Archive for May, 2007

Pirates of the Theatre: Proposed Anti-Camcording Law

The Federal Government is planning to introduce an anti-camcording law which would target bootleggers who record first-run movies in the theatre.  This appears to be a proposed amendment to the Criminal Code and perhaps also the Copyright Act, although details have not yet been released.

CTV News speculates that “If the bill passes next fall, cheap and readily available copies of popular current releases will presumably be less frequent in Canada and on the worldwide market. ”  This claim is extremely doubtful but the government is facing pressure to at least appear to be combatting piracy and this proposed legislation eases that pressure.

 

Calgary – 12:25 MST

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Rolling out the Settlement Agreement: General Mills vs. Kraft Foods

untitled1.bmpGeneral Mills sells a rolled fruit snack under the trademark FRUIT BY THE FOOT, and has obtained not one but two patents: U.S. Patent Nos. 5,284,667 (“Rolled Food Item Fabricating Methods”) and 5,723,163 (“Rolled Food Item”).  How mashed fruit and corn syrup can be a patentable invention is a separate issue. 

General Mills sued Farley, a rival maker of rolled fruit snacks, for patent infringement.  The parties settled out of court, and the resulting agreement made it clear that Farley’s successors would benefit from the settlement terms if Farley sold its entire “rolled food product business”.  Farley later sold its assets to Kraft Foods, and Kraft Foods in turn sold part of the Farley assets to a third company. General Mills then sued Kraft for patent infringement.

Did Kraft’s sale of part of the Farley assets strip Kraft of the protection in the settlement agreement, and expose it to a patent infringement suit by General Mills?  The Federal Circuit Court of Appeals said no, in General Mills v. Kraft Foods (Fed. Cir. 2007) stating that there was nothing in the agreement to deprive Kraft of protection as Farley’s successor.  General Mill’s “covenant not to sue” applied to Kraft as successor.

The lessons for business?

  • When buying intellectual assets, ensure your lawyers review any past litigation and any Settlement Agreements to assess the scope of protection for successors;
  • General Mills wanted to control the onward sale of assets through the settlement agreement – this is possible, but the terms must be clear in the settlement agreement and this case provides some guidelines on how that should be done;
  • And yes, even rolled fruit can be an intellectual asset.

 

Calgary – 09:54 MST

 

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Online Advertising Rules

avenueainc_logo.gifMicrosoft’s acquisition last week of aQuantive for $6 billion in cash shows the lengths that technology companies will go to muscle into the online advertising market.  Microsoft paid a substantial premium at $66.50 per share, compared with aQuantive’s closing price on Thursday of $35.87 per share.  The deal follows on the heels of Google’s $3.1 billion acquisition of DoubleClick Inc. in April.  A pair of recent US decisions considered the law relating to search engines and online advertising:

In Site Pro-1, Inc. v. Better Metal, LLC (E.D.N.Y. May 9, 2007), the court decided that keyword triggering and metatag usage in online advertising does not qualify as trademark use and therefore cannot constitute infringement.  For the court, the question was whether the trademark was placed visibly on any goods, displays, containers, or advertisements – if the trademark was not displayed to consumers, no infringement could take place.  This analysis differs from decisions elsewhere in the US, so the debate continues. 

In Perfect 10, Inc. v. Amazon.com, Inc. (9th Cir. May 16, 2007), the Court of Appeal decided that Google’s display of thumbnail images in search results should be considered “fair use” and therefore did not constitute copyright infringement.  While this decision is generally considered good for search engines, the court also left open the question of contributory infringement, and when search engines can take advantage of the defences available under the DMCA .

 

Calgary – 11:45 MST

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Privacy Issues in Outsourcing

A Canadian company with a database of customer information including names, email addresses and account information, wants to find a service provider to handle the information. A US company seems to provide the best solution and so the Canadian company hires the US provider to host, manage and handle all of the customer data. What should the Canadian company be aware of? Do privacy laws apply?

The trans-border outsourcing of personal-information is becoming more common and requires an awareness of privacy law implications. The easy answer is yes, privacy laws apply. The more complex question is which privacy laws apply?

Canadian privacy laws and recent decisions by Privacy Commissioners at both the federal and provincial level make it clear that companies are responsible for ensuring that they maintain contractual control over personal information handling practices by external service providers. The trans-border nature of the data flow does not mean that Canadian laws won’t apply or that Canadian companies can simply opt out of Canadian jurisdiction. In fact, the Federal Court has recently decided that the Privacy Commissioner can and should investigate complaints relating to the trans-border flow of personal information.

The outsourcing of services to the US raises concerns about the US Government’s ability to access that information under the USA PATRIOT Act. In a 2005 investigation into the outsourcing of financial services to the US, the Privacy Commissioner of Canada noted that:

“[T]he Act cannot prevent U.S. authorities from lawfully accessing the personal information of Canadians held by organizations in Canada or in the United States, nor can it force Canadian companies to stop outsourcing to foreign-based service providers. What the Act does demand is that organizations be transparent about their personal information handling practices and protect customer personal information in the hands of foreign-based third-party service providers to the extent possible by contractual means.”

In a 2006 decision involving a Canadian security company’s handling of personal information by its U.S.-based parent company, the Commissioner was satisfied that the outsourcing of personal information was handled appropriately. The company informed its customers of the practice and permitted customers to opt-out of the outsourcing. The fact that the disclosure was between parent-subsidiary relationship meant that the personal information was not technically disclosed to a third-party, and these factors resulted in the Commissioner approving the handling of personal information in this case.

Careful management of the privacy issues allows Canadian businesses to handle outsourcing and reduce the risks of a customer complaint or investigation by the Commissioner.

 

Calgary – 10:25 MST

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IP in China

Maybe imitation is the sincerest form of flattery.  It also may be the most profitable. 

There is much debate about the enforcement of intellectual property rights in China.  Canadian companies engaging in business there require lawyers with local contacts and expertise to manage the various aspects of intellectual property protection: everything from confidentiality agreements governing the use of manufacturing specifications to software piracy and trade-mark enforcement. 

Witness the state-owned Shijingshan Amusement Park which is a full-fledged knock-off of a Disney-style Magic Kingdom outside Beijing (pictures and video here).  Their catchy slogan is self-explanatory: “Disneyland is too far.”

 

Calgary – 15:35 MST

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Deceptive Privacy Policy: $4.5 Million in Damages

A recent US Federal Court case, CollegeNET, Inc. v. XAP Corp., 2007 WL 927946 (D. Or.), involved two rivals in the competitive college application business.  CollegeNET sued XAP for patent infringement in 2003, and then added an unfair competition claim in 2004.  A jury returned a verdict in favour of CollegeNET.  What’s interesting is that the unfair competition claim resulted in a damage award of $4.5 million for a deceptive privacy policy (compared with the $4 million patent infringement award). 

XAP’s privacy policy stated that personal data wouldn’t be released to third parties “without the user’s express consent and direction.” In the XAP online application process students were asked the following opt-in question: “Are you interested in receiving information about student loans and financial aid?” If the students answered “yes,” XAP forwarded the students’ personal information to its third-party “partners” for a fee.

This was considered to constitute unfair competition, since students were lured away from CollegeNET to use the free XAP system, not realizing that their personal information was being sold to financial institutions and others.

There are two lessons:

  • First, for Canadian companies doing business online with US customers, a well-drafted privacy policy is critical; the pitfalls are not only within the realm of Canadian privacy laws but also in US privacy and trade laws;
  • Second, IP lawyers should think creatively about the possible claims as they did here: a successful intellectual property infringement claim was bolstered and (in terms of the damage award) surpassed by an unfair competition award based on the privacy policy.   

The decision can be accessed here.

 

Calgary – 15:30 MST 

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US Patent Decision: KSR v Teleflex

The US Supreme Court issued its decision on Monday in KSR International Co. v. Teleflex Inc. , a case which is considered by many commentators to be a watershed decision in US patent law. 

KSR, a Canadian auto-parts company on contract to General Motors, designed a pedal with a sensor.  Rival autoparts maker, Teleflex Inc., demanded royalties on the basis that the KSR pedal infringed a Teleflex patent for a pedal equipped with an electronic sensor.  KSR refused to pay, asserting that the Teleflex patent was invalid since it had merely combined existing technologies in an obvious manner.

The court agreed with KSR, stating: “Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility.”

The practical impact of this decision is that many patents will now be open to challenge on obviousness grounds.  Inventions that introduce truly innovative concepts and elements will be more valuable than those which merely combine existing technologies in a new way.

 

Calgary – 09:35 MST

 

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