The Past and Present of Trade Secret Legislation

The Past and Present of Trade Secret Legislation

In order to better understand the past and present state of trade secret legislation, it is important to understand what a trade secret is and why it is often viewed differently from other intellectual property rights.

What is a Trade Secret?

Trade secrets can include a broad range of proprietary information, including product development plans, customer information, and even formulae. In order to have your trade secret protected, you:

  • must be using the trade secret
  • the trade secret must be conferring you with an economic advantage
  • the trade secret must not be generally known in the industry
  • the trade secret must be protected in a way that safeguards its confidentiality

If all of these elements are met, the owner of the trade secret may file a suit when the secret is acquired, used, or disclosed by illegal means.

Why are Trade Secrets different from other IP rights?

Unlike patents and copyrights that are governed by federal statutes, trade secret rights fall under state law. This usually makes trade secrets the “odd man out.” Congress is now considering making a federal civil action for trade secret misappropriation, including remedies that are currently unavailable under state law. Not only does Congress believe state law for trade secrets is inadequate, they also have expressed concern about the threat posed by international espionage.

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History of Trade Secret Legislation

Trade secret laws developed from common law principles of agency, trusts, and torts. Since these principles varied from state to state, the Uniform Trade Secrets Act (UTSA) was adopted by many states beginning in the 1980’s. 47 states have adopted the UTSA today.

The statute directed at trade secrets is the Economic Espionage Act of 1996, in which the EEA created criminal penalties for trade secret misappropriation. However, there was no room to bring were civil action for damages. Congress amended the EAA in 2012 to clarify that the EAA applied to trade secrets in use or intended to be in use. They also increased the range of available criminal penalties.

Proposed Legislation on Trade Secrets

House Bill 5233, known as the “Trade Secrets Protection Act of 2014” hoped to make a path for civil action for misappropriation of trade secrets. The bill also proposed a civil seizure remedy that would authorize the court to enter an Ex Parte Seizures to preserve evidence or to prevent the “propagation or distribution” of a misappropriated trade secret. Lastly, the bill hoped to create expanded remedies, including compensatory and punitive damages.

The Senate hoped to pass a similar bill, the Defend Trade Secrets Act of 2014, and both the House and the Senate had the support of many industry groups, who believed such a bill would protect trade secrets and combat any industrial espionage efforts. Critics argued that Congress did not need to step in if the current system of state laws worked. These critics further added that adopting federal statutes would erode state activity in the trade secret areas, resulting in fewer trade secret laws in the future. However, President Obama  made some changes to trade secret legislation in the past few days.

Defend Trade Secrets Act of 2016 (DTSA)

On May 11, President Obama signed into law the DTSA. This enables companies to go to federal court to sue for misappropriation of trade secrets. The DTSA now allows for Ex Parte Seizures in “extraordinary circumstances.” The law also expands remedies, such as adding Exemplary Damages and rewarding attorney’s fees. Injunctive relief is also provided and expanded with the DTSA.

With the passing of the DTSA, private parties do not have to rely solely on state law when it comes to protecting their trade secrets. The hope is that this new trade secret protection will allow trade secrets to function like other intellectual property rights and provide secret holders with more protection.

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Sources referenced:

  1. JD Supra (2014)
  2. JD Supra (2016)

 

 

 

Spirit v. Led Zeppelin: “Stairway To Heaven” Infringement Lawsuit

Spirit v. Led Zeppelin: “Stairway To Heaven” Infringement Lawsuit

There were many issues surrounding the Spirit lawsuit against Led Zeppelin and we will try to break down those issues in this post. Spirit claimed that Led Zeppelin infringed on its copyright with the iconic guitar arpeggio opening of “Stairway to Heaven.” Spirit believes their instrumental track “Taurus” is very similar to Led Zeppelin’s track. In order to better understand the case, let us first take a look at the issues that may come forth at trail.

Statute of Limitations

Led Zeppelin released their song about 43 years ago. The US Copyright Act says action must be “commenced within three years after the claim accrued.” This means Spirit would not be able to recover for any alleged infringement during the first 40 years of the song’s release. Recovery of new formats or new releases of the song would also be limited. Since the song has historically performed well, Spirit may still be able to recover a large amount of money. However, Spirit is concerned with more than just money. The band is also seeking an injunction to prohibit a new Led Zeppelin’s album by Jimmy Page.

Copyright Infringement

Many listeners are conflicted on whether Led Zeppelin copied Spirit’s song or whether the two bands just used the same instruments. To determine whether or not actual infringement took place, it is necessary to look at the court’s two-prong test:

  1. Copying of a prior work; and
  2. A substantial similarity to the prior work sufficient to constitute improper appropriation.

(1) Copying

This first element can be proven by either direct or circumstantial evidence. The more access a party had to prior work, the easier it becomes to prove similarity. In this case, proving access will not be a problem because Led Zeppelin and Spirit performed together the day after Christmas 1968 and many times in 1969. Spirit played “Taurus” at many of these concerts and music festivals. Since there is evidence of both access and similarity in this case, it must now be determined whether the second element is met.

(2) Substantial Similarity

In addition to proof of copying, there must also be a substantial similarity to the work. Substantial is defined as “qualitatively or quantitatively” and similarity means “similar in the ears of the ordinary member of the intended audience.” If the case reaches the trial court, both parties will present expert witnesses to show the similarities and dissimilarities between the two songs. Ordinary members of the listening audience may also be called upon to give their opinion.

Possible Affirmative Defenses by Led Zeppelin

  • The chord progression in “Taurus” is not original.
  • The chord progression in “Taurus” is not protectable under copyright law.
  • “Stairway to Heaven” was independently developed by Led Zeppelin without referenced to “Taurus.” Any borrowing from Spirit’s song would be seem as so minor that is it disregarded by the law. This would be “de minimis use.”
  • Since only short portions of “Taurus” were used by Led Zeppelin, the recording could be covered under the “fair use” limitations. However, this may not be the best defenses since copyright owners are entitled to as sales and licenses of their work.

Likely Outcome

If the court and ordinary members of the listening audience see enough similarities in the work to fulfill the two elements of copyright infringement, Led Zeppelin will be held strictly liable. It does not matter whether or not the copying with intentional or accomplished subconsciously.

It is very unlikely this dispute will makes its way deep into the legal system. Led Zeppelin has resolved prior claims of copyright infringement brought by third parties outside of court. In the case, Led Zeppelin is most likely to conclude the dispute with a confidential settlement agreement. The agreement may involve payments to Spirit and writing credit for the song “Stairway to Heaven.” However, Jimmy Page testified on behalf of his band on June 16, 2016. The trial is heating up and may not turn out as previous copyright infringement lawsuits have worked out for Led Zeppelin the past.

Source referenced: Forbes

Western Union vs. Bitcoin

Western Union vs. Bitcoin

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Western Union was not happy when Bitcoin “released” an advertisement comparing itself to Western Union. The image above shows the parody ad that was posted on Bitcoin’s Facebook page. Western Union filed a claim against Bitcoin under the Digital Millennium Copyright Act (DMCA) saying Bitcoin had infringed on its trademark of the image. However, DMCA only covers copyright material, not trademarks. Facebook removed the image from Bitcoin’s News Page immediately and the man who originally posted the image, Dave Aiello, wanted to charge Facebook for deleting his image. It is not clear whether Aiello was the one who originally created the image, but he was the one to post it on Facebook and later share it on reddit. Facebook told Aiello they would restore the image to Facebook, unless Western Union takes legal action within 10 to 14 days.

Parodies are usually considered “fair use” under DMCA. In addition, companies rarely take legal action based on images or content posted on social media sites. This raises the question of why Western Union was so fast to take action against Bitcoin. One reason could be that Western Union feels threatened by Bitcoin’s rise in popularity. Another reason could be that Western Union simply wanted attention. If this spoof had not surfaced on social media sites, Western Union would not have gotten the attention it received. If they decide to take further legal action against Bitcoin, it just brings more attention to the company.

While we may not know the exact reason Western Union is making such a big deal out of a parody advertisement, it will be interesting to see whether or not the DMCA holds that parodies fall under the “fair use” doctrine. In addition, DMCA does not cover trademarks, which is what Western Union wants to sue for. This controversy brought attention to Bitcoin and their services. It would be a win-win situation for both companies at the end of the day in terms of media exposure, especially if Western Union is not able to formally file against Bitcoin.

Sources referenced:

  1. ARS Technica
  2. Coin Desk
Google vs. Oracle: A Copyright Battle

Google vs. Oracle: A Copyright Battle

Google had a major victory on May 26, 2016 when a jury threw out Oracle’s $9 billion claim against them. The battle between the two technology giants started in 2010 when Oracle claimed that Google needed a license to use its Java programming language for its Android phones and technology. Oracle claimed that since Google had earned over $20 billion in profit by selling its Android phones, they deserved $8.8 billion in damages and $475 million in lost licensing revenue. In 2014, a Federal Appeals Court had ruled in favor of Oracle saying that the company had a valid copyright over its coding language. The Supreme Court declined to hear this appeal.

In the latest round of the case, which was heard in California’s Northern District Federal Court in San Francisco, the jury concluded that Google did not infringe on Oracle’s copyrights with its Java language. Throughout the hearing, Google said they had used Oracle’s API language to innovate new technologies, not copy their software. Experts say that Google relied on a “free-market” argument to win.  Oracle says they are planning to appeal the jury’s decision, but legal experts say it would be very difficult to reverse the decision in favor of Oracle.

What does this verdict mean?

This verdict has allowed many technology companies to breathe a sigh of relief. Google’s win gives other companies reassurance that they will be able to use common methods of software technology without infringing copyright claims. In other words, software can be widely used by many companies without starting a legal battle. However, some experts say Google won the case because of the vast amount of resources at its disposal. They say it is likely that a smaller company would have lost against Oracle.

The issue of whether Oracle’s coding deserved copyright protections is highly debated. While some are glad to see Google’s victory, others are concerned about what constitutes copyright protections. This case did not set any legal precedent because fair use rulings are made on a case-by-case basis. If Oracle decides to appeal the decision, one of the only ways they will be able to do so would be by saying that jury instructions on the legal issues were flawed. Whether or not Oracle appeals, and on what basis, is something we have to wait to see. While the impact of this ruling may not be felt yet, legal experts say similar rulings can have a “chilling effect” on developers.

Sources referenced:

  1. Bloomberg Technology
  2. The Verge

 

Legal Challenges with Online Reviews

Legal Challenges with Online Reviews

If you have ever bought something on Amazon or tried to find a new restaurant to eat at, one of the first things you probably did was read reviews and consider what other people had to say about the product or the restaurant. Turning to Yelp or the reviews section on Amazon is becoming an ordinary thing. People selling these products and business owners know the value potential customers place in their reviews and they are trying their best to keep customers happy or prevent them from writing negative comments. Some business owners are even willing to pay random people, who have never bought the product or visited their business, to write positive reviews. Robert Lee found himself in the middle of an online review lawsuit after visiting a New York City dentist.

The Incident with the Dentist

Lee visited Dr. Stacy Makhnevich at Aster Dental when he was in desperate need of treatment for his toothache. Before Dr. Makhnevich treated Lee, he signed a “mutual agreement to maintain privacy” contract which said he would not be able to comment about the services of the business. The dentist, according to the agreement, had a copyright protection and Lee would not be able to publicly comment on her services. Lee received his treatment and later realized he was overcharged. In addition, Dr. Makhnevich would not give him the dental records he needed to be reimbursed by his insurance company. Lee started writing negative reviews of the dentist on Yelp and other dental sites. When Dr. Makhnevich read the reviews, she demanded the online companies take the reviews down. She also sued Lee for copyright infringement. Lee fought back and aimed to invalidate her copyright claim. In the end, the U.S. District Court for the Southern District of New York said the privacy agreement was null and void. The agreement was found to be deceptive and Lee was awarded more than $4,700.

The reason dentists like Dr. Makhnevich and other business owners are so aggressive about their online image is because a 2015 survey by Mintel Group Ltd. showed that 54% of people read online reviews before purchasing goods or services. Harvard Business School found that adding even one star to a restaurant’s Yelp page can increase business by 5-9%. However, consumers are very intelligent and can be very suspicious of companies with only positive reviews. This should serve as a warning to business owners.

Freedom of Consumer Speech

Consumers have certain rights in the market and one of these rights is to speak their mind about the products and services they purchase. Since more and more business owners are including consumer gag clauses into their agreements, there are laws being put in place to protect consumer speech. Strategic lawsuits against public participation, or SLAPP suits, specifically spell out consumers’ rights to post negative, fact-based reviews. California’s Civil Code 1670.8 made the state the first in the nation to give consumers the right to post negative, honest reviews on Yelp. Congress is working towards passing a nation-wide law similar to California’s.

Companies like Amazon and Yelp are working with the FTC to make sure no fake reviews are posted online. The FTC also says consumers cannot be reimbursed in any way for writing positive reviews. Amazon and Yelp have even stricter guidelines and use “artificial intelligence to determine whether a review is legitimate and whether the poster and marketer have a connection.” Some authors on Amazon believe the company is being too strict by taking down reviews of people who received the book for free. Fans of the author are also not permitted to post reviews. A petition has been started by several authors to get Amazon to change its online book reviews policy. However, this effort seems unlikely to succeed.

Taking Fake Reviewers to Court

In 2015, Amazon named more than 1,000 John Doe users who created fake reviews. In an effort to provide customers with honest reviews, Amazon specifically shows “Amazon verified purchase” tags from consumers who bought the product. However, the problem of whether these people actually received the product and used it before reviewing it still remains. Many believe Amazon and other companies should not take their concerns over online reviews to the court because “the Communications Decency Act holds that an internet service provider can’t be held liable for something published by a third party—like a reviewer.” Amazon’s suit did lead to the shutting down of a few websites that sold reviews. Yelp filed a similar lawsuit against websites selling reviews and won by default when the defendant failed to show up to court. Both Amazon and Yelp agree that going to court is their last resort. They have practices in place to detect and stop fake reviewers before taking them to court.

New York Attorney General Eric T. Schneiderman has been working with Yelp and other companies to identify fake reviews. Many companies pay workers overseas $1-$10 per fake review, which is a violation of New York’s false advertising laws. A total of 19 fake review companies were identified and fined. Different states and the FTC are working together to stop these companies. The hope is that companies will come together to protect consumer rights and business owners will be more honest about their online image.

Source referenced: ABA Journal

 

Can Sharing a Web Link Lead to Copyright Infringement?

Most business and business savvy clients work in areas and on projects that involve regular, sometimes intensive, and often constant research.  Research is a constant!

And many people work from many places, researching at the office, at home or on the go. Many times this research involves the passing along of web links from one individual to another, and vice versa. Whether sharing news via e-mail, sync and data storage services, such as Drop Box, SkyDrive, Sugarsync, box.net., and many others; collaborative web portals, Social Media Sites, like Facebook, Twitter and Instagram;  we all use web links. They are easy to copy and paste and are so conveniently placed right in our address bar for easy access. We share these links all the time without a second thought. But is this legal?

Now a federal judge confirms that our actions are perfectly fine.

In a recent case, a plaintiff sued defendant for copyright infringement. The plaintiff claim was partially based on alleged improper use of web links, arguing that a web link provides the pathway to copyrighted material. The court found however that a web link does not itself contain copyrighted material and therefore does not infringe upon a copyrights owner’s rights under Section 106 of the Copyrights Act.

The hyperlink serves as a window through which one can view material, copyrighted or not.  Simply getting to the material presents no copyright infringement problem.   It is the steps taken after finding the material that present a mine field of challenges and potential trips.  Think twice ( or more) before downloading the material to your computer, or uploading it to a server.  As for merely sharing or clicking on a link, no harm done.

For now, we are free to continue our use of web link sharing without any copyright infringement fears.

Article Reference:

http://ow.ly/nXX4K

The Copyright Alert System. Get the details here:

Our clients include producers of copyrighted material as well as internet service providers and internet based content publishers.  The implications of the new, now operational, Copyright Alert System can be gleaned from a series of Frequently Asked Questions published by the proponents and the opponents of the alert system.

The Copyright Alert System (CAS) is a copyright surveillance machine— aka “Six Strikes” — consisting of an agreement between major media corporations and large Internet Service Providers to monitor peer-to-peer networks for copyright infringement and target subscribers who are alleged to infringe.  The agreement provides for actions and sanctions that range from “educational” alerts to throttling Internet speeds.  The Electronic Frontier Foundation (EFF) claims that the Center for Copyright Information, which is running this “educational” program, is not a neutral information source.  EFF provides its own insights and summary of CAS in this article:  https://www.eff.org/deeplinks/2013/02/six-strikes-copyright-alert-system-faq

The Center for Copyright Information version of the CAS is found here: http://www.copyrightinformation.org/

Contact your attorney to address specific questions about your content or operations and how they can be impacted by the CAS.