Business and Technology Law

President Obama was recently urged to sign a bill passed by the Senate on December 13, 2010, that seeks to educate US District Court judges on the intricacies of patent cases. The bill would send cases with one or more patent issues to judges who request to hear patent cases and would provide the judges with additional experience evaluating patent claims. The program would be instituted in the six U.S. District Courts that received the most patent and plant variety protection cases in the last year. Courts that adopt and implement local rules for patent cases also will be eligible for the program.

The bill is intended to provide judges an opportunity to develop their expertise and to better evaluate and understand patent cases. Patent law is a unique and complex area of the law unfamiliar to many experienced judges. President Obama has been urged to sign the bill into law to help thwart efforts of so-called “patent troll” plaintiffs, who typically file lawsuits against possible infringers of patents in which the plaintiffs have acquired ownership rights.

The law would remain effective for 10 years, and the Director of the Administrative Office of the United States Courts is to prepare a report of the pilot program approximately five years after the program begins. Companies with significant investments or dependencies in technology should keep an eye on how the participating courts handle patent claims, if the bill is signed. Implementation of this sort of program may have a positive effect on those companies’ legal exposure arising from third-party, patent-infringement claims.

A copy of the bill is available on the govtrack.us website.

On December 30, 2010 Dallas-based Match.com was sued in the U.S. District Court for the Northern District of Texas by a group of individual plaintiffs seeking class-action certification. In the complaint, the plaintiffs allege breach of contract and negligent misrepresentation against Match.com based on their claims that the dating website contains “thousands of fake and fraudulent profiles” and that some of those profiles were “placed by third-parties for illegitimate and unlawful purposes.” The complaint alleges that Match.com “makes little to no effort to vet, police, or remove these profiles and thereby permits, condones, and acquiesces in their posting.”

Online content providers increasingly are facing legal challenges from both users and third parties demanding that they take affirmative steps to police the content they host. Google famously is facing an expensive and challenging legal fight initiated by Viacom alleging that Internet service providers either “inducing” the use of their services for infringing activities or having reason to “know” that their services are being used for those activities are ineligible for protection under the safe harbor provisions of the Digital Millennium Copyright Act (DMCA). Viacom wants to hold Google liable for copyright damages associated with third parties’ posting of Viacom-owned content on YouTube. The devil, of course, is in how you define “induce” or “know,” and that same question now appears to be at the crux of the challenge now faced by Match.com.

It will be interesting to see whether the plaintiffs’ complaint in the Match.com case gains traction and, if so, whether social networking sites will start taking steps to reduce the frequency of spam-level profiles. Online content providers need to watch these developments closely, as unfavorable precedent could have a real and lasting impact on how they are able to do business in the future.

In a ruling handed down on December 14, 2010, the Sixth Circuit in United States v. Warshak held that a user of a third-party e-mail service has a reasonable expectation of privacy in the e-mails stored on the third-party’s servers. In the case, the government failed to obtain a search warrant based on probable cause before it compelled Warshak’s ISP to turn over his e-mail communications. The government argued that the Stored Communications Act of 1986 (SCA) permitted just such a warrantless search. In holding that Warshak had a reasonable expectation of privacy, the court struck that part of the SCA as unconstitutional.

Privacy issues such as those addressed by the Sixth Circuit in Warshak likely will continue to dominate the news in the coming year. As more individuals, companies, and governments communicate and store data in the cloud, both the technological and legal privacy and security of that data will be tested. And as the Warshak case demonstrates, federal statutes drafted decades ago — or even mere years ago —cannot be reasonably be interpreted in light of the current state of online data storage and communication. At its base, the privacy issue in Warshak is no different than traditional forms of private communication, which the Sixth Circuit correctly reasoned. In 1986, however, it was not so simple to draw the analogy between electronically stored communications and regular mail. Legislators are not often elected for their ability to understand how technological changes will effect current legislation.

Legislation aimed at regulating, or otherwise affecting, technological change is almost always going to be outdated shortly after it is passed. This is not necessarily because we do not have bright, technologically savvy legislators drafting these laws. Rather, it likely has more to do with the fact that our brand of democracy results in a government that often is slow to respond. To effectively mitigate privacy and security risks, reliance on the government for protection is not a wise strategy. The best protection will result from carefully considered, contractual provisions that include in the balance of equities the privacy and security risks individuals and organizations face when entering the cloud.

If you are working on a license agreement, don’t forget to carefully define what is and is not included within the scope of the license. “Scope creep” has the potential to contaminate the parties’ understanding of what the license includes and to damage the parties’ relationship. License agreements almost always include provisions to protect the parties, to provide for indemnity, to define appropriate limitations of liability, to set the extent of any warranties, and to set rules and effects of termination, but the license provision itself often receives inadequate attention.

The parties should ask themselves and each other: What may the licensee do with the licensed product? What may the licensee not do? May only certain individuals associated with the licensee use the licensed product? Don’t be afraid to delve into details. If the license includes a product with an accompanying service, clearly define the product and the service (some products and services appear inseparable at first glance, but it is usually possible to differentiate them in some meaningful way). If the license is for software, may the licensee make copies of the software for its internal use? May the licensee run older versions of the software for legacy systems? May the licensee run the software in multiple virtual environments simultaneously? If the license is for a complete technology solution, will the licensee have access to the technology platform, or will the licensor deliver the solution to the client from a secure environment under its exclusive control?

License agreements that incompletely define the scope of the license may result in disagreement and even litigation between the parties at a later date. It is almost always a good idea to seek the advice of knowledgeable IP counsel when drafting or reviewing such documents.

On January 10, 2011, Levi Strauss filed a lawsuit against Dolce & Gabbana based on claims that the Italian fashion icon infringed Levi’s registered, vertical-pocket-tag and pocket-stitching trademarks. Levi’s also alleged that D&G’s designs constitute a breach of a 1998 settlement agreement that the parties had signed to resolve an earlier dispute resolving the same trade dress issues in dispute in this new litigation. Samples of the designs registered by Levi’s and the designs sold by D&G are included in the complaint, a copy of which is available here. D&G has yet to answer Levi’s allegations.

Fashion-oriented goods are famously prone to claims of trade-dress infringement. The labels themselves are undoubtedly important, but even in this case, it is not so much a question of what those labels look like as it is a question of where those labels are placed on the product. To a much greater extent than for many other kinds of goods and services, brand value for fashion products is inherently dependent on the public’s recognition of the goods themselves – rather than on the logos or standard-character trademarks that may applied to those goods – as being indicative of their source or quality.

Registration of trade dress with the USPTO often is vital to empowering a business in that industry to protect its intellectual property, in that it gives an aggrieved designer substantial legal leverage, both in and out of court, in achieving a favorable outcome. However, trade dress registration can be a somewhat more challenging process than registration of a more “traditional” trademark. It typically makes sense to seek the advice or assistance of knowledgeable IP counsel in pursuing that kind of protection.

Chinese officials reportedly have arrested nearly 4,000 people in connection with software piracy allegations and have ordered nearly 200 web sites to remove content believed to constitute copyright infringements. Some Chinese web sites have replaced unauthorized content with deals from labels like Sony and Warner Brothers, but these web sites are struggling with the expense to acquire legitimately licensed movies and music. In addition, recent investigations into approximately 2,000 cases of copyright infringement may have a monetary value of $350 million. Chinese officials say they expect their campaign against software piracy to last through May, but U.S. officials expect the process may extend well beyond that time-frame.

Software piracy within the context of U.S.-China relations was an important discussion point during Chinese leader Hu Jintao’s recent visit with President Barack Obama, as it has been in past meetings.” The United States has been pressuring China – host to many hotspots of copyright infringement, where counterfeit software, video games, music, and movies are produced – to enforce copyrights and trademarks to prevent software piracy and counterfeit goods from mass production.

The new steps taken by the Chinese government indicate that China is at least serious about appearing to prevent IP infringement within its borders, though time will tell whether recent reported efforts are for the purpose of gaining short-term leverage in trade discussions or are indicative of meaningful, lasting reform.