Laws of .com

Volume II, Issue 2: January 22, 2004

Canadian Consumer Ministers Approve E-Commerce Code

U.S. Court of Appeals Dismisses Honeywell's Attempt to Utilize Trademark Protection in Expired Patent Case

Copyright Ruling Appealed by Industry Groups - CRIA Launching Lawsuits Against File Swappers

Canadian Firm Required to Pay Redress for Misleading Domain Name Marketing

VoIP: Level 3 Files Petition Seeking Exemption - FCC Chair Opposes Application of Existing Regulation - FBI Seeks Ability to Intercept Conversions - Bangladesh Telecom Breaks Law

U.S. Court of Appeals Rules that "Lawoffices" is Not Entitled to Trademark Protection

USPTO Releases List of Top Ten Patent Recipients for 2003

Microsoft Still on the Hook in EOLAS Patent Battle

Canadian Race Track First to Offer Online Gambling

U.S. Court of Appeals Finds Trade-mark Rights May Limit "Keyed" Internet Searches

Canadian Consumer Ministers Approve E-Commerce Code

Canadian federal, provincial, and territorial ministers met over the weekend of January 17-18, 2004, and agreed in principle to a new Code of Practice for Consumer Protection in Electronic Commerce. The Code addresses a variety of e-commerce issues, including: clear information for consumers, payment security, contract formation, and a complaints process. The Code is meant to enhance and not to replace the current benefits that are available to consumers through existing consumer protection legislation. The Code will go through a pilot test in different industry sectors from January to March 2004 and will then undergo a review and overhaul through a committee from April to June 2004. It is expected that the revised Code will be finalized and made available in the autumn of 2004 for official use.

For a copy of the code, visit:
http://makeashorterlink.com/?U29326827

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U.S. Court of Appeals Dismisses Honeywell's Attempt to Utilize Trademark Protection in Expired Patent Case

On December 31, 2003, the U.S. Court of Appeals (7th Circuit) upheld the decision of the U.S. District Court (S.D. Ind.) which dismissed Honeywell's motion for a preliminary injunction to restrain Eco Manufacturing Inc. from manufacturing and distributing its EcoStat round thermostat pending trial of the main action.

Honeywell has been marketing a round thermostat (called "The Round") for over 50 years. Although its utility patents relating to the thermostat expired long ago, Honeywell had since obtained trademark protection for the shape of its thermostat.

Last year, Eco Manufacturing Inc., a start-up manufacturing company based in Lebanon, Indiana, began marketing a round thermostat (the "EcoStat"). Honeywell demanded that Eco stop manufacturing and distributing the EcoStat thermostat in violation of Honeywell's trademark rights. In response, Eco filed a complaint against Honeywell in the U.S. District Court (S.D. Ind.) seeking a declaratory judgment that its product would not infringe or dilute Honeywell's trademark rights, and the cancellation of Honeywell's federal trademark registration. Honeywell filed a counterclaim seeking equitable relief, and a motion for a preliminary injunction.

Judge David Hamilton of the U.S. District Court (S.D. Ind.) declined to issue a preliminary injunction against Eco. In his decision of June 20, 2003, he held that:

The shape of Honeywell's round thermostats cannot be protected by a valid trademark. That round shape was the subject of a long-expired utility patent. Eco and the other competitors are entitled to copy that useful and functional shape so long as they do not take other steps to create the impression that their round thermostats are made by or associated with Honeywell. Accordingly, Honeywell is unlikely to prevail on the merits of its trademark claims, and its motion for a preliminary injunction is hereby denied.

For a copy of the decision, visit:
http://www.ca7.uscourts.gov/op3.fwx?submit1=showop&caseno=03-2704.PDF

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Copyright Ruling Appealed by Industry Groups - CRIA Launching Lawsuits Against File Swappers

The Copyright Board of Canada (the "Board") issued a ruling on December 12, 2003 which imposes a levy of up to $25.00 on non-removable memory permanently embedded in digital audio recorders (such as MP3 players). Industry groups representing retailers, electronics manufacturers and music companies launched separate court appeals to overturn the ruling of the Board, saying that the added levy raises the prices of their products and may incite the creation of a cross-border grey market for the affected media.

As part of the same ruling, the Board also denied the Canadian Private Copying Collective's ("CPCC") request to establish a levy on blank DVD's, removable memory cards and removable micro hard drives. The CPCC is the organization which collects the levies from manufacturers and importers of blank audio media according to a tariff schedule and then distributes the amounts to eligible authors, performers and producers of recorded musical works copied by individuals for personal use in Canada.

When the private copying levies were first implemented in 2000, the CPCC introduced a "zero-rating" program under which manufacturers and importers of blank audio recording media were permitted to sell such media levy free to certain parties such as religious organizations, law enforcement and schools. In the ruling, the Board wrote that "the question is not whether or not the zero-rating is desirable, but whether or not the board, or CPCC, is legally authorized to initiate such a program".

On a related but separate issue, the Canadian Recording Industry Association ("CRIA") intends to launch lawsuits against 40 Canadian digital music swappers, targeted through their IP addresses. The lawsuits are part of an attempt by the music industry to crack down on free downloading of copyrighted music by way of MP3 music files. Similar crack-downs in the United States have produced the desired effects and music downloading is being reduced. Sharing of free music in Canada is said to have resulted in a decline of CD sales of approximately $450 million, or 23% since 1999.

For a full copy of the Copyright Board of Canada ruling, visit:
http://www.cb-cda.gc.ca/decisions/c12122003-b.pdf

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Canadian Firm Required to Pay Redress for Misleading Domain Name Marketing

The U.S. Federal Trade Commission (FTC) has asked a District Federal Court to give effect to a stipulated final order, requiring a Canadian company, Domain Registry of America, Inc. (DRA), to pay redress to consumers and to stop making misrepresentations in the marketing of its domain name registration services.

DRA had sent out a direct email to U.S. consumers, soliciting them to transfer their domain name registrations from their current Internet domain name registrar to eNom, Inc. (a company for which DRA resells domain name registration services). The solicitations told consumers that their domain name registration was about to expire and, according to the FTC, misled consumers into thinking they were renewing their registrations with their current registrar. FCT also alleges that DRA did not disclose to consumers that it would charge a $4.50 processing fee for any transfer requests that were not completed and that DRA violated the Truth in Lending Act by not attending to refunds in a timely manner.

The stipulated order bars DRA from making any further false or misleading representations and from failing to clearly disclose any cancellation or processing limitations and/or fees. It requires DRA to comply with the Truth in Lending Act and requires DRA to comply with specific terms of the order, such as maintaining records for four years. DRA was also required to provide a full refund to consumers who cancelled a transfer request and was required to give current customers, who had acquired but had not renewed their registrations yet, the opportunity to transfer their registration and to pay $6 per consumer to defray the costs of the transfer.

For additional information, visit:
http://www.ftc.gov/opa/2003/12/domainreg.htm

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VoIP: Level 3 Files Petition Seeking Exemption - FCC Chair Opposes Application of Existing Regulation - FBI Seeks Ability to Intercept Conversions - Bangladesh Telecom Breaks Law

Level 3 Files Petition Seeking Exemption

On December 23, 2003, Level 3 Communications LLC filed a petition with the U.S. Federal Communications Commission requesting that the Commission forbear from application of certain provisions of the Communications Act and the Commission's rules that would otherwise permit local exchange carriers to impose charges on voice over Internet protocol (VoIP) traffic that originated or terminated on the public switched telephone network (PSTN), or on PSTN-PSTN traffic that is incidental thereto. Level 3 asserts that forbearance will result in increased investment, product and technology innovation, and increased deployment of advanced services.

The Chairman of the Commission, Michael Powell, has recently made comments that support the position of Level 3 and other broadband phone providers, preferring to allow such companies to develop the technology with a clean regulatory slate.

For a copy of the Commission's notice of the Petition, visit:
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-04-1A1.doc
For additional information, visit:
http://news.com.com/2100-1034_3-5138451.html

FCC Chair Opposes Application of Existing Regulation

The FBI and the U.S. Justice Department have asked the FCC to assist them in their efforts to be able to intercept conversations using VoIP. The concern is that terrorists and other 'lawbreakers' are using VoIP to avoid wiretaps, which the U.S. authorities rely heavily on in their work; 2.2 million conversations were intercepted in 2002 with court approval. The FCC is being asked to determine that VoIP providers are "telecommunications carriers" rather than "information services" such that the Communications Assistance for Law Enforcement Act (CALEA) would apply. A privacy advocate has commented that the application of CALEA to VoIP providers will only be good for busting "small-time bookies", as sophisticated criminals will use noncompliant VoIP available offshore. Compelling overseas VoIP providers to comply with the U.S. rules will be a challenge.

For additional information, visit:
http://news.com.com/2100-7352_3-5137344.html

Bangladesh Telecom Breaks Law

In Bangladesh, the use of VoIP telephony is no longer illegal, but all operators are required to be licensed by the Bangladesh Telecommunication Regulatory Commission (BTRC). However, Bangladesh Telegraph and Telephone Board (BTTB), a public entity, has been transferring internal calls using VoIP since December 30, 2003, despite the fact that it has not even applied for a licence yet. The purpose of the Bangladesh Telecommunications Act 2001 was to ensure that private operators in the telecommunications sector were afforded a 'level playing field' by regulating them and the BTTB under a single body. The BTTB Chairman is arguing that it should not be required to obtain a VoIP license like other operators, since it is a government department that generates revenues for the government.

For a copy of the article, visit:
http://www.matamat.com/fullstory.php?gd=23&cd=2004-01-14

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U.S. Court of Appeals Rules that "Lawoffices" is Not Entitled to Trademark Protection

In DeGidio v. West Group Corp., et al., the U.S. Court of Appeals for the Sixth Circuit affirmed a lower court ruling that the plaintiff, Anthony DeGuido, was not entitled to obtain trademark protection for the mark Lawoffices. DeGuido is the registered owner of the domain name "lawoffices.net", but does not own a trademark registration for that term. He had filed a trademark action in the U.S. District Court for the Northern District of Ohio alleging a number of violations by the defendants, The West Group Corporation, The Thompson Corporation, and West Licensing Corporation, who use the domain name "lawoffice.com" to market the West Legal Directory. The District Court granted summary judgment to the defendants on the basis that DeGuido's mark is descriptive and had not acquired secondary meaning.

The Court of Appeals agreed with the District Court. It stated that to be entitled to trademark protection, unregistered trademarks must be either: 1) inherently distinctive or 2) acquire distinctiveness through secondary meaning. In determining whether or not the plaintiff's mark was inherently distinctive, the Court referred to the categories of trademarks found in a spectrum of distinctiveness. Ranging in ascending order of the degree of protection afforded to the mark, the categories are: 1) generic terms, 2) descriptive, 3) suggestive, and 4) arbitrary or fanciful. The Court stated that generic terms never qualify as trademarks, descriptive terms are not inherently distinctive, and suggestive, arbitrary, and fanciful terms are always inherently distinctive.

The Court rejected the plaintiff's argument that the mark "Lawoffices" is a suggestive term and held that it is descriptive. Since the mark is descriptive, and therefore not inherently distinctive, it must have acquired secondary meaning in the marketplace if its use is to be protected at law. The plaintiff must show that in the minds of the public, the primary significance of the product feature or term is to identify the source of the product rather than the product itself. Secondary meaning can be established through evidence of: 1) direct customer testimony, 2) consumer surveys, 3) exclusivity, 4) amount and manner of advertising, 5) amount of sales and number of customers, 6) established place in the market, and 7) proof of intentional copying. The Court of Appeals found that the District Court had applied the seven-factor test correctly in determining that the plaintiff had failed to meet his burden of establishing a secondary meaning for the mark.

For a copy of the decision, visit:
http://pacer.ca6.uscourts.gov/cgi-bin/getopn.pl?OPINION=04a0019p.06

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USPTO Releases List of Top Ten Patent Recipients for 2003

The United States Patent and Trademark Office (USPTO) released its annual list of the top ten private sector organizations receiving the most U.S. patents in 2003. Included on the list are IBM, Hewlett-Packard, Intel, Hitachi, and Canon. IBM is in first place on the ranking, having received 3,415 patents in 2003. In a press release, IBM announced that it had broken the record for the most patents received in a year. The company stated that with more than 25,000 innovations patented since 1993, it has topped the USPTO list for eleven consecutive years. Intel appears on the list for the first time, having increased its number of patents by 48 percent from 2002, while Hewlett-Packard jumped from ninth place in 2002 to fifth place in 2003 with a 27 percent increase. The USPTO list is based on preliminary patent counts; the final list of the top patent recipients in 2003 will be available in early April.

For a copy of the USPTO press release, visit:
http://www.uspto.gov/web/offices/com/speeches/04-01.htm
For a copy of IBM's press release, visit:
http://www.shorl.com/jafrivafrypabi
For a copy of Hewlett-Packard's press release, visit:
http://www.hp.com/hpinfo/newsroom/press/2004/040112c.html

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Microsoft Still on the Hook in EOLAS Patent Battle

In its appeal of a jury verdict that required Microsoft to pay US$521M to Eolas Technologies and the University of California in a web browser patent suit, Judge James Zagel ruled against Microsoft last week in the U.S. District Court in Chicago. Despite the fact that the underlying patent in dispute is facing a rare U.S. Patent and Trademark Office instituted review for patentability and the Judge's personal discomfort in the amount of the award, the Judge saw no reason to overturn the jury.

Microsoft was further enjoined from distributing infringing software, but the injunction was immediately stayed pending an appeal. Microsoft is expected to appeal immediately.

Many in the web community have rallied in a bid to overturn the patent, scouring resources for "prior art" which may be used against the patent. There is a general fear that if Microsoft is required to re-write its browser, it might no longer support legacy web pages that may fall within the current patent. This would be a significant burden for the IT community.

For a copy of the decision, visit:
http://www.eolas.com/Zagel-final-judgement-99c0626.pdf
For additional information, visit:
http://news.com.com/2100-1023_3-5141318.html

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Canadian Race Track First to Offer Online Gambling

The Woodbine Entertainment Group (formerly the Ontario Jockey Club) has introduced an online wagering system that permits horse racing fans to place wagers online through the HPIBET.com website. In an attempt to ensure compliance with age requirements, Woodbine is requiring bettors to register in person at a track with proof of age and residency in order to open an account. While online gambling has been available throughout the United States, this appears to be the first Canadian online wagering website.

For further information, visit:
http://www.shorl.com/fupejiprestegra
To see the website, visit:
http://www.hpibet.com/

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U.S. Court of Appeals Finds Trade-mark Rights May Limit "Keyed" Internet Searches

The United States Court of Appeals for the Ninth Circuit has ruled that Playboy Enterprises Inc. (PEI) has at least an arguable case against Netscape Communications Corp. and Excite Inc. for trade-mark infringement.

PEI owns trade-marks for "Playboy" and "Playmate". The defendants included these terms in a list of about 400 terms to which they "keyed" advertisers' banner ads. Thus, when a user typed in Playboy or Playmate, other companies' banner ads would appear on the search results page. The defendants monitored click rates and used the statistics to convince advertisers to renew their key word contracts. PEI was concerned that users were being directed to adult-oriented banner ads that were graphic in nature and confusingly labelled. The defendants conceded that they used the words for their secondary meanings. The Court pointed out that this must be true as the defendants did not use the term "Playmate" for its dictionary definition of a "companion, especially a child, in games and play".

The lower Court granted summary judgment in favour of the defendants. The Appeal Court reversed and concluded that there were genuine issues of material fact which required a trial because PEI had a strong case for trade-mark infringement based on the likelihood of confusion. In particular, PEI was able to show the likelihood of initial interest confusion. Following Brookfield Communications, Inc. v. West Coast Entertainment Corporation, 174 F. 3d 1036 (Ninth Circuit, 1999) the Court accepted the argument that Internet users searching for PEI's website would find themselves at another website. Although they might realize immediately that it was an unrelated site, some customers who were originally seeking a PEI website might be perfectly content to stay at the other site. Those customers would have found the unrelated site due to the defendants' "misappropriation of PEI's goodwill in its mark". Such use of PEI's use was actionable. The Court went on to analyse the eight factor test set out in AMF Inc. and Sleekcraft Boats, 599 F. 2d 341 (Ninth Circuit, 1979) and found that a number of factors weighed in favour of PEI and demonstrated genuine issues to be tried.

The result of this case is that a search engine would be wise not to use trade-marked search terms to point customers to advertisements for companies other than the trade-mark owners.

For a copy of the decision, visit:
http://caselaw.findlaw.com/data2/circs/9th/0056648P.pdf

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