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 proposed Climate Change Accountability Act was passed by the House but killed in the Senate on Wednesday, marking an end to this attempt to set Canadian targets for atmos­pheric greenhouse gases. The bill also touched on funds or incentives for technology that could be implemented to reduce GHG emissions and the establishment of a federal carbon-credit trading scheme.
Calgary – 08:00 MST

In our post last month [Business Method Patents in Canada ], we noted the groundbreaking decision that upheld Amazon’s 1-click patent, and established that business methods are patentable in Canada. It now appears the Commissioner of Patents has decided to appeal that decision. The uncertainty is back. Businesses will have to wait until the outcome of this appeal to determine the scope of patentability of business methods in Canada.

Calgary – 08:00 MST

One company files a Canadian trade-mark application for IREWARD based on “proposed use” for a customer loyalty program. In other words, they intend to use it, but haven’t yet launched their service. However, they know that when they do start using the mark, they’ll benefit from their October 15th filing date.  A month later, unaware of the first mark, another company files an application for IREWARDS, a mark that is virtually identical, also for a customer loyalty program. This time, it’s based on actual use of the mark.  They have a November 16th filing date, meaning that they arrived at the trade-marks office one month later than the competing mark.

So, who wins?

Both marks were filed in 2001. After a lengthy battle, the decision in Indigo Books & Music, Inc. v. Preferred One Inc., 2010 TMOB 100 (CanLII) was recently handed down.  Indigo (a Canadian retail book store chain) was the later applicant for the IREWARDS mark. They commenced substantial use of their mark immediately, expending millions of dollars in advertising, merchandising and promotion.  Preferred One, the original applicant for the IREWARD mark never commenced use of their mark. Indeed, they put their program on hold when they found out that their opponent was a powerful national retailer.  This proved to be fatal to their mark.  Indigo eventually won the case since they could show that Preferred One’s mark was confusing with their mark as of the date of the opposition in 2004, by which time Indigo’s IREWARDS brand was firmly established across Canada.

Lessons for business?

• Search With Caution: Indigo conducted trade-mark searches before they filed. But their searches did not disclose Preferred One’s earlier IREWARD mark, since that application had not yet been indexed by the trade-marks office database. There is a lag of several months before marks will show up on search results. Thus, it is important to remember that searches are important, but not perfect due to this lag time at the trade-marks office.
• Invest in Your Brand: This case was really determined by the business realities of Indigo’s brand investment. If they had not invested so heavily in the promotion of their mark, they would not have been able to show distinctiveness at the relevant date.

Calgary – 08:00 MST

It’s not that far-fetched. Companies who sign a contract can agree in advance to resolve their disputes through arbitration.  The law that governs that arbitration, and even the place of arbitration, can all be determined in a “dispute resolution clause”. These kinds of clauses are often overlooked while the parties focus on the business points – such as price, delivery, and deadlines. However, a dispute resolution clause will suddenly be front-and-centre when the parties start squabbling, and one of them wants to get a remedy in Canada. For example, in one recent Alberta case (PetroKazakhstan Inc. v. Lukoil Overseas Kumkol B.V.), arbitration was triggered by one of the parties, and the Alberta Court decided that the breach of contract questions fell within the scope of the arbitration under the law of Kazakhstan.

What about intellectual property licensing agreements?  The same idea holds true. Canadian courts will uphold arbitration clauses. When negotiating your license, spend some time considering the dispute resolution clauses and the potential advantages of arbitration: for example, confidentiality, neutrality, and a resolution process that can be – compared to litigation – relatively quick and inexpensive.  In Bad Ass Coffee Co. of Hawaii Inc. v. Bad Ass Enterprises Inc., a Canadian licensee was held to a clause that compelled arbitration in Utah. The Canadian Court refused to grant a remedy and the licensee was bound by the decision of the US arbitrator.

Related Event: November 4, 2010 – The Licensing Executives Society – Meeting of the Calgary Chapter on the topic of “Arbitration and ADR Clauses in International License Agreements” Presented by Stephen Burns, Bennett Jones and Jim McCartney, McCartney ADR; panel moderated by Richard Stobbe: Link to Register

Calgary – 09:00 MT

 

When parties are negotiating a new business deal – maybe an investment, joint-venture, research or a pilot project – they often agree to joint ownership of the resulting intellectual property, as an easy starting point.  Let’s look at one case involving trade-marks. 

Trade-mark law in Canada is clear that each trade-mark should have one owner.  That means one company, one person, one entity can own the mark… or, if there are two people who co-own a trade-mark, they must apply to register the mark as a partnership.  In JAG Flocomponents N.A. c. Archmetal Industries Corporation, 2010 FC 627 (2010), two companies entered into a contract in which they agreed to co-ownership of the mark FUSION. This flowed from the catch-all clause in their agreement that: “Any new products, designs, patents, inventions, calculations, and other intellectual property which arise directly or indirectly pursuant to or in consequence of this agreement shall be deemed to [sic] equally owned by the parties hereto.”  The FUSION mark was part of the “other intellectual property” caught by the agreement.

After a falling-out, one company registered the FUSION mark in its own name.  After a court battle over ownership, the court decided that the registration should be expunged. Since the parties agreed to co-ownership of the mark, the trade-mark application by one party rendered the registration invalid. 

Lessons for business?

• Beware of catch-all “joint ownership” clauses, as they should be carefully considered. Should any of the intellectual property be jointly owned? And if so, think through the implications of each situation. Important rights will flow from jointly owned patents or trade-marks, for example.
• As a practice point, a material misrepresentation in a trade-mark application (in this case, that little detail about joint ownership was left out) can result in expungement of the mark.  

Calgary – 09:00 

In my review of iPhone App Law, I have discussed the case of Turner v Storm8 (Complaint), a 2009 US federal class action lawsuit that alleged a privacy breach by an iPhone app developer.  The lawsuit alleged that Storm8, creator of “iMobster” and “Vampires Live,” wrote its software to collect phone numbers automatically when players downloaded the games. The developer blamed this privacy breach on a software glitch. 

The Wall Street Journal has reported a similar breach by Facebook app developers. Many of the most popular Facebook apps have been transmitting Facebook ID numbers to at least 25 advertising and data firms.  This information can be cross-referenced to compile detailed profiles of Internet users. In this case, the breach goes far beyond phone numbers, and appears to implicate a range of rich personal data that makes up the Facebook world. The practice would violate the terms under which Facebook permits developers to sell apps, and may violate the app developers’ own privacy policies. But that is cold comfort if it’s your identity that is compromised.

Lessons for business?

• A risk of this type is not confined to Facebook apps – privacy breaches could be caused by any third-party app developer, whether it’s on the Facebook, Android or iOS platform;
• If you engage a developer to create an app for your company, make sure your terms clearly address privacy issues. A breach of this type can be fatal to the app, and can spread to implicate the whole company if the breach is serious;
• If you are a developer, ensure that you carefully manage privacy issues. If the collection of information is warranted, it should be done properly. In Canada, the collection of personal information can be permitted if there is informed consent by the end-user. And you need to compare your information-handling practices against the terms of the SDK – for example, Apple’s iOS terms are clear that developers will be liable in the event of any breach of a user’s privacy rights.

Calgary – 10:00 MT

In our post earlier this year (Business Method Patents: Amazon Clicks Through) we reviewed the story of Amazon’s battle with the Canadian patent office over its famous  1-click patent. South of the border, the USPTO confirmed the patentability of many of the Amazon’s claims earlier this year.

Yesterday, the Canadian Federal Court handed down its decision upholding the patent. The court was clear: “At its core, the question is whether a ‘business method’ is patentable under Canadian law. …the Court concludes that a ‘business method’ can be patented in appropriate circumstances.”  The court scolded the patent office for rewriting patent law in its rejection of the application. This is a major (and long-awaited) clarification of the law in Canada and will require time to assess its practical impact on patent applications. It is important to note that the Court sent the application back to the patent office to be re-examined, so the patent has not yet issued.

On that point, the Canadian Intellectual Property Office is currently reviewing its Manual of Patent Office Procedure (MOPOP) Chapter 16 – Computer Implemented Inventions. This chapter will need some re-thinking in light of the court’s guidance in Amazon.

In both the Amazon case in Canada, and the recent Bilski case in the US, the courts have indicated that the “machine-or-transformation” test should not be applied to patentability analysis in all cases, and that each application must be determined on its merits. In other words, there has been some guidance but no clear rules to apply to all applications. The state of Canadian law (unless this decision is appealed) is now clear that business methods can be patented in Canada, with careful drafting.

Calgary – 11:30 MT

 

Trade-marks can appear almost anywhere. But you have to be able to see them at the point of purchase for the brand to function as a trade-mark under Canadian law. Take this example. A purveyor of fine bathroom tissue tried to registered the floral pattern at left as a trade-mark. It’s the design that’s embossed onto a popular brand of “hygienic paper products” (that’s legalese for toilet paper). A competitor complained, saying the design was confusing with its own registered trade-mark – the floral design at right.

In the recent case of Scott Paper Ltd. v. Georgia-Pacific Consumer Products LP , 2010 FC 478, the court examined the competing trade-mark claims and decided that marks must be seen to develop a reputation and to be distinctive of their owner. In this case Georgia-Pacific’s mark (the one at right) was not visible to consumers through the packaging.  Since it was not visible at the point of purchase, it could not function as a trade-mark, regardless of how many times people saw the mark after purchase when they opened the packaging to use the product.

Lessons for business?

• There are many design elements that can function as a trade-mark to distinguish you from competitors… from the brand displayed on the package to designs embedded into the product itself.
• When reviewing trade-marks in your business, ensure that your packaging strategy dovetails with your brand strategy. In this case, the packaging may have changed over time to “hide” the trade-mark.
• Get advice on your brand-protection strategies and watch your competitors – in this case, the complaint failed and Scott Paper’s design (the one at left) was allowed to proceed to registration. However, this case also illustrates that Georgia-Pacific was vigilant about brand protection in a competitive business.

Calgary – 08:00 MDT

Technology commercialization starts with the invention or creation of something marketable – a new device, a tool, an algorithm, a software application.

Before you start to commercialize it, one of the first questions is: Who owns it? If an employee invents something marketable, employers will commonly claim that they own their employee’s invention.  However, in the case of patentable inventions, the Canadian Patent Act is silent on the question of whether an employer has any rights to an invention created by an employee. To the contrary, there is a presumption under Canadian law that an employee is the owner of his or her inventions, unless there is an express contract to the contrary, or the person was employed for the express purpose of inventing or innovating. The case of Techform Products Ltd. v. Wolda provides an interesting review of these issues, in a situation where the employer was ultimately found to have no rights to a valuable patented invention that was created for its business. 

I will be speaking today at UTI‘s Technology Commercialization Series: Commercialization Pitfalls: How to Avoid Them to review ownership issues.   

Calgary – 10:00 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

India recently granted its first “sound mark” to Yahoo Inc., in a development that brings India’s trade-mark registration system in line with the US, the EU, Australia and other trade-mark registries around the world. (Click here to listen the audio clip of the Yahoo yodel).

What about Canada? Although sound marks are not expressly prohibited by the Canadian Trade-marks Act, there has only been one successful registration of a sound mark in Canada (the MUSICAL NOTES DESIGN mark, which has since been expunged for failure to renew). The practice of the Canadian Intellectual Property Office (CIPO) has been to consistently refuse applications for sounds marks due to the procedural requirement that marks be visual in nature. This is not mandated by the definition of a “trade-mark” in the Trade-marks Act itself, but the Act does refer to the requirement of submitting a “drawing” of the mark, and court decisions have confirmed this. “A ‘mark’ must be something that can be represented visually” : Playboy Enterprises Inc. v. Germain (1987), 16 C.P.R. (3d) 517 (F.C.T.D.).  The MGM lion’s roar, which was the subject of a Canadian “sound mark” application in October, 1992 (Application No. 714314), is still before the office eighteen years later, having gone through various extensions, refusals and appeals.  It might be Canada’s longest-running application.

Is it finally time to permit sound marks in Canada? CIPO is considering some non-traditional marks – such as holograms – that can be depicted visually. Future amendments to the Trade-marks Act will probably permit registration of sound marks and other non-traditional marks in Canada, though these changes won’t likely be introduced for several years.  Listen for changes.

Related Reading: Registering Sound as a Trade-mark

Calgary – 10:00 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

Since when are bow ties a patent issue? Since clothier Brooks Brothers was sued for a false-marking claim, related to the long-expired patent for the “Adjustolox” mechanism on their bow ties. Since the patents have expired but are still marked on the product, the company is technically open to a false-marking claim, and the appeals court in the U.S. recently ruled in Stauffer v. Brooks Brothers, Inc., No. 2009-1428, -1430, -1453 (Fed. Cir. Aug. 31, 2010) , that virtually anyone has standing to bring a lawsuit for false marking claims.

In our earlier post (Patent Marking: Update for Canadian Patent Owners), which addressed the Forest Group decision (Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009)),we noted that false-marking claims are, in the US, one of many strategies being used by competitors.  We also note that earlier this year, in the US decision in Pequignot v. Solo Cup (Federal Circuit Court of Appeals, June 10, 2010), the appeals court also decided that knowingly marking a product with expired patents creates a rebuttable presumption of an intent to deceive the public. In the Solo Cup case, the company was successful in rebutting the presumption by gathering evidence of its decision-making process, and convincing the court that its intent was to minimize manufacturing costs, not to deceive the public.

From a Canadian patent case, here’s another patent strategy: in one of the rare cases considering a patent infringement court case versus a patent re-examination before the Canadian Intellectual Property Office (CIPO), the Federal Court recently “froze” the re-examination proceedings, until the outcome of the patent infringement trial. In Prenbec Equipment Inc v Timberblade Inc. 2010 FC 23, the court decided that the nature of the evidence, and the ability to cross-examine witnesses, meant that the trial was the better venue to decide the issues. This is an important consideration in assessing tactics in the midst of patent litigation.

Calgary – 18:00 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

The Canadian Intellectual Property Office has released a draft version of Chapter 16 of the Manual of Patent Office Practice (MOPOP), relating to “Computer-Implemented Inventions”. The chapter is open for public review and comments between June 16, 2010 and August 19, 2010 and is available through the MOPOP Updates web page. The current revision process provides more detailed guidance and examples regarding computer-implemented inventions. 

This development in Canada is being closely watched in parallel with the pending release of the Bilski review of business-method patents and computer-implemented inventions in the US.

Calgary – 09:00 MT

 

The Canadian government has introduced the next version of its long-awaited and much-debated copyright reform bill (Bill C-32, the Copyright Modernization Act). Here are a few interesting highlights:

• Format & Time Shifting: (Sections 29.22 and 29.23) The new law would allow consumers to “format shift” music from commercial CDs to hard-drives, iPods or other devices. It would also permit “time shifting” of TV programs. However, this right does not override the anti-circumvention restrictions. Put another way, if you have to crack a digital lock in order to make the shift, then you can’t legally shift. 
• Back-Ups:  (Section 29.24) The proposed law allows users to make backup copies, but again, this right is subject to the anti-circumvention restrictions. It’s hard to find a commercial DVD now that doesn’t have digital locks, which means that in practical terms, any back-ups of personal DVDs would have to break a lock, would violate the anti-circumvention restrictions, and would thus be prohibited under the new law.
• Software Interoperability: (Sections 30.61 and 41.12) Interestingly, the anti-circumvention rules do not apply if you want to circumvent a digital lock on software, “for the sole purpose of obtaining information that would allow the person to make the program and any other computer program interoperable”.  This need not be for personal use… so does this mean that competitors can legally hack each other’s code for the sake of interoperability?
• The YouTube Exception: (Section 29.21) There is an interesting exception for “Non-commercial User-generated Content”. Basically, if you construct a mash-up using bits of copyright-protected material, then this kind of creation will not infringe copyright, as long as it is for personal use and doesn’t have a “substantial adverse effect, financial or otherwise, on the exploitation or potential exploitation of the existing work”.   
• ISP Liability? (Section 27(2.3)) This new section might be called the Anti-Napster provision since it makes clear that copyright will be infringed by anyone who provides an Internet service that is designed “primarily to enable acts of copyright infringement”.  This raises the question of the liability of Internet Service Providers, though some language has been sprinkled in to provide comfort to ISPs. 

Before it becomes law, it must pass through Parliament and withstand any lobbying efforts by industry and consumers.

Calgary – 14:30 MT

The government has  introduced proposed amendments to the Personal Information Protection & Electronic Documents Act (PIPEDA). The changes to the federal law are wide-ranging and will have a significant impact on privacy law here in Canada. Here are a few highlights from a business perspective of the proposed changes in Bill C-29, and once it passes into law, we’ll provide an overview: 

• Business Transactions: If you want to disclose personal information during negotiations for a “prospective business transaction”, the proposed changes under Section 7.1 will be of interest since they permit “…organizations that are parties to a prospective business transaction” to “use and disclose personal information without the knowledge or consent of the individual” as long as the organizations have entered into an agreement restricting use, and imposing “security safeguards appropriate to the sensitivity of the information”.  If the transaction does not proceed, then the information must be returned or destroyed.   This moves the federal law into line with the approach taken in Alberta.
• “Business Contact Information” would be specifically excluded from the purview of PIPEDA. This category of personal information refers to an individual’s name, position name or title, work contact details and e-mail address.
• “Employee personal information” will be treated differently under the new law, since the changes make it clear that consent is not required for the collection, use and disclosure of such information as long as it is to “establish, manage, or terminate the employment relationship” as long as the employer has notified the employee. This is best done at the outset of the employment relationship.  Again, this brings PIPEDA in line with the Alberta law.

Calgary – 09:00 MT 

 

The trade-mark Moto Mirror is registered in Canada for use with truck and automobile mirrors. However, the owner of the mark did not actually manufacture the mirrors. In a series of licensing agreements, the owner of the mark authorized other companies to make and sell the mirrors under the Moto Mirror brand.  This is common enough, and is permitted under Canadian trade-mark law, as long as the owner maintains the required degree of control over the “character or quality of the trade-marked wares”.  So what degree of control is required?

In Tucumcari Aero, Inc. v. Cassels, Brock & Blackwell LLP (March 9, 2010), the Federal Court of Canada reviewed this question.  The Court has reinforced the concept that indirect control will satisfy the requirement, and indicated that: “What is required is that the registrant be able to control product quality through the exercise of its contractual rights vis-à-vis the intermediary which, in turn, is entitled to control product quality under contract with the sub-licensee. So long as there is a continuity of quality control that can be effectively maintained by the registrant under the chain of contracts no special conditions or language are required.”

Lessons for business?

• When licensing trade-marks, make sure you get legal advice to ensure your license agreements are properly drafted;
• The court was clear that “no special conditions or language are required” as long as it is clear that the owner controls product quality through the chain of contracts.

Calgary – 08:00 MT