Business Method Patents: Debate Continues

The battle over patentability of software and business-methods is continuing in both Canada and the US.  In the US, the Bilski case and its “machine-or-transformation” test is currently undergoing review at the Supreme Court level. Earlier this month the Free Software Foundation (FSF) and Red Hat each submitted amicus curiae briefs in support of the proposition that software is not patentable.  Briefs have been filed by Yahoo, IBM, the Business Software Alliance and dozens of others.  A decision is expected sometime in 2010.

In Canada, the Commissioner of Patents refused Amazon’s Patent Application No. 2,246,933 covering Amazon’s so-called “one-click” e-commerce patent.  Amazon is now appealling to the Federal Court.  This case will be closely watched to clarify the Canadian position on patentability of software and business-method patents.

Related Reading: Update: Business Method Patents , and USPTO Publishes Interim Guidelines for Subject Matter Eligibility

Calgary 11:45 MST

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Executives Depart with Secrets and IP


Four key employees of a software company resign and start up a competing venture.  The former employer stumbles. The new company aggressively targets the customers of the former employer, and develops into a successful and profitable business, twice the size of the former employer.

On the surface, that’s the story of GasTOPS Ltd. and MxI, a story spanning 13 years, leading to an epic lawsuit (295 days of trial… that’s like going to trial 5 days a week every day for over a year). Last month, when the Ontario court handed down its 675-page decision, the former employees who left GasTOPS and started MxI were hit with an $11 million damage award, for usurping corporate opportunities, and misappropriating trade secrets, confidential information and intellectual property of the former employer.  The decision [3.7 MB PDF] covers the issues in great detail and if you can wade through the analysis, it’s a great survey of current case-law in this area.

The take-home message: departing executives owe a continuing fiduciary duty to their former employer, not to use confidential information or poach business opportunities. In this case, the judge said that duty should continue for 10 years after employment ends.

Related Reading: Departing Employees & Trade Secrets

Calgary – 11:45 MST

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The Great Olympic Sweater Debate

Cowichan TMCourtesy of HBCAside from disputes over beer labels, you can’t get much more Canadian than this one.  When the Bay unveiled its line-up of Olympic gear last week, the knit sweater (pictured at left) attracted the attention of the Cowichan Band Council, who cried foul . The sweater, they complained, is a rip-off of the traditional Cowichan sweater which has been knitted by the Vancouver Island band for generations and has become something of a Canadian icon.  The Bay argued that theirs wasn’t a Cowichan knock-off, but was merely inspired by the design style. 

So, does the Band Council have a case for trade-mark infringement?  Probably not. The Band does indeed have several registered trade-marks, not for the design of the sweater, but for the words GENUINE COWICHAN, and the logo at right.  The design of the sweater itself is likely not protectable – there are countless variations of the design, even among genuine products.  As long as the Bay does not sell its sweaters with the words GENUINE COWICHAN or that logo, then it likely won’t infringe the Band’s marks.

Calgary – 10:45 MST

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Video Games & Free Speech

Courtesy of EA

Can a video game portray a character that looks like you, without your permission? There have been a number of disputes over the right of video-game publishers to use a person’s likeness – for example, the dispute over Kurt Cobain’s avatar in Guitar Hero 5, or the recent lawsuit over whether the images of certain professional boxers can be used in a video game. 

In a recent US case (Brown v. Electronic Arts Inc., Case No. 2:09-cv-01598 (US District Court, Central Cal.)), retired football player Jim Brown sued Vancouver-based EA over its use of his likeness in the popular Madden NFL game. This isn’t the first lawsuit over the use of football players’ images – last year, a group of players successfully sued the National Football League Players Association for claims arising out of royalty rates for the use of players’ images in EA games.  In the Brown decision however, the court rejected Brown’s complaint. 

In the US, video games are a form of protected expression qualifying for a free-speech defense, and EA made a successful free speech defense to this claim. 

The case turned in part on the fact that the character in the game was one of thousands of “virtual athletes”.  This particular character may have outwardly resembled Brown to football fans (they would have recognized his jersey number and designation as a running back), but Brown’s name was not used in the game or in advertising. If EA had made any of these mistakes – using his name or likeness in advertising – then they likely would have been tripped up by Brown’s Lanham Act complaint. This claim is based on the idea that an advertiser can’t falsely claim that a celebrity has somehow sponsored or endorsed their product.  EA did not attempt to signify that Brown endorsed the games, so EA did not get tackled by the Lanham Act claim.

Calgary – 13:45 MST

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Damages for Copyright Infringement

Where an infringer carries on with the infringing activity after the copyright owner has sent notice, damages can be higher.  This is the finding of a Federal Court judge in Microsoft Corporation v. 1276916 Ontario Ltd. (2009 FC 849)(Sept. 17, 2009).  In that case, Smart Buy, a computer retailer in Ontario, was selling PCs loaded with pirated copies of Microsoft software.  Smart Buy continued its infringing activities not only after warnings from Microsoft, but even after the lawsuit commenced in Court.  The court awarded statutory damages of $80,000 and punitive damages of $50,000.  The individual business owner was found personally liable.

Other recent copyright infringement cases have resulted in similar damage awards in Canada:

a)        $200,000 in punitive damages, $100,000 statutory damages against the individual defendant and $100,000 against the corporate defendants (Microsoft v. 9038-3746 Quebec Inc.)

b)        $100,000 in punitive damages and statutory damages of $20,000 per infringement (Louis Vuitton Malletier S.A. v. Yang)

c)        $300,000 in punitive damages comprised $200,000 against the individual business owner, and $100,000 against the other defendants (Louis Vuitton Malletier S.A. v. 486353, B.C. Ltd.)

d)        $50,000 in punitive damages against all of the defendants jointly and severally (Microsoft v. PC Village Co. Ltd.)

Calgary – 10:00 MST

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