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DancingToddler_YouTube_DMCAThe U.S. Court of Appeals for the Ninth Circuit this week issued a decision with implications for owners of music and audiovisual works. The court ruled that copyright owners first must assess whether a use of their content is in fact lawful “fair use” before sending a takedown notification under the Digital Millennium Copyright Act (DMCA). Considering fair use involves a balancing of subjective factors, this newly-clarified requirement may make it logistically more difficult and time consuming for content owners to evaluate whether a use of their content discovered online qualify for takedown notices.

Posted in Copyright

Prior to March 2, 2010, the law was well settled that in order to enforce a copyright in court, the party bringing the claim must have a registration. Copyright standing is governed by Section 411(a) of the Copyright Act of 1976, which states that “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.” Accordingly, copyright infringement lawsuits would be dismissed for lack of subject matter jurisdiction if the plaintiff did not have a registration.

Posted in Copyright

In November 2013, a federal judge in the Southern District of New York dismissed a lawsuit against Google, Inc., finding that Google’s copying of print works in connection with its Google Books project represents fair use under 17 U.S.C. § 107. The Google Books project includes two main programs: a “partner” program, in which Google stores and displays material provided by book publishers or other rights holders, and a “library” project, in which Google digitizes the entire collection of a library to make its text available for search and other uses. Back in 2005, The Authors Guild, Inc., along with several individual authors, brought suit against Google for copyright infringement based on unauthorized copying that occurs in connection with the digitization of printed works. In the opinion, Circuit Judge Chin analyzed the alleged copyright infringement in view of several fair use factors laid out in § 107, including the purpose and character of the use of copyrighted material, the nature of the copyrighted work, the amount and substantiality of the portion used, and the effect of the use on the potential market for the work. Judge Chin found that the Google Books project provides many previously-unavailable benefits to the public without superseding or supplanting the books themselves, and therefore held that any copyright infringement associated with the program represents fair use under the law. This decision highlights the ever-changing landscape of fair use—and copyright law in general—in the digital age. Practitioners dealing with fair use and other copyright issues should be mindful of the dynamic landscape surrounding copyright and digital media.

Posted in Copyright

Like everything else related to copyright in The Digital Millennium—which, let’s face it, we should start calling The Digital Eternity—the publishing concept of “out of print” (OOP) has been turned inside out (or maybe upside down, it is hard to say, maybe both).

The recent Supreme Court decision in Kirtsaeng v. John Wiley & Sons represents a significant victory for college students in their struggle with media companies over copyrighted media. In a 6-3 decision, the Supreme Court assented to college student Supap Kirtsaeng’s resale of textbooks in the United States that were bought in Thailand at low cost, reasoning that the Copyright Act does not create a right to divide foreign markets from domestic markets. Effectively, this decision establishes international copyright exhaustion, i.e., that the first sale of a copyrighted article, whether manufactured domestically or abroad, is sufficient to “exhaust” the copyright owner’s rights to that article.

Posted in Copyright

OK, let's go over it again—just because you hire and pay someone to write something for you, or to design a logo or a website, or to paint a portrait of the family dog, it does NOT mean that you own the copyright in the writing, logo, or canine portrait. You DO OWN the physical object you paid for, but you CANNOT make copies of it.

In Golan v. Holder (No. 10-545, January 18, 2012), the U.S. Supreme Court upheld § 514 of the Uruguay Round Agreements Act (URAA) which restored copyright protection to certain works of foreign authors that had previously been in the public domain. Users of foreign copyrighted works first published abroad between 1923 and 1989 will need to continue to assess their liability and decide whether they need to attempt to locate the owners of the restored copyrights.

Posted in Copyright

The recording industry is already reeling from the effects of the Internet -- illegal downloading of new releases has contributed mightily to a drastic reduction in industry sales in these early years of the Third Millennium.

Posted in Copyright

Not every copyright issue nowadays arises from the Internet.

Here’s one that arises from venerable needle and thread.

Haute couture is tired of knock-offs and is trying to “put its Manolo down.”

New York Senator Charles Schumer - - what, you were expecting Nebraska’s Ben Nelson to take the lead on this? - - is sponsoring the Innovative Design Protection and Piracy Prevention Act, intended to provide three years of copyright protection for fashion designs. This short term is itself interesting: first, if you write a non-pseudonymous book, your copyright is good for life plus 70 years; second, I’m showing my age, but didn’t the “chemise” and Rudi Gernreich’s topless bathing suit each come and go in about four months? Compared with life plus 70 years, three years seems absurdly short; compared with the labile nature of fashion (which mutates faster than a clever bacterium), it seems absurdly long.

Nevertheless, no matter how ardently you may long for the next Bonfire of the Vanities, it’s hard not to sympathize somewhat with a hardworking fashion designer. Personally, I’m not sure I see the point of what he or she does; on the other hand, I freely confess I could never design a dress or a mule myself.

There could be sticky wickets. The proposed law would protect original designers only against “substantially identical” copies. The standard for copyright infringement otherwise is “substantially similar.” “Identical” will be a higher bar for a plaintiff designer to clear. But let’s face it: the purpose of the proposed legislation is to deter knocking-off in the first place, rather than to provide an effective remedy for completed copying. Who’s going to order up 10,000 dresses from a Chinese tailor based on his or her own judgment call that he or she is being only “similar” and on no account “identical.”

And how will evidence be introduced?

Will runways be installed in courtrooms for models to descend wearing the “accusing” and the “accused” works?

Will aging designers whose stars are fading find second careers as expert witnesses?

Those farther down the fashion food chain are supposed to be protected from liability: buying or selling a knock-off inadvertently is not actionable. Will a phrase like “friends don’t let friends buy knock-offs on purpose” pass into the language? Amateur seamstresses (of either gender) may copy protected designs for personal use. (TiVo for clothes?) But what happens if you and your son are the same size, and he asks one night to borrow your “Tommy Hilfiger”?

I know not what course others may take, but as for me, you’ll find me at my local Goodwill Industries second-hand clothes shop.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.

Intellectual property rights broadly encompass patents, trade secrets, know-how, proprietary data, registered designs, copyrights and trademarks, among other things. Most often, such rights originate with a commercial entity and the owner retains the rights throughout their lifetimes as legal leverage against competitors.

However, there are times when an owner of intellectual property (IP) may want to transfer some or all of its IP but an outright sale is not an attractive option. For example, the owner may be a non-practicing entity (NPE) – a term that encompasses (1) individual inventors who, for one reason or another, may not be able to commercialize their IP, (2) universities and other research institutions that seek to transfer technology as part of their mission, (3) commercial entities whose business plans change and find themselves with surplus IP or (4) so-called “trolls” that accumulate patents and other IP as middle-men and then seek to license the rights to the highest bidders.

Even when the owner practices the IP, there can be advantages to sharing IP with others, e.g., as part of a settlement of litigation or a cross-license that may resolve a stalemate where two or more parties may have mutually blocking IP.

Licensing, as opposed to complete transfer or assignment of IP, provides the owner with several advantages. By retaining ownership, the seller (licensor) retains title and typically has an easier time reversing the transfer of rights if the buyer (licensee) doesn’t live up to its end of the bargain. In many instances, the party seeking to acquire the IP rights does not have sufficient financial resources to pay the full value upfront – or may perceive the IP as highly speculative but be willing to pay more if the technology can be successfully commercialized. A well-drafted license agreement therefore not only gives the licensor an opportunity to more readily terminate the agreement if future payments are not made but also allows the parties to “share in the upside.” License agreements can also delineate the responsibilities of each party for maintaining or enforcing the patent rights.

Thus, licensing allows greater flexibility and reduces the risk that the IP will be over or undervalued. If the desired revenue strategy is a stream of income, i.e., royalties or contingent payments, then licensing is often the most appropriate choice.

What are the components of a license?

A typical patent license will specify the rights granted, the term of the grant, the consideration in exchange for the grant, records and reporting, representations and warranties regarding the patent, how infringement issues will be handled, tort liability for products or services covered by the license, and other factors.

Grant clause

The grant clause sets forth what patent rights are being conveyed. The grant can be exclusive (i.e., only the licensee has the right to exploit the patent rights) or non-exclusive (i.e., the licensor can grant similar rights to other parties). The grant can be limited by geography (such as U.S., worldwide), and field of use (such as for cellphones but not laptops).

Improvements

A patent license can also define each party’s rights to improvements of the patented technology. Depending on the negotiation, improvements might be solely owned by the licensor, licensee, or jointly owned by both. The party with more bargaining power often insists on controlling the rights to improvements.

Consideration

The payment of consideration can be structured in many ways. The license agreement typically requires a licensee to pay an upfront license fee as well as ongoing royalties based on a percentage of sales or on a per-unit basis. The license can also require minimum annual royalties or minimum annual product sales to be sure the licensee is diligently marketing the products or services covered in the patent. The license agreement can also require that the licensee provide reports to the licensor, e.g., of sales or revenue, to ensure accurate royalty payments.

Milestone payments are a particularly useful way to deal with the speculative nature of IP rights and ensure that the licensor shares in the success of commercialization. For example, milestone payments upon capitalization of the licensee or FDA approval of a product that embodies the IP are common provisions.

Shifting the financial responsibility for the ongoing pursuit of patent rights or maintenance of such rights is another form of consideration that a licensor may seek as part of the agreement.

Infringement

A patent license can also control each party’s responsibilities for enforcing the patent rights along with apportioning liability if the licensee is sued for infringement. Generally, each party wants to have control of any infringement litigation but also wants to avoid being required to defend or indemnify the other party.

Depending on the terms of the agreement, an exclusive licensee can have the right to sue for infringement. The license agreement can determine how the costs of litigation are apportioned between licensor and licensee. For example, the license can provide a licensee the right to withhold all or part of royalties to offset costs of litigation. The license agreement can also define how the proceeds of successful litigation are divided. Damages can first be allocated to cover litigation costs and then divided between the parties according to predetermined percentages, for example.

Due diligence

License agreements can require due diligence by the licensee to develop and/or commercialize the IP. Such terms are typical in university license agreements to ensure that the IP is used and not just put on the shelf. For example, the licensee can be required to use reasonable efforts to develop and commercialize products covered by the license. License agreements will also typically include milestones that must be met in order for the licensee to maintain the license. The license can also require submission of periodic reports regarding the licensee's activities related to the development and testing of the products covered by the licensed IP.

Indemnities and product liability

Licensors and licensees can provide various indemnifications to each other in a license agreement. The license can include representations and warranties concerning the IP and can require indemnification against any inaccuracy or loss arising from those representations and warranties. For example, the license can include representations by the licensor that they own clear title to the IP, that the IP is valid and enforceable, and/or that none of the products produced under the IP are known to infringe other IP held by third parties. In turn, the licensor can require the licensee’s compliance with applicable laws, such as export controls, tax codes, etc.

The license agreement can also include indemnification terms ensuring that liability for defective products produced by the licensee does not extend to the licensor, who likely has limited if any control over the actions of the licensee. Alternatively or in addition, the licensor can require that the licensee carry sufficient liability insurance.

Dispute resolution

License agreements can require the parties to provide notice of any breach of the agreement and can specify periods during which any such breach can be cured. The license agreement can also be drafted so as to provide in advance for arbitration or mediation of disputes. For example, the agreement can require binding arbitration rather than litigation.

Transferability

License agreements can provide the licensee a right to sublicense or assign the IP. The licensor can require approval of any such sublicense or assignment. For example, the licensor may wish to prevent a competitor from obtaining license to the IP. However, it can be important for the licensee to have the ability to assign the license without restriction as part of the transfer of the business.

Termination

License agreements can include negotiated provisions that establish how and for what reasons the agreement can be terminated. For example, the agreement can specifically provide for termination upon breach of certain terms of the agreement. Note, however, that clauses that provide for automatic termination of the license agreement if one or the other party seeks or is placed under bankruptcy protection may not be enforceable. On the other hand, clauses that provide for termination for failure to pay royalties may be enforceable regardless of bankruptcy.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.

Maximizing the protection and value of intellectual property assets is often the cornerstone of a business's success and even survival. In this blog, Nutter's Intellectual Property attorneys provide news updates and practical tips in patent portfolio development, IP litigation, trademarks, copyrights, trade secrets and licensing.

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