Scott Technology Attorneys

According to a recent article published by Inman News, multiple listing service (MLS) companies – providers of real-estate listing information for brokers and their agents – may be contemplating the formation of an industry group to enforce the owners’ perceived intellectual property rights against third parties who acquire their data and make it available to others without the MLS providers’ permission. The issue apparently is a long-standing one for MLS providers, and it recently has gained more public attention due to copyright lawsuits filed by two regional providers (one from Maryland and one from Minnesota) against the operator of NeighborCity.com, which allegedly used the plaintiffs’ data in the creation of its real estate agent ratings and referrals site.

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The Center for Copyright Information (“CCI”) and its partners, the Recording Industry Association of America (“RIAA”), Motion Picture Association of America (“MPAA”), and leading U.S. Internet Service Providers (“ISPs”) soon will implement a system designed to reduce illegal file sharing of copyrighted works. The Copyright Alert System (“CAS”), also referred to as the “Six Strikes” system, is a subscriber notice system in which the ISPs will monitor Internet traffic to identify illegal downloads of copyrighted works.

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Many businesses develop their own software products, and they understandably want to save on the licensing costs associated with using third-party tools or products in their development environments. However, not all publishers treat development licensing in the same way, and companies that are familiar with one publisher’s practices may end up in hot water if they assume those practices represent some kind of industry standard.

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A flurry of attention surrounded the recent legal saga of Timothy Vernor and his protracted fight against Autodesk to re-sell software via eBay. In the end, it was decided by the Ninth Circuit Court of Appeals that the “first sale” doctrine applicable to other kinds of copyrighted works does not apply to software licenses and that software publishers may use copyright law to prevent the development of a market in second-hand software packages. (More information on the Vernor outcome is available here.)

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Using third-party software as components of business solutions delivered to customers over the Internet can be risky. Almost all major software publishers include terms in their license agreements prohibitions or restricting the use of their products for “hosting services” or in connection with “hosted environments.” However, what is level of exposure associated with violating the anti-hosting terms in a software license.

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At the conclusion of software audits where it appears that software products were installed and used without adequate licensing, many companies find themselves confronting two challenges. First, there is the fact that the software publisher likely is demanding that the company pay penalties or otherwise steep rates to obtain the previously un-purchased licenses, upon threat of license termination. In addition, however, in most cases the publisher also will bellow that its intellectual property rights have been violated and will threaten the company with copyright-infringement exposure. Both can be serious threats for most companies.

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I previously have discussed what “commercial hosting” means when it comes to Microsoft software, but the universe of problems created by the “hosting” ambiguity obviously is bigger than just Microsoft. Almost all software publishers restrict or prohibit – to varying degrees – their customers’ ability to use the software products they license in connection with solutions delivered to end users over the Internet.

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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.

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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.

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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.

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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.

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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:

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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 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.

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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.

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