California law changes the right of certain users to delete online posts, prohibits certain marketing starting in 2015

Beginning in 2015, any website or mobile service that is directed to minors under the age of 18 and allows them to post content, will have to delete that content on request of the minor user.  SB 568 provides in part that a site directed to minors must “(1) Permit a minor who is a registered user of the operator’s Internet Web site, online service, online application, or mobile application to remove or, if the operator prefers, to request and obtain removal of, content or information posted on the operator’s Internet Web site, online service, online application, or mobile application by the user. (2) Provide notice to a minor who is a registered user of the operator’s Internet Web site, online service, online application, or mobile application that the minor may remove or, if the operator prefers, request and obtain removal of, content or information posted on the operator’s Internet Web site, online service, online application, or mobile application by the registered user. (3) Provide clear instructions to a minor who is a registered user of the operator’s Internet Web site, online service, online application, or mobile application on how the user may remove or, if the operator prefers, request and obtain the removal of content or information posted on the operator’s Internet Web site, online service, online application, or mobile application. (4) Provide notice to a minor who is a registered user of the operator’s Internet Web site, online service, online application, or mobile application that the removal described under paragraph (1) does not ensure complete or comprehensive removal of the content or information posted on the operator’s Internet Web site, online service, online application, or mobile application by the registered user”

Some exemptions to this requirement apply (such as data that must be retained for law enforcement, data that is posted by a third party about the minor, and data that is anonymized).  It is not clear (to this writer) that the law would apply after a minor reaches his or her 18th birthday.  In other words – it is not clear a minor who does not make the request before their 18th birthday could make the deletion request after their 18th birthday.

That law also prevents a site “directed to minors” from presenting any content or advertising in the following enumerated categories:

(1) Alcoholic beverages
(2) Firearms or handguns
(3) Ammunition or reloaded ammunition
(4) Handgun safety certificates
(5) Aerosol container of paint that is capable of defacing property
(6) Etching cream that is capable of defacing property
(7) Any tobacco, cigarette, or cigarette papers, or blunt wraps, or any other preparation of tobacco, or any other instrument or paraphernalia that is designed for the smoking or ingestion of tobacco, products prepared from tobacco, or any controlled substance
(8) BB device
(9) Dangerous fireworks
(10) Tanning in an ultraviolet tanning device
(11) Dietary supplement products containing ephedrine group alkaloids
(12) Tickets or shares in a lottery game
(13) Salvia divinorum or Salvinorin A, or any substance or material containing Salvia divinorum or Salvinorin A
(14) Body branding
(15) Permanent tattoo
(16) Drug paraphernalia
(17) Electronic cigarette
(18) Obscene matter
(19) A “less lethal weapon”
A site is directed to minors if “[the] Internet Web site, online service, online application, or mobile application, or a portion thereof, [] is created for the purpose of reaching an audience that is predominately comprised of minors, and is not intended for a more general audience comprised of adults.”
This rule also reaches “advertising services” if the website/mobile operator advises the advertising service that the site is “directed to minors.”  Advertisers therefore will need to obtain certification from their customers that the site they are servicing is not directed to minors, or, they will need to add the above filters for such sites.
The California law appears to be the first law that has used the age of 18 in regulating website/platform content; prior to this, under the FTC COPPA act, the applicable age was “less than 13.”
Sites and services that are “directed to minors” will need to begin technologically addressing the issues raised by SB 568 in 2014, to be ready in 2015.
For more information, contact Mike Oliver

Fold me once shame on me – asserting a future intent to enforce a patent if issued is not wrongful

In Continental Datalabel, Inc. v. Avery Denison Corp, 09 C 5980 (U.S. D. N.D. Ill 2012) the 7th Circuit considered numerous legal issues arising from a war between two companies that manufacture sticky labels.

Despite the increasing use of electronic data storage, there still seems to be a high demand for labeling things.  This apparently hotly contested market is dominated by Avery Denison.   Avery makes labels that are perforated, so the user can easily peel the label from the backing.  This works well, but if a user is not careful, and does not need all the labels in a row, this will leave some labels without backing on the edge, and hence unusable in a printer.

So, Avery’s skilled inventors devise a new invention, the “pop up edge” which allows the user to “fold” the back, pop up some labels, and then refold it flat.  This allows it to be re-printed, and also, keeps the unused labels on the backer board.  It looks like this:

Avery label

Avery sells its labels among other places, Staples.  It advertised this new product as follows:  “Only Avery label sheets bend to expose the Pop-up Edge™” and “Only Avery offers the Pop-up Edge™ for fast peeling—just bend the sheet to expose the label edge.”

Competitor Continental Datalabel also sells peel off labels.  It also had perforated rows, but its labels suffered the same issue as Avery’s perforated rows. So, Continental Datalabel also marketed that its products could be folded to reveal the label, and then re-flattened.

Avery filed a patent application on the “Pop Up Edge” technology.  Before the patent issued, it allegedly threatened retailers with patent suits if they sold products of Continental Datalabel.  It also sent one email in which it said “Avery has made 2 rounds of patent applications for Easy Peel. The first set of patent applications were filed several years ago and the additional patent applications were filed for the pop up edge which are even stronger than the first set of filings. Once the patents are granted Avery will aggressively defend its IP.” (emphasis added).

 As one might imagine, the retailers, fearing a patent suit if they sold a possibly infringing product in the future, refused to deal with Continental Datalabel.  Predictably, Continental Datalabel sued.  The two main arguments presented by Continental Datalabel were (1) that the two statements above stating that “only” Avery sold fast peeling label sheets was false and misleading advertising; and (2) that Avery’s threats to Staples and other retailers that it had existing patents (at a time when it did not have any) and threatening to file future lawsuits on as of yet issued patents, violated Continental Datalabel’s rights.

Continental Datalabel lost this case (at least at this phase).  With respect to the false advertising claims, the claims refer to a trademarked term “Pop Up Edge” and not to a generic “easy peeling” label sheet.  In false advertising cases there are primarily two types of false advertising.   Literally false statements, and literally true statements that are misleading.  Proof of the former eliminates the need to show any harm or actually misled consumers – because a person who makes a literally false statement is presumed to have intended to mislead.  Proof of the latter, however, requires that “the plaintiff [] prove that the statement is misleading in context by demonstrated actual consumer confusion.” (emphasis added).  Here, the court held that the claims were literally true, primarily because the modifier “only” modified “Pop Up Edge” which was claimed as a trademark.  So, it was literally true that “only” Avery sold products with “Pop Up Edge” technology.  Thus, Continental Datalabel was required to show actual confusion.  It attempted to do this via a survey, and by testimony of an expert.  The expert, however, failed to survey respondents on the meaning of “Pop Up Edge” and as a result, his expert testimony was essentially disregarded.

On the claims regarding enforcement of the patent, the plaintiff was not able to provide any non hearsay evidence that anyone from Avery ever threatened Staples with patent infringement before a patent was issued.  It is clear law that threatening enforcement of non existent intellectual property rights is wrongful, and that you cannot infringe a patent application.  [Side note – you can however give notice of the patent that is pending, to a person who might be infringing, and indicate that you will seek a reasonable royalty for any infringements prior to the date of issuance, under 35 U.S.C. Sec 154(d) – and that is clearly protected communication – it is not clear why Avery did not use this statute here].  So, the only evidence that remained was the email noted above.  That email, however, only stated that Avery would aggressively enforce rights after they were acquired.

The Court’s discussion here is instructive:

“Indeed, any state law imposing liability for warning of potential patent litigation, without more, would be preempted by federal patent law, which “preempts state-law tort liability for a patentholder’s good faith conduct in communications asserting infringement of its patent and warning about potential litigation.” Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1374 (Fed. Cir. 2004); see also Virtue v. Creamery Package Mfg. Co., 227 U.S. 8, 37-38 (1913) (“Patents would be of little value if infringers of them could not be notified of the consequences of infringement …. Such action, considered by itself, cannot be said to be illegal.”). The principle applies to a patent applicant’s statement that it will enforce its patent once the patent is granted. See Scosche Indus., Inc. v. Visor Gear Inc., 121 F.3d 675, 680 (Fed. Cir. 1997) (affirming summary judgment for the defendant on a California unfair competition claim where the defendant told a non-party that “[w]e believe that the product sold by [the plaintiff] falls within the scope of the pending application and that their sale of the [product] will infringe [the defendant’s] patent when it issues,” and noting that the plaintiff “points to no authority holding that it is unfair competition for a patent applicant to advise a prospective customer of the status of his pending patent application and of the applicant’s belief that competing goods will infringe the patent if and when it issues”). There is an exception to this preemption principle: “State law claims … can survive federal preemption only to the extent that those claims are based on a showing of ‘bad faith.’” Globetrotter Software, 362 F.3d at 1374.

It is true that the precise wording of Avery’s email—“Once the patents are granted”—suggests that it expected to receive a patent when in fact it could not have been certain that the USPTO would grant its applications. But, again, Continental has cited no authority for the proposition that a company’s expression of confidence that a patent will be granted can be tortious. The case it does cite, Foboha GmbH v. Gram Technology, Inc., supra [2008 WL 4619795, at *1-2 (N.D. Ill. Oct. 15, 2008)], is not on point because it dealt with flatly false statements: the defendant first demanded that the plaintiff pay to use the defendant’s “patented technology” when the defendant had not yet been granted a patent, and then, after the USPTO reexamined the defendant’s patent and rejected claims 1 through 10, the defendant published a press release stating that “the [USPTO] has confirmed the patentability of the [patent’s] 10 original claims.” Id. at *1-2. Avery’s email, by contrast, was not false; in particular, it neither asserted that Avery already had a patent nor asserted that Avery would sue for violation of its patent application before an actual patent was granted. If anything, the email acknowledged to Staples both that Avery did not yet have patents and that it could not sue on a patent application. Avery sent the email in response to a question from a Staples employee asking whether Avery had any “opinion letters from outside counsel that clears its Easy Peel patents?” Doc. 203-2 at ¶ 116. A rule prohibiting a prospective patentee from telling interested firms what it intends to do with the patent if granted would make no sense. Cf. Atanus v. Am. Airlines, Inc., 932 N.E.2d 1044, 1050 (Ill. App. 2010) (“where a business entity provides accurate and proper reports to another entity in a reasonable business transaction, providing those reports should not constitute intentional interference”).”

 This case is a good example of some of the more technical issues in both advertising statements (it was somewhat critical that Avery applied the “TM” symbol by the words “Pop Up Edge”), the danger of exclusionary assertions like “Only” which is not mere puffery – or at least no party apparently asserted it was here, and the risks of warning customers that you will sue them before you actually have the intellectual property rights to do so.  It is also yet another case in a long line of cases where the survey was not done correctly.

For more information on issues arising in marketing, advertising and IP enforcement statements, contact Mike Oliver.

For Google’s sin, it gets (Rosetta) Stoned

Not so fast, says the 4th Circuit.  Many lawyers and bloggers had assumed Google would win its case in which Rosetta Stone alleged that Google was contributing to the infringement of Rosetta Stone’s trademarks . . . but Google mostly lost on appeal.

The Rosetta Stone case involves use of “adwords” – Google adwords are purchased and give the user the right to place sponsored advertising on the front page and other pages, when a user searches for the term that was purchased.  If the term is a trademark, often the advertising links to sites that are either not authorized to sell the goods, sell infringing goods, or sell competing goods.

In Rosetta Stone, Ltd. v Google, the 4th Circuit held that Rosetta Stone’s claims for direct trademark infringement, contributory trademark infringement and dilution arising from Google’s adword program could proceed to trial.

On direct infringement, the Court “assume[d] […] that Google’s policy permitting advertisers to use Rosetta Stone’s marks as keywords in the AdWords program and to use Rosetta Stone’s marks in the text of advertisements constituted an unauthorized use “in commerce” and “in connection with the sale, offering for sale, distribution, or  advertising of any goods or services.”  That left only likelihood of confusion to be addressed.  In reviewing the lower court decision, the 4th Circuit agree that not all of the 9 factors must be used, particularly where the competing use is nominative – that is, where the use actually identifies the trademark owners’ goods.  So, it focused on three factors – intent, actual confusion, and sophistication of the consuming public.

Evidence was presented that showed that Google believed that allowing use of trademark Adwords might cause some confusion (based in part on Google’s change in policy that allowed trademarks also to be included in titles and on ads – something it did not permit until 2009), and this was enough to overcome the intent element weighing solely in favor of Google as the lower court had found.

On actual confusion, evidence was presented both anectodally – by consumers who were confused, and by survey evidence.    Google itself had done internal confusion studies, that showed 94% of users who saw ads with trademark terms in them were confused at least once.

Finally on the sophistication of the consuming public element, the 4th Circuitheld that the lower court wrongfully rejected evidence of lack of sophistication based solely on price (the product is expensive) noting that “[t]he evidence also includes an internal Google study reflecting that even well-educated, seasoned Internet consumers are confused by the nature of Google’s sponsored links and are sometimes even unaware that sponsored links are, in actuality, advertisements.”

Hence, after rejecting other defenses such as the functionality defense, the direct infringement claim was permitted to go to trial.

On the claim of contributory infringement, Google lost because evidence was presented that Rosetta Stone notified Google that known infringers were purchasing adwords for sponsored links – however, Google never terminated such users.

Finally, Google lost on the dilution claim, largely because the lower court had applied a defense (the defense that the defendant must have used the mark on its own goods and service and such use must have been fair), as an affirmative element of the claim.  If anything on this point, which Google might win at trial, the case stands for the proposition that a plaintiff need not plead or prove the absence of statutory defenses, as a part of its claim.

If Google allows this to go to trial (unlikely) and loses, it could be subject to substantial damages, and worse, could open the door to many other claims by other trademark holders.

For our clients, this decision bolsters the ability to assert that Google might be directly and contributorily infringing a trademark when it allows adwords and advertising to be placed on its site that causes customer confusion.  Not every use of a trademark term will do so, but if a trademark owner can obtain such information on confusion, this case would support at least a notice and demand to Google to cease such use.  In addition, this case certainly supports an active trademark protection effort – to police misuse of trademarks and report them to Google (and any other search system provider) as the failure to remove such infringing content can constitute indirect contributory infringement.

For our clients that provide such portals and search services, this case essentially reinforces what our advice has been all along – that you must build into the system a means to remove allegedly infringing content upon notice.  While there is no equivalent DMCA protection for trademarks, the failure to remove infringing content after notice can lead to a lawsuit like this.

For more information, contact Mike Oliver.  

From the patenting-the-internet-is-not-a-good-idea department – Ultramercial decision goes back to the CAFC

We have all seen them – the short clips of video advertising we must watch before we are granted access to some other video content.  A company known as Ultramercial claims that the “idea” of putting that short advertising clip in front of content was its novel, non obvious and hence patentable invention.   A lower court disagreed, and invalidated the patent on subject matter grounds.  Last September, however, in Ultramercial v Hulu, the Court of Appeals for the Federal Circuit reversed that decision and remanded the decision for further proceedings (the issue of whether the patent was even valid on novelty or non obvious grounds had not yet been decided).

On May 21, 2012 the Supreme Court of the United States granted certiorari and remanded the case back to the CAFC for further review in light of Mayo Collaborative Services v. Prometheus Laboratories, Inc., a decision in which the process and method of administering certain therapeutic drugs was held to be patent subject matter ineligible.

There has been a distinct level of Supreme Court review of patent cases recently, most of them restricting or limiting the validity and subject matter of patents.  This latest remand indicates that the Supreme Court is expecting the CAFC to use these decisions in the internet area as well, to begin at least reviewing, and most likely holding invalid, many business method type patents that do not meet patent eligible subject matter requirements.

There are thousands of issued patents that cover basic functioning of the internet system (or, at least the commercial part of it) – that will be called into question in light of these recent Supreme Court decisions.

For more information, contact Mike Oliver.