Category: Intellectual Property

Aereo Loses the War Before the Supreme Court

The question presented to the court was whether Aereo’s conduct, in recording and re-broadcasting over-the-air television broadcasts to individual subscribers to Aereo’s services, constituted copyright infringement.  Aereo’s service is a web-based system that permits subscribers to watch broadcast television through a web broadcast.  Subscribers are able to access available television programming by selecting a specific live broadcast from a menu on Aereo’s website.  The system will then direct an Aereo-controlled antenna to tune in to the program and transcode the broadcast for access by the requesting subscriber.  In the process, the Aereo system makes a digital copy of the over-the-air broadcast to permit streaming of the content to the subscriber.  The digital copy is only made available to the individual subscriber that requested the particular broadcast.  Am. Broadcasting Cos. v. Aereo, Inc., 573 U.S. ___ (2014).

The plaintiffs in this case are the broadcasters that transmit over-the-air television programming, along with the producers, marketers, and distributors of this content.  They sought a court’s order to enjoin the conduct of Aereo on the grounds that Aereo’s services infringe on the public performance right provided under section 106 of the Copyright Act.  Section 101 defines “public performance” to mean:

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

(2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

17 U.S.C. § 101.

Case law over time has helped to clarify when a performance is to the “public.”  In Columbia Pictures v. Redd Horne, 749 F.2d 154 (3rd Cir. 1984), the defendant operated a video rental and sales business.  In addition, patrons of the store could rent one of eighty five private viewing booths, permitting up to four people to view a video in the store in the booth.  The plaintiff had alleged that the private viewing booths constituted an unauthorized public performance, in spite of the defendant’s attempt to limit the number of people who could view a tape in the store.  The third circuit agreed, finding that the video store was open to the public and that it was the defendant, not the patrons, that performed the copyrighted works in the private viewing booths.

However, as technology has evolved, a separate line of cases has developed in an attempt to shield technological improvements from claims of copyright infringement.  Starting with Sony in 1984, the Supreme Court held that the VCR could be sold, even though the people purchasing the technology might use it to record copies of copyrighted materials on television, without permission or a license from the copyright holders.  Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984).[1]  In more recent years the federal courts have sided with the music industry and found infringement with certain file sharing and peer-to-peer sharing technologies, such as Napster, Grokster and Limewire, concluding that these technologies resulted in massive and wholesale infringement.[2]

The Aereo service itself is like a cloud-based VCR, in that the service permits users to request that a particular over-the-air broadcast be recorded and transmitted via the internet to the individual requesting the recording.  Aereo also went to great pains to distinguish its service from peer-to-peer sharing services by emphasizing that a user selects a broadcast he wishes to watch via the internet, and Aereo only records and directs that recording to the individual requestor, not making the copy available to any other Aereo user – even one that requests the same broadcast through the service.  Unfortunately, Aereo could not prevail on these points before the Court.  Instead, the Court found that Aereo’s service was functionally similar to community antenna television systems (“CATV”), and that Congress had specifically amended the Copyright Act to define CATV systems as copyright infringing, overturning legislatively two Supreme Court decisions holding otherwise: Fortnightly Corp.[3] and Teleprompter Corp.[4]

In each of those cases, the defendants operated a system where the defendant would collect over-the-air broadcasts from a region and transmit those broadcasts to subscribers in another broadcast market without the payment of a royalty and without a license from the copyright holders.  The Court held that these activities were outside of the scope of the Copyright Act as it stood prior to the 1976 amendments, because the CATV systems were acting more like “viewers” rather than “broadcasters” of the copyrighted content of others.  This was so, according to the Court, because the CATV system “‘no more than enhances the viewer’s capacity to receive the broadcaster’s signals [by] provid[ing] a well-located antenna with an efficient connection to the viewer’s television set.’”  Aereo, Inc., slip. op. at 6 (quoting from Fortnightly Corp., 392 U.S. at 399).  However, Congress disagreed with the conclusion of the Court and ultimately amended the Copyright Act to reach the conduct of CATV system providers, establishing a compulsory royalty regimen under section 111 of the Act.

Ultimately the Court held that Aereo was providing a service similar to the CATV systems, and, in spite of some differences that the dissent argued were significant, held that if the CATV systems were infringing, so to must the Aereo system.  However, the Court did not declare that Aereo is, in fact, a cable system, which would permit Aereo to take advantage of the compulsory licensing system established by Congress.  In a filing July 9, Aereo has apparently now taken the position that it is a cable system and is seeking a license to operate as such.[5]  Time will tell whether Aereo will be able to operate in this manner or whether Aereo will be unable to become a “legitimate” content distributor, like some other technology innovations that had originally been declared infringing.

[1] Admittedly, the Sony case was about unauthorized copying, rather than public performance of, copyright works, and Sony was in the suit defending against a contributory or vicarious infringement claim, where Aereo was accused of direct infringement by publicly performing copyrighted works without a license.

[2] See, e.g., Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 545 U.S. 913 (2005); A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001); Arista Records LLC v. Lime Group LLC, 715 F. Supp. 2d 481 (S.D.N.Y. 2010); but see Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2nd Cir. 2008) (cert. denied 557 U.S. 946 (2009)).

[3] Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968).

[4] Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394 (1974).

Google Books Ends in Fair Use Verdict for Google

The case brought by the Author’s Guild against Google, for scanning of millions of books without any author’s permission, ended without a trial when Judge Chin granted a motion for summary judgment in favor of Google at the end of 2013.  In his thirty page opinion, Judge Chin agreed that Google’s conduct is affirmatively protected by section 107 of the Copyright Act, which sets out the factors that courts consider when determining if a use of another’s copyrighted work is “fair,” meaning the defendant is not required to obtain a license or pay a royalty for the use.

This controversy started almost ten years earlier when Google began its “Library Project” to scan and index books from a variety of library collections, including Harvard, the University of Michigan, the New York Public Library, Oxford and Stanford.[1]  Millions of books were to be scanned and indexed using Google’s engineering expertise and search engine, including some books that remain under copyright protection.  Google also established a “Partner Program” under which Google worked with publishers and rights holders to index and display books with permission from the owner of the rights in the work.[2]  By Judge Chin’s decision last year, more than twenty million books had been scanned and indexed into the Google Books project.[3]

Google’s database of books includes a full digital copy of each book it scans.  Each such book is indexed for searching.  Users can navigate to books.google.com and search through the index using queries of their own design.  In response, the search engine will return a list of books from the index that are relevant to the query.  Clicking on a particular book will take the user to a page which displays the cover of the book and a short summary of the content.  If the book was scanned through the Partner Program, the user is able to view what the author or publisher has consented to display on the results page.  If the book is in the public domain, the user is able to view the entire book and also to download the electronic version of the book.  However, for books still under copyright protection but not available from the Partner Program, the search result displays the book in “snippet view.”[4]  “Snippet view” is the source of controversy for the plaintiffs in the Author’s Guild because Google did not obtain permission to show portions of the indexed book in search results.[5]

Copyright infringement is the invasion of an exclusive right of an original work by another.  Among the exclusive rights of authors are the rights to reproduce, distribute, and publicly display their works.[6]  Fair use is an affirmative defense to a claim of copyright infringement.  Under section 107, courts consider four factors when determining if a defendant’s infringing use is “fair:” (a) the purpose and character of the defendant’s use, (b) the nature of the plaintiff’s work, (c) the amount and substantiality of the work used by the defendant, and (d) the impact of the use on the plaintiff’s market for his work.[7]  Determining whether fair use applies depends on the facts and circumstances of each case.[8]  Judge Chin emphasizes in his opinion that “transformative” uses of copyrighted material are more likely to be a fair use.  Citing Campbell v. Acuff-Rose,[9] the court defines “transformative” uses of a work as the creation of a new work from an old one, where the new work has a different purpose or character and the fair user alters the original expression resulting in a new work with a new meaning or message.

Fair use has been heavily litigated because the defense turns on the specific facts of each case.  In addition, while the Google Books case is an important one, it is not the first case to raise the issue of fair use in the context of technology on the internet.  More than ten years ago, the Ninth Circuit confronted a search engine that was sued for copyright infringement by a photographer, Leslie Kelly, whose photographs had ended up indexed into Arriba Soft Corp.’s internet image search engine.[10]  In that case, Kelly created, sold and licensed landscape photographs of the American West, which he made available for sale through his website.  The defendant, Arriba Soft, had crawled and indexed images available from public internet web sites, including Kelly’s web site. The Ninth Circuit held that Arriba Soft’s use of Kelly’s photographs was transformative.  Kelly’s purpose in creating his photographs was aesthetic: people would purchase Kelly’s works to have a framed photograph of a landscape in their home.  In contrast, Arriba Soft used Kelly’s photographs to create thumbnails which were placed into a search database so that search users could use keywords to find related images.[11]  The thumbnails could not supplant the original aesthetic use of the works because the thumbnails were at a considerably lower resolution.  Ultimately, Arriba Soft prevailed on the basis that its use of Kelly’s works was a fair use.[12]  Amazon obtained a similar outcome in the case Perfect 10, Inc. v. Amazon.com, 508 F.3d 1146 (9th Cir. 2007).

In the Google Books case, the court also found that Google’s use of the plaintiff’s works was transformative: “Google Books digitizes books and transforms expressive text into a comprehensive word index that helps readers, scholars, researchers, and others find books.  Google Books has become an important tool for libraries and libraries and cite-checkers as it helps to identify and find books.”[13]  The court continued: “Similarly, Google Books is also transformative in the sense it has transformed book text into data for purposes of substantive research, including data mining and text mining in new areas, thereby opening up new fields of research.”[14]

The court held that the second factor – the nature of the plaintiff’s works – also favored a finding of fair use, because most of the books indexed by Google, 93%, were non-fiction, and all of the books had been published before Google indexed them.  A court is less likely to find fair use when the defendant has used highly creative works, or works that are not yet published.  The court held that on balance, the third factor – the amount and substantiality of the use of the plaintiff’s works by Google – weighed slightly against a finding of fair use because Google had used all of the works verbatim, though that was required for the purpose of Google’s use.[15]

Finally, the court held that the last factor – the impact on the plaintiff’s market for its works – also strongly supported a finding of fair use.  In this case, the court found that the plaintiff’s market for its original works would be very unlikely to be supplanted by the “snippet” view that was available through Google’s website in response to user searches for keywords.  To the contrary, the court found that Google’s database would most likely enhance the sales of the plaintiff’s works.[16]

As a result, the court found that Google’s use of the plaintiff’s works was a fair use and entered judgment for Google.  The Author’s Guild filed notice of its intention to appeal, and subsequently filed an appeals brief with the Second Circuit in April.  Google’s reply is due in July.  Stay tuned for further developments!

[2] The Author’s Guild, Inc. v. Google, Inc., 1:05-cv-08136-DC 5 (S.D.N.Y. Nov. 14, 2013) (appeal pending in 2d circuit in case number 13-4829 CV).

[3] Id. at 1.

[5] A careful reader will note that Google also has a complete digital copy of each book it scans, which Google backs up to backup media and shares with the source library that provided the work to be scanned.  Plaintiffs alleged that these acts violate the authors’ exclusive rights of reproduction and distribution.

[6] 17 U.S.C. § 106.

[7] Id. at § 107.

[8] The Author’s Guild, Inc. at 16-17.

[9] 510 U.S. 569 (1994).

[10] Kelly v. Arriba Soft Corp., 336 F.3d 811 (9th Cir. 2003).

[11] Id. at 818.

[12] Id. at 822.

[13] The Author’s Guild, Inc. at 19.

[14] Id. at 20.

[15] Id. at 22-23.

[16] Id. at 25.

Klout and You

Klout is an online influence metric.  The site gathers information from your twitter, linkedin, facebook, google+, instagram, and other online social media web sites, and calculates a score of how your online postings influence others on the good, ole interweb.  This is an interesting metric because, if you are trying to have an impact on other users, you can experiment and see if your Klout score improves or declines.  Having a metric is helpful because the internet can be a very large echo chamber, with no outside way to measure if all the bouncing around off the rocks has any actual impact on your readership.

Try Klout out yourself and see what your current score is.  See how posting more content on various social media web sites impacts others that may follow what you are posting.  Where Klout looks for its scoring is also interesting – you might investigate whether you should join one or more of those web properties.  For example, I do have a google+ account, but rarely spend a lot of time with it.  There are a number of people that have added me to their circles and post content on google+, but I don’t spend too much time on it.  However, I thought I would check it out today.  The Dalai Lama posted a comment that we ought to use the time we have in a meaningful way.  Nice.  If you aren’t using social media to get out your message, maybe now is a good time to start doing something!

The “Hon” Controversy

If you are from Bawlmer, you probably say “hon.”  It is a local tradition.  The word is a part of our local vernacular.  However, Denise Whiting, owner of a restaurant named “Cafe Hon” registered the word “hon” as a trademark with the federal patent and trademark office.  The registrations online (which Whiting has subsequently abandoned after a public outcry) include these uses: (a) retail gift shops (see: Hon Trademark Reg) (IC 035), (b) paper goods, namely, bumper stickers, napkins, note cards, gift cards, greeting cards, stationery, wrapping paper, gift bags, note pads, note paper, calendars, pens (see: Hon Trademark Reg 2) (IC 016), and (c) restaurant services (see: Hon Trademark Reg 3) (IC 043).  Ms. Whiting’s use with her restaurant was not controversial, as Cafe Hon has been around for quite some time in Baltimore.  The public outcry was over her registrations for various goods with the “Hon” logo.

Trademarks, whether registered or not, are intended to identify the source of goods of a product or service.  Trademarks, in one way or another, have been in use by craftsmen and traders for thousands of years.  Trademarks serve an important purpose in commerce today, in that brand names distinguish a particular maker’s goods from competitors.  Businesses may invest millions of dollars over time in building up brand name recognition with the public.  Brands, with time, become associated with a particular product’s quality or attributes (the taste of Coke is strongly associated with its mark, and distinguishes it from Pepsi and other soft drink products).

In the “Hon” controversy, the public outrage was over Whiting’s claim of exclusivity for gift shop goods. Interestingly, even though the baseball team, the Orioles, evokes strong public response and is strongly identified with Baltimore, there is not much controversy over their trademarks or their exclusive right to use those marks on t-shirts and baseball hats (and a whole lot of other merchandise based on their trademark registration: O’s Trademark Reg).  I suppose the public doesn’t claim to own the “O’s” (that’s Peter Angelos, hon), but is there that much of a difference?  I haven’t seen any bumper stickers inviting the Orioles to sue to challenge the “O’s” trademark registration.

Property rights, whether the right is to a physical thing or an intangible, are limited by certain public interests.  For a piece of real property, you have to pay your property taxes or risk the loss of title to your property.  The public may also have certain limited rights to enter your property (like the sidewalk that runs through the front yards of many homes in Maryland).  And the air roughly 100 feet above your home is not yours, either.  The exclusive rights in intellectual property are also limited by certain public interests.  For example, there is the concept of the “public domain” in copyright law.  Original works of authorship can be dedicated to the public domain, or end up there after a certain period of time from when the work was originally created (a work today doesn’t end up in the public domain for quite some time, but older works created before the 1920’s are generally in the public domain).

The Lanham Act provides the statutory basis for trademark registrations in the U.S.  Section 1052 identifies certain exceptions to the right to register a particular mark.  Unlike the U.S. Copyright Act, which provides for a “public domain” of works that otherwise would be entitled to protection, the Lanham Act has a much more limited set of circumstances that would prevent registration of a mark.  For example, immoral or deceptive marks can’t be registered.  The coat or flag of a state can’t be registered as a mark.  A living person’s name, portrait or signature can’t be registered without that person’s consent.  The mark cannot be confusingly similar to another registered mark.  The mark cannot be merely descriptive of the product (e.g., “Table” brand tables won’t work).  But, words in the public vernacular are not necessarily protected by these exceptions.  As subsection (f) notes, a mark that has become distinctive over time as to that person’s goods can be registered.

Irregardless of the Lanham Act, Whiting abandoned her marks after local outcry about “Hon.”  There was a strong sense among some in the public that “you just can’t do that” with the word “Hon.”  Some invited Whiting to sue them so that they could challenge her marks in court.  The Baltimore Sun ran a number of articles on the controversy.  Public opinion was against the registration of the word “Hon.”  Ultimately, Whiting abandoned or “Hon” marks in response to it all.  Tempest in a teapot?  Maybe.  But don’t mess with our “Hons.”

Meaningful Use – Some Thoughts

HHS and CMS have released the regulations as promised to help define the phrase “meaningful use” that can be found within ARRA and will determine which health care professionals have been naughty and will receive no incentive payments from Uncle Sam, and those that have been nice and will.  The regulations themselves are long.  I can’t be critical on length alone; the regulations reflect the complexity of the area they intend to regulate.  To date, the regulators have drafted the Stage 1 measures for meaningful use.  These measures will determine whether the relatively early adopters of EHRs will receive incentive payments under Medicaid or Medicare (if the provider otherwise qualifies).

This post takes a closer look at the Stage 1 criteria.  There are a number of requirements that are basic to any self-respecting EHR, such as §§ 495.6(c)(1) drug interaction checking, (2) a problem list for each patient, (3) a medication list, (4) an allergy list, (5) basic patient demographics, (6) basic vital signs, and (7) the patient’s smoking status.  Most systems will store this kind of data in discrete data fields and can make this information available to be queried for reporting.  Section 495.6(c)(8) mandates that lab data reported back to the provider be stored in a structured format.  This is also a basic dimension of an EHR, though it takes more effort to get this to work efficiently (including someone with the job of maintaining the mappings that take reported lab results and place them in specific data elements in the database).

Section 495.6(c)(9) mandates that the provider be able to generate a list of patients by disease state.  Assuming that patient diagnoses are stored in a structured format, this also should not be too difficult to address with most systems.  The medical staff would need to provide some data definitions (for example, the diagnosis codes 042 and V08 both mean HIV; a series of diagnosis codes that start with 250 mean diabetes, and so on).

Section 495.6(c)(10) mandates that there be five decision support rules that can be built into the EHR and that are specialty or priority-specific.  For example, all HIV patients in care should have an HIV viral load test performed at least every 4-6 months.  Some systems may not support these kind of point-of-service reporting tools (so that the provider is reminded when in the exam room with the patient), but presumably a reporting tool that generated reminders to patients to receive a particular test or service might meet this requirement.

However, the regulations take a turn at (c)(11) when they mandate the use of electronic eligibility data and the submission of electronic claims data.  These are both not the typical province of an EHR, but of a practice management system.  And while there have been ANSI standards for electronic eligibility data published for years, there are still some insurers that cannot produce useable data for eligibility verification.

Section 495.6(c)(13) calls for a medication reconciliation at each office visit with the patient.  I presume the intent here is to have the provider ask the patient to verify that all these pills listed in the EHR are really what the patient is taking.  I’m not sure asking this question at every visit will be practical with every patient – particularly with the patients at the most risk for interactions – those on a large number of different drugs.  Health information exchanges may help to tame some of this by presenting to the physician listings of drugs associated with the patient from multiple sources, but truthfully, this may quickly become bewildering for both the patient and provider.

Section 495.6(c)(14) calls for a record summary to accompany each referral for specialty care.  With the paper referral system today, this will increase the amount of paper shared between practices.  I would hope this requirement would push more providers into participating in an HIE so that this kind of thing could be shared electronically.

Section 495.6(c)(15) and (16) are addressed to sharing data with certain governmental agencies for tracking patient immunizations and reportable diseases that are surveilled by local health departments.  Presumably both of these would be better addressed by having the government agency participate as a recipient of data from an HIE, rather than building an interface directly from a provider to the agency requesting the information.  The issue here, however, is that the items to be reported are probably not likely to be initially available from the HIE because these data elements may or may not be consistently stored across EHR systems (particularly immunizations; reportable conditions are often keyed to a particular diagnosis code, such as the codes for syphilis or HIV, and problem lists are more often consistently stored as structured data).

And, even though risk assessments have been mandated since 2003 within the HIPAA security regulations, CMS felt that this specific requirement needed to be reiterated within the meaningful use regulations.  My guess: most providers don’t regularly perform risk assessments because they are time-consuming, and information systems change to frequently for the risk assessment process to keep track.

Section 495.6(d) provides another 8 requirements for providers.  Notably, the regulations mandate direct patient access to their health record chart electronically, and the ability to feed data to patients on request (for example, for patients with a personal health record that want to get a live feed of lab results and medications from their doctor).

Overall, the regulations are substantial.  Some of the requirements in the regulations will cause some consternation for providers and will likely lengthen the time to implement EHRs for some organizations that were focused on the basics of just getting the visit documented in the system.

Software Licensing for Businesses

Here was a very good article on software license auditing for businesses: (click here for story).  The issues for businesses are twofold: (a) keeping track of the licensing that the business has purchased, and (b) keeping track and understanding the licensing agreements that control the software.  The former can be handled by software.  For example, Microsoft publishes Systems Management Server (SMS), which includes a software audit and metering tool.  I understand that Altiris also offers a solution, and undoubtedly there are other packages out there that can tell you what’s running on your network.

The latter, however, requires a human being to review the software licensing agreement terms, and then analyze purchase history against the usage from the audit/metering tool.  And the software license agreements themselves are often as clear as mud, especially if you have multiple, overlapping agreements for a variety of software packages.  Even small businesses may have a substantial number of software packages and licenses they have acquired over time, so keeping up with this to avoid an audit can take real effort and concentration.

Facebook and Twitter: Implications for Your Business?

Technology presents us with new opportunities and challenges on a regular basis.  Social networks and other “web 2.0” applications are starting to make inroads into the mainstream of the internet (ask how many of your iPhone-using friends have apps for one or both of these to measure the reality of the hype).  As a result, staff at your business are bringing their internet usage habits into the workplace.  Prospective customers are looking for you through these tools.  And business owners may want to consider the implications for their organizations.

IT departments at most organizations have struggled with having an effective internet usage policy for staff with internet access.  The difficulty has been in balancing the security of the network from viruses and other security threats against the need of users to access internet resources for business purposes.  The rise of google as a synonym for searching the web has increased the overall utilization of the internet as a business research tool.  Trying to keep inappropriate content from appearing in search results poses a real challenge for IT departments.

In addition, with the advent of more sophisticated attacks from web sites, IT departments have struggled to block phishing and other infectious sites and patch their organization’s computers to be resistant to attacks from the internet.  Facebook and twitter have both been used by malicious users to launch attacks on users of these sites (either by writing malicious applications and publishing them on facebook, or by posting malicious links in twitter postings).  The unfortunate knee-jerk reaction of most IT departments is to simply block these sites at the corporate firewall, preventing staff from having any access to these internet resources.

The typical rationale has been that these are not work-related sites, and staff are just wasting time using them on the clock, therefore, shutting down access to them at work is perfectly reasonable.  But, that rationale may no longer work as the web 2.0 world begins to take shape.  For one thing, more businesses are establishing fan pages on facebook in order to advertise their services and provide information to their customers.  Innovative businesses also may develop applications for facebook that are both popular and help to advertise the services offered by the organization.  Businesses also use twitter to keep customers in the loop on activities and events of the company, or monitor twitter to evaluate how its own advertising campaign may be progressing in reaching certain demographics.

Web 2.0 technologies are becoming more pervasive on the internet, which also increases the minimum skill sets of staff working for organizations that use web technologies to reach customers.  Blocking these technologies from the corporate network may result in a less-skilled workforce.  And, ultimately, according to Gartner, such efforts are futile and bound to fail because of the pervasive nature of these technologies.  (See CNET article)

It would seem that liberalization of internet use policies at companies, then, is an inevitable result.  And with that increased access comes new responsibilities for staff and businesses.   A landlord sued a former tenant for defamation earlier this year as a result of some tweets by the tenant about mold in her apartment.  (See article here)  Twitter itself is a rather informal medium for posting information online – similar to having an instant message chat in the chat rooms of yesteryear (which seem so quaint today).  And because it streams posts real time, you may say something that you later regret.  Imagine, for example, that your business allows access to twitter, and one of your employees angrily posts a series of defamatory tweets about a competitor or vendor.  Your organization may be slapped with a lawsuit if that competitor is monitoring twitter for tweets mentioning it by name.

Facebook represents similar challenges for organizations, especially where employees may blur the line between their social lives and work lives by forming, for example, groups on facebook of other employees.  Suppose a group of employees creates a group for only certain kinds of employees from your organization, and intentionally excludes others (perhaps on the basis of gender or age).  Is your organization discriminating against the excluded group?  Does your organization have liability for the acts of your employees in forming the exclusive group?

The web can also present a trade secret leak for those of you that have proprietary information or processes that are used by your business to generate revenue.  Social media also present challenges for protecting intellectual property, and avoiding infringement claims by others (tarnishment of famous marks on twitter – I’m sure a case is brewing as I type this story).

These questions are unanswered.  And I don’t offer these hypotheticals to scare your organization into shutting down the internet connection at the office.  My point is to encourage your organization to think about your policies related to internet usage and what constitutes acceptable use of the internet during normal work hours.  Establishing an effective policy, and consistently enforcing that policy with your staff goes a long way to managing your exposure to a law suit.  Controlling the internet at the organization’s firewall is unlikely to be a sufficient risk management tool.

There are a number of good starting points for a good internet usage policy for organizations.  Here are some principles to consider when drafting yours:

  1. Empower staff to be responsible for their internet usage.
  2. Disrespectful communication is not acceptable, whatever the medium of communication.
  3. Do not download and install software from the internet that is not approved by your IT staff.
  4. Use the internet for professional reasons.
  5. Be mindful that staff representations online reflect on the reputation of their employer.
  6. There are real-world consequences for staff that abuse access to the internet.

If your organization uses facebook or twitter today to market itself, re-enforce with your staff that organizational posts should be approved prior to posting on the web.  The immediacy of these services should be resisted by staff in order to ensure a consistent and accurate message is communicated to the outside world.

Rescuecom v. Google: Trademark Infringement

In a recent post on Google’s use of trademark words as advertising search terms, one of the questions I raised was whether Google was really any different than a newspaper that might run an ad that was infringing on a third party’s trademark.  Rescuecom, Corp. v. Google, Inc. may help to provide some insight into this question.

In Rescuecom, the Court of Appeals for the Second Circuit was asked to determine if the plaintiff had alleged a cause of action for trademark infringement against Google.  Rescuecom alleged that some of its competitors were purchasing its trademark as a keyword that would trigger the competitor’s ad when a google user searched with Rescuecom’s trademark.  For fun, I searched with this trademark but got no advertisements on google or yahoo.  I guess that the competitors got shut down by all of the litigation that was ongoing in this matter.

In any event, the Court goes on to discuss whether google’s practice of offering trademarks for auction to competitors could be infringement by google.  The Court noodle’s through the complaint in this manner: (a) most of google’s revenue comes from advertising, (b) google has a financial stake in the effectiveness of the advertisements it runs for advertisers, (c) trademarks of well known companies have value as keywords for advertisers, therefore, google can be liable for trademark infringement if the trademark is “used in commerce” as that is defined in section 1127 of the Lanham Act, and the use is likely to cause confusion on the part of users of google’s search engine when those users are presented with advertisements from competitors to the trademark holder.

The Court does not fully explain the logic in (b) above.  For those that use google’s AdWords, an advertiser can create an ad and determine when that ad will display on google’s web site based on keywords that are used by google users to search for web content.  For example, if you were looking for Starbucks and used that trademark as a search term in google, google will return web pages it thinks are relevant to that result, along with advertisements that are tied to that search term.  Advertisers can place a bid on the maximum amount they will pay for a click on their ad.  So, if there were multiple advertisers with “Starbucks” as their keyword, the one with the highest bid would display at the top of the list of advertisements (usually in the right hand column, but google also has ads at the top of the search results listing on the left periodically).  Clicking on an advertisement will take the user to the advertiser’s web page, which will not necessarily be Starbucks’ home page.

Google also benefits from a competitor outbidding the trademark holder per click through the AdWords system.  So if Starbucks and I both decided to run an ad in AdWords based on the trademark “Starbucks,” I could force Starbucks to increase the amount it would pay per click by automatically increasing my bid for the same keyword.  Google, in fact, has a tool to allow bids to automatically change based on the market for a keyword.

Consumers, I suppose, could be confused by this.  Rescuecom alleged that consumers were likely to be confused (and they were losing business to their competitors as a result) by the ads because they display in a “manner which would [not] clearly identify them as purchased ads…”  Rescuecom, at *6.  And the competitors that were using Rescuecom’s mark were in the same business as Rescuecom, and I seriously doubt they would put a link at the top of their page that would say “Looking for Rescuecom Corp?  Here is a link to their page.”  I suppose if I wished to sell my “Karbucks” brand coffee, the easiest way to advertise it would be to buy the trademark “Starbucks” on AdWords, and just have a very large marketing budget to bid on that keyword.  Maybe that is the reason that Starbucks coffee is around $12-$15 per pound – the AdWords bids keep going up because of competing trademark infringers!

I suppose that google could use the existing trademark database, TESS, which is maintained by the US Patent and Trademark Office, and simply prevent anyone (or anyone other than the current trademark holder) from bidding on a particular registered and active trademark.  Factually, there is also a question of whether much of google’s advertising money comes from the mis-use of trademarks.  For example, I do have the word Starbucks in an ad that I have run, but the link in my ad takes you to an article on my blog about another trademark infringement case against a Starbucks competitor.  I’m not selling coffee on my blog (at least not yet), so no danger of infringement.  When I originally created the ad, there was a lag before approval of it, where I presume that google at least had the opportunity to check to see if I was trying to infringe Starbucks’ mark.  Stay tuned!

Linden Labs and Virtual Sex Toys? Huh?

Oh, yeah, there is a lot of kinky virtual sex going on in Second Life.  And to support all of that activity, there are apparently a lot of vendors selling knock-offs of the “real” virtual sex toys of one vendor who is mad enough to sue.  (See Wired Article)

Yes, a few years ago, Linden Labs set up a special “mature” designation for areas in its virtual worlds that were aimed at “adult” conduct, so those under 18 and others with sensitive eyes  would not be offended by what they found.  However, probably much like the real world, virtual sex is rampant in Second Life.  As a consequence, there is a heavy trade in sex-related objects.  According to the plaintiff, Eros Products LLC, his SexGen products line has sold about $1 million (that’s U.S. dollars) within Second Life over the past five years.  (A copy of the Complaint is here)

Vicarious and contributory liability for copyright infringement is recognized by the courts as a cause of action under federal law.  This kind of liability has been raised in recent years by the various music file sharing services that came and went, such as Napster (originally a file sharing service without any copyright licensing from the music companies that owned the music being shared), Gnutella, and Limewire.  Each of these services were held to be liable for the file sharing of their users, in part based on the notion of vicarious liability.  Cases prior to Napster et al. that addressed this kind of liability along two lines: landlord-tenants where the landlord exercised no control over the leased premises, and dance-hall cases where the operator of the hall controlled the premises and obtained a direct financial benefit from the infringing performances.  Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996).  Under common law, landlords have not been held to have copyright liability where dance-hall operators have.

In Fonovisa, the defendant operated a “swap meet” where the operator rented stalls to individuals who were selling unlicensed copies of bootlegged music owned by the plaintiff.    For the swap meet operator to be liable, the plaintiff had to prove that the operator controlled the marketplace and obtained a direct financial benefit from the sales of infringing works.  The Court sided with the plaintiff in this case, even though Cherry Auction did not receive a commission from the sales of the infringing materials.

Assuming that Eros Products LLC (and other plaintiffs that may join the suit should the court certify this as a class action) can prove that they are the valid owner of the copyrighted works, the question for the court is whether Linden Labs can meet the standard for contributory liability.  Linden Labs is a virtual landlord in the sense that users of Second Life pay an annual subscription in order to “own” virtual real estate within the virtual world.  The right to own this virtual property is limited by payment of the subscription.  You will note, however, that there are plenty of users that do not acquire any virtual real estate in Second Life – and for them, there is no fee to participate.

However, Linden Labs also charges fees for the conversion of Linden Dollars into U.S. Dollars through the Linden Exchange.  For infringers seeking to sell pirated works in the virtual world, the real benefit to them is the ability to take the proceeds of those sales and convert them back into hard currency for use in the real world.  Approximately 250 Linden Dollars are worth a U.S. Dollar (the trading in this currency fluctuates).  In order to convert Linden Dollars back to U.S. Dollars, Linden Labs charges a fee of 3.5% of the value of the transaction.  So, indirectly, Linden Labs benefits from the sale of infringing goods every time that the infringer converts his Linden Dollar proceeds to hard currency.

There is a question, however, of whether Linden Labs is merely a landlord who relinquished control to his infringing tenant.  Eros Products LLC claims that Linden Labs did exercise control over the activities of its users because all of the virtual worlds within Second Life are ultimately housed on servers controlled by Linden Labs.  Pl.’s Complaint at ¶ 127-128.  And furthermore, Linden Labs has ultimate control over its software that operates Second Life, and I suppose that Linden Labs could alter its software to prevent copyright infringement if it wished to do so (how, exactly, is another story).  Factually, however, I think this is going to be tough to prove.  Unlike Grokster, who marketed itself as the successor to Napster for those looking to willfully infringe on the copyrights of others, Linden Labs has not marketed itself as a safe haven for willful copyright infringers.  On the contrary, Linden Labs gave some thought to copyright in its license agreement, granting its users rights in the works they create in-world.  (See Terms of Service here at section 3.2)

The other question is whether Linden Labs, in light of the DMCA, fits within the safe harbor established for internet service providers, shielding it from liability for the infringing acts of its users.  More on that in another post.  Stay tuned!

Banished? Who Knew Facebook Was Sovereign?

Facebook has threatened to “banish” users that buy friends on the popular social media web site, according to Yahoo.  The Australian company offering to sell you friends or fans, uSocial, is actually offering for sale what you otherwise just have to buy from Facebook directly through advertising.  Facebook has claimed that the method that uSocial is using, logging into other user accounts to make them a fan or friend of the business that paid it, violates Facebook’s terms of service.  But, my bet is more that Facebook just doesn’t appreciate the competition with its own ad service.  Besides, who made Facebook king anyway?  Oh yeah – its 200 million users.  Uh oh.