August 2010
From the editors of Wolters Kluwer Law & Business, this update describes
important developments from CCH and Aspen Publishers intellectual property
and computer law publications.
If you have any comments or suggestions concerning the information provided or the format used, we'd like to hear from you. Please send your comments to john.arden@wolterskluwer.com.
COPYRIGHTS
Restoring Copyright in Foreign Works Not Unconstitutional
Section 514 of the Uruguay Round Agreements
Act (URAA), which grants copyright protection to various foreign works
previously in the public domain in the United States, does not violate
freedom of expression under the First Amendment, the U.S. Court of Appeals
in Denver ruled.
Specifically, Section 514 "restores" copyrights in foreign works
that were formerly in the public domain in the United States for one of
three specified reasons—failure to comply with formalities, lack
of subject matter protection, or lack of national eligibility. It does
not restore copyrights in foreign works that entered the public domain
through expiration of the term of protection.
As a content-neutral regulation of speech subject to intermediate scrutiny, Section 514 was sufficiently narrowly tailored to advance the legitimate governmental purpose of protecting American copyright holders' interests abroad. The district court's ruling that Section 514 violated freedom of expression was reversed (Golan v. Holder, 10thCir, CCH Copyright Law Decisions ¶29,942, IntelliConnect User Link).
Ownership of Infringing Work Could Not Be Awarded as Remedy
A recording company was not entitled to a declaratory judgment that it was the owner of a sound recording that allegedly infringed its copyright in another recording, the federal district court in Miami has held. The Copyright Act does not provide for an award of ownership of an infringing work as remedy to copyright infringement. Under the Copyright Act, relief for infringement includes actual or statutory damages, plus equitable relief that flows from the infringement itself. Therefore, the record company’s declaratory judgment claim seeking ownership or rights to an infringing work was dismissed (Kernel Records OY v. Mosley, SDFla, CCH Copyright Law Decisions ¶29,938; IntelliConnect User Link).
Jury’s Excessive Award against File-Sharer Was Unconstitutional
The Due Process Clause of the U.S. Constitution was violated by a jury's award of $675,000 in statutory damages against an individual file-sharer who downloaded and distributed 30 copyrighted songs, the federal district court in Boston has held. Although the jury's award was within the parameters set by the Copyright Act, it nevertheless was unconstitutionally excessive because it was far greater than necessary to serve the government's legitimate interests in compensating copyright owners and deterring infringement, the court explained.
Section 504 of the Copyright Act permits a copyright owner to recover actual damages or statutory damages in a minimum amount of $750 per infringing act and, in the case of willful infringement, the statutory award may be increased to a maximum of $150,000 per infringement. The jury determined that the file-sharer willfully infringed the recording companies' copyrights and imposed damages of $22,500 per song.
A statutory damage award must bear some nexus to a copyright owner's actual damages and an infringer's ill-gained profits, if any, according to the court. The file-sharer did not derive any direct pecuniary gain from his infringement. The recording companies may have suffered approximately $1 in actual damages for each song that the file-sharer illegally downloaded, Even taking into account an assumed benefit of $1,500 per song that the file-sharer arguably could have derived from illegal file-sharing over a period of several years, the ratio of statutory damages to the file-share's gain was 450:1—grossly excessive and oppressive under any standard, the court said.
In a similar file-sharing case, the federal district court in Minneapolis reduced a jury's excessive award against an individual file-sharer to three times the statutory minimum (Capitol Records Inc. v. Thomas-Rasset, CCH Computer Cases ¶49,884, IntelliConect User Link).
"An award of three times the statutory minimum represented the outer limit of what a jury could reasonably (and constitutionally) impose," the court opined. Three times the statutory minimum was sufficient to compensate the recording companies for any damages while sending a strong deterrence message (Sony BMG Music Entertainment v. Tenenbaum, DMass, CCH Computer Cases ¶49,985, IntelliConnect User Link).
TRADEMARKS
EVISA Software Mark Likely to Dilute Famous VISA Brand
A language-instruction and multilingual software seller’s use of the mark EVISA and the domain name evisa.com was likely to cause dilution by blurring of credit card processor Visa International's famous VISA mark, the U.S. Court of Appeals in San Francisco has held.
The marks were effectively identical; the only difference was the prefix "e," which was commonly used to refer to an electronic or online version of a brand and did not distinguish the marks. The seller presented no evidence to rebut the inference of likely dilution created by the strength and similarity of the marks. The introduction of the EVISA mark to the marketplace meant that there were now two products competing for association with that word, instead of only one.
The common use of the word "visa" in a non-trademark sense did not undermine the uniqueness of VISA as a trademark, according to the court. Visa International could not prevent others from using the word "visa" for its literal dictionary meaning, but the seller was not using the word in that way. Although the seller's software made allusions to visa's dictionary meaning, its mark created a novel meaning for the word: to identify a multilingual education and information business, in the court's opinion (Visa Int’l Services Ass’n. v. JSL Corp., 9thCir, CCH Trademark Law Guide ¶61,637, IntelliConnect User Link; CCH Computer Cases ¶49,980, IntelliConnect User Link).
Injunction Barring Nominative Use of “Lexus” Was Overbroad
An injunction barring automobile brokers from using any domain name that included the mark LEXUS was overbroad because it prohibited domain names that, on their face, dispelled any confusion as to sponsorship or endorsement, the U.S. Court of Appeals in San Francisco has decided. Toyota Motor Sales, U.S.A., Inc. brought a trademark infringement suit against the brokers for using the domain names buy-a-lexus.com and buyorleaselexus.com.
The brokers were entitled to use the LEXUS mark in contexts that qualified as nominative fair uses, the appellate court said. Prohibition of truthful and non-misleading speech would not advance the Lanham Act's purposes of protecting consumers and preventing unfair competition.
Under the nominative fair use doctrine, the brokers could use the LEXUS mark in a truthful manner, even if they failed to expressly disavow association with Toyota, as long as the use was unlikely to cause confusion. The test for likelihood of confusion in a nominative fair use case was whether (1) the product was "readily identifiable" without use of the mark; (2) the defendant used more of the mark than necessary; and (3) the defendant falsely suggested it was sponsored or endorsed by the trademark owner.
It was error for the district court to treat nominative fair use as an affirmative defense to be proven by the brokers only after Toyota established likelihood of confusion. The injunction was vacated and remanded for reconsideration. On remand, Toyota would bear the burden of establishing that the brokers' use of the LEXUS mark in their domain names was not nominative fair use (Toyota Motor Sales, U.S.A., Inc. v. Tabari, 9thCir, CCH Trademark Law Guide ¶61,651, IntelliConnect User Link; CCH Computer Cases ¶49,979, IntelliConnect User Link).
Card Processors Could Be Liable for Sales of Fake Gucci Items
Luxury goods manufacturer Gucci could proceed with contributory trademark counterfeiting claims against three credit card processing services that allegedly enabled online sales of fake Gucci items, the federal district court in New York City has decided. The counterfeit products were sold on a website called "TheBagAddiction.com," operated by individuals collectively known as the "Laurette Counterfeiters," who had admitted liability for counterfeiting activities. The processing services allegedly assisted the Laurette Counterfeiters and other similar website operators.
With regard to contributory liability, there was evidence that one of the service providers intentionally induced infringement by reaching out, via its website, to "high risk merchant accounts," including those selling "replica products." Gucci alleged facts allowing an inference that the provider's advertisements or solicitations were designed to stimulate others to commit violations, the court said.
Although Gucci failed to show that the other two services intentionally induced the sale of counterfeit goods, Gucci alleged that they exerted control over the infringing transactions and knowingly provided their services to the counterfeiters. The Laurette Counterfeiters were functionally dependent on the processing services to complete sales of counterfeit Gucci products, the court observed (Amazing Spaces, Inc. v. Metro Mini Storage, 5thCir, CCH Trademark Law Guide ¶61,636; IntelliConnect User Link; CCH Computer Cases ¶49,982, IntelliConnect User Link).
COMPUTER AND INTERNET LAW
Supreme Court Broadens Test for Process Patents
Claims in a patent application for a method of hedging risk in the field of commodities trading were not patent-eligible because the claimed method was an abstract idea that did not qualify as a patentable "process" under §101 of the Patent Act, a unanimous U.S. Supreme Court has ruled. The patent examiner rejected the patent application as being directed to an abstract idea, a decision that was affirmed by the Board of Patent Appeals and Inferences and the U.S. Court of Appeals for the Federal Circuit (CCH Computer Cases ¶49,639, IntelliConnect User Link).
Section 101 specifies four independent categories of inventions or discoveries that are patent eligible—processes, machines, manufactures, and compositions of matter. A "process” is defined as a "process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material." Consistent with the notion that a patentable process must be "new and useful," U.S. Supreme Court precedent has delineated three specific exceptions to §101's broad principles—laws of nature, physical phenomena, and abstract ideas.
The Federal Circuit erred in rejecting a test it had used in the past for determining whether a claimed invention was a patentable "process" under §101—i.e., whether the invention produced a "useful, concrete, and tangible result"—and holding instead that the "machine-or-transformation" test was the only viable test for deciding whether a claimed method constitutes a statutory "process" under §101. Under the machine-or-transformation test, a claimed process is patent-eligible under §101 if it (1) is tied to a particular machine or apparatus, or (2) transforms a particular article into a different state or thing.
Although the machine-or-transformation test could be a useful and important clue or investigative tool, it was not the exclusive test for deciding whether an invention is a patent-eligible "process" under §101, the Court said. Principles of statutory construction dictate that undefined words used in a statute should be interpreted in their ordinary, contemporary, common meaning. The ordinary, contemporary, common meaning of "process" did not require it to be tied to a machine or the transformation of an article.
In this case, the applicant sought to patent both the concept of hedging commodities trading risk and the application of that concept to fluctuating energy markets. The patentee’s claims attempted to patent the use of the abstract idea of hedging risk, then instruct the use of well-known random analysis techniques to help establish some of the inputs into the equation. None of the claims were patentable processes, but rather were attempts to patent abstract ideas, the Court concluded (Bilski v. Kappos, USSCt, CCH Computer Cases ¶49,973, IntelliConnect User Link).
Action Proceeds against AOL for Search Record Release
California consumers could proceed with claims under that state's Consumer Legal Remedies Act (CLRA) against Internet service provider AOL for unlawfully making public a database containing the Internet search records of more than 650,000 AOL members, the federal district court in Oakland has held. The consumers alleged that AOL made false representations in its privacy policy and other statements posted on AOL's website, which assured members that AOL would endeavor to maintain the privacy of their personal information. These allegations were specific enough to satisfy the requirements of Federal Rule of Civil Procedure 9(b), the court said.
The consumers sufficiently pleaded causation and injury for purposes of the CLRA. The expectations of privacy fostered by AOL’s statements were material in terms of influencing AOL members' decisions whether to disclose sensitive information, in the court's view. "Damage" under the CLRA could encompass harms other than pecuniary damages, the court noted.
The consumers could seek an injunction requiring AOL to: (1) ensure that member search data does not appear as search results; (2) take all necessary steps to enforce a license to prohibit commercial and non-research use of member search data; (3) no longer store or maintain member search data on AOL's search engine; and (4) destroy all member search records in its possession.
AOL allegedly stored search queries containing confidential information and allegedly took no steps to ensure that such data would not be disclosed. By the time AOL pulled the leaked database from its website, the information was posted on a number of other public sites. AOL allegedly did not attempt to retrieve this information or to prevent further republication.
The CLRA requires plaintiffs to provide notice to the defendant of the alleged statutory violation and a demand to rectify the alleged violation within 30 days. The claim for damages was dismissed without prejudice, until 30 days or more after the consumers complied with the notice requirement. AOL could not be held liable for damages if it corrected or indicated that it would correct the wrongs within the 30-day period (Doe v. AOL LLC, NDCal, CCH Computer Cases ¶49,975; IntelliConnect User Link).
Copyright Claim Could Proceed Against Social Publishing Site
An author could pursue secondary copyright infringement claims against the operator of a popular "social publishing website" (Scribd) that allows members of the public to upload written content, the federal district court in San Diego has held. The author sought to hold Scribd liable for the acts of a Scribd user who posted excerpts from the author's works. The author's direct copyright infringement claim failed, but his contributory and vicarious copyright claims survived Scribd's motion to dismiss.
The author failed to plead a direct infringement claim based solely on an allegation that Scribd’s Chief Executive Officer knew of and encouraged the user's infringement because the two were “friends” on the website. Given common practice of social networking site users befriending other users, the "friendship" between the CEO and the alleged infringer was of questionable significance, wholly speculative, and insufficient to allow a "reasonable inference" that Scribd intentionally infringed the author's copyrights, in the court’s view.
The author stated a contributory infringement claim by alleging sufficient facts to show that Scribd “materially contributed” to infringing activity. The author alleged that Scribd failed to remove an infringing item and that Scrib’d provided the "site and facilities" for direct infringement.
The author’s vicarious infringement claim could proceed because he alleged adequate facts to show that Scribd had (1) the “right and ability to supervise” the infringing conduct and (2) a direct financial interest in the infringing activity. The court observed that Scribd could have benefitted financially from infringement if the presence of infringing material on Scribd's website attracted more visitors, thereby making it more attractive to advertisers.
The court declined to consider on a motion to dismiss whether the Digital Millennium Copyright Act's section 512(c) safe harbor barred the author's secondary infringement claims because there were several open questions about whether Scribd had knowledge of the alleged infringing uploads, expeditious removed them, or benefitted financially from them (Williams v. Scribd, Inc., SDCal, CCH Computer Cases ¶49,990; IntelliConnect User Link).
HOT TOPICS
Intel Agrees to Settle FTC Allegations of Anticompetitive Conduct
Federal Trade Commission Chairman Jon Leibowitz, joined by Commissioner
Julie Brill and Bureau of Competition Director Richard Feinstein, on August
4 announced a proposed consent order to resolve the agency’s action
against Intel Corporation for allegedly stifling competition in the markets
for computer chips.
The agency’s December 2009 complaint alleged that Intel unlawfully maintained its monopoly in the markets for x86 Central Processing Units (CPUs) for desktops, notebooks, and servers, as well as smaller relevant markets, and sought to acquire a second monopoly in the relevant graphics markets. The conduct allegedly violated Sec. 5 of the FTC Act, which prohibits unfair methods of competition and unfair acts or practices.
The FTC settlement applies, not only to CPUs, but also to graphics processing units (GPUs), and chipsets. It prohibits Intel from using threats, bundled prices, or other offers to exclude or hamper competition or otherwise unreasonably inhibit the sale of competitive CPUs or GPUs, according to the agency.
The FTC settlement order is intended to protect competition and not any single competitor. Chairman Leibowitz noted that the conduct restrictions would provide a level playing field for AMD and smaller rival VIA Technologies. Both the international settlements and the settlement between Intel and AMD focused primarily, if not exclusively, on AMD’s ability to compete in CPU market.
The settlement also prohibits Intel from deceiving computer manufacturers about the performance of non-Intel CPUs or GPUs. Intel allegedly redesigned its compiler and library software to reduce the performance of competing CPUs and failed to disclose the effects of its redesigned compiler on the performance of non-Intel CPUs.
“This agreement provides a framework that will allow us to continue to compete and to provide our customers the best possible products at the best prices,” said Doug Melamed, Intel senior vice president and general counsel. “The settlement enables us to put an end to the expense and distraction of the FTC litigation,” he added.
The proposed consent order in In the Matter of Intel Corporation, FTC Dkt. No. 9341, is available on the FTC’s website.
Wolters Kluwer Law & Business Publications
Perle and Williams on Publishing Law, Third Edition, by E. Gabriel
Perle, John Taylor Williams, and Mark A. Fischer
The 2010 Supplement for Perle and Williams on Publishing Law is now available on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network and in the Computer and Internet Law practice area of Wolters Kluwer IntelliConnect. Perle and Williams on Publishing Law is a two-volume work that covers the latest legal issues affecting the publishing industry, including advice on clearing text for libel, privacy, and related legal exposures. It identifies issues commonly encountered in negotiating royalties, advances, options, warranty clauses, subsidiary rights splits, and much more. You will also find coverage of intellectual property issues as they affect publishing, including electronic publishing and software, trademark and copyright law, and filing procedures.
The 2010-2 Supplement covers new developments in the fast-changing field of electronic publishing law, including: (1) an update on settlement efforts in the Google Books litigation; (2) a discussion of Lenz v. Universal Music Corp. and the possible obligations of copyright holders prior to issuing DMCA take-down letters; (3) an analysis of Greenberg III and “revised editions” in new media; (4) updated discussions of privacy law and traditional torts under modern copyright law and the Lanham Act; and (5) consideration of scope of immunity under Communications Decency Act § 230 in online advertising, consumer reporting sites, and other contexts. For more information on Perle and Williams on Publishing Law, visit the Aspen Publishers website.
Allen’s Trademark Digest, Aspen Publishers
Aspen Publishers is proud to announce that Allen's Trademark Digest is now available in the Intellectual Property practice area of Wolters Kluwer IntelliConnect. Allen's Trademark Digest remains the only professional journal that organizes, classifies, and analyzes both published and unpublished decisions from the Trademark Trial and Appeal Board and Trademark Commissioner. With 12 issues per year, Allen's Trademark Digest provides comprehensive and timely reporting of important trademark developments in a quick-reading, abstract format that busy lawyers appreciate. More information on Allen’s Trademark Digest is available on the Aspen Publishers website.
Software Patents, Second Edition, by Gregory Stobbs
The 2010 Supplement of Software Patents is now available on the Patent Law tab of the CCH Internet Research Network and in Intellectual Property Law practice area of Wolters Kluwer IntelliConnect. Never before has one resource broken down the process for drafting software patent specifications and claims into manageable segments. Software Patents will show you how to draft accurate, complete patent applications—applications that will be approved and that will stand in court if challenged. It discusses what a software patent is and the legal protection it offers; who holds software patents and for what inventions; and the steps you can take to protect software inventions in the worldwide marketplace.
The 2010 Supplement brings you up to date on the latest developments and adds significant new and revised material on a number of critical topics, including the following: (1) a new section on using means-plus-function claims for software inventions and discussion of cases including In re Donaldson, In re Dossel, and WMS Gaming Inc. v. International Game Technology; (2) coverage of Atmel Corp. v. Information Storage Devices and USPTO Rules on incorporation by reference; (3) analysis of expert testimony insufficient to link disclosed software to claimed function as shown in Medical Instrumentation & Diagnostics Corp. v. Elekta AB; and (4) discussion of the use of a "payment processing" entity or "financial processing" entity for e-commerce transactions in Net MoneyIN, Inc. v. VeriSign, Inc; For more information on Software Patents, visit the Aspen Publishers website.
Patent Claim Construction by Robert C. Kahrl
The 2010 Supplement of Patent Claim Construction is now available on the Patent Law tab of the CCH Internet Research Network and in Intellectual Property Law practice area of Wolters Kluwer IntelliConnect. Patent Claim Construction is an immensely practical resource that provides a comprehensive view of the art of claim construction. The book is intended for the general lawyer or student who needs a resource for understanding how patents are interpreted, the patent prosecution specialist who wants to understand the effectiveness of claim language in the enforcement of patents, and attorneys who attempt to predict the outcome of controversies regarding the scope of a patented invention and are called on to influence the outcome.
The 2010 Supplement brings you up to date on the latest developments, including: (1) a new subsection on the product-by-process claims; (2) discussion of the Federal Circuit’s clarification of the proper use of dictionary definitions as subordinate to the specification in determining the inventor's intended meaning; (3) the Federal Circuit’s explanation of the rationale behind the rule in Paragon Solutions, LLC v. Timex Cor., in which claims for an exercise monitoring system called for a display unit to be worn by the user for displaying “real-time data” concerning the user's performance; (4) discussion of the multi-claim variant of claim differentiation applied in Blackboard, Inc. v. Desire2Learn, Inc., wherein the patentee of a computerized system for learning materials for a multiplicity of users asserted that every claim of its patent included a limitation that a “single login” could be used by both faculty and students; (5) discussion of a seemingly higher standard used for finding a disclaimer than for finding a special definition as stated in Purdue Pharma L.P. v. Endo Pharmaceuticals Inc., in the course of reversing a judgment based upon a disclaimer; and (6) discussion of whether a dictionary reference used to confirm a meaning first suggested by the specification meets the standard of confirming the intrinsic and extrinsic evidence. For more information on Patent Claim Construction, visit the Aspen Publishers website.