October 2007

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.

COPYRIGHT

File Sharer Ordered to Pay $222,000 to Recording Industry Group
In the first ever file-sharing case to make it to court resolution, a federal jury in Duluth, Minnesota awarded damages of $222,000 to the Recording Industry Association of America (RIAA) for an individual’s sharing of more than 1,700 copyrighted songs online, in violation of the Digital Millennium Copyright Act (DMCA).

The RIAA accused the individual of downloading the songs without permission and offering them online through Kazaa, a now-defunct peer-to-peer file-sharing network. The individual was ordered to pay $9,250 for each of the 24 songs she was alleged to have infringed.

A week after the entry of the judgment, the individual announced she will appeal the ruling that she willfully infringed the recording industry’s copyrights. The appeal is expected to focus on the question of whether making a file available for download on a peer-to-peer network is “distribution” as defined by the Copyright Act. The outcome will likely turn on a jury instruction that “[t]he act of making copyrighted sound recordings available for electronic peer-to-peer network, without license from the copyright owners, violates the copyright owners’ exclusive right of distribution, regardless of whether actual distribution has been shown.” The Electronic Frontier Foundation, a nonprofit advocacy group, has announced that it will file an amicus brief with the Eighth Circuit Court of Appeals in support of the individual. The case is Virgin Records America, et al v. Jammie Thomas, DC Minn., October 4, 2007.

Furniture Copyrights Valid Despite Derivation from Public Domain Pieces
A furniture design company’s copyrights were valid, even though pieces of furniture in its collections were derivative works of public domain pieces, the federal district court in Greensboro, North Carolina held. Further, the copyrights were not invalidated by the utilitarian nature of the furniture. The company’s designer used public domain elements as inspiration for his own original design. The furniture exhibited enough expressive variation from the public domain to be readily distinguished from previous designs. The decorative elements adorning the company’s furniture were significantly original and conceptually separate from the furniture’s utilitarian function, as required by the conceptual separability test. Once the basic shape of the furniture was completed, the functional considerations came to an end. The designer then used his artistic ability to adorn the pieces with decorative elements that served no functional purpose. Thus, the shape of the furniture was not subject to a copyright, but the separable decorative elements were (Universal Furniture International, Inc. v. Collezione Europa USA, Inc., MD N.C., 2007 Copyright Law Decisions ¶29,451).

Database Sourced from City Maps Was Copyrightable
A city’s geographic database of tax blocks and tax lots which was based on its official tax maps was copyrightable, even though the factual information in the maps was insufficiently original to support a copyright. The federal district court in Brooklyn ruled that there was sufficient originality in the database as a whole because the city exercised discretion and non-mechanical decision-making in the selection of the information and the presentation of the database. A defendant’s tax map was substantially similar to the city’s geographic database, according to the court. There were innumerable identical control points between the map and the database. The map was so strikingly similar to the database that there was no need to show access to the city’s files to demonstrate copying. Absent any genuine issue concerning copying, the city’s request for partial summary judgment was granted (City of New York v. Geodata Plus, LLC, ED N.Y, 2007 Copyright Law Decisions ¶29,440).

TRADEMARK

Counterfeit Software Seller Infringed Microsoft Trademarks
An individual seller of low-priced computer software was personally liable for infringing trademarks owned by Microsoft Corp. by causing the company he owned to sell counterfeit Microsoft products, the U.S. Court of Appeals in Chicago has decided in a nonprecedential disposition. Microsoft submitted uncontroverted evidence that, on four occasions, the software seller’s company sold some combination of counterfeit Microsoft software components, counterfeit certificates of authenticity (COA), and counterfeit COA labels to private investigators hired by Microsoft. The seller’s deposition testimony and other evidence revealed that he and his company often purchased Microsoft COA labels from suppliers without the accompanying software and sold them to customers. The logos and labeling on the company’s counterfeit software closely resembled Microsoft’s logos and labeling, so consumer confusion was likely, the court said. This evidence established that the seller caused his company to sell the software knowing that these products infringed Microsoft’s marks. At best, the seller’s “ostrich-like” business practices amount to willful blindness, which was sufficient to show he had the intent necessary to be a contributory infringer (Microsoft Corp. v. Rechanik, 7th Cir., CCH Trademark Law Guide ¶61,118).

NIKEPAL Was Likely to Cause Dilution by Blurring of NIKE
Registration of the mark NIKEPAL for import and export agencies and wholesale distributorships featuring testing instruments and glassware for laboratory use and other applications was likely to cause dilution by blurring of the trade name and trademark NIKE, which was registered and used in connection with athletic shoes, sporting goods, and other goods and services, according to the federal district court in Sacramento. Nike’s request for an injunction barring use of the NIKEPAL mark was granted, as was Nike’s request for an order sustaining an opposition to NIKEPAL's registration. A decision by the Trademark Trial and Appeal Board (CCH Trademark Law Guide ¶61,106).

VTUNES.NET Likely to Be Confused with Apple’s ITUNES
An opposition by computer and electronic device manufacturer Apple Computer to an application for registration of the mark VTUNES.NET for digital music video downloads was sustained by the Trademark Trial and Appeal Board on likelihood of confusion grounds. In a precedential opinion, the TTAB stated that VTUNES.NET was confusingly similar to Apple’s registered, famous ITUNES mark for computer software for use in downloading, playing, storing, and organizing audio data. The dominant and distinctive portions of the parties’ marks differed by only one letter, which was insufficient to distinguish them. Thus, these portions were nearly identical in appearance. In addition, the marks engendered similar commercial impressions. The fact that the respective goods and services offered under the marks were not identical was no bar to a finding of likelihood of confusion. It was sufficient that the goods and services were related in some manner (CCH Trademark Law Guide ¶61,109).

COMPUTER & INTERNET LAW

Court Bars Use of Automated Program on Ticket Sale Website
A request by online ticket seller Ticketmaster that RMG Technologies be barred from using an automated program to purchase tickets from Ticketmaster's website was granted by the federal district court in Los Angeles. RMG Technologies developed a software program that was able to bypass security measures on Ticketmaster.com so that its clients ticket brokers and resellers could buy large quantities of tickets in violation of the website’s terms of use. The court determined that Ticketmaster was likely to succeed on breach of contract, direct and indirect copyright infringement, and Digital Millennium Copyright Act claims against RMG.

Access to Ticketmaster.com was governed by a Terms of Use prohibiting commercial use of the website; the use of robots, spiders, and other automated devices on the website; accessing the website more than once in any three second interval; and the purchase of more than a certain number of tickets per transaction. To ensure that automatic devices were not being used in transactions, Ticketmaster employed a CAPTCHA (Completely Automated Turning Test to Tell Computers and Humans Apart) security measure. A CAPTCHA typically requires users to type the letters of a distorted image appearing on the screen. Ticketmaster alleged that RMG's program inundated its website with thousands of automatic requests by circumventing CAPTCHA and other security measures. According to the court, RMG likely violated the Terms of Use by employing automated devices, making excessive requests, exceeding the copyright license, and interfering with the proper working of the website. Further, RMG likely committed direct copyright infringement by copying ticketmaster.com’s webpages into its cache (Ticketmaster LLC v. RMG Technologies, Inc., CD Cal., CCH Guide to Computer Law ¶49,416).

Classes Certified in Target.com Disability Suit
The federal district court in San Francisco has certified two classes of plaintiffs in the National Federation of the Blind’s lawsuit against Target Corp., alleging violations of the Americans with Disabilities Act and California law. The NFB and its California affiliate claimed that blind individuals were denied full and equal access to Target retail stores due to the inaccessibility of Target.com. Because the ADA applies only to physical locations, the nationwide class certified by the court consisted of “all legally blind individuals in the United States who have attempted to access Target.com and as a result have been denied access to the enjoyment of goods and services offered in Target stores.” The court also certified a California subclass comprised of “all legally blind individuals in California who have attempted to access Target.com, for plaintiffs’ claims arising under the California Unruh Civil Rights Act . . . and the California Disabled Persons Act” (National Federation of the Blind v. Target Corp., ND Cal., CCH Guide to Computer Law ¶49,410).

Two Receive Prison Sentences for Illegal Spamming
Two men who violated the CAN-SPAM Act were sentenced to more than five years in prison by the federal district court in Phoenix. In June, a federal jury convicted Jeffrey A. Kilbride, 41, of Venice, California and James R. Schaffer, 41, of Paradise Valley, Arizona of conspiracy to violate the CA-SPAM Act of 2003 and of criminal violations of CAN-Spam’s prohibitions against sending commercial e-mails containing materially false header information and originating from accounts or domain names that were registered using materially false information. The men were also convicted of fraud, money laundering, and obscenity charges. Kilbride received a 72-month sentence and Schaffer received a 63-month sentence. Kilbride and Schaffer were fined $100,000 and ordered to pay $77,500 in restitution to AOL. The men were also ordered to forfeit more than $1.1 million, the amount of illegal proceeds from the spamming operation (U.S. v. Kilbride, D. Ariz., CCH Guide to Computer Law ¶49,400).

NEW PRODUCTS

Privacy Law in Marketing Is Subject of CCH Reporter
Information gathered through marketing efforts can be personal, valuable, and subject to a variety of U.S. and international laws and regulations governing its collection, protection, and use. That’s why Wolters Kluwer Law & Business has launched a new publication (in print and online) to help untangle the complex web of legal regulation from around the world. CCH Privacy Law in Marketing brings together treatise-style explanations by D. Reed Freeman, Jr. and J. Trevor Hughes with the full text of privacy laws and regulations from the U.S. and 35 foreign jurisdictions (provided in English translation).

Topics include telemarketing, e-mail marketing, marketing to wireless devices, cookies and web beacons, information security, identity theft, "phishing," children’s privacy, fax marketing, online privacy policies, use of Social Security numbers, and international privacy law. Monthly reports include new and amended laws and regulations, court decisions and other new developments, a list of pending legislation, and an informative newsletter. For further information about Privacy Law in Marketing, call the CCH customer service department (1-800-248-3248) or visit the CCH Online Store (http://onlinestore.cch.com) and search the keyword “privacy.”

ASPEN IP and Computer Law Publications

Law of the Internet, Second Edition, by George B. Delta and Jeffrey H. Matsura
The latest release the 2008-1 Supplement went live in October on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network. This treatise covers the legal disciplines influenced by the Internet, with special focus on electronic commerce and online contracts, privacy and network security, intellectual property, and online content management. This latest supplement includes updates on (1) recent opinions analyzing jurisdiction in various tort cases, (2) the distribution of digital content and EMI's decision to distribute music online without copy protection, (3) recent cases interpreting immunity granted Internet Service Providers under the Communications Decency Act, (4) legal issues involving the launch of Apple’s iPhone, (5) the Second Circuit’s decision in Fox Television Stations, Inc. v. FCC, striking down the FCC's new regulatory scheme on indecent or profane speech, (6) ACLU v. Gonzales, which held the Child Online Protection Act unconstitutional, and (7) the European Union’s antitrust actions involving Microsoft, Intel, the music industry, and next-generation DVDs.

Electronic Discovery: Law and Practice by Adam I. Cohen and David J. Lender
The 2008 Supplement went live in October on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network. The first single-source guide to the emerging law of electronic discovery, this text discusses mechanisms for electronic discovery, spoliation, cost shifting, attorney-client privilege and e-mail, privacy, and more. The 2008 Supplement features (1) expanded discussion of the amendments to the Federal Rules of Civil Procedure and the cases that have dealt with them, (2) a new appendix detailing actual discovery protocols, (3) expanded discussion of important questions that litigants must address in dealing with the duty to preserve, (4) new sections on the duty to preserve instant messaging and hyper-linked images, (5) recent caselaw on document retention policies, (6) a new section examining litigation hold notices, and (7) a new section on the preservation and production of public records.

Hot Topic of the Month

Copyright Protection and China’s Software Industry
The connection between strong copyright protection and the growth of the software industry in China was the subject of a recent address by Thomas C. Rubin, Associate General Counsel of Microsoft Corporation, at an international copyright forum in Beijing.

In introductory remarks, Rubin quoted two “striking” sets of statistics regarding the growth of the industry in China:

(1) A report that the IT industry accounted for 10% of the growth in China’s gross domestic product in 2005, that the software sector was expected to grow twice as fast as the hardware sector over the next five years, and that software-related jobs were growing by almost 20% per year and

(2) A study showing that the piracy rate for business software products in China had declined steadily over the past several years, having decreased by 10% since 2003.

These statistics were cited to illustrate Rubin’s thesis that these developments are very closely related. “The decline in piracy of business software in China has been a major contributor to the remarkable growth of China’s software sector, “according to Rubin. “And I predict that if we can make further progress in increasing respect for copyright in China, that progress will be reflected in further healthy growth of the Chinese IT sector.”

Why is copyright protection so important for the development of the Chinese software industry? First, the development of high quality software depended on a “massive” investment in testing, marketing, training, and technical support. Such an investment cannot be justified if the market for a product is compromised by widespread piracy. Second, the investment necessary in creating breakthrough software would produce positive economic impact through increased efficiency, productivity, new jobs, and accelerated growth.

“Enacting good copyright laws and regulations is very important; that’s why China’s recent accession to the World Intellectual Property Organization Copyright Treaty and the WIPO Performances and Phonograms Treaty is a significant step forward,” said Rubin. “But without strong, consistent and effective enforcement of those laws, their positive potential simply cannot be reached.”

While it certainly must crack down on street markets and regulate optical disc production facilities, China must also address piracy in its business and state-owned enterprises. That is where copyright piracy is inflicting the most serious losses today for both the international and Chinese software sectors, he noted.

“All too often, enterprises in China are licensing access to business software applications for a small number of employees, and then making unauthorized copies available to tens or even hundreds more . . . Some enterprises don’t even license a single copy, using an unauthorized version of a program as the master. This is piracy just as surely as it would be to obtain unlicensed copies from unscrupulous replicators or illicit street merchants and its impact is just as destructive.”

The National Copyright Administration of China must direct its local copyright administration bureaus to undertake vigorous and sustained enforcement against business end-user piracy in the cities, counties, and provinces for which they have responsibility. The bureaus should impose fines large enough to discourage piracy and publicize the results of their cases to send a message that end-user piracy is illegal and will be punished.

Piracy should also be criminalized. [S]erious violators must face a realistic prospect of a criminal conviction, heavy fines, and imprisonment before true deterrence can be achieved, Rubin recommended, citing the success of criminal enforcement in Singapore, Hong Kong, and South Korea.

Continued progress against software piracy in China, online as well as offline, would be a “win-win” and lead to tremendous and sustained economic benefits in China, the Microsoft counsel concluded.

Thomas C. Rubin is Associate General Counsel and Assistant Secretary at Microsoft Corporation, where he heads the Copyright, Trademark, and Trade Secrets Group. He is a member of the CCH Computer Law Advisory Council.

An adapted version of this speech appears in the “Practitioner’s Perspective” column of CCH Guide to Computer Law Report No. 312, October 26, 2007.