by Mike Oliver | May 1, 2013 | Intellectual Property, Litigation, Trademarks, Uncategorized
A question often arises – does an owner of an intellectual property right have the duty to enforce it? While the answer is no, the failure to do so in the face of known infringement can damage and limit the ability to enforce the right in the future. This legal doctrine – laches – borrows from the statute of limitations – which prevents a claim from being filed if the event giving rise to the claim occurred a distance in the past. This doctrine applies differently in each area of intellectual property, but is most critical, and hardest to determine, in trademark cases.
In trademark cases, the elements in the 4th Circuit (and most circuits) are as follows: “In determining whether laches operates as a defense to a trademark infringement claim, we consider at least the following factors: (1) whether the owner of the mark knew of the infringing use; (2) whether the owner’s delay in challenging the infringement of the mark was inexcusable or unreasonable; and (3) whether the infringing user has been unduly prejudiced by the owner’s delay.” Ray Communications v. Clear Channel, 4th Cir Ct (March 8, 2012).
“[I]n the laches context, “(1) delay is measured from the time at which the owner knew of an infringing use sufficient to require legal action; and (2) legal action is not required until there is a real likelihood of confusion.” See What-A-Burger of Virginia, Inc. v. Whataburger, Inc. of Corpus Christi, Texas, 357 F.3d 441, 451 (4th Cir. 2004).
The mark at issue in Ray Communications is AGRINET for “educational services rendered through the medium of radio; namely, a program of interest to farmers.” The the defendant used similar marks such as “OKLAHOMA AGRINET” for agricultural news programming on the air and in marketing. The defendant had been using the potentially infringing marks for many years – plaintiff filed its case in 2008, but the use of the defendant commenced in the late 70’s and early 80’s – about 20 years prior to the filing date of the complaint.
While this case reversed the district court’s decision in favor of the defendant – largely because the record was not developed adequately to establish such relief, the case demonstrates the complexity of determining when and how to enforce a trademark. For example, there was evidence that the defendant had changed certain marks, and that it had used some of the marks under license from the plaintiff – facts not considered in the lower court.
Trademark enforcement is important to maintain the trademark strength, but the failure to enforce it in some cases, will not prevent later enforcement as the infringement looms large.
For more information, contact Mike Oliver or Kimberly Grimsley.
by Mike Oliver | May 1, 2013 | Intellectual Property, LegalEase, Privacy, Uncategorized
In April 2012, the Federal Trade Commission issued its report entitled “Protecting Consumer Privacy in an Era of Rapid Change.” You can read that here.
The Report, while a comprehensive review of hundreds of undoubtedly conflicting filings by the various extreme factions on privacy issues, ultimately just boils down to the FTC complaining that Congress has still not taken any action to normalize privacy rules. Let’s face it, privacy law is a mess – a hodge podge of state laws, some specific federal laws in the area of financial account, children, protected health information, and education areas, and a morass of case law and regulatory rules – rules that mostly derive from other laws (like the Lanham Act) not really intended to address privacy. For example, many of the actions the FTC has brought to enforce so called privacy, really involve false advertising – a company saying one thing to a consumer, and doing another, or offering some ability to control a privacy setting, and then ignoring the user setting.
The Report sets forth the FTC’s overview of its objectives and scope summarized here:
- does not apply to companies that collect only non-sensitive data from fewer than 5,000 consumers a year, provided they do not share the data with third parties
- “commonly accepted” information collection and use practices for which companies need not provide consumers with choice (product fulfillment, internal operations, fraud prevention, legal compliance and public purpose, and first-party marketing).
- recommended that companies provide consumers with reasonable access to the data the companies maintain about them, proportionate to the sensitivity of the data and the nature of its use.
- respect browser and consumer “do not track” election
- disclose privacy in use of Mobile Applications (also, the major platform providers recently signed an agreement with California, to require all apps on their platforms to link to a privacy policy
- allowing consumers to have access to and to correct information held by so called “data brokers”
- industry self-regulation (“no lip service”)
In terms of the actual principles, they are:
- Companies should incorporate substantive privacy protections into their practices, such as
data security, reasonable collection limits, sound retention and disposal practices, and data accuracy
- Companies should maintain comprehensive data management procedures throughout the life
cycle of their products and services
- Companies should simplify consumer choice (Companies do not need to provide choice before collecting and using consumer data for
practices that are consistent with the context of the transaction or the company’s relationship with the
consumer, or are required or specifically authorized by law)
- For practices requiring choice, companies should offer the choice at a time and in a context
in which the consumer is making a decision about his or her data. Companies should obtain affirmative
express consent before (1) using consumer data in a materially different manner than claimed when the
data was collected; or (2) collecting sensitive data for certain purposes
- Privacy notices should be clearer, shorter, and more standardized to enable better
comprehension and comparison of privacy practices
- Companies should provide reasonable access to the consumer data they maintain; the extent
of access should be proportionate to the sensitivity of the data and the nature of its use
- All stakeholders should expand their efforts to educate consumers about commercial data
privacy practices
From a lawyer for small to medium size businesses, it would be very helpful for some national, pre-emptive legislation that gave a lot of guidance and safe harbors for businesses so that they do not have top worry that they are violating some esoteric rule buried in some regulation, order or arcane state law. Unlikely to happen, though . . .
For more information, contact Mike Oliver.
by Mike Oliver | May 1, 2013 | Intellectual Property, LegalEase, Trademarks, Uncategorized
Section 1125(c)(1) of Title 15 (link here) provides as follows: “Subject to the principles of equity, the owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owner’s mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.”
Current law however also provided that a ownership of a valid registered mark was a complete bar to an action under state law, seeking a similar dilution remedy. 15 USC 1125(c)(6). The law, however, was inartfully worded such that it could be and was read to bar even claims based on federal law.
This “error” in the statute was corrected in 112 HR 6215 (https://docs.house.gov/billsthisweek/20120910/BILLS-112hr6215-SUS.pdf ) by making it clear that ownership of a federal registration is not a bar to an action for dilution under federal law. Though this is a “technical” change, the old law applies prior to the date this law came into effect, and at least one tribunal has read the old law literally, barring a claim for dilution against a federal trademark holder.
For more information, contact Mike Oliver or Kimberly Grimsley.
by Mike Oliver | May 1, 2013 | Business Law, Business Transactions, Mergers and Acquisitions, Uncategorized
Most merger and acquisition (“m&a”) transactions follow a fairly well defined course, commencing with a non disclosure agreement and sharing of a small amount of data to verify some key financial information, then moving to a letter of intent (“LOI”), which also can be called a Memorandum of Understanding (or “MOU”).
The LOI/MOU is often specifically non binding, except for confidentiality, a lockup clause, and perhaps certain other specific clauses (like typically that each party bears its own attorneys fees). If the due diligence performed in the LOI/MOU stage pans out, the parties will then proceed to definitive agreements, which are typically signed at a closing. In today’s world, that closing is most often “electronic” – that is to say, the parties exchange electronically signed documents, one of the attorneys assemble the documents, and hold them in an “attorney escrow” and then upon instructions, the escrow is “released” and the documents become “hard.” This is sometimes referred to as a soft closing – in that it can take some time to assemble the various signatures, and other documents that are pre-conditions to the effectiveness of the m&a deal.
An attorney nightmare in these cases occurs when, at the last minute, one of the parties calls off the deal. Often the parties have acted as if the deal will proceed, and have relied on the closing in taking or refraining to take certain actions. If a party fails to release the documents from escrow, and the other party has suffered damages, a lawsuit can ensue. These are somewhat rare cases, but in a recent case, Olympus Managed Health Care, Inc. v. Am. Housecall Physicians, Inc., 853 F. Supp. 2d 559 (W.D.N.C., 2/12/2012), exactly this issue was presented to the court.
M&A deals can be complex, and often involve other issues – such as pre-purchase loans, bridge agreements, options, teaming and distribution agreements, and so on. In the Olympus Managed case above, the merging parties had prior contractual agreements – one party was an exclusive dealer of services of the other party (in the U.S.), and one party had loaned the other party money. The parties had exchanged signature pages in a soft escrow, but the attorneys had not released them when something happened. The purchaser/acquiror had not informed the target that one of its stockholders was disputing rights to its stock, and there was an arbitration proceeding, and right before the merger was to close, the arbitrator had hinted that he might require all of the stock of the acquiror to be put in escrow. Had that occurred, the acquiror could not proceed with a merger (a merger often involves exchange of stock and issuance of new stock to the target). The acquiror called off the closing, one day before the escrow release. Therein ensued this lawsuit, which included every claim imaginable – fraud, breach of contract, breach of fiduciary duty, intentional interference with contract, and so on.
During the course of the negotiations, the lawyer for the acquiror had been careful to include certain language in his emails, letters and in the LOI/MOU. That magic language, was to this effect: the LOI expressly provided that it “does not constitute a binding agreement” and was “[s]ubject to the negotiation of definitive agreements meeting with approval of the parties” and the agreement then repeated a similar qualification three times as it laid out its operative paragraphs: “assuming the due authorization, execution and delivery hereof by [the parties], are, or will be, the valid and binding obligation of each [of them].” Also, most of the communications indicated similarly that any draft submitted was “subject to final execution.”
Under Delaware law, this process has been described as follows:
“Especially when large deals are concluded among corporations and individuals of substance, the usual sequence of events is not that of offer and acceptance; on the contrary, the businessmen who originally conduct the negotiations, often will consciously refrain from ever making a binding offer, realizing as they do that a large deal tends to be complex and that its terms have to be formulated by lawyers before it can be permitted to become a legally enforceable transaction. Thus the original negotiators will merely attempt to ascertain whether they see eye to eye concerning those aspects of the deal which seem to be most important from a business point of view. Once they do, or think they do, the negotiation is then turned over to the lawyers, usually with instructions to produce a document which all participants will be willing to sign. . . .
After a number of drafts have been exchanged and discussed, the lawyers may finally come up with a draft which meets the approval of all of them, and of their clients. It is only then that the parties will proceed to the actual formation of the contract, and often this will be done by way of a formal `closing’ … or in any event by simultaneous execution or delivery in the course of a more or less ceremonial meeting, of the document or documents prepared by the lawyers.”
Leeds v. First Allied Conn. Corp., 521 A.2d 1095, 1102 n.4 (Del. Ch. 1986).
The Olympus Managed case demonstrates that even when a transaction is carefully planned and follows traditional M&A practice, a lawsuit can arise when a closing is aborted, and this risk increases the closer one gets to the closing. In Olympus Managed, the documents had all been signed and were held in an attorney escrow and would have went hard one day after the notice was given to call the deal off. In these cases, the risk of litigation is exceptionally high. In Olympus Managed, however, the jilted suitor turned plaintiff was unable to prove that the M&A deal was “hard” and hence lost on that and most other claims it made.
While it may not be appropriate in every deal (and may be hard to obtain), potential targets are therefore sometimes well advised to seek representations and warranties from the acquiring company in the LOI/MOU, to the effect that the acquiring company has no pending or threatened lawsuit or other action that would impede or impair or otherwise prevent them from completing the deal as proposed. In the Olympus Managed case it is pretty clear that the acquiror knew it had this stockholder case pending, did not inform the target, and then used that as a basis to call the deal off. Even if the target had searched the case records for this case, it would not have found it, because it was a private arbitration. If a representation had been made that nothing impaired its ability to complete the transaction, the acquiror would have been in a much worse position trying to avoid the closing (as the resolution of the stockholder case was not a condition precedent to the deal) . Also, if the agreement was not a “sign and close” deal and instead was a “sign then close” deal, a proper representation of the acquiror in the definitive agreement would have been breached as well.
For more information on these issues, contact Mike Oliver.
by Mike Oliver | May 1, 2013 | Copyrights, DMCA, Infotech, Intellectual Property, Licensing, Patents, Software, Uncategorized
In a decision in the Oracle v Google case, the court held that APIs – application program interfaces – small amounts of human readable source code, are not sufficiently original to qualify as copyrights. This decision can impact API licenses, which most likely are based on copyrights.
What Google did. Google decided that to construct a mobile platform operating system (ultimately, the Android operating system) it wanted to be able to “interoperate” with java programs – in this way, developers could rapidly publish their programs written in Java, to the mobile platform. In order to do this, however, Google either needed a license to the Java virtual machine to allow it to “port” it to the mobile hardware, or it needed to emulate that environment. Google approached Sun (later bought by Oracle) for this license, but the parties never agreed. Google eventually copied the names of the base classes and methods, and wrote its own original code to implement the particular functions. So as an example, a Java program would call a function, using the precise identical name of the function, class or method, but the “behind the scenes” black box code in Android that returned a result, was written by Google and not copied from Java. Google did a few other things (for example, they decompiled some executable code in Java, and used the source code derived from that to test their own software compatibility, and they included verbatim 9 lines of code in a range check function, which the court utterly dismissed as De-minimis copying)
What Oracle claimed. Faced with having examined 15 million lines of code and discovering that only the structure, sequence and function was copied, Oracle took the position that it had a copyright in that structure, function and sequence.
What the court held. The parties had agreed that the issue of copyright was for the court to decide, with the jury being the arbiter of any infringement or damages. The court did a very good job of reviewing the history of protection of computer software – which really started in about 1980, with amendments to the Copyright Act that recognized computer software as a literary work. (this case is very well written and researched, so I can commend it to anyone who wants a crash course in software law)
The trouble with the copyright protection, however, is that copyrights cannot protect ideas – that is the exclusive domain of patent law. So, whenever a copyright expresses an idea, we often say that the idea is free but the expression of it may not be. However, where there is only a limited way of expressing the idea – courts hold that the idea then “merges” into the expression, becoming inseparable, and renders that particular expression free from copyright protection. That is what the court held here – essentially, the court said that if you want to protect the sequence, function and structure of how a software program works, you must use patent, and not copyright, law. This ended the case for Oracle, as Oracle had lost on patent infringement.
The court summarized the best argument as follows: “Oracle’s best argument, therefore, is that while no single name is copyrightable, Java’s overall system of organized names — covering 37 packages, with over six hundred classes, with over six thousand methods — is a “taxonomy” and, therefore, copyrightable under American Dental Association v. Delta Dental Plans Association, 126 F.3d 977 (7th Cir. 1997).” (emphasis added)
What impact does this case have? In the abstract, this case follows a fairly well defined line of cases that have denied copyright protection to such things as menu structures and programmatic access to underlying operating systems. In this regard, the case does not change the law. However, in a bigger picture view, and with particular reference to the amount of copying here – all of the main class and method calls in Java were replicated verbatim . . . it could be seen as a step toward requiring either very good contracting practice, or patenting, to protect access to a software language system. The only other way to protect access is under the Digital Millennium Copyright Act – installing and using a sufficient technological measure that must be decrypted in order to access content.
If a software developer desires to restrict access to base operating code, the Oracle v Google case poses a significant barrier to reliance on copyright alone. As stated above, the developer should consider proper contract language, patenting the system, and use of encryption technology to unlock such access.
For more information contact Mike Oliver.
