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iPhone Hacking No Longer Illegal

Posted Jul 26 2010 by tim in Legal Updates with 2 Comments

The US Digital Millennium Copyright Act (DMCA) at §§ 1201-1203 makes it illegal to circumvent technological protection measures in software or technology which protects underlying intellectual property. Today the Library of Congress has ruled that this prohibition does not apply to iPhone “jailbreaking.”

“Jailbreaking” is a term which describes the process of hacking a phone’s operating system in order to disable its security measures which otherwise prevent users from installing unauthorized applications. Prior to the FCC’s ruling, jailbreaking was a clear violation of the above statutes because it required the jailbreakers to hack the security measures of an operating system which necessarily contained underlying intellectual property (e.g., the operating system code).

This is likely to expand the market for 3rd party and user generated apps.

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New Massive Tax Reporting Burden for Small Businesses

Posted Jul 11 2010 by tim in Business News with 4 Comments

The March 2010 health care reform bill includes a new mandate which requires that, by 2012, businesses begin to issue 1099 forms to all vendors to whom they had paid a minimum of $600 during a given tax year. Naturally such a requirement would force many small businesses to devote more hours and manpower (not to mention postage) during the yearly tax filings.

Economists are concerned that the new law will discourage businesses from buying goods and services from a wide array of vendors where they, instead, will consolidate their dealings to a smaller group of regulars.

Exemption: Businesses purchasing goods via credit or debit card are exempt from such reporting requirements as separate measures will be taken to capture such information.

Comment on Rules: The IRS is currently accepting public comment on how to implement the new rules. Comments can be made here.

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Bukher & Associates welcomes Anthony H. Handal

Posted Jul 1 2010 by tim in Firm News with 1 Comment

Anthony H. Handal

Tony is Of Counsel to the firm’s Intellectual Property practice group and one of the most experienced intellectual property litigators in the United States. He focuses his practice on patent, trademark and copyright trial and appellate work. An experienced engineer who conceived the first digital data compression system while a University researcher under Project Apollo, he also has worked for many years in licensing, and related corporate matters, as well as in the enforcement and procurement of intellectual property rights in the United States, Europe, and Asia.

Over the past 30 years, Tony has served as lead counsel in over 200 intellectual property lawsuits with amounts at risk ranging up to $2 billion, representing such clients as ADM, JVC, Conair Corporation, Dayco, Estee Lauder, Clear Channel, Neiman Marcus and Target. These actions have been before the U.S. Supreme Court, many Federal appellate and district courts, and overseas tribunals, and include jury and bench trials. In his career, he has also obtained over 700 patents for his clients. He has experience representing clients from various technologies and industries, including pharmaceuticals, electronics, business methods, medical devices, software, molecular biology, biomedical systems, holography, apparel and retail. Tony has taught patent litigation strategy at the Patent Resources Group. He has also presented in-house training programs at many corporations, including Xerox, Pitney Bowes, J.P. Morgan Chase and General Electric.

Tony earned his Bachelor of Science in Engineering from Polytechnic University and his Juris Doctorate from the Georgetown University Law Center.

Admitted to Practice

Tony is admitted to practice in the states of New York and Connecticut. He is also admitted to practice before the United States Patent and Trademark Office, the U.S. Supreme Court, the Court of Appeals for the Federal Circuit, the U.S. Court of Appeals for the Second, Fourth, and Ninth Circuits, the Southern, Eastern and Northern Districts of New York, the Eastern District of Pennsylvania and the Eastern District of Texas.

Publications

  • “Does the Power of the Internet Justify Changing Traditional Rules for Trademark Infringement?” · Intellectual Property Today, February 2009
  • “Intellectual Property Update: Inter Partes Reexamination Becoming Efficient and Effective in Removing Weak Blocking Patents” · Thompson Hine LLP Bulletin, September 2008
  • “Second and Fifth Circuits Clash on Copyright Protection for Costumes and Clothing” · Intellectual Property Today, October 2005

Awards & Honors

  • Selected for inclusion in New York Super Lawyers® magazine (intellectual property litigation)

Anthony H. Handal
online at
Super Lawyers
visit superlawyers.com

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YouTube Safe from Copyright Infringement Claims

Posted Jun 24 2010 by tim in Legal Updates with 0 Comments

The Southern District of New York has held that YouTube enjoys the protections of the Digital Millennium Copyright Act (DMCA) “safeguard” exception for Internet Service Providers.

Section 512(c) of the DMCA protects ISPs from copyright infringement claims for storing user-uploaded infringing content so long as the ISP does not have “actual knowledge” of the infringement or “is not aware of the facts and circumstances from which infringing activity is apparent” or expeditiously removes the infringing content upon receiving notice of the violation. The Court has ruled that YouTube benefits from the DMCA’s safeguard because its services are analogous to that of an ISP (it provides storage for user uploads of videos) and it does not directly benefit from the uploaded content (e.g., YouTube does not charge people to watch the uploaded videos).

The most interesting aspect of this case is the Court’s decision that YouTube’s general knowledge that users tend to upload infringing content (like music videos) does not raise sufficient “red flags” to count as being “aware of the facts and circumstances from which infringing activity is apparent.”

In other words, YouTube knows that it hosts infringing content; we, the users, know that YouTube hosts infringing content; the entire world pretty much knows that YouTube hosts infringing content; but this knowledge is too “general” to raise red flags of infringement. Thus YouTube is liable only if YouTube is notified of infringement by the content owner and then fails to expeditiously remove that content.

This is a big ruling for publishers of user-based content who, by emulating YouTube’s Terms of Service and Policy, can likewise shield themselves under the DMCA’s safeguard.

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Product Licensing Agreements: The Basics

Posted Jun 4 2010 by tim in Intellectual Property Law, Small Business Law with 1 Comment

Product licensing agreements, whether the product is software, hardware, or simple consumer goods, center around two major legal areas: contract law and trademark law. The contract part of the agreement is fairly obvious while trademark is an added necessity in this modern age (where often up to 90% of a product’s value consists of the name or logo on its packaging).

The distributor license – a common product licensing agreement — is a complicated agreement whose drafters must take extra care to delineate each party’s rights and responsibilities else costly litigation is the surefire end-result.

Here’s what a typical distributor agreement should have:

1)      The parties (obviously).

2)      The Services: This is a detailed description of each party’s responsibility to the other. For example: Party A agrees to distribute software in New York for party A. In return, Party B agrees not to license any other parties to distribute the software in New York. Perhaps party B will also be responsible for updating and providing customer warranties for the software? That’s ultimately up to the parties…

3)      The Payment: Who pays whom? At what intervals? What are the penalties for late payments? Who is responsible for dealing with the end-client, collecting on invoices, etc…?

4)      Additional Warranties: This is where the parties make additional promises to one another. This is also where a good attorney will anticipate and provide for as many contingencies as possible: should an unanticipated contingency occur, costly litigation becomes inevitable (e.g., the distributor’s state passes a new tax on the type of product distributor sells and the agreement fails to provide which party bears the burden of this new tax). Best Advice: Do not rely on Googled forms, especially for large value agreements; hire a lawyer who knows your industry and, therefore, knows what can go wrong.

5)      Proprietary Rights: This is the trademark law section. The agreement should clearly state which intellectual property belongs to which party. After several years of working together and using one another’s logos on your products, the lines between who owns what can get blurred…

6)      Limitation on Liability: This is usually standard language where each party agrees not to hold the other liable for standard failures under the agreement (you can’t disclaim non-standard failures, like setting fire to the warehouse).

7)      Term (time): This is self-evident.

8)      Termination: This is also very important and requires sound legal counsel. How a relationship terminates and what continuing rights and responsibilities the parties have are just as important and litigation-prone as how the agreement begins.

9)      Arbitration and Choice of Law: These are optional but highly recommended. A strong arbitration clause will ensure that any disagreements go to arbitration. While arbitration can get costly, such costs do not come near the years-long engagement of motion practice, discovery and appeals you see in traditional litigation.

In sum, the main goal of a well-drafted agreement is to provide for as many contingencies as possible in order to avoid future disputes and certainly to avoid costly litigation over such disputes.

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Trial Advocacy: Cross-Examining Expert Witnesses

Posted May 18 2010 by tim in Litigation with 1 Comment

As part of my effort to share tips with fellow boutique firm and solo-practitioners, the following is the first in a series of tips for trial advocacy. I will tentatively title this series, “Don’t Fear the Court Room” as many of us must admit that our early forays into trial brought more than a few trepidatious pangs.

Most cross-examination methods are analogous to walking the witness out to the edge of a tree branch (the tree representing their argumentative position) and then giving that branch a good shake. This technique, which works better with expert witnesses (“experts” in their respective fields and probably experts in the sense that they find themselves in the courtroom as often as do lawyers), is analogous to getting the witnesses to cling tighter and tighter to the trunk only to finally show him that he was climbing entirely the wrong tree.

The trick is to play on the expert’s desire to display his expertise to the jury by “yessing” him through a long series of questions which subtly build up the contrary side of his ultimate conclusion. Once you have helped him lock himself to that position, it is a simple matter of casually revealing how such a position is entirely contrary to the other party’s conclusions.

Note: Do not fear objections! This video also serves as a good example of how the other party will attempt to interrupt your narrative with a constant stream of objections. Such disruptions tend to freeze many a counsel up as they pause their narrative to argue with the other side. If you are in the middle of a nice little narrative, it is best to keep your response to the objection to one or two words — keep that incredulous look on your face — and let the judge overrule them as they come. Sticking to an entertaining/interesting narrative for the jury is far more important than getting into a side tiff with opposing counsel!

(Latest version of Adobe Flash Player required to view.)

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The Trademark Application Process and Costs (Detailed)

Posted May 6 2010 by tim in Intellectual Property Law with 2 Comments

A United States trademark grants its owner the right to prevent others from using a confusingly similar mark in connection with similar goods or services. The cost of a trademark application can vary considerably depending on the existence of any similar marks.

The trademark application process moves through three stages:

Stage 1 – The Application

As a preliminary matter, trademark applicants have four options for trademark application depending on their particular circumstances:

1) Section 1(a) of the Lanham Act (the United States Trademark Act) allows application for applicants who have already made use of their mark in United States commerce (e.g., already doing business in the US).

2) Section 1(b) of the Lanham Act allows application for applicants who verify that they intent to use the mark in United States commerce within 1 year of publication on the National Register. Such application must be perfected within 1 year by submitting specimens to prove use of the mark in commerce. The purpose of a 1(b) application is for applicants who have not yet used the mark in the US to “lock” in their date of priority to the date of their 1(b) application — in other words, if another entity uses a similar mark after the applicant’s 1(b) application but before the date of perfection, the original applicant will be accorded priority as of the date of its 1(b) application.

3) Section 44(e) of the Lanham Act allows foreign applicants who already own a trademark registration in their foreign country of origin to register their mark in the US based on such foreign registration.

4) Section 44(d) of the Lanham Act allows foreign applicants to “lock” the day of priority for their mark to the day of their foreign trademark application. The practical results of this are the same as in the 1(b) application described above.

Applicants may apply under a combination of the above options. For example, they may apply under Section 1(a) if they have already used the mark in the US and they may also use Section 44(d) to lock their date of priority to the date of their potentially earlier foreign application.

Costs for Stage 1:

USPTO Fees: The United States Patent and Trademark Office (USPTO) charges a $325 filing fee for each class under which the applicant wishes to register their trademark. A “class” is a description of the type of goods or services with which the mark is associated. For example, Craigslist.com is registered for Class 35 (advertising information) and Class 38 (interactive bulletin boards).

Attorney Fees: Most attorneys charge hourly for trademark work or otherwise charge a flat fee based on the estimate time it would take to complete the initial filing. The initial paperwork for a Stage 1 filing should take no longer than one hour. As explained below, it is not possible to estimate the time it would take to move an application through Stages 2-3.

Search Fees: The USPTO does not refund filing fees, thus prior to filing the application it is highly advisable to have your attorney conduct a search of the USPTO database to confirm that a registration or application for a similar mark does not already exist. The most advisable search method is to have the attorney engage a specialist service, like Thompson CompuMark, to perform a thorough search. Such services generally charge $600-800 for the search.

While most attorneys can perform the search for a lower fee, we feel it borders on malpractice not to urge the client to pursue the more thorough option.

Stage 2 – Office Actions

Once the application is filed, the USPTO will assign an Examiner to evaluate the proposed trademark and decide whether it meets the requirements for publication to the Official Gazette.

The USPTO will issue Office Actions, in the form of correspondence from the Examiner to the applicant, if the Examiner finds defects in the application. The most common and innocuous defects include improper or vague description of the goods and services associated with the mark or a vague description of the mark itself. Such defects can be remedied with a short and simple response to the Office Action.

A more serious Office Action arises if the Examiner finds the application to be confusingly similar to an already-existing trademark. While the chances of seeing this situation are practically non-existent if the applicant performed a thorough search of the USPTO database prior to applying, there is, unfortunately, no 100% guarantee.

At this stage, depending on how similar the existing mark is, and based on his attorney’s advice, the applicant may wish to dispute the examiner’s decision or to abandon the application.

Costs for Stage 2:

USPTO Fees: There are no USPTO fees for responding to Office Actions. There is a $100 per class filing fee to appeal the Examiner’s final decision if the applicant’s responses fail.

Attorney Fees: Attorneys charge an hourly rate for responding to Office Actions and, where applicable, for appealing adverse decisions.

Stage 3 – Publication to the Federal Register and Potential Opposition

Once the applicant successfully moves through Stage 2 by satisfying any problems the Examiner may have with the application (or by successfully appealing an Examiner’s adverse decision), the proposed trademark will be published in the Official Gazette to allow other trademark owners the opportunity to Oppose the mark in the event that they feel it is substantially similar to their registered mark or their unregistered mark for which they may have priority of use (e.g.., they used the mark in US commerce before the applicant used it or before the applicant established priority with his application).

If a trademark owner makes an opposition, the application will proceed to litigation between the Applicant and the Opposer before the Trademark Trial and Appeal Board (TTAB).

Costs for Stage 3:

USPTO Fees: There are no USPTO fees for Stage 3 other than any TTAB filing fees which may arise out of an Opposition litigation.

Attorney Fees: If the application is Opposed by another entity with a substantially similar mark, the application will proceed as a litigation. It is difficult to estimate the number of attorney’s hours such litigation will require. Moreover, additional costs of such litigation will include the costs of discovery to ascertain whether the marks are similar, whether the Opposer has priority, as well as any other remedies that applicant may have depending on the facts learned in discovery.

The total costs of such litigation can range in the tens of thousands of dollars and, as such, we advise our clients that litigation is always the option of last resort. If such a situation occurs, we help our clients minimize costs by vigorously pursuing a settlement with the Opposer whereby the Opposer would agree to a “concurrent” use of the mark in return for some set value of remuneration.

Summary

The foregoing provides a list of all of the possibilities in the best and worst case scenarios. In most cases, a trademark application will proceed to the Official Gazette without any Office Action (Stage 2) or any Opposition (Stage 3). As explained above, we always advise our clients to elect a thorough USPTO database search prior to filing the application because such a search is the best way to predict how the application will proceed.

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Intellectual Property Q & A

Posted May 5 2010 by tim in Intellectual Property Law with 4 Comments

What is intellectual property?

Intellectual property is the intangible but valuable component of a business, a work of art, or even an idea. Intellectual property comes in three different forms: (1) Trademark (e.g., a consumer brand), (2) copyright (e.g., a work of art or expression), and (3) patent (e.g., an idea or a process).

What is a trademark?

A trademark is an intellectual property which adds value to a product or business by pointing the consumer to its source. For example, the iPod brand name is not something you can touch or feel, but most consumers would be willing to spend more money on a media player with that name on it than on a nameless brand because iPod has proven itself as a source of quality media products.

What is a copyright?

A copyright is an intellectual property which is basically defined as an artist’s exclusive right to make copies of his work of expression. This means that no one other than the artist has the right to make or sell copies of the work without the artist’s approval. A copyright’s value lies in the artist’s ability to sell or license his approval so that others could make copies of his work.

What is a patent?

A patent is an intellectual property which gives its owner the exclusive right to develop a product or even run a business process based on his or her unique idea. Businesses are always looking for the most efficient processes to make the most efficient and effective products. A patent allows its owner to protect his idea, for a number of years, either for his own exclusive use or so that he could license it or sell it to another business.

Why is intellectual property important?

The United States is the world’s largest exporter of intellectual property. In other words, we do not export manufactured products anywhere near as much as we export and sell names, expressions and ideas. If you own a business in the United States, then chances are that the most valuable component of your businesses is the name on your product or the idea behind it. It is a basic principle of economics that if a market for a product exists then you will soon find competitors in that market. Your intellectual property is what will allow you to set yourself apart from the others.

Why is intellectual property important to my small business?

Whether you are an artist, a small software developer, or a local restaurant, intellectual property is important to your business because it is your only way of competing with the “big boys.” The large corporations in your field have the money and resources to copy everything you do but on a grander scale. Securing your exclusive right to use your brand, your expression, or your idea and to prevent others from copying them will allow you to balance the playing field so that you could fairly pit your intelligence against your competitors’ vast resources and thrive.

How can I protect my intellectual property?

Your right to your intellectual property is a Constitutional right. Article I section 8 of the US Constitution grants Congress the power “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Congress established the United States Patent and Trademark Office (USPTO) and the United States Copyright Office to allow artists and inventors to register and protect their work. Visit www.uspto.gov or www.copyright.gov for additional information.

Do I need a lawyer to protect my intellectual property?

Whether or not a lawyer is ever needed (for anything) depends on the particular situation. It is fairly simple to register your copyright or trademark at one of the above websites. Patents require a slightly more complicated (and expensive) process because it is more difficult for USPTO agents to confirm that your complicated invention is unique among the thousands of existing ideas already registered. Nevertheless, even patents can be registered without the help of a lawyer if you have the time and the patience to learn the process.

Ultimately, as an artist, inventor or business owner, you will have to confront the following question: Is the time I spend researching what I need to learn to protect my idea worth the time I could spend marketing my idea or even developing new ones? Finally, situations can arise where only an experienced attorney would have the knowledge to advocate in your best interests; an attorney is well-equipped to identify such situations.

In short: It never hurts to get more information via a free consultation.

Contact us with your particular questions or concerns.

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NY Techies Attack LLC Publication Requirement

Posted Apr 6 2010 by tim in Business News with 2 Comments

I just recently posted an article comparing the steep price difference between registering an LLC versus an S-Corp and how LLC’s are subject to NY’s $2000 extortion publication requirement.

Now New York tech businesses have launched a petition, aptly named “Why-2K?” to nix this quasi-tax on small businesses. From Crains’ (subscription required):

A group of techies is launching an effort today to get the state to eliminate the law compelling new limited liability corporations to publish notices announcing their formation.

The requirement costs fledgling businesses up to $2,000.New York law requires every new LLC to announce its existence in two print publications such as Crain’s for six consecutive weeks, within 120 days of formation.

Let’s hope this goes through.

(Thanks go to Steve Caccavo of Creative Business Solutions for pointing me to the article.)

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Non-Disclosure and Non-Compete Agreements

Posted Mar 30 2010 by tim in Small Business Law with 5 Comments

There are several reasons a business might decide to employ a non-disclosure or a non-compete agreement (collectively known as “restrictive covenants”):

  • The business is engaged in work that grants its employees access to sensitive information which, if publicized, would get said business sued by its clients. Such work can range from managing e-mail exchange servers to working at a PR agency where the job is to know and hide the clients’ skeletons.
  • The business relies on certain proprietary information, such as client lists, to deliver its product and publication of such information would give its competitors an unfair edge.

In either case, it is in the business’ best interests to make sure that its sensitive information does not make its way into the wrong hands.

The Agreement

A non-disclosure or non-compete agreement is basically a contract between the employer and its employee where, for some valuable consideration (like a job and salary), the employee promises not to divulge any sensitive information learned during the course of employment or the employee promises not to go work for competitors for some period of time after the employment terminates.

As with all contracts, restrictive covenants require an exchange of consideration to be enforceable. The law defines consideration as a “bargained-for exchange between the parties,” in other words, something each side wants and promises to give to the other side. This is why restrictive covenants should be signed at the beginning of the employment relationship: There is no consideration when the employer promises the employee something he is already giving him (a job and salary). So NDAs signed mid-employment should be bought for something extra, like a bonus or a promotion, to be enforceable.

Enforcement of Non-Disclosure / Non-Compete Agreements

As with all breach of contract situations, the first step to enforcing a breached restrictive covenant is to send the breaching party a “Demand Letter.” The letter should contain the following:

  • Reminder of an existing non-disclosure / non-compete agreement along with a summary of its terms.
  • Explanation of how the employee / ex-employee breached such terms.
  • Demand that the employee comply with the terms of the agreement within a certain number of days (10 is the standard number).
  • Warning that failure to comply will be met with pursuit of all available legal remedies.

While the Demand Letters are usually ignored by the breaching party, they are necessary because most lawsuits based on breach of contract require a showing that the breaching party was warned of the breach and given an opportunity to comply. Which takes us to…

Court Relief

It is too late to stop a person from disclosing information once he has already disclosed it, so non-disclosure agreements are generally enforced by means of monetary relief. The Court will force the breaching party to pay the plaintiff a sum of money which plaintiff has proved to represent the total damages it suffered due to the breaching party’s conduct. Thus, the practical function of a non-disclosure agreement is to give employees notice that, should they breach the agreement, they will get sued and they will lose money — it is a deterrence mechanism.

Non-compete agreements are trickier because plaintiff, here, wants to force the breaching party to stop doing something it is already doing (competing). In this case, legal enforcement takes the form of an injunction ruling by the Court which commands the breaching party to stop what it is doing or face contempt. Civil contempt generally takes the form of steep fines and fees.

NY Does Not Like Non-Compete Agreements

New York courts take a very strict view of non-compete agreements because New York has a strong policy against preventing people from plying their trade and earning a living. New York courts generally require the following before they will enforce a non-compete agreement:

  • The restraint must be reasonable such that it “is no greater than is required for the protection of the legitimate interest” of the party seeking enforcement.
  • Legitimate interests are limited to “the protection against misappropriation of the employer’s trade secrets or of confidential customer lists, or protection from competition by a former employee whose services are unique or extraordinary”.
  • A restrictive covenant against competition must also be reasonably limited temporally and geographically.

What this basically means is that the geographical scope and time of the non-compete should be reasonably limited, and that the purpose of the non-compete is to protect the employers “legitimate interests.” What constitutes “legitimate interests” often becomes the subject of heavy litigation.

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Disclaimer

This material is for information purposes and does not constitute legal advice that is tailored to your own personal circumstances and should not replace legal advice of an attorney. Although we try our best to keep the information updated, the material is not guaranteed to be up to date or complete.