Register of Copyrights Says "Who Knows?" on Ownership of Computer Program Copies

Who owns the firmware on a smartphone, the device manufacturer or the purchaser?  Ownership of copies of computer programs is a thorny issue with which the federal courts have grappled in numerous cases. The issue arose during the most recent round of triennial rulemaking that resulted in the promulgation of a new set of exceptions to 17 U.S.C. § 1201(a), which prohibits the circumvention of technological measures deployed to limit access to copyrighted works.

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Logo, Copyright Notice and Link on Web Site Constitute "Copyright Management Information" under DMCA

The "copyright management" provision of the Digital Millennium Copyright Act, 17 U.S.C. § 1202, prohibits the provision or dissemination of copyright management information that is false, as well as the removal or alteration of copyright management information. An issue that has divided federal courts is whether the scope of this section is limited to digital copyright management systems such as digital rights management technologies, or whether it extends to the removal or alteration of copyright information that is affixed to or associated with works by more traditional means. For example in IQ Group, Ltd. v. Wiesner Pub., LLC, 409 F. Supp. 2d 587 (D.N.J. 2006), the court ruled that section 1202 was intended to cover "copyright management performed by the technological measures of automated systems," but not "copyright management performed by people." But several other courts addressing the issue have disagreed, including Associated Press v. AllHeadline News Corp., 608 F. Supp.2d 454 (S.D.N.Y. 2009), in which the court concluded that there was no textual support in the DMCA for limiting the copyright management provision to technological copyright management systems.

In Wayne Cable v. Agence France Presse, et al., 2010 U.S. Dist. LEXIS 73893 (N.D. Ill. July 20, 2010), Cable, the photographer-copyright owner, authorized a realtor to display his photographs of a home on the realtor's Web site with the proviso that the display include attribution of his authorship and a link to his own own Web site. The Web site included a credit line attributing the photographs to “Photos©2009 wayne cable, selfmadephoto.com.” The copyright notice was encoded as a link to Cable’s own Web site. Cable alleged that the photographs were subsequently copied by defendant Agence France Presse without his permission and displayed elsewhere without attribution. AFP moved to dismiss the DMCA claim, contending that Cable failed to allege that the attribution information functioned as a component of an automated copyright protection or management system and thus it did not constitute "copyright management information" within the scope of the DMCA.

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Credit Card Services Firms with Knowledge of Sales of Infringing Merchandise May Be Liable for Trademark Infringement

In Gucci America, Inc. v. Laurette Co. No. 1:2008cv05065 (S.D.N.Y.), the luxury goods manufacturer succeeded in shutting down a Web site called "TheBagAddiction.com" through which the defendants sold counterfeit Gucci handbags. In fact, the defendants consented to the entry of judgment and admitted liability for trademark infringement. In a subsequently filed action, Gucci America, Inc. v. Frontline Processing Corp., 1:2009cv06925 (S.D.N.Y.) the manufacturer sought to hold firms that provided credit card processing services to the operators of TheBagAddiction.com site liable for trademark infringement as well. On June 23, the court in Gucci v. Frontline refused to dismiss Gucci's complaint, finding that the two firms that processed credit card payments for transactions consummated on the site, as well as the company that brought the Web site operator and the processing firms together, may be liable for contributory trademark infringement.

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What Can We Learn from the SCO Litigations?

Last week, the district court in SCO, Inc. v. Novell (D. Utah), the current act in the long-running drama of the SCO litigations aimed at the Linux operating system, refused to grant SCO's motion to set aside the jury verdict rendered last March. The jury concluded that Novell owned the copyrights in the UNIX code that SCO claims is infringed by the Linux operating system.  Once again, open source advocates were  celebrating, and with good reason. The ownership of the UNIX code goes to the heart of all of the claims that SCO has raised in the other litigations, and if thet verdict stands, those litigations are effectively over. Although SCO's long-standing fee agreement with its attorneys apparently includes another trip to the U.S. Court of Appeals, it will be up to the Bankruptcy Trustee and the Bankruptcy Court in Delaware to decide whether that trip is actually made. We will learn their decision in due time.
 
Meanwhile, there are many answers to the question of what can be learned from the SCO litigations, but one of them has nothing to do with the future of open source software, or the potential futility of high-stakes, bet-the-company litigation tactics. For attorneys who are engaged in the daily exercise of drafting and negotiating complex technology licensing deals, one lesson is this: When there is a communications or knowledge gap between the lawyers that give final shape to a business deal  and the executives that will live with the deal over time, the result may be a fundamental and detrimental misunderstanding of just what the deal accomplished.

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Massachusetts Data Security Regulations: Your Company May Not Be Located There, But If Your Customers Are, You Need to Comply

Newly effective regulations promulgated under Massachusetts’ recent data security law, Mass. Gen. Law ch. 93H, have raised the bar for data security compliance, and they have a long reach. The regulations are national and international in scope, as they apply to all companies – wherever located-- using personal data of Massachusetts residents.

Although the deadline for compliance with the Regulations – March 1, 2010 – has come and gone, many companies – both within Massachusetts, but particularly outside of Massachusetts – are not yet, in fact, compliant. These companies are finding themselves in a position of playing "compliance catch-up." Even companies that were compliant with applicable law prior to the enactment of the Regulations are obligated to review where they stand in light of these new requirements.

The concern over non-compliance is not limited to Massachusetts regulatory enforcement. Companies are also concerned that private plaintiffs in data security breach-related litigation will allege that the Regulations establish a "standard of care" for the purpose of asserting a negligence claim.

In an article just published by the Washington Legal Foundation, we review the requirements of the Massachusetts law and Regulations, including the required written information security program, constraints on third-party providers and vendors, and enforcement mechanisms, among other topics.

We conclude with a discussion of whether other states, or the federal government, will adopt similarly tough data security laws, and some practical advice for affected companies.

"The Bay State Raises the Bar on Personal Data Security: Are You in Compliance?" by Jeffrey D. Neuburger and Natalie Newman is available here.

 

In Assessing Employee Status in Copyright Ownership Disputes, Technology Start-Ups Are a Special Case, Says the Ninth Circuit

A technology start-up company can be an informal environment - both Apple Computer and Hewlett-Packard famously started out in garages, and Yahoo!, Google and Facebook were developed, initially at least, in college dorm rooms. But informality can, and frequently does, lead to legal disputes down the road. In JustMed, Inc. v. Byce, 2010 U.S. App. LEXIS 6976 (9th Cir. Apr. 5, 2010), the Ninth Circuit was faced with a dispute over ownership of the source code for a program that operated a digital audio device.

Michael Byce, the programmer who wrote most of the code in question, claimed to be an independent contractor and thus the author, and copyright owner, of the code. JustMed claimed that Byce was an employee and that the code was a work for hire, with copyright ownership vested in the company. The appeals court concluded that the well-established factors for making the intensely fact-sensitive determination of employee status should be weighed specially in light of the fact that the company involved was a technology start-up and the activity in question was computer programming.

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Novell Prevails in Jury Trial on Ownership of UNIX Copyrights

The jury in The SCO Group v. Novell, Inc. litigation over ownership of the copyrights in UNIX source code has ruled in favor of Novell, the company announced on its blog this afternoon. Novell had previously prevailed on the issue of copyright ownership in a ruling by Judge Dale Kimball on Novell's motion for summary judgment, but as we blogged in August 2009, the U.S. Court of Appeals for the Tenth Circuit reversed that ruling, holding that the issue of copyright ownership was, under the circumstances presented, an issue for the jury. The jury in the federal district court in Utah spoke in Novell's favor following a three-week jury trial before Judge Ted Stewart (following Judge Kimball's recusal and subsequent retirement).

Presumably, the next act in this long-running drama (the litigation commenced in 2005) will focus on SCO's litigation against IBM, which was stayed when SCO filed a (still pending) bankruptcy proceeding. The ownership of the copyrights that are the subject of this jury verdict underlie SCO's claims in that litigation that IBM infringed SCO's copyrights by contributing certain of the UNIX source code to the open source Linux operating system project. And on that basis, SCO has claimed that the Linux operating system itself infringes SCO's copyrights, and has sought licensing fees from users of the Linux OS.

Whether SCO will be financially able to continue following this verdict remains to be seen.

Internet Financial News Aggregator Enjoined under New York Hot News Misappropriation Law

Electronic technologies have greatly reduced the costs of distributing information, but for content owners, that's been a mixed blessing. Just as their costs of content distribution have shrunk and their ease of distribution has increased, the same is true for parties who obtain and redistribute that content unlawfully, to the competitive disadvantage of the content owners. That equation has been repeated over and over, reflected in numerous litigation battles fought over the last several decades. One of those battles has been fought by major financial firms that have sought to regain control over the dissemination of the stock analysts' research reports that are central to their business model.

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No "Internet Exceptionalism" For the Second Circuit in Attorney Advertising Ethics Ruling

"Internet exceptionalism" is the notion that the Internet is a special and unique communications medium to which special rules should apply. In the legal field, that notion is manifested in legal rules that have been crafted by judges, legislatures and regulators for application in situations involving Internet communications.

In some cases the creation of an Internet-specific rule has involved a deliberate policy choice to reject a traditional rule in favor of a new and sharply different rule applicable to the online environment. Section 230 of the Communications Decency Act is at the top of the list of such enactments. In other cases, judges struggling with the task of applying precedents to controversies arising in the Internet context have crafted Internet-specific rules on the fly. The so-called Zippo sliding scale for assessing personal jurisdiction in cases involving Web sites is the prime example in that category. Prof. Eric Goldman has written an article analyzing the phenomenon, including recent examples of enactments that are not only Internet-specific, but focus in on a particular kind of Web site, e.g., social networking sites. See Eric Goldman, The Third Wave of Internet Exceptionalism, (March 11, 2009). But some courts have rejected Internet exceptionalism, at least in certain contexts.

Late last week, the U.S. Court of Appeals for the Second Circuit included in its ruling on New York's revised attorney ethics rules on advertising an essay broadly rejecting the notion of Internet exceptionalism in cases involving the First Amendment, at least in the context presented. This is not the first time that the Second Circuit has questioned the need for an Internet-specific rule. In Best Van Lines, Inc. v. Walker (2d Cir. 2007), a panel of the court concluded that while the Zippo sliding scale is useful in assessing whether a party did business in New York, "it does not amount to a separate framework for analyzing Internet-based jurisdiction." See also the ruling in In re Cohen,  (N.Y. Sup. Ct. N.Y. Cty Aug. 17, 2009), rejecting the argument that there are special rules applicable to defamatory statements made on a blog.

In Alexander v. Cahill, (2d Cir. Mar. 12, 2010), a panel consisting of Judges Walker and Calabresi (Judge Sotomayor was on the panel until her elevation to the U.S. Supreme Court) considered whether the New York ethics rule banning targeted attorney solicitation of accident victims in any media within 30 days of the accident was sufficiently narrowly tailored to survive constitutional scrutiny under applicable U.S. Supreme Court precedents. Noting that the rule would unquestionably survive constitutional review if it applied only to direct-mail solicitations, the panel concluded that the same analysis should be applied to all communications media, including the Internet. While recognizing that a "technology-specific approach" may be appropriate in some contexts, the court reasoned, it is not appropriate where there has been a merger of traditional and Internet communications channels:

In the context before us, we eschew a technology-specific approach to the First Amendment and conclude that New York’s moratorium provisions—as we construe them—survive constitutional scrutiny notwithstanding their applicability across the technological spectrum. We focus first on the potential differences among media as to the degree of affirmative action needed to be taken by the targeted recipient to receive the material Plaintiffs seek to send. For many media forms, it is about the same. Thus, to us, the affirmative act of walking to one’s mailbox and tearing open a letter seems no greater than walking to one’s front step and picking up the paper or turning on a knob on a television or radio.

It is true that the Internet may appear to require more affirmative acts on the part of the user in order to recover content (and is therefore perhaps entitled to greater First Amendment protection insofar as users are soliciting information, rather than being solicited). But regardless of whether this characterization was once accurate, it no longer is so. E-mail has replaced letters; newspapers are often read online; radio streams online; television programming is broadcast on the Web; and the Internet can be connected to television. See Christopher S. Yoo, The Rise and Demise of the Technology-Specific Approach to the First Amendment, 91 Geo. L.J. 245, 248 (2003) ("[T]he impending shift of all networks to packet switched technologies promises to cause all of the distinctions based on the means of conveyance and the type of speech conveyed to collapse entirely."). Furthermore, Internet searches do not bring a user immediately to the desired result without distractions. Advertisements may appear with the user’s search results; pop-up ads appear on web pages; and Gmail (Google’s e-mail service) creates targeted advertising based on the keywords used in one’s e-mail. In such a context, an accident victim who describes her experience in an e-mail might very well find an attorney advertisement targeting victims of the specific accident on her computer screen.

States are increasingly responding to these expanded and expanding roles of the Internet. Several already apply existing attorney professional responsibility rules to electronic and Internet advertisements and solicitations. See Amy Haywood & Melissa Jones, Navigating a Sea of Uncertainty: How Existing Ethical Guidelines Pertain to the Marketing of Legal Services over  the Internet, 14 Geo. J. Legal Ethics, 1099, 1113 (2001) ("[I]t can be assumed that Internet use in the context of legal marketing will generally invoke all ethics rules relating to advertising and solicitation."). Texas and Florida have also added language to their disciplinary rules specifically to address attorney solicitation via the Internet. The New York Task Force Report reached the same conclusion. The Report repeatedly stated that "on-line advertisements and websites are not materially different than typical" printed advertisements, and that the rules should be enforced equally across media. (Task Force Report 54-55) In so doing, the Report "demonstrate[d] that the harms it recites are real and its restriction will in fact alleviate them to a degree." Florida Bar, 515 U.S. at 626 (quotation marks omitted).

Accordingly, we conclude that even acknowledging that differences among media may be significant in some First Amendment analyses, they are not so in this case. Three aspects of the Supreme Court’s analysis in Florida Bar are of particular relevance to our determination that the harms identified in that case, and put forth by Defendants in this case, are just as compelling with respect to targeted attorney advertisements on television, radio, newspapers, and the Internet as they are in justifying a ban on targeted mailings of attorney advertisements.

Alexander v. Cahill, Slip Op. at 27-30 (citations omitted),

 

Jury Picked and Trial Commences in SCO v. Novell UNIX Code Copyright Ownership Dispute

The back story to the dispute between The SCO Group and Novell, Inc., over the ownership of copyrights to UNIX source code is lengthy indeed. But we'll spare you the details and just say that the ownership of the copyrights is a critical issue because it is that very source code that underlies SCO's claims that the open source Linux Operating System infringes on its intellectual property rights, thereby obligating just about everybody who uses the Linux OS to pay royalties to SCO. So needless to say, the open source community is very interested in the outcome of the current trial in The SCO Group v. Novell, Inc., which commenced in U.S. District Court in Utah on Monday.

To briefly recap, the issue of code ownership is being resolved in a slander of title lawsuit brought by SCO against Novell, which formerly owned (and claims to still own) the copyrights in the disputed code. When SCO claimed ownership of the UNIX code in its lawsuit against IBM, Novell made public statements disputing SCO's ownership, thus the claim by SCO that Novell slandered its title to the code. District Court Judge Dale Kimball ruled in favor of Novell on the ownership issue, granting summary judgment dismissing SCO's claims. But last August, the U.S. Court of Appeals for the Tenth Circuit ruled that there were disputed issues of material fact that precluded the grant of summary judgment, and remanded back to the District Court. Judge Kimball recused himself and the trial is now being held before District Court Judge Ted Stewart.

Meanwhile, the main event, the SCO lawsuit against IBM, is being held in abeyance pending resolution of the code ownership issue. If SCO prevails against Novel on the issue of ownership of the code, then the litigation against IBM should be the next event. The allegations in that lawsuit are, in brief summary, that IBM misappropriated SCO's UNIX code and contributed it to the Linux operating system.

We cannot do justice to all of the ins and outs of the SCO v. Novell litigation, nor to the several related lawsuits, in a short blog post. But we can point you to the mother of all Web sites on the subject, www.Groklaw.net, that has been following these litigations in the greatest of detail since at least 2003. Be forewarned that the operator of the site has strong opinions on the issues, but whether you agree with those opinions or not, the site is an invaluable source of relevant documents and up to date information on the conduct of the trial.

The trial is scheduled to take three weeks.