1/19/2010
The Supreme Court's opinion is split 5-4, with Justices Scalia, Roberts, Kennedy, Alito, and Thomas in the majority, and Justices Breyer, Ginsburg, Sotomayor, and Stevens in the dissent. The majority opinion is unsigned and the dissent is written by Justice Breyer.
The majority claimed that its opinion had nothing to do with its substantive view on the broadcasting of trials. Rather, the Court said, its decision is based on whether the District Court properly amended its local rules to allow the proposed broadcast. Many observers, however, are searching for deeper meaning in the opinion, speculating that it is Freudian read on the Justices' views on cameras in the courtroom or even on same-sex marriage.
Regardless of whether the observers are correct, it is hard not to notice how the Justices drafted their statements of facts in the respective opinions. The majority painted Judge Walker's approval as an eleventh-hour attempt to fast-track a controversial rule amendment without a chance for public comment. The dissent portrayed the rule amendment as one that had been publicly anticipated for years, and pointed out that thousands of people had already submitted comments on the proposed amendment.
In any event, it appears that the Courrt has quashed broadcasting of the Proposition 8 trial. 1/11/2010
The landmark trial testing the constitutionality of Proposition 8, California's ban on same-sex marriage, might also turn out to be a test of whether trials may be streamed on the Internet.
In an order issued on January 8, Chief Judge Vaughn Walker of the U.S. District Court for the Northern District of California allowed the trial, which started today, to be streamed on YouTube on a time-delay basis: Each day's proceedings could be broadcast after proceedings concluded for the day. Judge Walker also permitted the trial to be simulcast at several federal courthouses around the country, including those in Los Angeles, Portland, Oregon, and Brooklyn. Judge Walker relied on a recent decision from the Judicial Council of the Ninth Circuit to allow a pilot program for the limited use of cameras in courtrooms in the Ninth Circuit.
The Supreme Court, however, ordered a temporary stay of Judge Walker’s order this morning. The Supreme Court’s stay remains in effect until Wednesday at 4 p.m. eastern time “[t]o permit further consideration in this Court,” which suggests that the Supreme Court will be weighing in with a more thorough treatment of the issue. Justice Breyer, the only Justice to dissent from the temporary stay, stated that while he supported the limited duration of the stay, he believed the stay should not foreclose broadcasting of proceedings at other courthouses and that the papers filed “do not show a likelihood of irreparable harm.”
At its outset, the trial is already playing out in true California style, with celebrity lawyers representing the challengers of Proposition 8 (Ted Olson and David Boies) and Judge Walker, known for his maverick style, behind the bench. 12/22/2009
After a months-long search for the new White House Cybersecurity Coordinator, President Obama has chosen Howard Schmidt, a cybersecurity veteran in public and private sectors. Read more about the appointment and listen to Schmidt's video greeting here. Cnet provides analysis on the Schmidt appointment here.
When the White House completed its cybersecurity review earlier this year, President Obama proclaimed that the country--both private and public sectors--are inadequately prepared to deal with the multitude of threats to the cyber-infrastructure. He acknowledged that the inadequacy stems, in large part, from a lack of coordination and turf wars among government agencies and between the public and private sectors. He promised to create a position for a person to better coordinate the public and private sectors' approach to cybersecurity.
Schmidt's background appears to be ideal for the task: His CV includes service in the Air Force, the George W. Bush White House, Microsoft, and eBay. Schmidt has his work cut out for him, though. Coordinating government agencies is always a tall order, and businesses have already expressed concern about the government's proposed involvement in the private sector, including requiring private network operators to report cybersecurity incidents to the government.
Indeed, Schmidt's title is telling. People in similar positions have been called "czars" in the past. As a "coordinator," Schmidt is likely to have a full plate simply persuading others to work with one another on the same page. 11/20/2009
The Washington Post's personal technology columnist, Rob Pegoraro, provided an update this week on negotiations of the Anti-Counterfeiting Trade Agreement ("ACTA"), a multilateral agreement that we have chronicled in this blog before. The update, however, is that we do not have an update because the terms of the agreement are still secret.
Obama Administration officials are negotiating ACTA as an executive agreement rather than a treaty, which means that the Senate does not have to ratify it. The Obama Administration, like the Bush Administration, has kept the terms of the agreement and the negotiations secret on national security grounds.
Electronic Frontier Foundation has attempted to learn more about ACTA through FOIA requests. But despite the Obama Administration's claim that it intends to move toward more transparent governance, little is still known about the agreement. As the Post's Pegoraro writes, it is believed that ACTA would incorporate the anti-circumvention provisions in the Digital Millennium Copyright Act, thereby exporting the DMCA's owner-friendly paradigm abroad. What remains to be seen, however, is whether ACTA could result in an importation of even more draconian law. 11/17/2009
In a recent opinion, the United States Court of Appeals for the Ninth Circuit applied a national standard to assess whether the CAN-SPAM Act is unconstitutional when applied to the sending of obscene content by e-mail. The case is United States v. Kilbride, No. 07-10528.
Under the Supreme Court's holding in Miller v. California, 413 U.S. 15 (1973), government regulation of obscenity is subject to a more relaxed review than that of other types of speech. The Miller Court applied a three-element test to determine whether speech is obscene: (1) whether the average person, applying contemporary community standards, would find that the work taken as a whole appeals to the purient interest; (2) whether the work depicts or describes sexual conduct in a patently offensive way; and (3) whether the work lacks serious literary, artistic, political, or scientific value. In Hamling v. United States, 418 U.S. 87 (1974), the Supreme Court explained that the "contemporary community standard" in element (1) of the Miller test, when applied to obscene material sent through the mail, is determined by the "knowledge of the community or vicinage" from which the jurors come -- in other words, a local community standard.
In Kilbride, however, the Ninth Circuit concluded that when it comes to e-mail, the local community standard is too burdensome. People who send e-mail messages cannot ultimately control where they will be received. As a result, the most restrictive local community standard would apply nationwide.
The Ninth Circuit looked to the Supreme Court's plurality opinion in Ashcroft v. ACLU, 5335 U.S. 564 (2002), in which the plurality came to an analogous conclusion in deciding whether the Child Online Privacy Act ("COPA") was unconstitutional.
Separately, the Ninth Circuit held in Kilbride that the definition of a "materially falsified" e-mail header withstood a constitutional challenge on the ground of vagueness. 11/16/2009
Late Friday night, the plaintiffs in the Google Book Search case filed the parties' proposed Amended Settlement Agreement. A redline copy of the Amended Settlement Agreement, provided by The Public Index, and the plaintiffs' memorandum in support of approval are available here and here.
The court will review the Amended Settlement Agreement. The court may grant preliminary approval pending further public comment and a fairness hearing. The court will probably take a few months to review the agreement before issuing a ruling. Until then, commentators will parse the nearly 400-page agreement and try to make sense of the new copyright order that the document could create.
We will be doing our own parsing and posting our impressions. For now, we note a couple items of interest that we came across during a brief review of the Amended Settlement Agreement.
First, many have wondered how the parties would handle antitrust concerns raised by the Department of Justice. In their memorandum in support of the Amended Settlement Agreement, the plaintiffs contend that they believe the agreement can withstand antitrust scrutiny. Nevertheless, the parties have made several amendments to please the government, including removing "Most Favored Nation" status to Google and making several clarifications that ensure that the pricing algorithm cannot uniformly raise prices for a particular type of work. The parties also agreed to amend the proposed final judgment and order of dismissal to make clear that the settlement does not provide immunity from the antitrust laws, such as via the Noerr-Pennington doctrine. It remains to be seen whether these amendments satisfy the government.
Second, the geographic scope of the Amended Settlement Agreement has been considerably narrowed. Works are covered by the settlement agreement only if, by January 5, 2009, they were registered with he United States Copyright Office, or published in Canada, the United Kingdom, or Australia. This, to be sure, is a significant class of works, but Google seems to be leaving itself open to exposure from rights holders in many other countries even after the ink dries on this settlement agreement. 11/13/2009
United States District Judge Clay D. Land of the Middle District of Georgia has denied a motion by the Columbus Ledger-Inquirer to allow one of its reporters to send live twitter messages to the newspaper's website during the criminal trial of Georgia lawyer John Mark Shelnutt.
The case has generated considerable media attention in Georgia; the government obtained a 40-count indictment against Shelnutt stemming from his alleged involvement in a Columbus, Georgia drug organization. In filing its motion, the newspaper sought the ability to have its reporter provide live updates of the trial from the courtroom. Shelnutt opposed the motion, but the government took no position.
In denying the motion, Judge Clay relied on the text of Rule 53 of the Federal Rules of Criminal Procedure, which prohibits "broadcasting" of judicial proceedings from the courtroom. Judge Clay held that "broadcasting" encompasses tweeting. He relied on the dictionary definition of "broadcasting," which means "casting or scattering in all directions." He also noted that past revisions to Rule 53 broadened the restriction from "radio broadcasting" to simply "broadcasting."
Judge Clay also held that Rule 53, as applied to tweeting, does not improperly limit the media's right of access to court proceedings under the First Amendment. Judge Clay noted that the media would still have full access to the trial, and that the court planned to set up a media room immediately outside the courtroom from where reporters could transmit update.
Notwithstanding his ruling, Judge Clay dropped a curious footnote in which he stated, in essence, that his interpretation of Rule 53 did not evidence his own views on whether Rule 53 makes for good policy. Federal judges hold widely diverging views on what the media should be allowed to do in the courtroom. Without reading too much into Judge Clay's footnote, this blogger wonders whether Judge Clay would really have a problem with tweeting if the decision were up to him.
Judge Clay's order in United States v. Shelnutt, No. 4:09-cr-14, is available here. 11/5/2009Judge Denny Chin yesterday put an end to an attempt by the American Society of Media Photographers and other photographers' organizations to intervene in the Google Books case when he denied the photographers' motion for reconsideration.
The plaintiff class in the Google Books lawsuit only encompasses copyright holders in textual materials, not photographs. Four years after the lawsuit was filed, the photographers made a late-hour attempt to enter into settlement negotiations by intervening in the case. Judge Chin would have none of it. In the order denying reconsideration, he stated that the prospective class settlement, which is to be submitted to the court for approval by November 9, "represents thousands of hours of discussion, compromise, and legal draftsmanship. Yet, the movants propose to intrude at the very end of this long process, and to add the question of millions of pictoral materials to the question. Intervention could destroy the parties' settlement and send them back to the drawing board."
George Clinton's 1982 funk standard Atomic Dog was the subject of an opinion handed down by the U.S. Court of Appeals for the Sixth Circuit yesterday in Bridgeport Music, Inc., et al. v. UMG Recordings, Inc., et al., No. 07-5596.
The appeal stemmed from a copyright infringement action in the U.S. District Court for the Middle District of Tennessee. Bridgeport Music, which owns the copyright in the sound recording of Atomic Dog, sued UMG Recordings, the parent company of A&M Records, which released the album All Work, No Play and the song D.O.G. in Me by the rap group Public Announcement. Bridgeport alleged that D.O.G. in Me infringed Atomic Dog because Public Announcement incorporated three elements from Atomic Dog in D.O.G. in Me: the use of the word "dog" in a low voice as musical punctuation, rhythmic panting, and the refrain "bow wow wow, yippie yo, yippie yea," referred to by the court in abbreviated form as the "Bow Wow refrain."
UMG lost at trial and faced liability for $88,980 in statutory damages to Bridgeport. On appeal, UMG's primary assignment of error focused on the District Court's jury instruction with respect to substantial similarity. UMG claimed that the District Court erred because it failed to filter out the use of "dog" as musical punctuation and rhythmic panting, because those two elements were not original. Moreover, UMG claimed, the jury should have considered the two songs at issue as a whole rather than comparing individual elements in isolation.
The Sixth Circuit affirmed the District Court, relying on the principles of "fragmented literal similarity," which means that even a small degree of copying may support a finding of substantial similarity when the copied material is an integral part of the work.
The Sixth Circuit also rejected UMG's claims that the District court erred in its jury instructions on UMG's fair use defense and on willful infringement. 11/3/2009
The following discussion is from an NP Alert and follows up on our prior exploration in this blog of Lasco Foods, Inc. v. Hall and Shaw Sales, Marketing & Consulting, LLC, et al. (E.D. Mo., No. 4:08-cv-1683).
There are two competing lines of cases relating to the Computer Fraud and Abuse Act (CFAA) and Stored Wire and Electronic Communications Act (SECA). One line of cases seeks to limit civil actions to corporate hackers (e.g., electronic trespassers). See, e.g., Int’l Ass’n of Machinists & Aero Workers v. Werner-Matsuda, 390 F.Supp.2d 479, 495 (D.Md. 2005). A contrary line of cases, exemplified by International Airport Centers, LLC v. Citrin, 440 F.3d 418 (7th Cir. 2006), focuses on computer misconduct by employees acting “without authorization.” Based upon these competing lines of cases, the United States District Court for the Eastern District of Missouri opted to follow the “without authorization” line of cases involving insiders and disloyal employees in Lasco Foods, Inc. v. Hall and Shaw Sales, Marketing, & Consulting, LLC.
Ronald N. Hall is the former regional sales manager for Lasco Foods, Inc. Charles Shaw is the former national and regional sales manager. Hall and Shaw terminated their employment at Lasco and formed a new company, Hall and Shaw Sales, Marketing & Consulting LLC (HSSMC), in direct competition with Lasco Foods, Inc.
A lawsuit ensued for alleged violations of the Missouri Uniform Trade Secrets Act, violations of the Computer Fraud and Abuse Act (CFAA), violations of the Stored Wire and Electronic Communications Act (SECA), and other state causes of action.
A forensic analysis of a USB storage drive revealed that Defendant Shaw had accessed, printed, and/or copied Lasco’s information from the USB drive after his authorization to access this proprietary information had been revoked. Further, it was alleged that Shaw sent proprietary Lasco documents to his home computer. In turn, Lasco alleged that, after Hall resigned, Lasco sent Hall a letter demanding that he preserve the electronic information on the company laptop computer and return the computer to Lasco. A subsequent forensic analysis performed on Hall’s laptop showed that Hall had accessed and deleted Lasco files after the termination of Hall’s employment and after Hall’s authorization to access the information had been revoked by Lasco.
The issue before the court on a third amended complaint was whether the alleged facts were sufficient to withstand a motion to dismiss the two federal statutory causes of action for the alleged violations of the CFAA, 18 U.S.C. § 1030 et seq., and the SECA, 18 U.S.C. § 2701 et seq. Specifically, defendants argued that Lasco had not pled sufficient facts to demonstrate that defendants’ actions were “unauthorized” because they were permitted electronic access to the computers as Lasco employees.
Upon consideration of the competing contentions, Judge Jean C. Hamilton of the United States District Court for the Eastern District of Missouri denied the motion to dismiss the CFAA claim because Lasco sufficiently alleged that Hall and Shaw acted “without authorization” when they obtained Lasco’s proprietary information for their own personal use and in contravention of their fiduciary duties owed to Lasco.
Likewise, the district court denied the motion to dismiss the SECA claim because the allegations showed that both Hall and Shaw intentionally accessed Lasco’s electronic files “without authorization” after they breached their duty of loyalty to Lasco and after the termination of their employment relationship with Lasco. 10/29/2009
The United States District Court for the Eastern District of Missouri held in a recent opinion that an employer suing a former employee can state a cause of action under the Computer Fraud and Abuse Act and Stored Wire and Electronic Communications Act. The case is Lasco Foods, Inc. v. Hall and Shaw Sales, Marketing & Consulting, LLC, et al., No. 4:08-cv-1683 (Memorandum and Order Oct. 26, 2009).
In Lasco, two former employees of the plaintiff planned a new business venture using the plaintiff's computers and then deleted information related to their plans and other company information before leaving the plaintiff's employment.
A requisite element of a cause of action under both the CFAA and SECA is unauthorized access. Courts have divided on whether "unauthorized" access comes from an outsider to a company (i.e., a hacker) or whether a company's employees could gain unauthorized access.
The Eastern District of Missouri concluded that employees can perpetrate unauthorized access. The court reasoned that the "Defendants had authorization only to further the interests of Lasco, and did not have authorization to act in furtherance of their own business interests while employed by Lasco."
The same court issued an opinion in Lasco earlier this year in which it held that the costs an employer incurs in taking remedial measures satisfies the loss element under the CFAA. See our earlier post in the case here. 10/22/2009The Federal Communications Commission voted today to proceed with rulemaking on Net Neutrality, endorsing the desire of Chairman Julius Genachowski. The Washington Post has more here. 10/14/2009
In its Brief as respondent in Bilski v. Kappos, the Government has taken the position before the Supreme Court that the patentable subject matter must be tethered to technology, and that the Federal Circuit’s test, namely that a patent-eligible process must involve a machine or a transformation of matter. Activities such as means of performing “economic, social, or legal” tasks, are not, in the Government’s estimation, patentable subject matter unless they qualify under the “machine-or-transformation” test. Thus, the Government’s position is that Bilski’s claims are not patentable subject matter under this test.
However, an important position that the Government supports is that software when tied to a general-purpose computer should be in most cases patentable subject matter, basing this position off of the Federal Circuit case In re Alappat from 1994, which developed the legal theory that the installation of software itself onto a general-purpose computer transformed the computer into a specialized machine, thereby satisfying the requirements of the “machine-or-transformation” test.
Thus, as expected, the Government has argued against so-called “pure” business methods (and has generally supported the Federal Circuit’s test), and it will remain to be seen if Bilski’s attorneys and the amicus briefs can persuade the Court otherwise. However, it is extremely important to software companies who wish to patent their inventions that given neither side in the litigation seems to want to prevent software inventions which are patented in association with a general-purpose computer, even if patentable subject matter is restricted to exclude “methods of organizing human activity” (as the Government would prefer), Bilski v. Kappos will almost certainly leave a significant safe harbor for software inventions and most likely business methods which can be reduced to software as well. Thus, the decisions made by the government in the brief may make some inventors considerably more confident about concerns about successfully overcoming 35 U.S.C. § 101 challenges when submitting applications to the USPTO. 9/28/2009Judge Denny Chin of the United States District Court for the Southern District of New York has issued an order scuttling the Google Books case fairness hearing scheduled for early October. The parties to the case consented to a postponement after the Department of Justice filed a brief that made clear that the parties still have a lot of work to do before the government will support the settlement.
In the order, Judge Chin opined that "[t]he current settlement agreement raises significant issues, as demonstrated not only by the number of objections, but also by the fact that the objectors include countries, states, non-profit organizations, and prominent authors and law professors. Clearly, fair concerns have been raised." But Judge Chen went on to say that "the proposed settlement would offer many benefits to society, as recognized by supporters of the settlement as well as DOJ."
It appears that Judge Chin is stepping into the mix and attempting to usher the parties toward an agreement. While he acknowledge that there is still much work to be done, Judge Chin seems to expect that the parties will walk away with some kind of agreement.
Judge Chin is scheduled to conduct a status hearing on October 7 and guage the parties' progress. More to come then.
Judge Chin's order is available here. 9/23/2009
The Justice Department has filed a brief as a party in interest to the Google Books settlement ahead of the fairness hearing scheduled for October. Read DOJ's brief here.
DOJ is conducting a separate investigation into whether the proposed settlement agreement would violate antitrust laws. A good portion of the brief discusses the antitrust ramifications.
DOJ also expressed concern as to whether the settlement agreement adequately represents the interests of certain members of the class, namely, orphan works owners:
The structure of the Proposed Settlement itself, therefore, pits the interests of one part of the class (known rightsholders) against the interests of another part of the class (orphan works rightsholders). Google’s commercial use of orphan works will generate revenues, which will b deposited with the Registry. Any unclaimed revenues, however, will inure to the benefit of the Registry and its registered rightsholders. Thus, the Registry and its registered rightsholders will benefit at the expense of every rightsholder who fails to come forward to claim profits from Google’s commercial use of his or her work. And, as noted above, the broad scope of the Proposed Settlement’s licensing provisions exacerbate this conflict. The greater the economic exploitation of the works of unknown rightsholders by Google and the Registry, the stronger the incentive for known rightsholders to retain the unclaimed revenues for themselves.
Brief at 13.
The Brief also raises the question -- which we have also raised in the past -- of whether the court's approval of the settlement agreement will be tantamount to a redifinition of copyright that should really be handled by Congress. 9/22/2009
The chairman of the Federal Communications Commission announced Monday that the FCC will conduct formal rulemaking on the issue of "net neutrality." The FCC is scheduled to issue a Notice of Proposed Rulemaking at its October meeting.
The principle of net neutrality holds that the government should regulate Internet service providers so that they provide everyone equal access to the Internet, regardless of the type of content that they seek to transmit. Net neutrality proponents desire government intervention because they fear that network providers can stifle the marketplace of ideas by providing more bandwidth to preferred parties. An (over)generalized example would be network providers giving preferential treatment to big media at the expense of small, independent content creators.
On the other side of the debate, network providers claim that they are under pressure to control already crowded bandwidth. Government regulation, they say, will prevent them from stopping parties from consuming bandwidth with content that no one wants to see. Network providers also claim that the marketplace is competitive without government regulation and that regulation will only dampen the incentive to provide Internet services to consumers.
Until now, the FCC maintained a lukewarm position in favor of net neutrality with its four informal "open Internet principles." But in his speech at the Brookings Institution on Monday, the FCC chairman, Julius Genachowski, stated that the agency will now seek to implement rules and regulate net neutrality. Genachowski's press release is here.
The net neutrality issue has been simmering for years, so the rulemaking process promises to be a lively debate. A broad issue to keep an eye on is whether the government's concept of "neutrality" really turns out to be neutral. This could become a fight between whether big government or big business controls the Internet. 9/14/2009
Photographer Annie Liebovitz reached a last-minute deal with a lender that she owed $24 million, allowing her to stave off a forfeiture of her copyrights and film negatives -- at least for the time being.
Liebovitz shot some of the most famous pop culture photographs of the 20th century, including the Rolling Stone cover photo of John Lennon and Yoko Ono hours before Lennon was killed. Liebovitz had taken out the loan from Art Capital Group to finance various aspects of her business. She put up the copyrights in her entire portfolio and her two homes as collateral. Liebovitz was set to default on the loan on September 8. She and the lender, however, negotiated for several days after the due date.
The parties issued a joint press release that stated that Liebovitz had "purchased from Art Capital its rights to act as exclusive agent in the sale of her real property and copyrights” and that she will “therefore retain control of those assets within the context of the loan agreement.” The New York Times, however, reports that the copyrights still remain as collateral.
While it appears that Liebovitz has lived to fight another day, as commentators in the Times piece note, all she might have gained was more time to pay off the debt. 9/11/2009
The Register of Copyrights, Marybeth Peters, told the House Judiciary Committee yesterday that the proposed Google Books settlement could trammel on the rights of copyright holders and usurp Congress' role in establishing copyright policy.
Google is attempting to strike a settlement agreement to end a class action brought by book publishers and the Authors Guild. The plaintiffs in that lawsuit sued Google because of its Google Books project, in which Google was working with libraries to reproduce millions of protected books in their entirety without permission of the copyright owners. The books were indexed electronically, allowing end users to search by title and other bibliographic information. Google returned hits to its customers that included the option of browsing snippets, except for public domain books, which could be viewed and downloaded in their entirety. The settlement agreement would allow the copying to go forward, with author representative groups and Google sharing the profits.
Judge Denny Chin of the U.S. District Court for the Southern District of New York was set to conduct a fairness hearing on the settlement agreement a few months ago, but he delayed the hearing until October because the Justice Department is conducting an antitrust review.
Register Peters' remarks could complicate the court's review of the settlement agreement even more. In essence, she believes that the parties are attempting to rewrite the copyright law and create a compulsory license for Google while conducting and end run around the legislative process. In the same regard, she worries that the settlement will vitiate the rights of rights holders in orphan works. Her written remarks can be found here. 9/3/2009
Last week, a jury awarded $31.5 million in damages against a group of Internet service providers (ISPs), for contributory trademark infringement. The verdict marks the first time that ISPs have been assessed damages under the federal Trademark Act’s potent statutory damages provision for contributory trademark infringement. The decision clearly signals that ISPs may face extensive exposure for trademark infringement committed by third parties that use their services.
In 2007, Louis Vuitton Malletier, S.A., a unit of luxury-goods maker LVMH Moët Hennessy Louis Vuitton, filed a lawsuit against Akanoc Solutions, Inc.; Managed Solutions Group, Inc.; and Steven Chen in the U.S. District Court for the Northern District of California (Louis Vuitton Malletier, S.A. v. Akanoc Solutions, et al., Case No. 5:07-cv-3952-JW). Akanoc and Managed Solutions Group, controlled by Chen, were ISPs that provided Internet protocol addresses, routers that linked Internet traffic to websites, and servers that stored Internet content and allowed the content to be accessed through the Internet. The defendants did not operate websites, but sold IP addresses and use of their servers to customers, who used the servers to host their own website content or sold the services to other parties.
Louis Vuitton discovered that a number of the defendants’ customers, or customers of the defendants’ customers, were operating websites that they used to sell counterfeit goods bearing Louis Vuitton trademarks. Louis Vuitton claimed that it sent multiple notices to the defendants about the infringement and requested that the defendants shut down the websites, but that the defendants failed to do so.
When it filed suit, Louis Vuitton alleged four causes of action, including contributory trademark infringement and vicarious trademark infringement. The Trademark Act allows a plaintiff to recover actual damages or lost profits for contributory trademark infringement. Alternatively, a plaintiff that claims a defendant is using counterfeit trademarks can elect to recover preset statutory damages ranging between $500 and $100,000 per counterfeit mark per type of goods or services sold. If the infringement is found to be willful, statutory damages can rise to $1 million. Statutory damages can prove lucrative for plaintiffs because, in many counterfeiting cases, actual damages and lost profits are negligible or difficult to prove.
Until the Akanoc case, no court had awarded statutory damages against a party for contributory trademark infringement.
Defendants cannot remain “willfully blind” to infringement
Before trial, the defendants filed a motion in which they requested that the court grant judgment in their favor on the contributory trademark infringement count. The defendants claimed, among other things, that they were only resellers of services and that they could not monitor every website that uses their services. The court denied the motion because it believed there were genuine issues of material fact that had to be resolved at trial.
In ruling on the summary judgment motion, the court set forth the test for contributory infringement that Louis Vuitton would have to prove to recover against the defendants: (1) The defendants had knowledge of the third parties’ direct infringement, and (2) the defendants exercised control over their customers’ websites or websites operated by their customers’ customers.
The court suggested that there was enough evidence to prove that the defendants knew of the infringement because they had received multiple notices from Louis Vuitton about the infringement. The court also suggested that the defendants had the ability to take down the infringing websites because there was evidence in the record that they could disable offending IP addresses in about 30 minutes. The court opined that the “[d]efendants cannot remain ‘willfully blind’ to trademark infringement taking place on their servers.”
The jury agreed, finding that the defendants committed contributory infringement because they knew, or should have known, that the defendants’ customers were using the defendants’ services to infringe or facilitate others to directly infringe Louis Vuitton’s marks. The jury further found that the defendants had reasonable means to withdraw their services so their services could not be used to directly infringe, but continued to provide the services. To top it off, the jury found that the contributory infringement was willful, thereby entitling Louis Vuitton to enhanced statutory damages to the tune of $31.5 million.
The way ahead
The law remains extremely unsettled as to whether ISPs should be liable when users commit trademark and copyright infringement on their networks. The Akanoc case, however, suggests that courts will not allow ISPs to willfully turn a blind eye to their users’ activities.
That raises the question, of course, of how much ISPs need to do to avoid liability. IPS must establish protocols for handling complaints from IP owners about infringement. Not only do protocols need to be in place, however; ISPs need to act on complaints quickly. The longer an ISP allows a user to conduct potentially infringing activities, the more damages the ISP could face.
On the other side of the coin, the Akanoc case demonstrates that trademark owners have a potent weapon in enforcing their rights. Those who own large trademark portfolios, such as Louis Vuitton, can potentially recover mammoth judgments under the per-mark/per-type formula. This prospect can provide trademark owners with significant leverage when they need to compel an ISP to take down offending websites. 9/1/2009
In order to determine how to respond to relevant Supreme Court precedent and In re Bilski’s approaches to 35 U.S.C. § 101, the USPTO has developed a series of instructions for its Examiners. Of course, these instructions have been released with the realization that more stable guidelines will be established once the Supreme Court rules on Bilski v. Kappos. In addition, these are guidelines, since they are only based off of rules and laws, so they are "neither appealable nor petitionable." Overall, they condense the 35 U.S.C. § 101 issues into manageable flowcharts which reflect the current state of the law, but next spring the Supreme Court is very likely to reject the Federal Circuit's “Machine-or-Transformation” test. Therefore, Examiner time will have been wasted which could have been spent on more meaningful prior art issues.
A link to the guidelines is:
http://www.uspto.gov/web/offices/pac/dapp/opla/2009-08-25_interim_101_instructions.pdf
The guidelines consist of a series of steps represented by flowcharts. The first step is to determine if the invention is directed to a statutory class (process, machine, manufacture, or composition of matter), excluding things like a signal or a computer program per se. Next, inventions which encompass a judicial exception, such pre-empting a law of nature or a natural phenomenon, or which consist of a mental process or abstract idea are excluded.
Third, machines, manufactures and compositions of matter must have a practical application. If the invention is a process, it must pass the “machine-or-transformation” test prescribed by the Federal Circuit. Also, it must be a particular machine or a particular article to be transformed, and field-of-use and extra-solution activities are insufficient.
The USPTO’s press release about the guidelines may be found at:
http://www.uspto.gov/web/offices/com/speeches/09-14.htm
The USPTO has requested comments, which may be submitted via e-mail at: AB98.Comments@uspto.gov on or before September 28, 2009.
These guidelines do provide some helpful guidance for the interim, but the ultimate fate of this issue remains to be settled. | Check Effective Permissions | | /np20/np20blog/_layouts/SecurityReportAccount.aspx?id={ItemId}&List={ListId}&Type=ListItem | 0x40000000 | 0x0 | ContentType | 0x01 | 10 |
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