December 2008

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

Attorney Fees Awarded for Filing Suit With Invalid Registration
A patent holding company (NTP) was a “prevailing party” entitled to attorney's fees pursuant to Section 505 of the Copyright Act when a software developer's copyright infringement claim was dismissed for lack of subject matter jurisdiction, the U.S. Court of Appeals for the Federal Circuit has held. The developer argued that the patent holding company could not be a “prevailing party” because the action was dismissed on jurisdictional grounds. A prevailing party is one that has obtained some kind of relief from the court on the merits of a claim such that a "material alteration of the legal relationship of the parties" has occurred. The district court's decision that the developer's copyright registration was invalid constituted a decision on the merits because it materially altered the parties' legal relationship, the court concluded. (Tavory v. NTP, Inc., FedCir, 2008 Copyright Decisions ¶29,652; CCH Computer Cases ¶49,621).

Notice to Terminate Suspended License Was Invalid
An instruction to a jury that making sound recordings available for distribution on a peer-to-peer network qualified as distribution under the Copyright Act substantially prejudiced a file sharer's rights, the federal district court in St. Paul ruled. Accordingly, the jury's verdict that the file sharer willfully infringed sound recordings by illegally downloading and distributing the recordings via an online peer-to-peer file sharing application was vacated, and the file sharer was granted a new trial. Pursuant to the jury instruction given by the district court, actual distribution was not required. However, upon reconsideration, the court concluded that liability for violation of the Copyright Act's exclusive distribution right requires actual dissemination of the work. Equating the charge of "making available for distribution" with illegal “distribution” would undermine settled case law holding that merely inducing or encouraging another to infringe does not, alone, constitute infringement unless the encouraged party actually infringes, the court reasoned (Capitol Records, Inc. v. Thomas, DMinn, 2008 Copyright Decision ¶29,648).

TRADEMARKS

First Amendment Shielded Video Game’s Depiction of Strip Club
A video game producer did not violate the Lanham Act or California Unfair Competition Law by using the distinctive logo and trade dress of a Los Angeles strip club (the “Play Pen”) to depict a cartoon parody of the club (the “Pig Pen”) in Grand Theft Auto: San Andreas, which was set in a cartoon-style city modeled after Los Angeles, according to the U.S. Court of Appeals in San Francisco. The video game maker's conduct was protected by the First Amendment.

Use of a trademark in an artistic work is not actionable unless the use is devoid of artistic relevance to the underlying work or it explicitly misleads as to the source or the content of the work. In this case, the game maker’s artistic goal was to create a cartoon parody of East Los Angeles. Thus, use of the Play Pen’s trade dress and trademark bore some artistic relevance to the game, the court said. In addition, use of the club’s trade dress in the game did not explicitly mislead consumers as to the source or content of the game—the public would not reasonably believe that the club operator produced the game, or the game maker operated the club (E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc., 9th Cir, CCH Trademark Law Guide ¶61,327; CCH Computer Cases ¶49,625).

“Couch Bar” Design for Trucks Likely to Dilute Hershey’s Marks
A well-known maker of chocolate and confectionery goods (Hershey) was entitled to a preliminary injunction barring a Michigan-based furniture retailer from using or displaying a planned design for its decorated delivery trucks, the federal district court in Detroit has decided. Hershey was likely to succeed in showing that the retailer's “couch bar” design would cause dilution by blurring of Hershey's trademarks and trade dress for its chocolate bars. The “couch bar” design, along with nine other sample designs, were posted on the retailer’s website as part of an advertising campaign encouraging visitors to vote on a favorite design. The winning design would be emblazoned on the retailer’s two dozen delivery trucks.

Hershey’s marks and trade dress were famous and distinctive, and the marks became famous well before the retailer developed its truck design. Posting the truck design on the retailer's website as part of an ad campaign constituted a use in commerce, in the court's view. The evidence supported an inference that the retailer intended to create an association with Hershey’s chocolate bar packaging. The truck design bore a resemblance to some of Hershey’s candy bars. Accordingly, the design was likely to blur the distinctive nature of the candy bar packaging and marks.

Hershey failed, however, to establish a likelihood of success on its trademark infringement claims. Hershey’s marks were strong, and the retailer likely intended to evoke Hershey’s packaging with its truck design, but all the other likelihood of confusion factors weighed against a finding of infringement, the court said. Although the truck design bore a resemblance to a Hershey’s chocolate bar, differences between the designs made confusion unlikely. (The Hershey Co. v. Art Van Furniture, Inc., ED Mich., CCH Trademark Law Guide ¶61,323).

Dog Toy Resembling Budweiser Trade Dress Was Likely to Confuse
A dog toy maker’s “Buttwiper” squeeze toy was likely to cause confusion with brewer Anheuser-Busch's famous “Budweiser” beer trademarks and trade dress, according to the federal district court in St. Louis. The dog toy maker was preliminarily enjoined from manufacturing and selling the toys.

The “Buttwiper” toys were marketed in pet stores and online, under the toy maker's “Silly Squeakers” brand. The packaging, labeling, colors, and trade dress of the “Buttwiper” toy resembled those used for Budweiser beer. Anheuser-Busch presented a valid consumer survey that reported a 30 percent confusion rate among potential purchasers of dog toys. A significant percentage of respondents had the mistaken belief that “Buttwiper” was made or sold with the approval or sponsorship of the maker of Budweiser, or that there was a business relationship between the dog toy maker and the brewer.

The fact that the dog toy maker intended the “Buttwiper” squeeze toy to be a parody of the Budweiser marks and trade dress did not defeat the likelihood of confusion established by the brewer, the court determined. In this case, there was evidence that Anheuser-Busch sold a number of pet-related items with its Budweiser brand, which were similar in price to the “Buttwiper” toy (Anheuser-Busch, Inc. v. VIP Products, LLC, ED Mo., CCH Trademark Law Guide ¶61,325).

COMPUTER AND INTERNET LAW

Kentucky Authorities May Seize Internet Gambling Domain Names
The Commonwealth of Kentucky has been authorized by a state court to seize 141 Internet domain names that allegedly are being used to conduct illegal gambling activity within the state. Unless the operators of the domain names install software or devices to block or deny access to consumers located in Kentucky within 30 days of the court's order, the respective registrars of each of the 141 domain names are directed to transfer registrations to the Commonwealth. The court ruled that: (1) the domain names constituted property subject to in rem jurisdiction and forfeiture; (2) the domain names had a sufficient presence in Kentucky to be subject to jurisdiction; and (3) the domain names qualified as illegal "gambling devices" subject to seizure under Kentucky law. The domain names functioned as "virtual keys" that transported the virtual premises of Internet gambling casinos into the homes of Kentucky residents, the court explained. (Commonwealth v. 141 Defendant Domain Names, KyCirCt, CCH Computer Cases ¶49,623).

Warrantless "Hash Value" Search Was Unconstitutional
A warrantless search of a defendant's personal computer constituted an unreasonable search and seizure in violation of the Fourth Amendment, according to the federal district court in Harrisburg, Pennsylvania. A third-party turned the computer over to the police when he discovered a couple of videos containing child pornography. The government contended that it had not conducted a "search" because agents never opened files or otherwise "accessed the computer, but simply ran hash values on the computer." A hash value is a unique alphanumeric representation of the data, a sort of "fingerprint" or "digital DNA." The hash values of the computer's files were compared to the hash values of files that were known or suspected to contain child pornography. The defendant was indicted on two counts of receiving and possessing child pornography based in part on evidence obtained from the search. The court ruled that a hash value analysis, which made “every file, Internet history, picture, and 'buddy list' … available for government review,” constituted a search under the Fourth Amendment. The court also found that, while the defendant lost his privacy interest in the files opened by the third-party, the defendant retained a reasonable expectation of privacy interest in the computer's remaining contents (U.S. v. Crist, MDPa, CCH Computer Cases ¶49,626).

Hot Topics of the Month

FCC Opens Television “White Spaces” to Web Devices
The Federal Communication Commission announced last month that it adopted a Second Report and Order that establishes rules to allow unlicensed wireless devices—such as PDA's, cell phones, and laptops—to operate in unused portions of the broadcast television spectrum (often referred to as "white spaces"). FCC Chairman Kevin J. Martin said in a statement, "Opening the white spaces will allow for the creation of a WiFi on steroids…Consumers across the country will have access to devices and services that they may have only dreamed about before." The rules establish a framework for approval and monitoring of devices allowed to operate in white spaces. All white space devices must be certified by the FCC. Initially, fixed and mobile unlicensed devices must have geo-location capability and the ability to access an Internet database that will direct them to spectrum available at a given location. This will allow white space devices to operate without interfering with existing services, the report explained. The Second Report and Order, FCC 08-260, is available on the FCC's website.

Treasury, Federal Reserve Finalize Internet Gambling
U.S. financial firms will have until December 1, 2009 to comply with a Treasury Department and Federal Reserve Board rule that requires them to employ procedures to prevent payments from being made in connection with Internet gambling. The joint final rule, announced November 12, implements the Unlawful Internet Gambling Enforcement Act of 2006. House Financial Services Committee Chairman Barney Frank, D-Mass., urged the agencies to delay issuing a final rule. He expressed concern that failure to define the term "unlawful Internet gambling," would task each financial institution with reconciling conflicting state and federal laws, court decisions, and Department of Justice interpretations when determining whether to process a transaction. The agencies stated that they determined that a single, regulatory definition "would not be practical." The patchwork of diverse state and federal gambling laws does not lend itself to a single regulatory definition, the agencies explained.

ASPEN IP and Computer Law Publications

Law of Electronic Commerce by Jane K. Winn and Benjamin Wright. The 2009 Supplement is now available on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network. Law of Electronic Commerce is a guide to the business, technology and legal issues involved in electronic commerce. In addition to the most comprehensive analysis of the current legal and regulatory climate, Winn and Wright demystify the Internet technologies that are making e-commerce a viable model for doing business today.

The 2009 Supplement brings you up to date on the latest developments and adds significant new and revised material on a number of critical topics, including: (1) new sections on state privacy protections, including for medical records and other information privacy, as well as comparison of various state approaches to information security laws; (2) a discussion of courts' treatment of claims of conversion of electronic data, including cases involving former employees or agents; (3) information on litigation arising out of the credit card receipt provisions of the Fair and Accurate Credit Transaction Act and Congress's subsequent statute clarifying some requirements; (4) the FTC's active enforcement in the area of data security breaches and child privacy, including a discussion of the FTC’s new list of “blacklisted” practices and settlements with retailers and other companies; and (5) breach notification guidance of various foreign jurisdictions, including Canada, Australia, New Zealand, and the United Kingdom.

Electronic Discovery: Law and Practice by Adam I. Cohen and David J. Lender. The 2009 Supplement recently went live on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network. Electronic Discovery: Law and Practice is a comprehensive guide to the law of electronic discovery. Whether advising a client on electronic data retention policies, initiating or responding to discovery requests or making evidentiary rulings, this treatise helps practitioners stay on top of changes in law and procedures as well as technology issues that affect the law.

The Supplement brings you up to date on the latest developments, including: (1) detailed information on the procedural mechanisms for electronic discovery; (2) expanded discussion on when the duty to preserve is triggered; (3) new subsection on text messaging in the material discussing the Internet and issues of privacy; (4) developments in the area of authentication; (5) a new appendix outlining United States District rules on electronic discovery; and (6) a new appendix containing a table of state rules concerning electronic discovery.

Federal Telecommunications Law by Peter W. Huber and Michael K. Kellogg. The 2009 Supplement is now featured on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network. Federal Telecommunications Law offers comprehensive coverage of trends in competition, industry structures and technology, offering a total picture of the telecommunications industry in areas such as telecommunications equipment, long distance services, wireless services, the Internet and data services, information services, video services and more.

The 2009 Supplement, brings you up to date on the latest regulatory developments and case law, including: (1) issues regarding the Universal Service Fund, including the FCC's recent clarification of toll charges for wireless providers, imposition of contribution requirements on teleconference providers, and cap on high-cost program support; (2) broadband regulation, including the FCC's Comcast Order; and (3) forbearance, including movement toward revising the forbearance process and the Commission's rejection of Verizon's forbearance petition; (4) privacy, including protection of CPNI, litigation over the NSA wiretaps, and statutory immunity for telecommunications companies; (5) the FCC's regulations regarding the commercial mobile alert system; and (6) VoIP service regulations, including number portability, 911 requirements, and telephone relay service regulation.

Drafting Technology Patent License Agreements by Michael J. Lennon. The 2009 Supplement is now available on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network. Drafting Technology Patent License Agreements offers expert advice on: (1) implementing a patent licensing program; (2) evaluating the patent portfolio; (3) formulating a licensing strategy; (4) using databases in patent practice; (4) understanding the due diligence issues relating to information technology; and (5) recognizing crucial clauses in patent licensing agreements.

The 2009 Supplement brings you up to date on the latest developments, including (1) a new exemplary agreement providing a model framework for licensing the rights of a patent holder of intellectual property rights in technology that may be adopted as a standard by a standard setting organization and its members; (2) a new model agreement for settlement of an arbitration and resolution of related litigation such as the Nokia-InterDigital dispute; (3) antitrust enforcement by the Department of Justice and FTC as it relates to intellectual property rights; (4) comprehensive discussion of the latest cases and agency enforcement, such as Rambus v. FTC, Broadcom v. Qualcomm, and the FTC’s action in Negotiated Data Solutions LLC.

Law of the Internet by George B. Delta and Jeffrey H. Matsuura. The October 2008 Supplement has been included on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network. Law of the Internet offers a comprehensive and balanced coverage of the legal disciplines influenced by the Internet, with special focus on: (1) Electronic Commerce and Online Contracts; (2) Privacy and Network Security; and (3) Intellectual Property and Online Content Management.

The newest supplement includes details from recent WTO decisions, relevant cases, summaries and analysis on cyber-libel, international defamation law, shrink wrap licenses, e-mail messages, sales and use tax, data theft, patent conflicts and more. The supplement provides analysis of recent key cases, such as U.S. v. Williams and Connection Distributing Co. v. Keisler.

White Paper Examines Admissibility of Expert Financial Testimony
Since the U.S. Supreme Court handed down the “Daubert Trilogy” in the 1990s, the admissibility of expert witness testimony has become a major issue in federal and state court litigation. In Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993), the Supreme Court replaced the “general acceptance” standard for the admissibility of expert testimony with a test requiring that expert testimony (1) must be reliable—based on recognized knowledge, and (2) must be relevant—of assistance to the trier of fact.

During the six years following the Daubert decision, 1,065 federal court opinions were issued on the admissibility of expert testimony. And the number has continued to grow.

In order to help practitioners keep up with the issues and trends in this area, Wolters Kluwer Law & Business has published a white paper, entitled Challenges to the Admissibility of Expert Financial Testimony: 2005-2008, written by Bruce S. Schaeffer, Susan Ogulnick, and Sara Ann Schaeffer of Franchise Valuations, Ltd. Mr. Schaeffer is an attorney in private practice in New York City and the co-author of CCH Franchise Regulation and Damages, a treatise explaining franchise law, the computation of damages in franchise litigation, the assessment of legal risks, the valuation of franchises, and the use of expert witnesses.

The White Paper reviews the 85 challenges to the admission of expert financial testimony between 2005 and 2008 and reports the results of those challenges. In addition to a general analysis of the decisions, the study contains charts that categorize the type of expert involved in each case and summarize the outcomes of each decision.

A free downloadable copy of the White Paper is available at <http://business.cch.com/>.