the information occasionally in order to provide the service.  So, cloud providers of storage of PHI must sign a business associate agreement.  It is not clear how long one must hold on to a piece of information to be a storer as opposed to a transferor or if encrypting the information in storage without the key would serve to exclude the storage provider from the definition of a business associate.

(iii)  In a recent decision by the Seventh Circuit in Harris v. comScore, Inc., the court allowed the certification of a class to stand.  The class was composed of entities that had downloaded comScore's software that gathered information on the user's activities and sent the information back to comScore's servers.  One of the basic allegations of the plaintiff class was that comScore's clickwrap license was ineffective.  We have discussed this before in this post.  The court did not make factual finding as to any issues and this is only a class certification hearing and comScore may have legitimate individual defenses to many of the allegations.  However, comScore will have to deal with this in the context of a class action.

(iv)  The Securities and Exchange Commission has regulations in place regarding a publicly traded company's obligation to disclose its controls for cybersecurity and is now considering increasing the stringency of those rules.  A recent study by Willis Fortune 500 finds that a substantial percentage of  reporting companies fails (in Willis' opinion) to adequately disclose such company's exposure to cybersecurity issues and the impact on the company if an event occurs.  Look for this to increase in importance as the supposed cybersecurity wars increase in intensity.

What Are Patent Trolls and Why Is President Obama Saying All Those Terrible Things About Them?

Patent: an intellectual property right granted by the Government of the United States of America to an inventor “to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States” for a limited time in exchange for public disclosure of the invention when the patent is granted.  USPTO Website

Troll: a dwarf or giant in Scandinavian folklore inhabiting caves or hills.  Merriam-Webster Dictionary

Patent Troll: (Patent Assertion Entities, also known as PAEs) or "companies that don’t actually produce anything themselves and essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them".  President Obama

Patent trolls accounted for more than half of the patent suits filed this year.  The President issued executive orders today that, inter alia, asks Congress to pass laws to: (i) require disclosure of the real party in interest (not just the Patent Assertion Entity that merely holds patents, but doesn't practice any of them); (ii) remove consumers that are using the affected products in the manner intended from the effects of the lawsuits; and (iii) provide for the awarding of attorneys fees and costs to defendants in "abusive" lawsuits.

Now, given the speed in which Congress acts (Hey, the House has already repealed Obamacare 37 times), it is likely that this will not have any near term effect.  Some large patent holders, that are not PAEs, have expressed concern that laws such as those suggested by the President could have unintended consequences and make it harder for non-trolls to protect their patents.

Given that it is possible that facts will surface that indicate that the IRS has engaged in the targeting of trolls, that trolls could have prevented the tragedy at Benghazi or that trolls were the AP sources that the Justice Department was looking for, this could get folded into the other "scandals" and fail to get any legislative traction.  Or, it could just not get any legislative traction, like almost everything else.  It's now up to Congress.

FTC Concludes Investigation Into Google's Search Practices, Finds Nothing Much Wrong There. Hey, Google It If You Don't Believe It!

The Federal Trade Commission has been investigating Google's practices in regard to patent licensing, search results and other matters for about two years.  The FTC sought to determine if Google's practices in these regards were anti-competitive.  The FTC ended their investigation the first week of this year and entered into an agreement with Google in exchange for the FTC agreeing not to pursue the matter further.

Part of the analysis by the FTC was a investigation into whether Google manipulated its search algorithms such that websites that competed with Google's "vertical" results (i.e. sponsored Google sites) were moved down in the search results with concomitant  damages to the click through rate to such competing sites.  The FTC found that even though "...some of Google’s rivals may have lost sales due to an improvement (sic) in Google’s product...(t)he totality of the evidence indicates that, in the main, Google adopted the design changes that the Commission investigated to improve the quality of its search results, and that any negative impact on actual or potential competitors was incidental to that purpose."  The Commission went on to say "...these changes to Google’s search algorithm could reasonably be viewed as improving the overall quality of Google’s search results because the first search page now presented the user with a greater diversity of websites."

Needless to say, not all were enamored with the FTC's actions.  Microsoft, having been kicked around by the FTC for years, bemoaned the actions as "weak"Others found it to be totally justified.

Whatever your view, this is a win for Google and clears up their docket to proceed with their pursuit of world domination.  Not that there's anything wrong with that.

Are Confidentiality Provisions and I.P. Assignment Clauses In Employee Agreements To Be Treated Like Non-Compete Provisions? South Carolina Supreme Court Says No.

Almost every technology company of any variety has a couple of standard provisions in the documents that their employees sign as part of the employment on-boarding process.  Those are, of course, provisions that require the employee not to divulge certain information that they learn as a result of their employment and that provide that any intellectual property developed by the employee during the employment (and often for a period thereafter) and based on information provided by the employer, belongs to the employer.  Some agreements also contain non-compete provisions, which purport to prohibit the employee from engaging in certain kinds of employment activity after the present gig ends.

Mr. Morin went to work for Milliken & Company in South Carolina as a research physicist and worked for Milliken for nine years developing fibers.  Apparently, Mr. Morin began to make plans for his own company prior to leaving the employee of Milliken and filed for a patent on a new fiber within a few months after resigning from Milliken.  Milliken thought such behavior was untoward and filed a suit against Mr. Morin for breach of the confidentiality provisions and the breach of invention assignment provisions in his employee contract, among other things.

The appeal of this case recently found its way to the Supreme Court of South Carolina.  One of Mr. Morin's principal arguments was that the confidentiality provisions and the assignment of inventions provision were restraints of trade and as such, should be reviewed under the same standard as a non-compete provision, i.e. not favored by the courts and construed against the employer unless certain very stringent requirement were met.

The South Carolina Supreme Court disagreed with Mr. Morin and found that such provisions (confidentiality and invention assignment) were not restraints of trade and as such, were to be reviewed under the reasonableness standard, i.e. to be enforced as an ordinary contract provision unless the provisions exceeded what was necessary to protect the legitimate interests of the employer.  The court held: "We therefore hold confidentiality and invention assignment clauses are not in restraint of trade and should not be strictly construed in favor of the employee."

This confirms what most of us in this industry believed to be the law and should make it easier for well crafted provisions of this nature to be enforced in the future.

Oracle v. Google. Did Anybody Win?

Avid followers of this blog will clearly remember our discussion of the initial filing of the lawsuit involving the clash of the Larrys (i.e. Ellison [Oracle] and Page [Google]).  For a quick refresher, Oracle claimed that Google infringed on Oracle's Java related intellectual property (which Oracle obtained by buying Sun) by, among other things, violating some patents and copying application program interfaces ("API") in the development of the Android operating system.  There has been some question as to whether APIs are subject to protection by copyright but Oracle claims that the ones in Java are sufficiently complex  that they should be protected.  A recent case in Europe has held the other way.

The jury in this case held that Google did violate Oracle's copyrights but could not reach a decision as to whether the use was "fair use", a defense under the copyright act.  Therefore, this is not very conclusive.  The case is divided into three phases and this was the end of the first phase.  The case went directly into the patent phase of the case and the subsequent phase will be the damages phase.  So, a lot of work to do until this is finally decided but it is evident that this will have far reaching effects however it comes out.

New Patent Legislation Signed by President Obama - All Patent Problems Immediately Cured.

Snarky titles aside, President Obama today signed into law the America Invents Act.  This bill passed the Senate by a vote of 95 to 5, so given the political climate in Washington today, you almost have to assume that it doesn't do much, but that might be unfair.  Some of its features include:

  • Changes the definitive date from the first to invent to the first to file.  This is designed to eliminate controversy and the necessity of a court to review a lot of evidence to determine who has prior rights.  It also puts the U.S. into conformance with most of the rest of the world on this issue.  It also creates a race to the USPTO and may favor large companies with money and staff over inventors with less resources.
  • Allowing the USPTO to set its fees and keep most of the fees itself in contrast to having them siphoned off to fund other agencies as in the past.  This supposedly will help clear up a backlog of approximately 1 million applications.
  • Giving rights to third parties to challenge a patent within 9 months after its issuance.  It also limits patent rights for tax systems and financial products or systems.

Large companies like IBM touted the legislation but others weren't so impressed.

A full text of the bill can be found here.  Problems solved.

Design On Toilet Paper Found To Be Functional and Trademark Gets Wiped Out and More Bad Puns.

In the technical arena, we routinely deal with trademarks and their validity.  A basic tenet of trademark law is that if the thing that is being trademarked is "functional", i.e. useful for the product to function, it can not be the subject of a trademark.  We recently wrote about a case with which we disagreed that found that the image of Betty Boop on a purse was functional and therefore could be used on the purse without infringing.

Another case involving functionality in a trademark setting was recently decided by the Seventh Circuit and this case involved toilet paper.  The initial line in Georgia-Pacific Consumer Products LP v. Kimberly-Clark Corporation et al (Seventh Circuit Court of Appeals, No. 10-3519, Decided July 28, 2011) states: "Toilet paper. This case is about toilet paper. Are there many other things most people use every day but think very little about? We doubt it."

The case is a decision on a summary judgment motion filed by Kimberly-Clark that, inter alia, alleged that the "Quilted Diamond Design" on Georgia-Pacific's Quilted Northern was functional and therefore, Georgia-Pacific couldn't enforce an infringement action against Kimberly-Clark using a similar design on their Cottonelle product, even though the quilted design was the subject of a registered trademark.

The decision rested in large part on the fact that Georgia-Pacific had several utility patents on the design and the Court found that this was "strong evidence" that the design was functional, particularly if the "central advance" claimed in the utility patent matches the "essential feature" of the trademark.

The Court also engaged in what passes for ribald humor in an opinion.  In addition to their explosive first line described above, the puns flowed freely in the opinion: e.g. "Georgia-Pacific unrolled this suit against Kimberly-Clark", "...despite the fact that the judge dutifully plied her opinion, we now wipe the slate clean...", "[this] claim...does not hold water" and the "...judge was spot-on".  Riotous humor for a judicial opinion.

In the end [see what I did with that?] the Court held that "...if a design is functional the owner cannot trademark the design and block innovation. Georgia-Pacific, whether intentionally or not, patented their Quilted Diamond Design and claimed it to be functional. They must now live with that choice and can benefit only under the protection of a patent, not that of a trademark."

So the Court got to the bottom of the matter, flushed Georgia-Pacific's trademark claim and dispensed a double roll of justice.  

Please, may I be excused for this?

University of Texas Investment In Patent Company Questioned.

Our partner, Luke Stanfield, was quoted in the most recent issue of the Austin Business Journal In an article written by Christopher Calnan, the activities of The University of Texas Investment Management Co. ("UTIMCO") in investing in Intellectual Ventures Management LLC ("Intellectual Ventures") were called into question.

Intellectual Ventures is referred to as a patent troll or a hedge fund that defends valuable intellectual property, depending on the person doing the assessment.  The article cited above mentions that Intellectual Ventures has acquired rights to more than 30,000 patents and its principal business is licensing such patents and litigating the alleged infringement of such patents.

The article questions whether this is something in which the University of Texas should be investing.  Some say such firms do not foster innovation and in fact, divert the resources of the targeted companies.  This was Luke's focus when he was quoted in the article as saying: "If companies are forced to spend money on lawsuits instead of research and development, it can stifle innovation".  Sounds right to me.

Who Owns The Patent? Your Assignee or Your Assignee and Your Toxic Ex-Spouse?

We hold these truths to be self evident: (i) Patent rights originally vest in the inventor even if the patent was conceived in the course of employment; (ii) Most companies get assignments from their employees as to patent rights; (iii) All property obtained during marriage is presumptively community property in community property states (e.g. California and Texas); (iv) divorces can be nasty.

So, what happens if an inventor works for a company, creates a patentable invention while married, signs the standard assignment of intellectual property and the spouse does not sign the assignment.  Is that an effective assignment?

Or, what happens if an inventor develops a patentable invention, gets a divorce in which the ownership of such patent is not mentioned, then assigns the patent, the assignee then brings suit on the patent and the defendant moves to dismiss the complaint because the ex-spouse is a necessary party and was not named in the suit?

Who gives a damn?  Well, the U.S. Court of Appeals for the Federal Circuit has to decide this issue in Enovsys LLC v. Nextel et al.  In this case Nextel was sued for infringement of some GPS patents that Enovsys obtained from an inventor after his divorce.  The inventor and the spouse got a "quickie" divorce in California in which they marked a box on the divorce form that said they did not possess any community property.  The Court of Appeals thought that this was enough to vest all ownership in Enovsys and preserve their standing to sue.

Although the Court skirted the issue (no sexism implied) in this case, the issue remains as to the status of patents obtained during marriage and the proper way to assign them.  California and Texas are community property states and both states recognize that property obtained during a marriage is presumptively community property.  The Court of Appeals in Enovsys confirmed that federal patent law does not preempt state law in regard to property ownership.  The Texas Court of Appeals has said (in dicta) that "It is unquestionable that, had these patents been taken out during the marriage, the patents and the income they generated would be community property. In this, we would join other jurisdictions in which the courts treat the income from intellectual property created during marriage as marital or community property."  Alzenz v. Alsenz 101 S.W.3d 648 (2003)

Then, is it possible that a spouse or ex-spouse in a community property state has an interest in your patent portfolio?  Must you get the spouse to sign the assignment of intellectual property rights that resides in your standard forms that companies get all employees to sign?  Must you update that if an unmarried inventor gets married?  Seems like a lot of trouble, doesn't it?  Good practice may indicate that you do so, but the dearth of cases that revolve on this issue would seem to indicate that maybe the chances are so slim that it's not worth the trouble. 

What do you think?

Your Government And Courts At Work.

A few things for your consideration:

1.  The White House's proposed budget includes the authority for the USPTO to charge a surcharge on patent applications.  The proposed budget would provide $2.7 billion for fiscal 2012 with one of the stated objectives to reduce the backlog of 720,000+ applications.

2.  By Executive Order 13565 of February 8, 2011, the White House established two I.P. committees.  One is the Senior Intellectual Property Enforcement Advisory Committee, which will facilitate the formation and implementation of each Joint Strategic Plan, which will be be developed by the other committee established, the Intellectual Property Enforcement Advisory Committee.  As is evidenced by their names (i.e. Senior and not Senior) the Senior Advisory Committee will be comprised of cabinet level members or their designees and the Enforcement Advisory Committee will be comprised of representatives from the USPTO, DOJ, Department of Commerce and others.

3.  Health and Human Services through its Office for Civil Rights has assessed its first ever civil penalty for violation of HIPAA.  The penalty was $4.3 million against Cignet Health of Prince George’s County, Md.  Cignet failed or refused to provide health records to at least 41 patients and then apparently stonewalled the patients and requests from the Office for Civil Rights to the extent that the Office for Civil Rights obtained a default judgment against them.  Cignet also apparently was uncooperative in the investigation into this affair.  The penalty was $1.3 million for failure to provide access to the records and $3.0 million for being uncooperative.

4.  Microsoft was successful in getting a patent infringement suit originally filed in the Eastern District of Texas transferred to the Western District of Washington on the grounds of forum non conveniens.  For some strange reason, there are a lot of patent infringement suits and class actions filed in the Eastern District of Texas.  The plaintiff here, Allvoice, was an U.K. company with an office in the Eastern District of Texas but with no employees there or anywhere in the U.S.  Calls there were transferred to their office in the U..K.  Allvoice was incorporated in Texas but had done so 16 days before the suit was filed.  Forum shop much?  The Circuit Court of Appeals issued a writ of mandamus compelling transfer to Microsoft's home court even though Microsoft had also petitioned to move the case the Southern District of Texas.

 

Updates: Stuxnet, Bilski, COICA, Arcade Fire (HTML5)

Updates on a few of our earlier posts:

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Revenge of the Native Americans Continues. Sovereign Tribes Not Subject To Suit For Patent Infringement.

Specialty House of Creation ("SHC") is a company started in a chicken coop in 1971 by a 63 year old grandmother and a 26 year old entrepreneur (who both apparently loved dogs).  Their business grew over the years and one of their products is the "Slot-Card with Claw".  This device is designed to keep casino goers from losing their player cards by tethering the card to a belt loop, shirt pocket, body piercing or other stable foundation.  SHC has a patent on this device.

SHC provided a number of these Slot Cards to the Quapaw Tribe of Oklahoma for use in the tribe's casinos.  The Tribe allegedly obtained more of these tsotchkes from another company and referenced the SHC patent number in the request.

SHC sued the Quapaw Tribe in the Federal District Court for the Northern District of Oklahoma.  The Tribe moved for dismissal due to lack of subject matter jurisdiction.  The Court granted the motion and dismissed the suit.  The Court followed a line of cases that indicate that a tribe is a sovereign power and as such is immune from private law suits (including patent and copyright infringement) unless such sovereign immunity has been waived.  The Court did not find any such waiver and therefore dismissed the suit.

I think we can blame this too on George Bush.

USPTO Has Really Busy Year - Record Number of Patents Issued

According to IFI, the United States Patent and Trademark Office granted 219,614 patents in 2010.  This is 31% more than was granted in 2009 and 29% more than granted in the next busiest year (2007).  Granted applications took a big jump around 1998 when software patents began to be granted with more regularity (thanks, State Street Bank case).

Not everybody is happy about this, as some see this as merely an effort by the USPTO to reduce their backlog (now standing at 720,000+) and not as an increase in efficiency and quality.

In any event, a lot of patents were issued and the pace seems to be increasing.  Happy days are here again.

The Software Patent Lawsuit to End .....Software Patents?

Recently, Paul Allen (co-founder of Microsoft and worth roughly the GDP of Jamaica) filed a patent infringement lawsuit against most of Silicon Valley.  The Defendant's list reads like a who's who of modern technology giants:  Apple, Google, Facebook, eBay, AOL, Netflix, Yahoo, Office Depot, Office Max, Staples, You Tube (not listed: Microsoft).

The patents at issue extend back to the late 90s when Allen's now defunct company, Interval Research, was granted a number of patents dealing with e-commerce and search process.  In fact, it was so long ago that Google wasn't even in existence when some of the patents were applied for. This is obviously a big deal for Silicon Valley companies as they struggle to work within the current patent system.  The sheer number of defendants and the issues at stake has lead some to surmise that this could be the tipping point for software patents as a whole.  Earlier this year, many were guessing/hoping that software patents would finally be invalidated in by the Supreme Court in the recent case, In Re Bilski, but that didn't happen.  Obviously, an entire industry cannot constantly be fighting out their innovations in the court room because in the long run, it only ends up hurting consumers and stifling progress.  So we'll see if this is actually a turning point in our current patent system or just another addition to our patent thicket.  Stay tuned. 

Apple Patent Could Remotely Disable Jailbroken iPhones

After a ruling last month by the Library of Congress that jailbreaking cellphones, such as Apple's iPhone, was an exception to the DMCA, many users who didn't want to be tied to Apple's network and app restrictions rejoiced.  However, that freedom could be short lived.  A recently published patent application by Apple describes a system that seeks to identify "hacking, jailbreaking, unlocking, or removal of a SIM card."  According to the application, Apple could combat this by remotely examining for unauthorized use.  Some the measures Apple could take include:

  • keylogs
  • screenshots
  • deleting "sensitive data" (yikes!)
  • surreptitiously activating the cell phone's camera (double yikes!)

The purpose of this system is to protect consumers from "unauthorized users."  It's possible that Apple will consider users of jailbroken phones "unauthorized" based on this statement from the application describing the system:

An activity that can detect an unauthorized user can be any action that may indicate the electronic device is being tampered with by being, for example, hacked, jailbroken, or unlocked.

It's unclear whether Apple will ever actually implement these measures, but the Orwellian methods of detecting unauthorized use is a little disconcerting to say the least. 

Oracle vs. Google, Godzilla vs. Mothra, Perseus vs. The Kraken and other Titanic struggles

Consider this abbreviated time line:

November 5, 2007 - Google, T-Mobile, HTC, Qualcomm and Motorola announce the release of Android and announce the creation of The Open Handset Alliance comprised of 34 companies that will free the mobile world of all restrictions (the last part is made up).  Nowhere in the announcement does Java get mentioned.

Same day (almost like they knew it was coming) - The Chairman and CEO of Sun (possessor of Java) heartily congratulates Google et al on the release of Android and hails the salutary effect it will have on the Java community.  The blog entry goes out of its way to call Android a "Java/Linux phone platform" and "a Java based platform".

April 20, 2009 - Oracle buys Sun.  In the press release announcing the sale, Oracle calls Java "the most important software Oracle has every acquired."

 August 12, 2010 - Oracle files suit against Google alleging "In developing Android, Google knowingly, directly and repeatedly infringed Oracle's Java-related intellectual property. This lawsuit seeks appropriate remedies for their infringement."

Now what happens?  Google will claim that they aren't using Java but built their own version of this platform called Dalvik using approved clean room methods and therefore haven't infringed on anything.  Google hasn't filed an answer yet and probably won't for some time.  Then the fun will start.  This has the potential to be a very visible and influential suit with ramifications for years to come.  Google is not likely to be the last company with Defendant after their name in this matter.  There are millions and millions of devices with Android running on them.  Plus it involves some heavyweights.

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STARTUP WEEK: Intellectual Property and Your Company

So now you've chosen your entity, it's been incorporated, you have startup capital and are up and running, you've spent thousands of dollars in creating a logo, branding, and marketing.  Things are going great, and then one day you are hit with a cease and desist letter stating that you are infringing on another company's trademark because the name you are using is confusingly similar to the other company's name.  Now you are not only in danger of being sued, but you've just wasted thousands of dollars and many months of hard work on a name and brand you can't even use.  This is just one illustration of how important it is to assess as early as possible the intellectual property (IP) landscape of your company.  Three questions every new business owner should ask: "What IP does my company have?", "How do I protect that IP?" "Am I in danger of infringing the IP rights of another?"  This post will give a summary of the main types of intellectual property, how to protect IP, and how to avoid infringement.  This is just a summary and is no means comprehensive.  Every new business owner should consult with an attorney about their IP issues.

The four main types of IP: 1)Trademarks 2)Copyrights 3) Patents and 4)Trade Secrets. 

TRADEMARK LAW

Trademarks allow a company to easily distinguish itself in the marketplace in the minds of consumers.  A well known trademark is often one of a company's biggest assets.  Trademark law gives a company the exclusive right to use a distinctive mark used to identify its goods or services.  It allows for a company to develop a brand in the marketplace without fear that another company will cause a "likelihood of confusion" by using a similar mark.  Trademarks do have "common law" protection under federal law and the law of most states; meaning that you do not have to register to have protection.  But registering your distinctive mark at the federal and state level provides a number of benefits.  Registering serves as constructive notice that your mark is in use, it makes it easier to prove your case in court, and it gives you protection in a far greater area.  Prior to registration, the mark should be followed by "TM" for trademarks and "SM" for service marks.

Not all names are available for trademark protection.  The mark must be sufficiently distinctive.  The level of distinctiveness depends on the context it is used.  Generic or common terms are not protectable if they are used in the area they describe.  For example, "Apple" is protectable when used with computers, but would not be protected if the company sold fruit.  Marks can't be overly descriptive either.  For example, "Eye-Care Center" would not be protectable for an optometrist's office.  Suggestive marks have a better chance of obtaining protection, but are not perfect because they could be seen as too generic/descriptive.  For example, "America Online" is suggestive of the services it provides.  The best choice for a protectable mark would be an arbitrary or fanciful term.  (Think "Yahoo!" and "Google")  It should be noted generic or descriptive marks can become protectable through their use. A mark can obtain "secondary meaning" through its extensive and continuous use in commerce to such an extent that it has achieved the required level of distinctiveness. 

Picking a distinctive mark is just half the battle.  You must also ensure that you are not using a mark that infringes another company's rights.  The basic test the courts use when determining if a mark is infringing is "likelihood of confusion" in the minds of consumers.  There are thirteen factors courts consider when determining likelihood of confusion.  (Known as the "DuPont Factors")  You should search extensively for similar marks on the USPTO website  and consult with an attorney before deciding on your mark.

COPYRIGHT LAW

Copyright law protects original works of authorship fixed in a tangible medium of expression.  Obviously, this includes many areas: literary works, musical works, dramatic works, photos, paintings, sculptures, architectural works to name a few.    Business that don't produce these types of works should still consider whether they have copyrightable material.  Marketing materials, training materials, or other works that the business creates during its operations could potentially be copyrightable.

Anytime a business contracts to create something new it should consider the copyright involved.  Just because someone creates something for a business doesn't necessarily mean the business own it.  This is a common issue in "works for hire" cases, and every company should address ownership of the copyright when contracting for works made for hire. 

Similar to trademarks, copyrights can be registered, but they do not have to be.  Copyright protection exists from the moment of creation.  But like trademarks, there are a number of benefits from registration.  It is much easier to prove infringement if the copyright is registered, there are substantial statutory damages as well attorney fees available to the registered copyright holder.  Copyrights are relatively easy to register compared to patents and trademarks, but registration can be deceptive in its simplicity.  Consulting with an attorney is recommended. 

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Bilski: The Landmark Case That Wasn't ... Helpful?

We recently wrote about the recent Bilski holding, and how the narrow decision seemed to do little, except for increase the confusion about business method and software patents. The issue is understandably complicated (likely why the Supreme court punted this decision), and the holding is evidence of that. As I was reading Techdirt, I saw The IEEE recently released a press release that illustrated how confusing the recent decision actually was. The IEEE reported, "The U.S. Supreme Court ruled 5-4 Monday that a new method of doing business can be patented, and that the ability to patent software should not be limited." As Techdirt points out, this is not exactly the case. It was not a 5-4 decision, but a 9-0 with a split majority, and the holding did not succinctly state “that a new method of doing business can be patented.”

In an attempt to help clear up some of the confusion, we spoke with Bob Villhard, a local Austinite patent attorney (who we also work with quite a bit), about the Bilski holding. Our discussion turned into a brief summary by Villhard on the subject. In a much more eloquent manner than myself, here is Villhard’s insightful interpretation of Bilski:

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Bilski: The Landmark Decision That Wasn't

In the highly anticipated decision, Bilski v. Kappos, the Supreme Court affirmed the rejection of a specific business method patent, but left the door wide open on the validity of thousands of similar patents.  In what has become typical for decisions under the Roberts Court, the majority opinion was narrowly defined.  The court ruled only on the specifics of the case while failing to provide much guidance for similar patents. 

Watching the case intently were both sides of the patent divide. Of course, large sectors of the economy depend on patent rights for growth and innovation, and many feel that more patent rights further innovation. However, there exists a large segment of the business community, including many in the tech industry, who were hoping the court would take this opportunity to put an end to controversial business method patents (and software patents) by applying the "machine or transformation" test adopted by the Federal Circuit.  The test requires any patent to either: 1) be tied to a particular machine devised to carry out a process in a non-conventional, non-trivial way, or 2) transform an article from one thing or state to another.  Abstract ideas like business methods would not satisfy the test. 

At issue in Bilski was a rejected business method patent for a system to hedge on energy prices using weather projections.  And while the court rejected this particular patent, it went out of its way to state that it was a narrowly defined decision, and the machine or transformation test is only "useful and important clue," but should not be the sole test.  Many justices on the court expressed doubt about the validity of business method patents, but a majority of them were not ready to categorically exclude them from patentability.  The result is that thousands of business method patents and software patents remain valid, but future litigation will be needed to determine which ones.  So the lesson as always: nobody really wins except the lawyers. 

Patent Office Relaxes Rules for Green Technologies

In an effort to spur more green technology innovation and business development, the USPTO has decided to alter the application process for green technology related patents.  The initiative is a part Green Technology Pilot Program that allows a fast-track process for patents relating to green technology.  Under the pilot program, inventions related to green technology include:

  • discoveries related to renewable energy
  • more efficient use of energy resources
  • a reduction in greenhouse gas emissions

The average review time for green technology patents is 30 months.  The USPTO hopes to shorten that time frame and examine over 3,000 patents in the first year.  So far, under the Green Technology Pilot Program there have been over 950 requests for accelerated review and only 342 requests granted.  These new rules are aimed to alleviate that problem. 

Microsoft sues SalesForce.com for Patent Infringement

 

Ina Fried, from CNET.com, reported this week that Microsoft filed a patent infringement case against SalesForce.com. SalesForce.com is, among other things, a customer relations management (CRM) software company that provides its product through the cloud. Microsoft is no stranger to patent lawsuits. In fact, they were just ordered to pay $200 Million to Virnet X in a patent infringement lawsuit regarding VPN technology. However, the peculiar thing about the lawsuit filed against SalesForce.com was that it was Microsoft doing the suing. Microsoft has only filed 4 suits against competitors. Most infringement issues involving Microsoft commonly end up in some type of license agreement with the alleged infringer. (See HTC) From this Microsoft receives damages and then licenses their technology to the competitor. However, there appears to be more uncertainty surrounding this case.

 

It is no secret Microsoft is one of the more established players in the IT world. However, Microsoft, along with everyone else has been losing ground to Google. Microsoft and Google are competitors in e-mail (Gmail/Hotmail), browsers (chrome/IE), search engines (Bing/Google), electronic documents (Office/Google docs), and soon in operating systems (Windows/Chrome OS). Microsoft is attempting to chase Google into the cloud computing realm, as evidenced by the direction Office 2010 and other products are trending. The lawsuit against Salesforce.com might be just another way to gain ground. One of the benefits of being in the game as long as Microsoft has is that they have ownership to some of the foundational technology we all use today. Take a look at the subject matter referenced in these patents:

 

Ø       7,251,653: Method and system for mapping between logical data and physical data

Ø       5,742,768: System and method for providing and displaying a web page having an embedded menu

Ø       5,644,737: Method and system for stacking toolbars in a computer display

Ø       6,263,352: Automated web site creation using template driven generation of active server page applications

Ø       6,542,164: Timing and velocity control for displaying graphical information

Ø       6,281,879: Timing and velocity control for displaying graphical information (the 164 patent above looks to just be a continuation of this patent)

Ø       5,845,077: Method and system for identifying and obtaining computer software from a remote computer

Ø       5,941,947: System and method for controlling access to data entities in a computer network

 

All of these patent subjects are associated with cloud computing factors. This is no surprise since Salesforce.com is run from the cloud, but it does question what Microsoft will do next? Will they pursue other companies that infringe on the broad patents? Are they trying to get enforcement out of their patents before the Supreme Court returns an opinion on In re Bilski? Are they just trying to get another license agreement?

The Ongoing Patent Thicket War

 

For a good analysis and roundup of the ongoing patent litigation war occurring in the smartphone industry check out this Wired article.

What has for years been a who will-blink-first Mexican stand-off between the tech giants has turned into an all-out gunfight, albeit one conducted by the toughest corporate lawyers money can buy. "Everybody started suing each other a lot more -- not only in telecoms, but in software and a number of other fields -- starting in the mid- to late-90s," says Jim Bessen, a law lecturer at Boston University. "The number of lawsuits filed in the US has tripled since the early-90s." Other than the spat between Apple and Nokia, over the past couple of years several other high-profile companies have become lawyered up.  

The current spat of litigation highlights the problems with the current international patent system and the need for significant reform.

The fight between Apple and Nokia is emblematic of a broader malaise sweeping the tech and communications industries as companies use their patents not for innovation, but to hobble their rivals. Some of the world's most forward looking businesses are now litigators as well as innovators.