Articles Posted in IP Ownership

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2013 was an incredibly active year for social media legal issues. Below are selected highlights on some of the more interesting legal issues that impacted social media, along with links to reference material relating to the topics.

1. Virtual Currency/Bitcoin

FinCEN Virtual Currency Guidance and Enforcements – FinCEN published legal guidance  on virtual currency making clear that existing regulations regarding money transmitter and anti-money laundering laws apply to certain virtual currency activities. Shortly after issuance of the guidelines,
a wave of enforcements shut down non-complying entities. [BLOG]

Congressional Hearings on Virtual Currency – Congressional hearings were surprisingly more friendly and receptive of Bitcoin and other virtual currencies.

2. Privacy – Guidance and Enforcements

COPPA – The FTC issued new guidance
and FAQs for children’s online protection due to evolving technology and changes in the way children use and access the Internet, mobile devices and social media.

CA Privacy Law
– California passed new privacy laws.

3. Intellectual Property/Patents

Patents – The number of social media patent filings continued to increase. The America Invents Act (AIA) fully kicked in, providing a greater ability to challenge patents believed to be invalid without going through district court litigation. The Fast Track
process to get patents issued more rapidly (often in less than a year)
continued.

Ownership of Social Media Accounts and Followers – Despite a number of cases (including ones involving LinkedIn and Twitter) relating to ownership of social media accounts, the law remained murky and fact specific.
This uncertainty can be avoided by proper attention to social media policies before issues arise.

4. Employment Law and Social Media

National Labor Relations Board (NLRB) – The NLRB continued to issue surprising guidance and decisions on social media usage. In many cases, some or all provisions of employers’ policies governing the use of social media by employees were found to be unlawful. [BLOG] The NLRB affirmed that workers have the right to discuss work conditions freely without fear of retribution,
whether the discussion takes place in the office or on Facebook. But later in the year it actually found some uses of social media for employment (firing) decisions to be okay.

Employer Access to Social Media User Names and Passwords – By year end, 36 states had passed or initiated legislation prohibiting employers from requesting personal social media account information or passwords in connection with employment decisions.

National Conference of State Legislatures Report – Some states have similar legislation to protect students in public colleges and universities.

5. Online Gaming

First mover states
forged forward with online gambling.

·        Nevada – Legalized online poker and granted its first licenses for interactive gaming.

·        New Jersey – In February, passed legislation (signed into law by Governor Chris Christie) allowing on-line wagering. Subject to certain limitations, licensed operators are permitted to offer online versions of a wide variety of games currently permitted in Atlantic City casinos (e.g., roulette, craps, black jack, and slots).

·        Delaware – On October 31, launched what Delaware officials call a “full suite” of internet gambling.

Zynga – In September,
Zynga withdrew its bid for a gambling license in Nevada

Federal Gambling Legislation
– The prospects for a federal law for online gambling remain elusive.

6.
Mobile Health Applications

FDA Guidance
– The Food and Drug Administration (FDA) issued guidance that focused on applications that present a greater risk to patients if they do not work as intended or that cause smartphones or other mobile platforms to impact the functionality or performance of traditional medical devices.

FTC Guidance
– The FTC issued guidance in April focusing on truthful advertising and privacy.

7.
Gamblification/Sweepstakes

Florida prohibited
gaming promotions in a cause-related marketing campaign (where purchase of a good or service benefits a charitable cause).

Internet Sweepstakes Café Conviction in Florida – Lawyer Kelly Mathis was convicted on 103 of 104 counts related to illegal gambling based on his role in Internet Sweepstakes Cafés in Florida. He faces up to 30 years in prison. CA, OH, SC and other states moved quickly to shut down similar operations.

8.
Equity-based crowd funding legalized in the United States

SEC Rules
– In October, the SEC voted unanimously to propose rules under the JOBS Act to loosen the rules and permit companies to offer and sell securities through equity crowd funding.

Note:
Equity crowd funding is much like crowd funding, which has been popularized in the United States through sites such as Kickstarter and Indiegogo. The difference is that instead of individuals supporting campaigns through donations, numerous investors are purchasing small stakes in startups or small businesses.

Critics Emerge
– Critics of equity crowd funding worry that the industry will be rife with Ponzi schemes or that having too many investors will hurt startups’ prospects for future funding.

Pillsbury originally discussed this in a January 2012 client alert and March 2012 Blog Post.

9.
Endorsements

FTC Enforcements on Fake Endorsements – In February, the FTC permanently stopped a fake news website operator that allegedly deceived consumers about acai berry weight loss products. The settlements will yield more than $1.6 million and conclude a sweep against online affiliate marketers and networks. The sites falsely claimed endorsements from ABC, Fox News, CBS, CNN, USA Today and Consumer Reports.

Many companies’ understanding of and compliance with the FTC Endorsement Guidelines remains lacking, yet enforcements continue.

10.
Wearable Computing Lawsuit

Google Glass Liability? – In what may be a foreboding development, a California woman received a traffic ticket for wearing Google Glass while driving. Many states have broad distracted-driving laws or bans on certain monitors that may apply to Google Glass and similar wearable computing devices.

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twitter phone dog.jpgWe previously reported on the lawsuit over ownership of Twitter followers, when an employee left PhoneDog and changed the twitter handle of an account that had been used to tweet to PhoneDog customers. That case has now settled on confidential terms, but it appears the employee came out ahead. According to a statement from the employee, Noah Kravitz: “I’m very glad to have worked this out between us,” Kravitz said in a statement. “If anything good has come of this, I hope it’s that other employers and employees can recognize the importance of social media … good contracts and specific work agreements are important, and the responsibility for constructing them lies with both parties.”

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MC900250090.jpgA federal court recently found copyright infringement based on a developers copying of aspects of the popular Tetris game, even though the code itself was not copied. This ruling confirms that IP can be used to effectively prevent certain cloning practices that are prevalent with online games. While this case focused on copyright infringement, a passing note by the court highlights how patents can be instrumental to a comprehensive IP strategy as well.

In this case, Tetris sued Xio Interactive Inc. over its game Mino. Mino is a falling block game which incorporates game-play rules similar to Tetris, as well as utilizing a similar playing area and geometric block combinations. In its opinion, the court stated that game developers are free to use others’ ideas, but not the expression of those ideas. The court noted that the idea-expression dichotomy in the video game world is “simple to state- copyright will not protect an idea, only its expression – but difficult to apply, especially in the context of computer programs.”

The court summarized the law by stating generally that game mechanics and rules are not entitled to copyright protection, but courts have found expressive elements copyrightable, including game labels, design of game boards, playing cards and graphical works. Significantly however, the court noted that game mechanics and other functional game features can be patented.

The court determined that Xio did more than just incorporate Tetris‘ underlying rules in Mino. In looking at the similarity of the look and feel of the two games, the court stated that “[t]here is such similarity between the visual expression of Tetris and Mino that it is akin to literal copying” regardless of the fact that Xio did not actually copy the underlying Tetris code. For a more detailed discussion of this case, please see our client alert.

If you are a game developer and want to maximize your ability to shut down clones, it is critical to have a comprehensive IP strategy that incorporates both patents and copyrights. If you rely just on copyright, a more skillful game cloner can change the expressive elements enough to avoid copyright infringement. But if you patent core mechanics of your novel game, you can prevent others from copying that functionality regardless of how different they make the expressive elements.

For more information on IP protection for games, see IP Protection for Games.

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On March 30, 2012 the California federal judge hearing the lawsuit initiated by a putative class of retired NFL players against Electronic Arts Inc. denied EA’s motion to dismiss the suit and to strike the complaint.  The Court ruled that the retired players’ allegations that EA’s unauthorized use of their likenesses in the “Madden NFL” video game was not trumped by First Amendment protection because the video game does not pass the transformative use test.  Specifically, the court held that “[a]lthough EA appears to claim that its mere projection of plaintiffs’ likenesses into avatar figures, capable of manipulation by gamers, is sufficient to confer constitutional protection, another way to see this supposed transformation is as a relatively literal, if skilled, translation of plaintiffs’ conventional images into the medium of the video game”.

This begs the question of what is transformative use?  Generally, the courts have defined transformative use as a use that “adds new material that reflects critically on the original”.  Traditional categories of transformative use are for purposes of criticism, commentary, newsreporting and parody.  Therefore, EA’s argument relies on its ability to fall within one of these traditional categories or to convince to court to create a new category which is more reflective of the current world and the available technology.   

EA argued in its motion to dismiss the case that it’s “Madden NFL” video game should be granted the same First Amendment constitutional protection as any book or movie.  This argument is founded in the recent Supreme Court decision in Brown v. EMA which clearly granted First Amendment protection to video games.  However, the current Court took the position that the transformative use test focuses on the reproduction of the plaintiffs’ likenesses, not merely the inclusion of expressive elements in game as a whole.  The decision stated that “[i]f, as EA urges, any expressive elements within the larger work were somehow to ‘transform’ an otherwise conventional use of a celebrity’s likeness, the right of publicity would effectively be eviscerated”.

That said, this decision is merely one battle in an ongoing war.  It is not dispositive on whether EA or the putative class of retired NFL players will ultimately be successful in the suit.  Moreover, EA recently was successful in dismissing a similar lawsuit in another jurisdiction alleging the misuse of college players’ likenesses in its “NCAA Football” titles.  In this case the Court agreed with EA’s argument that its First Amendment protections overruled the publicity rights of players.  Therefore, with these conflicting decisions in the circuits it is uncertain in which way the current state of the law will head.  

If you would like to read more about right of publicity and video games, please see our recent Client Alert.

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MP900439452.JPGFacebook has previously filed over 80 trademark applications on variations of its name and other terms such as “POKE”, “WALL” and “LIKE”.  Facebook now seems to be attempting to claim some level of ownership/protection over the word “book” as well.  In a recent revision to Facebook’s “Statement of Rights and Responsibilities,” which is the agreement all users must accept when accessing Facebook, language was inserted which states (emphasis added) “[y]ou will not use our copyrights or trademarks (including Facebook, the Facebook and F Logos, FB, Face, Poke, Book and Wall), or any confusingly similar marks, except as expressly permitted by our Brand Usage Guidelines or with our prior written permission.”

While there is no record of a current US trademark application on “BOOK”, Facebook does have a pending application in the European Union’s trademark database.  Moreover, Facebook has brought several suits against online sites incorporating the word “BOOK” in their domain name, with mixed results.  Several of these suits have settled while others are still pending.  Under US law a certain level of trademark protection can be gained merely by use of an unregistered mark.  Generally, such unregistered use is referred to as having “common law” trademark rights.  While these “common law” rights do not provide the same level of protection as a registered mark, they are still quite useful.  Moreover, including the above-referenced clause in its “Statement of Rights and Responsibilities” could provide Facebook with ammunition for future suits against any of its users who attempt to wrongfully use the “BOOK” mark.  Given that approximately 50% of all internet users have registered for Facebook, this provides Facebook with fairly wide-reaching (but not all-encompassing) protection.  
Historically, Facebook hasn’t shied away from protecting what is seems to consider its right in the term “BOOK”.  Only time will tell how Facebook plans to utilize any new rights it has gained from users by updating the “Statement of Rights and Responsibilities”.

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A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

 

The Virtual Military

While much of the international system remains mired in the economic doldrums, many global military powers continue to increase defense budgets focused upon the research and development of simulation technologies. As part of our week-long focus on the importance of games to international relations and security, today we consider how Russia,
China and the United States are using virtual simulators to train its armed forces.

Social game Idle Worship takes Facebook gaming to new level

Idle Games is launching a next-generation social game today dubbed Idle Worship. The title opens up a new genre on Facebook — the once popular “god game” — and it has an interesting and witty approach to social gameplay. Founded by former ad executive Jeffrey Hyman, San Francisco-based Idle Games is in a “holy war against games that suck or aren’t actually social.”

TrialPay and TubeMogul Introduce Real-Time Bidding for Virtual Currency and Social Video

TrialPay,
a leader in transactional advertising, and TubeMogul, a media buying platform for brand advertising, announced a partnership that brings real-time media buying to social video advertising for the first time today.

Illinois legislation to ban employers from asking for social network passwords hits snag

Legislation that would prohibit employers from seeking job applicants’ social network passwords is on hold in the Illinois House. Democratic Rep. La Shawn Ford’s measure would allow job-seekers to file lawsuits if asked for access to sites like Facebook. Bosses could still ask for usernames that would allow them to view public information on the sites.

 Smithsonian Art Of Video Games Exhibit Opens With Gaming Festival

The exhibit is curated by Chris Melissinos of Past Pixels, a group charged with the preservation of video game history. Over the past year, Melissinos — aided by a board of advisors that includes Double Fine’s Tim Schafer, text adventure veteran Steve Meretzky, and Penny Arcade team Jerry Holkins and Mike Krahulik — designed an exhibit that encourages visitors to make what Melissinos calls “a deeply personal decision” of whether video games are art. The exhibit offers five eras of video games with both playable demos and self-playing videos,
showcasing everything from the Atari 2600 to the PlayStation 3, from the traditional platforming of Super Mario Bros. to the more experimental play of Flower.

Navy Pursues a Better Attack Submarine Virtually

Technical advances in the field of virtual reality, also known as virtual worlds (VWs), are making it possible for the U.S Navy to tap into the collective expertise of its best submariners to design and build the next generation of attack submarines. At the Naval Undersea Warfare Center (NUWC) in Newport, Rhode Island, designers are able to create collaborative environments for submarine development using a fully immersive virtual reality application similar to the popular Second Life environment, which enables them to interact with one another both audibly and visually. Numerous participants at remote sites worldwide are linked to one another through the Defense Department’s secure computer network.

 

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A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

From the Supreme Court to Anonymous, 2011 was a transformational year for games

It’s no exaggeration to say that 2011 was a transformational year for the game industry. As the game industry’s trade group chief, Michael Gallagher, said, “The word ‘historic’ is overused, but as we look back on 2011, it is a perfect fit for our industry’s year.” Here’s a recap of 13 events that made this such a big year for games.

Viacom Owes Additional $383 Million in ‘Rock Band’ Video Game Dispute

After already paying $150 million to former shareholders of Harmonix, arbitrators have determined that Viacom owes an additional $383 million to the video game company that created Rock Band, according to a regulatory filing on Tuesday.

New Wave of Hacker Attacks Coming

Virtual currency, sometimes called cybercurrency, has become a popular way for people to exchange money online. These online “wallets” are not encrypted and the transactions are public, making them an attractive target for cybercriminals. There have already been attacks directed at users of Bitcoin, one of the largest virtual currencies, said Dave Marcus, McAfee’s director of advanced research and threat intelligence. “Our concern isn’t confined to Bitcoin. Virtual currencies seem almost designed to attract hackers,” he told me.

5 social network predictions for 2012

Facebook is the power hitter in social networking today, and is likely to drive the most activity and a fair share of the innovation in social networking in 2012. But it’s not the only company driving things forward. Here are five ways social networking is likely to play out in the coming year.

Welcome to the future: We predict big trends in social games for 2012

Now it’s that time of year that we, once again, reshuffle our tarot decks and see what the next 12 months will hold for games of a social nature. And, even if the Mayan predictions about the world ending in 2012 prove true, that won’t happen until December — so everyone has plenty of time to get this stuff in under the wire.

Virtual Reality Treadmill

Some of us prefer running outdoors simply because it offers something different for the eyes (and senses), instead of pounding it on a treadmill like a hamster in a gym. Of course, there are others who do it right from the comfort of their home, and there are also some pros to offset the cons – you definitely lower the risk of being robbed, and neither do you need to sacrifice your morning run whenever the skies open and start to pour. With the $2,000 Virtual Reality Treadmill, you will be able to enjoy the best of both worlds.

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On December 6, 2011 Zynga settled its copyright suits against Vostu USA Inc. and others.  The first suit, case number 5:11-cv-02959,
filed in the U.S. District Court for the Northern District of California back in June, alleged that several of Vostu’s games infringed Zynga’s copyrights. 
Specifically, Zynga had alleged, that Vostu’s MegaCity, Cafe Mania, Pet Mania, Vostu Poker and MiniRazenda games are merely clones of Zynga’s popular titles. 
Zynga followed this suit with another one in Brazil claiming copyright infringement and unfair competition.  Vostu initially responded to the suits asserting that its games were non-infringing but has ultimately agreed to settle the US and Brazilian matters by compensating Zynga and altering some of its games.

The parties have issued a joint statement that “Zynga and Vostu have settled the copyright lawsuits and counterclaims against each other in the United States and Brazil”. 
Additionally, “[a]s part of the settlement, Vostu made a monetary payment to Zynga and made some changes to four of its games” but the parties did not elaborate on the amount of the payment or the nature of the changes.

This settlement followed (and may have been prompted by) some early success in the cases by Zynga.  Zynga was able to obtain a preliminary injunction from the Brazilian court ordering Vostu to cease making the challenged games available.  In response Vostu initially convinced a U.S. District Judge to grant a temporary restraining order prohibiting Zynga from enforcing the Brazilian court’s order; however this TRO was quickly dissolved.  The Brazilian order was stayed by the appeals court pending Vostu’s appeal.

This settlement is a good example of how IP rights can be used to protect a video game from being cloned.  There is a history of successful games being the subject of imitation which goes back to the earliest days of the industry.  Many companies have come to believe that cloning is just part of business and there is nothing that can be done to stop it.  However, this is not entirety true.  Copyright, trademark,
trade secrets and patent rights can all provide differing levels of protection for games.  Copyright can protect a game from literal duplication or use of its protected images, code, literary elements, music, etc.  Trademark can protect the actual name, logo or certain other identifying elements from a competitor’s potentially confusing use in a game (or elsewhere).  Additionally, trade secrets can be used to protect a company or game’s “secret sauce” from being co-opted. 
Finally, patents may be used to protect features and functions of a game, including game mechanics, business methods and other functionality and processes. 

Game companies should consult with IP attorneys who understand the IP strategies and patentable aspects for games. For an overview of some of the IP protection available for games, see here.

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A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

Virtual Justice

Rutgers University law professor Greg Lastowka looks at whether players can and should be granted legal ownership of virtual items, whether or not there’s any existing legal precedent and how the virtual item landscape may change in the near future.

Italian court: Online editors not responsible for reader comments

Online commentators Wednesday welcomed a ruling by Italy’s highest court that the editors of online publications cannot be held legally responsible for defamatory comments posted by their readers. In a ruling handed down at the end of October, the Court of Cassation acquitted a former online editor of L’Espresso news magazine of the crime of failing to prevent defamation committed by one of her readers.

OUII Seeks Clarity On ‘Process Of Establishment’ Claims

The U.S.
International Trade Commission

should review a recent finding in a video game patent infringement case and clarify how to determine if a domestic industry is in the process of being established in Section 337 cases, the ITC’s Office of Unfair Import Investigations said in a petition publicized Tuesday.

Germany’s Merck wants Facebook page back

Germany’s Merck KGaA has threatened legal action after it said it lost its Facebook page apparently to rival Merck & Co. in the U.S., though it has yet to identify defendants in the case.

Virtual World Startups Seek Refuge From Patent Attacks

The developers behind the next evolution of the Internet — linked,
immersive, 3D environments — are trying to think of ways to minimize the adverse impact of software patents on their industry.

Social media in for worse cyber attacks in 2012

Social media sites and cellphones will prove to be fertile grounds for cyber criminals to exploit globally important events in 2012 to steal personal information and data and make financial gains, cyber security firm Websense has said. The Websense document, ” 2012 Cyber Security Threats,” has said identity information posted by users of sites such as Facebook, Twitter or LinkedIn may prove more valuable to cybercriminals than even credit cards.

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The Supreme Court has validated the ability of software developers to prevent customers from owning the copy of software they acquire. Because software developers can limit the customers rights to a mere license, they can impose restrictions that can prevent the customer from reselling the software. This is a huge win for software companies as it limits the resale market, which cuts into sales of new software. This ruling may also benefit the virtual goods industry which also commonly uses a licensing vs. sale model. However, it is important to note that in order to get the benefits of this decision, the software distributor must carefully craft their End User License Agreement.

On October 3, 2011, the U.S. Supreme Court declined the petition for certiorari regarding the Ninth Circuit Court of Appeals decision in Vernor v. Autodesk,
Inc. As we outlined in a previous post, the Vernor decision held that software developers can grant mere licenses and that doing so does not violate the First Sale Doctrine,” which states:

“[T]he owner of a particular copy…lawfully made under this title…is entitled,
without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy…”

This doctrine applies if the initial distribution is a sale. As the Ninth Circuit held in Vernor, software developers can legally prevent customers from owning (and distributing) the copies of software that they purchase. This is accomplished by drafting software purchase agreements (e.g., End User License Agreements) in a way to avoid the first-sale doctrine, such as by structuring the agreement as a license or placing valid restrictions on the customer’s use of the software. Under such an agreement, software developers can retain ownership in the copies they distribute and customers merely have a license to use the software.

Extending the Vernor holding to virtual goods and currency, this ruling seems to provide additional ammunition for the validity of merely licensing virtual items to users instead of selling the items. This approach is commonly used with virtual item models.  In light of Vernor, it is clear that the “license” which is included in the terms of service must be carefully drafted.  But if done properly,
this can help prevent unauthorized resale of virtual items via secondary markets or otherwise.

For more information on the legal issues with virtual goods, click here.