June 2010 Archives

Supreme Court Broadens the Test for Patentable Subject Matter

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Th US Supreme Court issued a ruling today that overruled a relatively narrow test adopted by the Court of Appeals for the Federal Circuit, known as the machine-or-transformation test. The Supreme Court found:
i) The machine-or-transformation test is not the sole test for patent eligibility under §101. The Court's precedents establish that although that test may be a useful and important clue or investigative tool, it is not the sole test for deciding whether an invention is a patent-eligible "process" under §101;
ii) Section 101 similarly precludes a reading of the term "process" that would categorically exclude business methods. The term "method" within §100(b)'s "process" definition, at least as a textual matter and before other consulting other Patent Act limitations and this Court's precedents, may include at least some methods of doing business; and
iii) because petitioners' patent application can be rejected under the Court's precedents on the unpatentability of abstract ideas, the Court need not define further what constitutes a patentable "process," beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr. Nothing in today's opinion should be read as endorsing the Federal Circuit's past interpretations of §101. See, e.g., State Street, 49 F. 3d, at 1373. The appeals court may have thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents. In disapproving an exclusive machine-or-transformation test, this Court by no means desires to preclude the Federal Circuit's development of other limiting criteria that further the Patent Act's purposes and are not inconsistent with its text.

This is relevant to virtual worlds in that it expands the scope of patentable subject matter that can be protected for software based processes and the many novel business models that are emerging in virtual worlds, mirror worlds, augmented reality and other social media applications.

We have prepared a more detailed advisory on this case.

Virtual Currency Restrictions Coming to China

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According to a report from Global Times, the Ministry of Culture (MOC) issued an explanation on new rules which prevent gaming-related virtual currencies such as Tencent's Q-bucks from entering into circulation as real money. According to the report, the rules were released on June 3, 2010 and will go into effect in August. The regulations are intended to protect kids from fraud or other issues that might arise with virtual currencies. Additionally, anyone who issues or trades virtual currency must apply for a license.

This is not the first time China has been on the leading edge of virtual currency related issues. For example, in November 2008, we reported that China was one of the first countries issuing guidance on the taxation of virtual transactions.

The requirement to have a license to issue or trade virtual currencies is not unique to China. Similar laws apply in the US. But as the use and dollar volume of virtual currency transactions increases, so too will the regulation and the enforcement of existing regualtions.

If you are issuing or trading virtual currencies, it is important to understand the legal ramifications and requirements.

Twitter Settles Charges with FTC Over Privacy Issues

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The FTC recently posted a press release (FTC Press Release) on their settlement with Twitter, Inc. over charges that the company failed to protect users' private information. The charges against Twitter stem from several high-profile incidences where hackers were able to gain administrative control of Twitter to: view nonpublic user information; gain access to direct messages and protected tweets; reset any user's password; and send authorized tweets from any user account.

The FTC made it a point to remind companies that a promise to keep user personal information secure must be kept. Furthermore, even when social networking users choose to share information with others, they still have a right to expect that their personal information will be kept private and secure. The press release outlines the reasonable steps Twitter failed to take and serves as a useful guideline for companies that want to make sure their user information security practices do not run afoul of FTC expectations.

Google Prevails in DMCA Safe Harbor Dispute

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Google has prevailed on summary judgment in a lawsuit brought against it by Viacom for widespread copyright infringement due to uploading of copyrighted content to its YouTube site. Viacom was seeking $1billion in damages, alleging that Google was aware that users were committing copyright infringement by uploading songs and other content to YouTube and that Google was permitting this to happen. The Judge sided with Google finding that it was protected under the "safe harbor" provisions of the Digital Millennium Copyright Act (DMCA). Viacom has vowed to appeal.

The safe harbor provisions of the DMCA provide a significant shield from liability for online service providers, such as Google, when users post infringing content to their site However, to qualify for this safe harbor, the online service provider must have an effective policy and must comply with any proper DMCA take down notice. Other requirements must also be met.

Many companies are generally aware of the DMCA but some do not comply with all of the steps necessary to benefit from the safe harbor due to a lack of complete understanding of these requirements. If you are an online service provider and allow users to post content to your site, you should consult with an attorney knowledgeable of the DMCA to ensure you qualify for the safe harbor provisions. A copy of the decision is here: Google Decision

A more detailed summary of the case and strategic considerations is here.

Amazon Patents Friending?

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On June 15, 2010, Amazon was awarded U.S. Patent No. 7,739,139 entitled "Social Networking System." Some have said this relates to fundamental aspects of "friending" and data sharing in social networks. If the patent is truly as broad as some say, what impact might this have on Facebook and other social networking sites?

Here is a copy of claim 1 to read for yourself:

1. A computer-implemented method, comprising:
receiving and storing personal data of a first user of a computer-based service, said computer-based service accessible to users over a network, said personal data specified by the first user;
providing a user interface for users to establish contact relationships with other users of the service such that each user can have one or more contacts, said user interface enabling a user to identify other users of the service, and to selectively initiate the generation of requests to establish contact relationships with the identified users;
receiving a request from a second user of the service to establish a contact relationship with the first user, said request submitted to the service over a network via said user interface;
sending a notification of the request to the first user over a network;
providing an option, in connection with said request, for the first user to grant permission for the second user to view at least some of the personal data of the first user; and
in response to the first user granting said permission, providing the second user access to at least some of the personal data of the first user via a contact information user interface of the service, such that the second user is provided access to data that would not otherwise be accessible to the second user via the service;
wherein the method, including receiving and storing the personal data, providing the user interface, receiving the request, sending the notification, providing said option, and providing the second user access, is performed by a server computer system.

As such, the '139 Patent appears to be related to invitations between users that establish a contact relationship in which an invitation also includes an option that is selectable by a receiving user to provide enhanced access to personal information of the receiving user for a requesting user.

An obvious question that people ask whenever an apparently broad patent is issued is whether the patent is valid. The Amazon patent is part of a chain of applications and patents dating back to 1997. These patents include U.S. Patent No. 7,386,464 ("the '464 Patent") entitled "Network-Based Crossing Paths Notification Service", U.S. Patent No. 7,194,419 ("the '419 Patent") entitled "Network-Based Personal Contact Manager And Associated Methods", U.S. Patent No. 6,714,916 ("the '916 Patent") entitled "Crossing Paths Notification Service", and U.S. Patent No. 6,269,369 entitled "Networked Personal Contact Manager". The chain also includes two pending U.S. patent applications that have not yet been examined substantively by the U.S. Patent and Trademark Office. These applications have been published as U.S. Patent Application Publication No. 2009/0282120 ("the '120 Publication") entitled "Social Networking System", and U.S. Patent Application Publication No. 2009/0282121 ("the '120 Publication") entitled "Social Networking System". The patents and applications in this chain generally describe many features of social interactive media that are now common. Some of these features include:automatically proposing meetings for contacts based on travel plans and/or home locations; presenting users with other users they may be interested in forming contact relationships (based, e.g., on contacts in common, affiliation with common organizations, and/or other parameters); and controlling the types of personal information to which individual contacts have access.

Many argue that "software patents" describing systems and methods such as the ones described in the Amazon family of patents are not practical because this technology moves too quickly. This family of Amazon patents demonstrates how timely filing of patent applications early on in the development of a technology can continue to bare fruit that is relevant to ongoing technological developments for over a decade after the original filing.

As yet, Amazon has not brought any law suits based on this family of patents. Pillsbury's Virtual Worlds and Video Game team has previously prepared an article that discusses some of the reasons a portfolio like this one can be valuable to a company even if they are not used to bring law suits for patent infringement, a copy of which can be found here.

Actus Sues for Virtual Currency Patent Infringement

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In a recently filed complaint (Actus Complaint.pdf), a patent holding company has sued over a dozen major companies for alleged patent infringement. The suit alleges infringement of 4 patents that relate to virtual currency or "electronic tokens". The patents include United States Patent No. 7,328,189; 7,249,099; 7,177,838; and 7,177,838.

The defendants in the case include Discover Financial Svcs.; Electronic Arts, Inc.; Home Depot, Inc.; Lowe's Companies, Inc.; McDonald's Corp.; Moneygram Int'l, Inc.; News Corp.; Recreational Equipment, Inc.; Sears Holding Corp.; Simon Property Group; Starbucks Corp.; Target Corp.; The Sports Authority, Inc.; The TJX Companies, Inc.; The Gap, Inc.; Yum! Brands, Inc.; Zynga Game Network, Inc.; ACE Cash Express, Inc.; Brinker Int'l, Inc.; and Darden Restaurants, Inc.

Given the rapidly increasing use of virtual currency and alternative forms of micropayments, it is not surprising to see more patent litigation. But patent infringement is but one legal concern when using virtual currency. A whole host of legal issues impact virtual currency. Pillsbury's Virtual Worlds and Video Game team has prepared an advisory on legal issues with virtual currency. Virtual Currency.pdf