Wednesday, November 24, 2010

Oracle v. SAP AG: A Chilling Effect? Not Likely

On this chilly day before Thanksgiving, Oracle Corporation got a holiday present when a federal jury in Oakland awarded the company $1.3 billion in damages for its copyright infringement suit against German software giant SAP AG. The case focused on the intentional copying and use of Oracle’s software by TomorrowNow, a former division of SAP. TomorrowNow offered maintenance services and support software for customers of companies Oracle had acquired. Turns out in order to perform those services; TomorrowNow had downloaded, without Oracle’s permission, Oracle software – a clear and unambiguous copyright infringement.

Oracle sued, and before trial began, SAP admitted the copying and liability for infringement, which left only the amount of damages as the focus of the trial. Oracle sought $2.3 billion, SAP claimed the award should be limited to 40 million. So it appears the jury compromised and awarded damages in the middle of the range at issue.

Some commentators are concerned that this verdict, the largest in 2010 and, according to the San Francisco Chronicle story about the case, the 23rd largest verdict of all time, may have a chilling effect on companies seeking to develop new innovations in software, because of concern about being sued for infringement.

I’m dubious about that concern. This was, from all accounts, an egregious, indefensible case of blatant infringement. Companies that engage in this kind of conduct, when caught in the act, should indeed be concerned that they will be tagged with a big judgment against them. However, many jurisdictions allow for intermediate copying to occur as a company develops new products, provided the copied software is not used in any way in the product ultimately developed. Even in those jurisdictions that preclude intermediate copying, a fair use defense may still aid a defendant.

Given the nature of the conduct of SAP in this case, while the award sets a record, its importance as precedent is more likely to be limited.

Sunday, November 14, 2010

Digital History – Are We All Public Figures?

In his The Public Editor column in the November 14, 2010 New York Times, writer Arthur S. Brisbane casts a critical eye on the a bicycle/pedestrian accident in which 87-year old Claire Menagh was recently knocked down and injured on a quiet New York City street. The operators of the two bicycles which ran into her were a four-year old girl and a five-year old boy. Media reports of the incident named each of the children, and their parents, after Ms. Menagh’s Estate (she died three months after the accident, of unrelated causes) sued the children for damages resulting from negligence, and their parents (also named in the media) for negligent supervision.

Mr. Brisbane, in his Public Editor role, asks whether the Times was right to publish the children’s names. He posed this question to various editors with the Times, who noted that the names were in the public record via the lawsuit, and that other news organizations had previously listed the names in their reporting. They also pointed out that since the case didn’t deal with criminal law claims, nor did it deal with the sexual exploitation of children, the prohibitions on naming children that those instances trigger did not apply to this story.

Critics of the Times’ decision, also profiled by Mr. Brisbane, note that once these children’s names appear in the online universe in this context, this public record is never erased, and will dog them for the rest of their life. “When we stigmatize them by using their names, we say that childhood in America ends at 4-years old”, says the Rev. Emma Jordan-Simpson, Executive director of the Children’s Defense Fund-New York.

Therese Bottomly, managing editor for readership and standards at The Oregonian in Portland, summarizes the impact the digital revolution has on the decision whether to publish children’s names in these cases:

“I used to think short-term about what effect coverage might have on a child returning the next week to a classroom, say, and whether that should be a consideration. Now, we think about the ramifications if a would-be employer or college admissions counselor searches for a kid 10 years down the road”.

This case is directly relevant to the issue of privacy protection versus a shared life approach – the latter being a lifestyle choice many people have chosen in the Facebook and related social network milieu many live in today. While I, and other academics who teach in the area of Internet and related hi-tech law, routinely counsel students to be careful what they upload to social network sites because employers now regularly do Google and Facebook searches, even we fail, I think, to consider the long term impact of this digitally open and recorded lifestyle. The idea of re-inventing yourself to move past youthful indiscretions or poor choices may become less available in a world where your digital history becomes inescapable. This is an effect of these shared lives that many of us, with our eye only on the next month or year, may come to regret only when it is too late. Will we come to a tipping point where we realize we have offered, as some call it, TMI (Too Much Information)?

As is often the case with the excesses of technology in the digital age, there is a social tendency to look to the law and the legal system for a fix for this problem. However, there are some concerns the law is poorly suited to address, and I suspect this is one of them. Attempting to ban or limit, through legal strictures, user-generated content is a losing battle. It is far more likely that it will take many more cases like the Menagh case before the battle for people’s hearts and minds on these privacy issues may be won, and the value of limiting what people share will begin to be embraced, perhaps by a generation yet to come.

Sunday, November 7, 2010

Report on the GGU IPLC Annual Conference

On Friday November 5th, the Golden Gate University IP Law Center presented our 9th Annual Conference on Recent Developments in IP Law and Policy. The day long conference, held in Room 2201, attracted over 70 participants. Highlights included an electrifying presentation by U.C. Davis Professor Madhavi Sunder based on her upcoming work “IP: YouTube, MySpace, Our Culture”, and an engrossing panel of online gaming attorneys from Electronic Arts, Zynga and NAMCO BANDAI Games America.

Center Co-Directors Bill Gallahger and I, joined by Assoc. Prof Chester Chuang, our third IP Law faculty member, wish to acknowledge and thank the Townsend law firm for its generous financial support of the conference. Thanks are also due to Dean Ramey and the Dean’s Office administrative staff for its support. Our presenters and panelists, some of whom traveled from Irvine, Los Angeles and Davis, gave generously of their time and expertise, which is also greatly appreciated. Grad Law program coordinators Natascha Fastabend, Brad Lai and Tiptira Rammaniya provided valuable support as well. A special thanks is reserved for Justin Reid, Administrative Assistant for the IP Program – he did an exceptional job handling the myriad administrative tasks critical to making the conference a success. And lastly, we tip our hats to the twenty student volunteers who worked long and hard to make the event the success it was.

Planning for next year’s conference begins Monday!

Sunday, October 31, 2010

Upcoming Events and Blogs (Shameless Plugs Category – Low-Cost, High Quality MCLE!)

The IP Law Center at Golden Gate presents the Ninth Annual Recent Developments in IP Law and Policy Conference at Golden Gate University all day (9-5 p.m.) Friday, November 5th, at the GGU campus at 536 Mission Street in San Francisco. The Conference features panels on recent developments in trademark and patent law, an hour of ethics for IP practitioners, and a cutting edge panel on online gaming, featuring panelists from Zynga and Electronic Arts, and moderated by veteran copyright lawyer Neil Smith. The program offers 6 hours of MCLE credit for $75 for attorneys, $35 for GGU alums, and $15 for current students (which just about covers the box lunch cost!)
Tickets can be purchased online at, or on the day of the event. For further information, email Justin Reid at

Ninth Circuit Chief Judge Alex Kozinski speaks on April 11th, 2011. The IP Law Center at Golden Gate University School of Law is pleased to present to the Bay Area IP law community a rare opportunity to hear remarks by Ninth Circuit Chief Judge Alex Kozinski regarding IP law and important trends in federal IP law jurisprudence. Judge Kozinski will present these remarks as the third speaker in the IPLC’s Distinguished IP Law Speaker series, in a program free to the public, held at the GGU campus from 6:30-7:30 on April 11th. This is a not-to-be-missed opportunity to hear from one of the leading jurists in the nation, whose probing and sometimes caustic commentary on IP issues routinely makes headlines and is studied by academics and practitioners alike.

Last but not least, two new blog posts follow this one, and I’ve got a few more in the works. Its’ been a bit of a blogging dry spell since my September posts, but with the planning of the IP Conference now completed, I can now address a backlog of blog topics that have been waiting patiently on my desk – including commentary about the violence in video games case (Schwarzenegger v. Entertainment Merchants Assoc.), and the future of copyright, including my review of the fascinating analysis and proposals included in a forthcoming article on this subject by a consortium of contributors assembled by Berkeley Prof. Pamela Samuelson, and a discussion of the SFIPLA panel on the subject, in which Mark Radcliffe and I offered divergent forecasts. Stay tuned!

Digital Sweatshops: A New Global Labor Law Challenge

In his Digital Domain column in the October 31, 2010 Business Section of the New York Times, Silicon Valley author and business professor Randall Stross writes about the growing business of widely distributed repetitive task work in the online universe. Pioneered in 2005 by’s Mechanical Turk service, the business involves software apps which, per Stross, “carve a given task into microscopically small pieces, like transcribing a hand-written four-digit number in a tiny rectangle on a form”, a task which Stross points out presents a problem for text-recognition software, and thus is more efficient if performed by hand.

Such work is referred to as “microtasking”, and businesses pay a few cents per completed task, such as 2 cents for finding the contract information for 7500 hotels, or 3 cents for each answer regarding an inventory of about 9,400 toys. CloudCrowd in San Francisco offers work for “garble hunters” who find translation errors and are paid 20-25 cents per word.

Law professor Miriam A. Cherry has written of this practice, and has a new article forthcoming in the Georgia Law Review, entitled A Taxonomy of Virtual Work, in which she raises concerns about this kind of “virtual work”, and how it will raise new issues, and renew old issues, for labor unions and employers. In an earlier article on this subject she notes that Chinese “gold farmers” who are hired to play online games for long hours to earn “gold”, forms of virtual currency that allow gamers to move up levels, are paid low wages for the effort, and for whom the “game” is anything but fun.

This is once again an example of how developments in the online universe continue to present, in new contexts, legal issues that require the IP legal community to analyze their contexts, to see if existing law can address the issues, or if sui generis approaches are needed. Stay tuned…we are just touching the surface of this issue.

Viacom v. YouTube: Further Thoughts on DMCA Section (512(c)(3)(A)(ii), the Representative List Dilemma, and a Solution

Whew! What a long title – admittedly clunky, but accurate. At this weekend’s State Bar of California IP Law Section’s 35th Annual Intellectual Property Institute, I attended an excellent panel with a similarly long title: UGC on a Global Stage: International Update on Secondary Liability for Copyright Infringement. Moderated by James Nguyen of the Beverly Hills office of Wildman Harrold Allen & Dixon, the panel’s focus was on how secondary liability for UGC (user generated content) was being addressed in countries throughout the world. The discussion began with an insightful presentation by Melinda Mehringer, Senior Vice-President, Content Protection Litigation, Fox Entertainment Group, which summarized the UGC issues in the U.S., exemplified principally by the decision in the Viacom v. Google, YouTube et al. litigation.

I have previously discussed this case (see my July 1, 2010 blog posts) and voiced my concern that the DMCA notice and takedown process was a poor fit for UGC comprised of multiple uploads of the same or similar content. The inability of ISPs to locate posts via the “Representative List” process offered by DMCA Section (512(c)(3)(A)(ii) left content providers in the difficult situation of having to identify, by individual URL, each infringing post – a burdensome task when a work is posted and reposted multiple times. In subsequent commentary about the case that I offered on a panel at the Fall ABA conference in San Francisco, I noted that the use of hash marks as a form of pre-upload filtering was not much of a solution, since the hash marking systems only worked for identical content – which meant that any YouTube posting that added or mashed up content would escape detection.

I was reassured, and a bit horrified, to find Ms. Mehringer reaffirming the view that the notice and takedown system wasn’t working in the UGC context. She noted that in the first half of 2010, Fox Entertainment had sent out seven million (7,000,000) takedown notices! This is a staggering number of notices, and makes it abundantly clear that we need a better system to allow content owners to protect their work. Ms. Mehringer noted, in a conversation we had following her presentation, that the entire suite of different types of pre-upload filtering systems now in use by YouTube and other ISPs are allowing content owners to identify up to 85% of infringing content, but the burden of sending out notices, particularly in the kinds of numbers she cited, remains untenable.

All of this puts me to mind of Prof. Lawrence Lessig’s discussion, in the first version of his book, Code, and Other Laws of Cyberspace, that to effect change in the online universe, four different modalities must be involved: Code (or architecture), Law, The Market, and Social Normative change. While filtering systems and threats of legal enforcement may help address UGC infringement issues, the absence of any economic consequences, and more importantly, the failure to convince users that infringement is a social harm, likely means that this battle will continue, to the detriment of the creative community.

Coming up with a solution to this dilemma is a challenge for all of us in the IP community – so consider the gauntlet thrown readers – how do we solve this?

Saturday, September 11, 2010

Social Pressure and the Law: Craigslist’s “Adult Services” and Zynga’s Business Practices

Living and working in the Bay Area, a place where you can find people who care deeply about anything and everything, offers a front row view of the impact social pressure can have, often despite the legal nature of the conduct at issue. Two different online companies are experiencing that pressure now, and their response to it may reflect the power such pressure can wield.

Craigslist, the popular online resources/classified ad site, has faced a steady stream of criticism for years over listings that critics claim are thinly disguised advertisements for sex for hire services by prostitutes (both male and female). Politicians like Rep. Jackie Speier (D-Hillsborough, CA) and possible South Carolina gubernatorial candidate Henry McMaster have launched investigations and threatened lawsuits over what they characterize as websites like Craigslist being used to “facilitate criminal activity”. Craigslist’s CEO, Jim Buckmaster, points out that censoring the postings on the site, or forcing it to close down its “Adult Services” pages, won’t really address the social concerns over this kind of activity. Rather, he points out, all a closure will do is cause the companies and individuals advertising to move their ads to offshore websites, or to other sections of Craigslist, such as the “Personals” section. Critics of the closure advocates also note that ads of this nature have run for over fifty years in alternative newspapers (see the Bay Guardian and SF Weekly in Northern California for examples), without drawing similar pressure.

Despite the fact that no one claims that the First Amendment doesn’t protect these listings, and that Craigslist only starting charging for these ads when it was pressured to do so by a group of attorneys general, and that it donated the funds received to charity (until charities started publicly refusing to accept the donations), the pressure on the company continued. In the spring of 2009, Craigslist started manually reviewing all of the Adult Services postings, and reported any that seemed to indicate the involvement of underage persons to the National Center for Missing and Exploited Children. Once again, these measures didn’t appease the critics, nor did they stop the media pressure and threats of litigation and criminal charges.

Finally, last week Craigslist threw in the towel, first slapping a “censored” label over the Adult Services section, and then removing the entire section from the site.

In a similar social pressure vein, SF Weekly, one of those alternative newspapers with a prominent “Adult Entertainment” section laden with ads for escorts, phone sex, massage services and strip clubs, featured in its September 8-14 issue, a cover story by Peter Jamison about Zynga, the creator of Farmville, a hugely popular online game. The cover illustration features a farmer in overalls, wearing a black Zorro-like mask, carrying a pitchfork and a bag of money, with a pink pig looking on with a caption over the pig’s head that reads “WTF?”, a reference I assume needs no translation. The title on the cover page reads: “Zynga Has a Simple Business Formula: Steal Someone Else’s Game. Change Its Name. Make Millions. Repeat.” A pull quote in the middle of a page of the article, attributed to a former employee, reads: “Zynga’s Motto is ‘Do Evil’. I Would Venture to Say It Is One of the Most Evil Places I’ve Run Into.”

This all sounds pretty ominous. It is only deep in the article that Jamison acknowledges that nothing that Zynga is doing is illegal or constitutes copyright infringement or any other violation of intellectual property rights. Rather, the accusation is that the company is very aggressive in exploiting unprotected ideas for games developed by competitors, and essentially building a better mousetrap by focusing on the social networking appeal of these games (virtually all Farmville players play the game through their Facebook connection). Its’ hard to tell what the goal of this attack piece is – other than to assert that Zynga has committed the sin of being aggressively capitalist, instead of fostering innovation in the game universe. If the point is to attempt to get Zynga to moderate its conduct via social pressure, despite the legal nature of that conduct, it is again a bit troubling, as are the efforts of the Craigslist critics.

All participants in these conflicts, of course, have the absolute right to make their divergent viewpoints known, and to use whatever media platforms are available to them to present those views. However, when the expression of those views spills over into threats of litigation, criminal prosecution and thinly supported attacks on business reputation, despite an absence of any evidence of a violation of IP or other laws, then we begin to cross the line from free expression into coercion – a line 1st Amendment protectors need to be vigilant to preserve – always reminding critics that the 1st Amendment isn’t in place to protect speech we like – rather it is there to protect speech we don’t like.

Is It a Sale or a License? Ninth Circuit Sides With Autodesk – The First Sale Doctrine Doesn’t Apply to a License

In a decision filed yesterday, the Ninth Circuit reversed the USDC (Western Dist. Of Washington) in the long-running litigation between Timothy Vernor and Autodesk, Inc. Vernor purchased used copies of Autodesk’s AutoCAD Release 14 software from one of Autodesk’s direct customers and resold the copies on eBay. The problem, the Ninth Circuit found, was that those direct customers didn’t own the software – they merely licensed the right to use it from Autodesk, according to the terms that governed the original transaction. Since the customer didn’t own the software, they couldn’t lawfully sell it to Vernor, and thus Vernor couldn’t count on the first sale doctrine to protect his subsequent sale of it on eBay.

If this decision withstands a possible en banc review or Supreme Court challenge, it may offer a more definitive set of standards for evaluating cases that arise out of the long-standing debate over whether software licensing agreements are true leases or are merely disguised sales agreements. The Ninth Circuit opinion devotes considerable space to a review of the Wise and MAI trio of cases, and rejects, again in significant detail, the arguments advanced by Vernor and amicus supporters of his position. The opinion may be reviewed at

Microsoft Co-Founder Paul Allen Sues Everyone!

In a fifteen page patent infringement suit filed in United States District Court for the Western District of Washington at Seattle, Microsoft co-founder Paul Allen alleges that AOL, Apple, Ebay, Facebook, Google, Netflix, Office Depot, Officemax, Staples, Yahoo and YouTube have all violate four key patents owned by Interval Research, an idea lab he owned some years ago.

The patents involved focus on functions central to e-commerce, such as the ability of a site to monitor what a consumer is looking at in real-time, and recommend related products; the ability to refer readers of a news story to related stories, and the ability to stream news updates and stock quotes on webpages. Not surprisingly, Microsoft, which may also be using these claimed patents, is not named in the suit.

The patents at issue were granted between 2000 and 2004. This was a difficult period for the Patent Office with respect to online applications patents. The Office lacked depth in their team of examiners as far as online software applications, and in some cases may have granted patents whose claims were based on prior art that was not fully understood at the time. A classic earlier example of this problem was the patent originally granted to Random House for “multimedia” – a patent which the Office later withdrew when the industry rose up in protest and proved that the claims were not new, or novel.

The first line of defense in most IP infringement claims is to challenge the validity of the underlying grant or claim, and it looks like that is the path defendants will take in this case as well. I’ll be keeping an eye on this one, as a win for Allen will have far reaching impact on the digital world.

Sunday, August 22, 2010

The Sly Rabbit and the Three C's: China, Copyright and Calligraphy

My latest law review article, The Sly Rabbit and the Three C’s: China, Copyright and Calligraphy, has just been published as a Feature Article in Volume 7, Issue 2 of the Loyola University Chicago International Law Review (Spring/Summer 2010) at pages 163-191. The Law Review has not yet posted Issue 2 on its website, however I understand it will do so in the near future. When posted, the article will appear on the Review’s site, which is found at:

The “Sly Rabbit” portion of the title refers to a classic Chinese proverb that reads: “A sly rabbit will have three openings to its den”. In the context of my article, I am suggesting that in order to successfully create an environment in China where enforcement of copyright laws will be successful, it will be necessary to use a multi-faceted approach. The approach the West has used, with spectacularly unsuccessful results, has been to try to get China’s government and society to enforce the rule of law as a means of protecting copyright rights.

My research into Chinese history led me to conclude that this effort fails not simply because the Communist Revolution in China rejected private ownership of copyright, but more importantly that attempting to protect property through a legal structure was an approach that had been rejected over a thousand years ago. The use of law as the foundation for governance failed when the Imperial family and its ministers rejected the doctrine of Legalism in favor of the morality based approach of Confucianism. The use of law to attempt governance in traditional Chinese society is viewed as evidence of a moral failure – and the idea of elevating the needs of the individual over the needs of society as a whole is viewed as vulgar and crass, lacking in any sense of spirituality and moral values.

So the task of creating an environment in China where enforcement of copyright laws will be successful requires more than the legal approach. I suggest that by combining an approach based in economics, coupled with the creation of stakeholders in Chinese society who themselves can benefit from copyright ownership; there is a greater likelihood for developing broad acceptance of copyright’s benefits to the society.

So where does calligraphy fit in? I use the example of contemporary artists in China, some of whose work focuses on a re-envisioning of traditional calligraphy as an art form, as one place where these three approaches are developing more acceptance of copyright and its benefits. Many of these new artists have been able to sell their works, both in China and abroad, for millions of dollars. They are treated like rock stars, with loyal fans and collectors around the world. Their work has not fallen prey to the notorious copyright infringers in China, because their fans protect them, the art community recognizes the economic benefit accruing to them, and the copyright laws protect them as well.

In a bit of serendipitous timing, a contrary example also hit my desk today. The August 22nd issue of The New York Times Magazine features a story by Nicholas Schmidle entitled “Inside the Knockoff Factory”, which profiles the activities of Southern Chinese factories which manufacture millions of fake tennis shoes (primarily Nike), in a community environment that protects the manufacturers and has been impervious to legal efforts to shut them down. Schmidle's article illustrates and supports the point of my article. There are no stakeholders in Chinese society for whom protecting the Nike trademark is an important value. The economics of the knock-off market support this illegal activity, and no one in China is getting wealthy selling legitimate Nike shoes. Therefore, the effort to interdict this activity through the rule of law is doomed to failure.

I conclude my article by noting the difficulty of attempting to chart a prospective course for social change in a society, a difficulty greatly enhanced when the author is not a member of that society – that said, I suggest that the language of the historic proverb gives us a clue to the kind of multi-faceted approach to this problem that may hold out a chance for success. It seems worth trying, given our miserable track record to date, no?

A Blast From the Past: Justice Jesse Carter's Prescient Dissent in Kurlan v. CBS

A few years ago I was invited to join colleagues on the Golden Gate University School of Law faculty in writing a chapter of a jointly written book project. The subject of the book was the collection of dissenting opinions published by one of our most famous alumni, California Supreme Court Justice Jesse W. Carter. Justice Carter served twenty years as a member of the California Supreme Court, during which time he became known as the “Lone Dissenter” for the frequency and vehemence of his dissenting opinions.

The case I selected to write about was Kurlan v. CBS, 40 Cal. 2d 799 (1953). This case raised a variety of issues in entertainment law, including whether characters created for a book, and later used in a radio and television program, are entitled to separate protection under the law. They weren’t at the time, and the majority opinion does not extend the law to offer that protection. Judge Carter strongly argues that they should be entitled to this protection, and his was a prescient view, as characters which are clearly and strongly defined are now afforded such protection under federal copyright law.

Perhaps one of the oddest elements of the Kurlan case is the fact that it was litigated in state court, despite the predominance of copyright law related issues. This is significant since copyright law is exclusively federal law. My research led me to some explanations as to why the case was not brought in federal court, but rather than explain that here, I’ll just refer you to the book!

This fascinating review of Justice Carter’s dissents can be found in The Great Dissents of the “Lone Dissenter”, (2010) published by Carolina Academic Press, ISBN No. 978-1-59460-810-0. Copies are available on Amazon and other online book sites.

The Tech Writers’ Dilemma: Exempt Professional or Hourly Employee: The Sun Microsystems Case Settlement Leaves the Problem Unresolved

In May 2008, a Santa Clara County Superior Court judge made tech industry news when he issued an Order granting Sun Microsystems tech writer Dani Hoenemier’s motion to certify a class action lawsuit. (Hoenemier v. Sun Microsystems, Case No. 106CV-071531, Santa Clara County Superior Court) The claim at issue was that tech writers at Sun were working 60 hour weeks, without meal breaks and related benefits, in violation of California labor laws (Cal. Labor Code § 510).

Sun’s position, mirrored by most of the tech industry, was that tech writers were exempt professionals as employees in the computer software field, per Labor Code § 515.5. Further complicating the issue, many tech writers also supported the exempt characterization, desiring more autonomy in work hours, and the ability to telecommute. There was a concern on the part of these writers that they would lose valuable independence if they were deemed non-exempt hourly workers.

In granting the Order certifying the class, Judge Jack Komar cited California Labor Code § 515.5 as a section of the law which would need to be addressed in the litigation. While this section generally exempts computer software professionals from the overtime compensation laws, tech writers appear to fall into a non-exempt category, per subpart (B)(5) of the section, which provides:

b) The exemption provided in subdivision (a) does not apply to an
employee if any of the following apply:

(5) The employee is a writer engaged in writing material,
including box labels, product descriptions, documentation,
promotional material, setup and installation instructions, and other
similar written information, either for print or for onscreen media
or who writes or provides content material intended to be read by
customers, subscribers, or visitors to computer-related media such as
the World Wide Web or CD-ROMs.

A few weeks ago, on July 21st, Santa Clara County Judge Joseph Huber gave preliminary approval of a $5 million dollar settlement of the suit, resulting in an average $21,000 payout to the 152 tech writers listed as plaintiffs in the suit. A hearing is set for October 8th to grant final approval of the settlement. In the two years the suit was working its way through the legal system, a number of tech companies, including Oracle (which bought Sun in February for $7.4 billion), have changed their policies and are now paying overtime to tech writers.

While it seems clear to me that Section 515.5(B)(5) carves out tech writers from the exemption of software professionals from wage and hour rules, it remains an open question whether the settlement of this case, which leaves some uncertainty about the applicability of the Labor Code section, will serve as impetus for an industry-wide change of approach, or whether it will take a fully litigated case to deliver a definitive answer to this issue. A similar concern, whether software engineers are deemed employees or independent contractors, has bedeviled the industry for years.

Friday, July 30, 2010

IBM Under the Microscope: The EU Competition Commission Takes a Hard Look

In the 70’s and 80’s, IBM was a frequent target of investigation, both in the U.S and abroad, for alleged anti-trust claims. The last twenty years has seen that focus shift to Microsoft, as software became a much more lucrative and competitive field than computer hardware. With this history in mind, it is somewhat surprising to see that the European Union Competition Commission is now re-focusing its investigative eye on Big Blue. The focus of the investigation, according to an article in the July 29th San Francisco Chronicle with Bloomberg Business Report, is whether IBM is abusing its dominant position in the market for mainframe computers. The impetus for this investigation is a complaint by t3 Technologies Inc., a company in which Microsoft has invested in. Signaling its awareness that its rival is behind this complaint, IBM responded in a June 26th statement that “there is no merit to the claims being made by Microsoft and its satellite proxies”.

If the investigation yields evidence that supports the complaint, it could present a serious problem for IBM. Although mainframe sales account for only 4 percent of IBM’s revenue, those sales generate related sales of software, services and financing. These elements combine to contribute almost a quarter of IBM’s sales and 40% of its profits, according to Sanford C. Bernstein analyst Toni Sacconaghi.

The European Union has long taken a much tougher stance regarding competition policy (referred to in the U.S. as “antitrust”), and in recent years has focused on U.S. companies, collecting 2.2 billion in fines from Microsoft, and 1.39 billion from Intel. Bolstered by these victories, it is unlikely to ease off is aggressive policies – a factor U.S. companies would be wise to consider.

Applying Nominative Fair Use to Domain Names: Toyota v. Tabari

My thanks to GGU IP alum Jennifer Lam for alerting me to this decision. Farzad and Lisa Tabari are car brokers, focusing primarily on Lexus automobiles. They operate two websites, and, where customers would see photos of Lexus vehicles and the L symbol design mark used by Lexus. They are not authorized Lexus dealers – what they do is help customers get the best price from Lexus dealers, and they shop for their customers to get the best deals in terms of price, location, and model style and accessories.

Toyota, owner of the Lexus trademark, objected to the Tabaris’ usage of their logo, photos and related items. The Tabaris’ removed the photos and logo from their site, and posted a large disclaimer, making it clear they were not affiliated with Toyota. They declined, however, to abandon or change their URLs. Toyota sued, and the trial court found trademark infringement and issued an injunction ordering the Tabaris to cease using lexus in the existing or any future website. The Tabaris, acting pro se, appealed to the Ninth Circuit.

The Court, in another opinion by Judge Kozinski, reversed the District Court. Noting that this is a case involving nominative fair use, Judge Kozinski points out that the Tabaris were not involved in the sale of vehicles that weren’t in fact Lexus vehicles. So there is no passing off, no confusion in the marketplace – their customers wanted to buy a Lexus, and that is what the Tabaris found for them.

Because this is a nominative fair use case, the first error the Court finds in the District Court decision is that the use of the AMF v. Sleekcraft (599 F.2d 341, 348-49 (9th Cir. 1979) eight-factor test for likelihood of confusion, was incorrect, because that test only applies to actual infringement cases, not nominative use cases.

Judge Kozinski notes that because the URLs used by the Tabaris do not
claim affiliation with Lexus or Toyota, there is no basis to assume customers form a firm expectation, before going to the site, that it is a sponsored or endorsed site. This, he notes, “is sensible agnosticism, not consumer confusion”.

Citing the test established in the seminal nominative fair use case of New Kids on the Block v. News Am. Publ’g, Inc., 971 F.2d 302,308 (9th Cir. 1992), the Court finds that the revised Tabari website, which eschews use of the logo or official photos, used just what was necessary of the Lexus mark to let customers know the nature of their business. Consequently, their use was fair.

Judge Kozinski found support for this decision from another Judge known for his trenchant humor and concisely written decisions: Judge Posner in the Seventh Circuit. In an odd coincidence, Judge Posner, in upholding the right of a seller of Beanie Babies to operate at “”, noted that prohibiting the use of such a domain name “would amount to saying that if a used car dealer truthfully advertised that it sold Toyotas, or if a muffler manufacturer truthfully advertised that it specialized in making mufflers for installation in Toyotas, Toyota would have a claim of trademark infringement”.

I derive two takeaways from this case: 1. The nominative fair use defense in trademark infringement cases is alive and well; and 2) When Judges Posner and Kozinski line up against you – its’ time to throw in the towel.

Will the U.N. Try to Regulate the Internet? Not Likely

In an Opinion page piece in the Wall Street Journal on July 23rd, Robert McDowell, an FCC Commissioner, warns of a threat by the United Nations to take over regulation of the Internet. He bases his concern on the prospect that the FCC will soon classify the Internet as a “telecommunication service”. This, he suggests, could lead the International Telecommunication Union, a treaty-based organization under the auspices of the U.N. which regulates international telecom services, to assert regulatory power over the Net. He supports his concern by noting the spread of efforts by certain states to regulate the Internet, citing government interference in Iran, North Korea, Syria, China and Afghanistan. He concludes that the success of the Internet has come because of the relative freedom it enjoys.

Commissioner McDowell’s concern about the efforts of largely totalitarian regimes to attempt to regulate the freedom of speech which characterizes a substantial part of the Internet is well placed, albeit nothing new. Critics have voiced concern over state regulation of the Internet for years, with warnings such as those expressed by Harvard and now Stanford Professor Laurence Lessig expressing this concern in his Code and Code 2.0 books.

What strikes me as dubious and far less likely is that any organization operating under the auspices of the U.N. would be able to reach an international consensus about how to regulate the Internet. The decade long failed effort of the U.N. to reach a uniform standard for the enforcement of judgments eloquently exemplifies how unlikely it is that any such consensus could be reached.

So, while the freedom of the Internet may indeed continue to be threatened by dictatorial regimes, and perhaps also by large corporate interests, I think it unlikely that we need to add U.N. management to the threat list.

Thursday, July 29, 2010

Chapter Two in the Saga of Mattel, Inc. v. MGA Entertainment (aka Barbie v. Bratz)

On July 22nd, the Ninth Circuit Court of Appeals delivered its much awaited decision in Mattel, Inc., v. MGA Entertainment, Inc., reversing a District Court decision which had, in effect, transferred all rights to the multi-billion dollar Bratz line of dolls and related items over to Mattel. At the core of the dispute is Carter Bryant, a former Mattel employee who developed the Bratz concept and prototype dolls while employed as a Barbie fashion and hairstyle designer.
The District Court found for Mattel on both trademark and copyright infringement claims, imposing a constructive trust in favor of Mattel as to the Bratz trademarked product lines, and issuing a injunction preventing MGA from using any of the copyrights attached to the products as well.

Chief Judge Alex Kozinski, writing for a unanimous panel, first questioned the District Court’s finding that Bryant’s 1999 Mattel employment agreement gave the company ownership of any ideas he developed. The relevant language read:

“I agree to communicate to the Company…all inventions conceived or reduced to practice by me at any time during my employment by the Company. I hereby assign to the Company all right, title and interest in such inventions, and all my
right, title and interest in any patents, copyrights, patent applications or
copyright applications based thereon.”

The agreement defines inventions as “all discoveries, improvements, processes, developments, designs, know-how, data computer programs and formulae, whether patentable or unpatentable”.

So once again a major multi-billion dollar case hinges on a poorly drafted contract. If Mattel had wanted to secure rights to anything Bryant created, why not require him to sign an express work for hire transfer of all works eligible for protection under copyright law anywhere in the world? The disputed language sounds almost entirely in patent, except for the gratuitous addition of the word “copyrights”. This uncertainty, along with an erroneous application of an overly broad scope of copyright protection in the dolls design, and related errors, led the Court of Appeals to overrule the District Court’s decision and remand the case for retrial. Ah well, this is how we keep IP litigators employed.

Aside from the pleasure of reading another characteristically witty and erudite opinion by Judge Kozinski, perhaps the most significant portion of the opinion is found in Section II B, where the scope of damages is discussed. The Court notes that even if Mattel can prove ownership of the Bratz concept and first production prototype (called a “sculpt” in the doll industry), it should not be able to recover from MGA damages based on the huge profits MGA earned by taking the concept and developing it, through their own sweat equity and creativity. The Court holds:

“It is not equitable to transfer this billion dollar brand – the value of which is overwhelmingly the result of MGA’s legitimate efforts – because it may have started with two misappropriated names.”

The significance of this analysis is its likely application to the copyright termination cases now wending their way through district courts in New York and Los Angeles over the rights to the hugely successful comic book empires of DC Comics (built around Superman) and Marvel Comics (built on the characters created by Jack Kirby in the 1958-63 period, including Thor, The Fantastic Four, the Avengers, Hulk and Iron Man). In each of these cases, the heirs of the original creators of these comic book superheroes seek to terminate their grant of copyright to the publishers, and recapture those rights for their own benefit. A key issue in the cases is what rights the heirs have to derivative works created and exploited by those publishing companies, which greatly enhanced and extended the value of the original properties. If the holding in the Mattel case applies, it could have the effect of significantly limiting the range of applicable damages in those copyright termination cases. I am working on several extensive articles dealing with these copyright termination cases, so I’ll be watching these developments closely, and I’ll keep you apprised of the effect of this decision on those cases.

Tuesday, July 20, 2010

My Presentation at ComicCon

For those dedicated comics/comix fans going to the San Diego ComicCon, I am speaking at the Comics Arts Conference. Here are the details:

Thursday, July 222:30-3:30 Comics Arts Conference Session #4: Recapturing Copyright for Gold and Silver Age Comic Book Creators— Copyright lawyer Marc Greenberg (Golden Gate University School of Law) covers key developments in the Superman case (Siegel v. DC) and explores the claims filed by the Jack Kirby estate to the rights to the major Marvel Comics characters he created or co-created. Room 26AB.

Stop by and say hi. I will also be posting a blog about these cases in the near future.

Monday, July 19, 2010

George Carlin; Indecency and the FCC

On October 30, 1973, a man driving in his car with his young son set off a chain of events that had a significant impact on our legal system’s approach to obscenity law. He turned his radio dial to a New York station that was broadcasting George Carlin’s 12 minute monologue about “The Seven Dirty Words You Can’t Say On Television”. Offended that his young son heard these words, he filed a complaint with the FCC. After a five year see-saw battle in the lower courts, the Supreme Court upheld the FCC’s sanctioning of the radio station. In its decision, (FCC v. Pacifica Foundation, 438 U.S. 726 (1978)), the Court carved out a new category, “indecent language” which the FCC could ban from the airwaves until 10 p.m., when it was assumed that children and minors would be asleep and not at risk of hearing such language.

When the decision came down I was a law student and an Articles Editor of the Hasting Constitutional Law Quarterly, assigned to review that terms’ USSC decisions. I was baffled at the tortured logic the Court deployed in support of the “indecency” doctrine. In my article, First Amendment Cases - U.S. Supreme Court - 1978 Term, Hastings Constitutional Law Quarterly, Fall 1979, I was critical of the vagueness inherent in the definition of the term “indecency”. Coming on the heels of the equally vague decision in Miller v. California, (413 U.D. 15, (1973)), with its reference to a non-existent “local community standard”, the Pacifica case seemed to add insult to injury by adding yet another vague term for media publishers to attempt to avoid running afoul of.

Last week, 32 years later, the U.S. Court of Appeals for the Second Circuit finally struck down the “indecency” doctrine as being hopelessly uncertain and therefore in violation of the First Amendment. (Fox Television v. FCC, US Ct. App. 2d Cir., O6-1760-ag (July 13, 2010)).

The Court’s opinion answers the question of why it took so long for the indecency policy of the FCC to be once again considered by a court. The answer appears to be that the FCC, after the Pacifica case, may have realized that the Supreme Court’s decision rested on very thin legal reasoning, , and that the creation of the indecency standard was fraught with constitutional uncertainty, and likely was violative of First Amendment rights. So, for many years following the decision, the FCC limited itself to claims arising from the broadcast of only the specific seven dirty words from Carlin’s monologue. From 1978 to 1987 there were no such enforcement actions filed – why? Because broadcasters had a simple list of words to avoid, and did so.

The FCC, during most of these years, also recognized that with respect to live broadcasts, it was sometimes impossible to filter out the fleeting or one time use of an expletive, and so they adopted a “fleeting use” or one time use exception to the indecency policy as well. In a series of cases the FCC declined to enforce the policy where a single use of a word was the source of a complaint.

This caution on the part of the FCC also met a concern voiced by the Supreme Court in the Pacifica case – which was that the Court explained that it was trusting in the sound discretion of the FCC in allowing the indecency standard to be applied (Pacifica at 761 n.4) – a trust that the FCC honored by greatly limiting its use of its discretion for 30 years.

However, things changed in 2004. Blame it on Bono of U2. In accepting a Golden Globe Award, he said, “this is really, really, fucking brilliant.” (Fox at 9). The FCC found his spontaneous one time use to be “indecent” and “profane”. Over the next six years, the FCC dramatically increased its fines and abandoned both its limited application of the policy and its fleeting use exception. This shift in administrative approach drew substantial industry criticism, and led to the instant case.

The Second Circuit decision cites numerous examples of the FCC’s inconsistent application of its indecency policy over the past six years, and also noted that the changes in media platforms and the inclusion of the V-chip (allowing adults to filter programs they don’t want their children to watch) have changed the landscape of broadcast television, obviating the need for the policy. (Fox at 16).

The Court in Fox noted that even the FCC could not provide a list of terms or actions that would give rise to sanctions, finding “If the FCC cannot anticipate what will be considered indecent under its policy, then it can hardly expect broadcasters to do so”. (Id at 24).

It’s a good day for protectors of the First Amendment. Thanks George, for opening minds.

Monday, July 12, 2010

To Arbitrate or Not to Arbitrate: Celador v. Disney Complicates the Answer

On July 8th the jury in the long-running (six years!) litigation between Celador International, Ltd, the creator in the U.K. of the "Who Wants to Be a Millionaire" game show, awarded the company a verdict of $269 million against Disney, based on Celador's claims that Disney breached a contract to pay the company royalties for the license to produce the show in the U.S.

The news commentaries about the verdict noted that it wasn't likely to have a significant impact on licensing practices because the contract language at issue was based on a 1998 contract. Licensing and profit participation agreements have been revised since then, making a contemporary dispute on these same terms unlikely.

What is important about this decision is its contribution to the long-standing debate over whether mandatory binding arbitration clauses should be included in IP and entertainment licensing agreements. In this instance the contract between Celador and Disney lacked such a clause (The same is true of the contract in the Don Johnson v. Rysher Entertainment case, decided the same day and providing a significant award to Johnson).

Those in favor of the inclusion of mandatory arbitration clauses point to its key benefits: 1) the substantial savings in litigation costs; 2) the much faster pace in moving the dispute to a hearing; and 3) the ability to choose arbitrators with knowledge of the often extremely complex IP and contract issues found in these kind of licensing deals. Critics of mandatory binding arbitration clauses point to their principal drawbacks: 1) the lack of a right of appeal; and 2) the absence of a right to jury trial in these cases.

For Celador, it seems almost certain that it benefited from the presence of a lay jury which accepted their characterization of themselves as the victim of bullying by the more powerful Disney company. The surprisingly high damages verdict is less likely to have been awarded if the case was presented to an industry savvy arbitrator.

What Celador loses by taking this case to trial is the ban on appeals which applies to arbitration cases. Disney announced immediately after the verdict that they intended to appeal it. The outcome of that appeal could take years, and Disney might use that time and added expense to negotiate a lower dollar settlement of the case in the interim.

The absence of an appeal right is a significant detriment in the arbitration process, and I suspect is the primary reason parties often opt out of that process. Given the benefits arbitration offers in the IP and entertainment law context, particularly in the area of arbitrator expertise in industry practices and IP law, this is a terrible choice to force on contracting parties. One hope is that this recent spate of cases may spur some legislative consideration of reforming the arbitration rules to allow for some forms of appeal.

Monday, July 5, 2010

Who Will Regulate Internet Television?

The lead story in the Business Section of the July 4th Sunday edition of the San Francisco Chronicle, "Internet products ready to challenge cable TV", written by James Temple, focused on the upcoming launch of Google TV, a new service rolling out this fall that blends online streams and broadcast programming viewable on television screens. Temple notes that, the popular online video site, recently announced plans to offer a subscription service that will deliver broadcast shows online to computers and mobile devices like the iPhone.

The goal of all of these new services is to woo viewers away from cable subscriptions or "free" television on the broadcast networks, in favor of the more interactive capabilities of Internet television, in which you select what you want to watch, when you want to watch it, and to some degree, even interact with what's on the screen.

The second half of Temple's article suggests that cable and satellite companies, and the broadcast networks are also developing ways to deliver their services to the Web, so as not to be left behind the technology curve. This last point got me thinking about author Ken Auletta's 1992 national bestseller, Three Blind Mice: How the TV Networks Lost Their Way. Auletta chronicled how NBC, CBS and ABC failed to recognize the threat cable posed to their business model, and how they lost the majority of their profits and market share as a result.

While I agree with Temple that these players have learned from their prior error, and most likely will, in some fashion, retain their seat at the table in the new formats for the delivery of video content, a different concern about this change in direction may prove less susceptible to easy transition. The concern I am focusing on is the regulatory structure for video content that presently is the turf of the Federal Communications Commission and the federal government through Congress and its media related committees.

Regulation of content in the earliest days of broadcast television was heavily controlled and restricted by the FCC and Congress, based on the argument that only limited bandwidth was available. The grant of rights to broadcast on that bandwidth could therefore be conditioned on compliance with a wide array of regulation, including content (networks were required to meet obscenity standards, provide hours of programming for children, and provide news programming).

These standards loosened up with the development of cable television, as the availability of channels grew, and niche television programming became a reality. However, the cable industry remained located in the United States, and local programming also remained a mainstay of the television industry, guaranteeing that FCC and federal government regulation would still play a significant role in the television industry.

Internet television carries the possibility that this regulatory structure will no longer apply. Google TV promises to make the entire Internet available on your television. At that point, the regulation of content now enforced by the FCC and the federal goverment falls by the wayside in the same way those agencies and entities do not, and cannot, regulate what computer users see online. This will place the responsibility for regulating content on filtering systems, which have proven notoriously ineffective (for an analysis of the weaknesses of filtering systems, see my article, The Baby With the Bath Water: The ALA v. U.S. Case and the Application of Mandatory Filtering to Public Library Internet Access – Lead Article in the Spring 2006 issue of the Syracuse University School of Law’s Law and Technology Reporter).

As is often the case with technology innovations, the legal system follows along after each new wave and attempts to find, either through existing law or sui generis creation of new law, a way to accomodate for the diverse interests affected by the change. Stay tuned for that effort following the introduction of Internet TV this Fall.

Thursday, July 1, 2010

Viacom v. YouTube

When I decided to launch an IP Buzz Blog, the one thing I didn't worry about was finding subjects to blog about. I am obliged to the U.S. District Court for the Southern District of New York for offering up its Opinion and Order in Viacom International v. YouTube Inc. (07 Civ. 3582 - filed 6.23.2010) as it gives me the opportunity to begin this blog with a comment about this important decision.

The core of the decision is the Court's interpretation of the scope of the "safe harbor" offered to internet service providers (ISPs) by Section 512(c) of Digital Millenium Copyright Act of 1998. This safe harbor provision allows an ISP to avoid liability for a posting that violates copyright law, so long as the ISP complies with the "notice and takedown" process outlined in subsections (c), (m) and (n) of Section 512. A party who believes that material posted on a site operated by the ISP is required to notify the ISP of their claim, providing enough information about the location and content of the claimed infringement, so the ISP can find the allegedly offending material and take it down. The party posting the material is entitled to respond to the takedown by offering any defenses they have to the claimed infringement.

A key problem in this case is that YouTube subscribers had posted over a hundred thousand infringing items, forcing Viacom to expend considerable effort compiling a list of these infringements, which it then submitted to YouTube. Viacom argued that there were many more infringing posts, which it attemped to provide notice of by offering up a "representative list" of such works on the YouTube site. YouTube declined to take down any videoclips other than those specifically identified by Viacom, in essence ignoring the "representative list" Viacom submitted.

The ability to designate a representative list is an important element of the safe harbor protection offered by Section 512. This provision (512(c)(3)(A)(ii)), offers an option for companies like Viacom, who experience the problem of a huge number of infringing posts occuring over a short period of time. We have to remember that in 1998, when the DMCA became law, social networking and viewer created content sites like YouTube didn't exist. The notice and takedown process wasn't designed with the prospect of dealing with such a huge number of infringing posts, created by thousands of individual users. This representative list concept is the only way a content owner could attempt to limit the burden of having to compile a detailed list identifying thousands of individual users, their URLs, and further details of their post, when the same item is posted by many users. So, if 10,000 people all posted a video clip of an episode from the Seinfeld sitcom, the representative list option would allow Viacom to identify the clip, instead of all of the users who posted it, in its takedown notice.

The Court in this opinion essentially renders moot the representative list option in the Act by holding that the subsection which follows the representative list, which requires that the items referred to in that list be accompanied by "information reasonably sufficient to permit the service provider to locate the material" means that the content owner must provide the individual URL of the posting. In essence, this means Viacom would still have to identify each separate posting, thereby eviscerating any benefit the representative list option offers.

Supporters of this interpretation will point to YouTube's "Claim Your Content" system, which allows content creators an opportunity, via YouTube's Audible Magic fingerprinting tool, to pre-identify content by filing a reference video which YouTube would use to automatically remove matching material, as an appropriate response to the problem of multiple infringing postings. This system offers little benefit to creators of large quantities of content, such as Viacom, as it would require them to designate thousands of hours of content annually, an unduly burdensome task, and the system can still be circumvented if enough original content is added to the posts.

So what is the bottom-line takeaway from this decision? It highlights the need for Congress, aided by imput from all of the stakeholders and the IP academic community, to revisit the DMCA and address the issue of balancing the rights of content creators with those who wish to widely distribute that content online, via a much needed update and revision of the DMCA.