AS-IS: Ecommerce, Internet, Software & Technology Law and Contracts

Imagine working in an industry with no intellectual property protection at all.  Unlike the book, music, and high tech industries, you couldn't use the law to shut down an infringer who was ripping off your products.

How would you stay in business?

Ask the fashion design business.  That's what BusinessWeek did.  According to BW, garment designs are not copyrightable (but "counterfeit garments ... right down to the label ... are illegal").

BW found these strategies:

1. Protect what you can under existing intellectual property law - at the edge of IP, so to speak.  Diane Von Furstenberg has begun protecting her copyrights to fabric patterns (as opposed to the entire garment itself), as art.  Shoe designer Stuart Weitzman patented a shoe's buckle and ornamentation.  Both Von Furstenberg and Weizman have sued to enforce their intellectual property rights.  (Similarly, blue jeans companies have for years registered and sued to protect their trademarks in the ornamental stitching on the back pockets of their jeans.  For example, see Levi Strauss's U.S. trademark registration number 1,139,254.)

2. Use time to market to your advantage.  According to BusinessWeek, Designer Halston now makes its fashions available quickly at Net-a-Porter.com, to speed ahead of the inevitable copycats. Many industries have used this strategy successfully over the years, even the U.S. media industries in the late 19th century.  (See Stephen Breyer, "The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs," 84 Harvard Law Review 281 (1970).

3. Use "natural intellectual property" -- materials or processes that others simply can't copy, or that would be too expensive to knock-off cheaply.  For example, Weitzman is making shoe heels out of steel and titanium, which are too costly for low-price imitators.  When imitators try to use cheaper wooden materials, "the heels will snap."

4. Change the law.  The designers are supporting a proposed Design Piracy Prohibition Act.  But Congress is deliberative, and that path is slow and risky.  

Posted by Harry at 01:03 PM | Permalink

This month's Wired magazine has a perceptive article about so-called "data scraping" or "screen scraping" practices.  It discusses the practical aspects of data scraping (such as IP address banning or blocking as a practical remedy to prevent scraping), use of cease and desist letters, and use of properly-licensed web services application programming interfaces (API's) as a way to control such practices.

The article does not provide any detail about underlying legal theories or court cases to prevent data scraping, such as those based on the Computer Fraud and Abuse Act (CFAA) or court cases concerning unfair competition.

Source: Should Web Giants Let Startups Use the Information They Have About You?, by Josh McHugh. 

Posted by Harry at 03:55 PM | Permalink

A New York Times article describes where the "niche neighborhoods" and industry clusters are located in Silicon Valley, with web design and online advertising centered in San Francisco, software in the Palo Alto area, and semiconductors, disk drives and and network equipment located in the south Bay near San Jose.

No mention of Cupertino, where my office is located, which has an eclectic mix of hardware, software and great design: Apple Computer, Symantec, and the U.S. office of open source database developer, MySQL, among others. 

Source:  A Social Order Shaped By Technology and Traffic, by Steve Lohr, The New York Times, December 20, 2007.  "Silicon Valley is a collection of remarkably local clusters based on industry niches, skills, school ties, traffic patterns, ethnic groups and even weekend sports teams."

Posted by Harry at 09:47 AM | Permalink

Generally, when a small U.S. client tells me that they wish to expand abroad, I think to myself, "that's going to be complicated, time-consuming and expensive."

Recognizing the opportunities and challenges of globalization facing startups and other small businesses, the Wall Street Journal reports that consultants, such as High Street Partners of Annapolis, Maryland, now are advising them on how to expand abroad, such as dealing with tax issues, foreign employee benefits and local-currency transactions. 

I think that such consultants, especially for international finance and operations issues, would be a good complement to the advice of an international lawyer.

Source: Small Firms Hire Guides as They Head Abroad, by Phred Dvorak, The Wall Street Journal, November 5, 2007. 

Posted by Harry at 04:31 PM | Permalink

Web sites and other online services containing content submitted by users (also known as user-generated content) are obviously a hot growth area.

Not so obvious is the fact that these services depend on a little-known statute to protect their providers from legal liability for copyright infringement.  That statute is Section 512 of the Digital Millennium Copyright Act (DMCA).

Section 512 is crucial for online services such as YouTube, where users have been placing third parties' content (such as clips from a TV show or move) without authorization from the copyright owner.  Under the copyright law, the user placing the content on the site without authorization can be liable as a "direct" infringer.  Absent Section 512, the online service provider that hosts such content could be liable as a "contributory" or "vicarious" infringer -- roughly analogous to being an accomplice of the user.  The business impact is that the provider could face large damages in a pre-set statutory amount.  And, officers and directors of corporations and other entities face personal liability for their role in infringing activity.

Typically, the provider posts a policy regarding its copyright law compliance along with contact information for an agent to receive notices of copyright violations.  Providers also must register the agent in a public database at the U.S. Copyright Office to take advantage of Section 512. 

Owners of works that may be infringed then send what is known as a "takedown" notice, following detailed requirements in Section 512, for the work to be removed from the provider's service. The original user may submit a "counter notification" to have the work reinstated on the online service (and face a lawsuit from the copyright owner), again following detailed requirements in Section 512.

I recently attended a seminar of specialists on Section 512, and took away some practical tips on how providers can use the protections of Section 512.  These takeaways are a composite of panelists' opinions:

1. Many sites and services can face issues with user-generated content.  Content sharing sites such as YouTube and Myspace are obvious examples.  Even simple blogs, wikis or guestbooks that permit visitor comments can create similar issues, however.
2. Some copyright owners have hired rooms full of employees to search for infringing works and send take down notices.  One major media company sends more than 100,000 takedown notices -- per day.
3. Users rarely send counter notifications when their works are taken down.  Typically the works that are taken down, remain down.  (Unless, of course, the same or another user re-submits them separately later.)
4. Many providers fail to register their designated agents with the U.S. Copyright Office, and thus miss out on the benefit of Section 512.  (I often assist clients with this simple and inexpensive filing.)
5. Providers need to adopt a policy providing for termination of repeat infringers.
6. Providers should keep good records of all take downs, such as the number of terminated works and user accounts, the reason for termination and the date of notice and date of termination.  This can be very helpful in demonstrating that the provider has a reasonable policy of terminating infringers.
7. Because providers can face liability based on their actual knowledge that the works are infringing, they should be wary of reviewing the user-generated content more thoroughly than required by law. Some seemingly obvious situations (such as a human editor choosing featured content on a home page) might create actual knowledge.
8. Obtaining a financial benefit directly tied to individual pieces of user-generated content is risky. Receiving fees for an overall service (such as setup or periodic subscription fees) should be less risky.  The financial benefit from advertising is currently an open question, so many providers currently do not place ads directly in any problematic content.
9. Several groundbreaking lawsuits are pending in this area in New York federal court. Google and other web services are introducing filtering technology to keep infringing works off of their sites, but such technology is still in early stages.  Web site operators and other online service providers need to keep an eye on this rapidly changing area.

The seminar was "Viacom v. YouTube (Google) Case: A Review of Section 512 (DMCA)" at the High Tech Law Institute (HTLI) of Santa Clara Law School, on October 23, 2007.  The panel consisted of Mindy Morton, associate, Bergeson LLP; Professor Tyler Ochoa of Santa Clara Law School; Fred von Lohmann, Senior Counsel of the Electronic Frontier Foundation (EFF); and Jenny Lynn Cox, Moderator and Executive Director of HTLI.

Posted by Harry at 04:50 PM | Permalink

I've just written and added a new article to my web site, Welcome to California: A Very Short Introduction to Several California Laws that Affect Out-of-State and Foreign Businesses (MS Word file).

My resources page contains other articles that I've written.

Posted by Harry at 05:11 PM | Permalink

TechCrunch posted a useful chart comparing all the existing virtual world services, such as Second Life.

Posted by Harry at 04:01 PM | Permalink