Posted on

Web Videos Test the Limits of Feeds, Uploads & Time-Shifting

Web-based videos, through links, feeds or user uploads, are generating significant legal and commercial interest these days. Advertisers are also quick to recognize the potential “buzz” marketing opportunities enabled by the use of the Internet and digital audiovisual technology. User-generated content draws consumers to websites, powerful magnets for advertising messages targeted to those consumers. But beware: Simply because a consumer creates the content, doesn’t mean it is immune from standard legal tests for advertising, endorsements, publicity and product liability.

A lawsuit has recently been filed against one online video-sharing network—Veoh—alleging it allowed video works owned by an adult entertainment company to be viewed through Veoh’s website without authorization. The claims of copyright infringement could be an important test of how the courts view sites that enable sharing or feeds of audiovisual works. Although there are a growing number of popular user-generated content sites such as IFILM, YouTube, Guba, Yahoo! and Google, these sites often have very different policies and some, but not all, of them review user-generated content before it is posted—either to ensure it meets guidelines or to confirm that the user’s tags are accurate.

Earlier this month, the New York State Consumer Protection Board published an official warning about content available on Google Video, the new Google site for user-generated content. Because videos are uploaded by users, Google Video relies on tags (labels which describe the content) which are input and generated by the users. Since the content is not indexed or catalogued by Google, a search will turn up whatever the user submits—and that is what has irritated the New York authorities. As with many websites that allow user-generated content to be uploaded for viewing, Google warns users about uploading obscene or illegal material or items protected by copyright, but currently has no mechanism for filtering it out.

In a move widely viewed as adding an air of legitimacy to these sites, Warner Bros. agreed to allow Guba to distribute some of its television shows and motion pictures, online. NBC is allegedly planning to make clips of some of its most popular programs available to YouTube to promote its fall programming lineup. NBC’s decision is reportedly coupled with advertising commitments for both companies in broadcast television medium and the Internet. That should come as no surprise since advertising is what is usually at the root of all of these revenue models—a fact that has not escaped broadcast network executives.

Also this month, a number of leading television production and motion picture companies joined forces in filing suit against Cablevision, one of the largest cable television companies in the United States. The action asks the U.S. District Court in New York to declare the time-shifting service Cablevision has announced, but not yet offered, in violation of U.S. copyright law. Cablevision has countered that time-shifting of programming by consumers is legal. Unlike an “on-demand” service which would record everything and replay programs when selected by the consumer, Cablevision intends to offer subscribers a specific amount of allocated storage space on the network. Analogous to an outsourced set-top box or digital video recording device that a consumer might purchase, Cablevision will offer consumers an opportunity to buy storage space and use it to record and play back programs and then erase them to free space for new programs—no different than if the storage medium was sitting in their living rooms. Stay tuned.

Posted on

Damages Raise the Ante in Patent Infringement Suits

Just about a year ago, the Supreme Court in Grokster modified a decades-old ruling in the “Sony Betamax” case to remove the insulation automatically given to Internet service providers and hosting services when it can be shown that even with a substantial non-infringing use, a service condoned and encouraged (and made money) through illegal sharing of copyrighted materials. This month, a unanimous U.S. Supreme Court decided a case in favor of eBay which overturns decades of legal precedent favoring the issuance of injunctions as an automatic right granted to plaintiffs for patent infringement. The case involved eBay’s “buy-it-now” feature that permitted customers to buy items “now” without being involved in the auction process. Although the Supreme Court sent the case back to the lower court to ultimately determine if an injunction was or was not appropriate, the significance of the decision cannot be underestimated.

By way of background, when a lower court first held that eBay’s “buy-it-now” feature infringed two patents owned by Tom Woolston (founder of MercExchange), the court ordered eBay to pay damages (approximately $25 million), but did not issue an injunction. That court reasoned that since MercExchange was apparently willing to license its patents, an injunction was neither necessary nor appropriate. Unfortunately, the next court on the ladder upwards, the U.S. Appeals Court for the Federal Circuit, reversed that decision stating the “general rule” that injunctions must follow all infringement findings unless “exceptional circumstances” exist. Since an appeal was pending to the Supreme Court, the court held the injunction in abeyance awaiting the Supreme Court’s decision.

The Supreme Court, in a unanimous decision, held the lower courts did not properly evaluate the case under federal requirements. More importantly, language in the concurring opinion written by Justice Kennedy and signed by Justices Stevens, Souter and Breyer noted that courts must consider the broader implications of using injunctions because an “industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees,” and in those instances, “legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.”

This language in the Supreme Court’s decision could deal a serious blow to companies that exist solely to engage in patent infringement litigation (so-called “patent trolls”) and who use the U.S. patent system to coerce lucrative settlements from companies who previously faced injunctions that threatened to shut down entire businesses. Hearken back to the RIM “Blackberry” litigation which recently settled. If the schedule had been a few months earlier, RIM could certainly have been much better positioned before choosing to settle for more than $600 million rather than face the possibility of an injunction shutting down (or certainly making life exceedingly difficult with work-arounds) an entire business.

The Supreme Court’s decision in the eBay case could lead to a higher threshold for injunctions, now that money damages are not automatically precluded (nor injunctions automatically issued) in adjudicating patent infringement cases. Some critics complain that the ruling creates the possibility that courts can become the arbiters of a damage-based compulsory licensing system, while advocates say the ruling will prevent companies from buying up patents and exploiting their litigation value, rather than the underlying invention itself—the basis for patent protection in the first place. Most analysts, however, agree on one thing—the likelihood that products subject to patent infringement actions will be threatened with automatic shut downs will start to decrease, increasing the leverage defendants have in any patent infringement suit to settle cases.

Posted on

California Court Takes a Bite Out of Apple

In Apple v. Does (a.k.a. O’Grady v. Superior Court) Apple Computer sought to find the sources of certain leaks and rumors relating to trade secrets associated with an Apple product. Apple wanted to compel an email provider and Web publishers to divulge the information and the California Court of Appeal said “‘no,” ruling that the Stored Communications Act (the “Act”) prohibits these kinds of civil discovery efforts and prohibits Apple from compelling disclosure of the identity of the Websites’ sources. Aside from the holding that such a subpoena is not enforceable under the plain meaning of the Act, a subpoena compelling the disclosure of unpublished information from these particular entities would be unenforceable because of shield protections afforded reporters in California and, under the facts presented to the court, trying to get at these particular sources is protected by a conditional constitutional privilege against compulsory disclosure of confidential sources. If all this sounds like a lot of legal-ease, the bottom line is that Apple was barred from obtaining this type of information.

Posted on

Data Protection/Breach Disclosure Laws

In the news, yet more breaches of data security and the potential disclosure of personally identifiable, non-public information about you. From Wells Fargo to the Veterans Administration, breaches are becoming almost daily news. In response, more and more states are enacting breach disclosure laws requiring companies to notify consumers if there is an actual or potential breach of security compromising (or potentially compromising) your information. Even Congress is getting into the act of considering legislation at the national level. Although not all the definitions are uniform, nor are the requirements identical, most have common themes—but to understand what they are, how they affect you and what obligations you may have, you have to contact me, or you can simply wait for the next issue of Legal Bytes—stay tuned.