Libel Tourism – Limiting Foreign Claims of Defamation

Have you ever heard the phrase “libel tourism?”  Libel tourism is the practice of suing an author or publisher in a country with less free speech protections than those given to Americans by U.S. law.  Libel is a form of defamation (when defamatory words are reduced to writing).

Here is the real world example of Rachel Ehrenfeld, a U.S. citizen who was sued in Britain by a Saudi billionaire she accused of financing terrorist groups.  According to the Sacramento Bee:

Never mind that she didn’t live in Britain and that her book wasn’t published there. (A few copies were purchased online.) Rather than face the high legal costs and burdens of proof in London, Ehrenfeld chose not to contest the case, and the court ruled against her by default, ordering her to pay hundreds of thousands of dollars in damages and legal fees.

This practice is called ‘forum shopping,’ where a plaintiff picks the most favorable jurisdiction to sue in, and files suit there.  American courts do not like plaintiffs who forum shop, and several states have tried to limit this practice.  The Bee also reported:

Several states have enacted so-called Rachel’s Laws to prevent libel tourists from using U.S. courts to enforce foreign judgments. California’s version, enacted last year, says that state courts won’t enforce libel judgments from other nations unless the foreign defamation law “provided at least as much protection for freedom of speech and the press as provided by both the United States and California constitutions.”

However, the House of Representatives passed a Bill this week aimed at shielding U.S. journalists, authors and publishers from “libel tourists.”  The measure would prevent U.S. federal courts from recognizing a foreign judgment for defamation that is inconsistent with the First Amendment, which guarantees freedom of speech.

This is good news for publishers and authors who wish to express their opinions.

Eric Goodman for BKGG

Bratz vs. Barbie – A Plastic Catfight in Court

Barbie holds a special place in my heart (and, much to my husband’s dismay, on my wall, in the form of framed drawings of early Barbie designs).  A few days ago, the Ninth Circuit reversed a decision granting Mattel, the maker of Barbie dolls, rights to MGA Entertainment’s lucrative Bratz doll line.  The Bratz line is worth two billion dollars.

A little background: Carter Bryant worked for Mattel where he designed fashion and hair styles for high end Barbie dolls. In August 2000, while he was still employed by Mattel, Bryant pitched his idea for the Bratz dolls to MGA Entertainment, one of Mattel’s competitors. Bryant was soon called back.  Bryant signed a consulting agreement with MGA and began work on Bratz.  Bryant gave Mattel two weeks’ notice on October 4 and continued working there until October 19. During this period, Bryant was also working with MGA to develop Bratz.  MGA kept Bryant’s involvement with the Bratz project secret, but Mattel eventually found out. As you can imagine, this led to a major lawsuit.

The Court’s ruling has important significance in two respects; employee invention agreements and their enforceability and the standard for similarity in copyright infringement actions.

At the District Court level, Mattel argued that Bryant violated his employment agreement by shopping his Bratz idea to MGA idea instead of disclosing and assigning it to Mattel.

His employment agreement states:

I agree to communicate to the Company as promptly and fully as practicable all inventions (as defined below) conceived or reduced to practice by me (alone or jointly by others) at any time during my employment by the Company. I hereby assign to the Company . . . all my right, title and interest in such inventions, and all my right, title and interest in any patents, copyrights, patent applications or copyright applications based thereon.”

The agreement defined “inventions” as

including, without limitation, discoveries, improvements, processes, developments, designs, know-how, data computer programs and formulae, whether patentable or unpatentable.

The District Court held that Bryant’s employment agreement obligated an assignment of his ideas to Mattel, and so instructed the jury. What was left for the jury to decide was which ideas Bryant came up with during his time with Mattel. The jury decided Bryant came up with a substantial part of the Bratz concept, including sketches of the Bratz dolls, while still employed at Mattel.

However, the Ninth Circuit decided differently.  It held that an idea was not necessarily covered under the agreement’s definition of “invention” and the lower court erred when instructing the jury to focus on ideas as opposed to inventions.

“We conclude that the agreement could be interpreted to cover ideas, but the text doesn’t compel that reading. The district court thus erred in holding that the agreement, by its terms, clearly covered ideas. Had the district court recognized the ambiguity, it might have evaluated whether it could be resolved by extrinsic evidence.”

The Ninth Circuit also found that extrinsic evidence should have been consulted to determine whether an invention would be assignable to Mattel if it was created by the employee on personal time.

The takeaway from this portion of the ruling is that employers should always avoid ambiguities in contracts when it comes to IP rights.  Basically, the more specificity, the better.

As to the copyright claim, the District Court had found the majority of the Bratz dolls to be infringing.  The Ninth Circuit, however, called for a more stringent evaluation and a delineation between the standard of infringement used for the actual doll prototype and for the sketches.  In regards to the prototype, which was simply a sculpture of a small figure with exaggerated eyes, the Ninth Circuit opined that due to the limitation in the manner in which you could express that particular sculpture due to its simplicity, the copyright protection was very thin.  Thus, for a competing design to be infringing, it would have to be “virtually identical.”

With regard to the sketches, however, due to the fact that they involved elaborate costume designs, much greater detail and thus the capability of limitless expressions, the Ninth Circuit found that the “substantial similarity” standard applied.  The District Court, by contrast, had leaned towards a standard that bordered on the protection of the idea of a sassy doll rather than an evaluation of the protectible elements.

Definitely an interesting ruling from a contracts perspective and a reminder to all that copyright protection does not cover ideas!

Amanda Mooney for BKGG

Trademark Infringement Photo #13

Amanda Mooney for BKGG

Keyword Advertising – Can I use my competitors name?

Just about every business on the planet has a website.  Many business owners advertise their website on the internet.  One popular form of advertising is ‘keyword’ advertising.  But the question for today is, can you use a competitors name or trademark in those keyword advertisements?

First, what is keyword advertising?  Search engines, such as Google, Yahoo! and Bing, enable a website owner buy advertisements that direct viewers to the owners website. These advertisements show up when someone uses Google, Yahoo!, and Bing.  But they are unique to what the individual types into the search engine.  For example, if someone types in “color printing in Orange County,” the organic results will pop up, but so will keyword advertisements that printers in Orange County have bought.

Some businesses get sneaky about their keywords and use a competitors name in an effort to direct attention to their website versus their competitors.  I’ll give you a hypothetical: pretend that Microsoft invents a phone ten times cooler than Apple’s new iPhone4.  Steve Ballmer, CEO of Microsoft, decides to use keyword advertising on all the major search engines to promote the new phone.  However, in an effort to direct attention to Microsoft’s new phone, Ballmer buys ads that show up whenever someone searches “iPhone.”  This means that whenever someone types “iPhone” (Apple’s registered trademark) into a search engine, up pops an ad for Microsoft’s new gizmo.

As you can imagine, this has upset many business owners to find a fierce competitor is redirecting potential customers away from the owners website to the competitors website.  Is this illegal?

The short answer is ‘probably not.’  Some U.S. courts have held that this practice is legal.  For example, In J.G. Wentworth SSC Ltd v. Settlement Funding LLC, 2007 WL 30115 (E.D. Pa. Jan. 4, 2007), the court granted summary judgment to the advertisers based on the lack of evidence of consumer confusion.  Canada also recently ruled this practice legal.

The search engines know this. Google recently changed its policy stating that advertisers will be allowed to use trademark terms in their ad text even if they do not own that trademark or have explicit approval from the mark owner to use it.  Businesses who feel victimized by this practice aren’t taking it without a fight.

However, that hasn’t dissuaded some companies from fighting.  According to PC Mag, Rosetta Stone recently sued Google,

“alleg[ing] that Google is allowing third parties, including individuals involved in software piracy, to purchase the right to use its trademarks—or other “confusingly similar” terms—in Google’s Adwords advertising program.”

We will keep our eyes on this case to see if the court holds for the Rosetta Stone.  If so, then we may have some new law to deal with.  Stay tuned!
Amanda Mooney for BKGG

Gizmodo, Apple, Gawker, and the iPhone4 Settlement

We reported a month or so ago on the iPhone4 ‘incident.’  If you’re not up to speed on what transpired, read this article.

If you are up to speed, here is what went down a few days ago.  According to PC Mag:

Gawker Media and Gizmodo have agreed to voluntarily turn over relevant documents to authorities, according to a report.

That deal apparently persuaded a California judge to void a search warrant against Gawker, Gizmodo, and editor Jason Chen, Wired reported.

Gawker and Gizmodo will voluntarily turn over the documents that the San Mateo County District Attorney and its team require, Wired said. As a result, the search warrant will be withdrawn.

After the iPhone story broke, the authorities searched Jason Chen’s home.  Many attorney’s across the nation cried foul because reporters like Chen fall under a shield law.  California’s Penal Code section 1524(g), which disallows the use of warrants to obtain “unpublished information obtained or prepared in gathering, receiving or processing information for communication to the public.”

Eric Goodman for BKGG

Patent Troll on a Money Making Rampage

Did you know that companies are allowed to collect patents for inventions they never plan to manufacture?  These “patent trolls,” can then opportunistically sue alleged infringers.

Peter Detkin, the assistant general counsel for Intel, coined the term “patent trolls” in the 1990s, to describe “somebody who tries to make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced.”  Patent licensing is a $100 billion dollar business, and these patent trolls are taking an ever increasing piece of the pie.

For example, NTP Inc., a patent holding company…er patent troll…, filed lawsuits last week against Google, LG Electronics, Apple, HTC, Microsoft and Motorola for infringements of eight patents NTP owns related to wireless e-mail delivery.

According to CNN Money:

““The filing of suit today is necessary to ensure that those companies who are infringing NTP’s patents will be required to pay a licensing fee,” NTP cofounder Donald Stout said in a prepared statement. The lawsuits were filed in U.S. District Court for the Eastern District of Virginia.”

A few years ago NTP settled a similar lawsuit with Research in Motion (the makers of the mighty Blackberry) for $613 million.

In light of these practices, a bill has been proposed in the Senate that may bring significant changes to the USPTO, including a transition from a “first-to-invent” system to a “first-to-file” approach.  Interestingly, the U.S. is the only major country that gives patents to those who can prove they invented an item, device, or gizmo before someone else’s patent was filed.  This is a widely debated issue that we will follow closely.

Eric Goodman for BKGG

Sneaky IP Lawyer Loses Bid for Trillions

There is provision in patent law that allows a citizen to sue a company that deceives the public by using false patent numbers.  This is important because last year, the U.S. Court of Appeals for the Federal Circuit made false marketing lawsuits much more attractive with its decision in Forest Group Inc. v. Bon Tool Co.. That decision stated that a court can award a winning false-marking plaintiff damages of up to $500 per individual falsely marked product.

Now, I want you to imagine something.  Imagine a company develops and manufactures a new type of pencil.  Knowing it has a great product, but in a rush to market and sell it, the company stamps on the pencil fake patent numbers to discourage counterfeiters.  Then the company goes on and sells millions of pencils.  Theoretically, under these circumstances, any person who realized that the patent numbers were fake could sue for $500 per pencil.

Needless to say, someone could sue for an absurd amount of money given the right circumstances.

Well, San Diego patent lawyer Matthew Pequignot tried just that, and sued for trillions after realizing that patent markings on the lid to his daily cup of coffee (made by Solo Cup) had actually expired several years before.

However, he lost his quest in a ruling last month. The Court of Appeals found that Pequignot failed to prove the defendant company intended to deceive the public with its false mark, a requirement under the recovery statute.  If Solo had intentionally kept stamping the false markings on the cups, then we might be telling a different story.

According to the ABA Journal:

“Billions of Solo’s cup lids were made with improper marks. The court noted in a footnote to its Solo Cup opinion (PDF) that Pequignot’s quest for $500 in damages for each improperly marked product would produce an award to the United States of $5.4 trillion, an amount sufficient to pay 42 percent of the country’s national debt.”

Although we applaud Pequignot’s ingenuity and guts, this seems like a clear effort to take advantage of a poorly thought through statute.  But the law is what it is, and until the legislature changes it, or a court overrules it, it exists.

Eric Goodman for BKGG

Trademark Infringement Photo #12

Amanda Mooney for BKGG

McFest v. McDonalds – It’s Settled…

Not long ago we blogged about Lauren McClusky and “McFest,” her annual charity benefit concert for the Special Olympics.  Big bad mean McDonald’s wasn’t too thrilled with her trademark application (for the name ‘McFest’), and a dispute arose.

Well, we are happy to note that the case has settled.  According to the Chicago Sun-Times:

But now the beef’s been settled. McClusky, a college student from Chicago who’s raised about $40,000 for Special Olympics, has agreed to give up the “McFest” name in exchange for two years of sponsorship.

“It just really came down to what was best for Special Olympics,” says McClusky, who attends Boston University and is the daughter of Chicago concert promoter Jeff McClusky.

This year’s show — targeting high school and college students — will be held Aug. 4 at Metro.

The new name? Nelarusky, taken from the mixed-up letters of her first name and the “sky” from her last name.

“We wanted to come up with something completely different and a name we thought would stick with people,” says McClusky.

Good job, Lauren!  Or, I guess we should say, “Good job, Lauren’s attorneys!”

Amanda Mooney for BKGG

CNBC Crime Inc. – Counterfeit Goods premiers today

Counterfeit goods are a $600 billion dollar problem.  Depending on the client needs, we spend a large chunk of our time protecting clients and trademark owners from this issue.  That’s why we are excited about tonight’s premiere of CNBC’s Crime Inc. – Counterfeit Goods.  We hope this show raises awareness of how large the problem is, and spurs business owners to take the appropriate protective measures.

According to CNBC’s website:

Fake handbags, watches, shoes and perfumes. The business of Counterfeit Goods is the largest underground industry in the world. Hundreds of billions of dollars are generated while sapping the economy, putting lives in jeopardy, and funding organized crime in the process.

CNBC’s “Crime Inc.: Counterfeit Goods,” takes viewers on a rare look inside a global crime spree, where the goods are produced and confiscated in a world of high-risk and high-reward.

Host Carl Quintanilla takes you on raids with the LAPD anti-counterfeiting unit, inspections at ports, and back-room factories where counterfeits are produced. Meet a company whose whole brand was copied, and the story of a defense contractor who counterfeit defense parts that found their way into weapons depots in Iraq.

At around 7% of all global trade, Counterfeit Goods are a big business with low overhead. It makes too much money to go away any time soon.

The next time you buy a pair of Timberland boots, you might want to think about whether they are actually Timberland boots.

The show Premieres tonight, July 14th  9p | 10p | 12a | 1a ET.  It will also air on Saturday, 7/18 at 10PM ET; Thursday, 7/22 at 8PM & 12AM ET; and Sunday, 7/25 at 1AM ET

Eric Goodman for BKGG