Transcript E-Commerce in Iowa Legal and Business Issues

E-Commerce in Iowa
Legal and Business Issues
Bretttrout.com
© 2001 Brett J. Trout
What is Intellectual
Property
A useful invention
A brand name
The expression of an idea
A commercially valuable secret.
Why Worry About IP
Marlboro trademark is worth $31 billion
$909 Million patent infringement judgment
against Kodak
Formula for Coke Invaluable
IP is the most valuable asset of most
Information Technology companies
Intellectual Property Laws
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Patent
Trademark
Copyright
Trade Secret
Patent
New and useful
Processes
Machines
Manufactures
Compositions of matter
Improvements thereof
Patents Do Not Protect
Ideas
Obvious combination
of prior art
Illegal or immoral
matter
Pure research
Novelty or curiosity.
Infringement Remedies
Injunction
Damages and Infringer’s profits
Treble damages

Willful
Attorney fees

Willful
“Internet” Patents
State Street Bank Decision (July 23, 1998)

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Court of Appeals for the Federal Circuit
Allows patenting business method.
Examination no longer begins by determining
if claim recites a mathematical algorithm.
1998 USPTO revisions to computer related
examination guidelines reflect this decision.
Business Method
Applications
Amazon.Com

One-Click Shopping
AskJeeves.com

Plain English search service
Lycos

Spider technology
Cybergold

Cash for eyeballs.
Business Method
Applications
1996-2000
First Upheld in 1998
U.S. now files over
50% of European
Business Method
Applications
8000
7000
6000
5000
4000
3000
2000
1000
0
1996
1997
1998
Year
1999
2000
Why the Rush
Often the primary asset of an IT company
Delays competitors
Provides potential revenue stream
Marketing advantage
Increases the value of the company
Great bargaining chip in litigation
Problems
Internet developed using public domain
information
USPTO has weak database and few
patents in this area
Many applications will incorporate public
domain information
Patent may be invalid, but will be difficult
to prove
Is it a Protectable Business Method
Novel

Are you aware of it being done before?
Non-obvious

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Given the problem, would the solution be
obvious to a colleague?
Not whether colleague understands solution
Useful

Typically not an issue.
Patent Do’s
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Keep accurate records
Determine if method meets patent criteria
Determine if method is worth protecting
Take immediate steps to protect method
Determine all potential alternatives
Give patent attorney ALL of the information
you have
Patent Don’ts
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Disclose
Third parties
Offer for sale
Delay
Make decision not to pursue patent
without input from others in company
Patent Limitations
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Expensive $5K-$20K
Slow 18-48 months
Does not protect you from infringement
Expires 20 years after filing
Advantages of Patents

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Covers various alternatives
Provides triple damages and attorneys fees
Covers items subject to reverse engineering
Signs You May be an IT
Redneck
Your old computers are up on
cinder blocks in the front yard
A word, name or phrase, or symbol used
to identify the source or origin of a good or
service provided through commerce.
Infringement Remedies
Injunction
Damages and Infringer’s profits
Treble damages
Attorney fees

Must be an exceptional case
Types of Trademarks
Fanciful – Qwing
Arbitrary – Royal
Suggestive – NoDoze
Descriptive – red
Generic - apple
Types of Trademarks
Color – pink for fiberglass
Sound – NBC chimes
Scent – floral scent for yarn
Types of Trademarks
Domain names - Amazon.Com

Over 30,000 pending
Animated browser icon – Netscape
“E” marks – eVideo, eMusic
Correct Usage
Use ® only for federally registered
trademarks
Use TM or SM for all non-registered marks
ALWAYS use trademark as adjective
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
Correct “Hand me that Firewire cable”
Incorrect “Hand me that Firewire”
Incorrect Usage
Destroys valuable trademarks
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thermos- King Seely
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escalator- Otis Elevator
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cellophane- E.I. Du Pont
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yo-yo- F. Duncan
Xerox spends over $100,000/yr making
sure people do not say “Xerox this for me”
Types of Protection
Common law
State registration
Federal registration
Infringement
Similarity of marks
 Similarity of goods or services
 Similarity of trade channels
 Sophistication of buyer
 Strength of mark
 Actual confusion or lack thereof

Cybersquatting
Uniform Dispute Resolution
Policy
 Anticybersquatting Consumer
Protection Act.

Uniform Dispute Resolution Policy
Created by ICANN
Adopted by all Registrars
Mediation (6-8 weeks)
 Only transfer or cancellation of name
Registrant must respond within 20 days
Requires showing of bad faith
Do not have to have federal registration
Trademark owner wins 80% of disputes.
Anticybersquatting Consumer
Protection Act
Federal Court
Statutory Damages $1K to $100K
 Available only if name
registered after law enacted
Like UDRP, requires bad faith.
Typical State Anitdilution
Requires proof mark is both
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Famous
Distinctive
Only concerns likelihood of dilution
Only concerns distinctiveness loss per se
Federal Trademark Dilution Act of
1995
15 U.S.C. §§ 1125(c) (1998)
Effective January 16, 1996
Amends Section 43 of the
Lanham Act
Provides a federal cause of
action for trademark dilution
Proving Federal Dilution
Famous Mark
Dilution
What makes a mark famous
inherent or acquired distinctiveness
duration and extent of use with the goods or
services
duration and extent of advertising and publicity
geographical extent of the trading area
channels of trade
recognition of the mark in the trading areas
nature and extent of use of the same or similar
marks
whether the mark is federally registered
Trademark Infringement
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Same criteria on or off line
Similarity of the marks
Relatedness of the goods or services
Simultaneous use by competing companies of
the web as a marketing channel
Addition of “.Com” typically not a factor
Invisible Infringement
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Metatags
Playboy and playmate
Court does not differentiate visible from
invisible infringement
Stealthing
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Words same color as background
Invisible to viewer
Visible to search engines
Likely viewed the same as metatag
infringement
Banner Ad Linking
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Playboy
Summary Judgment for Defendant
Playboy used as English word
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Estee Lauder
Settled-links removed
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Lexis/Innovator -pending
“Suck” sites
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Walmartsucks.Com
Very difficult to get name back
First Amendment/Free Speech issues
Trademark Do’s
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Choose unique trademarks
Investigate domain name availability
Report all infringements
Use all trademarks as adjectives
Trademark Don’ts
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Allow unauthorized use of trademarks
Even as metatags
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Use trademarks of others without permission
Use a trademark similar to that of a
competitor
Use trademarks as nouns
Trademark Limitations
For non-famous trademarks, rights only
extend to association with goods or
services
No trademarks rights without actual use
Requires docketing for renewal of
trademark registrations
No protection for generic or merely
descriptive terms
Advantages of Trademarks
Potentially indefinite duration
Mere use provides common law rights
Federal registration provides
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Treble Damages
Attorney Fees
Protects against mere “likelihood of
confusion”
Signs You May be an IT
Redneck
You have a camouflage mouse pad
Copyright
Original works of
authorship
Fixed in a tangible
medium
©
Copyright Protects
Literary works
Musical works
Dramatic works
Choreographic works
Pictorial, graphic and sculptural
Motion pictures
Sound recordings
Architectural works
Exclusive Rights
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Reproduce the copyrighted work
Prepare derivative works
Distribute copies by sale or other
transfer
Perform the copyrighted work publicly
Display the copyrighted work publicly.
Damages For Infringement
Your damages and Infringer’s profit
Injunction
Statutory damages
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$30K
$150K if willful and malicious
Attorney fees and costs
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Available to either side
Frivolous or unreasonable
Copyright Duration
Sonny Bono Copyright Term Extension Act
 Last surviving author's life plus 70 years
 Works for hire and anonymous
95 years from publication
120 years from creation.
Copyright Does Not Protect
Ideas
Procedures
Processes
Systems
Federal
publications
Methods of
operation
Concepts
Principles
Public Domain
Material.
Copyright Does Not Protect
Certain aspects of software
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Items dictated by efficiency
Aspects required by external factors
Scenes a faire
Industry demands, etc.
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Items taken from the public domain
Avoiding Infringement
Clean Room
 Programmers have no access
Copyrighted program
Public Domain
 OK to use
 Avoid Open Source and Freeware
Unless you are absolutely sure
Could have been taken from
protectable material
Watch Out!
Much of the information relating to
copyright law on the Internet is inaccurate.
Using a small amount of material or
modifying the work, does not avoid
infringing the author’s copyright.
The poster of infringing work on the
Internet typically must pay damages and
remove the material from the Website.
ALWAYS Obtain an Assignment
Paying contractor for project
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Not sufficient to transfer copyright
Get assignment from “author”
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Custom software
Website design
Logo or graphic art
Get assignment up front.
Fair Use
Purpose and character or work
 Commercial use of copy
Nature of copyrighted work
 Form book
Amount of work taken
Economic impact of taking
Usually ok
 Parody
 Critical commentary
Fair Use
Very rarely applicable
Do Not rely on fair
use protection
Rarely upheld in
commercial context
unless
 Parody
 News
 Critical
Commentary
Infringement of Software
Abstract
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Source code protectable
Idea not protectable
Filter
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Non-protectable elements
Compare

Substantial Similarity
Proper Copyright Notice
Copyright Notice
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© or Copyright
Year of first publication
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Include all years new material published
2001
1997, 1998, 2001
1997-2001
Name of Copyright Owner
Use of Notice
© 2001 ABC Corp., Inc.
Apply to all
 Original works of authorship
Software
Documentation
Graphics
 Created by your company, its
employees or copyrighted work
assigned to your company
Deep Linking
Ticketmaster v. Microsoft
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Microsoft Seattle sidewalk website
Deep linked to Ticketmaster order page
Skips home page and several layers of
advertising banners
Settled
Deep Linking
Shetland times v. Shetland news
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Deep linking to news story
Framed story with linker’s advertising
Can link to story, but must give proper
attribution
Deep Linking
Bernstein v. J.C. Penney
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Linked Arden perfume page to page which
displayed infringing photographs of Elizabeth
Taylor
Court dismissed case as too tenuous
Always Obtain
Permission
Copyright Limitations
Registration required to bring suit
 Does not protect functionality
 Vesting of original ownership often
confusing
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Advantages of Copyright
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Registration not required
Inexpensive
Protection automatically attaches
Statutory Damages
Non-willful – up to $30K
Willful - up to $150K
Provides for attorney fees and court
costs
Signs You May be an IT
Redneck
There is a farm animal on your screen
saver
Trade Secret
Is It a Trade Secret?
Information which:
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
Derives independent economic value,
actual or potential, from not being generally
known to, and not being readily ascertainable
by proper means by a person able to obtain
economic value from its disclosure or use.
Is subject to reasonable efforts to keep secret
Trade Secrets
Formula
Pattern
Compilation
Device
Method
Technique
Process
Trade Secrets
Customer Lists
Vendor Information
Anticipated Return on Investment
Software Architecture
Functional Specifications
Module Interactivity
Alpha/Beta/Full Releases
Trade Secret Misuse
Posting trade secrets on the internet
Using trade secrets you should have
known were protected
Damages For Infringement
Injunction
Compensation
Punitive damages
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Willful and malicious
Attorney fees
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Willful and malicious
State Trade Secret Law
Iowa enacted uniform trade secrets act in
1990 (Iowa Code Chapter 550)
Enacted by about 40 states
Remaining states use common law
theories
Church of Scientology
Former members posting church secrets
on the internet
Court held
 Fair use
 Documents no longer trade secrets after
being disclosed in prior court proceeding
Trade Secret Don’ts
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Disclose Trade Secrets to anyone who has
not signed a confidentiality agreement
Attempt to extract trade secrets from others
under confidentiality agreement with third
party
Misappropriate Trade Secrets
Criminal penalties
Punitive damages
Attorney Fees
Trade Secret Do’s
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Maintain secrecy
Follow all security protocols
Appropriately mark all trade secret material
Limitations of Trade Secrets
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Could be gone tomorrow
Not applicable if you can reverse engineer
Must take precautions to prevent disclosure
Trade Secret Advantages
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No need to disclose
Potentially indefinite duration
Inexpensive
Covers Ideas
Signs You May be an IT
Redneck
You have ever used a CD-Rom as a beer
coaster
www.DomainNames.com
What is a Domain Name
A domain name is an alphanumeric string
representing a numerical Internet Protocol
Domain names represent numerical
addresses
Domain Name Servers (DNS) translate
these names into numbers using a huge
database
www.lockergnome.com = 216.246.17.205
Top Level Domain Names
.com (for commercial endeavors)
.org (for non-profit organizations)
.net (for network providers)
.mil (for military organizations)
.gov (for government organizations)
.edu (for educational organizations)
.ca .uk .to etc. (for various countries)
Domain Names as Trademarks
Do not register http:///www portion
Must indicate source
Not merely address
Not primarily a surname unless secondary
meaning
Not primarily geographically descriptive or
misdescriptive
Not selling only your own goods or
services over the site
Domain Name Disputes
Domain name rights are obtained by
registering with a domain name registrar.
There are four dispute resolution
providers:
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World Intellectual Property Organization
National Arbitration Forum
E-Resolution Consortium
CPR Institute for Dispute Resolution
Signs You May be an IT
Redneck
Your Outlook program has a “Reply Y’all”
button
Digital Millennium
Copyright Act
(DMCA)
Enacted on October 28, 1998
Addresses the impact of electronic
commerce on the existing legal
framework
Does not affect the rights, remedies,
limitations or defenses to copyright
infringement.
(DMCA)
Limits liability of Internet Service Providers
Prohibits circumventing anti-piracy
software
Requires rebroadcasters of copyrighted
material to pay royalties.
Internet Service Providers
Shielded from Liability if:

No knowledge
that material is
infringing
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No receipt of
financial benefit
from the
infringing activity
Moves
expeditiously to
remove the
material that is
claimed to be
infringing.
Anti-Circumvention
Under Section 1201
of the DMCA, no
person shall
circumvent a
technological
measure that controls
access to a
copyrighted work.
Prohibits trafficking in
any technology
product, service, or
device designed to
circumvent a
technological
measure that controls
access to a
copyrighted work.
Signs You May be an IT
Redneck
Your instant messages have ever begun
with “Howdy”
Defamation and Publicity
Defamation
Invasion of another’s interest in reputation
or good name
Twin torts
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Slander
Libel
Slander
Verbal defamatory statement made with
malice and causing damage to its victim
Two types
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Slander per se – specific categories
Slander
Slander per se
Slander per se
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Sexual misconduct
Lack of business acumen
Communicable disease
Criminal conduct
Presumed
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Proof of falsity
Malice
damage
Slander
Must prove
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Falsity
Made with malice
Damage
Question of law as to whether statement
could be interpreted as defamatory
Libel
Malicious publication tending to injure the
reputation of another
Two types
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Libel per se
Libel per quod
Libel per se
Defamatory of their face
Presumptions
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False
Made with malice
Damaging
Most actions brought as Libel per se
Libel per quod
Capable of defamatory interpretation when
considered with other extrinsic evidence
No presumptions
Plead anyway in case Libel per se case
gets dismissed
Other Factors
Must prove malice if figure is public figure
Publication-single third party, not subject
to privilege is enough
Identification-must be corporation,
partnership or living person
Damages-detail prior reputation and extent
statement distributed
Malice
Required if

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Public figure
Punitive damages
Made with knowledge it was false
Made with reckless disregard of its truth or
falsity
Defenses
Truth

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Must be substantial
Damages cannot be the result of the
inaccuracies
Privilege
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Qualified
Absolute
Qualified Privilege
Must be

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Made in good faith
Without malice
Types
Self interest

Giving description to police
Interest of others

Telling daycare worker is felon
Common venture

Boss details performance
Public interest

Statement to prevent a crime
Types
Report of public proceeding

Covers false statements
Fair comment
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Plaintiff held out for public comment
Entertainer
Public official
Absolute Privilege
If done in judicial
proceeding
Judges
Jurors
Lawyers
Witnesses
Parties
If not in judicial
proceeding
State officials in
execution of their duty
Local officials only
receive qualified
privilege
Mitigation
Impugn character
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Can only show allegations
Cannot show bad acts
Argue pure motive
Spoken in passion
Cases
Chubby
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Compuserve provided website forum and
subcontracted operation to third party
Defamatory posting
Ruling
Compuserve had no reason to know of falsity
Compuserve more like a newstand vendor than
publisher
Prodigy
SYSOP provided editing and screening of
bulletin board
Defamatory posting
Preliminary ruling
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
Prodigy could be liable
More like a publisher
Communications Decency Act
(CDA)
Codification of Chubby
Reaction to Prodigy case
SYSOP liable only if it knew or had reason
to know of defamatory nature of statement
Zeran
Bulletin board poster used plaintiff’s name
to sell OK city bombing t-shirts
Ruling

SYSOP AOL not liable even if aware of the
falsity of at least some of the postings
Drudge
Drudge stated Blumenthal had history of
spousal abuse
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Paid a salary
SYSOP could control content
Ruling

No liability of SYSOP
Lunney
Third party sent offensive e-mail through
SYSOP
Court said SYSOP more like a telephone
distributor than a telegraph operator

No liability
In re iPrimus
Anonymous e-mail
Allegedly disclosed confidential info
Allegedly defamed toy company president
Canadian Court ordered ISP to divulge
identity of sender
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Requires more than spurious claim
Plaintiff must prove legitimate need
Hvide v. ACLU
Eight message posters
CEO claimed postings led to his firing
Florida Appeals Court held ISPs had to
disclose identity of posters
John Doe Cases
CDA led to increases in defamatory
statements
Reasons for defamations
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Rush to print
Manipulate stock
Disgruntled employee
ISPs insulated from liability

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Little incentive to self-police
Companies cannot get name of defamer
Why Bring a John Doe Case
Rarely seeks monetary relief
Confirms to Shareholders that statements
are false
Usually leads to self-imposed injunction
John Doe Case Issues
1st Amendment Defense
Opinion Privilege
John Doe Plaintiffs
1st Amendment Defense
Media vs. non-media speech


Most protected-Public policy website postings
Least Protected-e-mail to specific company
Public figure

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Defamation requires proof of malice
Corporations as public figure
Does corporation have communication channel
Did corporation put itself into public controversy
Matter of public concern


Can override first two
Not personal prurient interest of CEO
Opinion Privilege
Statements not capable of being proven
false; or

Outlook for bond repayment is negative
Cannot reasonably be interpreted as
stating actual facts


Sex with your own mother
Look at context
Internet opinion privilege is very broad.
John Doe Plaintiffs
AOL v. Anonymous Publicly Traded
Company
Plaintiff remaining anonymous requires:
 More than proof of harm
 Must show
Social Stigma
Extraordinary Economic Retaliation
Signs You May be an IT
Redneck
Installing minesweeper would double the
value of your PC
RIGHT OF PUBLICITY
History
Developed from right of privacy
Protects commercial interest in one’s
persona, name and likeness
Some jurisdictions extend to

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Nickname
Voice
Mannerisms
Performing style
States
25 protect right


15 have statutes
10 use common law
Alternatives
Implied endorsement
Trademark
State dilution laws
Copyright laws
Defenses
Non-commercial use
News reporting
Critical commentary
Parody
Remedies
Injunction
Value of licensing agreement
Transfer
Can be made “in gross”
Cases
Pesina
Model for video game character
No showing character inextricably linked to
his identity
Michaels I
Pamela Anderson’s “private” tape
Court ruled likelihood of success on the
merits
Michaels II
Hard Copy wanted to air excerpts
Court held 1st amendment rights trumped
right of publicity in this case
Astaire
Use of likeness on cover for video tapes of
Fred Astaire Dance Studios
Court upheld and extended California
statute to cover video tapes
Pornographic Sites
Alyssa Milano
Amy Dolenz
Carmen Electra
$238,000 judgment against at least one
website host
Signs You May be an IT
Redneck
Your Computer is worth more than your
trailer
Uniform Electronic Transactions Act
(UETA)
Created to promote uniformity in state laws
regarding electronic transactions
Iowa’s UETA
Iowa Code Chapter 554D
Effective July 1, 2000
Transaction where both parties agree to
transact by electronic means
Iowa’s UETA
Contract or signature shall not be denied
effect simply because of electronic format
Electronic document qualifies as writing
Electronic signature qualifies as signature
Iowa’s UETA Does Not Cover
Transactions covered by specific
consumer transaction chapters of Code
Creation or execution of Will or Trust
Iowa’s UCC transactions
Transactions where instrument presumed
to confer title
ATM transactions
Transactions where construction of law is
repugnant
Signs You May be an IT
Redneck
You have a bumper sticker on your PC
that says “My other computer is a laptop
E-Sign Legislation
Designed to address discrepancies
among the 37 states that have enacted
one or more aspects of UETA.
E-sign
Preempts conflicting provisions of state
UETAs
Specifies consent requirements for
electronic consumer transactions
E-Sign Excluded
Transactions
Notice of termination of utility services;
Foreclosure or eviction;
Termination of health insurance
Product recall notices; or
Documents relating to hazardous
materials.
Signs You May be an IT
Redneck
You have ever visited
www.Jerryspringer.com
Uniform Computer Information
Transactions Act (UCITA)
Developed to address computer
information the way the Uniform
Commercial Code addresses tangible
goods.
UCITA
NOT the law of Iowa
Iowa has adopted “anti-UCITA” legislation
Adopted only in Maryland and Virginia.
UCITA
Controversy is that UCITA supports “click
wrap” and “shrink wrap” agreements to
detriment of general public
Signs You May be an IT
Redneck
You have a “Down Homepage”
No Electronic Theft Act
Amends United States Code
Titles17 and Title 18
 Copyright and Trademark Laws

No Electronic Theft Act
(NETA)
Strengthens existing trademark and
copyright laws
Makes the willful distribution of
copyrighted works a federal crime.
NETA © Penalties
Value of works < $1000

Exempted if non-willful
Value of works > $1000

Misdemeanor- up to 1 yr/$100K
Value of works > $25,000

Felony- up to 3 yrs/$250,000
Additional NETA
Provisions
Penalties increase for subsequent
offenses
Extends statute of limitations from 3-5 yrs
Provides for victim impact statement
Signs You May be an IT
Redneck
You have ever pulled a road-kill recipe off
the net
The ADA and the Internet
Covers companies using the Internet for
communications regarding



Programs
Goods
Services
ADA
Applies to “covered entities”




Employers
Employment agencies
Labor organizations
Etc.
Requires offering communication via
accessible means
Unless “undue burden”

Significant difficulty or expense
ADA Cases
Hooks v. OKBridge

ADA applies to Internet company even if
services performed at customers’ homes,
rather than at company’s facilities
National Federation of the Blind v. AOL


Argued ADA required AOL to use available
screen-access software for the blind
Settled
Rehabilitation Act
Mandates accessibility standards for
federal government web pages and
technology
Section 508
Effective 2/20/2001
Private enforcement began 6/21/2001
Rehabilitation Act Covers
Websites
Telephones
Info Kiosks
Computers
Fax
Copiers
etc.
Rehabilitation Act Does
Not Cover
Military command systems
Weaponry
Cryptologic activities
Rehabilitation Act
States

Must comply if using Assistive Technology Act
State Grants
Contractors – Federal and State

May have to represent and warrant
compliance with Section 508
Signs You May be an IT
Redneck
You have more mouse buttons than teeth
Spam
Iowa Code Chapter 714 E

Unlawful to send of bulk e-mail
Allows Attorney General to get
 Actual Damages
 Statutory Damages
 Injunction
Spam Under Iowa Law
Unauthorized use of third party in address
Misrepresents point of origin
Fails to identify the point of origin
Fails to provide e-mail declination
Unsolicited advertisement to a recipient
who has declined such e-mail.
Signs You May be an IT
Redneck
You have a “Protected by Smith &
Wesson” sticker on your laptop
Thank You