Software Audit Blog

What Is “Commercial Hosting” When It Comes To Microsoft Software?

Many companies using Microsoft products to deliver services to their customers are familiar with the “commercial hosting” prohibition included in most Microsoft license agreements:You may not host the products forcommercial hosting services.Most CIOs reading that prohibition also are familiar with the feeling of deep confusion that can arise when they notice that Microsoft has utterly failed to include any definitions or guidance in its license agreements regarding what “host” or “commercial hosting services” means.

Cyber Intelligence Sharing and Protection Act Bill Passes House

On April 26, 2012, the U.S. House of Representatives passed the Cyber Intelligence Sharing and Protection Act (CISPA). According to the bill sponsors, CISPA is an essential update to the National Security Act of 1947 that adds provisions allowing for information about “cyber threats” to be shared between the government and private industry.

Varicent Customers Should Plan for Audits by IBM

In April 2012, IBM announced that it had reached an agreement to acquire Varicent Software, Inc., an Ontario-based publisher of analytics software for compensation and sales performance management. According to the announcement, Varicent’s customers include Starwood Hotels, Covidien, Dex One, Manpower, Hertz, Office Depot and Farmers.

Warning: Business Software Alliance Reorganization May Affect You

The Business Software Alliance announced in a press release late last week that they are reorganizing the organization into two operating units: one focused on increasing its focus on software anti-piracy and the other on global advocacy around key emerging issues for the technology industry including privacy and security and intellectual property protection.

Avoid Pitfalls When Deploying ILMT for IBM Software

IBM software is expensive. In some cases, very expensive. While this may represent a necessary cost of doing business for many companies with mission-critical software solutions developed on or using IBM applications, all IBM customers clearly are incentivized to maximize the value of their software expenditures with Big Blue.

Top Three Decisions for Microsoft Enrollment for Application Platform

An increasing number of enterprises are considering the value of Microsoft’s enterprise-level licensing models. The model with which companies are most familiar likely is the Enterprise Agreement (“EA”), under which a business licenses all of its desktops for Windows, Office and/or client access licenses, with the cost of those licenses being payable in three installments over the term of an EA enrollment (usually three years). During that term, the company can upgrade to the most current version of the licensed software and can deploy additional desktops without first purchasing licenses in advance, all subject to annual true-up orders.

White House Outlines Consumer Privacy Bill of Rights

In late February 2012, the White House outlined a consumer data privacy framework that includes a “Consumer Privacy Bill of Rights” in a report entitled “Consumer Data Privacy in a Networked World: A Framework for Protecting Privacy and Promoting Innovation in the Global Digital Economy.” In it, the administration sets out a plan for a four-element approach to protection of consumer privacy: 1) enumerate the consumer privacy rights; 2) encourage industry developed of codes of conduct; 3) strengthen FTC enforcement power; and 4) ensure interoperability with international privacy rules and regulations.

Software-Audit Compliance Demands Often Include “Fuzzy Math”

In defending against software audits initiated by publishers such as Microsoft or IBM, many businesses make the mistake of assuming that those publishers or their designated auditors know what they are talking about when it comes to determining what licenses need to be purchased in order to achieve compliance. After all, the companies that wrote the license rules certainly know how and intend to apply them fairly, right?

Software-Audit Compliance Demands Often Include “Fuzzy Math”

New IBM Passport Advantage Agreement Drastically Changes Support Requirements

One of the major changes in the latest version of IBM’s Passport Advantage Agreement is the requirement that customers maintain subscription and support (S&S) on either all of the licenses that are installed and in service or none of the licenses. Customers can no longer maintain subscription and support on only some of the licenses in use.

Effective Audit-Response Policies Can Be Vital in Responding to Software Audits

Businesses often have close relationshipswith software vendors, and that close-ness usually is in direct proportion tothe extent and importance of those vendors’ software products in thebusinesses’ network environments. However, despite their best marketingefforts, software vendors’ interests always will remain aligned primarily withtheir own bottom line, and that often means that information shared with themcan and will be used against licensees in future transactions or, worse, in thecontext of an audit.

Big Changes for Microsoft System Center Licensing

Business software buyers increasingly are aware of the significant changes that Microsoft will be implementing to the license metrics for SQL Server when version 2012 of the popular database solution is released this April. However, of potentially equal or even greater significance for some companies is the fact that Microsoft also is planning big changes for the license rules applicable to System Center when version 2012 of the network-management line of products is released, likely in April alongside SQL Server.

Judge Allows Sales of “Used” MP3 Files to Continue

On February 6, 2012, a judge for the U.S. District Court for the Southern District of New York ruled that ReDigi – an upstart, online marketplace for “used” MP3 files – can continue operating pending the outcome of copyright-infringement litigation initiated by Capitol Records. ReDigi went live in October 2011 with a business model that uses proprietary technology to verify, transfer and delete instances of digital music content from a user’s computer for inclusion in an online library of MP3 files available for download by others.

Windows Server Licensing Under SPLA

Licensing under Microsoft’s Service Provider License Agreement (SPLA) often is not a simple process. There are monthly true-ups to process, user management policies to follow, and the specter of increasingly frequent audits looming large. To complicate things further, licensing rules for Microsoft server products vary significantly. Some products, such as Exchange, can only be licensed on a per user basis, while other products give the partner the choice of whether to license using a per-user or per-processor modelWindows Server Licensing Under SPLA

Top Five Important Provisions In Technology Vendor Agreements

Although technology spending has made up a significant chunk of company’s yearly budgets for some time, many organizations have been slow to develop the expertise necessary to review and negotiate the associated technology agreements—and I’m talking about both the customers and the vendors. Many of these agreements appear to be based on outdated templates that were customized by someone with an incomplete understanding of the unique risks associated with the technology, the industry trends with respect to specific provisions, or the law.

BSA Secures Half-Million Dollar Settlement with Texas Software Firm

The Business Software Alliance (BSA) announced on February 6, 2012 that it has signed a settlement with PCS-CTS, a Houston-based company providing supply-chain software solutions. Under the settlement, PCS-CTS agreed to pay the BSA a total settlement of $500,000.00 to settle claims that the company had unlicensed copies of Adobe, Filemaker, Microsoft, and Symantec software installed on its computers. The BSA’s announcement indicates that the amount of the settlement is the largest ever reached with a Texas-based business.

Copyrighting Web-Based Software Applications

There are a number of ways to protect the intellectual property in software, but by far, the most commonly used method for protecting software IP is to register the software code as a literary work with the Copyright Office. The process is generally pretty straightforward: gather the code, print it to PDF, and send it off to the copyright office with a note that you would like to register the code as a literary work. While there are some specific instructions regarding the deposit and how to protect any portions of the code that may be trade secrets (hint, stock up on markers), the process typically is not much more complicated than that.

Courts May Refuse to Compel the BSA and SIIA to Identify Their Informants

On January 12, 2012, the D.C. Court of Appeals held that the Software & Information Industry Association (SIIA) would not be required to disclose the name of one of its confidential informants in a civil case for defamation. Solers, Inc. had filed its lawsuit against a John Doe defendant for defamation after it resolved a software-audit investigation initiated by the SIIA. The SIIA had alleged, based on information that it previously had received from the anonymous defendant, that Solers was using a number of copies of SIIA-member software products in excess of the number of licenses it had purchased for that software. Solers had attempted to force the SIIA to disclose the name of its informant in order to proceed with the defamation action.

Getting More Value from the Microsoft Enterprise Agreement - Top Five Amendments to Consider

The “off-the-shelf” Microsoft Enterprise Agreement provides considerable flexibility for both Microsoft and its customers to construct a deal that is a good fit for both parties. That being said, there are some fundamental limitations at the core of the agreement that may prevent the customer from extracting maximum value from the EA. Below is a list of five important revisions to make to the contractual language in the EA in order to unlock the potential value stored within its pages.

Tips to Improve the Enforceability of Click-Wrap License Agreements

A very significant portion of Internet commerce today depends on the use and enforceability of “click-wrap” license and service agreements – legal terms that typically are presented to a customer during the service-ordering or software-installation process and that usually do not allow for any negotiation or modifications by the customer. Click-wrap agreements represent the evolution of “shrink-wrap” agreements, which for many years have been attached to the packaging of software products purchased in stores. As with shrink-wrap terms, the use of click-wrap agreements is not surprising, given the fact that most consumers of software or other products and services delivered over the Internet do not want or expect to sign more traditional contracts in order to use those products and services.

Compliance Documentation After BSA and SIIA Settlements – Three Top Tips

In a previous post, I introduced the concept of post-settlement compliance following the settlement of audits initiated by the Business Software Alliance (BSA) and the Software & Information Industry Association (SIIA). As noted before, the first step to completing the compliance review process is setting a baseline to determine what software is installed compared to what licenses are owned by the business.

Software Compliance After BSA and SIIA Settlements

Your business has just finished spending the last year of its corporate life responding to a software audit demanded by the Business Software Alliance (BSA) or the Software &Information Industry Association (SIIA). It has devoted substantial time and internal resources in an effort to gather an accurate inventory of software installations, together with all available documentation of license purchases. It also has incurred legal fees in order to obtain counsel regarding the audit process and to protect its rights during settlement negotiations. Management understandably is ready to move on.

Microsoft Enterprise Agreements - The Fine Print

Any Microsoft Enterprise Agreement (EA) negotiation should involve not only the organization’s IT budgeting, compliance, and forecasting groups, but also in-house or outside counsel for analysis of the legal and business risks that are not necessarily front-and-center during the negotiation process. A significant obstacle in the way of fully understanding the applicable rights and obligations under the EA is knowing which agreements apply, and in which order. Many times, decision makers review only a portion of the agreements during an EA negotiation and do not appreciate how the entire document set integrates to establish the parties’ respective rights and obligations.

Your Adobe Software May Be Phoning Home Without Your Knowledge

Increasingly, software publishers are looking for new tools and processes to assist them in their license-enforcement programs. While such efforts are understandable to a degree, they sometimes can include methods that are somewhat dubious at least from a customer-relations perspective, if not from a legal perspective. One provision from Adobe’s most recent end-user license terms provides a good example. (The full EULA is available here

Accurate Inventory Information Crucial to Audit Outcome

Obvious though it may sound, in almost every software audit the most crucial element contributing to a positive outcome is an accurate inventory of what software is deployed. Unfortunately, far too many businesses faced with an audit end up receiving grossly overinflated compliance-purchase demands, because the inventory data received by the auditors and used to calculate a license position is faulty. Here are three top tips for taming the inventory beast:

Software Audits Increase in 2012: What To Do

The number of software audits requested by software publishers and their trade groups including the Business Software Association (BSA) and Software & Information Industry Association (SIIA) will increase dramatically in 2012.

Business Software Alliance Runs Contest for Software Piracy Leads

The Business Software Alliance (BSA), the enforcement and lobbying arm of a private trade organization of approximately 100 members including Adobe, Autodesk, IBM, Microsoft, and Symantec, recently introduced the BSA Anti-Piracy Lead Generation Drawing offering a chance to win $1,000 cash for making anonymous reports of software piracy. As part of its new No Piracy Campaign, the BSA has established a web site Report Piracy Now that includes a recorded interview with an actual BSA informant—an IT consultant who reported a client’s alleged software piracy.

Kaspersky Parts Ways With BSA For Supporting SOPA

Kaspersky Lab, a past member of theBusiness Software Alliance (“BSA”), which enforces copyrights on behalf ofsoftware publishers, announced recently that it has disassociated itself from theBSA in opposition of the BSA’s support for the controversial “Stop OnlinePiracy Act” (“SOPA”).

Virtualization Rights Under The Enrollment For Core Infrastructure

We have previously examined the Enrollment for Core Infrastructure (ECI) program, a relatively recent “add-on” under the Microsoft Enterprise Agreement. ECI provides for volume licensing of Core Infrastructure Server Suite (CIS Suite), a server operating systems and management software bundle. ECI offers three flavors of the CIS on a per-processor basis: Standard, Enterprise, and Datacenter. The main benefit of the ECI aside from its potential costs savings is the simplification of server licensing for virtualization.

Server-Client Assessments in Microsoft Audits are Complex Undertakings

Microsoftaudits – especially for larger companies – often are resource-intensive andexhausting undertakings even for the most well prepared IT teams. However,certain aspects of such audits often present more challenges than others. Inour experience, the most difficult data to inventory and analyze accuratelyusually are those related to server clients.

Written SPLA Licensing Procedures Can Be Helpful Assets During an Audit

The Microsoft Services Provider License Agreement (SPLA), together with the Business Agreement (MBA) or Businesses and Services Agreement (MBSA) to which it almost always is attached, is a complex set of legal documents that demand careful consideration in order to avoid unnecessary licensing exposure. However, many businesses that license Microsoft products under a SPLA (typically in order to provide hosted software services to their customers over the Internet) often do not pay adequate attention to all of the restrictions and obligations contained in those agreements. All too often, in the event of an audit, such past inattention to these issues can result in substantial penalties for non-compliance.

Microsoft Server Licensing Under Enrollments for Core Infrastructure

We have covered Microsoft enterprise licensing options in detail, but have yet to discuss the changes that Microsoft has made to the server-side of the Enterprise Agreement. The traditional Microsoft Enterprise Agreement focuses on enterprise-wide desktop deployments and does not address server platform licenses as comprehensively. To account for this, Microsoft introduced the Enrollment for Core Infrastructure (ECI) addition to the standard EA that provides customers with the flexibility available under the EA to deploy core server platform software across their organizations.

BSA Advocates Revisions to SOPA

The Business Software Alliance ("BSA"), an organization that represents software publishers in efforts to combat software piracy and copyright infringement, voiced concerns in a November 21 blog entry regarding the current Stop Online Piracy Act ("SOPA") pending before a House of Representatives committee.

BSA Advocates Revisions to SOPA

Qualified Desktops and Industry Devices in Microsoft Enterprise Agreements

As we’ve discussed herebefore, Microsoft Enterprise Agreements ("EA") can offer significant opportunities for large companies to enjoy both IT asset and management cost savings. However, many enterprise-level customers that fit into the target market for an EA have complex corporate environments that make a single one-size-fits-all agreement difficult to squeeze into. One of the tightest fits that complex corporate customers experience is when attempting to apply the standard EA definitions of Qualified Devices and Industry Devices (also referred to as Line-of-Business Devices) to their organizations. Essentially, the standard EA requires a business to purchase the same licenses for every desktop computer in the organization, unless that desktop computer meets the narrow definition of an Industry Device.

Pros and Cons of Major Server-Software Licensing Models

Today, businesses have more options and more flexibility in acquiring licensing to accommodate their software needs. However, with that flexibility often come complex software asset management (SAM) obligations, the neglect of which can prove to be extremely costly.

Las Vegas Review-Journal Concedes Fair Use in Copyright Infringement Suit

On November 19, the Las Vegas Review-Journal conceded to a court in a pending case that using a short excerpt of a news article online did not constitute copyright infringement. The LVRJ has been represented with much notoriety in recent years by Righthaven, LLC, a company pursuing copyright claims on behalf of the newspaper, which has filed hundreds of copyright infringement lawsuits against web sites that host content from its clients’ news articles.

Attempts to Transfer Microsoft Licenses May be Ineffective

Like most software publishers, Microsoft includes terms in its standard license agreements to restrict a licensee’s ability to resell or otherwise assign to another party the right to install or use software. Increasing the level of difficulty for IT groups trying to manage their software assets, different types of Microsoft licenses come with different transfer restrictions. For retail off-the-shelf products, known as "full packaged product" or "FPP," and pre-installed software, called "original equipment manufacturer" or "OEM," licenses usually may be transferred without Microsoft’s consent, but these transfers are subject to limitations on the number of transfers (usually just one) and requirements that the transfer must be made along with the hardware on which it was originally installed. However, attempting to assign or transfer Microsoft software purchased under a volume license agreement often is considerably more difficult.

Challenges of Microsoft Server-Client Licensing

The basic model for licensing Microsoft server software – both for operating systems and for applications – is to purchase a license permitting the installation of the software on a server and a number of client-access licenses (CALs) equal to the number of users or devices that will be accessing that software over a network. Most IT teams are familiar with the basic server + CAL model. However, there are a number of complicating factors to keep in mind when analyzing licensing needs for these products in order to ensure that licensing requirements are met without overspending.

Court Rules Righthaven Lacks Standing To Sue for Copyright Infringement

On November 4, 2011, the U.S. District Court for Nevada ruled against well-known copyright "troll" Righthaven, LLC in a lawsuit Righthaven filed against NewsBlaze LLC. The court ruled Righthaven lacked standing to sue for copyright infringement on behalf of the Las Vegas Review-Journal and the Denver Post, calling into question Righthaven’s enforcement strategy. (and, possibly by extension, its reason for existing)

Enterprise Software Licensing vs. Self-Hosting – Top Three Things to Remember

Most business managers looking to license software in a large organization are interested in two key goals: cost reduction and flexibility. Cost reduction is an obvious goal. Flexibility is another matter, however. Retail licensing for large enterprises usually is a non-starter – retail licenses generally are more expensive per seat, are more difficult to track against software installations, and require a company to accurately forecast its software needs into the future, with a large up-front capital expenditure. Therefore, at a certain size, many companies start looking for alternatives, and those alternatives (for Microsoft products, at least) often take the form of either an Enterprise Agreement (EA) or a "self-hosting" solution under a Services Provider License Agreement (SPLA). Here are some of the most important things to keep in mind when trying to decide between them:

Office for Civil Rights to Begin HIPAA/HITECH Audits

On November 8, the Office for Civil Rights (OCR) at the U.S. Department of Health & Human Services notified members of its HIPAA Privacy Rule listserv that it will begin conducting a pilot program of the audit requirement under Section 13411 of the HITECH Act. In the communication, OCR indicated that it will perform approximately 150 audits of covered entities in order to assess the protocols established for conducting the audits as well as to uncover any additional risks or vulnerabilities in the privacy and security rules themselves. The targeted covered entities will be notified of the request for their participation sometime this month, with OCR’s goal to conclude these pilot program audits by the end of next year.

Non-SPLA Licensing for Hosted Microsoft Software

Most businesses seeking to license Microsoft software for the purpose of delivering hosted software solutions over the Internet turn first to the company’s Services Provider License Agreement (SPLA). SPLA is Microsoft’s flagship licensing model for commercial hosting services, and it offers the primary benefit of permitting a licensed hosting company to pay on a month-to-month basis only for the products ordered by its customers. For many businesses, that model may work fine, but others may not want to undertake the expense or hassle of entering into yet another contractual relationship with Microsoft. In those cases, businesses may want to consider the Self-Hosted Applications (SHA) rights that are available for certain products licensed under one of Microsoft’s several other, volume-licensing models (e.g., Open, Select, Enterprise). Some of the notable differences between SHA and SPLA include:

Pros and Cons of Auto-Entrolling New Affiliates Under an Enterprise Agreement

The basics of Microsoft Enterprise Agreements have been covered here many times before, but in order to understand the subject of post-EA acquisitions, it is helpful to revisit the most fundamental of EA basics: under the Microsoft EA, an organization is required to license a specific desktop bundle across all Qualified Users or Desktops in the Enterprise. So, during the term of an EA, the Enrolled Affiliate is required to pay for a license for all new Qualified Desktops or Users added to the Enterprise. For some companies, increases in Qualified Users or Desktops are due simply to workforce growth. However, for enterprise-level organizations, many increases in Qualified Users or Desktops may come from business-unit or entity acquisitions.

SOPA Moves To House Committee with Modifications

The U.S. House Judiciary Committee will consider the Stop Online Piracy Act ("SOPA") on November 16, a bill designed to complement the proposed PROTECT IP Act in the Senate in efforts to fight online piracy and copyright infringement.

Licensing Microsoft Applications in a Citrix Environment

Many organizations allow their users to access desktop applications like Microsoft Office through Citrix, which is often used to control the number of users who can access the software at any one time. These organizations need to carefully evaluate whether they are legally able to install applications on their network for remote-user access and also need to evaluate how many application licenses are required to ensure that all such access through Citrix is proper.

SPLA in a Supply Chain – Three Important Concerns to Keep in Mind

Many businesses use the rights granted under a Services Provider License Agreement (SPLA) to deliver hosted software solutions or, optionally, rental hardware to their customers. Many other businesses also would like to use a base licensing agreement with Microsoft – like a SPLA – in order to equip resellers or other business partners in a supply chain to deliver hosted solutions or other services to customers with whom those partners have the primary business relationship. SPLA can work under those circumstances, but there are a few very important points to keep in mind:

Microsoft Enterprise Agreement - True-Up Timing

The Microsoft Enterprise Agreement (EA) provides large organizations with significant licensing and administrative cost savings over traditional off-the-shelf or OEM licenses. Under an EA, a company that has 250 or more desktops can license a standard image (or images, if you know what to ask for), that includes an operating system and productivity suite for every computer in the organization as well as server operating systems, databases, and other software platforms. One of the primary, administrative cost savings under an EA is the yearly true-up process for purchasing new licenses. The true-up process is intended to make it easy to deploy new software over the course of a year without the burden of purchasing the software as it is installed. However, there are differences in the timing of the true up that can complicate the process somewhat

SPLA in a Supply Chain – Three Important Concerns to Keep in Mind

U.S. Copyright Office Considering Changes to Copyright Rules

Last week, Maria Pallante, Register of Copyrights for the U.S. Copyright Office, announced the Office’s priorities and projects for the next two years. Ms. Pallante explains that the Copyright Office will be focused on how to implement changes to copyright law and updates to the copyright-administration process. Many of these projects and priorities are meant to directly address the thorny copyright issues that everyone involved with copyright – including content creators, technology companies, courts, and consumers – have been struggling with in the past decade.

Can a Laches Defense Help in Defense of Software-Copyright Claims?

Copyright remedies can hurt. A copyright owner can force an infringer to pay damages equal to lost licensing fees and profits derived from infringing activities, or it can opt for an award of statutory damages up to $150,000 per copyrighted work, if the infringement is found to be willful. For many businesses, though, much worse than any of that is the threat of an injunction barring use of a software product, or, outside the context of litigation, simply the loss of a license for software deployed for business-critical purposes. If, for example, your business depends on IBM operating systems, middleware (like WebSphere) and database software (like DB2 or Informix) to deliver your products and services to customers, your loss of licensing for that software can cause a severe disruption to your business, if not the end of your business altogether. IBM in particular knows this, and it will not hesitate to use this fact as leverage in the event of an audit.

How to Protect Trade Secrets in the Cloud

Although cloud computing often delivers reduced costs and increased flexibility, cloud customers now find themselves storing potentially sensitive data via someone else’s applications, on someone else’s databases, located at someone else’s facilities. What used to be locked up in a filing cabinet in the basement is now…well…who knows where? And this loss of logistical control over company information can be troubling—especially for that most tenuous form of intellectual property: the trade secret.

Client-Licensing Basics for Microsoft Server Products

Many businesses struggle with the task of determining what kinds and quantities of licenses are needed in order to deploy Microsoft operating systems and client-accessed applications on their servers. The first step in that process often is the most difficult: deciding whether to use “traditional” server + client access licenses (CALs), processor licenses or External Connector licenses (where available), or an appropriate licensing metric under a Services Provider License Agreement (SPLA). Here are some analytical questions to ask when seeking a solution to that question:

Second Circuit Hears Oral Arguments in Appeal of Trial Court’s YouTube Decision

On October 18, 2011, the U.S. Court of Appeals for the Second Circuit heard oral arguments in an appeal filed by Viacom, which is seeking to overturn a lower court’s ruling that Google-owned YouTube did not commit copyright infringement in making copyrighted works available via the popular media-sharing website. Viacom argued that YouTube’s business is generated and facilitated by the use of copyrighted material and that the safe-harbor provisions in the Online Copyright Infringement Liability Limitation Act (“OCILLA”) and in the Digital Millennium Copyright Act (“DMCA”) do not protect YouTube.

Business Downturn Protections in Microsoft Enterprise Agreements

Many organizations take advantage of the volume discounts offered by software vendors in return for a commitment to purchase a pre-determined number of licenses. Microsoft typically offers these discounts through a number of different licensing programs, including Enterprise Agreement (EA), Enterprise Subscription (EAS), Select, and Services Provider License Agreements (SPLAs). The deepest discounts generally are available for those organizations that qualify for the EA and that and are willing to undertake the true-up requirements of that program. The EA also requires the licensee to maintain licenses at a minimum count regardless of need.

Ninth Circuit Rejects Psystar’s Appeal from Verdict that it Infringed Apple’s OS

On September 28, 2011, the 9th Circuit Court of Appeals rejected an appeal from Psystar, which had sought to overturn a November 2009 [673 F.Supp.2d 943]verdict finding the small computer maker liable for infringing Apple’s copyright in the Mac OS X operating system. Apple filed the original lawsuit in 2008, alleging Psystar’s use of Apple software in Mac clones violated the Digital Millennium Copyright Act (“DMCA”), and constituted copyright infringement, trademark and trade dress infringement, and violations of unfair-competition laws.

Cost-Effective SQL Server Client Licensing Can Be A Difficult Target To Hit

Most business owners are familiar with the “traditional” server-plus-client licensing scheme for many Microsoft server software products, such as Windows Server operating systems, Exchange messaging software and SQL Server database software. That is, you purchase one license permitting the installation and operation of the software on a server, and then, in addition, you purchase client access licenses (CALs) in sufficient quantity to allow devices or users on the network to access and use that software. Many business owners also are familiar with the processor-based licensing option for SQL Server, where you purchase a (much more expensive) license for each physical processor running on the server where the software is installed, but then acquire the right to have an unlimited number of users or devices access and use the software. However, determining when it makes sense to move from server + CAL to processor-based licensing is no easy trick, especially as IT environments start increasing in size.

U.S. Supreme Court Hears Challenge to 1994 Copyright Law

The U.S. Supreme Court heard oral arguments on October 5 in Golan v. Holder from petitioners seeking to overturn a 1994 copyright law that reinstated copyrights for foreign copyright owners. The petitioners, a group of businesses and artists who use works in the public domain as part of their business or trade, seek to overturn this law in order to continue to use these works without paying royalties.

Top 3 Steps for Adopting New Trademarks

Too many businesses devote considerable attention to developing new brands and trademarks to maximize market effect without paying sufficient (or, sometimes, any) attention to the legal implications of using new marks in commerce. The result often is that what appeared to be a valuable mark ends up being either un-protectable under U.S. law or, worse, already owned and used by another person or entity. The following 3 steps can greatly help to avoid legal exposure and other problems that can be associated with new marks:

The Risks of IBM Sub-Capacity Licensing

I am an intellectual property attorney specializing in defending end-users in software audit matters including those initiated by IBM. We get hired by targets of IBM audits to facilitate the flow of information and protect the client's interest in the audit process. The most significant compliance claims we have encountered arise under Virtualization Capacity (Sub-Capacity) License terms in IBM's Passport Advantage Licensing offering. According to IBM, Sub-Capacity licensing "allows flexible software licensing using advanced virtualization capabilities such as shared processor pools, micro-partitioning, virtual machines and dynamic reallocation of resources." Sub Capacity Licensing is very attractive in data center environments because "it enables customers to license software for only the processor core capacity available to the partition hosting the IBM software." Although very attractive, Sub-Capacity licensing can create very significant legal liability under two common fact patterns.

Supreme Court Allows Pro-Autodesk Decision to Remain Intact in Ninth Circuit

On October 3, 2011, the U.S. Supreme Court declined a request to grant certiorari in the case of Vernor v. Autodesk, in which the Ninth Circuit found that Autodesk could use copyright law to prevent an eBay user from re-selling its software products via the popular auction site. The Supreme Court’s refusal to hear the case means that, at least in the Ninth Circuit, software publishers like Autodesk may continue to seek injunctions and other remedies against those who attempt to distribute copies of a copyrighted software product without a license.

Supreme Court Allows Pro-Autodesk Decision to Remain Intact in Ninth Circuit

Microsoft Volume Licensing - SPLA and Internal Use

Microsoft offers a number of volume license programs designed for use by organizations with more than 250 desktops. The Microsoft Enterprise Agreement (EA) and Enterprise Subscription (EAS) agreements are for organizations licensing products for internal use only. For companies that have the need to license software for use by their customers – say, for companies offering hosting services – Microsoft developed the Service Provider License Agreement, or SPLA. With the SPLA, organizations that are Microsoft Partners can provide access to Microsoft software by purchasing either Per-Processor or Subscriber-Access Licenses for a number of Microsoft titles. In addition, however, the SPLA also permits these Partners to deploy the software licensed under the SPLA for internal use.

IBM Software Audit Step Number 1: Read the Contract

When first contacted by IBM for a “compliance review” (read: software audit), many business owners simply assume that the scope of the requested audit is within IBM’s rights under applicable licensing agreements. Alternatively, if they do request that IBM identify the basis for the audit demand, they take it at its word that those rights are described accurately in the current, standard-form license agreements. This is a mistake.

Microsoft Volume Licensing – Top True Up Tips

Microsoft Enterprise Agreement, Enterprise Subscription, and Services Provider License Agreement (SPLA) volume licenses all provide Microsoft’s customers with the benefit of a periodic, license-deployment-versus-entitlement reconciliation called a "True Up" (or, as we like to call it, a periodic self-audit). Essentially, Microsoft allows its volume customers to purchase all of the licenses for software deployed during the True Up period at the end of that period, which is particularly attractive because the risk of noncompliance is mitigated (notice I didn’t use the word, "eliminated").

SAP Ordered To Pay $20 Million to Oracle for Criminal Copyright Infringement

SAP subsidiary TomorrowNow plead guilty to criminal copyright infringement of Oracle software in a plea agreement negotiated by federal prosecutors. As part of the deal, SAP was ordered to pay $20 million in damages. Prosecutors did not seek additional restitution due to the currently pending civil copyright infringement case against SAP.

SIIA’s Corporate Content Anti-Piracy Program Continues Apace

The Software & Information Industry Association (SIIA) is well known for contacting businesses regarding claims of copyright infringement based un unlicensed use of its members’ software. The audit process associated with those matters can be arduous, and fines payable to the SIIA at the conclusion of an audit can be, in some cases, crippling to a company’s bottom line. However, the SIIA does not limit itself to copyright claims related to software.

Microsoft Enterprise Agreement vs. Enterprise Subscription

Microsoft has long offered the Enterprise Agreement (or, “EA”), a licensing scheme for organizations with 250 or more desktops that consists of a three-year term providing free software upgrades during the term of the agreement and a perpetual license for the software at the expiration of the agreement. In the past few years, Microsoft has added an additional licensing scheme – called the Enterprise Subscription – for organizations that do not necessarily need perpetual licenses. This agreement also has a three-year term and software upgrades, but includes a non-perpetual license that expires at the end of the term.

Court Overturns “Grossly Excessive” $1.3 Billion Copyright Infringement Award

Last November, a court awarded Oracle record copyright-infringement damages in the amount of $1.3 billion against SAP’s TomorrowNow for allegedly making thousands of unauthorized copies of Oracle software and downloads. However, on September 1, U.S. District Judge Phyllis Hamilton granted SAP’s motion to overturn the award, reducing it to $272 million.

Microsoft Company Store Restricts Terms of Use, Leads to Licensing Confusion

Microsoft offers its employees an opportunity to buy discounted software if they agree to restrictive usage terms when purchasing from the Microsoft Company Store. In addition to the online Microsoft Company Store, employees may go to one of a few different physical locations, including one near the Microsoft campus visitor center. The Microsoft Company Store is separate and distinct from the online Microsoft Store, which is aimed at the general public.

Top Three IBM Software Licensing Challenges

In the past, I have covered some of the most problematic aspects of standard IBM software license agreements. However, IBM software licensing can be a recurring nightmare for procurement teams and IT administrators for reasons that extend beyond the four corners of those agreements. Three of the more “global” challenges associated with correct licensing of IBM software products include the following:

Microsoft Enterprise Agreement – Understanding Qualified Desktops and Users

Software licensing for medium to large companies is complicated. Not only are the software license agreements often hard to read and understand, but the terms frequently change with little notification to the user. Deploying software across an entire enterprise, therefore, can be exceedingly complex, and it requires both technical expertise and a thorough understanding of the practical application of the terms and conditions of the licenses. Many organizations, relying on their senior IT professional to make software purchasing recommendations, fail to submit the licensing agreements to legal review. For those that do submit the licenses to legal, the lawyers reading the agreements often will understand the typical contract language—the indemnities and limitations of liabilities of the world—but they often will not fully appreciate the practical effect of the license on implementation, deployment, and compliance.

Brasher’s Idaho Auto Auction

In Brasher’s Idaho Auto Auction vs. Software & Information Industry Association, Adobe Systems, Corel, McAfee, Symantec, Idaho Auto Auction, ADP, and Robert William Gillespie filed in U.S. District court for the District of Idaho (Case #1:11-cv-00310-REB), the plaintiff, a target of an SIIA audit, is asking the court to determine who is legally responsible for the unlicensed software found on its computers during the audit.

Microsoft Server Licensing – Shared Resources for Internal and External Users

When it comes to Microsoft licensing, we are frequently asked how to license for a situation where a Microsoft server resource is to be accessed both by internal company employees and external non-employee affiliates. Our typical legalese answer to this perfectly reasonable question: “It depends.” The correct answer (read: most-cost-effective-while-still-being-compliant answer) requires an examination of the circumstances surrounding the required access (number of users, manner of access, specific server products implicated) and a grasp of company’s current licensing environment with Microsoft.

SQL Server Licensing Perils: Free and Paid Components

Correct licensing for Microsoft SQL Server database software can be a complex undertaking, and in light of the prices charged for certain kinds of SQL Server licenses, it also is an undertaking where mistakes can be extremely costly.

Consumer Groups Urge the Supreme Court to Reconsider the Vernor Case

A number of consumer groups – including the Electronic Frontier Foundation, the Consumer Federation of America, the American Library Association, Association of Research Libraries, Association of College and Research Libraries, U.S. Public Interest Research Group, and Public Knowledge – recently filed a “friend of the court” brief asking the Supreme Court to reconsider the Ninth Circuit’s decision in Autodesk v. Vernor. Those groups are asking the Court to determine what they consider to be an important question: What is the impact of technology licensing on the First-Sale Doctrine?

New Texas Healthcare Privacy Law

Starting on September 1, 2012, businesses handling electronic protected health information (ePHI) in Texas will be subject to more stringent data privacy and security regulations and harsher penalties than those imposed by federal HIPAA regulations. Among other things, the new bill, signed into law in June 2011 by Governor Rick Perry, expands on the HIPAA definition of a “covered entity.”

Overview of Proposed Federal Data Privacy Legislation for 2011

Arguably as a result of the Obama administration’s call for federal data privacy and security legislation, a number of bills have been introduced this year in both the House and Senate to address consumer-data privacy issues. Introduced earlier this spring were the Do Not Track Online Act, discussed here previously, and the comprehensive, Commercial Privacy Bill of Rights Act sponsored by political heavyweights Senators John Kerry and John McCain. A new crop of bills introduced this summer focuses on data-protection procedures and breach-notification requirements. Highlights from these entries, by Senators Leahy and Pryor and Representative Bono Mack, are outlined below.

Top Four Terms to Remember when Purchasing Autodesk Software

Software-license compliance can be a difficult task, and understanding the standard Autodesk Software License Agreement may present challenges. Here are four of the most important terms in that agreement to remember for compliance purposes:

Online Software Purchases – The Good, The Bad and The Ugly

Businesses understandably want to reduce both the time spent shopping for software licenses and the amount to be paid to acquire those licenses. However, efforts to minimize license spends online can have negative unintended consequences. If you are shopping at a software publisher’s own online marketplace (such as Adobe’s or Autodesk’s stores), then you usually can rest assured that you at least have the tools available to purchase the correct kind and quantity of genuine licenses. However, the pricing available at those stores often is higher than the pricing available through third-party resellers.

Who Gets Sued for Software Compliance Violations?

A recent Northern District of Idaho case should shed some light on how to apportion legal liability for copyright infringement damages related to business software usage. In Brasher’s vs. The Software & Information Industry Association, Adobe, Corel, McAfee, Symantec, Idaho Auto Auction, ADP, and Robert Gillespie, plaintiff Brasher’s, the target of an SIIA software audit, filed suit asking the court to determine who is legally responsible for unlicensed software found on its computers during the audit.

Top Three Challenges in Standard IBM License Agreements

IBM software licensing can present an array of interpretive and compliance challenges for even the most sophisticated licensees. Here are three of the most important things to keep in mind when planning to license IBM products under the company’s standard-form agreements (which, for the vast majority of IBM customers, are essentially the company’s only agreements, since IBM generally is loathe to deviate from them).

Microsoft Certificates of Authenticity May Not Constitute Proof of Licensing

The Business Software Alliance (“BSA”) and Software Industry & Information Association (“SIIA”) work on behalf of their members (the lists of which include Microsoft (for the BSA), Adobe, and Autodesk, among others) to enforce copyrights and the terms of end user license agreements (“EULAs”) pertaining to those members’ software products. The BSA and SIIA typically initiate software audits against companies in a stated effort to determine whether the software installed on those companies’ computers is properly licensed according to the terms of the relevant EULAs.

Approach Third-Party “Solutions” to IT Costs with Caution

Many IT-solution providers develop and sell hardware, software or support services (or some combination of all three) intended to reduce costs associated with deploying someone else’s enterprise-level software products in the licensee’s network environment. For business owners, the high cost of deploying some industry-standard, server-based software deployments can lead to near-desperation in efforts to remain competitive while keeping associated costs from breaking the bank. In many cases, third-party solutions designed to achieve those ends can seem too good to be true. However, in those cases, a prudent business owner will start with the assumption that they are, in fact, too good to be true, and he or she will conduct a thorough level of due diligence before (1) obligating the company to contractual obligations with a provider that can’t deliver on its promises and, possibly, (2) exposing the company to legal liability.

Avoid Risks Associated with Software Licensed Through ISVs

Independent software vendors (ISVs) constitute a diverse group of businesses whose core business model typically consists of utilizing third-party software infrastructure and development platforms (such as Microsoft SQL Server or IBM WebSphere Application Server) to create targeted solutions for their customers. ISVs have become a fixture in today’s marketplace for information technology solutions, and most large software companies have programs and licensing models specifically intended for use by ISVs. However, while the return on investment for ISV-delivered solutions is very high in many cases, it is critical for potential ISV customers to be aware of opportunities for legal exposure that can arise when one company’s software products are licensed through in independent vendor.

Top Tips for Responding to an Autodesk Audit

Autodesk routinely sends letters to businesses that it suspects may be using Autodesk software products without adequate licensing, both in order to confirm those suspicions as well as to address any license-compliance discrepancies. Typically under threat of a federal lawsuit for copyright infringement, Autodesk requires targeted businesses to respond to detailed questions about the Autodesk software installations on company computers, the employees who use those installations, and the licenses owned for those installations. It is Autodesk’s position that unlicensed software installations constitute copyright infringement, and businesses that are unable to show full compliance typically face significant penalties on order to obtain Autodesk’s release from liability for the alleged infringement.

Renewal Grace Period in Microsoft Enterprise Agreements

The Microsoft Enterprise Agreement renewal process can be a difficult time for many large organizations. The process generally begins with a count of software products, processor cores, and virtualizations. All of these elements are necessary for a thorough evaluation of an organization’s true-up obligations under the EA. Next up is the process of evaluating future needs in order to determine whether the perpetual use rights associated with the licenses purchased under the original EA will satisfy the organization’s needs moving forward. Finally, all of these activities must be conducted under the looming specter of the EA’s expiration date and the associated non-stop communications from the company’s Microsoft account representative.

Tread Carefully When Deploying IBM Software in Server Clusters

Many businesses are realizing the processing and failover benefits of incorporating clustered servers in their IT environments. Having groups of servers whose processing resources are shared and centrally allocated means that server malfunctions can be remedied without compromising business functions that otherwise might need to be suspended until the appropriate fix can be applied. It also means that the most mission-critical functions can benefit from prioritized allocation of processing power from multiple machines, often resulting in improved overall performance.

Obtaining Payment Terms for BSA Settlement

Negotiating a settlement with the Business Software Alliance (“BSA”) to resolve a copyright infringement dispute over allegedly unlicensed software can be arduous and costly. The BSA typically demands a penalty based on some multiple of the MSRP of each product alleged to have been infringed, in addition to the BSA’s attorney’s fees and, usually, a premium for confidentiality if the targeted business wants to avoid unflattering press releases regarding the settlement.

Responding to a License Review Request from Oracle License Management Services

As with many software publishers, Oracle seems to be making a push to audit their customer base in search of revenue streams arising from licensing deficiencies. However, Oracle usually does not like to use the word “audit” and instead tends to ask its customers to engage in a “license review,” courtesy of the Oracle License Management Services (LMS) division. LMS generally requests that a customer fill out a Server Worksheet, which is essentially an overview of the company’s Oracle deployments.

The Basics of Sub-Capacity PVU Licensing for IBM Software

A processor value unit (PVU) is a unit of measurement that IBM uses to determine licensing costs based on the kinds of processors deployed on servers where IBM software is installed. A server’s PVU count is defined by the brand, model and number of physical processors running in the server and the number of core chips per processor. In order to calculate the number of PVUs, it also is necessary to refer to IBM’s PVU-per-core ratings for current processor technologies, which are updated on IBM’s website here.

Autodesk Targets Architects In Software Audits

Autodesk routinely conducts software audits to determine whether businesses have unlicensed copies of its software installed on their computers. Architecture firms typically represent a significant portion of the targets of such audits – many such firms are heavily reliant on Autodesk software due to Autodesk’s dominance in the market for computer-aided design software and due to file-format compatibility requirements for architecture bids and client projects.

Are Your Microsoft SQL Servers Properly Licensed?

Depending on the size of your organization, Microsoft SQL Server licensing costs easily can be one of the biggest yearly expenditures for an IT department. As multi-core and virtualization technologies have taken hold in nearly every datacenter across the globe, SQL Server spends often consist not only of licensing the SQL Server instances, but also, in many cases, of over-licensing due to a lack of clear understanding of SQL Server licensing models and associated options. Proper licensing of SQL Server depends on, among other things, SQL Server use characterization, access characterization, and developer needs.

One Easy, Preventative Step to Reduce Exposure in Autodesk Audits

In the universe of software-copyright enforcement programs, Autodesk’s may be the most active and vigorous. All businesses – even those not running Autodesk software – should take steps early and regularly to identify and eliminate any software-compliance gaps associated with Autodesk and other software installations. It is common for businesses owners to be surprised by the presence of software on their company computers that not only was unauthorized by company management but also unused for company business purposes. Regular, internal software audits can help to avoid those surprises, and in the case of Autodesk software, product serial numbers represent a valuable tool to help determine whether a software installation is licensed.

Five Factors to Consider When Deciding Whether to Renew a Microsoft Enterprise Agreement

For organizations experiencing the resource drain that is the impending expiration of a Microsoft Enterprise Agreement (“EA”), the decision of whether to move forward with renewal is critical. These renewals easily can impart a seven-figure hit on an organization’s IT expenditure, and it is important to understand the full spectrum of the costs and benefits of renewal. Key factors to consider when making an EA renewal decision include the following:

BSA Settlement a Reminder of Licensing Requirements for Hosting and Development

The Business Software Alliance (BSA) announced on March 28 that it had reached a $100,000 settlement with an advertising agency in Melbourne, Australia, based on the firm’s allegedly unlicensed use of BSA-member software products. However, unlike the majority of BSA settlements, which typically involve claims that a business has more installations of a particular product than its documented licenses permit, this case apparently included allegations that the company “was insufficiently licensed for its development environment and not properly licensed to provide hosting services for its customers.”

Licensing Old Microsoft Products

Businesses seeking to license older versions of Microsoft products may encounter challenges acquiring valid licenses. This is a particular concern for some companies that utilize Microsoft products as the basis for their IT infrastructure and that want to avoid a costly migration to new software versions.

Nokia Launches Second Suit Against Apple for Patent Infringement

Nokia announced on March 29 that it was filing a new round of patent-infringement complaints against Apple for allegedly infringing on patents incorporated in the majority of Apple's cellular phones, portable music players, tablets, and computers. These new complaints follow a string of similar actions filed against Apple in U.S. federal court and in the United States International Trade Commission related to dozens of patents held by Nokia for technologies use in mobile communications devices. It also follows a March 25 ruling by the ITC that Apple had not infringed other patents in claims previously brought to its attention. According to Keli Johnson, an attorney with Scott & Scott, LLP: "While it seems to be busy throwing every available claim at the wall to see what sticks, it is important to keep in mind the fact that the stakes here are very high. Apple and Nokia currently are closely matched in the marketplace, and if Nokia successfully proves patent infringement and wins an injunction preventing Apple from using the technologies at issue, Nokia may see significantly increased market share as a result of the competitive edge." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

Dept. of Commerce Reiterates Need for Privacy Bill of Rights

Speaking before the U.S. Senate Committee on Commerce, Science and Transportation on March 16, Department of Commerce Assistant Secretary for Communications and Information Lawrence Strickling reiterated the need for Congress to enact a "Privacy Bill of Rights." Stricking's prepared remarks called for key elements of the legislation to include implementation of a Code of Conduct for online businesses and to empower the FTC to enforce the legislation. "This administration continues to make it clear that online privacy is one of its top concerns to be addressed this year," says Andrew Martin, an attorney with the technology law firm Scott & Scott, LLP. "The high priority given to addressing online privacy is overdue-innumerable people are now living their lives online, but in many ways, the current state of online living resembles the lawlessness of the Wild West." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

FTC Enforces 5-year Term for Opt-out Requests

On Tuesday, March 15, the FTC announced the settlement of a complaint against online marketing firm Chitika stemming from allegations that the company deceived consumers by structuring its opt-out mechanism to be effective for a short, ten-day period. In the settlement, the FTC requires Chitika's privacy policy to be revised to allow consumers to opt-out for a minimum of 5 years and also requires the company to destroy all consumer data received during the period that the "defective" ten-day policy was in effect. "This settlement, coming on the heels of the Do Not Track Me Online Act introduced by Jackie Speier last month, may indicate how the proposed legislation will be revised as it moves through the legislature," says Andrew Martin, an attorney with technology law firm Scott & Scott, LLP. "As it stands, Congresswoman Speier's legislation endorses no limits on opt-outs-that is, once a consumer opts-out, they are opted-out until they change their mind. Although the FTC's settlement with Chitika is a step in the right direction for consumer privacy online, it ultimately could serve to weaken the Do Not Track Me Online Act." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

FTC Announces First Monetary Penalty Under Blog Endorsement Rules

The Federal Trade Commission (FTC) announced on March 21st a 30-day public comment period regarding the proposed settlement agreement with Legacy Learning Systems, Inc. and Lester Gabriel Smith for violations of the FTC's "Guides Concerning the Use of Endorsements and Testimonials in Advertisement." The settlement includes the first ever monetary component for a violation of the blogger endorsement rules-a payment of $250,000. "The original complaint alleged that Smith posted reviews for the instructional videos offered for sale by Legacy while failing to mention that Smith, as the endorser, receives financial compensation for the sale of Legacy products," says Andrew Martin, an attorney with the technology law firm Scott & Scott, LLP. "This settlement makes clear that failure to stay abreast of, and invoke the necessary internal controls to comply with, changing online marketing and privacy regulations is a risky strategy for any company doing business online." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

SEO Company Found Liable for Contributory Trademark Infringement

The U.S. District Court for the District of South Carolina entered judgment on March 14 against a search engine optimization firm based on the company's role in helping to create and host a website used to market counterfeit golf clubs. The plaintiff in the case, Roger Cleveland Golf Company, had alleged that the defendant, Bright Builders, knew or should have known that it was hosting and otherwise helping to market a site (under the not-so-subtle domain copycatclubs.com) that was being used illegally to infringe the plaintiff's trademarks, and that Bright Builders should be held liable for damages even without having received actual notice of infringement. "SEO companies and web hosts need to pay close attention to the outcome in this case," says Christopher Barnett, an attorney with Scott & Scott, LLP. "There is no equivalent under U.S. trademark law to the safe harbor provisions of the DMCA in the copyright arena, which means that aggrieved trademark owners do not have to make ISPs aware of trademark infringements before filing suit. The disparate damages awards in this case ($770,750 against Bright Builders, compared to $28,250 against the site owner) should serve as strong incentive for ISPs to maintain a reasonable level of awareness regarding how their services are being used." For more information, please contact Mr. Barnett at 800-596-6176, or cbarnett@scottandscottllp.com.

Judge Rejects Google Books Settlement

Federal Judge Denny Chin recently rejected the $125 million proposed 2008 settlement between Google and the various book publishers and authors who had alleged that Google's plan to digitize of every book ever published would violate copyright law. Judge Chin cited a multitude of concerns in his opinion rejecting the settlement, while focusing on the underlying anti-trust concerns and copyright infringement issues. "Judge Chin acknowledged that while the public would benefit from the 'creation of a universal digital library,' the proposed agreement went too far," says Andrew Martin, an attorney with the technology law firm Scott & Scott, LLP. "The judge apparently was persuaded by the fact that a significant number of copyright owners opted out of the settlement, a fact that he repeatedly referenced in his opinion. Ultimately, though, Judge Chin reiterated what the Supreme Court already has held: that determinations on how best to pursue and preserve the objectives of the Copyright Clause should be handled by Congress, not by the courts." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

Top Tips to Reduce Exposure From Software Audits

The Business Software Alliance ("BSA") and Software & Information Industry Association ("SIIA") represent the interests of large software companies such as Microsoft, Adobe, and Autodesk, among others. Among other industry-advocacy programs, the BSA and SIIA are well known for demanding software audits from companies based on allegations that those companies are using unlicensed software. Businesses that are unable to produce evidence of license ownership (usually in the form of purchase receipts) for software installed on their computers typically resolve such matters in out-of-court settlements involving fines and enhanced license-compliance obligations. Software audits themselves often are expensive undertakings, especially when coupled with the expense of purchasing licenses for software that is needed for business operations. According to Keli Johnson, an attorney with Scott & Scott, LLP: "Businesses can mitigate software-audit exposure by taking a few critical steps:

New York Court: File Internet Copyright Lawsuits in Plaintiff's Location

On March 24, the Court of Appeals of New York held that New York-based plaintiffs in Internet copyright-infringement lawsuits may, under New York law, sue infringers in federal courts located in New York, rather than resorting to courts located in the infringers' jurisdictions. The federal trial court in the case previously had reached a different conclusion, holding that New York's long-arm jurisdiction statute did not give New York-based courts jurisdiction to hear Penguin Group's complaint over the unauthorized, online distribution of four books by the Oregon-based defendant. However, the Court of appeals - New York's highest court - disagreed, stating that the "intangible and ubiquitous" nature of the Internet complicates traditional analyses into where tortious injuries occur. "This case represents a significant win for content owners and publishers, since it means that state laws may give them the ability to conduct their rights-enforcement activities at home, rather than in infringers' jurisdictions," says Christopher Barnett, an attorney with Scott & Scott, LLP. "However, the Court of Appeals left it to the trial court to determine whether an exercise of jurisdiction over the defendant would satisfy federal law. It will be interesting to see how Penguin is able to use this holding to its advantage in the litigation (and appeals) sure to follow." For more information, please contact Mr. Barnett at 800-596-6176, or cbarnett@scottandscottllp.com.

LimeWire Ruling Limits Damages on Copyright Infringement Claims

A federal judge ruled on March 11 to limit LimeWire's exposure in pending copyright-infringement litigation by allowing one damages award per each infringed copyrighted work in its lawsuit brought by record companies. The record-label plaintiffs had sought an award for each infringement by individual LimeWire users. Although LimeWire previously settled a similar copyright-infringement suit filed by music publishers for claims arising from its music file-sharing service, it is facing up to $1.5 billion in liability for alleged copyright infringement in the still-pending suit with aggrieved record companies. "Each infringed copyrighted work may result in an award of statutory copyright damages typically ranging from $750.00 to $30,000.00," says Keli Johnson, an attorney with Scott & Scott, LLP. "However, if a claimant can prove that a work was infringed willfully, then the statutory-damages limits increases to $150,000.00 per work, meaning that LimeWire's potential exposure in this case remains significant." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

U.S. Trade Representative Identifies 'Notorious Markets'

On February 28, the Office of the United States Trade Representative released the first, annual, stand-alone report listing so-called "Notorious Markets" - the most prominent physical and Internet-based markets dealing in pirated or counterfeit goods "that have been the subject of enforcement action or that may merit further investigation for possible intellectual property rights infringements." A copy of the report is available here. The report includes a number of well-known websites in different categories, such as ThePirateBay and torrentz.com in the "Bit Torrent Indexing" category and Baidu - the most visited site in China - in the "Linking" category. According to Christopher Barnett, an attorney with Scott & Scott, LLP: "The Office of the USTR previously published its Notorious Markets list within a larger, annual Special 301 Report, and it made the decision to issue a separate report in order to highlight the problem represented by these Notorious Markets. That action represents one more step in furtherance of the U.S. government's stated interest in curbing IP-rights violations domestically and worldwide." For more information, please contact Mr. Barnett at 800-596-6176 or cbarnett@scottandscottllp.com.

Supreme Court Grants Certiorari for Copyrighting Public Domain Works

The U.S. Supreme Court granted certiorari on March 7 in the case of Golan v. Holder, which now will be set for hearing to determine whether Congress has the legal authority to restore copyright protection to works long-held in the public domain. The case arose following the 1994 passage and implementation of the Uruguay Round Agreements Act, which purported to restore the copyrights in at least 50,000 foreign works in furtherance of federal trade obligations. Restoration of the copyrights means that included works - such as Prokofiev's Peter and the Wolf, for example, now only may be performed or recorded under licenses that may be cost-prohibitive for many performers. "The outcome of this case will be very interesting to watch," says Keli Johnson, an attorney with Scott & Scott, LLP. "Restoration of the copyrights in question affected not only the ability to perform the covered works in the future, but also the rights of performers who may have created recordings or derivative works based on those covered works in the past. Many performers' rights and livelihoods will hinge on the Supreme Court's decision." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

Twitter Settles with FTC Over Security Breach

Twitter reached a settlement on March 14 with the Federal Trade Commission regarding data security breaches that exposed users' information to hackers. The FTC had accused Twitter of failing to safeguard user privacy and of misleading its users about its security practices. The settlement does not include monetary damages. However, it does ban Twitter from misleading its users about security and privacy policies, and it also requires the microblogging site to establish and maintain an information-security program that is to be independently audited every two years. "The FTC's settlement with Twitter sends a clear message to online social networking sites about neglecting to secure users' data and implementing inadequate security practices," says Keli Johnson, an attorney with Scott & Scott, LLP. "However, it is equally important for users to be circumspect about sharing personal information online." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

House Subcomittee Votes to Repeal FCC Net Neutrality Rules

The House Commerce Subcommittee on Communications and Technology voted on March 9 to overturn the FCC's network neutrality rules adopted in December. The net neutrality rules require broadband service providers to allow their users to access all online content, including content from direct competitors. This vote follows an attempt in February by House Republicans to attach an amendment to a spending bill that would bar government funding of the FCC net neutrality program. "The net neutrality rules are disfavored by service providers and communications companies, which have argued that the FCC is exceeding its power to enact such requirements," says Keli Johnson, an attorney with Scott & Scott, LLP. "In addition, MetroPCS and Verizon have filed suit in a federal court to challenge the rules. It will be interesting to see how the pending litigation and legislative attacks on the rules affect their implementation." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

Proposed Bipartisan Online Privacy Bill of Rights Legislation

On March 10, Senators John McCain and John Kerry introduced legislation that would create an "online bill of rights." As it is currently drafted, this law would become the first comprehensive federal privacy law not governing a specific industry, and it is structured as a series of opt-in or opt-out requirements for data collection, storage, and transfer. "This interest from the federal government in online privacy issues is driven in no small part by the rise of social networking sites like Facebook and Twitter," says Andrew Martin, an attorney with Scott & Scott, LLP. "Although young people may have lived their entire lives online, it has taken older generations joining these social media sites in order for lawmakers to take notice of the potential exposure of personal information online." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

Courtney Love Settles Twitter Defamation Case

On March 3, Courtney Love finalized a settlement agreement with designer Dawn Simorangkir, who had filed a defamation lawsuit against the singer based on a series messages Love had posted to Twitter. Love reportedly agreed to pay Simorangkir $430,000 to settle the case, and many legal watchers are disappointed that this case will not go to trial. "The Love defamation case is the first major celebrity defamation case to be brought based a series of Twitter posts," says Andrew Martin, technology and new media attorney with Scott & Scott, LLP. "The case might have produced guidance on tantalizing legal questions regarding disparaging comments broadcast by influential celebrities on Twitter and how those comments are treated under traditional defamation law. The amount of the settlement seems to speak to uncertainty that both parties felt with respect to the strength of their legal arguments, so it appears these social media questions will remain unanswered for the time being." For more information, contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

Legal Concerns When Running Facebook Promotions

Facebook recently relaxed their requirements for running promotions on the social networking site. Companies that previously were effectively priced out of the Facebook promotions market are now taking advantage of the new policy to run their own sweepstakes or giveaways. However, the following legal issues must be addressed in order to run a successful Facebook promotion:

Judge Grants Sony Right to Subpoena IP Addresses

A federal magistrate for the Northern District of California granted Sony the right to subpoena information from Google, YouTube, and Twitter consisting of the IP addresses of users who visited web pages operated by an alleged hacker of Sony's PlayStation 3 gaming console. Sony claims that George Hotz, a 21 year-old New Jersey resident, has distributed instructions and other files that allow users to gain control over, or jailbreak, their PlayStation 3 consoles. Sony is claiming that the distribution of these materials constitutes a violation of the Digital Millennium Copyright Act. "The subpoenas permitting Sony to collect the account names and IP addresses of every individual that accessed Hotz's jailbreaking files and instructions may raise the eyebrows of many of us concerned with Internet privacy issues, but it is important to understand that this information is to be used by Sony solely to show that Hotz distributed the instructions and that venue for the lawsuit is proper in the court where it was filed," says Andrew Martin, technology and new media attorney with Scott & Scott, LLP. "Sony and the defendant entered into a confidentiality agreement regarding the subpoenas, and that agreement is intended to prevent Sony from using any of the subpoenaed information for any other purposes, such as pursuing legal action against the downloaders." For more information, contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

New Guidance for Trademark Infringement Based on Search Keywords

On March 8, the Ninth Circuit Court of Appeals issued new guidance for cases involving claims of trademark infringement based on the use of registered marks as Internet search keywords. In its opinion (a copy of which is available here), the Ninth Circuit held that trial courts must evaluate such disputes holistically and not based on any rigid set of factors. Earlier in the case, the trial court had applied the so-called "Internet troika" - a set of three analytical factors including (1) the similarity of the competing marks at issue, (2) the relatedness of the competing goods or services at issue, and (3) the competing parties' simultaneous use of the Web as a marketing channel - to find that the defendant's use of the plaintiff's marks as paid search keywords constituted trademark infringement. The Ninth Circuit specifically rejected that approach, holding instead that the appropriate analytical factors will depend on the facts and context of each case. "This is the latest in a series of appellate decisions reflecting the courts' attempts to provide legal guidance on a very dynamic kind of trademark dispute," says Christopher Barnett, a trademark attorney with Scott & Scott, LLP. "Internet marketing in general - and search engine optimization in particular - can carry with it a diverse set of legal risks, the scope of which may be difficult to predict, as this case demonstrates." For more information, please contact Mr. Barnett at 800-596-6176 or cbarnett@scottandscottllp.com.

FTC Report Raises Concerns Regarding 'Patent Trolls'

In a 300-page report issued on March 7, the FTC has undertaken the task of trying to evaluate the effects of patent-enforcement remedies on the IP marketplace, especially the effects of so-called "patent trolls" - companies whose business models center on purchasing patents and then enforcing them against infringers. The report (a copy of which is available here) is based on information gathered during a series of hearings that commenced in December 2008, and it includes a number of recommendations intended to align patent-protection mechanisms with the public's interest in innovation and competition. Those recommendations include:

Senate Creates New Subcommittee on Privacy and Technology

On February 14, Senate Judiciary Committee Chairman Patrick Leahy announced the creation of a new subcommittee called Privacy, Technology and the Law, which will be chaired by Senator Al Franken. Among other things, the committee will oversee laws and policies that govern the collection, protection, use and dissemination of commercial information by the private sector. During the announcement, Senator Franken spoke of a desire to ensure Americans can "reap the rewards of new technologies while also protecting Americans' right to privacy." "Privacy legislation and litigation will continue to lead legal news for 2011," says Andrew Martin, a technology and new media attorney with Scott & Scott, LLP. "This new subcommittee is the latest in a series of reactionary measures related to privacy concerns arising as a result of the recent explosion in social media use. It is high time for careful consideration of online privacy issues." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

Motorola Hit With Trademark Lawsuit on Launch of Xoom

The day before the much-hyped, February 24 launch of its new Xoom tablet, Motorola was sued for trademark infringement by Xoom Corporation - an online payment processor - in the U.S. District Court for the Northern District of California. A copy of the complaint is available here. Xoom is seeking a permanent injunction against Motorola's alleged infringement of the XOOM® trademark along with damages (including treble damages) allegedly incurred as a result of Motorola's activities. "This case appears to involve a calculated risk by Motorola," says Christopher Barnett, a trademark attorney with Scott & Scott, LLP. "Even if it was previously unaware of Xoom's business, Motorola likely knew about Xoom's trademark from an early stage (Xoom owns the www.xoom.com domain name, for example). When Motorola applied to register its XOOM™ trademark with the USPTO, none of Xoom's registrations were identified as obstacles to registration. However, Motorola nevertheless must have been expecting a challenge from Xoom in the form of an opposition proceeding or a lawsuit. It appears to believe that there is sufficient dissimilarity between the products and services associated with the competing marks that its use of the term will be allowed to move forward." For more information, please contact Mr. Barnett at 800-596-6176 or cbarnett@scottandscottllp.com.

University of Texas Sues Car Wash for Trademark Infringement

In a complaint filed on February 16, the Board of Regents of the University of Texas have alleged that an Austin-area car wash business' replica of the iconic UT tower constitutes an infringement of UT's rights in three trademarks consisting of various depictions of the tower. (A copy of the complaint, with pictures, is available here.) The car wash owner reportedly spent approximately $3 million designing and building his 60-foot replica of the famous 300-foot tower, but he apparently did not expect that undertaking would implicate intellectual property rights held by UT. "This case presents a good example of how trademark disputes can arise from unexpected sources," says Christopher Barnett, a trademark attorney with Scott & Scott, LLP. "High-value projects incorporating pre-existing works in any form need to be accompanied by some measure of due diligence regarding third-party rights. However, UT's likelihood-of-confusion claims seem to be somewhat misplaced, in light of the fact that it is doubtful the defendant is offering educational services at the car wash. It will be interesting to see if the university amends its complaint to emphasize a trademark-dilution theory of liability. For more information, please contact Mr. Barnett at 800-596-6176 or cbarnett@scottandscottllp.com.

U.S. Announces Internet Freedom Policy

In a speech at George Washington University on February 14, Secretary of State Hillary Clinton laid out a new policy on Internet freedom intended to prevent autocratic governments from using Internet technology to repress dissent. In order to help ensure the broadest protection, the policy will back several different technologies representing multiple tools to fight repressive governments. "The State Department's announcement of this new policy has been construed by some to be at odds with their position on other Internet-based 'freedom initiatives,' such as Wikileaks," says Andrew Martin, a technology and new media attorney with Scott & Scott, LLP. "But the real question is how to reconcile this new policy with the so-called Kill Switch Bill which aims to defend U.S. infrastructure from a cyber-terrorist attack." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

Maryland Stops Asking Applicants for Social Media Passwords

The Maryland Department of Public Safety and Correction Services announced on February 22 that it is suspending its a policy of asking potential employees to reveal their social media site user credentials during the application process. Through a spokesperson, the Department stated that its reason for asking for this information was to screen applicants for gang affiliation. "There is no doubt that the Department can claim a legitimate interest in screening its potential employees for gang affiliation, but a social media policy that asks for applicants' credentials is not a good way to pursue that interest," says Andrew Martin, a technology and new media attorney with Scott & Scott, LLP. "No matter the intentions, a social media policy that is overbroad or overreaching can get employers into trouble-as was evidenced recently in well publicized Facebook firing law suit. Companies cannot ignore social media use in the workplace, but they should consult with experienced counsel when addressing it in a policy for all to see." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

House Seeks to Block FCC's New Net Neutrality Rules

The House of Representatives voted on February 17 in favor of an amendment to a spending bill that prohibits the Federal Communications Commission (FCC) from accessing government money to implement its new "net neutrality" rules, which are intended to ensure fair play among Internet service providers and to guarantee that consumers can access Internet content at prices and speeds that are comparable to those now available. Among other things, the new rules require broadband service providers to allow users access to all online content, including content from direct competitors. "The FCC has been on the receiving end of tough criticism over its claim of authority to implement the new net neutrality rules," says Keli Johnson, an attorney with Scott & Scott, LLP. "The House's proposed amendment, if passed in the final bill, likely will add a new wrinkle to that debate and may affect the course of litigation that already has been filed over the issue." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

University of Georgia Found Immune from Copyright Damages

A federal court in Georgia ruled in favor of the Board of Regents of the University of Georgia on February 24 in a case involving copyright infringement claims filed by a national pharmacy association. The association claimed the Board of Regents distributed questions from the association's licensing exam to students preparing to take its test. The court ruled that sovereign immunity protected the university from damages claims. "In many cases, state government entities may be held liable for damages only to the extent of waivers of sovereign immunity passed by their state legislatures," says Keli Johnson, an attorney with Scott & Scott, LLP. "Absent an appropriate waiver, damages claims may be impossible to prosecute. However, in this case the pharmacy association apparently intends to continue to pursue breach-of-contract and other claims that may not be so narrowly limited." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

Drudge Founder Settles Lawsuit Filed by Righthaven

The founder of the Drudge Report settled a lawsuit with "copyright troll" Righthaven, LLC, on February 17. Righthaven has become infamous over the past year by filing an estimated 239 lawsuits against various website operators. In those lawsuits, Righthaven has asserted claims of copyright infringement based on the re-posting of copyrighted material in a manner that is common with online media outlets. "Righthaven is considered by many online and new media players to be a scourge on the industry, though it appears from court papers that its process nevertheless may be technically proper," says Andrew Martin, a technology and new media attorney with Scott and Scott, LLP. "However, Righthaven has been filing suit against a large number of "mom and pop" sites, often collecting settlements averaging an estimated $5,000 per suit, using an interpretation of copyright law that does not take into account Internet norms. Essentially, it smells like copyright abuse." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

Media Bloggers Association Intervenes Against Righthaven

On February 23, the Media Bloggers Association - a non-profit organization with a mission of promoting the interests of Internet bloggers - filed an amicus curiae brief in a lawsuit filed by Righthaven, LLC, the now-notorious copyright "troll". In its brief to the U.S. District Court for the District of Nevada, the Association alleges that Righthaven's entire business model - which is dependent on "assignments" of the copyrights in works originally created by its newspaper-publishing clients - is fatally defective, because there is no evidence that the assignments encompass full ownership of the articles that are the subject of the lawsuits. "U.S. copyright law limits the ability to sue for copyright infringement only to bona fide owners of the works that are the subject of disputes," says Keli Johnson, an attorney with Scott & Scott, LLP. "Righthaven has sued more than 200 bloggers and web site owners for allegedly posting copyrighted content created by its clients. It will be interesting to see whether the Media Bloggers Association's argument regarding Righthaven's purported copyright assignments gains traction. If it does, Righthaven may have to drastically revise its legal strategies going forward." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

SIIA Wins Settlement in First European Anti-Piracy Lawsuit

The Software & Information Industry Association (SIIA) announced on February 22 that it had settled an anti-piracy lawsuit previously filed against a German eBay vendor who allegedly sold unauthorized copies of Adobe software. The German defendant's identity was concealed under the terms of the settlement agreement, but the seller agreed to pay a "five-figure sum to cover damages and...to stop selling the unauthorized software." The SIIA had alleged in its lawsuit that the seller had violated German trademark and copyright laws by purchasing Adobe software overseas, importing the software to Germany without authorization from Adobe, and then selling the software on eBay. "The SIIA tends to be aggressive in challenging both offers and purchases of unauthorized SIIA-member software via the Internet," says Christopher Barnett, an attorney with Scott & Scott, LLP. "We regularly counsel our clients to avoid software offered via Internet auction sites, because those transactions often involve counterfeit or otherwise unauthorized software licenses. In the event of an SIIA-initiated audit, purchase records from those transactions typically are rejected as proof of license-ownership, resulting in fines that must be paid by audited businesses in order to reach a settlement." For more information, please contact Mr. Barnett at 800-596-6176 or cbarnett@scottandscottllp.com.

Attachmate Customers Should Prepare for Audit Demands

Businesses deploying software published by Attachmate Corporation should strongly consider making an effort now to review their license-compliance status. Attachmate is a major player in markets for various IT-infrastructure software solutions, and it has demonstrated its willingness to pursue litigation in support of its copyright-enforcement interests. For example, in April 2008, Attachmate pursued and reached a $1.1 million settlement with the State of Montana after an audit revealed unlicensed software use on state-owned computers.

Cloud Agreements Will Be Affected by Developments in Privacy Law

It appears that Congress is taking seriously the mandate from the Obama Administration regarding Internet privacy issues. In February, Senate Judiciary Committee Chairman Patrick Leahy announced the creation of a new subcommittee called Privacy, Technology and the Law, which will oversee laws and policies that govern the “collection, protection, use and dissemination of commercial information by the private sector.” In March, Senators John McCain and John Kerry introduced proposed legislation that would create an “online bill of rights.” The McCain-Kerry law is poised to become the first comprehensive federal privacy law governing data collection, storage, and transfer. While these actions are aimed at addressing privacy issues as they implicate individual consumer rights, there is no limit to how impactful these laws could be in creating additional administrative and procedural requirements for the majority of cloud computing providers.

ISPs Can Get Burned By Their Customers’ Trademark-Infringements

Most Internet service providers are well versed in their obligations with regard to copyrighted content posted by their users. Sophisticated vendors know that the Digital Millennium Copyright Act (DMCA) gives them an important shield against claims of contributory copyright infringement resulting from their users’ actions, as long as the providers have a registered agent to receive claims from content owners and take prompt action to remove infringing content brought to their attention.

Tech Companies Concerned Over Washington State Software Legislation

On April 4, the Washington state legislature passed a bill making it a violation of the state’s unfair competition laws for a business to sell products in Washington “while using stolen or misappropriated information technology in its business operations,” provided that the business first receives notice of the alleged misappropriation. The law applies regardless of whether the theft or misappropriation takes place inside the state or even inside the USA – if a company based in China engages in software piracy in China, the Washington law still affects the sale of goods inside the state.

Facebook Promotions May Be Easy to Develop, but They Can Create Legal Liability

In December of 2010, Facebook relaxed the rules on creating and implementing promotions designed to drive user “Likes” to company Pages. It did so in part due to the marketing industry’s recognition that the value for each Like to a company Facebook page can be calculated in real dollars. For example, Sycapse, a social media management company, conducted a study that calculated the average value of a Facebook Like to be over $70 of extra spending by each user on the company’s goods or services. To capitalize on this interest in the platform, Facebook eased the process to set up a promotion from a technical perspective and no longer requires companies to obtain specific approval from Facebook for each promotion run on its platform. Despite this lowered bar to entry, companies and social media managers should take note that although Facebook relaxed its internal rules, each promotion still should be evaluated carefully in light of various state and federal laws that may be implicated when running this type of promotion.

Dance the Copyright Two-Step When Working With Developers

Businesses often rely on the talents of creative independent contractors when developing original works like software, marketing media, and product documentation, to name a few examples. Many business owners believe – mistakenly – that the fact they paid for the contractors to develop the creative works in question means their companies own those works. Other business owners hit a little closer to the mark and believe – still, though, mistakenly – that their companies always will own the works as long as they identify them as being “made for hire” in their agreements with the contractors. However, both sets of owners run the risk of failing to perfect their rights in those works, leading to the possibility of disputes and costly, unexpected licensing arrangements down the road.

Limewire Copyright-Litigation Woes Continue

In 2010, music-sharing website Limewire shut down amid allegations that it facilitated copyright infringement. Subsequently, a lawsuit brought by more than 30 music publishers was filed and settled under confidential terms. However, Limewire is still facing a lawsuit brought by 13 record companies, including Atlantic, Elektra, Interscope, Motown, Sony BMG, Virgin, and Warner Brothers, which is set for trial in May. (Music publishers and recording companies are able to pursue separate copyright-infringement claims based on the fact that they hold different rights -- the copyright in the composition for the former and the copyright in the actual sound recording for the latter.)

Do Not Track Me Bill Introduced in Congress

Last month, California Representative Jackie Speier introduced H.R. 654, the so-called Do Not Track Me Online bill, to Congress. The bill is the first response to the Federal Trade Commission’s December 2010 request for the establishment of a Do Not Track registry for online users that would be similar to the Do Not Call registry for telemarketing calls established in 2003. The Do Not Track Me Online bill calls for the FTC to establish regulations requiring covered entities (defined as companies engaging in interstate commerce that collect or store online data), to allow customers to opt out of online tracking. The bill provides for monetary penalties for violations of the bill, not to exceed $5 million for a related series of events.

Investments That Depend on Existing Creative Works Can Be Risky

Businesses often use famous creative works as source material for new marketing campaigns, construction projects or other investments. The Mona Lisa might serve as the subject of a new ad campaign for an printer manufacturer, or a cartoon character may be used to promote a new family-themed restaurant. However, while the payoff from such investments may be worth the price of entry (often in the form of licensing agreements with the owners of the pre-existing works), businesses that fail to exercise due diligence prior to incurring new costs can find themselves in the position of seeing their money wasted and their bottom lines exposed to legal liability.

White House Recommends New Measures to Combat IP Infringement

On March 15, 2011, the White House released its White Paper on Intellectual Property Enforcement Legislative Recommendations, outlining a number of proposals for preventing IP-rights violations and for empowering the U.S. government to more effectively enforce copyrights and trademarks, including new punishments proposed for violations.

Web Site Operator Faces Jail for Copyright Infringement

The U.S government continues to take strong measures against persons accused of illegally making copyrighted material available on the Internet. In a recent example, a Texas resident named Bryan McCarthy was arrested for criminal copyright infringement following an investigation by the Department of Homeland Security’s Immigration and Customs Enforcement division, and he now faces five years in jail for posting streaming copyrighted videos of live sporting events on his web site. McCarthy operated www.channelsurfing.net – a domain name that was seized by the government – which did not directly host any content itself, but which instead embedded content from other sites. Prosecutors allege McCarthy sold advertising on his web site and profited from the copyrighted material, earning approximately $90,000.00.

How to Handle Trademark Infringement on Facebook

Businesses are beginning to fully realize the immense marketing power of Facebook and other social media platforms. Users of these sites often log on daily to share personal information, pictures and videos, and informal product reviews and endorsements, presenting businesses with tremendous opportunities to engage and communicate directly with their customers. However, brand managers need to understand the dangers presented by this kind of communication and user-generated content. Users can infringe on the intellectual property rights of organizations, potentially reaching millions of users and diluting brands with the click of a button. Monitoring and protecting trademark rights on social media sites such as Facebook is a critical element in every brand management strategy.

SIIA Calls for More Flexibility in Cloud Security Requirements

The Obama Administration announced last week that it is considering expediting cloud computing certification for federal agencies by relaxing some of the security requirements issued by the General Services Administration (GSA) in November of 2010. This apparently is a response to comments issued by, among others, the Software and Information Industry Association (SIIA), which argued that the one-size-fits-all approach to cloud security requirements issued by the GSA in November was impractical and outdated. “The SIIA’s point is that the nature of services offered by some cloud platforms is such that they do not require the highest level of security measures, and I tend to agree with them,” says Andrew Martin, technology and new media attorney with Scott & Scott, LLP. “Different sets of requirements for different categories of web-based solutions likely will help to avoid forcing vendors to integrate inefficient and unnecessary functionality into their products. Private-sector organizations should consider a similar service category-based technique when evaluating cloud vendors in order to promote efficiency during negotiations for the service.” For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

SIIA Calls for More Flexibility in Cloud Security Requirements

Microsoft Accuses Mexican Drug Cartel of Software Piracy

Microsoft recently claimed that the “La Familia” Mexican drug cartel is peddling counterfeit Microsoft Office suite software in Mexico and using the profits of those sales to help fund its drug trade and other illegal activities. Microsoft claims it found the cartel’s “FMM” mark stamped on the counterfeit software packages. “Microsoft may struggle to prevent the duplication of copyrighted software in this instance, because Mexican officials have been engaged in a deadly, ongoing war with the cartels,” says Keli Johnson, an attorney with Scott & Scott, LLP. “Although the Mexican government likely is willing to work with U.S. officials to crack down on software piracy and copyright infringement, such enforcement efforts have taken a back seat to prevention of other criminal activities that have been ripping apart the country.” For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

New Digital Copyright Laws Promoted in Annual IP Report

The annual U.S. Intellectual Property Enforcement Report issued by the Obama administration this month proposes changes to the nation’s copyright laws in an effort to combat Internet piracy and digital copyright infringement. Although no specific proposed language is included in the report, it broadly urges Congress to work from legislative proposals to improve intellectual property enforcement and online piracy prevention. The report will be sent to Congress in an effort to spawn a bill that will supplement the Digital Millennium Copyright Act. “Although the Intellectual Property Enforcement Report does not propose many specifics, previous reports have been used as bases for legislation,” says Keli Johnson, an attorney with Scott & Scott, LLP. “Based on the tenor of the report, any resulting legislation likely will incorporate stricter copyright infringement controls.” For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

Senator Leahy Seeks Google’s Input on Anti-Piracy Bill

U.S. Senator Patrick Leahy has been seeking input from Google and other companies ahead of a Senate hearing on February 16 for the Combating Online Infringement and Counterfeits Act (COICA), a bill proposed late last year. The bill would require Internet service providers to actively participate in preventing online piracy. Senator Leahy invited Google, Visa, Verizon, and other companies to testify at the Senate hearing, but so far only Visa and Verizon have accepted the invitation. In addition to new regulations for Internet service providers, the legislation also would facilitate the government’s ability to shut down web sites linked to online piracy and copyright infringement, in part by giving the Department of Justice the authority to shut down access to overseas sites. “The proposed legislation already has been amended to appease critics concerned with granting the government too much authority over Internet service providers and domains,” says Keli Johnson, an attorney with Scott & Scott, LLP. “The bill has support from copyright owners seeking to protect their work online. However, it may yet be modified further to avoid overly burdensome the requirements for Internet service providers.” For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

New Media Risks and Brand Management

All companies understand the value of building and protecting a brand, but most do a poor job of protecting it against the risks posed by the ever-increasing power and influence of new media. Three of the most prevalent ways that new media can be used to tarnish a company’s brand are: 1) establishment of gripe sites; 2) social media use by current employees; and 3) social media use by former employees. Gripe sites are websites erected specifically to complain about or criticize a brand, and typically use URL addresses similar to the brand they are criticizing. Once a gripe site is established, organizations often encounter what may be insurmountable difficulty in shutting the sites down. For employees, both current and former, carefully drafted policies and employment agreements may be helpful in mitigating new-media risks. According to Andrew Martin, an attorney with Scott & Scott, LLP: “Instead of attacking gripe sites after the fact, the better option often is to try to register gripe-oriented domain names to stop others from setting up the negative sites. In addition, organizations should implement acceptable Internet use policies that curb new-media abuses by current employees, and they also should consider the possibility of post-termination incentives to prevent former employees from posting harmful content to the web.” For more information on how to protect your company from online brand attacks, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

Tech Industry Heavyweights Supporting Microsoft Against i4i

On February 2, Red Hat, Verizon, and Hewlett-Packard filed a joint amicus brief in the U.S. Supreme Court in support of Microsoft’s appeal against a patent-infringement injunction won in May 2009 by i4i, Inc. i4i had claimed that an XML feature in Microsoft’s Word software violated its patent rights, and the injunction, which took effect on January 11, 2010, required Microsoft to stop selling copies of Word that included the disputed technology. “The common concern among Microsoft and its supporters is the fact that software patents – like other kinds of patents – often are easier to obtain at the USPTO than they are to attack in litigation,” says Christopher Barnett, an attorney with Scott & Scott, LLP. “Many large, software- and tech-industry stakeholders have their eyes fixed on this case, because it gives the Supreme Court another opportunity to provide meaningful guidance on the proper way for trial courts to assess infringement claims pertaining to software patents.” For more information, contact Mr. Barnett at 800-596-6176 or cbarnett@scottandscottllp.com.

Patent Reform Approved by Senate Judiciary Committee

On February 3, the Senate Judiciary Committee voted to approve S. 23, the Patent Reform Act of 2011. The bill would include a number of provisions to address the review of patents after they are granted by the U.S. Patent & Trademark Office. The bill does not include any new law related to “business method patents,” which the U.S. Supreme Court refused to invalidate in its 2010 opinion in the Bilski v. Kappos case. However, senators on both sides of the aisle on the committee have voiced strong objections to that kind of patent and have indicated that they are ready to introduce either amendments or new legislation to curb (or prohibit) the availability of such patents. The House has yet to introduce complementary patent-reform legislation. “IP stakeholders and practitioners have been waiting for years for reforms to the nation’s patent laws,” says Christopher Barnett, an attorney with Scott & Scott, LLP. “The patent prosecution process is notoriously slow and cumbersome, and the system is weighted down with claims related to patents that arguably do not relate to the kinds of technologies that should be considered patentable. It will be very interesting to see if both houses of Congress can manage to agree on meaningful legislation that the President is willing to sign.” For more information, please contact Mr. Barnett at 800-596-6178 or cbarnett@scottandscottllp.com.

Ford Sues Ferrari over F-150® Trademark

Ford Motor Company has filed a trademark-infringement lawsuit against Ferrari North America based on the latter’s promotion of the “F150,” a new Formula 1 race car. In its February 9 complaint, Ford claims that Ferrari’s use of F150 is likely to dilute its well-known F-150® trademark, which it uses in connection with its line of light trucks, and to cause confusion regarding the source of Ferrari’s products. A copy of the complaint is available here. Ferrari has responded with a February 10 press release, in which it confirms that it has no intention of using the F150 mark for any production vehicle and that, going forward, it will refer to the car only using its full name: “Ferrari F150th Italia.” “Ford certainly has an obligation to protect its valuable brands, but litigation here is premature,” says Christopher Barnett, a trademark attorney with Scott & Scott, LLP. “Ford’s claims of dilution and, especially, likelihood of confusion seem to be weak. Especially in light of Ferrari’s apparent willingness to compromise with regard to future references to the car, it would have made more sense to seek a mutually beneficial agreement, such as one allowing Ford to use the Formula 1 reference to the benefit of its truck line. Then again, Ferrari is owned by Fiat – a controlling shareholder of Chrysler – which may make that sort of agreement problematic.” For more information, please contact Mr. Barnett at 800-596-6176 or cbarnett@scottandscottllp.com.

Google Claims Microsoft's Bing Copies Search Results

In a report released February 1, Search Engine Land’s Danny Sullivan broke a story about a “sting operation” run by Google against Microsoft in an attempt to prove that Microsoft’s Bing search engine copies Google’s search results. Google engineers apparently injected illogical entries in Google search results and found that the same bad data found its way into Bing’s results some time later. Microsoft has denied that it copied Google’s search algorithm. However, it has admitted to culling search data from users who install the Bing toolbar, opting-in to send use data to Microsoft servers. “While I expect an ongoing media battle to be waged by both sides over this issue, I do not expect to see Google file a lawsuit over the alleged copying,” says Andrew Martin, a technology and new media attorney with Scott & Scott, LLP. “Unless Google somehow managed to copy Google’s search algorithm, U.S. copyright laws probably provide no remedy for this kind of activity.” For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

FCC Commissioners To Testify About Net Neutrality Rules

All five FCC Commissioners have been asked to testify on February 16 before the House Communications & Internet Subcommittee regarding the Internet neutrality rules approved by the FCC on December 21. Those “net neutrality” rules require Internet service providers to grant all users equal access to their networks and to certain web sites. The rules were met by almost immediate legal challenges from Verizon and MetroPCS disputing the FCC’s authority to regulate broadband Internet and arguing that the FCC had overstepped its authority. However, despite the legal challenges to the net neutrality rules, the FCC now is turning its attention to extending broadband to rural areas. “The House sub-committee hearing will likely include pointed questioning regarding the FCC’s authority to issue the net neutrality rules,” says Keli Johnson, an attorney with Scott & Scott, LLP. For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

Facebook Firing Settles Out of Court

A possibly precedent-setting employment and new media law case settled out of court on Monday, February 7th, a day before it was set for trial. The suit was brought by the NLRB after an ambulance company employee was fired due to postings she made to her Facebook account criticizing her employer. “A decision by the Board could have given us insight into their take on the social media question as it pertains to employment law—specifically, how much of what is posted to Facebook or Twitter should be considered protected activity,” says Andrew Martin, a technology and new media attorney with Scott & Scott, LLP. “Even though there is some disappointment that a ruling likely will not be forthcoming, the facts in this case were muddied by the circumstances surrounding the firing, and it is likely that the Board could have avoided the thorny social media issues in favor of a ruling on a different point of law. However, a case was filed on February 4th against Student Transportation of America that involves a simpler set of facts, that that case might give the Board a better opportunity to present its take on social media policies.” For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

Considering an Asset Purchase? Due Diligence is More than Reviewing a Checklist.

Every savvy business owner understands the importance of due diligence when engaging in an M&A transaction, but the Third Circuit issued a ruling that serves to underscore the point that due diligence must be accompanied by a thoughtful risk assessment exercise. On January 21st, 2011, the Third Circuit ruled that a buyer who purchases a seller’s assets may be liable for the seller’s late contributions to certain benefit plans. Einhorn v. M.L. Ruberton Construction Co., No. 09-4204 (3d. Cir. 2011). The court reasoned that interest in federal labor law policy is more important than common-law, “successor-liability” doctrines that normally shield buyers from a seller’s liabilities (unless the buyer is merely a re-organization of the seller).

Sony Threatens to Ban Copyright Infringers From PS3 Services

In February, Sony posted a notice on its official PlayStation blog threatening to permanently ban users from the company’s online PlayStation services if those users deploy circumvention devices or software to “jailbreak” their PlayStation consoles, thereby enabling those consoles to play pirated or otherwise unauthorized game software. Sony considers such activities to be a violation of the PlayStation software license agreement and a breach of the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA). The announcement represents the latest in a series of anti-PlayStation-jailbreaking actions by Sony, which previously sought a temporary restraining order against hackers who published a how-to guide for PS3 jailbreaking.

IBM Software Audits Complicated by Diverse License Types

Businesses that have endured software audits from industry groups like the BSA and the SIIA or from software publishers like Autodesk likely are familiar with the basic audit process of counting the total number of installations for audited products and comparing those installations against the number of licenses previously purchased to support them. There are some common variations on that general theme used by some publishers – notably, Microsoft – involving connections to server software by other computers on the network. However, for the most part, the numbers of different kinds of licenses at issue are relatively limited.

Unauthorized Employee Use of Company Information Under the Computer Fraud and Abuse Act

In 1986, Congress passed the Computer Fraud and Abuse Act, or CFAA, which established criminal liabilities for unauthorized access to information stored on a protected computer. Since that time, the CFAA has been amended to keep up with new privacy concerns and, in some cases, civil liability has been attached. The typical CFAA claim is asserted by a party against an unrelated entity accused of stealing computer files for personal gain. However, in cases where a company is seeking to prosecute one of its own employees for accessing protected files, the meaning of the phrase “without authorization,” an element of any CFAA claim, is hotly contested.

What Does it Mean to “Trademark” Something?

Many business owners seem to have an inaccurate grasp of what it means to acquire trademark rights in a word, phrase, logo or other item capable of serving as a trademark. Usually in the context of a discussion of filing an application to register a trademark with the U.S. Patent & Trademark Office, many practitioners often hear (and some, unfortunately, often say) some derivation of: “It is time to trademark that slogan.” This inaccurately conveys the sense that all trademark rights in that slogan depend on registration with the USPTO. Not so.

E-discovery Risks in Social Media Use for Companies

Many companies today have their own company Facebook Pages, Twitter accounts or blogs. It is estimated that 4 out of 5 companies with more than 100 employees will utilize social media platforms to communicate with their current customers and to market to potential ones. These companies understand the value of participating in the online marketplace. What is not widely understood, however, is that companies are obligated to store and maintain social media communications as “electronically stored information” or ESI in the same way as they are obligated to store e-mail or written communications. Courts require companies to have document retention policies in place to allow the companies to access and produce such ESI during the discovery phase in the case of litigation.

Congress Considering Legislation To Create Internet Kill Switch

As Egypt’s government seized control and cut off that nation’s access to the Internet last week, U.S. Senator Joseph Lieberman reintroduced the “Protecting Cyberspace as a National Asset Act of 2010” legislation, commonly referred to as the Internet Kill Switch Bill. Although the timing unintentionally coincided with the events in Egypt, sponsors of the bill have no intention to abandon the legislation.

Federal Judge Upholds USPTO's Suspension of Lawyer

The United States District Court for the District of Columbia affirmed on January 4 the U.S. Patent and Trademark Office's five-year suspension of an attorney. The USPTO excluded attorney John Halvonik of Rockville, Maryland from practicing before the USPTO for five years on a finding that Halvonik violated a number of provisions of the USPTO's Code of Professional Responsibility, which includes disciplinary rules governing conduct of attorneys practicing before the Office. The USPTO found that Halvonik committed multiple willful and egregious acts of professional misconduct in violation of the Code, including commingling client and personal funds, failing to promptly refund client fees that had not been earned, and neglecting to prosecute client matters in a timely manner. "Attorneys must be careful to abide by the rules of professional conduct of their state bar and any agency or office before which they practice," says Julie Machal-Fulks, partner at Scott & Scott, LLP. "The USPTO received complaints about Halvonik and thereafter concluded he had engaged in misconduct." For more information, please contact Ms. Machal-Fulks at 800-596-6176 or jfulks@scottandscottllp.com.

USPTO Announces Discussion Forum for Rules Comments

The U.S. Patent & Trademark Office recently announced the implementation of new, online discussion tools designed to give IP owners and practitioners an opportunity to provide public comment on how the USPTO can update and improve the Manual of Patent Examining Procedure (MPEP) and Trademark Manual of Examining Procedure (TMEP). The Office also recently announced that it would be maintaining an index of all electronic forms available through the Trademark Electronic Application System (TEAS). Previously, in order to determine the forms available online, it was necessary to drill down through several categories of filings. "The USPTO continues to demonstrate a commitment to transparency and to minimization of bureaucratic inefficiency," says Christopher Barnett, a trademark attorney with Scott & Scott, LLP. "Practitioners should find both of these new resources to be useful tools, and I expect that each should help to facilitate positive developments for the prosecution of registrations at the USPTO." For more information, please contact Mr. Barnett at 800-596-6176, or at cbarnett@scottandscottllp.com.

Intel and Nvidia Resolve Patent Dispute With License Agreement

A patent infringement battle between Intel and Nvidia started in 2009 when the chip maker sued Nvidia regarding a chipset license agreement between the two companies that allegedly was not valid for Intel's then-current and future generation CPUs with integrated memory controllers. Nvidia responded, alleging that the suit was part of Intel's plan to push competitors out of the market. The two companies have resolved their dispute with a $1.5 billion software license agreement in which each party will license some of its technology to the other. Intel and Nvidia will gain access to parts of each others' patent portfolios (excluding Intel x86 designs and flash memory). "Software license agreements are excellent tools for helping companies with valuable software products resolve a dispute and find a mutually beneficial arrangement," says Scott & Scott, LLP managing partner Robert Scott. "License agreements need to be carefully negotiated documents in order to allow companies to leverage their intellectual property and gain access to technology previously out of reach or deemed too costly to develop independently." For more information, please contact Mr. Scott at 800-596-6176 or rjscott@scottandscottllp.com.

Department of Justice May Block Google Acquisition of ITA

The Justice Department is considering anti-trust and anti-competition litigation against Google following its deal to acquire ITA Software Inc. ITA powers airline booking web sites, such as Kayak.com, Hotwire.com, American Airlines, and Continental Airlines. Although no formal decision has been made to challenge this deal, some critics argue that it effectively would allow Google to control the online travel industry. "Google needs to demonstrate that this acquisition will not give it an unfair competitive advantage over its rivals," says Keli Johnson, an attorney at Scott & Scott, LLP. "If the Justice Department pursues anti-trust litigation, Google may not be allowed to acquire ITA." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

Sony Requests TRO Against Hackers

On January 12, electronics giant Sony, maker of the PS3 video game system, filed for a temporary restraining order against three hackers who published a PS3 "jailbreak" on the Internet that would free the PS3 system to run unauthorized games and other applications. The company claims that the release of this jailbreak hack is a violation of the Digital Millennium Copyright Act (DMCA) anti-circumvention provisions and that it will significantly affect the market and sales of authorized PS3 games. "It will be interesting to see how this plays out for Sony in light of the ruling by federal regulators this past summer that similar 'jailbreak' technology used on Apple iPhone devices was lawful," says Andrew Martin, media and technology attorney with Scott & Scott, LLP. For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

AP Announces Settlement with Shepard Fairey

The Associated Press announces on January 12th that it had reached a settlement in ts copyright lawsuit against Shepard Fairey, the New York-based street artist who created the iconic "HOPE" image of Barack Obama. In a statement regarding the settlement, the AP said that "neither side surrenders its view of the law," and that the two sides have agreed "to work together going forward with the Hope image and share the rights to make the posters and merchandise bearing the Hope image." The monetary terms of the settlement were not described in the statement. According to Christopher Barnett, an attorney at Scott & Scott, LLP: "The interesting legal questions involved in this lawsuit - including the extent to which news photography deserves copyright protection and the related boundaries of 'fair use' - remain undecided. However, a March trial date in this case remains in place for the purpose of deciding related claims against companies that sold merchandise bearing the 'HOPE' image, so this litigation may yet spawn important precedent." For more information, please contact Mr. Barnett at 800-596-6176, or at cbarnett@scottandscottllp.com.

Microsoft Atttempting to Halt Apple's Registration of APP STORE Trademark

Microsoft and Apple are in the midst of a fight to determine whether Apple will be allowed to register APP STORE™ as a trademark with the U.S. Patent & Trademark Office. In a motion for summary judgment filed January 10 at the USPTO's Trademark Trial and Appeal Board, Microsoft alleged that the term is used widely to describe the entire category of marketplaces into which Apple's well-known App Store falls, rendering the term "generic" and ineligible for protection as a trademark. Apple disagrees, saying that the term merely describes its own store, rather than the whole class of such stores, and that the public has come to associate the term exclusively with Apple's store. "The line between a generic mark and a descriptive mark is rarely a bright one," says Christopher Barnett, a trademark attorney with Scott & Scott, LLP. "Apple clearly has an incredible incentive to fight Microsoft's motion, and I would not be surprised to see the TTAB deny Microsoft's motion and let the case play itself out, so that each side has a full opportunity to offer evidence in support of its position." For more information, please contact Mr. Barnett at 800-596-6176, or at cbarnett@scottandscottllp.com.

Supreme Court Refuses to Halt Price-Fixing Suit Against Music Labels

On January 4, the Software & Information Industry Association (SIIA) announced its fifth annual forum on the adoption of cloud-based technologies by public sector organizations. Formerly known as SaaSGOV, SIIA has rebranded its forum to capitalize on the recently announced federal "cloud-first" policy. "SIIA's annual forum is re-invigorated this year, as the federal government officially adopted a pro-cloud position in the midst of the frenzy of cloud computing interest that erupted in 2010," says Andrew Martin, technology attorney with Scott & Scott, LLP. "Hopefully, many conversations will occur between private and public-sector cloud experts at this conference to drive cloud computing standards for years to come." For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

SIIA Announces CloudGOV Annual Forum

Microsoft confirmed that its Business Productivity Online Suite cloud offering, the precursor to the upcoming Office365 Google App killer, experienced a data breach on December 22. The breach of users' Offline Address book data occurred due to a configuration error across data centers in North America, Europe and Asia. "Though relatively minor in scope, Microsoft's breach highlights the kinds of questions businesses and individuals should be asking when making a decision to place critical data in the cloud," says Andrew Martin, technology attorney with Scott & Scott, LLP. "Though governments are taking steps to establish baseline rights for cloud users, at this point, the only way to address privacy and security issues is through the contract with the cloud service provider." For more information, please contact Mr. Martin at 214-999-00880, or amartin@scottandscottllp.com.</</body>

Federal Court Validates Contributory Cybersquatting Claim

A federal judge ruled on Wednesday against a motion to dismiss a cause of action for contributory cybersquatting brought by Microsoft against several defendants accused of establishing domain names constituting infringements of the software giant's trademarks. The Court held that contributory cybersquatting is a valid cause of action, though it noted that the claim requires a showing of bad faith by the defendants. "In order to establish a cause of action for cybersquatting under the Anti-Cybersquatting Consumer Protection Act, a plaintiff must prove (1) that the defendant registered, trafficked in, or used a domain name; (2) that the domain name is identical or confusingly similar to a protected mark owned by the plaintiff, and (3) that the defendant acted in bad faith," says Keli Johnson, an attorney at Scott & Scott, LLP. "This ruling may have wide-ranging implications for web sites designed to imitate more well-known sites in order to divert Internet traffic." For more information, please contact Ms. Johnson at 800-596-6176 or KJohnson@scottandscottllp.com.

Courtney Love Twitter Defamation Suit Set for Court

Clothing designer Dawn Simonrangkir filed a defamation suit against rock musician Courtney Love based on a series of posts the celebrity made to her Twitter account. The suit, originally filed 2 years ago, will be heard by Los Angeles court on January 18, as the parties were apparently unable to reach a settlement. "The outcome of this case will turn on how the court views posts to social media sites by high-profile individuals as compared to traditional news media. If the court decides that celebrities should be held to the same standard as a news outlet when it comes to false or damaging statements of fact, then Love's case will take a considerable hit. She likely will be forced to fall back on her long-shot 'Twitter made me do it' defense," says Andrew Martin, media and technology attorney with Scott & Scott, LLP. For more information, please contact Mr. Martin at 800-596-6176 or amartin@scottandscottllp.com.

Responding to Autodesk Audits

The BSA and SIIA are not the only organizations pursuing business for software copyright infringement. Though it is a member of both the BSA and SIIA, Autodesk, which manufactures the popular design software AutoCAD, often pursues audit targets on its own.

Autodesk Audit: The Importance of Serial Numbers

In many software audits, the auditing entity like the Business Software Alliance or the Software & Information Industry Association requires a dated proof of purchase to demonstrate when a license for a software product was acquired. However, in audits initiated by Autodesk, the serial number can play a crucial role in demonstrating ownership.

Another Court Ruling Against Autodesk in Software Dispute

Many businesses that use software published by Autodesk are familiar with the company’s vigorous copyright enforcement program. Autodesk is one of the most active software publishers when it comes to threatening litigation over allegedly unlicensed use of its well-known computer-aided design products, such as AutoCAD, and it regularly targets businesses of all sizes demanding costly and distracting audits and settlements, often based solely on the word of unidentified informants.

Google Requires Reciprocity For Data Sharing

Google recently amended its terms of service to require reciprocity to import contacts into another application, effectively banning Facebook from accessing its Contact API. Although Facebook entered into reciprocity agreements with Yahoo and Hotmail for the same data sharing features, Facebook does not allow reciprocity for sharing e-mail addresses and contact information with Google. "The social networking site has come under fire in the past for failing to provide sufficient security to protect its user's privacy," according to Keli Johnson, an attorney with Scott & Scott, LLP. "However, because Facebook currently engages in similar agreements with Yahoo and Hotmail, it willbe difficult for the social networking site to cite privacy concerns for failing to provide reciprocity. Ultimately, Google may determine there is value in exchanging data with Facebook and its many users." For more information, please contact Ms. Johnson. at 817.722.3962 or KJohnson@scottandscottllp.

Microsoft Makes a Big Move to the Cloud

A new product offering called Office 365 is Microsoft's latest cloud computing offering. Office 365 is a cloud productivity platform incorporating elements of Microsoft Office, SharePoint, Exchange, and Lync. Office 365 is marketed as a comprehensive productivity and communication cloud application targeting both small-to-medium and enterprise markets. While Office 365 will not officially be released until sometime next year, beta testing is proceeding with "a few thousand organizations in 13 countries and regions," according to Microsoft's press release. "The Terms and Conditions posted to the beta sign-up website are brief, but they do indicate that Microsoft is avoiding the issues with data storage and transfer present in the European Union by representing that no European Union country will host any data stored to the Office 365 cloud," says Andrew Martin, an attorney with Scott and Scott, LLP. For more information, contact Mr. Martin at 214.999.2918 or amartin@scottandscottllp.com.

RIAA's Legal Fight Against Minnesota Woman Continues After New $1.5 million Verdict

On November 3, a federal jury determined that Jammie Thomas-Rasset, of Brainerd, Minnesota, should pay $1,488,000.00 in copyright damages to the Recording Industry Association of America (RIAA). This latest award follows two previous damages awards - one for $222,000.00 and a second for $1.92 million - both of which were subsequently abandoned. Ms. Thomas-Rasset has maintained her innocence from the beginning of the legal saga, and has stated that she cannot pay any amount to settle the matter. Her attorneys have indicated that they would appeal the verdict as being unconstitutional. According to Christopher Barnett, an attorney at Scott & Scott, LLP: "Both parties to this lawsuit probably wish at this stage that the matter would just go away, but neither can afford to concede - the RIAA cannot let a person who is, from their perspective, an unrepentant copyright violator escape punishment, and the defendant cannot pay a statutory damages award for copyright infringement. It is understandable that the RIAA has stopped asserting these types of claims against individuals who download music over the Internet." For more information, contact Mr. Barnett at 800.596.6176 or cbarnett@scottandscottllp.com.

Food Magazine Learns Important Lessons About Web Content

Public interest in Cooks Source, a food magazine, spiked recently after members of the magazine's editorial staff were caught after apparently copying the substance of a food blogger's cooking article and then reposting it as the magazine's own content. However, after being confronted by the blogger, the editors appear to have compounded their original error by belittling the blogger's concerns and claiming "public domain" entitlement to the original work. The incident subsequently became the kind of online PR headache that gives many business owners nightmares. "Copyright protection in recipes usually is fairly thin, but the blogger's article here appears to have included additional editorial content that could be copyrightable," according to Christopher Barnett, an attorney with Scott & Scott, LLP. "Likely worse for the magazine's editors, however, is the fact that they failed to appreciate their magazine's exposure to negative press from social networking. Businesses must learn that any confrontational communication sent to third parties all too easily can become the subject of an Internet publicity disaster." For more information, contact Mr. Barnett at 800.596.6176 or cbarnett@scottandscottllp.com.

Congressmen Send Letter to Facebook Regarding Privacy Practices

On October 18, US Represenatives Edward Markey and Joe Barton sent a letter to Facebook co-founder and CEO Mark Zuckererg demanding that Facebook answer 18 questions regarding its privacy practices. A recent Wall Street Journal article reported that a number of Facebook apps inadventently transmitted tens of millions of users' personal information. The congressmen stated that, "given the number of current users, the rate at which that number grows worldwide, and the age range of Facebook users, combined with the amount and nature of information these users place in Facebook's trust, this series of breaches of consumer privacy is a cause for concern." According to Ilan Jenkins, an attorney at Scott & Scott, LLP, "the legislators' inquiry is one of many directed toward Facebook and is representative of the dangers that face software developers and online media companies." For more information, contact Ms. Machal-Fulks at 800.596.6176 or jfulks@scottandscottllp.com.

Sixth Circuit Recognizes Right to Privacy in E-mail

In a ruling handed down on December 14, 2010, the Sixth Circuit in United States v. Warshak held that a user of a third-party e-mail service has a reasonable expectation of privacy in the e-mails stored on the third-party’s servers. In the case, the government failed to obtain a search warrant based on probable cause before it compelled Warshak’s ISP to turn over his e-mail communications. The government argued that the Stored Communications Act of 1986 (SCA) permitted just such a warrantless search. In holding that Warshak had a reasonable expectation of privacy, the court struck that part of the SCA as unconstitutional.

Working On A License Agreement? Don’t Skimp On The License.

If you are working on a license agreement, don’t forget to carefully define what is and is not included within the scope of the license. “Scope creep” has the potential to contaminate the parties’ understanding of what the license includes and to damage the parties’ relationship. License agreements almost always include provisions to protect the parties, to provide for indemnity, to define appropriate limitations of liability, to set the extent of any warranties, and to set rules and effects of termination, but the license provision itself often receives inadequate attention.

Levi’s in Trademark Fight with Dolce & Gabbana Over Jeans

On January 10, 2011, Levi Strauss filed a lawsuit against Dolce & Gabbana based on claims that the Italian fashion icon infringed Levi’s registered, vertical-pocket-tag and pocket-stitching trademarks. Levi’s also alleged that D&G’s designs constitute a breach of a 1998 settlement agreement that the parties had signed to resolve an earlier dispute resolving the same trade dress issues in dispute in this new litigation. Samples of the designs registered by Levi’s and the designs sold by D&G are included in the complaint, a copy of which is available here. D&G has yet to answer Levi’s allegations.

China Makes Moves to Crack Down On Software Piracy

Chinese officials reportedly have arrested nearly 4,000 people in connection with software piracy allegations and have ordered nearly 200 web sites to remove content believed to constitute copyright infringements. Some Chinese web sites have replaced unauthorized content with deals from labels like Sony and Warner Brothers, but these web sites are struggling with the expense to acquire legitimately licensed movies and music. In addition, recent investigations into approximately 2,000 cases of copyright infringement may have a monetary value of $350 million. Chinese officials say they expect their campaign against software piracy to last through May, but U.S. officials expect the process may extend well beyond that time-frame.

Effective Dates in Software Audits Are Critically Important

Businesses that receive software audit demand letters from auditing entities such as the BSA or SIIA, or from software companies like Autodesk or Microsoft, often contend they cleaned up their network after receipt of the letter and should be released from any further obligation to conduct an audit or communicate with the auditor. Audited business should keep in mind, however, that the auditing entities typically are focused only on the targeted businesses’ software license-compliance status as of the audit effective date – the date on the first letter those entities send to a targeted business. The auditing entities usually will seek confirmation that the businesses were compliant on the effective date, and on no other date.

Effective Dates in Software Audits Are Critically Important

Costly Software Audit Mistakes

The Business Software Alliance (BSA) and the Software & Information Industry Association (SIIA) are organizations that represent software publishers seeking to enforce the copyrights in the products they publish. In furtherance of this goal, these entities routinely send letters to businesses they believe may be infringing their members’ copyrights by failing to satisfy the requirements of applicable software license agreements. In the letter, the BSA and SIIA request audits of all member software products installed on all computers and servers owned by the targeted businesses.

Software Information Industry Association (SIIA) Settlement Agreement Provision Regarding Purchase of Software

Settlement Agreements with the SIIA, a trade association for the software and digital content industry, often contain provisions requiring the audited company to not only purchase software to satisfy licensing deficiencies it carries going forward after settlement, but also to purchase software from an “authorized reseller.” An authorized reseller is a vendor with permission to sell the software publisher’s products. Software publishers often publish lists of authorized vendors on their websites. Many audited companies looking to rectify past purchasing oversights by buying software from the first reputable vendor they locate may breach their SIIA settlement agreement if the agreement contained the provision requiring that all purchases must be made from an authorized reseller.

Unpleasant Surprises In BSA & SIIA Software Audits

Many companies who comply with a demand by a software publisher or industry association (such as the BSA or the SIIA) for an internal software audit end up facing significant settlement demands after forwarding their audit materials to the other side. One of the reasons the settlement demands often are so high is the fact that the auditing entities frequently base their demands, in part, on the “unbundled” price of software suites. Thus, where a company may expect to pay a fine based on the MSRP of, for example, one undocumented installation Microsoft Office Professional 2007 ($679), it likely will end up receiving a settlement demand based on the combined MSRPs of each of the components of that undocumented suite: Word ($229), Excel ($229), PowerPoint ($229), Outlook ($110), Publisher ($169), and Access ($229), all totaling $1195. In a typical case these difference add tens of thousands of dollars to the amount in controversy.

Proof of License in SIIA Software Audits

Like all audits, success in a SIIA software audit depends less on what you own and more on what you can prove that you own. Although not required by law, the SIIA takes the position that a target company is out of compliance for each installation of SIIA member software products for which the target company cannot produce a dated proof of purchase. Many clients are dismayed to discover what does and does not constitute valid proof of purchase according to the SIIA.

Software Piracy

Software piracy audits conducted by the BSA and the SIIA threaten small and medium sized businesses. As the economy tightens, software publishers such as Microsoft, Adobe, and Autodesk hide behind software piracy enforcement groups to pursue customers accused of installing more software on corporate computers than they have purchased licenses for.

Suing the Informant in SIIA Audits

The targets of SIIA audits frequently believe that they know who reported them to the Software & Information Industry Association. Justifiably angry, they want to know what legal recourse they have against the informant. Because the informants are frequently out of work, having been fired by the target, I advise my clients about the number one rule governing litigation: never sue poor people. Legally speaking, the most probable cause of action against an informant in a SIIA audit would be based upon a breach of an employment agreement containing a confidentiality provision. We have frequently assisted clients in drafting letters to former employees presumed to be the informant, forcefully reminding them of their confidentiality obligations, but have come short of advising clients to file suit against a presumed informant.

Cooperation or Litigation: SIIA Audit Strategy

If your company has received a letter from the SIIA requesting a software audit, you are probably wondering whether you should cooperate or tell the SIIA to pound sand. I advise my clients to cooperate but to do so in a manner that will not jeopardize their legal position in the event that cooperation does not result in an acceptable out-of-court settlement. This advice is predicated on the fact that business clients almost universally seek a resolution that has the lowest total costs and the most predictability. In SIIA audits, these costs are software licensing fees, fines payable to the SIIA, attorney’s fees, organizational impact, and the potential damage to brand associated with negative publicity. In my experience, a properly handled BSA audit can always be resolved for a lower total cost through cooperation than through litigation.

The Importance of the “Audit Effective Date” in SIIA Audits

One of the first things I ask a prospective client is: What is the date on the initial letter you received from the SIIA? The date on the initial in a SIIA letter is often referred to as the Audit Effective Date. This date is important for many reasons. I like to tell my clients that a SIIA audit measures a snap-shot in time – what SIIA member software was installed on the company’s computers as of the Audit Effective Date. Once you have an accurate inventory of what was installed on the Audit Effective Date the next step is to determine what proofs of purchase are available to establish purchases prior to the Audit Effective Date.

Unbundling Software Suites in SIIA Audits

One of the most controversial tactics the SIIA uses when calculating its settlement demands is its practice of unbundling software suites such as Microsoft Office and Adobe Creative Suite. Unbundling occurs when the target of a SIIA audit is unable to provide acceptable proof of purchase for one or more installation of a software suite.

A New Definition of Software Piracy

What is software piracy? Like many politically charged phrases, the definition of software piracy is influenced by your financial interests and your viewpoint. The Software & Information Industry Association recognizes several types of piracy, including, softlifting (installing a single licensed copy of software on several machines), unrestricted client access, hard-disk loading, OEM piracy, commercial use of non-commercial software, counterfeiting, CR-R piracy, internet piracy, manufacturing plant sale of overruns, and renting.

When to Buy vs. Uninstall in SIIA Audits

One of the most common mistakes I encounter in SIIA audits is what I call the post-effective date software buying spree. The buying spree occurs in response to a letter from the SIIA’s attorneys requesting a self audit. Many clients are discouraged to learn that software purchases made after the date of the SIIA’s initial letter have no impact in a SIIA audit matter. For this reason, I advise my clients against scrambling to acquire software in response to a SIIA audit.

SIIA Audit Timeline

One of the top ten questions asked by my clients is “How long does the SIIA self-audit process take from start to finish?” Of course I give the standard lawyer answer: it depends. Here are the steps to a typical SIIA audit.

Match.com Sued in Potential Class Action Lawsuit

On December 30, 2010 Dallas-based Match.com was sued in the U.S. District Court for the Northern District of Texas by a group of individual plaintiffs seeking class-action certification. In the complaint, the plaintiffs allege breach of contract and negligent misrepresentation against Match.com based on their claims that the dating website contains “thousands of fake and fraudulent profiles” and that some of those profiles were “placed by third-parties for illegitimate and unlawful purposes.” The complaint alleges that Match.com “makes little to no effort to vet, police, or remove these profiles and thereby permits, condones, and acquiesces in their posting.”

President Obama Urged To Sign Patent Program For District Courts

President Obama was recently urged to sign a bill passed by the Senate on December 13, 2010, that seeks to educate US District Court judges on the intricacies of patent cases. The bill would send cases with one or more patent issues to judges who request to hear patent cases and would provide the judges with additional experience evaluating patent claims. The program would be instituted in the six U.S. District Courts that received the most patent and plant variety protection cases in the last year. Courts that adopt and implement local rules for patent cases also will be eligible for the program.

Supreme Court Upholds Ninth Circuit Ruling Limiting First-Sale Copyright Doctrine

Omega sued Costco for copyright infringement, alleging Costco purchased heavily discounted watches from unauthorized resellers in Europe. Costco defended against the copyright claims by invoking the First Sale Doctrine, which allows a reseller to sell a copyrighted work without the original copyright holder’s permission. Omega lost in the trial court, but won a reversal before the Ninth Circuit Court of Appeals, which ruled the First Sale Doctrine did not apply to copies of a work produced overseas.

U.S. Funds World-Wide IP Infringement Enforcement

The United States government has earmarked money for intellectual property enforcement education and training for many foreign nations. Countries including China, Brazil and several located in sub-Saharan Africa as well as Interpol will work with U.S. officials to collaborate in the delivery of IP rights-protection training.

Inaccurate Copyright Applications Can Result in Allegations of Fraud on the Copyright Office

Copyright registration is a necessary step for any owner of original content, but it is important to be vigilant when completing the application to the U.S. Copyright Office – inaccurate information on the application can lead to significant copyright enforcement obstacles.

Ninth Circuit Emphasizes Importance of EULAs in World of Warcraft Holding

On December 14, 2010, in the case of MDY Industries v. Blizzard Entertainment, the Ninth Circuit emphasized an important point for online service providers and legal practitioners to keep in mind when drafting software end user license agreements. MDY Industries, maker of software program – “Glider” – that automatically plays Blizzard Entertainment’s popular World of Warcraft game, filed a declaratory judgment action against Blizzard to determine whether MDY’s program infringes any of Blizzard’s rights. The Ninth Circuit addressed, among other issues, whether Glider violates Blizzard’s copyrights.

THUMBDRIVE® Trademark Saved from Becoming “Genericized”

Many trademarks – among them, ‘escalator,’ ‘pilates,’ and ‘netbook’, to name a few – have suffered the fate of being deemed “generic,” often in the context of trademark disputes. In those cases, what may have once been words or phrases capable of identifying the source of a product or otherwise uniquely identifying the product in the marketplace have been found to describe an entire category of products, such that competitors would be harmed by one company’s continued monopolization of the term. Ironically, in many cases, such “genericide” follows on the heels of significant commercial success for the products or services associated with the mark, making the loss of branding rights particularly troublesome for long-term business goals.

Microsoft Seeks to Add Additional Defendant to “Click-Fraud” Lawsuit

On December 10, 2010, Microsoft announced that it was seeking to add an additional defendant to its pending federal lawsuit against RedOrbit.com, a news and information website intended for space, science, health, and technology enthusiasts. In its lawsuit, Microsoft has alleged that RedOrbit and, now, Vertro Inc. (a web advertising network business) engaged in a scheme to generate fraudulent “clicks” on advertisements placed on RedOrbit.com through Microsoft’s adCenter platform (now called pubCenter).

Mississippi Becomes 46th State to Pass Data Breach Notification Law

Earlier this year, Mississippi passed legislation requiring organizations to notify individuals whose personal information is compromised by a data breach. With only Alabama, Kentucky, New Mexico and South Dakota as the remaining states without data breach notification laws, Mississippi joins the vast majority of states to have passed such legislation. House Bill 583 will not go into effect until July 1, 2011, but its form and structure tracks many other states’ notice requirements in the event of a data breach.

Dow Jones Settles “Hot News” Content-Infringement Lawsuit

On November 15, 2010, Dow Jones & Company, Inc. settled a lawsuit it had filed against Briefing.com for Briefing.com’s systematic republishing of more than 100 time-sensitive Dow Jones articles. Dow Jones had alleged that Briefing.com’s actions constituted both “traditional” copyright infringement as well as an infringement of Dow Jones’ rights under the so-called “hot news” doctrine. That doctrine originally was formulated by the Supreme Court in 1918 to address a competitor’s re-distribution of briefly valuable, time-sensitive “facts” that otherwise might not be copyrightable. A copy of Dow Jones’ complaint is available here.

Amazon’s Dropping of WikiLeaks Raises Cloud Concerns

With the intense scrutiny and speculation swirling around WikiLeaks’ most recent posting of confidential U.S. State Department documents, it should not come as a surprise that Amazon, WikiLeaks’ hosting provider, found itself under informal investigation by Congress. Facing this type of inquiry, it did not take long for Amazon to terminate its cloud agreement with WikiLeaks, leaving the whistle-blowing site temporarily without an online presence as it searched for a new cloud provider to host its materials.

XBox Player Escapes Criminal Charges for Cracking Gaming Codes

On December 2, 2010, criminal charges were dismissed against a defendant in California who was facing up to 10 years in prison for running a business circumventing security measures for Xbox gaming systems. Matthew Crippen had been charged with two counts of breaching anti-circumvention provisions in the Digital Millennium Copyright Act (DMCA) by modifying gaming consoles to play pirated games.

SAP Ordered to Pay Oracle $1.3 Billion in Damages

In a highly publicized case, SAP has been ordered to pay Oracle $1.3 billion for a SAP subsidiary’s theft of customer-support documents and software in an attempt to hijack Oracle’s customers. This is one of the largest amounts – if not the largest amount – ever awarded by a U.S. court for software copyright infringement. The U.S. District Court for the Northern District of California agreed that the value of the stolen intellectual property was vast and that the damages award was appropriate due to the vital importance of copyrights in the software industry. SAP had admitted liability, but it claimed that it should only pay for money it made from the 358 customers it gained with the stolen data.

Efforts Ramping Up to Weed Out Software Piracy in China

The Chinese government and software stakeholders in China appear to be strengthening their attention to the problem of unlicensed software use. On November 30, 2010, the Chinese government announced that it would be inspecting all central and local government computers during 2010 and 2011 to ensure that all departments are using only properly licensed software. That announcement followed a six-month national campaign by the Chinese government to crack down on the production and distribution of pirated content. In addition, Microsoft recently announced that it had filed a lawsuit against 10 companies in China for selling computers with unlicensed versions of Windows and other products pre-installed, which came on the heels of the software giant’s recent victory in a lawsuit it filed against a chain of Internet cafe businesses in China that used pirated software.

Copyright “Troll” May Be Scaling Back its Enforcement Program

In an earlier post, we examined “copyright trolling,” an unsettling trend in intellectual property enforcement. So far, the primary culprit is the Las Vegas Review-Journal (LVRJ) by way of Righthaven LLC, a copyright litigation specialist possibly created to work exclusively on LVRJ cases, which searches for websites that have reposted articles from the LVRJ without explicit permission to do so. When Righthaven finds a website that has reposted portions of or entire articles, its strategy has been to proceed directly to filing suit instead of engaging in the typical procedure of attempting to resolve the issue first without involving the courts. The more cynical among you may contemplate that Righthaven’s strategy may be designed to extract settlements from unsophisticated bloggers intent on avoiding costly legal battles.

Many Cloud Contracts are Missing a Critical Term

Cloud computing contracts vary widely depending on the type of service being provided and the market to which that service is targeted. Cloud services that are inexpensive or free generally present the contract in the familiar “click-wrap” format that we all, at one point or another, have “agreed to” (but that we almost never actually read). Those agreements often are wholly in favor of the cloud service provider. On the other hand, larger cloud implementations representing considerable, strategic business decisions on the part of the customer (and considerable sales on the part of the cloud service providers) usually are accompanied by agreements that should be read, understood and negotiated to meet the right balance of risk and incentive for both parties. However, many of these large-scale implementation cloud contracts nevertheless are missing a critical term: the cyber risk insurance requirement.

NLRB Complaint is a Warning to Companies Policing Social Media Use

Early this month, the National Labor Relations Board (NLRB) issued a press release regarding a complaint issued by the Board’s Hartford regional office against a company that terminated an employee who “posted negative remarks about her supervisor on her Facebook page.” The NLRB contends that, among other things, the company’s Internet use policy contained provisions prohibiting employees from engaging in protected concerted activity—a violation of Sections 7 and 8(a)(1) of the National Labor Relations Act (NLRA).

Corporations Increasingly Confronting Social Media Concerns

No one questions the prevalence and increasing reliance on social media from a corporate perspective. Earlier this year, PR firm Burson-Marsteller released a study of 100 of the top Fortune 500 companies and found that upwards of 75% of the companies use blogs, YouTube, Facebook or Twitter to communicate with their clients or stakeholders. Personal use of social media sites continues to rise as well, with the Pew Internet & American Life Project finding social networking use by users 18-24 at 86%, while use by users 50-64 at a surprising 42%. Along with this increased use come rising concerns of privacy issues on social media sites. One has to look no further than two of the Internet’s behemoths, Facebook and Google, to understand the privacy risks associated with social media.

DOJ Asked to Investigate Oracle’s Hardware Maintenance Policies

Many businesses that partner with Oracle to resell its server hardware or to host software solutions built on Oracle platforms are familiar with that company’s sometimes complex licensing rules. Many companies also are familiar with the fact that “complexity,” as applied to those rules, often could be replaced by “unreasonable” or even “draconian.” One industry group recently fired what could be the opening salvo against Oracle in an effort to attack some of those rules as being anticompetitive and in violation of U.S. antitrust law.

Facebook Parody Site Files Preemptive Lawsuit

Lamebook.com, the Facebook.com parody website, has filed a declaratory judgment action in the U.S. District Court for the Western District of Texas in Austin. Lamebook, founded in April 2009, defines itself as a, “fun humor blog that allows us to all share and marvel at the funny, ridiculous, and outright crazy posts that can be found on your favorite social networking site.” The Lamebook logo appears to borrow heavily from Facebook’s blue and white logo with a lower case and sans-serif font.

BlueCross BlueShield Hit with Price-Fixing Lawsuit

On October 29, 2010, health insurance giant BlueCross BlueShield’s Michigan unit was sued for illegal price-fixing under the Sherman Act by Michigan plaintiffs seeking class-action certification. A copy of the complaint is available here. In their complaint, the plaintiffs allege that BCBS forced hospitals to include “most favored nation” or “MFN” clauses in their provider contracts, under which the hospitals allegedly agreed to charge other commercial insurers either at least as much as – or more than – they charged BCBS for the same services, thereby giving BCBS a competitive advantage in the marketplace. BCBS Michigan also is facing an antitrust lawsuit filed by the U.S. Department of Justice based on essentially the same set of facts.

ivi v. Broadcasters & Content Owners-Old Arguments Born Again

New media technologies always will create unforeseen challenges for copyright law. For example, in the 1950s and 60s cable television providers battled broadcasters over the cable operators’ right to re-transmit broadcast television signals to cable subscribers. After numerous courtroom scrapes, Congress stepped in with Section 111 of the Copyright Act, which established a statutory fee to be paid by cable broadcasters in return for the right to re-broadcast television signals.

Trademark “Bullies” may be in the USPTO’s Sights

A business owner’s perception of vigorous trademark enforcement in many cases depends entirely on whether he or she was last on the passing end or the receiving end of a cease & desist letter. For businesses that have been accused of trademark infringement, those allegations often seem to be nothing but overreaching by trademark owners trying to make a quick buck based on an unintentional and harmless oversight. However, for many of those trademark owners, failure to police unauthorized, third-party use of identical or arguably confusingly similar marks may mean loss of brand value or even the “genericization” of their once-valuable marks.

Is Your Affiliate Licensed Under Your Microsoft Agreements?

Entering into a Microsoft Enterprise or Select agreement can be an effective way for companies with large and predictable software needs to reduce IT costs. However, Enterprise and Select agreements may include restrictions on an affiliate’s ability to use software licensed under those agreements. Additionally, the flow of documents over the course of a Microsoft agreement relationship may create confusion regarding the current terms of the agreements and may end up steering a company in the wrong direction relative to its software asset management objectives.

How Not to Be a Trademark Troll

Most of us have heard of patent trolls. Recently, we have seen the ascendance of the copyright troll. Trademark trolls, by contrast, probably shouldn’t even exist. After all, one of the principal concepts allowing a person to claim exclusive rights in a trademark is (supposed to be) that person’s actual use of the trademark in commerce, and actual use of IP is not something with which most trolls are supposed to be familiar. Trolls, the story goes, exist in shadowy recesses, ready to swing their quietly acquired IP clubs against the unwitting in the hopes of spilling a little windfall.

Buying and Selling Software on eBay is Risky Business

A recent 9th Circuit ruling overrules a series of trial court results from the U.S. District Court for the Western District of Washington and reiterates the dangers of buying and selling software on eBay and other resale websites. Typically, the “first-sale doctrine” provides that the exclusive right of distribution granted to the owner of a copyrighted work extends only to the first sale of the work. Once the work has been sold, the new owner may resell the work without fear of copyright infringement. In addition, the “essential-step” defense provides that the owner of a copy of software does not infringe copyrights if the new copy is created as an essential step in using the software on a computer (for example, when copying software to a computer’s memory). However, in Vernor v. Autodesk Inc., 2010 WL 3516435 (9th Cir. Sept. 10, 2010), the court ruled that the first-sale doctrine and essential-step defense do not apply to software that is merely licensed rather than sold.

Using Social Networking Sites in Commercial or Legal Contexts Can Be Hazardous

Social networking web sites have become an emerging conduit for small companies to recruit and conduct business. However, while some companies find this to be a successful means to expand business opportunities, others, such as Mark One Financial, have discovered that use of social networking for some purposes carries risks. Mark One attempted to collect debt from a Florida individual who had fallen behind on auto payments by contacting her friends and family members on Facebook. It is now facing a lawsuit for abuse and harassing attempts to collect debt, including a request for an injunction against using Facebook as a means to contact its clients.

The Copyright Troll is Under Attack

Earlier this year, this blog introduced you to “copyright trolling,” a new business model for intellectual property lawyers. The copyright trolling concept is simple: search the Internet for instances where another website has used portions or all of your original work, sue the website operator for infringement demanding statutory damages completely out-of-line with any actual damages, rely on the website operator’s evaluation of the cost of settlement versus the cost of a protracted legal battle, and collect a settlement of a few thousand dollars for all your hard work. Oh yes, and to be successful as a copyright troll, the IP attorney must completely ignore other sections of the copyright statute pertaining to fair use—the legal concept that not all copying of copyrighted material constitutes infringement. Rinse and repeat.

Considering the Cloud? Don’t Overlook the SLA

Listening to a discussion about “cloud computing” may make listeners’ ears cringe because of a sensitivity brought on by the unending cloud media hype, but computing in the cloud soon will be as mainstream as e-mail (coincidentally, one of the first successful cloud offerings). The hype is fueled by pro-cloud commentators, vehemently promoting the cloud panacea, battling it out with cloud naysayers who warn that a move to the cloud is fraught with too much risk for serious consideration. I think both sides are right. An investment in the cloud can yield a tangible cost savings on upfront set-up and ongoing maintenance costs for companies. Additionally, the on-demand aspect of cloud architecture means that companies quickly can adapt to opportunities for growth and can tighten their belts when demand for their services and products shrinks. But cloud detractors are not mere panic mongers—there is significant risk lurking in the cloud. Happily, most companies can have it both ways by focusing on a document, frequently overlooked, that is a shield against many cloud-based risks—the Service Level Agreement or “SLA”.

HP Sues Ex-CEO to Keep Him from Joining Oracle

On September 7, 2010, Hewlett-Packard sued its former CEO, Mark Hurd, in California state court for alleged breach-of-contract and threatened misappropriation of trade secrets. HP is seeking to keep Hurd from joining rival Oracle, which recently offered to hire Hurd as a top-level executive following his publicized departure from HP over claims that he altered expense reports to cover up a personal affair. (A copy of the complaint is available here.)

Microsoft Sues Online Retailer over Bogus Server Software

On August 27, 2010, Microsoft filed suit against online retailer Jigantic.com alleging fraudulent software sales, copyright violations, trademark violations, and other claims. The August 27th filling in the District of Connecticut also names 20 “John Does,” because the retailer allegedly went out of its way to mask its identity.

Facebook Claims Ownership of “Book” and “Face”

Social networking giant Facebook recently filed a trademark infringement lawsuit against Teachbook.com, an upstart networking web site for teachers. Although Teachbook obtained a trademark in 2009, Facebook’s suit claims its incorporation of the word “book” constitutes unfair competition and trademark dilution. Teachbook denies the trademark infringement claims and asserts that Facebook does not own the word “book.” Teachbook also has vowed to vigorously defend itself against Facebook’s claims.

Microsoft Co-Founder Paul Allen Casts a Wide Net in New Patent Lawsuit

Interval Licensing, a patent holding company owned by Microsoft co-founder Paul Allen, filed patent-infringement claims on August 27, 2010, against eleven of the biggest names in Internet-based commerce: AOL, Apple, eBay, Facebook, Google, Netflix, Office Depot, OfficeMax, Staples, Yahoo, and YouTube. Interval’s complaint alleges that those companies incorporated technologies in their web sites that fall within the scope of four patents owned by Interval. However, as reflected in the substantial share of online activity dominated by those companies, Interval’s suit arguably represents one company laying claim to core components of the infrastructure of Internet business – components that vast numbers of businesses small and large employ every day in order to attract customers.

Texas Attorney General Investigating Google

The Texas Attorney General’s Office is investigating whether Google violated antitrust laws with its search rank methods. The inquiry reportedly focuses on whether and to what extent Google manipulates search results to place certain links closer to the top of the results list in order to stifle competition. A good search result ranking often translates into instant commercial success for many businesses while a lower ranking may contribute to a business’ failure.

AOL Loses Trademark Injunction Battle

In Advertise.com, Inc. v. AOL Advertising, Inc., 2010 WL 3001980 (9th Cir. 2010), the Court of Appeals for the Ninth Circuit partially reversed a trial court decision granting AOL an injunction against Advertise.com. In August 2009, AOL – which owns the mark ADVERTISING.COM – filed a complaint and motion for a preliminary injunction against Advertise.com alleging that Advertise.com had infringed AOL's trademark rights. Advertise.com appealed the trial court's decision to grant the preliminary injunction, but it did not contest that part of the preliminary injunction that enjoined it from using any design mark that was confusingly similar to AOL's stylized marks.

Lawsuits Against Gripe Sites Can Backfire

Web sites catering to online reviews of businesses – including sites dedicated to reviewing (some might say attacking) only one business – have created public relations nightmares for many businesses. In some cases, the targeted businesses perceive the content of the gripe sites to be defamatory or infringing of the target’s intellectual property rights. However, while it may tempting to threaten legal action against these sites, companies are learning that such action may cost more than it achieves and may risk further bad publicity as a result of so-called oppressive prosecution. A good example is the recent case of Career Agents Network, Inc. v. CareerAgentsNetwork.Biz.

Cloud Computing Vendors Attempt to Avoid Liability

Both state and federal governments are seeking ways to ensure citizens’ personal information is secure and remains private, but the laws vary wildly and are sometimes frustratingly complex. For businesses, it is not always clear which laws, if any, the business is subject to. Once applicability of the law to a business is determined, the process of evaluating compliance of IT systems and policies can be time-consuming.

Google Comes Under Fire from Oracle in Patent Lawsuit

On August 12, 2010, Oracle sued Google in U.S. District Court in San Francisco based on claims that Google’s Android operating system constitutes an infringement of Oracle’s patents and copyrights related to the Java software development platform. Oracle owns the intellectual property rights in Java following its acquisition of Sun Microsystems earlier in 2010, and in its lawsuit, it alleges that a Google-developed technology called Dalvik, which is integrated in the Android O/S, is a competitor to Java that infringes the various patents and the copyright in Java.

Victory for Consumers: Library of Congress and 5th Circuit Clarify Exceptions to DMCA

The Library of Congress and the 5th Circuit Court of appeals both recently made significant strides in expanding and clarifying the exceptions to the anti-circumvention provisions of the Digital Millennium Copyright Act (“DMCA”).

Software Publisher Wins Injunction Against Cake Boss

An Austin-area software publisher recently obtained a significant court order against Discovery Communications, Inc. related to the popular Cake Boss television show on TLC. The plaintiff, Masters Software, Inc., which consists of husband-and-wife team Kelley and Jon Masters, publishes a computer program called CakeBoss that provides office management functions for professional cake bakers. The Masterses learned about the Cake Boss program, which, for the uninitiated, is a reality-TV program centered around the New York-based cake-baking business of Bartolo “Buddy” Valastro, prior to its debut and contacted both Discovery and Mr. Valastro in an effort to keep the show from airing under the Cake Boss name. The show aired despite the Masterses’ complaints, and it since has become one of the networks more popular shows.

Eating and Drinking Establishments Sued for Music Copyright Infringement

The American Society of Composers, Authors, and Publishers (ASCAP) recently filed copyright infringement actions against 21 bars, nightclubs, and restaurants nationwide. ASCAP claims in its press release that the establishments “either publicly performed the copyrighted musical works of ASCAP’s songwriter, composer and music publisher members without obtaining a license from ASCAP to do so, or had signed a license agreement with ASCAP but failed to comply with the license's payment terms.” ASCAP claims that it gives each establishment an opportunity to license music and pay the appropriate fees and that it resorts to legal action only when amicable attempts at resolution to a licensing dispute have failed.

Introducing The Copyright Troll — What He Is And How To Avoid Him

A new type of copyright lawyer has arrived on the intellectual property scene—not terribly good news for bloggers or online media outfits. Righthaven LLC CEO Steve Gibson is on the attack, beginning a campaign this past March against bloggers and website operators who post articles from the Las Vegas Review-Journal, his first client. Righthaven has acquired copyrights to the LVRJ content and is filing suit against these operators for copyright infringement. According to a Wired.com article, Righthaven plans to continue targeting bloggers who repost entire articles without permission by filing hundreds of lawsuits by the end of the year.

Beware “Document Soup” Software Licensing

On July 22, 2010, software publisher AccuSoft sued Northrop Grumman Systems in federal court for breach of contract, copyright infringement and trademark infringement related to Northrop’s use of AccuSoft’s ImageGear and ImageTransport software. Northrop allegedly used and integrated AccuSoft’s products in the development of a paperless records information system it developed for the U.S. military. According to AccuSoft, Northrop failed, in particular, and in violation of applicable software license agreements, to provide the required periodic reporting regarding the number of end-user licenses for the AccuSoft products that Northrop had distributed. AccuSoft did not specify a damages claim in its complaint, though it did state that the unauthorized software distributions number in the “hundreds of thousands,” meaning that a decision in its favor potentially could entail a multi-million dollar penalty against Northrop.

Patent Lawsuit May Cause Negative Feedback for eBay

On July 13, 2010, online auction giant eBay, Inc. was sued for $3.8 billion in the United States District Court for the District of Delaware by XPRT Ventures, LLC, on claims that eBay incorporated XPRT’s patented business method processes in eBay’s payment processing technology and that eBay breached a confidentiality agreement that allegedly covered the processes in question.

Legal Pitfalls in the Cloud: Windows Azure License Agreements

Microsoft’s cloud offering, Windows Azure, is a cloud services platform designed for software development, hosting and web service management. The platform includes a cloud-based operating system with pre-configured developer tools and other options available. The license agreements are available online here and here. So, how does the Microsoft cloud licensing model stack up to our legal concerns regarding cloud computing?

Microsoft v. Salesforce.com – Taking the Fight to the Cloud

On June 24, 2010, Salesforce.com filed suit against Microsoft in a Delaware Federal court claiming Microsoft willfully infringed five Salesforce.com cloud computing-related patents. This is an apparent counter to a May 18th suit filed by Microsoft accusing Salesforce.com of patent infringement. Though Salesforce.com and Microsoft promote slightly different cloud computing models, each company claimed the patents infringed were significant components to their platforms, signifying that the fight over cloud market controls is ramping up.

Facebook and Mark Zuckerberg Face Lawsuit Headache

On June 30, 2010, a New York businessman named Paul Ceglia filed a lawsuit against Facebook, Inc. and its founder, Mark Zuckerberg, that has the potential to become a significant distraction for the social networking giant. In the state-court complaint, Ceglia claims he signed into a contract in April 2003 with Zuckerberg, in which Zuckerberg agreed to grant Ceglia a 50% stake in the business to be derived from the expansion of “the project [Zuckerberg] has already initiated that is designed to offer the students of Harvard university [sic] access to a website similar to a live functioning yearbook with the working title of ‘The Face Book.’” Based on that and other language in the contract, and on the completion date for an earlier Zuckerberg-authored site at thefacebook.com, Ceglia claims that he now is entitled to an 84% interest in Facebook.

David v. Goliath: Songwriter Wins Coca Cola Case

In Vergara Hermosilla v. Coca-Cola Co., 2010 WL 2232657 (S.D. Fla. 2010), a U.S. federal court in Florida required Coca-Cola to post a conspicuous notice indicating Rafael Vergara Hermosilla’s (“Vergara”) contribution to a song Coca-Cola intended to use in its advertising during the 2010 World Cup soccer games.

Unauthorized Software: Costly to Your Bottom Line

The Business Software Alliance (“BSA”) and Software & Information Industry Association (“SIIA”) pursue copyright infringement claims against companies accused of installing unauthorized copies of software. Typically, the BSA and SIIA send letters to businesses and request audits of their computer systems.

Supreme Court’s Opinion in Bilski Leaves Questions

On June 28, 2010, the U.S. Supreme Court issued its long-anticipated opinion in the case of Bilski v. Kappos, which, it was hoped, would at long last provide much-needed guidance for the U.S. Patent & Trademark Office and for practitioners on the subject of the patentability of business methods and other processes. However, other than rejecting the process-patentability test that had been proposed by the U.S. Court of Appeals for the Federal Circuit, the overall effect of the opinion is to re-introduce uncertainty into the question of what constitutes a patentable process and what does not.

The Sneaky Chef Loses Appeal

In Lapine v. Seinfeld, 2010 WL 1688713 (N.Y.C.A. 2010), plaintiff Missy Chase Lapine and The Sneaky Chef, Inc. (“Lapine”) appealed from a summary judgment awarded to defendants Jessica Seinfeld and others on plaintiffs' claims of copyright infringement, trademark infringement, and trademark dilution. The district court determined that Seinfeld’s book Deceptively Delicious: Simple Secrets To Get Your Kids Eating Good Food, was not substantially similar to plaintiffs' cookbook, The Sneaky Chef: Simple Strategies for Hiding Healthy Foods in Kids' Favorite Meals, released four months earlier. The court affirmed the district court’s findings.

Dave & Buster’s Busted

The FTC recently approved a settlement with Dave & Buster’s, Inc., a restaurant and arcade chain, for the largest recorded data breach of private credit card information.

Sports Equipment Retailer Loses Trademark Dispute

In New York City Triathlon, LLC v. NYC Triathlon Club, Inc., 2010 WL 808885 (S.D.N.Y. 2010), the court granted plaintiff’s request for an injunction against defendant barring defendant from using versions of “NYC Triathlon” in its name. New York City Triathlon, LLC (“NYC Triathlon”) sent a cease and desist letter to NYC Triathlon Club, Inc. (the “Club”) after the Club changed its name from SBR Multisports, Inc. to NYC Triathlon Club. The Club did not respond to the letter, and NYC Triathlon then filed its request for injunctive relief seeking relief to protect its trademark and goodwill pursuant to the U.S. Lanham Act and to the common and statutory laws of New York.

Video Professor Learns Costly Lesson

Many companies that market their products or services through distribution channels give their distributors licenses to use company trademarks and logos in order to facilitate marketing efforts. However, it is important for those companies to remain vigilant against overbroad license terms that may give the distributors rights in excess of what those companies may believe is reasonable or necessary to accomplish those ends. This consideration is doubly important when the distributor has substantially greater bargaining power than the manufacturer.

Facebook Ruling - Social Media and e-Discovery

On May 26, 2010, in the case of Crispin v. Christian Audigier, Inc. (C.D. Cal. Case No. No. CV 09-09509), Judge Margaret Morrow of the U.S. District Court of Central California issued a ruling in a copyright suit concerning, in part, the discoverability of private messages sent between users on MySpace and Facebook. This decision marks one of the first examinations of the applicability of federal e-discovery rules to social media site content. In her decision, the judge reversed a magistrate judge’s finding that private messages sent between users over social networking sites are public communications and quashed subpoenas that had been issued in an attempt to obtain copies of those messages.

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