Legal Jurisdiction in an Internet World without Borders

July 23rd, 2010

BeachOne of the illusory advantages of conducting business offshore (in a location outside of the United States) is to protect the business from the reach of the U.S. judicial and alternative dispute resolution systems.  Contrary to belief, if you operate an offshore website that attracts U.S. visitors through, for example, online sales of products or services, you are not sheltered from the long arm of the United States courts.

Recent court cases have determined that U.S. courts can claim jurisdiction over a web site regardless of the geographical location of the registrant and even the domain name registrar.  In Atlas Copco v. Atlascopcoiran.com, for example, a trademark holder sued various domain names under the Anticybersquatting Consumer Protection Act of 1999.  Although the defendant domain name owners appeared to be located outside of the United States, the court held that it had jurisdiction over the property, that is, the domain names themselves, because the registry, VeriSign, was located in Virginia.  VeriSign incidentally controls all <.com> and <.net> domain names.  The court’s jurisdiction over property is referred to as in rem jurisdiction as opposed to in personam jurisdiction, which is jurisdiction over the person or individual. The court issued a judgment and ordered transfer of the domain names.

In Com. ex rel. Brown v. Interactive Media Entertainment and Gaming Association, Inc., the state of Kentucky filed an action to seize 141 domain names being used for gambling sites, an illegal activity in Kentucky.  Although most of the sites were located offshore and served gamblers both inside and outside of Kentucky, the state court ordered a forfeiture hearing.  The domain name representatives appealed to the Supreme Court of Kentucky where they lost for lack of standing.  Although the status of the domain names is uncertain, the case demonstrates how the lower courts will exercise in rem jurisdiction over domain names and seize them if their owners are violating state laws.

Thus, while moving your domain name offshore may protect the registrant from personal jurisdiction, it will not prevent the courts from exercising in rem jurisdiction over the domain names itself.  It is clear that the long arm of the law can reach across oceans.

–Deborah A. Logan, Esq.

The Good Grammar of Copyrights and Trademarks

July 23rd, 2010

symbolsIn the world of intellectual property, the precise use of language is important, whether preparing a copyright, trademark, or patent application, drafting an assignment or license agreement, or in oral communication.  In a short article on the subject, Daniel Kegan, wrote in the newsletter of the Illinois State Bar Association, “Many people, journalists, and judges use language loosely, contributing confusion rather than precise precedent and clear communication. Prominent are the malapropisms of intellectual property: confusion among patent, trademark, and copyright; confusion between the intellectual property right and a government registration.”  Kegan then makes the following simple point: “Copyright is a noun, trademark is an adjective.”  Here’s what he means.

Copyright under the United States Copyright Act automatically exists in “original works of authorship fixed in any tangible medium of expression” (§ 102).  Hence, registration is not a prerequisite to copyright protection.  A copyright owner may apply to register a copyright and received the attendant benefits but he or she does not “copyright” an original work; that happens automatically.  Copyright consists of a bundle of rights and the Copyright Act itself defines a “Copyright Owner” as the owner of “particular right.” (§ 101).  In this sense “copyright” is a noun, used to identify a right of ownership; it is not a verb.

A trademark, on the other hand, is not a noun but an adjective, modifying a noun or a pronoun.  Trademark rights in the United States are obtained by public use of a word, phrase, design, sound, or smell to uniquely identify the source of a good or service. 15 USC §§1114, 1125 (Lanham Act §§ 32, 43).  Trademark owners may register their trademarks with the United States Patent and Trademark Office or a similar state office, or both.  Trademark usage should conform to a set of rules and this is where good grammar is a must.  One should use a trademark as a brand name in combination with the common or generic name for a specific product.  For example, COKE beverage, IPOD music player, or WINDOWS operating system.  Why is this important?  Well, begin using your trademark as a verb (e.g., to XEROX) or a noun (e.g., YO-YO) and over time the public may do the same.  The brand then begins to identify not the source of the good or service but, generically, the good or service itself.  Generic terms cannot act as trademarks.  CELLOPHANE and ESCALATOR are two examples of trademarks, which have become genericized and no longer act as trademarks.  The International Trademark Association has a set of rules for trademark usage:

·    NEVER use a trademark as a noun. Use the trademark only as a brand name in combination with the common or generic name for a specific product. Always use a trademark as an adjective modifying a noun (e.g., “Xerox copier” where “Xerox” is the brand name and “copier” is the generic product name).

·    NEVER modify a trademark to the plural form. Instead, change the generic word from singular to plural (e.g., a “Xerox copy”, not a “Xerox”).

·    NEVER modify a trademark from its possessive form, or make a trademark possessive. Always use it the form it has been registered in (e.g., not “Xerox’s copiers’).

·    NEVER use a trademark as a verb. Trademarks are products or services, never actions (e.g., not “to Xerox”).

In his article, Kegan makes the point that informal usage of trademarks is relatively harmless so long as the public is aware that the COKE they order, or the XEROX they make are registered trademarks.

Public awareness, however, starts with the trademark owner who should enforce and reinforce correct grammatical usage.  Make sure to use the product’s generic name with the trademark; make the trademark stand out from surrounding text so consumers may easily distinguish between trademark terms and generic product names or descriptive text in product labels or in advertising; use a trademark notice; and avoid using variations of a mark; otherwise, the consuming public may believe improper usage is okay. For more information, we recommend visiting The International Trademark Association web site, which provides many examples of proper and improper trademark usage.

–Adam G. Garson, Esq.

“Inventors Eye” Presents Inventor-Friendly Information from the PTO

July 23rd, 2010

Inventor's EyeThe USPTO has launched “Inventors Eye,” a bimonthly on-line publication for independent inventors.  Here is a link to the most recent edition.  “Inventors Eye” leans toward encouragement, anecdotes and success stories, but includes valuable information in a non-technical style.  We recommend that you check it out.

– Robert J. Yarbrough, Esq.

Ask Dr. Copyright…

July 23rd, 2010

copyright question

Dear Dr. ©:

My church wants to host a movie night for the kids, where we show a Disney film, serve popcorn, and promote fellowship among the parents.  One of the parents has a DVD copy of the movie, and we own a projector and screen.  Everybody says not to worry about copyright.  If we show the movie without charging anything, are we OK, legally speaking???

Doubting Thom

Dear Thom:

You are right to worry, since what you’re planning could get your church in some hot water, not to mention brimstone. Under copyright law, movies that are not in the public domain (and very few are) can only be shown at a home to family and friends, without charge. Whether or not your church charges for admission, your “movie night” will be considered a “public performance” of the film.  If you look at the legal fine print on the DVD case, you’ll see that simply buying a copy of the movie does not give you the right to publicly perform it.

Fortunately, there is an easy solution:  just point your browser at http://www.cvli.com. That organization exists specifically to provide low-cost licenses to places of worship, schools, camps, and daycare providers so that movies may legally be shown.  The cost depends on the size of your congregation, and ranges fro $60 to about $650 per year.  You can apply on-line.

For other kinds of establishments, there are other licensing organizations, each with its own list of participating studios and producers, and its own pricing scheme.  Just search on the internet for “movie copyright license” and you’re sure to find them.  If you have other questions, be sure to ask an attorney at LW&H.

– Lawrence A. Husick, Esq.

Breaking News – Supreme Court Decides Bilski – Business Method Patents Safe for Now

June 28th, 2010

Supreme Court SealJune 28, 2010 — In an a unanimous opinion on the result, though fractured on the reasoning, the Supreme Court issued its long-awaited decision today on patentable subject matter.  The Bilski v Kappos decision is important for inventors and owners of software, Internet and particularly business method patents.

Under the law, even if an invention is novel, un-obvious, has utility, and meets all of the technical requirements for a patent, a patent cannot issue unless the invention addresses patentable subject matter.  Patentable subject matter includes “any new and useful process, machine, manufacture, or composition of matter….”  The concept is very broad and under Supreme Court precedent includes everything EXCEPT laws of nature, physical phenomena and abstract ideas.

The Bilski case involved whether a business method was the proper subject for patent protection.  The Bilski method was for hedging risk relating to the energy supply business.  The Federal Circuit Court of Appeals, which was the lower court, held that the Bilski method was not patentable subject matter since it was not tied to any particular machine and did not transform an article into another state or thing.  The Federal Circuit further held that this “machine or transformation” test was the exclusive test to determine whether a method can be patentable subject matter.

The Supreme Court affirmed the Federal Circuit’s determination that the Bilski hedging method is unpatentable, but rejected the reasons given by the Federal Circuit.  The Supreme Court expressly held that the “machine or transformation” test is not the only way to determine that a method is patentable subject matter and is instead only ‘the clue’ to be considered. The Court did not flesh out what other ‘clues’ might point to whether a method addresses patentable subject matter.

The Supreme Court also held that business methods are not categorically excluded from patent protection, declining to read non-existent limitations into the patent statute.  The Court noted the uncertainty as to how the term ‘business method’ is defined and the unintended consequences that such a categorical exclusion likely would have.

The Court concluded that the Bilski invention was not patentable since it attempted to patent a prohibited abstract idea under Supreme Court precedent.  The decision creates hope, but also substantial uncertainty, for inventors of business methods and owners of business method patents.

– Robert J. Yarbrough, Esq.

The United States Supreme Court Sends a Message

June 28th, 2010

textingAn employer’s right to monitor employees’ electronic communications in the workplace is fairly well settled, particularly when the employer provides its employees with the equipment and has express policies on computer and Internet usage. In City of Ontario v. Quon, the United States Supreme Court has finally added to the growing body of law on this subject.

In Quon, the employer was a governmental body, the City of Ontario, California, police department (OPD) and the employee, was a police officer.  In 2002, the OPD distributed alphanumeric pagers to 20 of its personnel.  All employees signed a “Computer Usage, Internet and E-Mail Policy,” which expressly stated that the OPD had a right to monitor and audit employee’s Internet use with or without notice.  Each pager was allotted a monthly quota of incoming and outgoing characters.  Police officers were told that text messages should be treated like e-mail and that they could be audited.  One of the police officers, Jeff Quon, exceeded his monthly quota several times.

In an effort to evaluate the message quotas, Quon’s superiors audited his messages to determine the relative amounts of personal and work-related messages.  They discovered that very few were work related, most were personal, and some were sexually explicit.  As a result, Quon was reprimanded and he sued the OPD for violation of his Fourth Amendment rights.  The District Court and the Circuit Court of Appeals held that the audit amounted to an unreasonable search and seizure so the City of Ontario appealed to the Supreme Court, which reversed.

In short, the Supreme Court held that although the Fourth Amendment applied to employees as it does to other citizens, there are exceptions for “noninvestigatory, work-related purpose” or for the “investigation of work-related conduct.” O’Connor v. Ortega, 480 U.S. 479.  The Court wrote that the OPD’s audit and scope were reasonable with a “legitimate work related purpose.”  The Court was persuaded by the fact that Quon was told his messages might be audited and that as a law officer he should have known his actions might be scrutinized.

Although narrowly tailored to the governmental workplace, the Quon decision once again reminds employees that their privacy expectations in the workplace may not be what they believe and that employers’ actions may be deemed reasonable so long as the rules are known to the employees.  If you are an employer, remember to include Internet and computer usage policies in your employee handbooks.  If you would like guidance, Lipton, Weinberger & Husick can help.

– Adam G. Garson, Esq.

Ask Dr. Copyright…

June 28th, 2010

copyright  question Dear Dr. ©:

I’d like to make a donation to a charity, such as my college.  I have some copyrights.  May I donate them and take a tax deduction?

Sincerely,
Copyright Cheapskate

Dear Cheap:

First, the answer is Yes, you may donate a copyright to your college.  Since copyrights last a very long time (if it’s your personal creation, it will last until seventy years after your demise) this kind of donation may be the gift that keeps on giving. To donate a copyright, it’s wise to first register the copyright with the United States Copyright Office (www.copyright.gov) and then draft an assignment or deed of gift (some colleges have forms for this, but many do not) and record it in the copyright office.  Both the registration and recordation require payment of a small fee (of course…what self-respecting government agency does things for free?)

When you donate your copyright, you’re giving the donee the right to receive income from the property.  A few famous copyrights have been donated and have benefited their institutional owners.  For instance, J.M Barrie donated Peter Pan to the Great Ormond Street Children’s Hospital in London.  It turned out to be worth millions of dollars.  Irving Berlin donated the copyright to God Bless America to the Boy and Girl Scouts.  Again, millions!

As for the tax deduction, since the “Doc” is not a tax attorney, he recommends that you consult one, or an accounting professional.  But (and there is always a “but”) if you’re the creator of the copyright, your deduction will be limited to your “actual cost basis”, not the fair market value.

According to the Internal Revenue Code, Section 1221(3) explicitly provides that artistic property is not a capital asset and, thus, not entitled to long-term capital gain treatment (and thus, a deduction at fair market value.) Although Section 1221 of the Code defines a capital asset as “property held by the taxpayer (whether or not connected with his trade or business); Section 1221(3) excludes from the term “capital asset”– “a copyright, a literary, musical or- artistic composition, a letter or memorandum, or similar property, held by — (A) a taxpayer whose personal efforts created such property, (B) in the case of a letter, memorandum, or similar property, a taxpayer for whom such property was prepared or produced, or (C) a taxpayer in whose hands the basis of such property is determined, for purposes of determining gain from a sale or exchange, in whole or part by reference to the basis of such property in the hands of a taxpayer described in subparagraph (A) or (B).”

What does this mean?  Unless you’re a publisher acquiring rights from others that you then donate, you may not get much of a tax deduction at all!

So, if you have copyrights just sitting around, consider giving them away, even if you can’t get a tax windfall.  Your alma mater may thank you.

– Lawrence A. Husick, Esq.


PTO Considers Multiple Review Tracks for Patent Applications

June 28th, 2010

USPTO Seal
The delay between the filing of a utility patent application to the first office action by the PTO averages three years.  The PTO is considering whether to offer multiple options for patent application review in an effort to reduce the delay.  The proposal would allow the applicant to select fast, medium or slow review.  For the fast option, the patent applicant would pay higher fees in return for expedited review.  The medium option is the current system.  The slow option would allow an applicant to pay a lower fee and postpone examination for up to 30 months, which is equivalent to the current deferred examination.

The PTO also proposes to delay examination of applications claiming foreign priority, which comprise approximately 40% of U.S. patent filings. The PTO would not review the application claiming foreign priority until the first office action by the foreign patent office and the applicant’s response.  This requirement would instantly incorporate deferred examination (at least insofar as foreign inventors are concerned), and off-load at least the initial review to the foreign patent office.  The proposal is not as xenophobic as it first appears – a foreign inventor can avoid the result by filing first with the United States PTO or otherwise eliminating claims of foreign priority. The PTO reports that Japan and the European Patent Office already give priority to local applications.

We believe that more choices available to an applicant are a good thing; however, the proposal may present a significant danger to the fairness of the U.S. patent system.  Depending on its cost, expedited review may create a patent class system and small companies and independent inventors with limited resources may become second class citizens.  The patent applications of those second-class citizens may languish while the PTO expends its resources on expedited reviews for wealthier, more lucrative customers.

The proposal is not final and the PTO is accepting public comment.

– Robert J. Yarbrough, Esq.

Internships: It’s Not Just Another Free Employee

June 28th, 2010

internshipsWith the economy slow to recover, many firms, both for-profit and not-for-profit are offering summer internships, rather than paid positions.  Sounds good, right?  The employer gets free labor, and the intern gets experience and resume enhancement.  What could be better?  Well, it turns out that paying a fair wage could be better because both federal and state laws prevent unfair labor practices that include much of what many interns face.

So, what are the general laws outlined by the U.S. Department of Labor’s Wage and Hour Division regulating unpaid internships? The following six criteria must all be met in order for companies to lawfully offer unpaid internships:

1.  The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school or similar institution;

2.  The training is for the benefit of the trainee;

3.  The trainees do not displace regular employees, but work under close observation, instruction and supervision;

4.  The employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer’s operations may actually be impeded;

5.  The trainees are not necessarily entitled to a job at the completion of the training period; and

6.  The employer and the trainee understand the trainees are not entitled to wages for the time spent in training.

The federal and state labor departments may inspect a company’s operations for compliance.  Interns who feel wronged may also file for back pay and penalties, even if they agreed in writing to work for nothing.  In the end, it may be better and cheaper simply to pay interns, rather than lawyers!  To find out more about  the Fair Labor Standards Act (FLSA) and other laws that apply to interns and work-based training, you may visit the U.S. Department of Labor’s Wage and Hour Division web site or call WHD’s toll-free helpline at (866) 4US-WAGE, (866-487-9243).

– Lawrence A. Husick, Esq.

Patent Prosecution Highway

May 28th, 2010

PPH LogoOur economy is global and an invention that is valuable in the U.S. likely is valuable in other countries as well.  The Patent Prosecution Highway allows for expedited review of corresponding foreign patent applications upon the allowance of a U.S. patent application. If a patent applicant receives a decision from the U.S. PTO that at least one claim of a patent application is allowable, then the applicant can request any of several foreign patent offices to ‘fast track’ the corresponding claims of a pending application in the foreign patent office.

Several countries participate in the Patent Prosecution Highway program, including the United States, the European Patent Office, Canada, Australia, the United Kingdom, Germany, Japan, Korea, Denmark, Finland and Singapore.  The Patent Prosecution Highway works both ways – an application having at least one allowed claim in any of these foreign patent offices is entitled to ‘fast track’ review by the U.S. PTO.

– Robert J. Yarbrough, Esq.