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Those Bright Ideas Will Cost You!

A little more than a year ago, Taco Bell was ordered to pay $30.1 million to two men who convinced a court they conceived the talking Chihuahua. Lest you think this is an aberration or that these men were opportunists trying to make a quick buck, you would be wrong on both counts. Outside suggestions are a source of potential ideas and potential liability. Companies would be well-served to learn a lesson from these cases.

Smart marketing companies have policies—even outside suggestion “units”—to handle those suggestions company strategists, executives and marketing professionals all say they welcome to better understand what customers want. This is not the place to belabor legal distinctions between market research, focus groups, customer satisfaction surveys and unsolicited outside suggestions, but these distinctions highlight the need to pay attention to potentially dangerous legal landmines at the intersection of intellectual property law and product development.

Imagine that a customer of a bank suggests to the branch manager that the bank issue travelers checks with dual signatures (they exist, so don’t you get any bright ideas) so vacationing couples can use them interchangeably. Now fast forward six months—the bank proudly launches its latest new product, the dual-signature travelers check. Guess the rest. Lawyers, letters, demands, assertions of ownership, misappropriated proprietary information—the suggestion was not an “idea” but a specific product development concept with specific implementation details. Talking Chihuahuas anyone?

Of course, if the company can prove its product was independently developed or in development before the suggestion came in, or that the branch manager threw the suggestion in the trash without telling anyone, showing it to anyone or keeping a copy—yes, the company may win the lawsuit. But do you really want to risk all those lawsuits and the cost of litigation to prove you are right? Settle or fight: each can be costly.

Dealing with outside suggestions should be a part of a company’s product development, brand management and marketing risk management strategy—optimizing the company’s ability to gather meaningful information while minimizing potential exposure to litigation liability and damages. Rimon has lawyers who have developed and managed these functions, counseled clients, conducted seminars, and drafted policies and procedures to do just that. Contact me at joseph.rosenbaum@rimonlaw.com. We are happy to help.

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Internet Streaming Media—-The FCC Just Says Yes

Last month we reported the Ninth Circuit Court of Appeals found that Grokster and Streamcast Networks were not violating copyright laws by making software that allows people to swap digital content. Just a few days ago, over the objections from the motion picture, broadcast and professional sports industries, the FCC approved technology allowing digital recording services like TiVo to transmit television programming to subscribers over the Internet, allowing programming, for example, to be viewed anywhere an Internet connection was available. Digital recording services and streaming programs remotely threatens local advertising relevance and revenue, while still allowing viewers to edit out commercials. Advertisers are you paying attention??

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Pop Goes the Lawsuit

This past June, we reported L.L. Bean filed suit against Nordstrom, J.C. Penney, Atkins and Gevalia alleging copyright and trademark infringement in connection with pop-up advertising. Bean has now settled with Gevalia and Atkins, who have agreed to damage payments (i.e., for trademark infringement), as well as agreeing not to authorize pop-up advertisements of their products on Bean’s website. Spyware has been the subject of significant controversy, and anti-spyware legislation has passed in Utah and is pending in Congress and in California, although the Utah statute is being challenged by spyware maker WhenU. It is likely lawsuits such as Bean’s will continue to be filed based on theories that not only are consumers annoyed by pop-up ads, but that they become confused by the advertisements as well.

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Court Sanctions UBS for Destroying E-Mails

On July 20, the U.S. District Court for the Southern District of New York imposed sanctions against UBS Warburg for destroying relevant e-mail messages during the course of litigation (Zubulake v. UBS Warburg LLC, et al., 2004 U.S. Dist. LEXIS (S.D.N.Y, July 20, 2004)). The Court ordered UBS to pay expenses and attorney fees incurred by the plaintiff, granted plaintiff’s request for further discovery, and agreed to instruct the jury that a negative inference may be drawn against UBS as a result of the missing evidence. The case provides important guidance for counsel on electronic discovery issues and record management, and the Court notes counsel is expected to take some affirmative steps: (1) “identify sources of discoverable information”; (2) “put in place a litigation hold and make that known to all relevant employees by communicating with them directly” and not only repeat these instructions “regularly” but also “monitor compliance”; (3) “call for employees to produce copies of relevant electronic evidence”; and (4) “safeguarding any archival media” the client must preserve. Given the notoriety of the case, these practices will likely become a de facto standard in evaluating electronic discovery issues and requests for sanctions. Got litigators? Call Rimon—we not only have knowledgeable litigators, but we also have an entire team of professionals skilled in data management, record retention, and compliance in and out of litigation. Try us, you’ll like us.