tag:blogger.com,1999:blog-30300959619993551422024-03-12T19:30:34.241-07:00HOVIBLOGIn re intellectual property, technology, wireless, software, new mediaSean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.comBlogger22125tag:blogger.com,1999:blog-3030095961999355142.post-30933613490057348552010-08-15T14:14:00.000-07:002010-08-15T14:17:56.769-07:00HOVIBLOG has movedPlease go to <a href="http://www.epiclaw.net/blog">Sean's blog</a> at his new <a href="http://www.epiclaw.net/">website</a>.<div>Thanks.</div><div>Sean</div>Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-78828965632600181772010-07-26T12:54:00.000-07:002010-07-26T13:28:43.824-07:00Employment Agreement Drafting Lessons from the "Barbie versus Bratz" 9th Circuit Decision<!--StartFragment--> <p class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family:'times new roman';"><span class="Apple-style-span" style="font-size:medium;"></span></span></p><span class="Apple-style-span" style="font-family:'times new roman';"><blockquote></blockquote><!--StartFragment--> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">On July 22, 2010, the Ninth Circuit Court of Appeals </span><a href="http://www.ca9.uscourts.gov/datastore/opinions/2010/07/22/09-55673.pdf"><span class="Apple-style-span" style="font-size:medium;"><span class="Apple-style-span" style="color:#6633FF;">held</span></span></a><span class="Apple-style-span" style="font-size:medium;"> that Mattel, Inc., maker of the Barbie line of dolls, should not have been granted intellectual property rights ownership over the Bratz line of dolls, estimated to be worth $1 billion. The originator of the Bratz concept, Carter Bryant, presented the ideas for Bratz to MGA Entertainment, Inc., Mattel's competitor, while Bryant was an employee of Mattel (although the work Bryant performed was done after hours and at Bryant's home).</span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">The lower court had ruled, essentially as a matter of law, that an employment agreement between Mattel and Bryant applied to capture Bryant's ideas such that Mattel was automatically the sole and exclusive owner of those ideas and any related or derivative concepts. As such, the district court held, Bryant's actions of presenting those ideas to MGA constituted trade secrets misappropriation and copyright and trademark infringement.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">In overruling the district court, the Ninth Circuit held that the employment agreement was ambiguous on whether the specific Bratz concept was subject to the agreement's provisions assigning ownership of inventions to Mattel. The appellate court determined that the jury should have been allowed to decide the issue, and remanded the case for a new trial.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">The employment agreement stated, in pertinent part:</span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"></p><blockquote><p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">I agree to communicate to [Mattel] as promptly and fully as practicable all inventions</span><i><span class="Apple-style-span" style="font-size:medium;"> </span></i><span class="Apple-style-span" style="font-size:medium;">(as defined below) conceived or reduced to practice by me (alone or jointly by others) at any time during my employment by the Company. I hereby assign to the Company . . . all my right, title and interest in such inventions, and all my right, title and interest in any patents, copyrights, patent applications or copyright applications based thereon.</span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"></p></blockquote><p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">The term "inventions" is defined to include all "discoveries, improvements, processes, developments, designs, know-how, data computer programs and formulae, whether patentable or unpatentable."<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">The court found two specific ambiguities: whether the mere "idea" of an urban, multi-ethnic and trendy line of dolls with exaggerated features is captured within the definition of "inventions", and whether the Bratz concept was developed by Bryant during the period and within the scope of Bryant's employment with Mattel.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">With respect to the first ambiguity, the Ninth Circuit noted that in the definition of "inventions", ideas are "markedly different" from most of the listed examples, and that as a rule of contract construction, courts should avoid interpretations that would "make a particular item in a series ... markedly dissimilar to other items on the same list." Although the court readily admitted that the contract text supports an interpretation that would include ideas, the text does not compel that reading. As such the jury should be entitled to rule on that issue, that court stated.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">The second ambiguity relates to the fact that Bryant created the Bratz concept on his own time, without use of Mattel resources, and outside the scope of his duties. At Mattel, Bryant was responsible for fashions and hair styles, and not new doll lines. The phrase, "at any time during my employment", could be interpreted to mean the entire calendar period Bryant worked at Mattel, or more narrowly, as capturing only those inventions created during work hours, the court held.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">The Ninth Circuit's ruling carries important lessons for employers utilizing employment agreements to ensure ownership of employee-developed works and inventions. Primarily, employment agreements should be tailored to the type of business the employer operates. The definition of "inventions" for doll fashion designers should differ from that used for computer programmers, for example.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">At a minimum, in all employment agreements, "ideas" should be covered in the definition of "inventions" subject to the company's exclusive ownership rights. In fact, a prudent definition would include "proposed trademarks" as well. Here is an example of a more robust "inventions" definition: "trade secrets, inventions, mask works, </span><i><span class="Apple-style-span" style="font-size:medium;">ideas</span></i><span class="Apple-style-span" style="font-size:medium;">, </span><i><span class="Apple-style-span" style="font-size:medium;">innovations</span></i><span class="Apple-style-span" style="font-size:medium;">, processes, </span><i><span class="Apple-style-span" style="font-size:medium;">proposals</span></i><span class="Apple-style-span" style="font-size:medium;">, formulas, source and object codes, data, programs, know-how, improvements, discoveries, developments, </span><i><span class="Apple-style-span" style="font-size:medium;">concepts</span></i><span class="Apple-style-span" style="font-size:medium;">, designs, techniques and </span><i><span class="Apple-style-span" style="font-size:medium;">proposed trademarks</span></i><span class="Apple-style-span" style="font-size:medium;">."<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">Further, the employment agreement should clarify the exact conditions under which inventions are to be assigned. A employer-preferred employment agreement would ensure that all such inventions are assigned, whether conceived or reduced to practice during or after work hours, so long as such inventions relate to the employer's business or anticipated research and development. Example:</span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"></p><blockquote><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">You agree to assign to Company all Inventions, whether or not registrable under patent, copyright, </span><i><span class="Apple-style-span" style="font-size:medium;">trademark</span></i><span class="Apple-style-span" style="font-size:medium;"> or similar statutes, made, developed, conceived, reduced to practice, or learned by you, either alone or jointly with others, which relate to the Company’s business, or actual or demonstrably anticipated research or development of the Company, or which result from any work performed by you for the Company, and (a) with the use or aid of Company resources, or (b) </span><i><span class="Apple-style-span" style="font-size:medium;">during the general period of time (whether during or outside Company business hours) of your employment with the Company</span></i><span class="Apple-style-span" style="font-size:medium;">; or (c) pursuant to or in furtherance of your employment with the Company.</span></p> <p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"></p></blockquote><p class="MsoNormal" style="margin-bottom:14.0pt;mso-pagination:none;mso-layout-grid-align: none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">(Section 2870 of the California Labor Code renders unenforceable any employment agreement that purports to require assignment of inventions to the employer for inventions developed on the employee's own time and without use of the employer's resources, except for those inventions that relate to the employer's business or anticipated R&D, or which result from work performed by the employee for the employer.)<o:p></o:p></span></p> <span class="Apple-style-span" style="font-size:medium;">Had provisions like those suggested above had been in place in the employment agreement between Mattel and Bryant, there's a strong possibility that the case would have been resolved more quickly via settlement or summary disposition. In any case, employers would be wise to consider the lessons this case provides and adjust their employment agreements accordingly -- with the help of licensed counsel, of course.</span><!--EndFragment--> </span><span style="font-family:Cambria;mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Cambria;mso-fareast-theme-font:minor-latin;mso-hansi-theme-font: minor-latin;mso-bidi-Times New Roman";mso-bidi-theme-font:minor-bidi; mso-ansi-language:EN-US;mso-fareast-language:EN-USfont-family:";font-size:12.0pt;"><blockquote><span class="Apple-style-span" style="font-family:'times new roman';"><span class="Apple-style-span" style="font-size:medium;"><blockquote><span class="Apple-style-span" style=" ;font-family:Georgia, serif;font-size:14px;"><span style=" ;font-family:Cambria;font-size:12pt;"></span></span></blockquote></span></span></blockquote></span><!--EndFragment-->Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-33300107866984204282010-06-02T14:01:00.000-07:002010-06-02T14:06:37.078-07:00Enforceability of Vendor On-Line Terms After Written Contract Execution<!--StartFragment--> <p class="MsoNormal"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style="font-size: medium;">National Auto Lenders, Inc. (NAL) purchases installment contracts from retail car dealers in Florida, thus enabling indirect consumer loan purchases for cars. NAL contracted with SysLOCATE to purchase over 2,000 GPS units to track vehicles covered by its loans on SysLOCATE's website SysLOCATE makes available to its customers. Unfortunately, many of these units turned out to be defective, thus frustrating NAL's ability to locate and repossess vehicles of owners in default. While the parties were trying to resolve their dispute, SysLOCATE changed the terms of its online click-accept access contract that would have effectively limited NAL's ability to recoup its losses, and that would require binding arbitration as a means of resolving disputes. NAL's executives, upon learning of these new on-line terms, instructed SysLOCATE that only certain named individuals have authority to bind NAL to the terms of any contract, including any online click-accept agreement.</span></span></p> <p class="MsoNormal"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style="font-size: medium;">Despite this, two NAL lower-level employees subsequently click-accepted the terms of SysLOCATE's online agreement. After NAL filed a lawsuit against the successor-in-interest to SysLOCATE, the latter predictably filed a motion to dismiss in favor of binding arbitration. NAL resisted such motion by arguing that these two lower-level employees lacked apparent authority to bind NAL to the new online terms containing the binding arbitration clause.</span></span></p> <p class="MsoNormal"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style="font-size: medium;">In </span></span><i><a href="http://www.scribd.com/doc/29617533/National-v-Syslocate-02-10"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="color:#000000;">National Auto Lenders, Inc. v. SysLOCATE, Inc.</span></span></span></a></i><a href="http://www.scribd.com/doc/29617533/National-v-Syslocate-02-10"><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style="font-size: medium;"><span class="Apple-style-span" style="color:#000000;"> (S.D. Fla. Feb. 10, 2010)</span></span></span></a><span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style="font-size: medium;">, the district court agreed with NAL and denied the defendant's motion. The court ruled that the two lower-level individuals at NAL lacked apparent authority because NAL made clear that only certain executive level personnel have authority to bind the company to such terms. The court stated, "The reliance of a third party on the apparent authority of the principal's agent must be reasonable and rest in the actions of or appearances created by the principal ...." (citations omitted).</span></span></p> <span class="Apple-style-span" style="font-family:georgia;"><span class="Apple-style-span" style="font-size: medium;">Vendors frequently deliver products, technologies or services online, even if the original contract between the vendor and the customer is a traditional written – and usually heavily negotiated – document. As a result of the SysLOCATE decision, vendors may soon start seeing language in these written agreements clarifying who within the customer's organization has authority to bind the customer to subsequent online terms, so as to avoid any possibility for the vendor to alter the terms of the written agreement via subsequent (and perhaps inadvertent) acceptance of vendor online terms. Unless the vendor implements a mechanism to ensure that only such authorized customer personnel assent to the online terms, the vendor may find itself unable to enforce such terms against the customer altogether. </span></span><!--EndFragment-->Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-28892906721615203942010-05-04T11:35:00.000-07:002010-05-04T15:13:29.667-07:00Tech Startup Nightmare on My Street: How Lack of Written Documentation for Staff Developers Wreaks Havok<!--StartFragment--> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><!--StartFragment--> </p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">It's difficult to imagine a more frightening scenario for tech startup founders.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Envision a small bootstrapped tech venture hiring a software engineer, with family connections and a proven track record of competence and trustworthiness, to perform coding work from his home in a remote out-of-state location.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">The engineer is paid solely in shares.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">He receives no benefits and no tax withholding occurs.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">No written agreement between the engineer and the company exists.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">Now imagine that this engineer suddenly perceives inequitable behavior among the founders.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Disputing the notion that he's an employee, this engineer claims for the first time, after nearly a year of development, copyright ownership over the source code he's written, and deletes every copy of the code from all company computers, including the laptop PCs of the co-founders. He alone holds the only copy of the company's heart, blood and soul.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">He refuses to release the code until his demands for more equity are met.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">Imagine then that the founders bring a lawsuit against this engineer, asserting that the engineer is in fact an employee, that the company owns the code in question, and as such, the engineer by his actions committed misappropriation of the company's trade secrets.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">After an extensive factual and legal record is established, the court of appeals affirms judgment in favor of the company on the issue of copyright ownership of the code, but against the company on the trade secret misappropriation claim.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Surprisingly, the developer faces no legal consequences for his ransoming of the company's valuable trade secrets.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">The recent case of </span><i><span class="Apple-style-span" style="font-size:medium;">JustMed, Inc. v. Michael Byce</span></i><span class="Apple-style-span" style="font-size:medium;">, No. 07-35861 (9</span><sup><span class="Apple-style-span" style="font-size:medium;">th</span></sup><span class="Apple-style-span" style="font-size:medium;"> Cir. April 5, 2010), presents this exact factual and legal scenario, and recounts the story of two brothers-in-law embarking on a entrepreneurial adventure that takes an acrimonious and costly turn for the worse.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">In the mid-1990s, Joel Just and Michael Byce co-developed a hands-free digital audio larynx to facilitate speech for those whose larynx had been surgically removed.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Both have double-E degrees and are both tech company veterans.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">In 1998 they secured a patent to their invention.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">Shortly after the patent issued, however, the company was hit with tragic news: the sudden and unexpected death of the wife of Byce and the sister of Just.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">No activity takes place again until 2003, when Joel and Ann Just form JustMed, Inc. in Beaverton, Oregon, to continue development of the product.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">Joel Just offers and Byce accepts 130,000 founder shares in exchange for $25,000 cash, and Byce takes a position on the board.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">He begins work with another engineer in the company, Jerome Liebler, to create the hardware prototype and embedded software that runs it.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">No one in the company was working for salary at this time.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">All were paid in shares.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Cash to pay company expenses originated from angels in the form of family and friends, and from a loan from the Justs.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">By the summer of 2004, the company finally had a product ready to market, "JusTalk".</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">At this point, Byce took over complete development of the software from Liebler, who moved to Kentucky and assumed a less active role in the company.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Byce's sole compensation at this time came in the form of 15,000 shares per month, valued at fifty cents a share.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">However, no written employment agreement or other writing documenting the relationship existed.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">The company issued no W-2s, paid no workers' compensation or unemployment insurance for Byce, and processed no tax, Social Security or Medicare withholding.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">Byce worked from home, using his own computer, in Boise, Idaho.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Byce set his own hours, often working late into the night.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Communication with the rest of the company took place solely via emails and telephone calls.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Byce would periodically send over new versions of the source code to Just in Beaverton.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Just never made any modifications to the code, trusting Byce's skill over his own.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Eventually Byce had nearly completely re-written Liebler's code.</span></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">Byce had a company business card and company title, and was listed as an employee in the company profile brochure.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">He attended conferences and conducted product demonstrations, and performed marketing duties in addition to his development responsibilities.</span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">By May 2005, Byce, who had been living off credit, became concerned about his financial situation and requested that half his compensation be paid in cash.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Just agreed, Byce signed a W-4, and the company issued three paychecks to Byce as salary for May, June and July of 2005 – checks that Byce never cashed.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">The checks were not cashed because, by this time, Byce had convinced himself that he was not being treated fairly.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Apparently realizing that if he started accepting cash salary, his status as an employee would be difficult if not impossible to contest, Byce refused the cash.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">What followed next is best recounted by a direct quote from the Ninth Circuit's opinion:</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;"><span style="font-family:Georgia;"></span></span></p><blockquote><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">At this point, Byce became concerned that Just did not view him as an equal in the corporation.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">In order to protect what he perceived as his intellectual property, Byce changed the copyright statement on the software, so that it now read “Copyright (c) Mike Byce 2005” instead of copyright JustMed.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">Then, while Byce was working in the Oregon office two days before Just was scheduled to meet with a potential merger or buy-out partner, Byce deleted all copies of the source code from JustMed’s computers. Byce testified that he made the decision after seeing a spreadsheet showing a large disparity between the number of shares Byce owned and those shares that the Justs and Liebler owned. In its memorandum decision, the district court found that Byce deleted the code to gain leverage over Just in Byce’s efforts to acquire a greater share of the company. The next day, Byce raised with Just the disparity in ownership between Byce and the other primary shareholders. The two talked for several hours, but Just declined to give additional shares to Byce. During this conversation, Byce did not mention that he had deleted the source code from JustMed’s computers.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">Just still had a recent version of the object code loaded on a JusTalk unit, but after flying to Chicago for his demonstration meeting, Just could not get the unit to work. Hoping this was a curable problem, Just tried to recompile the source code on his laptop and then load it onto the unit, only to discover that he no longer had a copy of the source code. Just called Byce about the missing code, but Byce claimed to have assumed “revision control,” meaning that he had removed the source code to insure that no one else would make changes to it.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">Only upon returning to Oregon did Just realize that Byce had deleted the source code from all of JustMed’s computers. Just was able to recover some prior versions of the source code files, but not the most recent one. Byce later returned the latest version of the source code, with some of the programmer’s notes removed, but only after JustMed filed suit against Byce and the Idaho state court issued a temporary order.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Because Just did not trust the code he received from Byce, JustMed has since worked from older versions of the code to develop the device.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" align="center" style="margin-top:0in;margin-right:0in; margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-align:center; mso-pagination:none;mso-layout-grid-align:none;text-autospace:none"></p></blockquote><p class="MsoNormal" align="center" style="margin-top:0in;margin-right:0in; margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-align:center; mso-pagination:none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">_____________</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><o:p><span class="Apple-style-span" style="font-size:medium;">The US Copyright Act's default rule of copyright ownership is that the creator or author owns the copyright to the work in question.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">One exception arises in the situation in which an employee creates works on behalf of and in the scope of employment for an employer.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">In this case, the employer is deemed to be the owner from the outset.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">If however the developer is not an employee but is instead classified as a contractor, the exception does not apply and ownership remains with the contractor.</span></o:p></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">The Ninth Circuit affirmed the district court's judgment that Byce was an employee, based on the following factors:</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">i)</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">Byce was not hired for a specific term or with a defined end in mind.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">The parties envisioned an indefinite relationship.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">ii) Byce performed other work for JustMed in addition to product development and programming, such as web site maintenance and marketing work, thus suggesting that the company could have assigned additional non-programming related tasks to Byce.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">And, the formal title that Byce gave himself ("Director of Engineering") was indicative of broad duties and permanence of position.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">iii) The Ninth Circuit characterized the shares that Byce received as "salary", paid "in the same way as other JustMed employees".</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">iv) Byce's work was critical to the success of the product and to the company's future.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">That Byce worked from home, set his own hours, and directed his own work, was not viewed as dispositive, but rather endemic to the type of work that Byce was doing in the environment that he was doing it in.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">The strongest argument Byce marshaled in support of his claim that he was never an employee stemmed from the company's failure to pay benefits and complete the appropriate payroll forms, and the company's tax treatment of Byce.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">The Ninth Circuit dispensed with this argument by noting the unique characteristics of small technology startups:</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;"><span style="font-family:Georgia;"></span></span></p><blockquote><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">JustMed’s treatment of Byce with regard to taxes, benefits, and employment forms is more likely attributable to the start-up nature of the business than to Byce’s alleged status as an independent contractor. The indications are that other employees, for example Liebler, were treated similarly. Insofar as JustMed did not comply with federal and state employment or tax laws, we do not excuse its actions, but in this context the remedy for these failings lies not with denying the firm its intellectual property but with enforcing the relevant laws.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">As a small start-up company, JustMed conducted its business more informally than an established enterprise might. This fact can make it more difficult to decide whether a hired party is an employee or an independent contractor, but it should not make the company more susceptible to losing control over software integral to its product.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"></p></blockquote><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">Having found that Byce was in fact an employee and therefore that the company is the rightful owner of the source code, the Ninth Circuit turned to resolution of JustMed's trade secret misappropriation claim.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">It was undisputed that the source code was JustMed's trade secret, and that Byce was under a duty, under the Idaho Trade Secrets Act, to maintain the code's secrecy and limit its use.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">The Court of Appeals first noted that Byce's disclosure of limited parts of the code to the US Copyright Office, in an attempt to obtain copyright registration in his own name, "is not necessarily inconsistent with maintaining the secrecy and value of the trade secret".</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">The Copyright Office policy is to deny direct public access to in-process files, and after registration issues, the Copyright Office releases reproductions of the work "under limited circumstances", the Court observed.</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">As this was the only form of disclosure that occurred, the Court next considered whether Byce had "used" the code in violation of his duty to protect the company's trade secrets.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">The term "use" as utilized in the Idaho Trade Secrets Act "generally contemplates some type of use that reduces the value of the trade secret to the trade secret owner," the Ninth Circuit noted.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">In this case, Byce filed for a copyright registration and threatened permanent loss of the code for the company, but this use, the Court of Appeals held, did not diminish the value of the code or its secrecy. As the code had been fully returned to JustMed, no harm or diminution in value occurred.</span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">The district court had awarded JustMed damages of $41,250, to compensate for the salaries of Just and Liebler for the three months they spent in recreating the source code Byce had deleted.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">The Ninth Circuit overturned this award:</span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;"><span style="font-family:Georgia;"></span></span></p><blockquote><span class="Apple-style-span" style="font-size:medium;">These damages, however, do not reflect damages from Byce’s use, as opposed to his mere possession, of the source code. Byce returned the source code to JustMed after the court ordered him to do so. His possession of the source code for some period of time did not result in a loss of secrecy or a loss in value, which is evident from the fact that the court did not award damages for lost value or unjust enrichment. Thus, not only are damages not appropriate under Idaho law, but neither is a finding that Byce misappropriated the source code.</span></blockquote><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span><p></p> <p class="MsoNormal" style="text-align: center;margin-bottom: 0.0001pt; "><span class="Apple-style-span" style="font-size:medium;">____________</span></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><o:p><span class="Apple-style-span" style="font-size:medium;">What could be a more common occurrence among tech startups in the Valley:</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span><span class="Apple-style-span" style="font-size:medium;">an early employee of a tech startup, paid in shares, working from home, with no benefits, no tax withholding, and n</span><span class="Apple-style-span" style="font-size:medium;">o written agreement between the staff member and the company.</span><span><span class="Apple-style-span" style="font-size:medium;"> </span></span></o:p></span></p> <p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span style="font-family:Georgia;"><span class="Apple-style-span" style="font-size:medium;">Founders of most venture companies would not necessarily expect that such staff would be considered employees subject to tax withholding and employee protection regulations.</span><span><span class="Apple-style-span" style="font-size:medium;"> Yet, at the same time they expect the company will own all intellectual property rights to the inventions and software such staff create.</span></span><span class="Apple-style-span" style="font-size:medium;"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">The </span><i><span class="Apple-style-span" style="font-size:medium;">JustMed</span></i><span class="Apple-style-span" style="font-size:medium;"> decision's value is the lesson it gives all tech startup founders: always require everyone who works for you, whether they are doing so for cash or stock, or as employees or contractors, to sign a Proprietary Information and Inventions Agreement (PIIA), which clarifies the company's sole ownership over the staff member's creations and mandates an irrevocable assignment of intellectual property rights for inventions and code. Had Byce signed such a document, Byce would never have been able to hold the JustMed code for ransom in the way that he did.</span></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">The other lesson to be learned here is that classification of staff members as employees or as contractors, particularly software engineers working from home in exchange for shares, is tricky business. Don't assume that such staff will be considered to have the status you intend. Make a determination, after consultation with your attorney, and comply with all necessary tax and reporting obligations associated with that determination, and thereafter act consistently with that decision.</span></p><p class="MsoNormal" style="margin-bottom:0in;margin-bottom:.0001pt;mso-pagination: none;mso-layout-grid-align:none;text-autospace:none"><span class="Apple-style-span" style="font-size:medium;">The bitter irony for JustMed is that its apparent victory over Byce in its claim that Byce was at all times an employee, thus confirming JustMed's ownership of the source code, now means that Byce may have claims against the company resulting from the courts' post hoc determination of an employment relationship over a period of several years.</span></p> <!--EndFragment--> <p></p> <!--EndFragment-->Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com1tag:blogger.com,1999:blog-3030095961999355142.post-37706887940225896832009-09-30T10:06:00.000-07:002009-09-30T10:32:41.443-07:00Japan Fair Trade Commission Accuses Qualcomm of Anticompetitive PracticesSan Diego, USA-based Qualcomm is in the business of licensing patents its holds covering the CDMA wireless telephony standard. Such patents cover technologies related to CDMA integrated circuits and CDMA base stations. Qualcomm participates in various standards-setting organizations related to the CDMA standard in which Qualcomm promises to license its technically essential patents on fair, reasonable, and non-discriminatory terms. In reliance on such promises, the members of such standards-setting groups agree to approve and promote the CDMA-related standards in question. The Japanese government, specifically, the Japanese Ministry of Posts and Telecommunications (MPT), adopted such standards for exclusive use in Japan.<br /><br />Qualcomm's patent licensing agreements with manufacturers of CDMA-based chips, base stations and other equipment mandate that such licensees agree never to assert patents such manufacturers may have that read on the same technologies that Qualcomm is licensing, on a royalty-free basis. Manufacturers who refuse to assent to this non-assertion covenant are denied access to the patent licenses from Qualcomm.<div><br /></div><div>By order dated September 30, 2009, the Japan FTC has ordered Qualcomm to cease such licensing practices. The order itself can be found <a href="http://www.jftc.go.jp/e-page/index.html">here</a>. Qualcomm's press release regarding this order can be found <a href="http://www.fiercewireless.com/press-releases/qualcomm-confirms-japan-fair-trade-commission-order?utm_medium=nl&utm_source=internal">here</a>.</div><div><br /></div><div>In its press release, Qualcomm justifies its practices by making the following assertions:</div><div><br /></div><div>A) "None of our Japanese licensees were forced to enter into license agreements with us." </div><div><br /></div><div>B) "The provisions at issue were subject to arms-length negotiations" and "are common in technology licensing agreements".</div><div><br /></div><div>C) "These provisions promote 'patent peace' and reduce transaction costs and licensing fees."</div><div><br /></div><div>With respect to the argument in (A) above, it's true that manufacturers are not obligated to license the patents from Qualcomm; but if they don't, they cannot manufacture telephony devices and equipment compliant with the telephony standards adopted by the Japanese government.</div><div><br /></div><div>With respect to the assertion in (B), such provisions are not common, in my opinion. While it is not uncommon for a technology licensor to attempt to extract patent non-assertion covenants from its licensees, such clauses are rarely if ever agreed to unless the licensor has superior bargaining leverage over the licensee, or unless there's separate consideration flowing to the licensee in exchange for such non-assertion promises. Qualcomm knows that the licensees in Japan have little choice but to agree to Qualcomm's terms. As such, it's extermely doubtful that such provisions were truly the subject of "arms-length negotiations". Rather, they were, in all likelihood, presented to the Japanese manufacturers on a take-it-or-leave-it basis.</div><div><br /></div><div>Finally, the argument in (C) that such clauses promote "patent peace" is true, but such peace accrues solely to the benefit of Qualcomm. The Japan FTC concluded that such clauses have the effect of frustrating legitimate research and development efforts of the Japanese manufacturers and thereby impede competition.</div><div><br /></div><div>Qualcomm has sixty days to request an evidentiary hearing and Qualcomm has indicated that it intends to do so.</div><div><br /></div>Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-6269409322469955112009-06-08T19:56:00.000-07:002009-06-08T20:12:20.713-07:00ALI's Principles: My Recommendation for Software VendorsI'm recommending to all of my clients that they insert into their operative software license agreements the following or something close to it in the choice of law clause: "This Agreement and all related disputes shall be governed by the laws of _______, without regard to the United Nations Convention on Contracts for the International Sale of Goods<span style="font-weight:bold;"> <span style="font-style:italic;">or the American Law Institute's Principles of the Law of Software Contracts ("Principles")</span></span>. <span style="font-weight:bold;"><span style="font-style:italic;">The parties agree that (i) the Principles shall have no application whatsoever to the interpretation or enforcement of this Agreement, and (ii) neither party shall invoke the Principles in whole or in part in any judicial or arbitral proceeding relating to this Agreement.</span></span>"<br />But, aren't many of the rules stated in the Principles, especially the controversial ones like the implied warranty of no hidden material defects and the implied indemnification obligation, not excludable or disclaimable, or disclaimable only with specific prescribed language?<br />Well, that's what the Principles say. The Principles dictate, for example, that the newly-discovered warranty of no hidden defects cannot be excluded or disclaimed.<br />Here's the thing: the Prinicples have no force of law whatsoever. They have persuasive authority only. They are not the equivalent of a statute or judicial decision. If the parties agree in their contract that the Principles will have no effect, why would a court feel free to disregard that? <br />For example, if a famous law review article written by a highly regarded law professor advocated for a specific interpretation of common contract language, and this interpretation would benefit one side over the other, there's no reason why the parties could not simply agree that this professor's article will be disregarded in any legal proceeding.<br />The same should hold true for the Principles.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-29881134318094959612009-05-20T15:45:00.000-07:002009-05-20T15:51:56.246-07:00ALI's Proposed Principles of the Law of Software Contracts Approved for Final ReleaseIn a previous blog <a href="http://hoviblog.blogspot.com/2009/05/alis-proposed-principles-of-law-of.html">posting</a>, I discussed the new ALI Principles of the Law of Software Contracts. On May 19, 2009, the ALI membership, at its annual meeting, gave final approval to these principles. A number of provisions will prove controversial among software companies, particularly the new non-waivable implied warranty of no hidden material defects.<br /><br />This implied warranty drew rebuke from a pair of unlikely allies: Microsoft and the Linux Foundation. In a joint<a href="http://microsoftontheissues.com/cs/blogs/mscorp/archive/2009/05/17/different-business-models-common-concerns.aspx"> May 14, 2009 letter</a> to the academic representatives of the ALI responsible for the principles, Microsoft and the Linux Foundation requested that the ALI delay adoption of the principles pending further discussion and input from commercial software distributors and developers.<br /><blockquote><span style="font-style:italic;">This [implied] warranty [of no hidden material defects] does not reflect existing commercial law: no similar warranty appears in the Uniform Commercial Code, and no explanation is given … for treating software contracts differently …. [T]he inability to disclaim the warranty does not reflect existing law or public policy: the UCC permits disclaimer of all implied warranties ….<br /></span></blockquote><br />Apparently the ALI stewards of the principles were unmoved by the entreaties of these two powerful representatives of both sides of the software industry spectrum.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com1tag:blogger.com,1999:blog-3030095961999355142.post-19239550163766568652009-05-18T15:18:00.000-07:002009-05-18T15:28:28.816-07:00Fundamentals of Non-Disclosure Agreements<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/_sI64ceoH-jU/ShHftvuRHZI/AAAAAAAAAAo/mAnRn4vYHNI/s1600-h/NDA.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 309px; height: 400px;" src="http://3.bp.blogspot.com/_sI64ceoH-jU/ShHftvuRHZI/AAAAAAAAAAo/mAnRn4vYHNI/s400/NDA.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5337293010408381842" /></a><br />Among the nearly infinite variety of legal agreements in use today, the NDA is by far the most ubiquitous. Especially prominent among companies in technology, NDAs are signed on a daily basis. Every company has their own unique NDA template; paradoxically, most companies signs the opposite party's template more often than not. The party larger in size, reputation, market cap, or perceived importance usually wins the battle of the NDA form. This NDA ritual takes place thousands of times a day all over the world.<br /><br />Fundamentally the purpose of the NDA should be simple and straightforward: protect information designated by each party from unauthorized use and disclosure. Both parties have an equal and legitimate interest in protecting their own information, and both parties usually recognize the other side's interests as well. In terms of accomplishing the ultimate objective of the document, therefore, the best NDAs are those that are short, simple, clear, and mutual. The worst are those that are needlessly complex, lengthy, and lack basic mutuality.<br /><br />This article sets forth what I consider to be a model non-disclosure agreement, replicated above (right-click to open in a new window or tab in order to enlarge the view). This template is licensed under the <a href="http://creativecommons.org/licenses/by/3.0/">Creative Commons Attribution 3.0 License</a>. The article includes a summary explanation of each of the more important sections of the template. It then recites a top five list of NDA pet peeves.<br /><br /><span style="font-weight:bold;">Model NDA Template</span><br /><br />The template above accomplishes the primary objective of any NDA: establish a balanced legal framework for the protection of each party's confidential information in a simple, clear and direct manner. All of the terms and obligations in this template are reciprocal. Neither side is advantaged. There are no unexpected provisions. The NDA is a modest one page in length.<br /><br /><span style="font-style:italic;">Effective Date</span><br /><br />The "Effective Date" in this template is the date of the last signature. The problem with leaving the date blank is that it often remains blank after both parties have signed. If the NDA protects information whether disclosed before or after the effective date, as this template does, then there's little significance to the effective date, other than clarifying when the agreement came into being.<br /><br /><span style="font-style:italic;">Definition of Confidential Information</span><br /><br />The agreement defines "Confidential Information" to include written as well as orally disclosed information. With respect to the latter, oral information is protected only if it is either (a) summarized in writing within 30 days after disclosure or (b) falls into certain specifically enumerated categories of information (here, "contemplated product or service plans, marketing or business strategies, third party relationships, or pricing or financial information").<br /><br />The issue of orally disclosed information is a challenging one. Many companies, especially larger ones with active and sizable legal departments, are reluctant to tie themselves to confidentiality obligations with respect to any orally disclosed information that is not summarized in writing later. The problem of course is that such summaries are rarely completed. Without the summary, no protection applies. The template attempts to strike a balance between the two extremes. Few would argue that oral information about a company's publicly unreleased product plans or strategies, or financial information, should not be protected as confidential. For oral information that falls outside of these protected categories, the written summary requirement applies.<br /><br />Yet another possible variant is to protect orally disclosed information falling into these categories only if "the information, given its nature and the details of its disclosure, should reasonably be considered as confidential in nature" or the like. This may ease the concerns of those who insist that all orally disclosed information should be protected only if summarized in writing. However, this concession may not be enough to satisfy the larger corporate legal departments that will insist on the written summary requirement. If so, then I'd recommend dropping the issue. The requirement that oral disclosures be summarized is so commonplace that to oppose it in every case would unjustifiably impede the transacting of necessary business. Educating the client to ensure that important conversations are memorialized is the best solution; refusing to sign a NDA due to opposition to this requirement is not.<br /><br />One final point about orally disclosed information is that this template preserves the confidential nature of the information pending the production of the written summary. Without this clarification, the information may never be considered confidential unless and until the disclosing party produces the written summary. This may take time. Meanwhile, the receiving party could literally publish highly sensitive orally-disclosed information within hours of the parties' meeting, in the absence of a clause like this.<br /><br /><span style="font-style:italic;">Duty of Confidentiality</span><br /><br />This section of the template prohibits the disclosure of Confidential Information to anyone other than the receiving party's employees. Agents or employees of affiliates are not included here. The template can easily be modified to allow disclosure to such parties, but care should be taken to ensure that such agents and affiliates are tightly defined. Virtually any person or entity can be an agent or affiliate, including, obviously, competitors of the disclosing party.<br /><br /><span style="font-style:italic;">Exceptions</span><br /><br />The exceptions component of the NDA is the most important. Every NDA must exclude from the confidentiality obligation any information that is (a) known to the receiving party prior its disclosure by the disclosing party; (b) is or becomes generally known or available, or is in or becomes part of the public domain; (c) disclosed to the receiving party by a third party without any duty or breach of confidentiality; or (d) independently developed by the receiving party without use of any of the disclosing party's confidential information. All four exceptions should be included in any NDA or confidentiality section of any agreement.<br /><br />One exception occasionally found in NDA forms is "disclosed by the disclosing party to a third party without restriction on disclosure. " Whichever party to the NDA has a stronger incentive to protect confidentiality will most likely object to the inclusion of such an exception, particularly if the NDA form already contains the public domain/generally known exception. If interpreted in conjunction with the latter, this exception is not logically redundant only in the situation in which the information owner's dissemination of its own information has not reached the level of being generally known, but has been selectively revealed to a certain few. While an argument can certainly be made that if the owner has been selectively disclosing the information in question to a select few, it should not be entitled to confidentiality protection at all, the sensitive information owner will argue that such intermittent disclosure may have been inadvertent, or under circumstances indicative of apparent, even if ultimately non-existent, confidentiality. Such party will argue that the public domain exception should suffice.<br /><br /><span style="font-style:italic;">Termination</span><br /><br />The model NDA form is evergreen in term; that is, it does not expire until either party, at such party's sole discretion, serves written notice of termination. Unlike other NDA forms in common use, this template does not limit the term of protection or extend protection only during a specified period. Rather, the NDA continues in force until either party elects for any reason to terminate it. Of course, confidentiality obligations survive for a period of time after such termination.<br /><br /><span style="font-weight:bold;">Top 5 NDA Pet Peeves</span><br /><br />1. "Purpose" Requirement. It is unfortunately quite common for NDA templates to require that information protected under the NDA be relevant or germane to, or disclosed solely in furtherance of, a defined purpose in order to qualify for protection. Oftentimes the purpose definition is blank, requiring the business people involved in the discussions to complete what they believe the purpose should be. Business clients from either side may specify an inordinately narrow purpose, or the discussions may evolve beyond what is defined in the NDA's purpose statement. In such case, legal cycles are again consumed in order to amend the purpose statement or enter into a new NDA. Worst case, the parties will fail to realize that the discussions have evolved beyond the purpose statement set ou in the NDA, thus resulting in no confidentiality protections whatsoever.<br /><br />Realistically, after the NDA is signed, it is forgotten, and it is extremely unlikely that representatives from either side will be closely monitoring the discussions to make sure they do not deviate from the expressed purpose scope. And finally, whether a given item of information is germane to the purpose may not be clear, thus inviting disputes in the future. Any information that is designated as confidential should be protected. The confidentiality exceptions are the best defense against assuming unnecessary or unrelated confidentiality obligations.<br /><br />2. Documentary Proof Requirement. Variants of the confidentiality exclusions clause may require that applicability of the exceptions be proven by documentary evidence. The hidden premise behind such a requirement is that testimonial evidence is inherently untrustworthy or at least not as reliable as documentary evidence. I believe this premise is invalid. Oftentimes it may be impossible to find documentary proof of prior knowledge or independent development for a given piece of information. For example, it is easy to envision how a large company with R&D facilities all over the world could quite readily develop technology independently of any access to or use of the confidential information protected by the NDA and disclosed in a remote locale. Yet if the documentary proof requirement applies, it's not clear what type of proof would satisfy the requirement. Would documents proving the existence of the development of the same information in a far-flung R&D center be sufficient? Or would a court require documents affirmatively proving that the developers of the information specifically refused to expose themselves to the NDA-protected information?<br /><br />3. Time-Limited Term. As discussed, many NDA forms contain a limited term of effectiveness. Such forms can be inconvenient if the NDA expires prior to the termination of the parties' negotiations or relationship. Such premature expiration will result in the need for a renewal amendment or for a new NDA, thus consuming inordinate legal resources. If the NDA is truly balanced and limited in scope, there's no logical reason to require that the NDA expire, particularly if either party is free, as is often the case, to terminate the NDA at will.<br /><br />4. Non-Reciprocal Terms. Language granting an enhanced degree of protection for only one party's data, or securing a longer period of confidentiality protection for one party's source code, or requiring one party and not the other to bear the burden of proving the applicability of a confidentiality exceptions, are all common examples of non-reciprocal clauses that will inevitably invite negotiation and therefore delay. The rather limited legal benefit of such clauses should be balanced against the wasted cycles and delays in transacting business such provisions cause. The ultimate goal is to secure signatures on the NDA form as soon as possible, given that no business can take place until the NDA is closed.<br /><br />5. Residual Rights. A residuals, or residual rights, clause clarifies that general knowledge or know how that has not been intentionally memorized is not subject to the confidentiality obligations of the agreement. Such clauses are common in source code licensing agreements. Example:<br /><br /><span style="font-style:italic;">Nothing in this Agreement shall be construed to prevent the receiving party's employees who access Confidential Information from using Residuals for any purpose. The term "Residuals" means information of a general nature, such as general knowledge, professional skills, know-how, work experience or techniques, that is retained in the unaided memories (without conscious memorization or subsequent reference to the material in question) of the receiving party's employees who have had access to Confidential Information. Memory shall be considered unaided if the employee or contractor has not intentionally memorized the information contained within the Confidential Information for the purpose of retaining and subsequently using or disclosing same. <br /></span><br />Such a clause essentially removes confidentiality protections for any information that is retained in the unaided memories of the receiving party's employees. At bottom it's a gaping hole in the non-disclosure and non-circumvention obligations of the NDA. "Anything that remains in my head" may be freely used and disclosed.<br /><br />While such clauses may be appropriate in certain types of source code licensing agreements, in which the licensee wishes to preserve the ability to assign engineers to any work assignment without any implied clean room obligation, they have no legitimate place in a general-purpose non-disclosure agreement established solely in order to facilitate substantive preliminary discussions.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com4tag:blogger.com,1999:blog-3030095961999355142.post-44549382400545093972009-05-18T15:14:00.000-07:002009-05-18T15:18:15.402-07:00Symbian Foundation Legal PolicyNotwithstanding recent inroads made by Apple with respect to the iPhone Mac OS-based operating system, the Symbian operating system is the most successful operating system in use today for high-end smart phones, largely thanks to the efforts of Nokia. The Symbian Foundation, a non-profit consortium of various companies in the wireless industry, is charged with charting the future course of the open source Symbian Foundation Platform, based on Symbian OS. The Foundation has recently released legal <a href="http://www.symbian.org/registration.php">documents</a> comprising the framework for inbound source code contributions to the platform, as well as outbound licensed rights enjoyed by members and non-members alike. The following constitutes a high level summary of the Symbian Foundation licensing structure.<br /><br /><span style="font-style:italic;">Inbound Contributions</span><br /><br />A. Foundation Members.<br /> (i) each member grants to the Foundation<br /> - for each “Contribution”, a<br /> - royalty-free, perpetual, worldwide, non-exclusive<br /> - copyright and trade secrets license<br /> - to use, distribute, copy and make derivative works of such Contributions<br /> - as part of the Foundation Platform under the Foundation Member License.<br /> (ii) “Contribution” = any work (including source, binary, and documentation) “originally submitted via any form of electronic or other written communication to the Foundation for inclusion in, or documentation of, the Foundation Platform”.<br /> (iii) no patent licenses are granted; the Patent Policy exclusively controls (see below).<br /> (iv) each member permits the Foundation to license the Contribution under the Foundation Public License, provided that the Foundation must name the contributing Member a distributor under the Foundation Public License.<br /> (v) the Foundation agrees to treat as confidential Contributions in source code form.<br /> (vi) each Member undertakes obligations to ensure that no third party software licensed under inconsistent terms has been introduced into any Contribution, including the obligation to use commercially reasonable efforts to procure substitute licenses from the third party or provide a replacement or workaround, and “otherwise offer the Foundation commercially reasonable assistance in resolving the issue.” This could be interpreted to require an indemnification or defense of the third party claim. However, patents would most likely not be an issue under this clause, as it appears to be limited to the situation in which third party code has been incorporated without authorization.<br /><br />B. Foundation Non-Members.<br /> (i) each non--member grants to the Foundation<br /> - for each “Contribution” (defined identically to that above), a<br /> - royalty-free, perpetual, worldwide, non-exclusive<br /> - copyright and trade secrets license<br /> - to use, distribute, copy and make derivative works of such Contributions<br /> - as part of the Foundation Platform.<br /> (ii) each non-member grants to the Foundation and recipients of Foundation’s distributions a<br /> - royalty-free, perpetual, worldwide, non-exclusive license<br /> - to make, have made, use, sell, offer to sell, export, import and otherwise dispose of the Foundation Platform<br /> - under such non-member’s patents that are necessarily infringed by the Contributions as such and<br /> - in combination with the Foundation Platform and any wireless devices.<br /><br />C. Open Source Contributions.<br />The membership rules specify that once the platform is released under a public open source license approved by the Foundation’s board (currently, EPL) then future contributions will be governed by that license and not either of the two contribution agreements above.<br /><br /><span style="font-style:italic;">Outbound Contributions</span><br /><br />A. Symbian Foundation License (aka "Foundation Member License") (SFL)<br /> (i) the Foundation grants to each member<br /> - for each Software Component and Modification (definitions below)<br /> - a royalty free, perpetual, worldwide, non-exclusive<br /> - copyright and trade secrets license<br /> - to use copy, and perform Software Components and Modifications<br /> - to distribute to other members same in binary and source code forms, under the same terms as the SFL, and<br /> - to distribute generally solely in binary code form in connection with the products or services of the member and only as part of the platform.<br /> (ii) no patent licenses granted; the Patent Policy controls (see below)<br /> (iii) “Software Components” = “software source code released and licensed by the Foundation or any member under this Agreement”.<br /> (iv) “Modifications” = “any work of authorship being additions and/or changes to source code files of the Software Components”<br /> (v) source code of Software Components must be kept confidential<br /> (vi) mandatory delivery of Modifications to the Foundation (not clear whether Modifications need to be in binary or source code forms)<br /> (vii) the member must indemnify, hold harmless and defend the Foundation from any claims arising from exploitation of the Software Components and Modifications<br /><br />B. Foundation Public License<br /> (i) currently this is designated as <a href="http://www.eclipse.org/legal/epl-v10.html">Eclipse Public License v. 1.0 (EPL)</a><br /> (ii) weak copyleft and business friendly license<br /> (iii) “contributions” = “additions or changes”<br /> (iv) contributions must be open-sourced under EPL<br /> (v) excludes additions which are (a) separate modules licensed separately and (b) not derivative works<br /> (vi) binary forms may be distributed under terms of choice, provided that the source code of the Program is made available under the terms of EPL<br /> (vii) contains an express patent license for Contributions, alone or in combination w/Program<br /> (viii) “patent peace” clause: initiating patent litigation terminates all rights as of the time of bringing patent claim<br /> (ix) commercial distributors required to indemnify and hold harmless other contributors for acts/omissions arising from commercialization, excluding IP infringement claims<br /> (x) NY and US law controls; no jury trial; 1 year limitations period<br /> (xi) the interaction or relationship between the Symbian Foundation License, the Member Contributor Agreement, and the Eclipse license is unclear; ie, is it possible for a member to provide contributions for, and to license externally, the platform under the terms of Eclipse?<br /> <br />The Symbian Foundation License will eventually be replaced, according to the Foundation's legal policy overview summary, with Eclipse, but older versions of the platform will continue to be licensed under SFL. It’s not clear whether the transition to the EPL would cover everything that had been licensed under SFL.<br /><br />Also, the licenses above are not actually licenses covering the Foundation Platform. In other words, the licenses do not actually grant any rights to the platform. Rather, rights are granted with respect to components of software (as the Foundation may start with and as members contribute) that the Foundation agrees to include in the platform. Presumably the Foundation will, as expected, license everything that had always been included in Symbian OS, but there’s actually no guarantee that this will be the case. Noteworthy in this respect is that the Symbian Foundation is a non-profit entity separate and distinct from Symbian Software Limited, a division of Nokia. As the legal overview explains, “Symbian Software Limited retains exclusive responsibility for all licensing and marketing activities related to the proprietary operating system named ‘Symbian OS’”.<br /><br /><span style="font-style:italic;">Patent Policy </span><br /><br />A. Applies to and from each member.<br /><br />B. Each member agrees to license “Platform Patents” (definition below) to the other members under fair, reasonable and non-discriminatory (FRAND) terms, provided that such terms<br /> - permit each member to make, use, sell, offer to sell, import, export and otherwise dispose of, or to practice any process or method embodied in, any official Symbian release<br /> - provided each such member is also a licensee of such Contribution<br /> - for use in devices designed by a member or sold by or on behalf of a member.<br /><br />C. Each member agrees to license “Contribution Patents” (definition below) to the other members a personal, royalty-free, worldwide, non-exclusive license to make, use, sell, offer to sell, import, export and otherwise dispose of, or to practice any process or method embodied in, any Contribution solely as part of the Symbian platform for a member-branded/distributed device.<br /><br />D. Each member grants to the Foundation and other members a personal, royalty-free, worldwide, non-exclusive license under each Platform Patent the right to use any Symbian release or pre-release and any part thereof for research and development purposes.<br /><br />E. “Platform Patents” = patents owned or licensable by a member necessarily infringed by the manufacture, use, sale, etc of any Symbian platform release issued during the member’s membership, alone or in combination with a member-branded/distributed device.<br /><br />F. “Contribution Patents” = patents owned or licensable by a member necessarily infringed by the manufacture, use, sale, etc of any Contribution included in any Symbian platform release, alone or in combination with a member-branded/ distributed device.<br /><br />G. Each patent license is subject to reciprocal patent licenses from/to each other member.<br /><br />H. The licenses for Platform Patents and Contribution Patents described in 3.B and 3.C above are left to the parties’ negotiation in good faith.<br /><br />I. Securing injunctions to remedy patent infringements by a member is not possible under this policy.<br /><br />In summary, if the member owns any patents that happen to read on any part of the Foundation platform, now or in the future (even after termination of the relationship), the member is required to license those patents to other Foundation members under FRAND terms; ie, the member is permitted to impose commercial terms for the licensing of such patents, provided such terms are fair, reasonable and non-discriminatory. For Contributions the member makes to the Foundation, the member is obligated to license patents that read on any aspect of such Contributions under royalty-free, perpetual terms (but there is still the possibility of requiring a written agreement with the members who seek to use such Contributions).<br /><br />Patent owners have reason to be a bit wary of this policy. If any of the members commit infringement of a patent owned by a member, the latter will be confronted with arguments based on vaguely worded clauses that could serve to unduly benefit patent infringers. For example, clause 8 states:<br /><br /><span style="font-style:italic;">THE FOUNDATION, MEMBERS AND THEIR RESPECTIVE AFFILIATES WILL HAVE NO LIABILITY FOR ANY COST, LOSS OR DAMAGE, INCLUDING WITHOUT LIMITATION ANY LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, PUNITIVE OR OTHER DAMAGES, INCURRED BY ANY PARTY FROM ANY EXPLOITATION OR ANY ATTEMPTED EXPLOITATION OF ANY PATENT OR PATENT LICENSE UNDER THIS PATENT POLICY. <br /></span><br />This could be construed to preclude the availability of damages for patent infringements. When I pointed this out to Foundation counsel, counsel dismissed it as a radical interpretation, but I believe the clause as written gives unnecessary and unintended ammunition to a party infringing a member’s patents.<br /><br />I found the patent policy to be unnecessarily complex, confusing in places, and overall, somewhat hostile to patent owners. For potential members with an extensive patent portfolio, this should be kept in mind. On the other hand, the policy certainly affords a high level of patent peace among the members.<br /><br /><span style="font-style:italic;">Trademark Policy</span><br /><br />The trademark policy permits members to use and display the official Foundation logo in connection with the marketing and distribution of Foundation platform implementation releases that satisfy Foundation testing requirements. Use of the logo is optional.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-22992538395628839992009-05-18T15:12:00.000-07:002009-05-18T15:14:13.193-07:00On-Line Contracts that May Be Modified at any Time per Notice Held UnenforceableA United States district court in Texas issued an important <a href="http://amlawdaily.typepad.com/Blockbusterdecision.pdf">ruling</a> regarding the enforceability of online terms of use agreements, in a dispute between users of Blockbuster Online, an on-line video rental service Blockbuster Inc. controls, and the users of such service who alleged that Blockbuster violated the Video Privacy Protection Act. The Act prohibits disclosure of personally identifiable information in connection with video rentals. Blockbuster Online caused user's movie rental choices to be published on each user's Facebook pages.<br /><br />Blockbuster moved to dismiss the case based on the service's on-line terms of use, which mandated that disputes be resolved via binding arbitration. Plaintiffs defended the dismissal notion by arguing that the arbitration provision was illusory and not supported by consideration, because Blockbuster reserved the right to at any time to modify the terms in its sole discretion, with such modifications purportedly becoming binding immediately upon such terms' posting on the site.<br /><br />The district court agreed with the plaintiffs and denied Blockbuster's motion to compel arbitration. The court so held despite that Blockbuster had never modified the terms of service to add the arbitration provision post hoc. The mere existence of a right to unilaterally modify terms without notice was sufficient to render the arbitration clause unenforceable. The court stated "[T]he ability to change the rules at any time made the contract merely illusory …." <br /><br />Given that thousands of websites contain on-line terms of use or terms of service, and that most expressly contemplate unilateral modifications with or without notice, the court's decision if withheld on appeal could prove highly significant.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-31671465279862000452009-05-18T15:09:00.000-07:002009-05-18T15:12:19.116-07:00US Appeals Court Rules an Irrevocable License Cannot Be Terminated Even in the Case of Material BreachIn 1998, Nano-Proprietary Inc. granted Canon Inc. an "irrevocable" and "perpetual" license under Nano-Proprietary's field emission display patents, useful in field of flat panel televisions. The license expressly prohibited sublicenses. A mere six months later, Canon entered into a joint development venture with Toshiba to develop technology utilizing Nano's patents. After Nano brought suit, the lower court in the case ruled that the joint venture constituted an impermissible sublicense and therefore a material breach of the agreement. Consequently, the lower court, notwithstanding the irrevocability language, ruled that this breach permitted Nano to terminate the license.<br /><br />The appeals court (Fifth Circuit Court of Appeals) <a href="http://www.ca5.uscourts.gov/opinions/pub/07/07-50640-CV0.wpd.pdf">reversed</a>, holding that under ordinary rules of contract interpretation, a perpetual and irrevocable license is exactly that. Nano would be entitled to pursue breach of contract remedies, but termination was not available per the terms of the parties' bargain. Adding insult to injury, the appellate court held that Nano's damages claims were disallowed as speculative, given the undeveloped and incipient nature of the market in which the patents applied.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com1tag:blogger.com,1999:blog-3030095961999355142.post-88938110952927363852009-05-18T15:02:00.000-07:002009-05-18T15:09:03.678-07:00ALI's Proposed Principles of the Law of Software Contracts Set for Final ReleaseFounded in 1923, the <a href="http://www.ali.org">American Law Institute (ALI)</a> consists of “judges, practicing lawyers, and legal scholars from all areas of the United States as well as some foreign countries, selected on the basis of professional achievement and demonstrated interest in the improvement of the law” who are tasked with publishing “various Restatements of the Law, model codes, and legal studies to promote the clarification and simplification of the law.” <br /><br />Several years ago, the ALI, in partnership with the National Conference of Commissioners on Uniform (US) State Laws (NCCUSL), had promulgated Article 2B, the so-called "Uniform Computer Information Transactions Act", or UCITA, as a new component to the US states' Uniform Commercial Code (UCC). The UCC is a long-standing body of laws of commerce that has been adopted by nearly every state in the United States. UCITA did not fare as well as the larger set of laws embodied in the UCC, however; rather, only two states, Virginia and Maryland, adopted it. UCITA fell victim to controversies engendered by the attempt to codify rules that critics contended unfairly favored the interests of software companies over those of consumers. NCCUSL abandoned UCITA in 2003.<br /><br />Since 2004, the ALI has been in the process of issuing a more modest set of guidelines applicable to software contracts, known as the <a href="http://www.ali.org/index.cfm?fuseaction=projects.proj_ip&projectid=9">Principles of the Law of Software Contracts</a>. The intention is to secure broad consensus on a set of uniform principles, which could then, at some point in the future, evolve into a default set of licensing rules. The principles deal with issues such as enforceability of click-wrap or on-line agreements, forum selection, mandatory arbitration clauses, and embedded software.<br /><br />On May 19, 2009, it is anticipated that the ALI will give final approval to these principles, barring any late proposals to postpone their adoption. A number of provisions will prove controversial among software companies. This article highlights a few of the more prominent features of the principles.<br /><br /><span style="font-style:italic;">Implied Warranty of No Hidden Defects</span><br /><br />Software developers often release software despite a long list of known defects, based on the assumption that the defects are not likely to materialize or prove fatal, with the intention to correct such errors in the next release. The principles' newly articulated implied warranty of no hidden defects may radically alter the way software is marketed and sold.<br /><br />The principles require the software licensor to “warrant to any party in the normal chain of distribution that the software contains no material hidden defects” of which the licensor “was aware at the time” of the license or transfer of software. Unlike other implied warranties, such as the warranty of fitness for a particular purpose or merchantability, this new implied warranty cannot be excluded in the operative license agreement. Any such purported exclusions or disclaimers of this warranty will not be enforceable.<br /><br />A hidden defect is defined as an error that "would not surface upon any testing that was or should have been performed by the transferee." The principles fail to provide any meaningful guidance on the severity of defect required to rise to the level of "material", other than state that such an error is one that renders the software "not fit for its ordinary purpose." Would a bug that renders the use of the software inconvenient but does not otherwise preclude the use of the software fall into this category? What of errors that render the software inordinately consumptive of memory or processing power? The principles are silent on this rather significant threshold issue.<br /><br />The only way to avoid liability under this warranty is to either prove lack of knowledge, or fully disclose all known defects at the time of the license and beyond. In short, software vendors will be forced to produce a known defects list to its customers upon first license and constantly thereafter. The principles state that such disclosure should be done directly to the customer, and that a "mere posting of defects" on a website is "generally insufficient".<br /><br />Software vendors will now need to seriously consider not only the most effective and diplomatic method of disclosing known defects to their customers, but also pursuing a list of known defects from each of their upstream suppliers, in order to be in a position to make the same disclosure downstream. This new implied warranty applies for the benefit of "any party in the normal chain of distribution", thus removing as defense lack of contractual privity.<br /><br /><span style="font-style:italic;">Implied Indemnification Obligation</span><br /><br />The principles advance a new implied indemnification obligation against intellectual property rights infringement for rights in existence at the initial time of the transfer or license of the software in question. The scope of the indemnity is limited to IP rights based on US state or federal law. The vendor "must pay those costs and damages incurred" by the licensee "that are specifically attributable to such claim" or those cost and damages agreed in settlement. If a court enjoins the licensee's use of the software, or rules that the software is infringing, the vendor is obligated to pay the customer's direct, indirect and consequential damages, and is further required to, at the vendor's election, replace or modify the software to render it non-infringing, or refund the fees paid for the use of the software (with a deduction for a reasonable allowance for the period of time the transferee used the software). <br /><br />This implied obligation may be excluded in the operative license agreement only if the exclusion is in writing, is conspicuous, and "uses language that gives the transferee reasonable notice of the modification or notice that the transferor has no obligation to indemnify the transferee."<br /><br />The comments to this section of the principles state that the commonly-used boilerplate, "THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS ….", would not suffice to satisfy this standard. The disclaimer must specifically reference the implied obligation of indemnification.<br /><br /><span style="font-style:italic;">Effect on Open Source Licensing</span><br /><br />Both the implied warrant of no hidden material defects, and the implied indemnification obligation, apply only in the situation in which the vendor receives monetary consideration in exchange for use of the software. Thus, open source software developers will not face liability under the principles. However, companies that aggregate, package and license open source components for a fee, for example, Red Hat, Montavista, Azingo, ACCESS, or the like, will not be exempt.<br /><br /><span style="font-style:italic;">Conflicts with US Federal Law</span><br /><br />The principles state that the term of a software license or transfer agreement is unenforceable if it (a) conflicts with a term of federal intellectual property law; (b) conflicts impermissibly with the purposes and policies of federal intellectual property law; or (c) would constitute federal intellectual property misuse in an infringement proceeding. Based on notions of federal intellectual property law preemption of contract terms, and caselaw regarding patent and copyright misuse, the principles provide illustrative examples of problematic provisions.<br /><br />These examples include: contract terms that forbid reverse engineering; terms that prevent fair use under copyright law; restrictions on the dissemination of factual information; and enforcement of royalty or other obligations beyond the term of the intellectual property right in question.<br /><br />The analysis, the principles suggest, may differ depending on whether the software is licensed under a mass-market click-accept agreement or under a arms-length negotiated agreement between two parties of relatively equal bargaining strength. Provisions restricting reverse engineering or fair use, for example, may be less likely to be enforced in the case of the former.<br /><br />Interestingly, the commentary to this specific principle appears to call into question the enforceability of the GPL as interpreted to require that separate independently created works that merely link to or are integrated with GPL code be licensed reciprocally under GPL. This scrutiny comes in the form of a hypothetical:<br /><br /><span style="font-style:italic;">Organization A licenses source code under standard terms that permit the licensee to modify and distribute the software provided that the licensee distributes its modifications under terms that replicate those in A’s standard form (including the term authorizing modifications provided they are distributed only with A’s terms). The term placing conditions on distribution of modifications is likely enforceable as long as those modifications are a derivative work of the original code. It is more troublesome if the modifications are independently developed and separable from the original code.</span>Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com1tag:blogger.com,1999:blog-3030095961999355142.post-13556649370565613422008-10-23T15:40:00.000-07:002008-10-23T15:44:10.867-07:00Clean Room Defeats Software Infringement Claim in US Federal CourtUnder copyright and trade secrets laws as such laws apply to source code, if a person without permission copies the source code or misappropriates a trade secret contained within the code (such as know-how), that person is liable to the owner of the copyrighted code or the trade secret embodied within that code.<br /><br />For purposes of proving such a claim of copyright or trade secret misappropriation, it is not necessary to prove that actual copying occurred. It is sufficient to show that (1) the accused party had access to the code, and (2) the accused party's code is substantially similar to the claimant's code. Thus, for an independent software developer, accessing competitive or substantially similar code is fraught with legal risks, especially in the situation in which the company is developing software with the same or similar functionality as that which exists in competitive products or existing third party code that the company has already licensed. In order to avoid claims of breach of such terms or claims of infringement, it may be advisable to establish "clean room" software development policies.<br /><br />The purpose of such policies is to create an environment in which the company’s personnel can develop competitive software in a manner that insulates the company from copyright infringement or trade secret misappropriation claims by third party licensors of functionally similar software. Clean room engineering attempts to defeat the “proof of access” element of such claims. Independent development of code, even if that code happens to be substantially similar, is a complete defense to a copyright infringement claim, and would refute a misappropriation of trade secrets claim as well.<br /><br />Clean room engineers should obviously at all times avoid direct examination of the original corresponding third party code. Functionality should be designed only by using specifications or tests derived from the third party code being emulated. If it is necessary to internally develop these specifications and/or tests, then such materials may be developed by a separate group within the company that is physically and electronically isolated from the clean room group. This group is known as the "dirty room" group. When it is determined that the specification from which the clean room engineers are working is insufficient to produce the degree of compatibility desired, the only recourse is to search for additional documentation or to write additional tests.<br /><br />For example, looking at the individual instructions that make up a computer program, even if only to determine specifications that aren't publicly available, is an example of dirty room reverse engineering. Dirty room reverse engineering done by the same engineers who create clean room code runs the obvious risk of deliberate or accidental copyright or trade secret violations. To avoid this risk, dirty room reverse engineering should be done in conjunction with clean room development by using two physically and electronically isolated teams where one team does dirty room reverse engineering and the other does clean room development. If a dirty room team exists, the clean room engineers can write a description of the portion of the specification that needs elaboration or clarification. The dirty room engineers then use that request to create additional functional specifications or tests. These functional specifications or tests should not reveal in any manner the way in which the emulated software was written.<br /><br />The viability of a clean room defense was put to the test in the case of <span style="font-style: italic;">Nordstrom Consulting, Inc. v. M&S Technologies, Inc.</span> (N.D. Ill. 2008). In this case, the plaintiff (NCI) accused the defendant (M&S) of developing an unauthorized and infringing derivative work of software NCI had licensed to M&S. M&S sought to avoid infringement liability via the use of documented clean room procedures.<br /><br />In actuality, M&S used what is more accurately referred to as “dirty room” reverse engineering described above, as the court explained in the court’s written opinion:<br /><br /><span style="font-style: italic;">"Defendants claim that M&S hired independent developers to create a new software program … shortly after [NCI] sent an email … stating [the] intention to renegotiate or terminate [the] relationship with M&S. Defendants claimed to have used a “clean room” procedure to develop the new software. “Clean room” procedure attempts to avoid violations of the copyright laws by using two separate teams of developers to create a competing product. The first team describes the functional aspects of a product to the second team; the second team then uses those descriptions to write the code for the competing product. … <span style="font-weight: bold;">If Defendants did indeed follow clean room procedures, the Plaintiffs would be unable to make the necessary showing that Defendants had access to the copyrighted work</span>."</span><br /><br />Defendant M&S was successful in this defense despite that one of the engineers in the functional specification team actually (a) sent snippets of code or “pseudo code” to the clean room engineering team – code that was “used to help the developers understand what the new system needed to do”; and (b) offered “suggestions to difficulties encountered by the independent programmers in writing the new code. “ The court ruled that NCI failed to prove that this assistance or pseudo code was in any way identical or substantially similar to plaintiff’s copyrighted code.<br /><br />A final note: clean room or dirty room procedures do nothing to minimize the threat of patent infringement claims; successful assertion of such claims does not depend on proof of copying or access. Independent worldwide patent searches should be conducted in the applicable fields in order to assess the scope of possible patents and to design around such patents if possible. Also, clean room procedures or reverse engineering could be subject to contractual restrictions in the applicable license agreements covering the third party code being emulated. Such terms should be analyzed prior to any clean room development.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com5tag:blogger.com,1999:blog-3030095961999355142.post-459347725793144642008-10-23T15:31:00.000-07:002008-10-23T15:39:43.624-07:00Jacobsen v. Katzer: A Significant Victory for Open SourceOpen source licenses rely on enforcement of certain obligations intended to further the ideals of the free software movement. The more significant of these obligations include preservation of copyright notices and developer attribution, to preserve the pride of authorship that motivates the open source developer community, and, most importantly, mandating that any modifications, improvements or derivative works of the open source software be made available under the same terms as the original license under which the software is licensed. The latter is oftentimes referred to as the "copyleft" obligation, in that the proprietary rights of copyright law, traditionally employed to restrict use, are instead used as a means of enforcing the liberalization ideals of the free software movement. The <a href="http://www.gnu.org/licenses/gpl-2.0.html">General Public License</a> (GPL), the most popular open source license in use today, contains such an obligation. The GPL permits anyone to modify GPL-licensed code and distribute such modified code, provided that the entire derivative work thereby created by such modification is licensed as a whole under the terms of the GPL itself. Other open source licenses employ similar copyleft-like restrictions, such as the Mozilla Public License (MPL), used for the Firefox browser project.<br /><br />Characterization of these obligations as either independent covenants or conditions on the scope of the license has significant remedies implications. Violation of conditions to the license rights (that is, exceeding the scope of the license) is tantamount to copyright infringement. As such, violation of license conditions gives rise to copyright infringement remedies, including injunctive relief, aided by the presumption of irreparable harm if the plaintiff is likely to succeed on the merits of the infringement claim. Violation of independent contractual covenants, on the other hand, generally does not give rise to injunctive relief, and permits merely compensation for direct economic loss. In the open source context, where software is licensed without charge, establishing economic loss is nigh impossible. The availability of injunctive relief is essentially the only meaningful remedy open source licensors have. <br /><br />In <span style="font-style: italic;">Jacobsen v. Katzer</span>, the US District Court for the Northern District of California <a href="http://jmri.sourceforge.net/k/docket/158.pdf">ruled</a> that defendant’s failure to comply with the attribution and notice obligations of the Artistic License, an open source license, amounted to a claim for breach of contract and not copyright infringement, materially limiting the remedies available to the licensor of the software at issue. Noting that the scope of the Artistic License was intentionally broad, the district court held in rather conclusory fashion that the notice and attribution requirements were not conditions to the license grant itself, and did not limit the scope of that license.<br /><br />In so ruling, the district court seemed to ignore the portion of the Artistic License dealing with the right to modify the licensed code, in which the notice obligations are stated in conditional fashion: "You may otherwise modify your copy of this Package in any way, <span style="font-style: italic;"><span style="font-weight: bold;">provided that</span> you insert a prominent notice in each changed file</span> …." The "provided" modifier clearly appears to be a conditional obligation to the right to modify. Further, the preamble in the Artistic License expressly states that the "intent of this document is to state the conditions under which [the licensed code] may be copied …"<br /><br />The <span style="font-style: italic;">Jacobsen</span> lower court ruling cast considerable doubt on whether the GPL's copyleft requirement is a limitation on or a condition of the license. The GPL's copyleft requirement, mandating that derivative works of that code be licensed under GPL in source code form, is expressed in a way substantially similar to the notice requirement in the Artistic License at issue in the <span style="font-style: italic;">Jacobsen</span> case. It's not clear whether this requirement would be construed as a license condition under the reasoning employed by the <span style="font-style: italic;">Jacobsen</span> district court. If not, the copyleft requirement of GPL would become practically unenforceable.<br /><br />As the GPL is the most popular and strongest copyleft license in existence today – the flagship of the free software movement – the impact of the lower court’s reasoning would have been serious, if permitted to stand. In the <a href="http://www.lawandlifesiliconvalley.blogspot.com/2008/02/jacobsen-redux-remedies-for-breach.html">words</a> of Mark Radcliffe, General Counsel of the Open Source Initiative, "The appeal of the Jacobsen case has the potential for disaster for open source licensors: if the [Court of Appeals] decides the issue incorrectly and uses sweeping language …, open source licensors will be in a considerably weaker position in pursuing licensees who are in breach.”<br /><br />Fortunately for the free software movement, the US Court of Appeals for the Federal Circuit repudiated the district court’s reasoning and left intact copyright remedies for breach of notice and attribution requirements and, by logical extension, copyleft obligations as well. In so <a href="http://www.cafc.uscourts.gov/opinions/08-1001.pdf">ruling</a>, the appellate court accorded considerable recognition, if not endorsement, of the objectives and beneficial aspects of the free software movement. (<span style="font-style: italic;">Jacobsen v. Katzer</span>, 2008-1001, at 1 (Fed. Cir. August 13, 2008)).<br /><br />Phrasing the issue for consideration as determining “the ability of a copyright holder to dedicate certain work to free public use and yet enforce an ‘open source’ copyright license to control the future distribution and modification of that work”, the court began its analysis by describing the “creative collaboration” represented by open source licensing, and by extolling the virtues of such collaborative efforts. “Open source licensing has become a widely used method of creative collaboration that serves to advance the arts and sciences in a manner and at a pace that few could have imagined just a few decades ago.”<br /><br />The Federal Circuit then explained how the notice and attribution conditions of open source licenses are an integral component of open source licensing:<br /><br /><span style="font-style: italic;">"Through [open source] collaboration, software programs can often be written and debugged faster and at a lower cost than if the copyright holder were required to do all of the work independently. In exchange and in consideration for this collaborative work, the copyright holder permits users to copy, modify, and distribute the software code <span style="font-weight: bold;">subject to conditions that serve to protect downstream users and to keep the code accessible</span>. By requiring that users copy and restate the license and attribution information, a copyright holder can ensure that recipients of the redistributed computer code know the identity of the owner as well as the scope of the license granted by the original owner."</span><br /><br />Defendant had argued in the lower court that because plaintiff had made his code available under a broad non-exclusive license to the public at large, the defendant had essentially foreclosed the ability to recover any copyright infringement remedy notwithstanding the presence of obligations connected with the exercise of the rights in the Artistic License. The appellate court observed that defendant’s argument was premised on the notion that the plaintiff’s copyrights in the code licensed under the Artistic License “gave him no economic rights because he made his computer code available to the public at no charge.” Yet, economic rights go beyond royalties, the court stated. In comparing the open source model with traditional copyright business models calling for payment of royalties in exchange for licenses, the court emphasized the “substantial benefits, including economic benefits, to the creation and distribution of copyrighted works under public licenses that range far beyond traditional license royalties”, including increased market share, reputational benefits, and rapid product development and improvement.<br /><br />Turning to analysis of the language of the Artistic License, the Federal Circuit rejected the district court’s interpretation, calling out the “provided that” phrasing as a typical means of expressing conditional obligations, and observing that the license expressly labels the obligations of the license as “conditions under which” the licensed code may be copied. Most significantly, the appellate court demonstrated its understanding of the issues at stake, and the importance of preserving injunctive relief for violation of open source license requirements, by the following passage in the court’s opinion:<br /><br /><span style="font-style: italic;">"Copyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material. … Copyright licenses are designed to support the right to exclude; money damages alone do not support or enforce that right. The choice to exact consideration in the form of compliance with the open source requirements of disclosure and explanation of changes, rather than a dollar-denominated fee, <span style="font-weight: bold;">is entitled to no less legal recognition</span>. Indeed, because a calculation of damages is inherently speculative, <span style="font-weight: bold;">these types of license restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief</span>."</span><br /><br />Section 2 of GPL states that “You may modify your copy of the Program or any portion of it, thus forming a work based on the Program, <span style="font-weight: bold; font-style: italic;">provided that</span><span style="font-style: italic;"> ... you must cause any work that you distribute or publish, that in whole or in part contains or is derived from the Program … to be licensed as a whole at no charge to all third parties under the terms of this License</span>.” This same phrasing is contained in the Artistic License. By upholding such language as conditional, and by explicitly recognizing the objectives and virtues of open source collaboration, the Federal Circuit largely eliminated any possibility that the GPL’s copyleft obligation would ever be characterized as a mere contractual covenant. As such, the court’s decision represents a substantial victory for the free software movement.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com1tag:blogger.com,1999:blog-3030095961999355142.post-9198489716487721472008-10-23T15:26:00.000-07:002008-10-23T15:27:36.184-07:00Refusal to Honor Licensing Commitments in Standards Setting Forums Can Be AnticompetitiveMany standards-setting organizations (SSOs) require participants to disclose patents that might be technically essential to implementing the standard being formulated, and some go further and require that participants agree to license those patents on fair, reasonable and non-discriminatory terms. The US Federal Trade Commission (FTC) earlier this year issued a <a href="http://www.ftc.gov/os/caselist/0510094/index.shtm">decision</a> stating that a patent holder's refusal to honor licensing commitments made in a standards setting organization constitutes an unfair method of competition, despite the fact that the patent holder lacked market power in the relevant market. The decision was reached in connection with a settlement decree with Negotiated Data Solutions LLC (N-Data).<br /><br />N-Data licenses patents it acquired from National Semiconductor Corporation. N-Data's patented technology enables an Ethernet device to detect and optimize local-area network communication with any other vendor's device automatically. In 1994, the Institute of Electrical and Electronics Engineers (IEEE) adopted the IEEE 802.3 Ethernet standard. National Semiconductor was a member of the IEEE at the time, and during the formation of the standard, National disclosed that it had filed for patent protection for certain technology that could be adopted in this new standard, and offered to license such patents, should the patented invention become part of that standard, for a one-time flat fee of $1,000 for each company adopting the standard. Based on these assurances, the IEEE adopted National's technology as part of the Fast Ethernet standard.<br /><br />Subsequently, N-Data "threatened to raise prices for an entire industry" by charging vendors fees in excess of the promised $1,000 one-time fee after they committed themselves to the standard, the FTC said. (Actually a predecessor to the patents at issue, Vertical Networks, began the practice, but it was continued by N-Data after the former assigned the patents to N-Data.) The FTC concluded that this ex ante "hold up" behavior constitutes an unfair business practice "likely to cause substantial injury to consumers" because IEEE members "had no way to anticipate repudiation of the price commitment". A major concern motivating the FTC was that pro-competitive standards setting efforts would be undermined if commitments by SSO members could be ignored once the patents are transferred to another company. Because later patent assignees are not in contractual privity with the standards-setting body or its members, the FTC was concerned that contract remedies would prove ineffective.<br /><br />The lessons of this decision are clear for companies participating in standards setting organizations. Participants need to ensure that any offers to license technology implicated by the standard contain sufficient built-in flexibility in the event market or economic conditions warrant an adjustment to the proffered terms. And, for companies acquiring patents implicated in a standard, such companies need to perform due diligence to determine whether and to what extent the terms offered to SSO members in the past can be adjusted.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-88915412307444518672008-10-23T15:20:00.000-07:002008-10-23T15:24:33.775-07:00Make Sure Your Arbitration Clause Covers IP DisputesMandatory arbitration clauses in licensing agreements as the exclusive means of resolving licensor-licensee disputes are becoming more common. Typically such clauses are phrased in terms of requiring "any controversy or claim arising out of or relating to this contract, or breach thereof" to be settled by binding arbitration. A recent US Court of Appeals decision has revealed that this language can in certain situations be insufficient to bring into the arbitration obligation's scope intellectual property-related disputes that may arise between the parties. <a href="http://www.ca6.uscourts.gov/opinions.pdf/08a0029p-06.pdf">NCR Corporation v. Korala Associates, LTD. (6th Cir. 2008)</a> (holding that resolution of plaintiff's copyright infringement claim was not dependent on reference to or interpretation of the license agreement, and therefore such claim is not arbitrable under an arbitration clause requiring arbitration of "any controversy or claim arising out of or related to this contract").<br /><br />From the licensor's perspective, expressly capturing intellectual property disputes in the operative license agreement has some inherent advantages. First, because arbitration as a general matter only affects the immediate parties to the dispute, an arbitrator's intellectual property invalidity ruling would only apply as between the parties, and would not serve to invalidate the licensor's intellectual property generally or render it unenforceable as against all other parties. This is, at least, the rule in the US, UK and Germany. (It's worth noting however, that some jurisdictions, such as Japan, France, Italy and Spain, permit parties to arbitrate issues of infringement but not to arbitrate the validity of registrations; and Switzerland goes in the complete opposite direction and enforces arbitral rulings invalidating patents, trademarks and designs, as a general matter.) Second, arbitration enables the parties to select a subject-matter expert with relevant experience and knowledge of not only the technology at issue but also the operative rules of law of the controlling jurisdiction, thus potentially enhancing the quality of the final decision and reducing or eliminating the need to retain experts. Third, arbitration proceedings can usually be conducted under strict obligations of confidentiality. The licensor may have a strong interest in avoiding the negative publicity that could be engendered by a noisy and protracted court case with one of the licensor's customers. Trade secrets and other confidential or sensitive matters can be more readily protected from disclosure in an arbitration as opposed to a court case, where all documents and proceedings are required to be open and publicly available (absent a court-issued protective order, which requires time and resources to secure). Finally, there is the 1959 New York Convention, a treaty, ratified by over 140 countries, providing for the recognition and enforcement of foreign arbitral awards. No similar treaty or convention providing for similar recognition of foreign court judgments exists, and the US, importantly, is not a party to any such convention or treaty for foreign judgments.<br /><br />In order ensure the arbitrability of intellectual property disputes and avoid the result of the <span style="font-style: italic;">Korala Associates</span> decision, licensors should consider language along the lines of the following (with capitalized terms referring to specially defined terms in the license agreement):<br /><br /><span style="font-style: italic;">"Any controversy, claim or dispute between the parties arising out of or relating to this Agreement, the Licensed Technology, Support Services, or Intellectual Property Rights, including controversies, claims or disputes involving the validity or infringement of Intellectual Property Rights, shall be resolved by binding arbitration conducted in accordance with the rules of the World Intellectual Property Organization's Arbitration </span><a style="font-style: italic;" href="http://www.wipo.int/amc/en/arbitration/rules/">Rules</a><span style="font-style: italic;"> …."</span><br /><br />Also, licensors should make sure they preserve the ability to pursue injunctive relief at any time in any court of competent jurisdiction, in order to have the right, notwithstanding the obligation to arbitrate disputes, to seek an emergency order preventing incipient or ongoing acts of infringement.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com1tag:blogger.com,1999:blog-3030095961999355142.post-86588974393880460322008-10-23T15:16:00.000-07:002008-10-23T15:18:11.853-07:00The London Agreement is Now in Effect, Reducing Patent Prosecution Costs in EuropeThe London Agreement is a treaty under which the signatory countries agree to waive, for the most part, the requirement that patents be translated into the national language of each European Patent Convention country. Previously, when a patent application was granted by the European Patent Office (the EPO has always permitted patent filings and correspondence to be carried out in either English, German or French), most European Patent Convention member states required the filing of a complete translation of the patent specification into the national language of that state in order for the patent to take effect there. Consequently, translation costs accounted for as much as forty percent of the total cost of securing European patent rights.<br /><br />Last October, the French Parliament finally ratified the London Agreement after initially refusing to do so. The London Agreement consequently went into force on May 1, 2008 and applies to patent applications granted after that date. Post-grant translation requirements have been relaxed considerably, and the advantage is maximized when the original filing was conducted in English. Further details may be gleaned at <a href="http://www.epo.org/patents/law/legal-texts/london-agreement.html">here</a>.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-47072582924520242192008-10-23T15:08:00.000-07:002008-10-23T15:14:57.937-07:00Software Patenting in the UK Moves Closer to the Liberalised EU ApproachArticle 52(2) of the European Patent Convention (reflected in section 1(2) of the UK Patents Act of 1977, as amended) includes in a list of unpatentable inventions "programs for computers … as such". The European Patent Office (EPO) has construed this exclusion to allow software to be patented if the operation of the program produces a further technical effect going beyond mere physical interactions between software and the computer. <br /><br />In 2006, the UK Court of Appeal issued a pair of decisions, <a href="http://www.bailii.org/ew/cases/EWCA/Civ/2006/1371.html">Aerotel Ltd. v. Telco Holdings and Re Macrossan's Application</a>, that the UK Intellectual Property Office (UK-IPO) had construed as a blanket prohibition on any software-related patent claims. Before this time, the EPO and UK-IPO had taken similar positions on the issue of the patentability of software inventions; namely that software was patentable if the invention was capable of generating a technical effect beyond the normal physical effects which result from the running of the program. As a result of these decisions the UK-IPO refused to grant patents on any claims involving software, diverging markedly from the more liberalized approach taken by the EPO.<br /><br />In February of 2008, a series of patent applications came up for appeal to the UK High Court in the decision of <a href="http://www.bailii.org/ew/cases/EWHC/Patents/2008/85.html">Astron Clinica and others v. Comptroller General of Patents and Trademarks</a>. (Among the applications under consideration included one filed by SurfKitchen for mobile Internet services.) The court stated that the UK-IPO's blanket ban on software patents was incorrect, ruling that if the method or apparatus performed by running a computer program was patentable, then a claim to the program itself should be patentable as well. The court stated that the intention of the Aerotel/Macrossan rulings was not to announce an outright ban on software patents. In so ruling, the court paved the way for patenting of, for example, a method, implemented by a particular software algorithm, of generating bit masks for use with laser printers that results in higher quality images. The UK-IPO declined to appeal this ruling, and the UK-IPO changed its practices and released a practice <a href="http://www.ipo.gov.uk/p-law-notice-subjectmatter-20080207.htm">note</a> confirming adherence to the analytical framework stated in Aerotel/Macrossan as further clarified in Astron Clinica.<br /><br />The Astron Clinica ruling thus brought the UK's software patent regime closer to that of the EU, although some commentators opined that even after this ruling, it nevertheless remains easier to obtain patent protection for software-implemented inventions in the UK if the applicant first obtains patent protection via the EPO. The EPO is willing to find the requisite "technical effect" in patent applications that purport to improve the functioning of a computer system, such as software that reduces the load on a processor or otherwise makes more efficient use of computing resources.<br /><br />For example, Research in Motion (manufacturer of the Blackberry device) was <a href="http://www.bailii.org/ew/cases/EWHC/Patents/2008/335.html">successful</a>, in February of this year, in convincing the UK High Court to invalidate a patent owned by Visto Corporation for a system and method for synchronizing email across a network. Invalidation was based in part on the determination of the High Court that the system described in the patent was for nothing more than a computer program "as such". The High Court had additionally found that the Visto patents lacked the requisite "inventive step", and so perhaps this deficiency also served to buttress the conclusion that the "technical effect", needed to save an invention from otherwise falling into the computer program exclusion, was missing.<br /><br />The plot thickened considerably in March of this year with the decision of the UK High Court of <a href="http://www.bailii.org/ew/cases/EWHC/Patents/2008/518.html">Re Patent Application in the name of Symbian Limited</a>. Symbian sought a patent on claims for a method of accessing data held in a dynamic link library (DLL) in a computing device, as well as to the device itself controlled by the method. In short, Symbian's invention changed the way a computer's operating system invokes DLLs in order to eliminate the possibility of errors resulting from changes in that DLL. The UK-IPO rejected the application, on the basis that the invention was comprised of nothing more than the operation of a computer program as such. However, the EPO had granted the patent to Symbian for the exact same invention. On appeal, the High Court overruled the UK-IPO, stating that it had too narrowly considered the invention's technical effect. The court questioned "why a program which has some novel technical effect on an important component in the computer's operating system should not qualify as doing more than merely operating as a computer program, notwithstanding its effect is to solve … a software problem affecting the functionality and reliability of the computer." The court additionally bemoaned the inconsistency between the UK-IPO's approach and that of the EPO. It appeared that the court wanted to bring the UK's approach to software patentability even closer to that of the EU.<br /><br />After the Symbian ruling, the UK-IPO issued a press release announcing its intention to appeal the ruling, stating that the High Court did not apply the Aerotel/Macrossan test in the way intended by the Court of Appeal. This, in UK-IPO's view, has created uncertainty about how the Aerotel/Macrossan test should be applied for inventions of this type. The UK-IPO <a href="http://www.ipo.gov.uk/press/press-release/press-release-2008/press-release-20080318.htm">explained</a>, "whilst it is possible to get patents in the UK for some inventions involving computer programs, it is not possible to get patents for innovations which are solely computer programs, such as an improved word processing program."<br /><br />Software patents are more readily granted in the US, Japan and Australia.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-74800320740748154592008-10-14T18:04:00.000-07:002008-10-14T18:11:36.521-07:00Could the MedImmune Decision Justify Microsoft's Refusal to Specifically List its Patents Believed to be Infringed by Linux?Microsoft has in the past claimed that various open source software infringes no fewer than 235 patents Microsoft owns, including 42 patents Microsoft claims are infringed by the Linux kernel; 65 that are allegedly infringed by various Linux graphical user interface solutions; and 45 by the Open Office suite of productivity software. (See "<a href="http://money.cnn.com/magazines /fortune/fortune_archive/2007/05/28/100033867/">Microsoft Takes on the Free World</a>"). Microsoft has, moreover, steadfastly refused to specify in detail which patents are exactly infringed by which software technologies, drawing the ire of open source software proponents who claim that Microsoft is simply spreading fear, uncertainty and doubt (FUD) among businesses who would otherwise consider using free open source software solutions in lieu of Microsoft's proprietary packages like Windows and Office. (See, e.g., "<a href="http://techdirt.com/articles/20070514/013229.shtml">Microsoft's Claims About Linux Patent Infringement Are Old News And Old FUD</a>").<br /><br />The United States Supreme Court may have provided Microsoft with a facially neutral justification for its behavior with the decision of <a href="http://www. supremecourtus.gov/opinions/06pdf/05-608.pdf">MedImmune, Inc. v. Genentech, Inc. (US S. Ct. 2007)</a>. In that case, the Supreme Court held that a licensee under a patent license need not breach or terminate the license in order to challenge the licensed patent's enforceability or infringement in court. Prior to this decision, US law had specified that a licensee could not enjoy the benefits of a patent license while at the same time seek to invalidiate the patents at issue or seek a ruling that its products are not infringing such patents.<br /><br />In so ruling, the Court rejected the "reasonable apprehension from suit" test which lower US courts had consistently applied as a threshold test for determining whether a party can seek a declaration from a court of patent invalidity or noninfringement. Under US law prior to the MedImmune decision, securing non-infringement or invalidity declarations concerning patents owned by a party who is not currently threatening legal infringement actions was not easy. Parties had to show that the patent owner's actions created a "reasonable apprehension" of an "imminent" lawsuit before a court would entertain such actions.<br /><br />MedImmune changed this requirement, and in so doing, radically altered the balance of negotiating leverage between patent owners and existing or potential patent licensees. Patent owners who seek to secure royalty-bearing patent licenses now must be even more careful to approach a potential licensee in a non-threatening, non-adversarial way, so as to avoid setting up conditions conducive to a patent invalidity/noninfringement declaratory lawsuit brought by the potential licensee. Subsequent lower US court decisions following MedImmune are illustrative.<br /><br />In <a href="http://www.fedcirc.us/opinions/05-1300.pdf">SanDisk Corp. v. STMicroelectronics, Inc. (Fed. Cir. 2007)</a>, STMicroelectronics initiated contact with SanDisk, explaining that STMicro has certain flash memory-related patents of which SanDisk may "have an interest", and inviting SanDisk to enter into licensing negotiations. STMicro revealed in detail all of the patents it claimed read on SanDisk's products. Many weeks of what SanDisk's Chief IP Counsel described as "friendly discussions" culminated in a confidential written patent license offer from STMicro to SanDisk. SanDisk responded by filing a lawsuit in federal court seeking a declaration that SanDisk is not infringing STMicro's patents and/or that such patents are invalid. The district court dismissed SanDisk's lawsuit, noting that at no time did STMicro ever threaten SanDisk with patent infringement litigation. On appeal, the Federal Circuit reversed the dismissal order based on the Supreme Court's MedImmune decision, holding that where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license, the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.<br /><br />These cases can be used to explain Microsoft's refusal to specify the patents it claims are infringed. Any concrete licensing discussions concerning specific patents could expose Microsoft to numerous declaratory judgment lawsuits of the SanDisk kind, in multiple courts throughout the United States. Microsoft is no doubt treading lightly so as to avoid inviting a multiplicity of such lawsuits.<br /><br />In fact, the MedImmune and follow-on decisions should cause any party licensing patents, either standalone or associated with software or other technologies, to take care to minimize the threat or effect of declaratory judgments from its licensees or potential customers. Some suggestions in this regard include:<br /><br />- in license agreements, the licensor should seek provisions which allow the licensor to terminate the agreement in the event that the licensee initiates litigation challenging the validity of the patents at issue (so that the licensee cannot enjoy the benefits of the license while the licensee is at the same time challenging the patents being licensed under it);<br /><br />- licensors should specify a choice of forum and law where all challenge suits must be brought (so that if a declaration suit is brought, the licensor can at least litigate that claim in a forum of its choice);<br /><br />- licensors should seek contractual admissions under which the licensee admits the validity and/or its infringement of the patents at issue (a court may disregard such admissions but they may nevertheless have some evidentiary value);<br /><br />- in pre-license negotiations, the licensor should seek to have the potential licensee sign a confidentiality agreement that would prevent the licensee from using pre-license discussions as a basis for a declaration lawsuit (an approach the SanDisk court itself suggests); and<br /><br />- pre-license discussions should be postured in as non-adversarial and as non-threating way as much as possible, emphasizing the "complete solution", "added value" and "complete security" the patent package offers to the potential customer – ie, perhaps something like the current Microsoft approach to Linux customers.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-26505814424435868252008-10-14T18:03:00.000-07:002008-10-14T18:14:09.272-07:00What Happens if the IP Asset You've Licensed is Transferred to a Third Party?It is not uncommon for a company licensing in technology to spend much time and legal resources on ensuring that the licensor of that technology cannot assign or transfer the operative license agreement to a third party without the licensee's knowledge and consent. However, less common is attention to the risk of a licensor transferring the actual intellectual property that is the subject of the license in question. This situation arose in a recent US Court of Appeals decision within the US Federal Circuit, the courts responsible for patent appeals. The decision is <a href="http://www.cafc.uscourts.gov/opinions/07-1317.pdf">Datatreasury Corp. v. Wells Fargo & Co., et al</a>.<br /><br />In that case, Wells Fargo Services Corp. entered into a 2004 patent license agreement with WMR e-Pin LLC related to net banking settlement services. The agreement was expressly binding on successors and assignees, and prohibited assignment of the agreement without the prior written consent of the non-assigning party. The license agreement also contained a mandatory binding arbitration clause.<br /><br />In 2006, WMR assigned the patents at issue to Datatreasury Corp. Soon afterwards, Datatreasury filed suit against Wells Fargo, accusing the bank of infringing the patents previously licensed to Wells Fargo. Wells Fargo moved to compel arbitration, based on the binding arbitration clause in the license agreement covering the transferred patents. Wells Fargo argued that Datatreasury is bound by the arbitration clause, notwithstanding that it was not a party to that license agreement and never contractually agreed to be bound to arbitrate disputes with Wells Fargo, because, the argument went, the arbitration obligation "runs with the patent" at issue. The bank relied on cases standing for the proposition that because the owner of a patent cannot transfer an interest greater than that which it possesses, an assignee takes a patent subject to the legal encumbrances associated with it.<br /><br />The Federal Circuit affirmed the district court's denial of the motion. The court distinguished the cases upon which Wells Fargo relied, concluding that "the legal encumbrances deemed to 'run with the patent' in these cases involved the right to use the patented product, not a duty to arbitrate." The court made a distinction between terms of an agreement relating to use of the patented product, and other ancillary terms of an agreement. "[P]rocedural terms of a licensing agreement unrelated to the actual use of the patent" are not binding on a subsequent owner of the patent.<br /><br />The question that arises now is what exactly is meant by "procedural" terms. Would infringement indemnification and warranties run with the intellectual property in question, such that transferees would be bound to honor those commitments, or would these be held to be non-binding on subsequent transferees of that intellectual property? The Datatreasury case instructs that licensees should, to the extent possible, attempt to deal with the risks engendered by the intellectual property owner transferring the intellectual property at issue to a stranger to the license agreement, by ensuring that the transferee is bound by the obligations of the license agreement.Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-92027955080868833692008-08-27T15:31:00.000-07:002008-08-27T16:07:46.332-07:00OSiM World, Berlin: September 17-18, 2008<div style="text-align: justify;"><span style="font-size:100%;"><span style="font-family:georgia;">I will give a presentation entitled, <span style="font-style: italic;">Key Legal Factors to Consider When Establishing Open Source Projects</span>, and will participate as a panelist in, <span style="font-style: italic;">How Do You Choose the Right License?</span>, at the <a href="http://www.osimconference.com">Open Source in Mobile World Conference</a> in Berlin on September 17-18, 2008. Discounts of 25% off of program fees are available through me; please contact me at sean@hovilaw.com if you are interested in attending.</span></span></div>Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0tag:blogger.com,1999:blog-3030095961999355142.post-28119008558821552442008-08-27T15:12:00.000-07:002008-08-28T16:07:02.977-07:00Are You Ready for an IPR Audit?<div style="text-align: justify;"><span style="font-family:georgia;font-size:100%;"><span class="Apple-style-span">Consider the following hypothetical (the names contained in which are entirely fictional):</span><span class="Apple-style-span"><br /><br /></span><span style="font-style: italic;"><span class="Apple-style-span">Arthur Jones, Worldwide VP of Sales for eOS Corporation, a small start-up vendor of embedded operating systems, has worked hard for nearly six months to convince the world's largest manufacturer of microcontrollers, IMC, Inc., to adopt the company's flagship eOS product in all of IMC's high volume products. The commercial terms have been agreed upon and a letter of intent has been signed. The next step is to successfully complete IMC's supplier quality audit, required by IMC's procurement division. IMC's auditing engineers will visit eOS's development center in Bangladesh to observe the software development and QA processes and ensure IMC's stringent best practices are followed. As Arthur reviews the agenda for the upcoming audit, Arthur notices for the first time that IMC auditors will be inquiring as to eOS's "policies, procedures and processes for ensuring the integrity of the company's intellectual property, minimizing the risk of contamination and adverse third party legal claims, and maximizing the legal protection afforded to the company's products." Suffering a sudden attack of the sweats, Arthur phones his company's lawyer and asks him to "draft something up quick …!"</span></span><span class="Apple-style-span"><br /></span><span class="Apple-style-span"><br /></span><span class="Apple-style-span">Software companies are frequently the subject of stringent supplier quality audits prior to being selected by their customers. Oftentimes software supplier selection criteria for major OEMs includes successful completion of an onsite inspection in which a team of software or process engineers inspect the supplier's software development and quality assurance processes, such as adherence to the software capability maturity model (CMM), extreme programming methodologies, ISO, or the like. Frequently suppliers are questioned as to their compliance with information security standards or practices, such as ISO 17799.</span><span class="Apple-style-span"><br /><br /></span><span class="Apple-style-span">With increasing frequency, these companies are now demanding to include within these audits a review of the developer's internal intellectual property rights policies. Proliferation of infringement lawsuits, the ever-increasing costs associated with litigating or settling such claims, heightened prevalence of open source licensing regimes, and peer-to-peer distribution mechanisms, among other factors, have all contributed to a heightened awareness of and sensitivity to the legal risks associated with software development, and a concomitant heightened level of scrutiny for software suppliers.</span><span class="Apple-style-span"><br /><br /></span><span class="Apple-style-span">Of particular importance are external source code intake policies, clean room development procedures, and technology use and confidentiality policies. It is now expected that software companies have well-documented and consistently applied policies which ensure adequate protection and optimal management of IP assets, insulate against the risks of contamination, particularly in the area of open source software, and impose discipline in the manner in which software engineers license in or introduce external code into the companies' products. These IPR reviews can oftentimes rise to level of scrutiny normally reserved for M&A due diligence. </span><span class="Apple-style-span"><br /></span><span class="Apple-style-span"><br /></span><span class="Apple-style-span">Failure to have these policies and processes established, documented, and fully implemented early in a software company's growth cycle can prove to be a significant impediment to satisfying these quality audits, and could as a result foreclose significant business opportunities. OEMs would not look favorably upon a software company's reactive and post hoc establishment of such policies as a result of the OEM's auditing conditions.</span><span class="Apple-style-span"><br /><br /></span><span class="Apple-style-span">Such policies should at a minimum consist of the following:<br /></span></span><ol style="font-family:georgia;"><li><span style="font-size:100%;"><span class="Apple-style-span">external source code introduction and management policy: procedures to avoid or minimize the risk of external source code being introduced into the software company's products without authorization or in violation of licensing terms, which include a process for legal review of licensing terms and inbound licensing "playbooks" or guidelines;</span></span></li><li><span style="font-size:100%;"><span class="Apple-style-span">clean room development procedures: a formalized and systematic process description, consisting of clear and precise rules regarding staff segregation, network management, access logs, management audits, etc.;</span></span></li><li><span style="font-size:100%;"><span class="Apple-style-span">technology use and confidentiality policies: best practices and rules regarding use of company technology and IP assets and protection of company confidential information and trade secrets; and</span></span></li><li><span style="font-size:100%;"><span class="Apple-style-span">IP asset management policies: systems for tracking, clearing, identifying and protecting the company's patent, trade secret and copyright assets.</span></span></li></ol><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><br /></span></span></div>Sean Hoglehttp://www.blogger.com/profile/08300020264777018204noreply@blogger.com0