Laws of .com

Volume IV, Issue 10: May 18, 2006

Apple Wins Trademark Battle Against Beatles' Record Company

Complaint Filed Against Google's Click-Fraud Class Action Settlement

Technology Firms Urge Patent Litigation Reform in U.S.

AT&T, BellSouth and Verizon Accused of Violating Privacy Laws

Rockers Sue Sony Music for Unpaid Royalties on Downloaded Music

UK High Court Permits Prosecution of Bulk Spammers

UK Court Approves Extradition of Hacker to U.S.

Yahoo! Faces Class Action Lawsuit

U.S. Supreme Court Holds That Injunctive Relief for Patents Is Discretionary

Nevada Regulators Endorse Wireless Gambling Company

Federal Court Orders Payment of $4 Million from Spyware Operator

Apple Wins Trademark Battle Against Beatles' Record Company

On May 8, 2006, England’s High Court of Justice, Chancery Division, released a judgment regarding an on-again-off-again legal dispute between Apple Corps, the Beatles’ record label, and the technology company Apple Computer, owners of the iTunes Music Store. Since 1978, the parties have been involved in various disputes surrounding their respective rights to the use of the word mark “Apple” and various stylized logos.

The High Court’s decision related to a breach of contract suit brought by Apple Corps against Apple Computer regarding their 1991 trademark agreement. The agreement provided that Apple Corps held the right to use “Apple” and its stylized logo on any "creative works whose principal content is music", while Apple Computer held the right to use “Apple” and its stylized logo on "goods or services ... used to reproduce, run, play or otherwise deliver such content" as well as “data transmission services”, but could not use its mark “on or in connection with physical media”, effectively disentitling Apple Computer from using its marks to package, sell or distribute physical music materials.

Apple Corps contended that Apple Computer’s use of its marks with its iTunes Music Store (along with Apple Computer’s advertisements for the iTunes Music Store) was a breach of their agreement since users would think that Apple Computer was in some way a record company as opposed to an online retailer. The High Court disagreed, and held that in the eyes of a reasonable and sensible user, which the court defined as one who would be familiar with the notion of buying recordings of creative works from a retailer and would be capable of not seeing any other association between the retailer and the music other than that arising out of the sale itself, there would not be a connection between Apple Computer’s marks with the music as a creative work.

Despite the fact that the High Court found Apple Computer not to be in breach of the agreement on alternative grounds (either because iTunes Music Store was within Apple Computer’s explicit privileges of providing a “data transmission service” or Apple Computer’s use fit with a reconciliation provision of the agreement), Apple Corps has stated that it will appeal the decision.

For a copy of the decision, visit:
http://www.bailii.org/ew/cases/EWHC/Ch/2006/996.html

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Complaint Filed Against Google's Click-Fraud Class Action Settlement

Last week, a former Google advertiser filed a complaint to block a class-action settlement between Google and thousands of online merchants who had purchased ads through Google’s search engine since 2001, on the grounds that the settlement amount of $90 million shortchanged the class. The class action suit relates to “click-fraud” that can take many forms, but ultimately results in the billing of merchants for Internet traffic generated by persons repeatedly clicking on advertiser’s links without any intention of completing any purchases.

The complaint was brought by lawyers who had previously filed a similar click-fraud suit against Google in California. The California suit has been suspended pending the outcome of the suit in Arkansas, from which the $90 million settlement was reached. As much as $30 million of the settlement could go to a handful of lawyers who filed the Arkansas suit, and the remaining amount will go to thousands of advertisers in the form of credits.

The Arkansas court is scheduled to consider final approval of the $90 million settlement beginning on July 24. If advertisers that have supplied more than 5% of Google’s ad revenue since 2001 reject the agreement, Google, who has denied any wrongdoing, has the option to nullify the settlement.

For additional information, visit:
http://www.siliconvalley.com/mld/siliconvalley/news/editorial/14548096.htm

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Technology Firms Urge Patent Litigation Reform in U.S.

A group of leading technology companies, including Intel, Cisco and Hewlett-Packard, have formed a coalition, tentatively called Coalition for Patent Fairness, to lobby for patent litigation reform. Although the coalition has yet to provide a list of policy goals, it has stated that it will focus on several patent litigation aspects it believes are being abused in the current system, including the standards for injunctive relief, royalties and damages, as well as choice of venue.

One of the concerns of particular interest to the Coalition relates to so-called patent-trolls. Patent-trolls are companies that file patent infringement suits to gain injunctive relief, which grants a hold on product use or shipment related to the patent in order to force settlement offers. The issue was highlighted recently in the NTP-Research In Motion case, where the injunctive relief provided to NTP threatened the shutdown of RIM’s Blackberry service. RIM eventually agreed to settle the suit for $612.5 million (U.S.). There has been some recent development in this regard which is summarized for your review below.

The Coalition is also talking to leaders in various other industries including automotive, energy, financial services, manufacturing and retail.

For additional information, visit:
http://news.com.com/2100-1014_3-6071321.html

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AT&T, BellSouth and Verizon Accused of Violating Privacy Laws

On Friday May 12, 2006, a day after USA Today published a story alleging that the U.S.A.’s National Security Agency (NSA) has been secretly collecting phone call records of tens of millions of Americans, using data provided by AT&T, Verizon and Bell South, two public interest lawyers in New Jersey filed a $50 billion lawsuit against Verizon for privacy violations in turning over the records to the NSA without a warrant. The suit alleges that Verizon violated the U.S. Constitution and Telecommunications Act in disclosing the records, and seeks $1000 for each Telecommunications Act violation, or $50 billion if the case is certified as a class action ($1000 for each of Verizon’s 50 million customers). The suit also seeks to block Verizon from turning over any additional records to the NSA without a warrant or consent of the subscriber.

Verizon, the US’s largest telecommunications corporation by revenue, has stated that since the program is highly classified, they are unable to confirm or deny whether they had any relationship to it. Verizon has also declined to comment about the lawsuit.

This week, BellSouth and AT&T were added as defendants to the suit.

For additional information, visit:
http://money.cnn.com/2006/05/15/news/companies/verizon/
http://www.siliconvalley.com/mld/siliconvalley/news/editorial/14593435.htm

For a copy of Verizon’s issued statement, visit:
News Release

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Rockers Sue Sony Music for Unpaid Royalties on Downloaded Music

Rock bands Cheap Trick and the Allman Brothers have launched a lawsuit against Sony Music for failing to pay royalties they allege are properly owed from digital downloads. The suit’s central allegation is that Sony is treating the digital downloads as physical “distributions”. At the time the bands signed their agreements with Sony, distributions referred to the physical dissemination of hard copies of albums that Sony produced, on vinyl, compact disc or tape. The plaintiffs are seeking to have the Court certify a class, which would include artists that had signed with Sony from the 1960s to 2002.

Artists’ contracts often include terms such as deductions for breakage and packaging on distributions; charges that are clearly inapplicable to paid downloads from a service provider like iTunes or Napster. The bands’ lawyers are claiming that digital downloads should be considered “licensed music”, which is subject to a significantly different royalty system.

The plaintiffs allege that of the 70 cents received by Sony on average for a licensed download of their song from the Internet, they only receive 4.5 cents per song, approximately 25 cents less than they claim is rightfully theirs if the download was considered to be the granting of a license rather than the distribution of a product.

For additional information, visit:
http://www.forbes.com/home/feeds/ap/2006/04/28/ap2707008.html

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UK High Court Permits Prosecution of Bulk Spammers

London ’s High Court has ruled that persons sending barrages of unsolicited email in a coordinated denial of service (DoS) attack can be prosecuted under the 1990 Computer Misuse Act.

The ruling overturned a District Judge’s earlier decision to dismiss charges against a former employee accused of using a computer program (Avalanche) to send approximately five million emails to the employer that had fired him. The District Judge concluded that David Lennon, now 18, had no case to answer but the High Court said that the issue turns on the consent of the receiver. The extent of consent to receive email should be decided on a case-by-case basis. Such consent did not include receiving email sent intentionally in quantities sufficient to overwhelm the receiver.

For additional information, visit:
http://edition.cnn.com/2006/WORLD/europe/05/12/britain.spam.reut/

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UK Court Approves Extradition of Hacker to U.S.

On May 10, 2006, District Judge Nicholas Evans, sitting at Bow Street Magistrates' Court in central London, ruled that a British computer expert, accused by Washington of the world's "biggest military hack of all time", can be extradited to the United States. Gary McKinnon, 40, was arrested last June following charges by U.S. prosecutors that he illegally accessed 97 government computers, including Pentagon, Army, Navy and NASA systems, causing $700,000.00 worth of damage over a one year period beginning in February 2002.

McKinnon fears he will be detained indefinitely at Guantanamo Bay, however, the US government has apparently given assurances to the UK government that McKinnon will not be subject to ‘Military Order Number One’ which would permit indefinite detention.

The final decision on extradition lies with the Home Secretary, John Reid. McKinnon’s lawyers have said they will appeal the decision and that their client could be just as easily tried in Britain and will not receive a fair trial in the U.S.

For additional information, visit:
http://uk.news.yahoo.com/10052006/80-91/computer-hacker-set-u-s-extradition.html

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Yahoo! Faces Class Action Lawsuit

A class action lawsuit has been filed in a New Jersey federal court against Yahoo!, Inc. and various unnamed third parties. The basis of the claim is that Yahoo! has engaged in “syndication fraud”; advertisers pay Yahoo! to display their ads on search results for certain keywords, but the claim alleges that Yahoo! instead displays the ads via spyware, adware, and “typosquatter” websites (i.e., websites that use common misspellings of well-known trade-marks, such as “Expedai.com” instead of “Expedia.com”). Placing ads via spyware and adware is relatively inexpensive, and the suit claims that Yahoo! charges full price for the ads while only incurring the lesser charges for using spyware and adware. The added problem is that ads placed via spyware and adware are worth far less to the advertisers themselves. In other words, the advertisers are paying to have their ads placed in premium, prominent locations, but the ads are not actually displayed in that manner.

The suit also contains a more controversial claim that Yahoo! regularly uses its relationships with adware and “typosquatting” sites to generate extra revenue during financial reporting periods.

Yahoo! is already fighting other claims that it overcharged customers for per-click advertising; it seems that Yahoo!’s advertising programs will be under the legal microscope for some time to come.

The suit, Crafts by Veronica v. Yahoo!, Inc., was filed on May 1, 2006 in the United States District Court for the District of New Jersey. If the class action is certified, any Yahoo! customer in the United States would be a member of the class.

For additional information, visit:
http://blog.washingtonpost.com/securityfix/2006/05/class_action_targets_yahoo_ove_1.html

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U.S. Supreme Court Holds That Injunctive Relief for Patents Is Discretionary

The U.S. Supreme Court handed a victory to advocates for patent-reform this past Monday in eBay Inc. et al. v. MercExchange, L.L.C. by unanimously holding that patent holders are not automatically entitled to injunctive relief against patent infringers: “We hold that the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.” The case surrounded the granting of injunctive relief for a number of business methods patents held by MercExchange that eBay had been found to infringe. Although the Court clarified the law on this issue, it sent the matter back to the lower court for application to the particular case. eBay continues to challenge the validity of the MercExchange patents at the U.S. Patent and Trademark Office.

Interestingly, in two concurring opinions, the Justices disagreed on the usefulness of earlier patent cases that had established a long tradition of granting injunctive relief. Chief Justice Brown rationalized the tradition by emphasizing the “difficulty of protecting a right to exclude through monetary remedies that allow an infringer to use an invention against the patentee’s wishes”. Justice Kennedy disagreed with this part of the Chief Justice’s opinion, noting that “in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases”. In particular, the fact that there are “firms [that] use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licenses” means that monetary damages may be sufficient as compensation for infringement where the patent(s) covers only a small component of the infringer’s product and injunctive relief is sought simply for “undue leverage in negotiations” for licensing fees. Justice Kennedy also noted that “injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times”. Justice Thomas, who wrote the opinion of the court, did not assent to either of the concurring opinions.

For a copy of the decision, visit:
eBay Inc. et al. v. MercExchange, L.L.C.

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Nevada Regulators Endorse Wireless Gambling Company

The Nevada Gaming Control Board has recommended to the Nevada Gaming Commission that Cantor Gaming, a wireless gambling company, be licensed to market handheld, mobile gambling devices in Nevada. The Gaming Commission will make its decision at a meeting on May 18.

Regulations passed in March, under 2005 legislation, made Nevada the first state to approve the use of handheld devices for gambling in any public area of the state's casinos, including restaurants and pool sides. A range of games, including bingo, poker, blackjack and horse race betting are permitted. Use of the devices in hotel rooms and other private areas that cannot be supervised is prohibited.

Manufacturers say that biometric fingerprint readers will help keep the devices out of the hands of minors.

Cantor Gaming has indicated that it is ready to invest "significant" capital to install its mobile gambling systems in Nevada hotel-casinos.

For additional information visit:
http://www.siliconvalley.com/mld/siliconvalley/news/editorial/14500147.htm

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Federal Court Orders Payment of $4 Million from Spyware Operator

Stanford Wallace, first accused by the Federal Trade Commission (FTC) in 2004 of operating a spyware operation, has been ordered to give up $4 million in ill-gotten gains by the U.S. District Court in New Hampshire. Wallace, in the nation’s first spyware case, was accused of infecting computers with a program that produced a barrage of pop-up ads. According to the accusation, two programs, “Spy Wiper” and “Spy Deleter,” were then sold to the victims to remove the offending application for $30. Last year, Wallace agreed with the FTC to stop infecting computers with such programs, and the current order also bars Wallace and his company, SmartBot.net Inc., from further spreading such applications.

Wallace, also known as the “spam king”, had been previously involved in court cases regarding the activities of his former company Cyber Promotions. In the late 1990s, Cyber Promotions was reportedly one of the leading sources of unsolicited emails and a number of ISPs sought injunctions against the company to stop the flood of spam. Wallace stated that he believes he has done nothing wrong and is being persecuted due to his prior involvement with Cyber Promotions.

For additional information, visit:
http://www.siliconvalley.com/mld/siliconvalley/news/editorial/14502078.htm

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Announcement

THE IT.CAN / LSUC IT LAW SPRING TRAINING PROGRAM

The Sixth Annual Information Technology Law Spring Training Program hosted by the Canadian IT law Association and the LSUC, will take place at the Law Society Building, 130 Queen Street West, Toronto, on Monday, May 29 - Tuesday, May 30, 2006. This year’s program is a comprehensive 2 day IT mentoring program. It will be of benefit to young lawyers and lawyers in general corporate commercial practice with less than 10 years of IT law experience. IT.CAN is offering a 20% discount to any group registering 3 or more lawyers. The full brochure can be viewed at www.it-can.ca. For more information contact IT.CAN Executive Director Lisa Ptack at lisa.ptack@rogers.com