A recent app dispute between the Globe and Mail newspaper, and Spreed Inc., a Toronto-based app developer, highlights the risks with outsourcing app development, for both companies and developers.  Spreed developed an iPhone app news reader for the Globe, which was popular enough to pull in 700,000 readers. For whatever reason, the Globe later decided to develop its own app inhouse.

When the Globe’s inhouse app was launched, Spreed issued a software update to the users of Spreed’s Globe and Mail app. Updates provide bug fixes, upgrades to a new iOS, or new functionality – at least that’s what users expect. However, in this case, the update peeled off the Globe and Mail user-interface, and transformed the app into something new called “Free Press News” – a generic news reader no longer associated with the Globe and Mail.  Why can Spreed do this? Because, according to them, they own the code.  Lessons for business?

• Get advice. If you’ve hired an independent app developer, then check your contract: who owns the code? This becomes critical when the relationship breaks down – in this case between the content-provider and the app developer.
• App ownership is important in other situations including: privacy (who has access to what information during and after the contract?), and transfer of IP rights (let’s say you sell your company and want to transfer all the intellectual property – including your popular iPhone or Blackberry app. You can’t transfer the code if you don’t own it).

Calgary – 07:00 MDT

 

My article Software Licensing in the Cloud  [PDF copy] is published in the May 6th edition of The Lawyers Weekly, which addresses the legal issues arising in the use of “cloud computing” services: including data handling, jurisdictional issues, warranties and service levels, customization and subcontracting, and licensing models.

Contact me at the Intellectual Property and Technology Group at Field LLP for advice on your cloud computing licenses.

Calgary – 07:00 MDT

 

As a follow-up to our earlier post (To hack or not to hack…), here’s a reason NOT to hack. Evony LLC, a maker of multi-player online games, has successfully sued Philip Holland, a “botter” who had developed a task automator for one of Evony’s games. By circumventing the copy protection measures in one of Evony’s titles, Mr. Holland developed a bot that automatically completed tasks and effectively played the game for players.

In Evony, LLC v. Holland, Dist. Court, WD Pennsylvania 2011  the company obtained a permanent injunction, an order for impoundment and destruction of copies of the game and bots, as well as damages of $300,000, plus lawyers’ fees, costs and interest.  The judgement came so swiftly (they only filed their claim in January 2011) because Mr. Holland failed to file a defence. The case was based, in part, on breach of Evony’s Terms of Use.

Related Reading: our post on a World of Warcraft botter: Apps, Bots and Workarounds – Part 1

Calgary – 07:00 MDT

 

 

For Canadians who are following the copyright reform story, here are are a few updates:

• Bill C-32 (the hotly debated proposal for amendments to the Copyright Act) has now died on the vine. When the government was defeated and Parliament was dissolved, all pending legislation fell off the order paper, including Bill C-32. The next Parliament is likely to take this issue up, but the timing and approach will depend on who forms government. 
• While legislative reform idles, the Supreme Court of Canada (SCC) is carrying on.  The SCC has agreed to hear several major cases that will impact copyright law in Canada.
• First the appeal in Entertainment Software Association (ESAC) et al. v. Society of Composers and Authors and Music Publishers of Canada (SOCAN) will address the use of music in video games. SOCAN (the organization responsible for collecting copyright royalties) asserts that royalties should apply to video games that incorporate copyright-protected music
• Another SOCAN case is Rogers Communications Inc. v. SOCAN, and will also deal with royalties applicable to online music sales. 
• A third SOCAN case (SOCAN v. Bell Canada ) will also be heard, dealing with the interpretation of the word “research” and whether 30-second song previews qualify as “fair dealing” for the purpose of the research and private study exception under the Copyright Act.

Related Event: Copyright Reform is Dead…. Long Live Copyright Reform!! For details and registration, please see the invitation.

Photo Credit: Renjith Krishnan

Calgary – 07:00 MDT

 

That is the business question for many in the software industry, including Microsoft, Sony and Twitter.

Software companies have to consider whether to embrace the hacking (…or shall we say “custom development”) culture of their customers, or gird for battle against the hackers. Mashable’s interesting article (Xbox Kinect vs. Sony PS3: How 2 Companies Handle Hacking) reviews the different approach taken by Microsoft which is (uncharacteristically) opening up its popular Kinect gaming console, and Sony which is suing customers who hack into PlayStation 3 [Link to Sony’s Complaint against hacker George Hotz is here 1MB PDF ].  Big old multinationals like Microsoft and Sony aren’t the only ones who have to face this question. New technology upstarts like Twitter are also wrestling with the problem: Twitter recently told developers to back off, after complaints of privacy violations and fragmented user experience. Companies offering software of any kind are finding that customers – both individual consumers and corporate users – are accessing the code, unlocking, jaibreaking and building their own functionality, whether or not the vendor has approved this.  My recent article on Software Licensing in 2011 [PDF] reviews the issues for software vendors.

Related Reading: Apps, Bots and Workarounds

Calgary – 07:00 MST

 

What do you get when you photograph someone else’s photograph? German photographer Michael Wolf received honorable mention in this year’s World Press Photo Contest for a series of images from Google Street View. He scrolled / strolled through Street View in different cities, and photographed scenes that he came upon. Let’s leave aside the question of whether this qualifies as art or photojournalism (maybe it’s both), and look at the copyright issue. Can a photograph of another image be protected by copyright or is it an infringement of the copyright in the original work?

The Quebec Superior Court in Ateliers Tango Argentin Inc. v. Festival d’Espagne et d’Amerique Latine Inc., (1997), 84 C. P. R. (3d) 56, dealt with a staged reproduction of a photo, rather than a photo of a photo. In that case, the defendant reproduced a photograph – same location, same angle, same layout of the same subject matter. The court decided that this infringed the copyright in the original photograph. Applying this reasoning, a photo of a photo could easily be an infringement.

In a 1999 US case, the court considered whether a copy of a photograph of a painting would infringe copyright.  Someone had taken photos that were exact replicas of paintings.  Copyright in the paintings had already expired at the time the photos were taken. The court decided that the photos are not themselves protected by copyright because they lack originality – an essential ingredient of copyright. So, copying those photos was not an infringement of copyright: Bridgeman Art Library v. Corel Corp., 36 F. Supp. 2d 191 (S.D.N.Y. 1999).

The image above? It’s not one of Mr. Wolf’s works – this one is my own image, snapped from Google Street View, right outside Field’s Calgary office. (If you look closely, you can see Google’s copyright notation on Calgary’s summer sky.)

Calgary – 07:00 MST

The relationship between China and Canadian business is a complex one. Rising wages and a swelling Chinese middle class will fuel demand for Canadian products and commodities. However, rising wages in China’s manufacturing sector and increased fuel costs will also increase the price of Chinese imports for Canadian companies who have outsourced their manufacturing to one of Guangdong’s many factories.  That puts pressure on Canadian importers and retailers.

In either case – whether exporting consumer goods to China or outsourcing manufacturing to China – intellectual property rights (IPR) are critical for Canadian companies.  Recent reports suggest an encouraging trend:

The “Intellectual Property Tribunal” of the Supreme People’s Court of the P.R.C. has seen a surge in IPR cases in recent years. In 2010, over 1,000 foreign-related cases of IPR infringement were heard, but this number is a small fraction of the 40,000 IPR cases involving Chinese entities. IPR cases involving foreign companies appear to have success rates of about 50%. And 2010 statistics also show an increase in efficiency in handling IPR cases despite the surge in filings. All this is likely driven by the government’s high-profile campaign against IPR violations, including against online piracy. This suggests two things:

• The government (for its own purposes) is encouraging IPR enforcement, and domestic entities are taking advantage of the legal system in increasing numbers for IPR enforcement. Domestic entities wouldn’t be rushing to the local IP Tribunal unless they had some confidence that the process was worth pursuing. 
• Foreign entities don’t appear to be suffering any disadvantage or enjoying any advantage. Their claims are being processed along with those of their domestic counterparts – which is how a dispassionate legal system should work. 

IPR enforcement in China has come a long way, but it still has a long way to go. If you are doing business in China, get access to experienced legal counsel – in both Canada and the PRC – for trade-mark protection, trade-secret and patent protection, licensing agreements and manufacturing agreements.

Calgary – 07:00 MST

 

We have compiled a few recent open-source software (OSS) stories:

• GPL in the App Store: A recent article on ZDNet reviews the differences in treatment of apps subject to the General Public License (GPL) in Apple’s App Store compared with Google’s Android Market. It argues that Apple’s closed system is incompatible with the GPL and so apps built from open-source kernels can’t be sold through Apple’s store, whereas the Google marketplace is compatible with GPL-licensed apps. When Apple pulled the VLC player last year, OSS enthusiasts complained that iPhone users would be deprived of OSS apps like GNU Go and the VLC media player (See: App Law Update – Part 2: Breach of GPL).  However, it’s worth remembering that the apps were pulled because of complaints from the OSS community, who levelled copyright infringement allegations at Apple. It was in response to those complaints that the apps were pulled.  It should be noted that the GPL is merely one of many species of OSS licenses, and other forms of OSS license will not necessarily be incompatible with Apple’s App Store terms.
• OSS and M&A: Lexology has a review of the OSS issues to consider in the context of mergers and acquisitions. In particular, when buying IT assets, business owners should work closely with legal counsel to review the software issues and the risks, and arrive at a practical way of mitigating those risks. Depending on the scope of the transaction, this may involve everything from simple representations and disclosure schedules in the asset purchase agreement, to detailed code-reviews by technical advisors. A “fear” of OSS need not kill an otherwise sensible transaction, as this article points out.
• Enforceability of the GPL: This story from the UK articulates an interesting argument about the enforceability of the GPL. It’s worth a read.

 

Calgary – 07:00 MST

 

 

Here is the last case in our trio:

MLS Database – As a follow-up to our earlier post ( Data Mining Decision), you may recall the story of a real estate broker who tried to repackage the MLS listings controlled by the Toronto Real Estate Board (TREB).  The TREB controls the database for residential resale listings (the MLS database) for its approximately 25,000 member real estate agents and brokers.  Fraser Beach was one such broker who developed a workaround to pull the data from TREB’s database, and then redisplay it to the public through his own site.  The TREB cut off his access and Mr. Beach sued the TREB. The court agreed that the TREB was justified in terminating access since this “end-run” violated the authorized use terms that Mr. Beach had agreed to as a member of the TREB. In Fraser Beach v. Toronto Real Estate Board, 2010 ONCA 883, decided in December 2010, the Ontario Court of Appeal upheld this decision. 

Lessons for business? The TREB’s well-drafted Authorized User Agreement specified that use of the database was permitted “for the purposes expressly specified in this Agreement and for the exclusive and internal use by Authorized User“. This was critical to the court’s conclusion that Mr. Beach’s use was a violation of these terms. Companies in the business of licensing database access should take care to have their licenses and authorized use terms reviewed to keep up with technological advances and new methods of obtaining unauthorized access to the data.

Calgary – 07:00 MST

 

Here is the next case in our trio:

BlackBerry – Consider the problems faced by Canada’s world-leader in mobile devices. You open an app store to compete with Apple, so the little guys can develop interesting apps. The problem is, little guys keep developing interesting apps. In Research in Motion Ltd. v Kik Interactive Inc. [Statement of Claim available here], filed in November, RIM sued Kik, an upstart messaging service that had grown wildly popular in the previous several weeks (over 2 million Kik users reportedly signed up within the space of a month). In its suit, RIM alleges patent and trade-mark infringement as well as misuse of confidential information – (the principal of Kik is a former employee of RIM) – and privacy violations.  This shows the difficulty of controlling ex-employees and independent developers, and RIM is not alone. Apple has booted apps that mimic its own core services or threaten the bottom-line (most famously, Google’s VOIP apps). 

Moving to India, RIM faces another challenge in the form of Bharatberry, an app created by an independent Indian developer that provides an “India-compliant solution to the existing users of the BlackBerry® service in India”, and appears to piggy-back on BlackBerry hardware to run a parallel email and messaging service through its own servers, rather than through RIM servers.  This service was developed in the wake of concerns that the BlackBerry service would be disrupted in India if RIM did not solve the Indian government’s demands to have access to RIM’s encrypted e-mail traffic.

 

Calgary – 07:00 MST

 

We’ll review a trio of cases that illustrate the line drawn by the law when software users try to do an end-run around a software owner:

World of Warcraft (WoW) – Blizzard is the publisher of the popular WoW multiplayer game. MDY sold an autopilot bot marketed as “Glider“ that automatically played the lower levels of WoW, to enable a player to graduate to higher levels and earn points.  In a fascinating case (MDY Industries v. Blizzard Entertainment), Blizzard sued MDY for sales of this “Glider” bot. In the course of the cat-and-mouse tactics between Blizzard and MDY, Blizzard prohibited the use of bots in its Terms of Use, and then deployed bot-detection software to block Glider-users. The US Court of Appeals for the 9th Circuit said that the antibot provisions were covenants rather than conditions. “A Glider user violates the covenants with Blizzard, but does not thereby commit copyright infringement because Glider does not infringe any of Blizzard’s exclusive rights. For instance, the use does not alter or copy WoW software.” Thus, Blizzard failed in its copyright claims. 

However, the court decided that MDY was liable for a DMCA violation with respect to WoW’s “dynamic non-literal elements”. The term “dynamic non-literal elements” refers to the copyright-protected elements of the game other than the written code that are created in the course of dynamic play by user. The court upheld the permanent injunction against MDY.

Lessons for business? In Canada, we don’t have an equivalent of the DMCA, though the proposed changes to the Canadian Copyright Act contain anti-circumvention rules of the type that caught MDY in the WoW case. Software publishers and vendors should ensure that their end-user terms or acceptable use policies are well-drafted and up-to-date to guard against this type of indirect access. This may not allow a software vendor to access copyright infringement remedies, but will provide a contractual remedy.

Cases 2 and 3 up next. 

Calgary – 07:00 MST

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Thanks 2010, intellectual property and internet law had an interesting ride. Here are a few issues to watch in 2011:

Canadian Copyright Reform and Anti-Spam Law:  Around this time last year, we predicted that copyright reform wouldn’t come to Canada until 2011 at the earliest. So far that appears to be holding true. However, Canada did make headway in the anti-spam department, with the passing of the Fighting Internet and Wireless Spam Act (hardly a poetic name, but we’ll take what we can get from Ottawa).  Canada’s anti-spam legislation received royal assent on December 15, 2010.  Meanwhile, the Canadian copyright reform bill was introduced in 2010 and the debate will continue when Parliament resumes at the end of January.

And the courts continue to tackle copyright issues piece by piece. News came in late December that a copyright “fair dealing” case will be going to the Supreme Court of Canada in 2011 (SOCAN v Bell).

Clean Tech Law: 2011 may prove to be a break-out year for Canadian Clean Tech companies, as private investment and government incentives provide a boost to companies in this technology-intense sector.  The law surrounding the uses, protection and licensing of clean technologies in Canada will gain traction in 2011.

App Law: This fascinating area of law shows no signs of slowing, as app developers continue to push the boundaries in their use of copyright materials, trade-marks and personal information of consumers, as the technology gallops forward. In December another iPhone-related class action suit was announced, naming Apple and a number of app developers as defendants (Lalo v. Apple, Inc et al, case 5:10-cv-05878).

Business Method Patents: We predicted that some clarity would come out of the Bilski review (in the US) and the Amazon 1-click patent (in Canada). In the US, the Supreme Court handed down its decision in the Bilski review, generally upholding the lower court decision, but cautioning that the machine-or-transformation test is not the only patentability test to be applied.  In Canada, the decision in October in the Amazon case upheld the patentability of business method patents, but the waters were immediately muddied again, when it was announced in November that the decision was being appealed (See: Amazon Business Method Case to be Appealed).

Calgary – 07:00 MST

 

My article on the Legal Implications of App Development [Download Copy of Article (2MB PDF)] is published in the November 19th edition of The Lawyers Weekly. It discusses “app law“ issues such as end-user licensing, copyright disputes, app-related trade-mark issues, trade-secrets, privacy and app development agreements.  [Link here for a preview of the digital edition]

Calgary – 09:00 MST 

The Canadian government’s proposed reform of the Copyright Act has passed “Second Reading”. For those of you who are a little rusty on your Canadian parliamentary procedure, this means that Bill C-32 will next go to committee for analysis and debate. Everyone will try to score political points in committee. After that, the Bill may proceed with or without amendments, or in theory it could still be killed after the committee stage.  The digital lock provisions are still among the Bill’s most contentious issues. 

While we’re on the topic of legislation, Bill C-28, the government’s long-overdue Anti-Spam Bill, has passed the committee stage and is being sent back to the House of Commons for “Third Reading”.

Calgary – 08:00 MST

 

Here are two more interesting cases involving apps for sale through the App Store. These cases arise from an alleged breach of open source software licenses. In this case, the open source code was licensed under the terms of the GPL. When GPL-licensed code is used or embedded in an iPhone app, does the licensing of that app through Apple’s iTunes terms and conditions result in a breach of the terms of the GPL? 

• In the first case, relating to an OSS application known as “GNU Go”, the Free Software Foundation complained that the licensing of the iPhone version through the App Store was a violation of Section 6 of the GPL. In response to the complaint, Apple simply removed the app. the FSF complains that Apple’s remedy is to “disappear” the app (as though they are a military junta… some might take that view), rather than licensing the app under the GPL.
• The second case involves the VLC Media Player, an OSS application ported to the iOS platform. Again, there was a complaint and an allegation of copyright infringement against Apple, on the basis that the GPL was breached. This app is (as of early November) still available in the App Store. 

Apple is not blind to the issue. In fact, Apple’s agreement with its developers is clear that apps should not violate the terms of any open-source licenses, and the developer will be liable for any such violation. One idea is for developers to invoke their contractual ability to use their own end-user terms, and insert the GPL at that juncture, subject of course to the mandatory terms imposed by Apple, that all end-user licenses must contain.  This would be up to the developer to implement, not Apple.

Calgary – 08:00 MT

You download the software…you click “I accept”.  Now, who is on the hook? 

Two recent cases illustrate the different ways that End-User License Agreements (EULAs) will be upheld by the courts.

• Canada: In Bérubé v. Rational Entertainment Limited, 2010 ONSC 5545 (CanLII), a user in Ontario clicked through a license agreement when she opened an account with PokerStars, an online gaming site. The user later sued the site operator, claiming various damages. The user attempted to avoid the terms of the end-user license agreement by arguing that it was a standard-form contract that was against public policy because it was an online gambling site. (Online gambling is not legal in Ontario…though governments in Ontario and BC are getting into the business themselves). The court disagreed. A clause in the EULA was clear that “…the Software is not for use by …individuals connecting to the Site from jurisdictions from which it is illegal to do so.  PokerStars is not able to verify the legality of the Service in each jurisdiction and it is the User’s responsibility to verify such matter.” The case was dismissed based on the terms of the EULA, to which the user had assented.
• US:  A software vendor hired a subcontractor to install its software at the offices of the end-user – in this case, the US Air Force. The subcontractor allegedly made unauthorized copies of the software, so the software vendor sued the subcontractor, claiming breach of the terms of the EULA. The subcontractor denied that it was bound by the EULA. In BMMSoft Inc. v. White Oaks Techology Inc., 2010 WL 3340555 (N.D.Cal. August 25, 2010), the court decided that the subcontractor was not bound by the EULA, since it had clicked acceptance on behalf of the end user – the US Air Force – not on its own behalf.  The subcontractor had clicked through the EULA as agent for the end-user customer.

Software vendors and online service providers can take comfort that properly-worded end-user terms are binding. They also need to get advice so they know who will be bound by those terms.

Calgary – 09:00 MT

Maybe you’ve heard of patent trolls – companies who own a patent or two, but don’t actually manufacture or sell any products. When they see that another company has become independently successful, they pounce, alleging patent infringement and millions of dollars in damages. The famous case of NTP v Research in Motion is the classic example.

Well, now we’re looking down the barrel of copyright trolls: advances in technology and litigation have combined to create ideal conditions for the modern copyright troll. In the US, copyright holding company Righthaven LLC, acquired copyrights to newspaper content originally published by the Las Vegas Review-Journal, a Nevada newspaper.  Sophisticated software can search the internet for instances that might qualify as copyright infringement. Righthaven has since filed over 100 copyright infringement lawsuits in the US.

The approach seems to be gaining traction: a Las Vegas federal judge recently ruled that Righthaven had standing to sue for copyright infringement even though the company didn’t own the copyright at the time the alleged infringement occurred.

In Canadian news, proposed Copyright Reform legislation (Bill C-32) is headed back to committee, as Parliament resumes for the fall.  If the progress of legislation is not halted (again) by an election, then the committee deliberations promise to be contentious as each party jockeys for position on the politics of copyright.

Calgary -10 MT

 

A television production company noticed that audio-clips from its popular TV show were being used in a new iPhone app called “Chopper Soundboard”. (Follow-up story here) While this was an Australian company, the issue is also a common one in both Canada and the US, as owners of copyright content notice that iPhone and iPad developers will “borrow” content – images, video, audio – for use in their apps.

For the copyright owner, the practical question is usually resolved when the app is removed from the iTunes store. A relatively easy remedy, but one that does not address the copyright issues.

The main legal question – which has not yet been settled in court – is who has responsibility for the infringement?  Copyright owners have launched litigation against Apple (for example, the Australian production company Jigsaw Entertainment has made noises about a lawsuit against Apple; photographer Louie Psihoyos has sued Apple in the US for copyright infringement arising out of an iPhone app), and largely left the developers out of their cross-hairs.  However, the Agreement that developers sign with Apple is clear that developers take on the liability in the event their app infringes someone else’s copyright.

Developers: Be aware of the scope of your liability with Apple, and review the agreements with your own customers. Take care when collecting content for your app. Original or properly-licensed content will reduce risks of future copyright issues.

Copyright owners: If content is being used without authorization, get advice on the options you have for remedies under the Copyright Act.

Calgary – 11:30 MT

 

For Canadian software companies who license their software in the US, this decision will be encouraging (Vernor v. Autodesk Inc. (September 10, 2010, US Ninth Circuit Court of Appeals, No. 09-35969). Timothy Vernor purchased several used copies of Autodesk, Inc.’s AutoCAD Release 14 software from one of Autodesk’s customers. Then he resold the copies on eBay. Vernor never installed the software or agreed to the terms of the software license. 

Is it copyright infringement to re-sell a used copy of software?

The “first sale doctrine” is a defence in the US that says no, it’s not infringement because a copyright owner’s right to control sale or disposition of the copyrighted work is exhausted after the first sale occurs.  In other words, owners of copies of copyrighted works can resell those copies without needing the copyright owner’s consent.

The essence of the court’s conclusion in Vernor is that a software license is an important exception to the “first sale” defence. This is because the court found that Autodesk had not sold copies but merely licensed copies of the copyrighted work.  Where an end-user license (or EULA) is a limited license agreement in which the copyright owner reserves title to the software copies and imposes significant use and transfer restrictions on end users, then this type of license is an exception to the “first sale” defence.  In the court’s words: a “software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.”  Canadian software vendors should review the terms of their end-user licenses to ensure that they can take advantage of this remedy in the US. 

Calgary – 10:30 MT

 

ipblog.ca will be taking a break over the summer. We’ll be back in the Fall to pick up developments such as:

• Canadian Copyright Reform (with Parliament breaking for the summer, there will be no further Parliamentary debate on Bill C-32 until September);
• The US Supreme Court’s decision in the Bilski case (relating to patentability of business methods and software);
• Changes to the Canadian rules in assessing patentability for “computer-implemented inventions”;
• The Canadian Intellectual Property Office’s plans to expedite the examination of so-called “green technology” patent applications;
• Developments in licensing, trade-marks, internet law and trade-secret law.

Have a good summer. 

Calgary – 09:00 MT