June 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

“First Sale” Doctrine Applied to Promo CDs

Free CDs distributed by a recording company to music industry insiders to promote the release of a new recording were subject to the first-sale doctrine, the federal district court in Los Angeles ruled. An individual who obtained the promotional CDs from music shops and online auctions and then resold them through online auctions was protected from infringement liability.

The recording company alleged that sending the promotional CDs to the insiders did not affect its exclusive right to distribute and sell the CDs. However, the court found that the recording company actually transferred the title to the insiders when it mailed them the CDs. Therefore, the individual lawfully owned the CDs at the time he sold them.

Contrary to the company's contention, the language on the promotional CDs did not create a license. Intent to regain possession of a product is strong evidence that the product was licensed rather than sold. In this case, the recording company gave the promotional CDs to the insiders, never to be returned. The insiders' ability to indefinitely possess the CDs was a strong incident of ownership through a gift or sale. Therefore, the CDs were subject to the first-sale doctrine (UMG Recordings, Inc. v. Augusto, CDCal, CCH Copyright Law Decisions ¶29,920; IntelliConnect User Link).

File-Sharing Network Operator Was Liable for Users’ Infringement

Lime Wire, LLC, the distributor of a popular Internet peer-to-peer file-sharing application (LimeWire) that enabled users to share unauthorized digital files over the Internet, intentionally induced users to commit direct infringement of music recording companies' copyrights, the federal district court in New York City has ruled. Lime Wire also likely was vicariously liable for its users' direct copyright infringement. The recording companies' contributory infringement claim, however, could not be decided on the summary judgment record before the court.

Inducement liability arises when a person (1) engages in purposeful conduct that encourages third-party infringement (2) with the intent to encourage such infringement. Lime Wire purposely developed and promoted its peer-to-peer network to enable millions of file-sharers to commit substantial amounts of infringement by: (1) engaging efforts to attract infringing users, such as marketing the LimeWire application as "excellent for downloading music files" to former Napster users and college students; (2) enabling and assisting users' copyright infringement, for example by implementing categories and search features designed to facilitate infringement; (3) developing a business model that depended on massive infringement; and (4) failing to implement technological or other measures to mitigate infringing activities.

Lime Wire also likely was vicariously liable for its users' infringement, the court found. A defendant is liable for vicarious copyright infringement if it "profit[s] from direct infringement while declining to exercise a right to stop or limit it." There was substantial evidence that Lime Wire had the right and ability to supervise and control users' infringing activities, but failed to limit the use of its product for infringing purposes, including by (1) implementing filtering; (2) denying access; and (3) supervising and regulating users. The evidence also established that Lime Wire possessed a direct financial interest in users' infringing activity. Lime Wire profited from its ability to attract infringing users, including through increased advertising revenue and increased sales of authorized music and its LimeWire Pro application (Arista Records, LLC v. Lime Group, LLC, SDNY, CCH Copyright Law Decisions ¶29,921; IntelliConnect User Link; CCH Computer Cases ¶49,940; IntelliConnect User Link).

TRADEMARKS

Use of VW Badges Was Not Protected by “First Sale” Defense

A manufacturer of automobile accessories that sold marquee license plates bearing Volkswagen badges purchased from Volkswagen was not protected by the "first sale" doctrine from Volkswagen's trademark infringement claims, the U.S. Court of Appeals in San Francisco has held.

The "first sale" defense was not available because the license plates were likely to cause post-purchase confusion among observers who saw the plates on purchasers' cars. In general, the right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product. However, activities creating a likelihood of post-purchase confusion, even among non-purchasers, were not protected, according to the court.

Although the plates were sold in packaging that contained a disclaimer explaining that the manufacturer was not associated with Volkswagen, post-purchase observers would not see the disclaimer. Customers bought marquee license plates principally to demonstrate an association with Volkswagen; thus, the demand for the manufacturer's products was inextricably tied to the trademarks themselves. An order granting a permanent injunction to Volkswagen was affirmed (Au-Tomotive Gold Inc., v. Volkswagen of America, Inc., 9thCir, CCH Trademark Law Guide ¶61,616; IntelliConnect User Link).

Toy Maker Retained Rights in CRASH DUMMIES Trademark

A decision of the Trademark Trial and Appeal Board, sustaining an opposition by toy maker Mattel, Inc. to an application to register the mark CRASH DUMMIES for a line of games and toys, has been affirmed by the U.S. Court of Appeals for the Federal Circuit. The applicant's mark was likely to cause confusion with Mattel's common-law rights in the trademarks CRASH DUMMIES and THE INCREDIBLE CRASH DUMMIES for action figures and playsets. The applicant's contention that Mattel had abandoned the marks was rejected.

Mattel's predecessor in interest, Tyco Industries, Inc., first produced a line of toys under the CRASH DUMMIES mark in 1991. Tyco obtained federal registrations for the marks CRASH DUMMIES and THE INCREDIBLE CRASH DUMMIES in 1993. Tyco sold toys under the marks through 1994, and, the following year, entered into an option agreement with the applicant to produce a movie based on the toys. In 1997, after the option agreement expired, Tyco assigned its trademark portfolio, including the CRASH DUMMIES marks, to Mattel. In 2000, Mattel began developing a new line of toys under the CRASH DUMMIES marks and introduced the new toys into the market in December 2003.

The applicant filed its intent-to-use application for CRASH DUMMIES in March 2003. Mattel had common-law rights in its marks predating the applicant's filing date, the court said. Although Mattel had presumptively abandoned its marks based on three years of nonuse, Mattel rebutted that presumption by showing reasonable grounds for the suspension and plans to resume use in the reasonably foreseeable future.

In 1998, Mattel had entered into negotiations with a retailer about an exclusive deal to sell CRASH DUMMIES toys. The parties never reached an agreement, but there was no evidence that Mattel rejected the business opportunity because of an intention to abandon the marks. Mattel recorded the assignment of Tyco's marks with the Patent and Trademark Office in 1998, which demonstrated intent to use the marks in the future. Although Mattel allowed its registrations to lapse, that did not constitute abandonment of its common-law rights, according to the court (The Crash Dummy Movie, LLC v. Mattel, Inc., FedCir, CCH Trademark Law Guide ¶61,611; IntelliConnect User Link).

“Organic” Certification Mark Was Not Protected Speech

A soap manufacturer could pursue a California state-law unfair competition action against a trade association that sought to develop a standard that would provide a definition of "organic" specific to beauty and personal care products and would permit members meeting this standard to display a certification mark on their products, a California state appellate court has decided. The manufacturer's claims were not barred by California's anti-SLAPP statute.

The manufacturer contended that the standard would allow products to be labeled "organic" even if they contained certain nonorganic and synthetic materials. Thus, according to the manufacturer, the certification program would constitute an unfair and unlawful business practice and would mislead consumers into purchasing products certified by the association instead of the manufacturer's products. The manufacturer sought to enjoin the association from certifying products that met the association's standard but not the "organic" standard set by the U.S. Department of Agriculture.

With regard to the anti-SLAPP defense, the association's certification activities were not in furtherance of speech in connection with a public issue or issue of public interest. Although discussion about the formulation of a proposed industry "organic" standard could be protected activity, the use of the certification label on products was not, the court said. The association's commercial speech also was not protected activity on an issue of public interest, according to the court. False or misleading commercial speech was not entitled to First Amendment protection (All One God Faith, Inc. v. Organic and Sustainable Industry Standards, Inc., CalCtApp, CCH Trademark Law Guide ¶61,614; IntelliConnect User Link).

COMPUTER AND INTERNET LAW

New Jersey Press Shield Law Did Not Apply to Blogger

A blogger could not invoke the New Jersey Newsperson's Privilege Law (Shield Law) to protect the identity of persons from whom she obtained information relevant to allegedly defamatory statements she posted on a website bulletin board, a New Jersey appellate court has ruled. When the developer of affiliate tracking software used in the adult entertainment industry sought to obtain the identity of sources the blogger allegedly relied on in making her statements, the blogger invoked the New Jersey Shield Law and the First Amendment to protect the anonymity of her "confidential sources."

The blogger, however, failed to show that she was connected with any news media, or that her postings were intended to disseminate news to the general public. The blogger’s website, allegedly functioning as a news magazine to "inform the public" on scams, fraud, and technological issues in the adult entertainment industry, never was fully launched and published no findings. The blogger also was not “reporting news to the public” when she posted the comments on a website that described itself as the "Wall Street Journal of porn." Although the website arguably could be considered "news media" for purposes of the Shield Law, the blogger's comments were made not in the context of a writer for an online publication, but rather as a commenter in a public forum, where anyone who wished could post a comment.

The court also rejected the blogger's assertion that the software developer was required to establish a prima facie case of defamation in order to discover the identity of her sources. Dendrite Int'l Inc. v. Doe, (CCH Computer Cases ¶48,183; IntelliConnect User Link) set forth the requirement that a plaintiff must establish a prima facie cause of action in order to discover the identity of a fictitiously-named anonymous defendant. Dendrite, however, involved a subpoena to non-party ISP to discover the identity of anonymous posts. The blogger in this case was the known author of the posts and she was a party to the suit, subject to discovery rules. Denial of the blogger's motion for an order to protect the identity of her sources was affirmed (Too Much Media, LLC v. Hale, NJAppDiv, CCH Computer Cases ¶49,939; IntelliConnect User Link).

Sex Offender Registry Could Not Include “Internet Identifiers”

An amendment to Georgia's sex offender registry statute that required convicted sex offenders to register Internet identifying information—i.e., e-mail addresses, Internet user names, and passwords—likely violated a registered offender's First Amendment right to anonymous speech, the federal district court in Atlanta has ruled. The Amendment was not sufficiently narrow to accomplish Georgia's legitimate interest in protecting children from online predators, and the permitted uses of Internet identifying information were sufficiently ambiguous to be unconstitutionally vague, the court found.

The scope of the Internet identifying information required to be reported was not limited to identifiers used in the type of Internet communications that would enable sexual predators to entice children, according to the court. For example, an offender must disclose the usernames and passwords used on "interactive online forums." This term was not defined and arguably would include forums where protected anonymous speech occurs.

In addition, law enforcement's permitted uses of the information were undefined and extensive. Internet identifiers could be disclosed to law enforcement agencies for "law enforcement purposes" and could be released to the community by law enforcement "as necessary to protect the public." The undefined phrase "law enforcement purposes" could be subject to different meanings. It was foreseeable that a person in law enforcement would determine that a registrant's Internet identifiers should be released to the public, which would allow members of the pubic to search for and monitor communications an offender intended to be anonymous, the court explained. The state was enjoined from enforcing the amendment against the registered offender (White v. Baker, NDGa, CCH Computer Cases ¶49,935; IntelliConnect User Link).

Wolters Kluwer Law & Business Publications

Scott on Information Technology Law, Third Edition, by Michael D. Scott

The 2010-2 Supplement of Scott on Information Technology 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. Scott on Information Technology Law is your comprehensive, practical guide to the rapidly developing area of information technology law. With 35 years of experience in the field, Michael Scott explains the relevant substantive legal issues, analyzes relevant litigation, and offers thorough practical guidance on IT-related transactions.

The 2010-2 Supplement brings you up to date on the latest developments, with (1) a new subsection analyzing the Digital Millennium Copyright Act and consequences for improper notification; (2) a discussion of typosquatting and actions under the Anti-Cybersquatting Consumer Protection Act; (3) new subsections on the FTC's "Guides Concerning the Use of Endorsements and Testimonials in Advertising" and online behavioral advertising; (4) in-depth discussion of Cloud Computing Service Agreements; (5) analysis of the civil remedies provision of the Racketeer Influenced and Corrupt Organizations Act (RICO); (6) analysis of state and federal laws pertaining to the evolving problems of cyberbullying and child luring; and (7) the guidelines that law enforcement officers must follow when conducting computer searches and seizures. For more information on Scott on Information Technology Law, visit the Aspen Publishers website.

Law of the Internet, Third Edition, by George B. Delta and Jeffrey H. Matsuura

The 2010-2 Supplement for Law of the Internet 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. Law of the Internet offers a comprehensive overview of the Internet, lucid discussion of its current applications, and thoughtful analysis of recent trends. The authors identify the legal issues that arise from the use of the Internet and its applications, provide incisive analysis of how existing law applies, and alert readers to potential issues and future areas of concern.

The 2010-2 Supplement covers the fast-changing field of Internet law, including: (1) the Federal Communications Commission’s National Broadband Plan and the adoption of Internet "deep-packet" inspection technology for monitoring Internet traffic; (2) competition law’s emergence as a potential issue in the context of Internet telephony applications and services; (3) recent developments in the European Union affecting personal information privacy, social networking oversight, and intellectual property rights; (4) electronic book rights and the growth in the e-reader industry, as well as Google's library initiative; (5) domain name owners’ rights and litigation trends in federal courts; (6) antitrust issues, including global actions against major technology companies; (7) key Internet security topics, including appointment of a U.S. "cybersecurity czar" and creation of a "cybercommand" in the Department of Defense; (8) major patent licensing and competition law controversies; and (9) important trademark litigation associated with keyword advertising, including the Google "AdWords" system. For more information on Law of the Internet, visit the Aspen Publishers website.

Law of Electronic Commerce, Fourth Edition, by Jane K. Wynn and Benjamin Wright

The 2010-2 Supplement for Law of Electronic Commerce 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. The volume of trade done through electronic media continues to skyrocket, and the law evolves at a staggering rate. To keep pace with all the new cases, statutes, proposals, commentaries, and model laws, there is no better resource than the new edition of the Law of Electronic Commerce—your guide to the implications of communications technology for commercial law and transactions.

The 2010-2 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) patents and trade secrets; (2) domain names and trademark law; (3) copyright and anti-circumvention technologies; (4) software licensing; and (5) privacy and collections of data. For more information on Law of Electronic Commerce, visit the Aspen Publishers website.