IP and Computer Law – January 2010

From the editors of Wolters Kluwer Law & Business, this update describes important developments from CCH and Aspen Publishers intellectual property and computer law publications.

If you have any comments or suggestions concerning the information provided or the format used, we’d like to hear from you. Please send your comments to john.arden@wolterskluwer.com.

COPYRIGHTS

Criminal Antipiracy Statute Preempted by Copyright Act
An Illinois statute that made the act of pirating sound recordings into a criminal offense was preempted by Section 301 of the federal Copyright Act, the Illinois Supreme Court has ruled. The presumption that historic state police powers are not superseded by federal law does not apply where the proscribed activity is also within the realm of traditional federal regulation and federal concerns predominate.

The sound recordings offered for sale fell within the subject matter of copyright. Congress made it clear that it wanted to preempt all state law protection for sound recordings fixed after February 15, 1972. It also was Congress’ intent to protect works subject to copyright both civilly and criminally. The Illinois antipiracy law did not contain any additional elements that substantively distinguished it from copyright infringement under the Copyright Act. The fact that the “owner” of the copyright might not have been the actual owner of the master recording did not create an “extra element” making the statute qualitatively different from copyright infringement. Accordingly, a state appellate court’s judgment of preemption was affirmed (Illinois v. Williams, IllSCt, CCH Copyright Law Reports ¶29,858; IntelliConnect User Link).

Prevailing Defendant Not Automatically Entitled to Attorney’s Fees
Although a computer user prevailed on record companies’ claims that he downloaded copyrighted songs through an Internet program, he was not entitled to attorney’s fees, the U.S. Court of Appeals in New York City has held. Fee awards to prevailing parties are made in the exercise of the court’s “equitable discretion.” Imposition of a fee award against a copyright holder with an objectively reasonable litigation position would not promote the purposes of the Copyright Act, in the court’s view.

Section 505 of the Copyright Act states that a court “may” award a reasonable attorney’s fees to a prevailing party. The word “may” connotes discretion. A presumption that a prevailing defendant should receive attorney’s fees as matter of course is contrary to statutory language, according to the court. The record companies had evidence before filing their suit that the computer user admitted he had downloaded the songs in question. Accordingly, the district court’s refusal to award fees was affirmed (Lava Records, LLC v. Amurao, 2dCir, CCH Copyright Decisions ¶29, 846; IntelliConnect User Link).

Similarity Could Not be Based on Collective Comparison to Series
Comparison of a novel with a series of action adventure books collectively did not provide grounds for finding similarities between the works, the federal district court in Honolulu determined. The novel’s author argued that the court had to assess substantial similarity not merely between his book and each of the books in the group separately, but also between his book and the books in the group collectively. If the court were to compare the novel with all of the books in the group collectively, copyright infringement could be established based on isolated similarities between the novel and all of the books in the group, even though none of the books individually shared substantial similarities with the novel. The court found that pulling out disparate aspects across multiple works would result in a list of random similarities.

Although there were similarities between the novel and one of the books in the group, the “scenes a faire,” general plot ideas, and minute details were insufficient to support a copyright infringement claim. The coincidences between the works were nothing more than coincidences of similarities that exist among almost any work of the same genre, the court concluded (Doody v. Penguin Group (USA) Inc., DHaw, CCH Copyright Law Decisions ¶29,853; IntelliConnect User Link).

TRADEMARKS

Notice of Registration Required to Get Lanham Act Damages
A manufacturer and seller of various goods, including designer eyewear, was not entitled to an award of profits, actual damages, or statutory damages on its Lanham Act claims against a wholesale distributor of eyewear that sold sunglasses bearing an exact reproduction of the manufacturer’s “CC Design” trademark, the federal district court in Los Angeles has ruled. The manufacturer failed to provide the requisite notice of its federal registration.

Section 29 of the Lanham Act provides that a registrant that fails to give constructive notice of registration—that is, fails to include the ®symbol as part of its mark—cannot recover profits or damages in an infringement action, unless the defendant had actual notice of the registration. The manufacturer did not give constructive notice of its registration, and the distributor did not receive actual notice of the registration until it received service of the manufacturer’s complaint, the court said. However, there was no evidence of actual damages after suit was filed.

The manufacturer was entitled to an award of $5,183 for violations of the California trademark dilution statute and for trademark infringement under California common law. This amount represented the net profit to the distributor from sales of the infringing sunglasses (Coach, Inc. v. Asia Pacific Trading Company, Inc., CDCal, CCH Trademark Law Guide ¶61,524; IntelliConnect User Link).

“Charbucks” Coffee Brands Could Have Blurred “Starbucks”
A seller of packaged coffees could have caused dilution by blurring of the trademarks of coffee seller Starbucks Corp. by marketing a blend of roasted coffee under the names “Charbucks Blend” and “Mister Charbucks,” according to the U.S. Court of Appeals in New York City. A decision by the federal district court in New York City (CCH Trademark Law Guide ¶61,252; IntelliConnect User Link) that Starbucks failed to prove a likelihood of dilution, was vacated and remanded.

The district court did not err in finding that the Starbucks and Charbucks marks were only “minimally similar,” but rather, in its determination that the lack of substantial similarity between the marks negated the likelihood of dilution. Substantial similarity was not required to establish a likelihood of dilution under Sec. 43(c) of the Lanham Act. As amended by the Trademark Dilution Revision Act, the current federal dilution statute defines dilution by blurring as an “association arising from the similarity between a mark…and a famous mark that impairs the distinctiveness of the famous mark.” The statute did not use the words “very” or “substantial” in connection with the similarity factor to be considered in analyzing a federal dilution claim, the court noted.

Use of the Charbucks marks was not protected from Starbucks’ dilution claims by a parody defense, the court also held. The Charbucks marks did not fall under the federal dilution statute’s parody exception because the Charbucks marks were used as a designation of source for the seller’s own goods, that is, its Charbucks line of coffee. Use of the Charbucks marks was, at most, a subtle satire of the Starbucks marks and did not demonstrate a clear parody of Starbucks. The district court’s dismissal of New York state-law dilution claims on the ground that the marks were insufficiently similar was affirmed, however. Substantial similarity was an element of a New York state-law dilution claim (Starbucks Corp v. Wolfe’s Borough Coffee, Inc., 2dCir, (CCH Trademark Law Guide ¶61,532; IntelliConnect User Link).

Weather Website Could Sue “Typosquatter” in Michigan Court
A Delaware-based domain name registrant that allegedly conducted a “typosquatting” scheme against a Michigan-based commercial provider of weather information (“Weather Underground”) had sufficient contacts with Michigan for the exercise of personal jurisdiction, the federal district court in Detroit has ruled. The registrant allegedly registered 41 domain names with various misspellings of Weather Underground’s domain names, <weatherunderground.com> and <wund>, in order to redirect Weather Underground’s customers to competitors and third-party advertisers.

Specific personal jurisdiction was established under the “effects test,” the court said The registrant allegedly knew its conduct would cause harm to Weather Underground and intended to cause such harm. Given the registrant’s business model and prior proceedings involving it, there was sufficient evidence that the registrant knew of Weather Underground and its mark, as well as its location. Any burden to the registrant from having to defend itself in a Michigan court was outweighed by Michigan’s interest in protecting its citizens from tortious interference with their trademarks, as well as Weather Underground’s interest in obtaining the most efficient resolution of the dispute. Weather Underground could proceed with cybersquatting, trademark infringement and dilution, and unfair competition claims against the registrant (Weather Underground, Inc. v. Navigation Catalyst Systems, Inc., EDMich, CCH Trademark Law Guide ¶61,525; IntelliConnect User Link; CCH Computer Cases ¶49,854; IntelliConnect User Link).

COMPUTER AND INTERNET LAW

Mac Clone Maker Psystar Infringed Copyrights, Violated DMCA
A computer manufacturer (Psystar) that modified Apple Inc.’s proprietary Mac OS X operating system software so that it could be installed on non-Apple computers sold by Psystar infringed Apple’s copyrights as a matter of law, the federal district court in San Francisco has ruled. Specifically, Psystar violated Apple’s (1) right of reproduction by making and installing copies of Mac OS X on non-Apple computers, (2) right of distribution by offering and selling Mac OS X on its own computers, and (3) right to create derivative works by replacing original files in Mac OS X with unauthorized files. In addition, Psystar was indirectly liable for infringement committed by end users each time they turned on their computer and the modified operating system copied itself to RAM.

The court also held that Psystar violated the anti-circumvention and anti-trafficking provisions of the Digital Millennium Copyright Act. By marketing and selling computers running the modified Mac OS X, Psystar also was guilty of trafficking in both types of circumvention devices, in violation of section 1201(a)(1)(A) and section 1201(b)(1). In a separate order, the court granted Apple’s request for permanent injunctive relief because remedies at law would be inadequate to compensate harm to Apple’s good will and reputation and there was no assurance that Psystar would be able to pay a damage award (Apple, Inc. v. Psystar Corp., NDCal, CCH Computer Cases ¶49,842; IntelliConnect User Link).

Client’s Use of Work E-Mail Waived Attorney-Client Privilege
A client waived the attorney-client privilege by corresponding with her attorney using a work e-mail account that was subject to monitoring by her employer, the federal district court in Boise, Idaho has held. The attorney-client privilege did not apply to messages sent by the client to her attorney from her work e-mail account because she had agreed to her employer’s computer use policy reserving its “right to review, audit, intercept, access, and disclose all messages created, received, or sent over the e-mail system for any purpose.”

The attorney-client privilege did not apply to messages sent by the attorney to the client’s work address because he should have known that the e-mail address was a work address that would be subject to employer monitoring, access, and retrieval. The privilege, however was not waived with regard to messages sent by other members of the client group that either copied or were directly addressed to the attorney and the client at her work address. There was no evidence that the other clients were aware—or should have been aware—that the woman’s e-mail messages were subject to her employer’s scrutiny. Constructive knowledge about employer e-mail monitoring practices was not imputed to lay persons in the same manner as to attorneys, according to the court (Alamar Ranch, LLC v. County of Boise, DIda, CCH Computer Cases ¶49,846; IntelliConnect User Link).

New Hyperlinks to Existing Article Did Not Republish It
A nonprofit organization’s addition of hyperlinks to an article on its website that allegedly defamed an attorney was not a “republication,” and therefore, did not toll Kentucky’s one-year statute of limitations applicable to defamation claims, the federal district court in Louisville has ruled. The attorney’s defamation action was accordingly dismissed. In Kentucky, publication of defamatory material is subject to the “single publication rule,” which provides that “any form of mass communication or aggregate publication…is a single communication and can give rise to only one action for libel.” However, “republishing” material in a new edition or placing it in a new form resets the statute of limitations.

In traditional print media, republication usually involves the presentation of previously published material in its entirety before a new audience. A mere reference to previously published material, without more, did not do that. Hyperlinks functioned more like a new type of reference tool than a means of republication, according to the court. Otherwise, material could be republished repeatedly, and the statute of limitations tolled indefinitely, simply by adding new hyperlinks, the court noted (Salyer v. Southern Poverty Law Center, Inc., DKy, CCH Computer Cases ¶49,852; IntelliConnect User Link).

Hot Topics of the Month

FTC Seeks Public Input on Children’s Online Privacy
The Federal Trade Commission is seeking public comment on proposed safe harbor guidelines to help website operators comply with the FTC’s Children’s Online Privacy Protection Rule, the FTC announced on January 6. The Rule requires operators of websites that collect personal information from children under the age of 13 to notify parents and obtain their consent before collecting, using, or disclosing any such information. Since the Rule took effect on April 21, 2000, four groups—the Children’s Advertising Review Unit of the Council of Better Business Bureaus, the Entertainment Software Rating Board, TRUSTe, and Privo, Inc.—have received FTC approval for their safe harbor programs.

The proposed guidelines were submitted to the FTC by a nonprofit organization known as iSAFE, Inc. under a provision of the Children’s Online Privacy Protection Act aimed at industry self-regulation (18 U.S.C. Sec. 6503). Specifically, the FTC requests input as to: (1) whether the guidelines provide “the same or greater protections for children” as those contained in the Rule; (2) whether the mechanisms used to assess operators’ compliance are effective; (3) whether incentives for operators’ compliance with the guidelines are effective; and (4) whether the guidelines provide adequate means for resolving consumer complaints. The comment period will last for 45 days. More information about iSAFE’s safe harbor application is available here on the FTC’s website.

FCC Requests Extension for Submission of National Broadband Plan
The Federal Communications Commission has requested an additional thirty days to meet the February 17, 2010 deadline set by Congress for submission of a national broadband plan. The request came a few days after the FCC received comments submitted by the Antitrust Division of the U.S. Department of Justice (DOJ) and the National Telecommunications and Information Administration (NTIA) on January 4, both urging the FCC to reallocate frequency spectrum to accommodate the public’s growing need for wireless broadband.

“We urge the Commission to give priority to making more spectrum available to wireless broadband providers so as to maximize their potential to compete against the established wireline ones,” the DOJ advised in its filing. Wireless services have greater potential to reach underserved areas and to provide an alternative to wireline broadband providers in other areas. Given exploding consumer demand for mobile broadband, the “spectrum pipeline is drying up” the DOJ said. “There is no time to spare.”

The NTIA, an arm of the U.S. Department of Commerce, suggested in its filing that, in addition to wireline cable spectrum, the FCC should consider radio frequency spectrum. “The Administration favors exploring both commercial and government spectrum available for reallocation,” including “a spectrum inventory to determine how radio frequencies are currently being used and by whom.”