It's Best to Encrypt, Lest the Data Slip
Randy Gainer gives a nice summary on the Privacy and Security Law Blog of some proposed state-law encryption requirements when storing personal information:
More here.
Court Says No to Licensee Estoppel
Recently, the U.S. District Court for the Northern District of Illinois briefly discussed "licensee estoppel" in a copyright infringement case. Here's how BNA summarized the case (and in the process tried to win the 2008 Longest. Sentence. Ever. Competition):
Doctrine of licensee estoppel does not bar defendant's challenge to plaintiff's ownership of copyright in computer software, even though provision in licensing agreement explicitly forbidding licensee from challenging validity of licensor's copyright is generally enforceable, since licensing agreement between parties to present suit did not contain no-contest clause, and broader application of licensee estoppel doctrine is disfavored in copyright cases.
Whew. Anyway, in case you're a little hazy on all that estoppel stuff, especially regarding patents, trademarks and copyright, here's a quick overview:
Under the common law doctrine of licensee estoppel, a licensee was forbidden to challenge the licensor's ownership of an intellectual property right, or the validity of that intellectual property right, during the license term. Under current U.S. law, licensee estoppel continues to be applied in all circumstances only in the context of trademark and trade secret licenses. The doctrine of licensee estoppel has been made explicitly inapplicable to patent licensees. When a copyright license is litigated, courts have, in some circumstances, applied the doctrine, while courts in other circumstances have not.
That's from Intellectual Property Licensing: Forms and Analysis by Richard Raysman, Edward A. Pisacreta, and Kenneth A. Adler, which you can buy here.
So far, so theoretical. What does one of these "you can't challenge the validity of my IP rights" clauses look like? Here's one I came across recently:
Licensee will not during the term of this Agreement, or at any time thereafter, contest the validity of, jeopardize by affirmative act or knowing inaction, or take any action inconsistent with, Licensor's rights or goodwill in the Software in any country or jurisdiction.
The case, by the way, is FM Industries Inc. v. Citicorp Credit Services Inc., and you can find the court's decision here. The bottom line: FM forgot a clause like the one above and left themselves open to a claim of invalidity. Ouch.
iTunes Moves Up Notch
Wal-Mart is still tops in music sales but Apple has rolled into second, with Best Buy and Target close behind.
From the SF Chronicle:
Apple said it has sold more than four billion songs to 50 million iTunes Store customers. It added that on Christmas day alone it sold 20 million songs.Apple had been ranked No. 4 during the fourth quarter of 2006, but it leapfrogged Best Buy and Target to the No. 2 spot in 2007, according to NPD [Group, a market research firm].
Legal downloads, apparently, are on the rise:
Separately, NPD said that 29 million consumers downloaded music legally last year, an increase of 5 million from last year, and that legal music downloads now account for 10 percent of overall music acquired in the United States.
CDs? Consumers reaction seems to be "Meh," according to an AP summary of the NPD data:
Meanwhile, an estimated 1 million consumers did not buy CDs in 2007, and 48 percent of U.S. teenagers didn't buy any CDs during the year, up from 38 percent in the year before, according to NPD data.
Head in the Cloud
If you're curious about "cloud computing," Nick Carr's latest piece in The Guardian gives a nice overview of the subject. Carr became infamous for his widely misunderstood book Does IT Matter? His latest book is The Big Switch, a short, punchy history of technology that supports Carr's current idee fixe: just as electricity became a utility in the late 19th century, computing power is increasingly being provided the same way (in other words, it's now "in the cloud.")
Examples abound, but consider SmugMug (where I store my photos.) Rather than build a huge data center itself, SmugMug relies on Amazon's S3 service, which is essentially a computational utility for storage. (Amazon also has another service that that is even more utility-like, EC2.)
In any event, Carr makes a compelling case. More details can be found in this piece from Technology Review, which discusses Carr's prognostications. For an overview of some of the legal/biz issues, check this out--a couple years old, but still useful, in my view.
(Cloud illustration by tinney used under Creative Commons license.)
Creative Congress
Lawrence Lessig is thinking about taking a run at Congress, it seems, hoping to fill the House seat of Tom Lantos (D-CA), who recently passed away. In this piece by Julian Sanchez, Lessig describes some of his goals:
"Silicon Valley needs a representative who can speak for the interests of the Internet, of making it flourish," he says. "As we're leading into this moment when the owners of telecommunications platforms are trying to leverage their ownership into control of the Internet, yammering about the need to turn it into the old Bell System, we need someone in Washington who's going to be able to stare them down."But while Lessig wryly notes that the RIAA and MPAA "won't be excited to have an opponent of extremist copyright legislation in Congress," he also stresses that a congressional run would not be some kind of crusading extension of his work on "free culture." For Lessig, the central policy question will be, "Who ultimately controls innovation on the Internet? That's the net neutrality fight; that's the open spectrum fight.
Lessig will make a decision on whether to run or not by the beginning of March .
Weekend Reading: Goldstein's Intellectual Property
Looking for a nice overview of IP written for the non-lawyer? Here it is.
Paul Goldstein, Lillick Professor of Law at Stanford and counsel with MoFo, has written a wonderful---and wonderfully readable---review of IP law that weighs in at just over 200 pages. Goldstein keeps it lively, covering the necessary topics (patent, copyright, trademark and trade secret law) without bogging down in minutiae.
Don't be scared by the Publishers Weekly review you'll see on Amazon, either. This book is a delight. And speaking of Amazon, you can even download Intellectual Property to your Kindle.
Trends in Cybersquatting
According to some recent numbers from WIPO, 2008 should be a boom year for cybersquatting. Here are the annual number of complaints filed by trademark owners under the Uniform Domain Name Dispute Resolution Policy (UDRP):
Then again, past performance is no guarantee of future results.
Know Your Nines
If you're negotiating a service agreement, sooner or later you have to confront the question of how many "nines" you want to buy.
Often, businesses want at least "five nines" of uptime, meaning the service will be up 99.999% of the year. (Though it often isn't clear what exactly that means.) Certain businesses, like financial firms, may require more availability than this.
Five nines, though, can be expensive. Often money saved from cutting the service level down a nine could better be used on something else. Joel Spolsky has a nice, non-theoretical discussion the issue here. Here is another helpful analysis.
Unless you live and breathe these issues, those articles are probably worth rereading before negotiating your next SLA. At the least, it's not a bad idea to know the approximate meaning of the various service levels for annual uptime. For instance:
- 99.9999% uptime means about 30 seconds of downtime.
- 99.999% uptime means about 5 minutes of downtime.
- 99.99% uptime means about 1 hour of downtime.
- 99.9% uptime means about 9 hours of downtime.
- 99.0% uptime means about 90 hours of downtime.
I find it much easier to think of these issues it terms of how much approximate downtime I am "buying." Then the question becomes, "Can I live with that?" Often it's not easy to say, for the reasons Spolsky points out on his blog. But at least it clarifies the problem.
(By the way, if you haven't had enough of the number nine yet, you can always get John August's highly entertaining and enigmatic movie on DVD.)
Huawei and 3Com
Bain Capital is looking to buy 83.5% of 3Com, the networking equipment provider. Chinese telecom equipment maker Huawei is looking to snap up the other 16.5%.
But some in the U.S. Government are concerned, according to the FT, since "3Com supplies intrusion prevention technology to the US defense department, designed to protect the Pentagon against cyber attack."
The FT asked Xu Zhijun, Chief Marketing Officer for Huawei, for comment and he didn't hold back:
Asked about concerns that the deal could endanger US national security, Mr Xu said through an interpreter: "That would be bullshit."
Continuing with the barnyard theme, Mr. Xu also suggested that what's good for the goose is good for the gander:
Mr Xu said Cisco, the leading US network equipment maker, supplied products to Chinese telecoms companies: "Cisco's equipment is everywhere in China." he said. "If the US government is concerned about Huawei, if some of the lawmakers are concerned about Huawei, Cisco is everywhere within China. Who should be more concerned?"
The Committee on Foreign Investment apparently will finish vetting the deal by the end of February.
Fresh Legislation
OK, it's not that fresh. But in case you haven't seen these, here are:
- Colorado's new spam bill
- Indiana's new breach notification bill
- West Virginia's anti-spyware bill
Enjoy.
Copyright and Garbage
Ever throw your copyrighted expression into the trash only to find out that a dumpster diver has found and resold it? Me neither. But if you or someone you represent has, you may find William Patry's discussion of United States v. Chalupnik, 2008 WL 268997 (8th Cir. Feb. 1, 2008) illuminating (or infuriating). Patry and commentators on his blog locked the lower court's decision in the pillory and began pelting it with vegetables days ago. While the discussion there goes in a predictable direction, it's worth a skim.
Who Will Watch the Weight Watchers?
In The Republic, Plato memorably posed the question, "Who will watch the watchers?" The much more intriguing question is, of course, "Who will watch the Weight Watchers?" The answer is Thomas O'Toole, who gives us the lowdown on how Weight Watchers and others ranked on TRUSTe's list of most trusted companies. In order of most to least trusted, here they are:
- American Express
- Charles Schwab
- IBM
- America Online
- Amazon
- Johnson & Johnson
- U.S. Postal Service
- E-Bay
- Procter & Gamble
- Nationwide
- E-Loan
- WebMD
- Dell
- Countrywide
- USAA
- Disney
- Hewlett-Packard
- U.S. Bank
- Bank of America
- Intuit
- Weight Watchers
More here.
Gauging Interest in SaaS
Phil Wainewright has a nice piece here on why SaaS will surge in 2008. It's pretty convincing. If nothing else, interest in SaaS seems quite strong relative to those other software darlings everyone is talking about, social networking and virtualization:
Forget The Term Sheet?
Certain phrases scare the heck out of me. For instance, "This won't hurt a bit," "This may feel a little cold," "This stock can't lose!" and, of course, "It tastes just like chicken." But perhaps the most frightening statement I've come across in my practice is the following: "Let's forget the term sheet and just draft the contract."
Why is this scary? Going straight from idea to contract without passing term sheet is a little like writing an article or book without an outline. Sure, you can do it. But it's quite painful. And it wastes a lot of time, including attorney time (which can be expensive---or so I've heard.) Other than some very simple deals a term sheet is key, for at least two reasons. First, it helps you think through the deal. Second, it keeps everyone involved in the deal on the same page. Or sheet.
Jonathan Handel has a great piece, posted here, on the basics of term sheets. The main ideas in his piece apply to just about any deal. One thing I would stress: as a default, make the term sheet or LOI non-binding. If you want to bind the other party, enter into a contract. Yes, sometimes it's appropriate to do binding LOIs or term sheets. But rarely, in my experience.
eBay and Personal Jurisdiction
Yet another eBay jurisdiction case. From Decision of the Day:
So the [plaintiffs file] a pro se suit in Colorado, seeking a declaratory judgment that their wares constituted fair use.
The defendants are a Connecticut company and a British company with no ties to Colorado, so they moved to dismiss on the ground that the court lacked jurisdiction over them. Although a magistrate judge disagreed, the district judge overrode his recommendation and dismissed the suit for lack of personal jurisdiction.
On appeal, the Tenth Circuit reverses, adapting the standard test for personal jurisdiction to the internet age.
The basis? According to Fairly Useful
The court noted that the defendants did more than simply assert their rights to the plaintiff; they involved eBay as a third party and invoking the VeRO procedures. Thus the defendants terminated (or suspended) the plaintiffs' auction causing them lost business and a damaged business reputation.
If you want a bit more, the details are here. Or go here. The case is Dudnikov v. Chalk & Vermillion Fine Arts, Inc., 06-1458 (10th Cir., Jan. 28, 2008)
ENOUGH WITH THE CAPS ALREADY!
Sure, most of us put them in our contracts. But do we really need ALL THOSE CAPITAL LETTERS FOR CLAUSES THAT ARE SUPPOSED TO BE CONSPICUOUS, LIKE DISCLAIMERS OF WARRANTY? The eminently sane Ken Adams suggests not:
Andrew says that some laws require that certain provisions be written in all capitals. Can anyone cite for me any such laws?
And no, the Uniform Commercial Code doesn’t count. Parts of the U.C.C. require that text be “conspicuous.” For example, section 2-316(2) states that a disclaimer of the implied warranty of merchantability must be conspicuous. But section 1-201(10) of the U.C.C. specifies that “language in the body of a form is ‘conspicuous’ if it is in larger or other contrasting type or color”; it doesn’t say anthing about all capitals.
And Amercian General Finance, Inc. v. Bassett, 285 F.3d 882 (9th Cir. 2002), debunked the notion that text needs to be in all caps to be conspicuous. I particularly like this sentence from that case: “Lawyers who think their caps lock keys are instant ‘make conspicuous’ buttons are deluded.”
In the comments, Craig Tindall finds a law actually requiring all caps--and bold as well:
ARS 12-1366(A)(1) If a contract for the sale of a dwelling or an association’s community documents contain commercially reasonable alternative dispute resolution procedures. If the contract for the sale of a dwelling contains the procedures, the procedures shall conspicuously appear in the contract in bold and capital letters. If the contract for sale of a dwelling contains the procedures, a disclosure statement in at least twelve point font, bold and capital letters shall appear on the face of the contract and shall describe the location of the alternative dispute resolution procedures within the contract.
South Carolina improves upon this even more:
South Carolina requires all caps (underlined, no less; how’s that for readability?) for disclaimers in employee handbooks. S.C. Code Ann. § 41-1-110 states that “a disclaimer must be in underlined capital letters on the first page of the document.”
The BOTTOM LINE seems to be that "conspicuousness" does not require all caps, but all caps may nonetheless be required, even though they are less readable.
Leakage
Waxy.org crunches some piracy numbers:
This year, all but six of the 34 nominated films were available in DVD quality by the last week of January. This is about consistent with past years, but we're seeing a shift towards studios releasing DVDs closer to their theatrical date. This trend, combined with the new availability of high-quality Region 5 rips from overseas, is making the screener leak less meaningful. After all, why bother releasing the screener if the retail DVD or a direct-from-film transfer is already out?
More here.
Mice Love Rice
This week's issue of The Economist has some interesting numbers on Internet usage in China. The most intriguing statistic, at least to me, is that the ringtone of the song "Mice Love Rice" brought in $10 million in 2005. Who knew?
Anyway, here are the other staggering stats:
- The number of internet users in China is currently 210 million. (That's more than three times as many users as in India.)
- Internet penetration is only about 16%. (Read: lots of room for growth.)
- "Leading" Chinese Internet firms have operating margins of 28%. (Compare that with the 15% that comparable American companies earn.)
- China has 500 million mobile phones.
Much more here.
Selling What Can't be Copied
"When copies are free," writes Kevin Kelly at Edge.org, "you need to sell things which can not be copied." Like what, you ask? Kelly has a few ideas. Eight in fact. Here they are:
1. Immediacy. "Sooner or later you can find a free copy of whatever you want," says Kelly, "but getting a copy delivered to your inbox the moment it is released — or even better, produced — by its creators is a generative asset." Another example is a hardback versus a paperback book. Hardbacks cost more. If you want to read the latest Sue Grafton novel, you have to pay for hardback. If you can wait, you can get the paperback for less. In each case, you are buying the same story.
2. Personalization. Kelly notes that a "generic version of a concert recording may be free, but if you want a copy that has been tweaked to sound perfect in your particular living room — as if it were preformed in your room — you may be willing to pay a lot."
3. Interpretation. Kelly's most interesting example is genetic data. "Right now getting your copy of your DNA is very expensive," says Kelly, "but soon it won't be. In fact, soon pharmaceutical companies will PAY you to get your genes sequence. So the copy of your sequence will be free, but the interpretation of what it means, what you can do about it, and how to use it — the manual for your genes so to speak — will be expensive."
4. Authenticity. "You might be able to grab a key software application for free, but even if you don't need a manual, you might like to be sure it is bug free, reliable, and warranted. You'll pay for authenticity." This idea is worthy of a book. In fact, it's already been written: Authenticity: What Consumers Really Want. It's a pretty good read and has lots of case studies about authentic companies like REI and Starbucks.
5. Accessibility. "We'll pay Acme Digital Warehouse to serve us any musical tune in the world, when and where we want it, as well as any movie, photo (ours or other photographers). Ditto for books and blogs. Acme backs everything up, pays the creators, and delivers us our desires." I'm in.
6. Embodiment. I'm with Kelly here: "sometimes it is delicious to have the same words printed on bright white cottony paper, bound in leather. Feels so good." Another example: there's lots of poetry on the web that you can read absolutely free. But many people, myself included, still buy nicely bound volumes of, say, Milton. Embodiment matters.
7. Patronage. In other words, tipping. "Radiohead's recent high-profile experiment in letting fans pay them whatever they wished for a free copy is an excellent illustration of the power of patronage. The elusive, intangible connection that flows between appreciative fans and the artist is worth something."
8. Findability. "A zero price," says Kelly, "does not help direct attention to a work, and in fact may sometimes hinder it. But no matter what its price, a work has no value unless it is seen; unfound masterpieces are worthless. When there are millions of books, millions of songs, millions of films, millions of applications, millions of everything requesting our attention — and most of it free — being found is valuable."
Another Legal Storm Hits The Pirate Bay
Legal threats are nothing new for The Pirate Bay, of course, as you can see from their helpful legal threats page. What appears to be new is that the Danish government wants an ISP to block access to the notorious site. According to Reuters,
A Danish court has ordered Denmark-based Internet service provider Tele2 to shut down its customers' access to the popular file-sharing site Pirate Bay, Danish IT magazine Computerworld reported on Monday. Computerworld said on its Web site that a court had ordered Denmark's Tele2 -- one of the Nordic country's largest Internet providers -- to close access to the site at the request of the International Federation of the Phonographic Industry (IFPI).
Never heard of TPB? Here's a quick overview from Wikipedia:
The Pirate Bay website allows users to search for and download torrent files (torrents), small files that contain the machine-readable information necessary to download the data files from other users. The torrents are organized in the categories: Audio, Video, Software applications, Games, and, for registered users only, Pornography. Registration requires an email address and is free; registered users may upload their own torrents and add comments to torrent descriptions. Downloading of data files from other users is facilitated by the Bittorrent tracker that also runs on a Pirate Bay server.
Never heard of BitTorrent? The bottom line is that it's a P2P file sharing technology:
BitTorrent is a peer-to-peer file sharing (P2P) communications protocol. BitTorrent is a method of distributing large amounts of data widely without the original distributor incurring the entire costs of hardware, hosting and bandwidth resources. Instead, when data is distributed using the BitTorrent protocol, each recipient supplies pieces of the data to newer recipients, reducing the cost and burden on any given individual source, providing redundancy against system problems, and reducing dependence on the original distributor.
Again, that's from Wikipedia.
My Life. My Card. My Slogan
A few years ago, American Express starting running the "My Life. My Card." campaign, featuring De Niro, Tiger Woods and (my personal favorite) Wes Anderson. But who came up with the slogan? Stephen Goetz said he did. Goetz, a consultant for Mez Design at the time, sent Amex a proposal:
"`My Life, My Card' American Express delivers personalized cards to its cardholders!"
Goetz's idea, according to AP, was to "enable credit card customers to personalize a card by choosing a picture to be printed on the card's face." Amex went ahead with its own "My Life. My Card." campaign and sought a declaratory judgment that it wasn't trampling on any of Goetz's rights. Goetz counterclaimed for misappropriation and TM infringement. Goetz lost and appealed.
On Monday, the 2nd U.S. Circuit Court of Appeals found for Amex. Why? According to the court,
"Goetz employed the slogan `My Life, My Card' to generate interest among potential licensee credit card companies and not to differentiate the origin of his goods or services."
The appeals court said the slogan served as "a mere advertisement for itself as a hypothetical commodity."
"There can be no trademark absent goods sold and no service mark without services rendered," the court added.
The entire story is here.
EULAs and Servitudes
Molly Shaffer Van Houweling has an interesting paper on EULAs and servitudes (think: real property). According to the abstract:
In the age of electronic commerce, consumers routinely acquire intangible products without engaging in any direct human interaction. These products - computer programs, digital music, etc. - often arrive bearing terms that purport to limit the sticks in the consumers' bundles of rights in ways that depart from the background limitations imposed by intellectual property law.
For example, a consumer who has downloaded a computer program from the Internet might be presented with a screen of text imposing myriad restrictions on how the program may be used; installation commences only when the consumer clicks 'I agree.' Courts in the United States have increasingly enforced such restrictions - labeling them 'click-wrap licenses' and applying to them the same contractual concepts that govern face-to-face exchanges of promises...
In this article I develop a comprehensive account of the evolving jurisprudence of servitudes as applied to both land and personal property, identifying the sources of traditional servitude skepticism in order better to evaluate the new generation of running restrictions on intangible informational goods.
I apply the lessons I draw from the old servitudes to paradigmatic examples of contemporary licensing practices - including Microsoft end-user license agreements, the Free Software Foundation's General Public License, and Creative Commons licenses.
A non-gated version of the paper is here and the author is discussing these issues at the University of Chicago Law School Faculty Blog this week.
