January 2009

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.

COPYRIGHT LAW

License Termination Valid, Copyright Misuse Defense Inapplicable
A software developer's letter to a software company constituted sufficient notice to terminate a license agreement that had given the company exclusive licensing rights to the developer's software, the U.S. Court of Appeals in Richmond held. The letter, in which the developer stated "I now consider the contract terminated," was definite, specific, positive, and unconditional. Therefore, the company infringed the developer's copyrights by continuing to sell the software after the agreement was terminated.

The software company could not employ the misuse of copyright defense to bar the developer from recovering for the infringement. The company contended that the inclusion of a non-competition covenant in the agreement constituted a misuse of copyright because it prohibited the company from independently developing software having functions similar to the developer's software. However, even if inclusion of the covenant was a misuse of copyright, any misuse was purged when the developer terminated the agreement. At the time of the termination, the company was free immediately to begin development of a competing product (Altmayer-Pizzorno v. L-Soft International, Inc., 4thCir, 2008 Copyright Decisions ¶29,665).

MGA Ordered to Stop Making and Selling Bratz Dolls
On December 3, MGA Entertainment, Inc. was ordered by a federal judge to stop making and selling all 40 of its popular Bratz dolls. The order follows a jury's August damages award of $100 million to Mattel for copyright infringement and breach of contract. The award, which was based on the conclusion that the Bratz doll designer developed the Bratz concept while he was employed by Mattel, was limited to profits derived from only the first four Bratz dolls. However, there remained a dispute as to which dolls actually violated copyright laws. The jury verdict form asked panelists to find whether there was infringement, but did not ask them to specify which dolls were infringing. MGA must now stop manufacturing all of the dolls and reimburse vendors and distributors for the costs of the dolls and for shipping them back. Dolls were to remain on store shelves through the holiday season. The text of Mattel v. MGA Entertainment will appear in an upcoming issue of Copyright Law Reporter.

Internet Posting Not Proof of Wide Dissemination and Access
Although a graphic designer's copyrighted work was posted on the Internet, he failed to demonstrate that advertising agencies had a reasonable opportunity to view the work, the federal district court in New York City held. Therefore, dismissal of the designer's copyright claim was appropriate. The designer alleged that the agencies accessed and copied his work in an advertising campaign for a credit card company. However, the designer's work had not been widely disseminated. The fact that the work was posted on the Internet prior to the creation of the ad campaign was insufficient to demonstrate wide dissemination, the court said. An e-mail sent to one of the ad agencies containing a link to the designer's website in an attempt to secure employment with the agency did not establish access. There was no proof that the e-mail was received and read by the agency, or that the designer's website was visited and copied. Thus, there was insufficient evidence to show a reasonable probability that the ad agencies were exposed to the designer's work. Even if access had been demonstrated, the designer's copyright claim would have failed because the there were no probative similarities between the subject works (O'Keefe v. Ogilvy & Mather Worldwide, Inc. SD N.Y., 2008 Copyright Decisions ¶29,666).

TRADEMARK LAW

T-Shirt Designs Infringed Universities’ Colors, Logos
Four universities (Louisiana State University, the University of Oklahoma, Ohio State University, and the University of Southern California) established that an apparel seller engaged in trademark infringement by marketing a line of shirts bearing the universities' color schemes, logos, and designs, the U.S. Court of Appeals in New Orleans has held. The universities' trademarks were valid, and the apparel seller's conduct was likely to cause confusion.

The universities' color schemes, logos, and designs had acquired the requisite secondary meaning to be entitled to trademark protection under Sec. 43(a) of the Lanham Act, the court said. The universities had used their color combinations since the late 1800s. The seller's t-shirts were similar to products sold by the universities. The fact that the seller's shirts displayed "irreverent" phrases or slang language did not distinguish its products from the universities' licensed merchandise. The universities could seek monetary damages without having to show actual confusion, according to the court. However, an award of attorney's fees was not appropriate because the case was not "exceptional," for purposes of Sec. 35(a) of the Lanham Act (Board of Supervisors of the Louisiana State University and Agricultural and Mechanical College, 5th Cir., CCH Trademark Law Guide ¶61,342).

Use of COHIBA Name on Cigars Violated New York Common Law
A Cuban cigar exporter established that a U.S. cigar maker misappropriated the exporter's COHIBA brand name, in violation of New York's common law of unfair competition, the federal district court in New York City has determined. The exporter was entitled to relief under Federal Rule of Civil Procedure 60(b)(6) from a prior final judgment dismissing the claims. A previous ruling had determined that dismissal was required in the absence of bad faith. However, the New York Court of Appeals later held in the case of ITC Ltd. v. Punchgini (CCH Trademark Law Guide ¶61,157) that a New York state-law unfair competition claim required proof of deliberate copying, not bad faith.

Under Rule 60, a court may relieve a party from a final judgment when an intervening decision of law constitutes "extraordinary circumstances." In this case, the equities weighed heavily in favor of granting the motion for relief. The cigar maker violated New York unfair competition law by intentionally copying the COHIBA mark, in part to capitalize on the success of the Cuban COHIBA brand. The exporter's COHIBA mark had secondary meaning in the United States—the mark was "uniquely associated" with the exporter. In addition, granting relief would not impose undue hardship on the cigar maker, in the court's view (Empresa Cubana del Tabaco, SD N.Y., CCH Trademark Law Guide ¶61,343).

COMPUTER AND INTERNET LAW

Law Barring Prescription Data Sales Held Constitutional
A New Hampshire law that prohibited certain transfers of physicians' prescribing histories for use in marketing campaigns by pharmaceutical manufacturers did not unconstitutionally restrict commercial speech, the U.S. Court of Appeals in Boston has held. A federal district court’s decision invalidating the law on First Amendment grounds was reversed. The law's purpose was to curb the spiraling costs of brand-name prescription drugs by prohibiting use of physicians’ prescribing histories for target marketing, known in the pharmaceutical industry as “detailing.” Two data mining companies alleged that the law’s ban on transfer and use of prescriber-identifiable information violated the Free Speech Clause of the First Amendment, was void for vagueness, and offended the Commerce Clause.

The law did not unconstitutionally restrict commercial speech because it regulated conduct, not expression, according to the court. Even if the law's restrictions on data transfers implicated the First Amendment, the law was constitutional. The law was a targeted legislative response to the state's substantial interest in reducing overall health care costs. The law was not unconstitutionally vague, in the court’s view, because it applied only to the practice of detailing by pharmaceutical companies and excluded almost every other commercial use. Finally, the law did not violate the Commerce Clause because, while it was not explicitly limited to activities within the state, the New Hampshire Supreme Court would interpret it as only affecting intrastate transactions, the court determined (IMS Health v. Ayotte, 1st Cir, CCH Computer Cases ¶49,633).

Antitrust Claims Against Apple Fail for Lack of Proper Market Definition
Antitrust counterclaims against Apple Inc. for restricting the use of the OS X Operating System (Mac OS) to Apple-labeled Macintosh computer hardware systems were dismissed by the federal district court in San Francisco. Psystar, a manufacturer of Mac-compatible computers, raised the counterclaims in an infringement suit brought against it by Apple. Psystar failed to establish a relevant market to support its tying, monopoly-maintenance, and exclusive dealing allegations. Neither a relevant market consisting only of Apple's Mac OS nor an aftermarket for Mac OS-compatible computer hardware systems was plausible, according to the court. While it was possible that, in rare and unforeseen circumstances, a relevant market might consist of only one brand of a product, Psystar failed to explain why competing operating system software should be excluded from the definition of the relevant market. The court also found that the alleged aftermarket for Mac OS-compatible computer hardware could not be predicated on an aftermarket contractual restriction that was fully disclosed and accepted by consumers. Because Apple restricted the use of Mac OS to Apple-labeled computer hardware systems in its End User License Agreement, purchasers knowingly agreed to the challenged restraint, the court held (Apple Inc. v. Psystar Corp., NDCal, CCH Computer Cases ¶49,640).

Spammers’ Website Fees Could Not Be Used to Satisfy Judgment
An individual who was awarded $1,125,000 in a default judgment against adult website operators for violations of California's unsolicited commercial e-mail statute could not attach the operators' website subscription fees, according to the federal district court in San Jose. Pursuant to an alleged "assignment" of rights agreement predating the complaint, a third-party financial services company was directed to transfer the websites' subscription fee proceeds to an off-shore entity, which effectively admitted that it owned the websites. In order to add a third party as a judgment debtor, a court must find that the third-party (1) was an alter ego of the existing judgment debtor and (2) had exercised control over the litigation. The off-shore entity's receipt of revenue from the websites, without more, did not prove that it was the alter ego of the website operators, the court found. In addition, even if the off-shore entity had received actual notice of the instant litigation, the mere awareness of a lawsuit was not sufficient to imply control over the litigation, the court noted. In the instant case, there essentially was no litigation to control because the defendants had defaulted (Balsam v. Angeles Technology, Inc., NDCal., CCH Computer Cases ¶49,641).

WOLTERS KLUWER LAW & BUSINESS IP and COMPUTER LAW PUBLICATIONS

New Patent Law Library
Wolters Kluwer Law & Business has launched a new Patent Law Library covering all areas of domestic and international patent law practice — including prosecution, litigation, and licensing. This integrated library contains all the best Aspen Publishers’ expert-authored, analytical treatises—and links to primary source material, such as cases, laws, and statutes. The library features current awareness from weekly email alerts of patent cases, as well as articles from Aspen IP periodicals. Also included are the invaluable Kluwer Law International resources: the Manual Industrial Property and the Kluwer EU Copyright Cases database.

The Patent Law Library features: (1) current developments & awareness with weekly email alerts from the Federal Circuit Review by Alston & Byrd ,as well as selected articles from top intellectual property journals from Aspen Publishers, such as The Licensing Journal, Intellectual Property and Technology Law Journal, IP Litigator, and The Computer and Internet Lawyer; (2) primary source material from the Manual of Patent Examining Procedure and the Patent Act; (3) patent prosecution, litigation, licensing/transactions and forms modules with 13 popular treatise titles from Aspen Publishers including Biotechnology and Pharmaceutical Patents: Law and Practice by Marc S. Gross, S. Peter Ludwig and Robert C. Sullivan Jr.; Business Method Patents by Gregory A. Stobbs, Esq.; Patent Practice Forms by Peter S.Canelias; Patent Claim Construction by Robert C. Kahrl; Patent Disputes: Litigation Forms and Analysis by Gregory J. Grimes and Charles W. Grimes; and (4) Kluwer Law International content including Manual of Industrial Property and Kluwer EU Copyright Cases database.

Further information regarding the Patent Law Integrated Library is available on the CCH Online Store.