February 2011

From the editors of Wolters Kluwer Law & Business, this update describes important developments from CCH and Aspen Publishers intellectual property and computer law publications.

If you have any comments or suggestions concerning the information provided or the format used, we'd like to hear from you. Please send your comments to john.arden@wolterskluwer.com.

 

COPYRIGHTS

Game Cheat Program Violated DMCA, But Did Not Infringe Copyright

A software developer (MDY) that sold a game cheat program (Glider) to players of Blizzard Entertainment's World of Warcraft game (WoW) violated the Digital Millennium Copyright Act's anti-circumvention provisions, but was not secondarily liable for copyright infringement, the U.S. Court of Appeals in San Francisco has ruled.

The court first held that WoW players were licensees and not owners of the WoW's game client software. Blizzard reserved title in the software and granted players a non-exclusive, limited license.

The court then addressed whether WoW players infringed Blizzard's copyrights by using Glider in violation of the WoW license. The court distinguished between breach of a "covenant,” actionable under contract law—and breach of a "condition,” constituting copyright infringement. Glider users only violated covenants because Glider did not copy WoW software or otherwise infringe any of Blizzard's exclusive rights. Without any direct infringement by Glider users, MDY could not be secondarily liable.

Blizzard's DMCA claims alleged that the Glider program circumvented WoW's game client bot detection software (known as Warden). The court held that Glider violated section 1201(a)(2) of the DMCA, which prohibits circumvention of a technological measure that "effectively controls access" to a copyrighted work. Warden qualified as an access control device because it barred access to the interface or "non-literal" copyright protected elements of the program, such as the multi-media presentation of the WoW universe and character interactions.

Glider, however, did not violate section 1201(b)(1) of the DMCA, which prohibits circumvention of a technological measure that "effectively protects" a copyright. Warden was designed to reduce the presence of cheats and bots; it did not control unauthorized copying, the court observed (MDY Industries, LLC v. Blizzard Entertainment, Inc., 9thCir, CCH Copyright Law Decisions ¶30,027; IntelliConnect User Link;  CCH Computer Cases ¶50,093; IntelliConnect User Link).  

  

Presumption of Harm Insufficient to Support Injunctive Relief

In light of the Second Circuit's abrogation of its longstanding practice of presuming irreparable harm upon a showing that a copyright plaintiff was likely to succeed on the merits of an infringement action, a district court's order prohibiting a law firm from distributing and continuing to use billing software developed for a boutique firm was vacated. The case was remanded to the district court for additional fact finding on the issue of irreparable harm.

The district court granted injunctive relief after applying a presumption of irreparable harm upon a showing that the boutique firm was likely to succeed on the merits of its copyright infringement claim. However, the Second Circuit subsequently rejected the presumption in Salinger v. Colting, (Copyright Law Decisions ¶29,936; IntelliConnect user Link). The appeals court explained that courts must weigh the balance of hardships, make a determination that the plaintiff is likely to suffer irreparable injury absent an injunction, and consider whether an injunction would serve the public interest. The boutique firm must provide evidence to show irreparable harm, such as loss of market share or clients (Esbin & Alter, LLP v. Sabharwal, Globus, & Lim, LLP, 2ndCir, CCH Copyright Law Decisions ¶30,021; IntelliConnect User Link).

 

Casebook Was Joint Work, Copyright Not Subject to Partition

A casebook containing contributions from two law professors was a joint work rather than a collective work, the federal district court in San Francisco has determined.  An action by one of the contributing professors, seeking a declaration that the casebook was a "collective work” and that he therefore owned sole copyright to the parts of the Casebook he created, was dismissed.

A "joint work" is a work prepared by two or more authors with the intention that their contribution be merged into inseparable or interdependent parts of a unitary whole. The authors of a joint work are co-owners of the copyright in the work. On the other hand, a "collective work" is a work in which a number of contributions, constituting separate and independent works in themselves, are assembled into a collective whole. Copyright in each separate contribution is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution.

Applying the criteria to determine whether a work is jointly authored—intent to be coauthors, control of alleged author over work, and audience appeal of the work—the court found that the casebook was a joint work. Although both professors supervised the casebook by exercising control, their independent contributions merged into inseparable parts of a unitary whole. The casebook was attributed to both professors without distinction. Thus, it was impossible to determine which one contributed more to the casebook's audience appeal or success (McMunigal v. Bloch, NDCal, CCH Copyright Law Decisions ¶30,026; IntelliConnect User Link).

 

TRADEMARKS

OBAMA Marks Refused Registration for Pajamas and Briefs

The marks OBAMA BAHAMA PAJAMAS, OBAMA PAJAMA, and BARACK'S JOCKS DRESS TO THE LEFT were not registrable for pajamas and briefs because the record did not include the written consent of President Barack Obama, the name of the living individual identified in the marks, the Trademark Trial and Appeal Board has determined in a precedential decision. Section 2(c) of the Lanham Act bars the registration of a designation that identifies a particular living individual absent written consent.

Section 2(c) did not prohibit only registration of marks comprising an individual's entire name, the TTAB said. It also barred registration of surnames, shortened names, nicknames, etc., as long as the name identified a particular living individual.

News stories described many examples of "Obamafication"—words "manufactured" from Barack Obama's name—during the year preceding President Obama's inauguration, the TTAB noted. Given this evidence, along with the fact that the applicant sought to register the mark during Obama's presidency, there was no doubt that purchasers would recognize that the marks referred to President Obama. Although there were third-party registrations comprising the names of the previous six presidents, those names were much more common than "Obama," which appeared only 82 times in a directory of surnames in the United States (In re Hoefflin, TTAB, CCH Trademark Law Guide ¶61,734; IntelliConnect User Link).

 

$2.4 Million Awarded for Misuse of MASTERS AND JOHNSON

A jury verdict of $2.4 million in favor of a well-known researcher and author in the field of human sexuality, on claims of service mark infringement and breach of contract by an owner and operator of psychiatric hospitals and mental health facilities, had sufficient evidentiary support, according to the U.S. Court of Appeals in St. Louis.

The jury determined that the operator willfully exceeded the scope of a license agreement granting the operator the right to use the author's MASTERS AND JOHNSON mark in connection with inpatient programs for the treatment of sexual dysfunction and sexual trauma in accordance with the methodology of the author and her late husband. The record showed that after the parties’ license agreement expired, the operator used the mark to promote treatment programs unrelated to sexual dysfunction and sexual trauma and to promote treatment methods unrelated to the established MASTERS AND JOHNSON methodology.

The jury determined that disgorgement of the operator's profits was appropriate as a remedy for this willful infringement. There was sufficient evidence for the jury to reasonably decide that the operator willfully breached the agreement by using the mark for these purposes, the court found.  A finding of damages was not a precondition for an award of disgorgement of profits. A profits award was an equitable remedy intended to deter willful infringement or prevent unjust enrichment. The award was not excessive or internally inconsistent, the court said. The operator's own expert testified that its net profits from the treatment programs exceeded $6 million (Masters v. UHS of Delaware, Inc., 8th Cir., CCH Trademark Law Guide ¶61,745; IntelliConnect User Link).

 

 

Mark Could Confuse, But State Immune from Infringement Suit

The federal district court in Madison, Wisconsin erred by finding, as a matter of law, that the University of Wisconsin's registered CONDOR mark for computer software was not likely to be confused with a software company's previously registered CONDOR mark, according to the U.S. Court of Appeals in Chicago. A petition by the software company to cancel the university's registration had been granted by the Trademark Trial and Appeal Board.

In the cancellation proceeding, the TTAB had determined that the parties' software products were sufficiently related for confusion to be likely. Although the software company's goods were used in a mainframe environment, and the university's goods were used in a network of individual computer workstations, the TTAB concluded that the marks were identical and that both products performed similar functions, such that even sophisticated purchasers were likely to believe there was some relationship or association between the sources of the products. The district court was required to afford deference to the fact findings of the TTAB, the appellate court said. Thus, the TTAB's findings were reinstated, the district court's entry of summary judgment in the university's favor was reversed, and the case was remanded for trial.

Although the software company could go forward with its administrative action to cancel the university's registration, the software company could not pursue a civil action for trademark infringement against the university, the appellate court decided. The university—as a branch of the State of Wisconsin—was protected by sovereign immunity under the Eleventh Amendment. The university did not waive its immunity by participating in the federal trademark system or filing suit to review the TTAB's cancellation of its CONDOR registration. The university originally had been haled into the litigation involuntarily, as a defendant in the cancellation proceedings (Board of Regents of the University of Wisconsin System v. Phoenix International Software, Inc., 7th Cir., CCH Trademark Law Guide ¶61,739; IntelliConnect User Link).

 

COMPUTER AND INTERNET LAW

Labels on Promo CDs Failed to Create License

The First Sale doctrine barred a music recording company's infringement claim against an individual who sold eight promotional CDs on eBay, the U.S. Court of Appeals in San Francisco has ruled.

Despite labels affixed to some of the promo CDs purporting to create a license prohibiting transfer or resale, the circumstances surrounding the recording company's distribution of the promo CDs supported the conclusion that the recording company relinquished ownership rights in the CDs.  There was no indication that the music industry professionals who received the CDs had agreed to a license when they accepted them; nor were there any prior arrangements requiring the return, discard, or other handling of the distributed copies.

In addition, the unrequested promo CDs constituted "gifts" under the federal Unordered Merchandise Statute, which grants a recipient of unordered goods "the right to retain, use, discard, or dispose of it in any manner he sees fit without any obligation whatsoever to the sender," 39 U.S.C. § 3009. Because the recipients acquired a statutory right to treat the CDs as their own, the recipients were owners, not licensees, of their copies of the CDs. The first sale defense protected them and subsequent sellers from infringement liability, the court said  (UMG Recordings, Inc. v. Augusto., 9thCir,  CCH Computer Cases ¶50,106; IntelliConnect User Link).

 

Photographers Claims Proceed Against News Outlets

Freelance photographer Daniel Morel could proceed with copyright infringement and Digital Millennium Copyright Act (DMCA) against French news agency Agence France Presse (AFP), an imaging licensing company (Getty), and certain network television broadcast companies, the federal district court in New York City has ruled.

Shortly after the Haitian city of Port-au-Prince was struck by an earthquake on January 12, 2010, Morel blogged about it on Twitter.com and uploaded photos to his account at Twitpic.com, an image-hosting website affiliated with Twitter. The attributions "Morel" and "by photomorel" appeared next to Morels' twitpic images. Minutes later, Puerto Rican resident Lisandro Suero copied Morel’s photographs and posted them on his Twitpic page. AFP downloaded the photographs from Suero's account and transmitted them to Getty, which, in turn, licensed the photos with the attribution "AFP/Getty/Lisandro Suero" to numerous third-party news agencies. The following day, AFP issued a wire instruction to change the photographer credit from Suero to Morel, but by then the photographs had been widely disseminated. 

AFP unsuccessfully argued that it was exempt from infringement liability because it had been granted a license to use Morel's images—either directly or as an intended third-party beneficiary—by Twitter.com's and Twitpic.com's terms of use. While the websites' terms expressly granted themselves and their "partners" or "affiliated sites" a license to use posted content, no licenses were granted to third-party users like AFP. A provision in Twitter’s terms permitting and encouraging "broad re-use of Content" was insufficient at the pleading stage to show intent to confer licensing rights on third-party users of the site. The photographer's direct, contributory, and vicarious copyright infringement claims were allowed to go forward.

Sections 1202 of the DMCA prohibits intentionally removing or altering "copyright management information" (CMI) from a protected work and knowingly providing or distributing a work with false CMI. The attributions adjacent to Morels’ Twitpic images qualified as CMI, according to the court. The defendants' distribution of Morel’s photos with inaccurate or no CMI provided sufficient grounds for Morel's DMCA claims (Agence France Presse v. Morel, SDNY, CCH Computer Cases ¶50,099; IntelliConnect User Link).

 

ISP Customers Consented to Interception

Customers of an Internet service provider could go forward with Computer Fraud and Abuse Act (CFAA) and common-law trespass to chattels claims against an ISP for unlawfully diverting their online communications to a third-party Internet advertising company, the federal district court in Billings, Montana has decided. The customers' claims under the Stored Communications Act (SCA) and for common-law invasion of privacy, however, were dismissed because the customers gave consent for the interception of their communications.

The ISP allegedly allowed the advertiser to install software onto its network. The advertiser then purportedly used the software to gather information to create profiles of the ISP's customers in order to target them with preference-sensitive advertisements.  The ISP's online privacy notice and subscriber agreement expressly allowed the ISP and its agents to monitor customers’ electronic communications and use equipment to collect information on their Internet usage. The ISP’s customer consent to such interception foreclosed their SCA claims. Similarly, the customers’ invasion of privacy claim failed because, given the ISP’s notice of monitoring, the customers could not have had a reasonable expectation of privacy in their communications.

With regard to the CFAA claims, the customers alleged that the ISP allowed the advertiser's software to disable and alter the customers' security settings in order to place tracking cookies on their computers. This conduct exceeded the authorization provided by the subscriber agreement.  Damages to individual customers' computers could be aggregated, for purposes of meeting the CFAA's $5,000 threshold, according to the court. Altering or tampering with the computers' settings also could constitute trespass to chattels, the court said (Mortensen v. Bresnen Communications, LLC, DMont, CCH Computer Cases ¶50,091;IntelliConnect User Link).

 

Hot Topics

FCC’s Net Neutrality Rules Spark Controversy

The Federal Communications Commission, by 3-2 vote, adopted net neutrality rules in “In the Matter of Preserving the Open Internet; Broadband Industry Practices,” Report and Order 10-201, December 21, 2010 (CCH Guide to Computer Law ¶60,602; IntelliConnect User Link).

The order codifies three general rules applicable to broadband Internet access service providers: (1) Transparency—service providers shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of their broadband Internet access services; (2) No Blocking—Fixed broadband service providers shall not block lawful content, applications, services, or non-harmful devices. Mobile broadband services providers shall not block consumers from accessing lawful websites, or block applications that compete with the provider's services; and (3) No Unreasonable Discrimination—Fixed broadband service providers shall not unreasonably discriminate in transmitting lawful network traffic over a consumer's broadband Internet access service.

The Commission indicated that the rules were broadly drafted to provide flexibility for application on a case-by-case basis. Critics of the rules contend that they vest too much discretion in the FCC, pave the way for more rules in the future, create uncertainty for service providers, and could impair future markets.

Conservative lawmakers have signaled their intention to attempt to legislatively block the FCC's rules. On January 5, Representative Marsha Blackburn (R-TN), introduced the " Internet Freedom Act" (H.R. 96), a bill designed to "prohibit the Federal Communications Commission from further regulating the Internet." Other measures are expected to follow in both chambers.

Verizon Communications was the first to file a “Notice of Appeal” challenging the FCC's authority to issue the rules. Michael Glover, Verizon's Senior Vice President and Deputy General Counsel, said in a Statement, "We are deeply concerned by the FCC's assertion of broad authority for sweeping new regulation of broadband networks and the Internet itself. We believe this assertion of authority goes well beyond any authority provided by Congress, and creates uncertainty for the communications industry, innovators, investors and consumers.”

 

Wolters Kluwer Law & Business Publications

The Law of Chemical Pharmaceutical Invention, Third Edition, by Jerome Rosenstock

The Third Edition of The Law of Chemical and Pharmaceutical Invention by Jerome Rosenstock is now available on the Patent Law tab of the CCH Internet Research Network and in the Intellectual Property practice area of Wolters Kluwer IntelliConnect. The Law of Chemical and Pharmaceutical Invention is the only resource that covers both patent and nonpatent protection for chemical and pharmaceutical inventions, including: (1) fundamentals and protection eligibility; (2) utility patent claims; (3) design patents; (4) eligibility of genetic engineering inventions; (5) nonpatent eligibility and protection; (6) enforcement of patent rights; and (7)  infringement defenses—noninfringement, invalidity, unenforceability.

This unique reference includes extensive use of diagrams of chemical structures to eliminate confusion. You’ll also find guidance on such important topics: (1) managing litigation expenses and obtaining reliable litigation insurance; (2) extending your patent life through the filing of provisional patent applications; (3) securing design patents to protect your brand; (4) understanding the exhaustion doctrine and its implications; and (5) determining whether your patent is part of a standard-setting organization.

For more information on The Law of Chemical and Pharmaceutical Invention, visit the Aspen Publishers Website.