According to a report by Tech Crunch, e-book publisher Smashwords received a notice from PayPal on Feb. 18th giving the publisher only a few days to achieve compliance with the “ultimatum.” In response to the Paypal demands, Smashwords has posted this press release on its website advising authors, publishers, and literary agents of the new Smashwords position.
Zdnet is reporting that AllRomance, Excessica and Bookstrand received similar notices.
As you might expect, the uproar over the Internet is on the fact that a payment processor is trying to “censor” obscene content sold over the Internet by third parties. The concern is over the slippery slope of censorship and how dangerous this is for society as a whole.
On the other hand, PayPal is definitely not the only payment processing option available over the Internet, so these e-book publishers do have other options besides working with Paypal. Moreover, PayPal is a privately owned company, and despite recent acts by the President and Congress to force particular behavior on privately owned companies, as far as I know, there are still laws in this country recognizing the right of privately owned companies to make their own decisions about how to run their businesses, including what customers to work with and what terms and conditions to operate under. We may be on a slippery slope of private companies losing their autonomy to make their own business decisions, but at the moment, we still live in a country where private companies have some autonomy to make their own individual decisions.
Furthermore, we still have obscenity laws in this country, which are local in nature. Can’t an international company like PayPal take the position that running payments to purchase obscenity would be a violation of the laws somewhere in this country?
According to many of dissenter voices over the Internet, the answer is a clear “no.” Constitutional rights to free speech are at risk when censorship is involved, say these dissenters.
In considering this issue, I must say that I am a strong proponent of free speech; however, at the same time, I personally see no value in this type of content, other than to law enforcement who might want to know who is reading it. I would contrast this type of content with pure adult pornography in the sense that it is actually depicting criminal activity against a non-consenting third party or a third party who is not capable of consenting, whereas pornography does not by its very nature depict something that is of a criminal nature. That puts this type of content, in my opinion, in a different category from mere obscene content.
I would also argue that companies like PayPal have the right to make business decisions based on their own conscience and morals, provided that those decisions do not violate any laws themselves. I worry about the direction our society is going in, if private companies are no longer the afforded the opportunity to make business decisions for themselves and the public good starts dictating private business behavior motivated by morality and conscience. Isn’t that how our society and other societies have gotten themselves in trouble in the past?
It will be interesting to see how this controversy develops. The Silicon Valley IP Licensing Law Blog will continue to follow the story and keep you posted on any new developments.
]]>The Wall Street Journal is reporting that Proview has filed a lawsuit in Santa Clara County Superior Court claiming that Apple committed fraud when it used a company called IP Application Development Ltd., to purchase the iPad trademark from Proview on Dec. 23, 2009. According to The Wall Street Journal, there are emails in which a representative of IP Application Development told Proview “that it wanted to acquire the iPad name because it was an abbreviation of its company’s title, and that its future products wouldn’t compete with Proview’s products.”
Reuters is reporting that the strategy of filing now in the U.S. increases the likelihood that the dispute will disrupt Apple’s supply of iPads to China, and puts additional pressure on Apple to settle the matter quickly.
At the same time, Proview also likely needs this dispute resolved quickly, given its current financial situation. According to Reuters, Proview will be de-listed by the Hong Kong stock exchange this summer unless it comes up with a viable plan to deal with its debt. Going after Apple would appear to be its strategy for dealing with its current debt load.
As an outsider looking in on this dispute, it seems highly likely to me that a settlement in this matter will be reached at some point this year, since Apple stands to lose a significant amount of money in sales if its supply chain is disrupted and Proview is reported to be desperate for cash. The primary impediment to settlement is likely to be emerely the amount of money on the table, since Proview requires a certain amount of money as a business necessity to get out of its current financial problems and a settlement for less than that amount will not resolve its problems. Of course, if Proview is in such dire straits, Apple may be able to just drag out the dispute until Proview runs out of money; however, whether or not that makes sense as a legal strategy depends on how much money Apple is losing by not resolving the dispute. Thus, as with most things in business, reaching an agreement is all about the bottom-line.
What can be taken away from these recent developments in this dispute? Well, this story is full of lessons for Silicon Valley businesses, some of which I’ve raised in my prior blog posting regarding this matter. I think you can add to the list, though, tying up loose ends with your business before they cost you money. In my practice, I regularly work with start-ups who often neglect a long list of legal matters in their early years in order to keep expenses at a minimum, and they often what I would call “loose ends” that I identify for them as matters that might need to be “tied up” in order to avoid a dispute down the road. This is a good example of what can happen when a “loose end” for a business is left unaddressed–the other side can get into financial trouble and then the “loose end” may become a big headache for your business. When you identify loose ends, the temptation is always to let them slide because they aren’t a problem for you at the moment, but you have to weigh that preference against the cost that the price of tying up the loose end goes up down the road. It is unclear at the moment on the outside as to what extent this dispute developed out of a “loose end” or what the exact facts are in this dispute, but in my role in advising clients, many disputes often do evolve this way and this is certainly an example of what can happen when the stakes go up for the other side.
]]>The focus of Congress will now shift to consideration of the Online Protection and Enforcement of the Digital Trade Act (the “OPEN Act”), H.R. 3782, which was introduced by Rep. Darrell Issa (R-California) on the day that the SOPA blackout was held. In a blog posting to the Silicon Valley Software Law Blog I explored whether the OPEN Act was a more viable alternative, writing as follows:
Obviously, the OPEN Act provides a far less drachonian approach to dealing with infringing foreign websites than what was contemplated by SOPA, which would have allowed full websites to be completely “erased” from the Internet. Instead, the OPEN Act’s approach goes to the heart of the problem: cutting off the ability of infringers to make a profit off of their infringement. So, in that respect, the OPEN Act is definitely improvement over SOPA. Also, there is an argument that the ITC is a more appropriate body to hear these kinds of disputes, since the agency already has been tasked with the job of addressing unfair import disputes, where intellectual property violations are involved. Furthermore, this bill focuses on the problem of infringement by foreign websites, so it targets the real source of concern over infringement as opposed to usurping existing methods of dealing with domestic infringers. . . . All in all. . . I think the OPEN Act is a much more palatable proposal for dealing with infringers, and that this bill is a far better working document than what we had on the table with SOPA and PIPA. At the same time, I think that the whole concept of adopting new legislation to deal with online infringers is still a work in progress warranting further consideration before any new legislation is adopted.
A working text of the OPEN Act has been posted for comment, and I would encourage all members of the Silicon Valley IP community to check out the website and provide your feedback to the proposed legislation. Unlike SOPA and PIPA, this particular piece of legislation is receiving support from some prominent online companies such as Google, Facebook, LinkedIn, and Twitter. As you might expect, it is not receiving the same kind of fanfare from the entertainment world.
The Silicon Valley IP Licensing Blog will continue following this story as it develops and keep you updated on any news.
]]>You might wonder how in the world this happened, given Apple’s large, IP savvy legal department and the fact that China was such a large potential market. Apple surely started focusing on the protection of its worldwide rights in the “iPad” mark the moment it conceived the concept and the name itself.
Well, according to MSNBC’s report, a Chinese company reserved the mark originally back in 2000 and in 2009, Apple purchased the company’s worldwide rights in the mark from the company’s Taiwanese subsidiary. However, the Chinese company maintains that it still owns the rights in the mark in the Chinese mainland, and that the subsidiary never had those rights to license. Unfortunately for Apple, the Chinese company is now having financial problems, and so, the Chinese company is diligently pursuing this issue, no doubt in order to procure a large settlement from Apple that can keep the company in business.
The facts of this particular legal dispute provide a variety of lessons to Silicon Valley companies.
First and foremost, if you come up with novel business product that you plan on marketing worldwide, you need to devote resources before you launch to protecting your mark in all of your key markets and you need to work with qualified local counsel in each country to ensure that your mark is actually protected in each of those key markets. Then, when you have to enter into agreements with with foreign companies, make sure that both your local and your U.S. counsel are experts in the relevant areas of law, so that they can confirm that the English and foreign language versions of your agreements give you the correct rights that you need to proceed. When I negotiate agreements with China, for example, the agreements typically have one line in Chinese and another line in English, so it is important to confirm that both sentences read as intended.
Second, when you enter into agreements regarding IP, do due diligence on the IP in advance to confirm ownership rights in the IP and also procure warranties and indemnifications regarding the ownership of the IP from any third party who is transferring rights in IP to you, so that you don’t find out down the road that you didn’t actually get what you paid for and have to absorb the losses directly yourself, when those losses are inevitably going to be far more expensive.
Finally, if you are launching a product for the worldwide market, make certain that the marks you want to build your brand around are protectable on a worldwide basis. So many clients that I work with do it backwards and select a name and develop their brand before they even stop to consider whether they can even protect the brand they are developing. Far too often I see companies have to start over 2 to 3 years into their business with rebranding everything because they discover that a third party is already using their mark. Even if they are successful in avoiding a lawsuit for trademark infringement, they run the risk of losing all of their Internet history for their old brand and having to spend thousands and thousands of dollars recreating all of their branded materials such as their website, business cards, landing pages, brochures, stationery and everything else. It can be a very costly mistake, even when the companies escape the worst case scenario of litigation.
The bottom line is that trademark protection planning needs to start on the day that you conceptualize a brand, and when you are trying to protect the brand off-shore, you need to make sure you are coordinating your U.S. and foreign representation to ensure that you are definitely protecting your brand in both locations.
]]>As I reported on the Silicon Valley Software Law Blog, Mozilla, Reddit, Word Press, Boing Boing and the English language version of Wikipedia have confirmed that they will participate in the blackout.
In addition, Politico is now reporting that Google will be joining in tomorrow’s protest, but will not be participating in the Internet blackout. Instead, Google will reportedly be posting a link on its homepage explaining its opposition to the Stop Online Piracy Act and the Protect IP Act.
The nonprofit organization Fight for the Future has posted a comprehensive list of the participants who have currently committed to tomorrow’s online strike.
In case you have not been following the SOPA controversy, the purpose for tomorrow’s blackout is to express online opposition to the proposed SOPA legislation. I discussed the controversy in the Silicon Valley Software Law Blog as follows:
[T]he Stop Online Privacy bill was introduced in late October, 2011 by the Republican Congressman Lamar Smith of Texas, which would allow the Attorney General of the United States to seek a court order against internet service providers to cause them to make a website disappear from the Internet. . . . The bill was designed to allow U.S. companies to shut down offshore infringers, and as you might expect is being championed by the Motion Picture Association of America and the Recording Industry Association of America, which of course, are highly invested in stopping the loss of profits to online privacy.
While few in the Internet world would disagree that online privacy is bad, the controversy over SOPA is over the concern that large companies are going to be able to censor or blacklist smaller Internet players and simply be able to “erase” their very existence from the Internet. Net Coalition.com has assembled a list of parties who oppose SOPA. The list includes companies, prominent individuals and educators, public interest groups, industry associations, websites and online services, cybersecurity and engineering groups, and international human rights advocates.
In case you are wondering what my position is on the issue, I am absolutely against infringement but am very concerned about the potential impact of this bill. As I wrote in the Silicon Valley Software Law Blog:
Like most attorneys who represent clients in the Internet space, I have found myself on both sides of this issue. It is not unusual to have a client come to me with a complaint about a third party infringing my client’s copyright on the Internet, and to find myself in the frustrating position of having to advise my client of the limited options available for dealing with the infringement. It is particularly frustrating when I am talking to a client who has limited resources and cannot afford the investment of resources that is going to be required to really go after the infringer.
In fact, even I have run into situations where my copyrighted works were being infringed on the Internet and I had to make a decision about how to best deal with the infringement.
At the same time, however, I am very concerned by the fact that Congress wants to further legislate in this area. I agree with many of my fellow Internet law experts that we should oppose in general the encroachment of government regulation of the Internet, and this bill appears to be very serious encroachment. Moreover, I am concerned about how a bill like this would be used. It is almost certain that the small content publisher on the Internet would be at a serious disadvantage in defending itself against SOPA-based actions. Large companies with large teams of lawyers would be in a position to effectively censor smaller entities on the Internet, since the accused would not be financially able to defend themselves. It is highly likely that a bill like this which would allow parties to “erase” websites from the Internet would be misused for the economic benefit of one party over another.
Of course, there is another issue. Given the fact that the very nature of Cyberspace is borderless, should a U.S. attorney general really be able to police websites offshore? If so, shouldn’t the equivalent officials for other governments be able to do the same thing? What kind of standard are we setting for the rest of the world to follow? I’m not sure we want certain countries’ political leaders to start erasing American websites from the Internet.
The bottom line is that the implications of this bill go beyond the intent of just getting offshore infringers that cannot be shut down off the Internet. The effects of this bill could be very far-reaching, and take us a step closer to the day when virtually every activity on the Internet is subject to government oversight and regulation–not only by the U.S. but also other governments around the world.
For any companies interested in supporting tomorrow’s protest by participating in the blackout, you still have time to get involved. Wired.com has republished Google’s recommendations for how to participate in the blackout in a “web-friendly” way. Fight for the Future has also published instructions on its website on how to get involved.
]]>In my recent blog posting on the California Biotech Law Blog, I raised concerns about whether or not this bill was really good for the biotech industry. As you might expect, my concerns about the bill go beyond its effect on the biotech community–my concerns are relevant to the Silicon Valley start-up community as well.
It has yet to be seen as to whether or not the legislation will really improve the operations of the USPTO as promised, but the passage of this legislation has an immediate effect on inventors and start-ups, who now have to race to gather the capital necessary to file a patent on their invention, so that they can ensure that they are the first to file a patent on the invention. Like many who work with start-ups, I worry that this hurdle will now discourage innovation, particularly in these challenging economic times, since investors and loans are so difficult to come by. Why make the effort to invent at all if it is going to be such a challenge to protect your invention?
In truth, despite my concerns about this new legislation, I have faith that Silicon Valley entrepreneurs will overcome this hurdle as they do so many others. The Silicon Valley is a resilient place where people are used to overcoming challenges and setbacks. However, I remain puzzled as to why Congress chose to finally pass this bill, which had been introduced and debated by many prior Congresses. Why impose this new hurdle on inventors at this point in history during this economic crisis? Shouldn’t our policy be to encourage innovation at every opportunity so that we can get new businesses going that create new jobs? Placing new hurdles on cash-strapped inventors and start-ups in this economy just seems to defy common sense.
To see the full text of the American Invents Act of 2011, click here.
]]>In my recent posting to the Silicon Valley Software Law Blog, I report on this new move and what it should signal to all companies–even the start-ups and sole proprietorships–selling on the App Store.
The bottom line: if you are distributing an application on the Apple App Store which links to a website where you offer additional products for sale, you should definitely take note of today’s news and anticipate what it will mean for your business. Clearly, large companies doing business on the Apple App Store are concerned about the impact that these new policies are going to have on their profits. If they are concerned, you should be too.
]]>Our latest blog will address legal issues of interest to members of Silicon Valley’s software industry.
The purpose of the new blog is to enable the firm to focus on the narrow topic of software legal issues while continuing to cover the broader topic of IP licensing issues on this blog.
If you have an interest in software legal issues, I encourage you to check out the Silicon Valley Software Law Blog.
]]>Most are a little disappointed to learn that ideas alone are not something that you can protect with an IP filing.
So, if ideas alone are not protectable, how exactly does an entrepreneur protect an idea long enough to get it off the ground?
My first piece of advice to entrepreneurs who call me with this issue is that they need to procure a well-written nondisclosure agreement, and use it with any friends, family, or business contacts that they share their idea with. Of course, I always caution them that the best form of protection is not to share confidential information in the first place, and if they do have to share confidential information, to keep the sharing to an absolute minimum. But certainly, to the extent they need to discuss their ideas with anyone else, the discussion needs to be covered by a nondisclosure agreement.
My second piece of advice is to make certain that anyone they hire to develop anything at all for them related to their idea needs to assign all their rights in whatever is developed to him/her or his/her company. The mistake I see entrepreneurs make over and over again is that they think payment amounts to a transfer of ownership rights. This is far from the case. If you pay for development and there is no assignment of rights to you, then the contractor will own the rights in what was developed.
My third piece of advice: if your idea constitutes an invention, you need to hire a patent attorney right away and get a provisional patent filed on your invention. Please note: THIS STEP WILL BECOME INCREASINGLY CRITICAL IF PATENT REFORM IS PASSED, SINCE THE NEW PATENT BILL WOULD MAKE THE U.S. A FIRST TO FILE SYSTEM, and you will lose your rights to the invention if someone else files the patent first.
My fourth piece of advice: if you have created or developed or recorded in any way your ideas and you are not concerned about having them published at the Libary of Congress, then you will want to register a copyright to cover what you created/developed/or recorded, so that there is a record of ownership.
My fifth piece of advice: If you come up with a great name for your company or product, immediately do a thorough search of the name on the USPTO website and the web to see if anyone else is using that name, and if so, confirm whether or not they are using it to describe similar services or a similar product that could be confused with your business, product, or service. A common mistake that I run into with my practice is that entrepreneurs get their heart set on a particular name, and then find out months or years later that they are infringing on another company’s trademark and realize that they have to change the name(s) they have chosen. Not only is this a huge waste of money, but it’s also a huge waste of time, since you will have spent an extended period advertising a mark that you have to drop. It is much easier to simply confirm that you are not infringing from the start.
At some point, you will of course want to protect the mark you come up with, but I don’t recommend doing it immediately since there’s a minimal amount of risk that another entrepreneur in your same space will come up with the same mark at the same time you do. It is far more likely that you will select someone else’s mark than that you will lose your mark if you wait to file it until you can afford to do so.
Finally, my sixth piece of advice: you should not let people use your ideas except pursuant to a well-written agreement, even if the third party is simply “testing” or “evaluating” your product. Entrepreneurs tend to be educated on the need for filing patents, copyrights, and trademarks, and are generally willing to spend money on those filings; however, they often forget that the agreements are perhaps the most important piece of the puzzle to IP protection and either try to draft their own agreements based on contracts they find or in many cases, they simply forget to enter into an agreement altogether. It is a really bad idea to permit third parties to use your IP without having a well-written agreement to govern the relationship, particularly if you want to retain the value of your IP, even if the other side simply wants to evaluate the product or services It will pay to take the time to do things the right way–even if you have to spend a little more money up-front to get the work done.
In summary, an entrepreneur can protect his or her ideas–but just not directly as a particular IP filing. Thus, to protect the idea an entrepeneur has to examine the individual elements of the idea to determine how to protect each element. By utilizing a combination of nondisclosure agreements, copyright and trademark registrations, patent filings, and agreements, the entrepreneur can protect his or her ideas long enough to get them to market and start making money.
]]>In other words, if someone hands you work that he or she created and no copyright assignment is made, then you typically are just going to receive a nonexclusive license to use the work created. However, if the license is not written, then the extent of your rights is technically unclear and not actually defined. Thus, your license could be terminated at any time.
So, what does this mean? It means that if you decide to repurpose the work that was created and use it in an alternative way, i.e. other than what was contemplated by the contractor, then you may be committing copyright infringement. Similarly, if you decide to create a derivative work of the original work which was created, well then you may be commiting copyright infringement as well, since only the owner of the IP in a work can authorize the creation of derivative works.
In the current economy, I see this issue come up quite often in terms of payment disputes. The buyer of the work decides not to pay the invoice for the work that was created but wants to continue using the work. Obviously, if you only have a license to use work and you breach that license by not paying for the work, then you are technically infringing the copyright of the creator if you continue to use the work after the dispute arises.
Thus, the best practice when you are hiring someone to create something for you–whether it is artwork, text, videos, designs, software code, music, or any other type of creative work–is to make certain you get a copyright assignment from that person BEFORE you pay him or her any money for his or her work. And, if you have a payment dispute with the person you hire, you need to resolve that dispute and you should stop using the work until a resolution has been reached which involves an assignment of copyright. And, of course, it’s always best to discuss your expectations with this person when you hire him or her rather than after he or she has already finished the project, as he or she is always going to be more willing to enter into a copyright assignment before starting the job rather than after the work has been concluded.
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