Chapter 13 Copyright, trademark, and protection of software

Chapter 13

COPYRIGHT, TRADEMARK, AND PROTECTION OF SOFTWARE

CHAPTER SUMMARY

Chapter 13 expands on the IP protection discussions contained in Chapter 12 by examining the areas of copyright and trademark safeguards. Means of securing protections are specified. Actions creating infringement of copyright and trademark rights are discussed along with appropriate defenses. Recent applications of the law in the area of Internet related legislation are presented with direct examples of pertinent IP cyberspace issues.

CHAPTER OUTLINE

I. COPYRIGHT

A. Copyright Protection Extends to original works of authorship fixed in any tangible means of expression.

1. Works are defined as literary and artistic creations including:

·  Computer software

·  Musical works

·  Dramatic works

·  Pictorial works

·  Movies

·  Sound recordings

·  Audio visual performances

2. Copyrights provide the author the exclusive right to reproduce and

distribute the works.

3. Copyrights also provide the author the exclusive right to prohibit derivative works using the author’s original work as a model.

B. Impact of the Berne Convention: Copyright Formalities

1. The Berne Convention is designed to provide international reciprocity for copyrights.

·  Complete reciprocity means that foreign works must be given the same protections as those from the violator/user’s country

·  Formalities are not required, a work is considered copyrighted once published

·  Signees of the act must agree to provide a minimum level of protection, despite independent legal remedies available by or through the author’s home nation.

2. In the U. S., registration and notice (i. e. - © and ®) are no longer required.

C. Registration of Copyrighted Work

1. Registration does provide additional protections.

2. Risks of copyright registration

·  Registration does require that the work be made part of the public record

·  Only a portion of computer software code is required to be made public to assure identification

D. Duration of a Copyright

1. For works authored after 1978:

·  Life of the author plus 70 years (Sonny Bono Act)

·  Joint works – life of the last surviving author plus 70 years

·  Works for hire last for 95 years from publication or 120 years from creation

2. When copyrights expire, the work becomes part of the public domain and may be used by anyone.

3. Copyrights may not be renewed.

E. Scope of Copyright Protection

1. The works themselves may be copyrighted.

2. Ideas may not be copyrighted.

3. Functionality is protected by patents, not copyrights.

4. Re: Protection for databases:

·  Facts may not be copyrighted

·  Arrangement of fact may be copyrighted

Teaching Tip: Examine the fact situation presented in the last paragraph of page 401 regarding Mary copying a page with a chart prepared by Harry, for her own book. Note how a copyright infringement can also result in plagiarism.

F. Copyright Infringement

1. Copyright owners have the exclusive rights to reproduce and distribute their works.

2. Only the copyright owner may perform and or display:

·  Musical works

·  Dramatic works

·  Choreographic works

·  Pantomimes

·  Motion pictures

·  Audio visual works

3. Copyright owners have the exclusive rights to reproduce and

distribute derivative works.

4. Proof of infringement requires:

·  Substantial similarity between the works

·  Evidence that the defendant had access to the copyrighted work

5. Independent creation is a valid defense to infringement.

·  Access is crucial to prove in order to refute independent creation

·  Evidence of substantial (striking) similarities will refute independent creation

Teaching Tip: Remember that intent is not required to prove infringement. Unconscious or accidental infringement is still actionable infringement.

6. Both literal and nonliteral portions of software are protectable under copyright law.

7. Literal portions of a program include:

·  Source code

·  Object code

8. Nonliteral portions of software include:

·  Screen displays

·  User interfaces

G. Infringement: Actual and Statutory Damages

1. Actual damages:

·  Lost profits

·  Profits earned by the infringer

·  Double counting of lost profit plus infringers profits is prohibited

2. Burden of proof

·  Copyright owner need only show infringers gross profits

·  Infringer has burden to prove variable costs that result in net profits

3. Statutory Damages

·  Available only to registered owners

·  Consists of not less than $750 and no more than $30,000 as the judge deems appropriate

·  Willful infringement will allow the court to raise the limit to $150,000

·  Innocent infringements will allow the court to lower the minimum to $200

·  Recovery is based on each work infringed, not the number of infringements per work

4. Additional remedies and criminal liability

·  The prevailing party is entitled to attorney fees and court costs

·  Willful and egregious infringement will allow the court to impose treble damages

Teaching Tip: Remind students that copying a chapter from a textbook to same money is copyright infringement. Copying a movie rented from a video store is copyright infringement. Admittedly, the likelihood of a lawsuit is negligible but a suit could create severe liability.

H. Copyright Defenses

1. First sale

·  Purchasers of copyrighted materials become licensees

·  The licensee may not make copies and sell them

·  The licensee may not rent or distribute the work

·  The licensee may resell the originally purchased work (first sale defense)

·  Software is excluded from the first sale defense and cannot be resold although a spare or archival copy may be made for the licensee’s protection

Teaching Tip: Most people don’t read the “READ FIRST” portion of software during installation, simply clicking on “I AGREE”. Reading the material would show that one who purchases software technically does not become the owner but merely becomes a licensee.

2. Fair Use Exception allows unauthorized users to make copies or reproduce portions of copyrighted works for (nonconclusive list):

·  Criticisms

·  Commentary

·  News

·  Research

·  Teaching

3. Factors used by the court to determine fair use include:

·  Whether the infringing use is commercial

·  The nature of the copyrighted work

·  The amount of copies made

·  The market effect

Teaching Tip: Many teachers at all levels frequently intentionally or inadvertently infringe on copyrights. Making a copy of something to discuss it in class is likely not a problem. Making copies for every student in class may be an infringement. Making copies for every student in class over a number of semesters as a regular part of a course is almost definitely an infringement.

4. Defendants in contributory infringement cases may escape liability if they can evidence a noninfringing use of their devices.

5. Defendants that have control over infringers may be held liable based on vicarious liability.

6. The No Electronic Theft (NET) Act (1997) closed a loophole in criminal law sanctions under the Copyright Act.

·  Hackers did not have to monetarily profit from their infringement to be criminally liable

I. Copyright Law and the Internet

1. Infringement occurs on the Internet frequently.

·  The infringers’ assets are generally not worth the cost of a law suit

·  Suits against the direct infringer (i. e. Napster) make sense while suits against the indirect infringer (i. e. the student) do not

2. ISPs are treated like as distributors with no liability rather than publishers subject to liability.

·  This rule is consistent with defamation rules as discussed in Chapter 11

·  ISPs that follow Title II to the Digital Millennium Copyright Act (DMCA) procedures will be free of liability when a dispute arises

4. The Digital Millennium Copyright Act, Title II: Online Copyright Infringement Liability Limitation

·  The DMCA specifically addresses the legal liability of ISPs

·  Safe harbors are created

·  The ISP cannot be held liable for contributory or vicarious infringement if they simply route and provide e-mail services

·  The ISP may remove infringing material without liability to the customer/publisher if they do so in good faith

II. TRADEMARK LAW

A. Trademarks, Trade Dress and Trade Names

1. Under the Lanham Act, only the following may be registered with the Patent and Trademark Office (PTO):

·  Trademarks

·  Service marks

·  Collective marks

2. The legal protection of trade names and trade dress is based on state common law.

3. The Lanham Act allows for suits based on imitation of trade dress.

4. Trademarks may be registered at both the state and federal levels.

5. A trademark is any word, name, symbol, device or any combination thereof used to identify or distinguish goods

·  Trademarks apply only to tangible goods

6. SEE the NUTZ and BOLTZ box on page 413.

7. A service mark is any word, name, symbol, device or any combination thereof used to identify or distinguish the services of one person or business.

8. A certification mark is issued by a third party certifying agent who vouches for the quality of a product. Examples include:

·  The Good Housekeeping Certificate of Approval

·  UL (Underwriters Laboratories)

·  TRUSTe

·  Member Better Business Bureau

9. Trade names cannot be registered with the Patent and Trademark Office.

·  If a trade name is used that causes confusion, state common law remedies exist

10. Trade dress refers to the distinctive appearance of a business.

·  The Lanham Act allows the first business to sue if customer confusion can be shown

Teaching Tip: An interesting classroom discussion can ensue if you ask for examples of distinctive trade dress. Most banks and restaurants have facades that allow you to recognize them before even reading the sign. Need we even mention the Golden Arches of McDonald’s?

Teaching Tip: To prove the significance of trade dress, ask your students if they have any younger siblings or relatives. Have they experienced any situations where the youngster who couldn’t read could never the less recognize their favorite restaurant (usually McDonald’s) or some other favorite place.

B. Federal Registration

1. Registration formalities:

·  Application submitted to the Patent and Trademark Office

·  An examiner is assigned

·  Sample marks must be submitted

·  The PTO conducts a search to discover similar or possibly confusing marks already registered

2. See the NUTZ and BOLTZ box on page 415.

3. Federal registration provides constructive notice to other companies.

4. After five years, the mark becomes incontestable.

5. Registrants must provide notice to violators before liability applies.

6. Trade mark registration is perpetual as long as the proper fees are

paid (every ten years).

C. PTO Decisions and Appeals

1. Internal and external appeals are conducted.

·  Initial decisions take approximately three months or less after submission

·  Final decisions are usually rendered within six to eighteen months after submission

·  Appeals of rejected applications go to the Trademark Trial and Appeal Board

·  Appeals from the Trademark Trial and Appeal Board and appeals of other board decisions go to the Circuit Court of Appeals for the Federal Circuit

D. What Can and Cannot be Registered

1. Generic marks may not be registered.

·  Names or marks that refer to a class of products rather than to a specific product.

2. Genericide occurs when legitimate trademarks have become so widely used that they appear to be generic labels and may potentially lose registered status. Examples include:

·  Xerox – we often hear people call copy machines Xerox machines regardless of brand

·  Band Aids – we often use the term band aid to describe plastic bandage strips of all brands

·  Kleenex - Many of our grandparents use the term Kleenex rather than tissue

3. The PTO must examine whether a proposed mark will be substantially similar to an existing registered mark.

·  Confusion by the public must be avoided

4. Descriptive terms cannot be registered, only distinctive terms identifying a product.

E. Fanciful and Descriptive Marks

1. Fanciful marks may be registered.

·  No direct functional or descriptive relationship to the product

·  Many use lettering patterns that represent the products they stand for

ggestive marks may be registered.

·  These suggest a product quality

F. Remedies

bject to the Lanham Act, liability arises due to:

·  Confusion

·  Mistake

·  Fraud

2. Lost profits and other damages are not available unless the infringement was intentional.

3. Incontestable registration provides an elevated status.

4. Despite incontestability, eight defenses never the less exist:

·  The mark was fraudulently obtained

·  The mark was abandoned

·  The mark was being used with the registrants permission

·  The name, term or device charged to be an infringement is a use of the defendant’s own name in his business

·  The defendant was using the mark before the registrant registered their mark

·  The accused mark was registered by the defendant prior to the plaintiff’s registration

·  The registrant’s mark was used to violate antitrust laws

·  Equitable principles such as laches, estoppel or acquiescence are applicable

5. Injunctions are frequently used remedies.

·  Product recalls may be required to remedy infringement

6. Court awarded damages include:

·  Damages equal to the defendant’s profits

·  Damages representing the harm to the trademark owner

·  Costs of legislation

·  Treble damages for intentional and egregious conduct or should a counterfeit trademark be used

Teaching Tip: Note that damages for trademark violations parallel copyright violation damages.

G. The Anti-Dilution Act (1996)

1. Dilution and noncompeting goods

2. Multiple registration of similar trademarks is allowed if the names

are used for products that are dissimilar and confusion is unlikely.

Teaching Tip: A look in the yellow pages will show that many businesses may share similar names and marks. The University of Delaware uses the Blue Hen as its mascot and the Blue Hen is a registered trademark. Never the less, in the vicinity, one will find The Blue Hen Plumbing Company, The Blue Hen Printing Company, The Blue Hen Diner and dozens of other “Blue Hen” companies, none of which are affiliated with the University and none of which cause confusion with the university. Is your school part of a similar situation?

3. Allowing companies to use names similar to established registered trademarks may cause dilution of the registered mark.

·  Dilution can also lead to public confusion

·  The Lanham Act was amended in 1996 to address dilution on the federal level

·  The Lanham Act was as amended in 1996 also provided special treatment regarding famous marks such as McDonald’s

·  Diluters of famous marks are not subject to monetary liability unless willful intent can be shown

H. Anticybersquatting Consumer Protection Act (1999)

1. Domain name protection has grown as an important area of IP protection.

2. Domain name protection is privately administered and does not fall under the auspices of the PTO.

·  Domain names are governed by the Internet Corporation for Assigned Names and Numbers (ICANN)

3. Cybersquatting occurs when someone unrelated to a company registers a domain name similar to a companies name with a registered trademark intending that the company would have to purchase the domain name in order to use it.

4. Bad faith use of a domain name may result in both civil and criminal penalties.

5. ICANN provides:

·  Dispute resolution procedures

·  Procedures for reassigning domain names when bad faith has been shown

6. See Chapter 4, pages 111-113 for a previous discussion of ICANN and online dispute resolution.

ETHICAL SCENARIOS

1. Be honest, have you ever infringed on someone’s copyright? Perhaps you taped a movie for repeated viewing or maybe the finals of the World Cup or the Super Bowl. Have you downloaded music or burned a copy of a friend’s CD to avoid having to buy it. Before reading this chapter, did you realize that you were likely committing a state offense and might even be committing a federal offense? How do you feel about this? In a few years, when you are possibly an executive with a company having their rights infringed upon, do you think that your feelings will be different?

2. The fair use exception to copyright laws allows for limited use of materials for particularly defined ppose that an author has created a copyrightable work that somehow makes a difficult educational concept perfectly understandable. If a school could copy this work and distribute it to its entire student body, the vast majority of students would immeasurably benefit. If every school in America copied and distributed the work to their students, the entire society could benefit. Further suppose that there is no other arrangement of the facts and data that will come even close to the effectiveness of the original work. How do the protections afforded authors relate to the fair use doctrine when a utilitarian application would provide such a wonderful benefit to the majority?

3. Copyright protection exists for the life of the author (or last surviving co-author) plus 70 years. (Do not be concerned with works for hire.) Once the person has died, why 70 years? Does the time period after death need to be for so long? If you (at 20 years old) wrote the “perfect” novel or the “best song ever”, do you realize that it may not become part of the public domain for 125 years or more? Is it fair to deprive society of widespread distribution and duplication of your work for so long?

SUGGESTED ANSWERS TO CASE QUESTIONS FOR REVIEW

Case 13-1

Matthew Bender & Company, Inc. v. West Publishing Corporation

1. Briefly explain star pagination. Can a computer arrangement of page numbers constitute creativity sufficient to qualify for a copyright?

Answer: Star pagination is a computer created system of page numbers in reported court cases that are part of a page numbering system. Page numbering, particularly if done automatically by a computer program, does not rise to the level of originality or creativity necessary to qualify for copyright protection.

2. Does this case affirm the proposition that if a machine creates the copyrightable portion of a copyrighted work, it cannot qualify as a copyright? Don’t computer graphic artists make extensive use of computers in creating their works, which are copyrighted?

Answer: A machine that does something new or unique may qualify for a patent but not a copyright. The software used by the machine may create a result that qualifies for a copyright.

Computer graphics artists use computers and specialized software that through the direction of the user creates original and creative work, which may qualify for copyright protection. This concept is substantially similar to the fact that a computer armed with word processing software is being used to produce this answer.

3. What did the court say was clearly not copyrightable about West Publishing’s service? Are facts in the public domain ever copyrightable?

Answer: The court noted that, “where and on what particular pages the text of a court opinion appears does not embody any original creation of the compiler”. Therefore the pagination system was not copyrightable.

Facts themselves are not copyrightable. If these facts are compiled in a particular way, the compilation may be copyrightable but the copyright “extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work”. For example, the chart on page 36 of this book provides information regarding the federal court system. The data contained in the chart cannot be copyrighted; however, the chart itself, as a compilation of information, is copyrighted and cannot be legally reproduced, as is, for another book without violation.

Case 13-2

Sony Corporation v. Universal City Studios, et al.

1. If surveys showed that the prominent use of Sony VTRs was to acquire libraries of copyrighted programming that would be viewed multiple times, would the court’s decision have been different? Why do you think that it would or wouldn’t?

Answer: The court noted that the surveys conducted by both the plaintiff and the defendant each showed that “a substantial number of interviewees had accumulated libraries of tapes.” One must surmise that such libraries are for multiple viewing of tapes. The plaintiffs did not prove that television viewing diminished nor did they prove injury due to this use. Sony was able to show that VTRs had multiple uses that were perfectly acceptable. If the predominant use however, was to steal copyrighted material and no other proper uses could be shown, the courts may have found the defendants guilty under contributory infringement grounds.

2. How could the use of VTRs result in nonminimal harm to copyright owners?

Answer: If the VTRs are being used simply for time shifting, this enhances television viewing and does not harm the entertainment injury. Even if libraries are being accumulated for repeated viewing, the issue becomes whether television viewing diminishes and true harm can be proven.

Case 13-3

Ale House Management, Inc. v. Raleigh Ale House, Inc.

1. Does the opinion mean that the term “ale house” cannot be part of a registered trademark?

Answer: The term “ale house” was determined by the court to be generic and therefore not appropriate for registration protection. Trademarks are supposed to identify a particular brand of product whereas generic marks identify a class of products.

2. What other words that are basically synonyms for “ale house” does the court suggest are also unavailable for trademark registration? Pick a product, any product. Name five ways of describing the product that are so generic that the words cannot be trademarked.

Answer: The court pointed out that the words “bar”, “lounge”, “pub”, “saloon” and “tavern” are similarly generic terms that are synonymous with “ale house” and therefore not appropriate for registration.

Student answers will vary regarding the second part of the question.

Case 13-4

Brookfield Communications, Inc. v. West Coast Entertainment Corporation

1. What was the nature of the consumer confusion that the court was concerned about in this case? Do trademark owners and domain owners have to be competitors for consumer confusion about trademarks and domain names to exist?

Answer: Since and offer similar search databases, and since both use the web as a marketing and advertising tool, consumer confusion is quite possible if not probable. Someone searching for information on “moviebuff” software may easily become confused upon reaching the web site.

In this case, the parties are not direct competitors. Brookfield offers software and is an information provider while West Coast sells and rents videos. The confusion occurs because the software program that Brookfield sells provides substantially similar material as the search engine found on the West Coast site. The similarity of names makes it difficult for consumers to distinguish between the two.

2. Besides confusion over trademarks, what other confusion was the court concerned about? Can a firm use a metatag to describe its product when it is the trademark of another firm?

Answer: Confusion over trademarks general causes a problem for consumers trying to identify the source of a product they are purchasing. Here, much of the confusion extended to where a person might be on the web and how they got there. It seemed likely that one could be searching for one site but unknowingly be on the other. Using metatags that are trademark infringements will certainly extenuate the problem due to the one click nature of the searchable web.

Case 13-5

Toys “R” Us, Inc. v. Eli Abir

1. What is the difference between trademark infringement and dissolution? What is the principal focus of this case?

Answer: Trademark infringement occurs when someone creates a trademark that duplicates or substantially duplicates an existing trademark. When the trademark is deemed famous, extra precautions are mandated to prevent free-riding and confusion as to whether the famous mark holder is or is not associated with the infringing mark. A change in spelling, where the pronunciation is identical, only adds to potential confusion.

The focus in this case was whether the public might associate and confuse the infringing mark with the original mark and whether such confusion would diminish or harm the “Toys R Us” name. Having determined that “TOYSAREUS” and “Toys R Us” sound alike, the high degree of similarity between the two marks would diminish the value of the famous “Toys R Us”.

2. What other factors weighed heavily in favor of Toys “R” Us? Was the mark a famous mark? Was there evidence that the defendant was operating in bad faith?

Answer: The court looked at eight factors. Besides the similarity issue, the remaining factors leading to confusion were, (1) that “Toys R Us” is a protectable mark, (2) the similarity of products offered by the two companies, (3) the use of the web makes distinguishing between the products more difficult for the typical consumer, (4) the defendant’s admission that they intended to cause confusion, (5) the finding of deliberate bad faith, (6) the difference in quality between the products offered by the two companies and (7) the fact that the children and parents visiting the websites are probably not sophisticated shoppers.

Evidence that the defendant was willing to sell the name and if refused threatened to create a worldwide toy catalogue, directly in competition with the plaintiff during the holiday season, traditionally the busiest toy selling season shows an intention to unjustly realize a monetary windfall. There was no existing toy catalogue and the name appeared to be registered solely to obtain money from “Toys R Us”. This purpose proves bad faith.

SUGGESTED ANSWERS TO QUESTIONS FOR REVIEW AND ANALYSIS

1. Advise your rich uncle on what the U. S. Copyright Office does. What if your uncle tells you that he has heard that you don’t have to register with the Copyright Office in order to get a copyright? Can you tell your uncle what the value of registering with the Copyright Office is?

Answer: The U. S. Copyright Office allows authors and creators to register their works. The owner is issued a certificate of registration evidencing their ownership.

The benefits of copyright registration are that the issued certificate becomes prima facie evidence of the owners rights should a future dispute arise. Furthermore, registration allows access to the federal system to resolve disputes.

2. What can be protected with respect to a software program and what cannot?

Answer: Mere facts may not be copyrighted however; the arrangement of those facts may be copyrighted. Therefore, computer databases are subject to protection. The structure, sequence and organization of the command structure regarding software, may be copyrightable if there are other ways of achieving the same functionality. Literal portions of a program such as the object code and the source code may be copyrighted as may nonliteral factors such as screen displays and user interfaces.

3. In deciding whether someone who has made unauthorized copies of copyrighted work qualifies for the fair use defense, courts look at a number of factors. What are those factors, which is the most important, and why is it most important?

Answer: The fair use exception allows the copying of copyrighted work for certain named and limited in scope purposes. Four factors are consider as follows, (1) whether the infringing use is commercial, (2) the nature of the copyrighted work, (3) the amount of duplication entailed and (4) the market effect of the duplication. The market effect is considered the most important factor because a diminishing of the owners market has the most direct effect on the owner.

4. After five years of being registered with the Patent and Trademark Office, a mark is said to be “incontestable”. What does incontestable mean in this context?

Answer: Incontestable means that the mark has achieved elevated status and its registration “shall be conclusive evidence of the validity of the registered mark and of the registration of the mark, of the registrant’s ownership of the mark and of the registrant’s exclusive right to use the registered mark in commerce.” In short, incontestability creates a presumption of validity. This status however, is a rebuttable presumption because the many challenges to the mark survive past the five-year period. Eight such defenses exist despite the incontestability status.

5. What does the Anticybersquatting Consumer Protection Act do? How does this act cut down on nuisance suits?

Answer: The act amends the Lanham Act establishing domain name protections and prohibiting the use of domain names or identifiers of online locations that are the trademark of another person, or are sufficiently similar to a trademark so as to cause confusion, mistake, deception or dilution of the distinctive quality of a famous trademark. Bad faith violation become subject to criminal sanctions.

Prior to the Anticybersquatting Consumer Protection Act, the only major sanctions available related to injunctions prohibiting the use of particular domain names and damages were not available. The Anticybersquatting Consumer Protection Act provided for specific regulations to deal with cybersquatting along with statutory and criminal penalties for infringement by domestic infringers. Therefore, nuisance suits have become cost prohibitive to the offender due to the increased penalties.