North Carolina Creates Tax Incentive for Digital Media Companies

Interactive digital media developers that are currently located in North Carolina—as well as those contemplating doing business in North Carolina—should evaluate their business activities to take full advantage of the tax benefits of a new North Carolina tax credit for companies developing interactive digital media, including video game companies and developers of online virtual worlds and interactive websites that allow consumers to create and manipulate certain digital goods (i.e., avatars in role-playing scenarios). In particular, digital media developers should consider joint ventures with educational institutions that will allow them to maximize the benefits provided by the North Carolina credit. For more information on North Carolina’s new tax credit for digital media developers, please read our full client alert, “North Carolina Creates New Tax Incentive Opportunity for Digital Media Companies,” written by Rimon attorneys Donald M. Griswold, Michael A. Jacobs, John P. Feldman and Kelley C. Miller.

Hats Off to CAP: New Advertising Codes in the UK Launched

This post was written by Christopher Hackford.

After an extensive year-long review, on March 16, 2010, the Committee of Advertising Practice in the United Kingdom announced the launch of new Advertising Codes for both broadcast and non-broadcast media, covering television standards, television scheduling, radio and text services.

Much remains nearly the same, but there are some notable new rules, including rules intended to offer greater protection for children, rules to prevent exaggerated environmental claims, and a new section dedicated to lotteries and promotions.

That said, here are two examples of some rules that have actually been relaxed. One: charities are now allowed to make comparisons with each other (competitive advertising fighting for your British Pound Sterling). Two: advertisers in the UK are now permitted to advertise condoms on television before 10:00 pm on television. Some of this may reflect the increasing contention among advertisers for share of wallet from consumers.

The new Codes did not deal with some contentious areas of British advertising, but to find out more, you will either have to plod through the Advertising Code yourself, or you could read the Rimon Advertising Technology & Media Alert, New Advertising Codes Launched, written by our ATM colleagues in the UK.

So, if you need help understanding the new Advertising Codes, or you want to hear from the authors of the alert and experts in this area, feel free to contact Marina Palomba, Christopher Hackford or Huw Morris directly. Of course, you can always contact me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

Outsourcing Providers Pitching Business? Be Careful What You Wish For.

As far back as May 2005, Legal Bytes reported that Europe was becoming a major outsourcing hub for a variety of reasons (Outsourcing Statistics). Well just this week, the law started catching up.

In what is certainly a major ruling and quite possibly the beginning of emboldened plaintiff-customers seeking greater accountability from outsourcing providers, Electronic Data Systems (EDS) has lost a case initiated by British Sky Broadcasting Plc (BSkyB) back in 2004, alleging that EDS, one of the leading outsourcing providers in the world, had misled BSkyB about its capabilities and expertise. For those of you who are legal research hounds, the case is cited as HT-06-311, British Sky Broadcasting v. Electronic Data Systems, although I don’t believe it has been fully published yet. The dispute arose over a services contract that was entered into by EDS and BSkyB in 2000, well before EDS was purchased in 2008 by its current owner, Hewlett-Packard (HP), for slightly more than US$13 billion.

To give you the background, BSkyB selected EDS to develop a new customer relationship management (CRM) system for its call centers in Scotland. After almost two years and failure by EDS to deliver, by March 2002, BSkyB ended the contract and took over the project itself – the frustration and events ultimately leading to the legal proceedings filed in 2004 that alleged EDS lied about its ability to undertake and complete the project. On the other side of the case, in its own court documents, EDS alleged that BSkyB simply “did not know what it wanted,” and wanted the lowest cost possible to accomplish “it.” To highlight the disconnect further, the contract with EDS was for £48 million, but according to court documents filed in the case, with all of the delays, budget over-runs, EDS’ failure to deliver, and BSkyB taking over and completing the project itself, costs had mounted to £265 million.

Justice Ramsey, writing for the British High Court, ruled that EDS misled BSkyB in making false and fraudulent misrepresentations in pitching and marketing its capabilities to BSkyB, giving rise to a claim for damages. Further, the court concluded, to the extent these representations were fraudulent, the limitation of liability clause in the contract that would have otherwise limited EDS’ liability for damages should be set aside and does not apply. While damages have not yet been fixed, in theory, if one includes the differential in costs, lost profits and other damages that are now fair game, EDS could be liable to BSkyB for well in excess of £200 million – that’s more than US$315 million at current exchange rates.

This is a major decision not only in the UK, but also for outsourcing deals around the globe, and if the beginning of a precedential trend, it could signal a radical shift in the way outsourcing deals are bid, negotiated and consummated. There is no question that anyone involved in outsourcing knows that the customer does not always have its specifications and detailed requirements buttoned up when discussions begin. Indeed, outsourcing often presents a singularity at which time enhancements, efficiencies and improvements that might have been difficult or impossible internally, can be effected by moving the operations to a third-party provider. The provider, eager to win a lucrative bid, may over-promise or over-represent its experience and capabilities. Smart negotiators know that forcing both sides to diligently and meticulously work through the “devil in the detail,” and making sure expectations, resources and capabilities are clearly set out and unambiguous, is the single most important contribution to be made in avoiding disputes, potential litigation and problems as the work and services unfold. Those of you in marketing know all too well that there is often a fine line between an actual claim and puffery. The former represents actionable representations, the latter . . . well, “you’ve tried the rest, now try the best” on every pizza box in the world.

Are you contemplating a major outsourcing initiative? Are you considering any outsourcing project, even a small one, involving critical operations – customer services, supply chain management, operations, transaction processing? Outsourcing is complicated. Need help? We wrote the book. No really, you can see for yourself: Outsourcing Agreements Line by Line: A Detailed Look at Outsourcing Agreements & How to Change Them to Fit Your Needs, written by none other than yours truly, Joseph I. Rosenbaum. Whether you check out the book or not, if you do need help, our Advertising Technology & Media law team here at Rimon has the help you need to make sure that, even if you are right, you can avoid the costly consequences and angst inherent in any legal proceedings between customers and providers. How can we help you? Call me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

UK Sports Minister Proposes Changes to Gambling Legislation

This post was also written by Laura Hicks.

Last week, Gerry Sutcliffe, Minister for Sport in the United Kingdom, announced proposals to make significant changes to the existing legislative framework under which remote gambling is regulated. Following a review of the system of online gambling regulation in Great Britain by the Department for Culture, Media and Sport, a consultation is being launched with a view to introducing laws requiring all online operators to apply for a license from the Gambling Commission in order to either advertise or provide gambling services to British consumers. According to the Minister for Sport, the proposed changes were “necessary to ensure the protections in the Gambling Act – to keep gambling crime free, to ensure gambling is fair and open, and to ensure that children and vulnerable people are protected from harm – continue to be afforded to British consumers.”

Under the proposals, a license will be required even if the gambling services are offered to British consumers using remote gambling equipment from outside Great Britain. Currently, only operators based and licensed in the UK are allowed to advertise in the UK, unless the country in which they are based is either a member state of the EEA or on the government’s “whitelist.” More information on the “whitelist” is available on the Department for Culture, Media and Sport website, but to give you some insight, territories currently on the list are Antigua and Barbuda, Tasmania, the States of Alderney and the Isle of Man. “Whitelisting” is the process used by the UK Ministry to assess the regulatory framework for gambling in any jurisdictions outside the EEA that apply for permission to advertise their services within the UK.

As well as being obliged to share information about suspicious betting patterns with the UK’s sports governing bodies and the Gambling Commission, foreign operators would also have to comply with British license requirements concerning the protection of children and vulnerable people, and contribute to the research, education and treatment of problem gambling in the UK.

This appears to be a move by the UK government to close a loophole in the laws that protect online gamblers in the UK, and that more closely mirror the more protectionist regime in the United States. If this extension of the licensing regime is introduced into legislation, it will be interesting to see how the regulator intends to enforce the license scheme against gambling companies with no UK presence. In the United States, enforcement has involved a variety of “indirect” mechanisms, from the Department of Justice’s use of the Interstate Wire Act of 1951, which applies to sports betting to assert jurisdiction over online gaming – even though the Fifth Circuit ruled in 2002 that the Wire Act only applies to sports betting – to seizing advertising payments made to broadcast networks by advertisers seeking to promote online gambling considered illegal by the United States. Since 2006, with the enactment of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), the United States has sought to seize assets in financial institutions tied to online gambling, based on what it considers illegal activity, money laundering and a variety of other offenses. It is noteworthy that UIGEA does not make online gambling illegal per se, but rather prohibits any transfer of funds from a financial institution (as defined in the legislation) to an illegal Internet gambling site.

Once you read the UK Sports Ministry’s announcement, if you need more information, contact Laura Hicks, an associate in the Media and Technology team, in our London office. Of course, you can always contact me, Joseph I. (“Joe”) Rosenbaum in New York, or Gregor Pryor in London, or the Rimon attorney with whom you regularly work, if you need legal advice, information or support on this subject.

Happy New Year Wishes for 2010

Wishing you health, happiness, prosperity and peace in 2010

In a tradition that started almost 4,000 years ago by the ancient Babylonians – although they celebrated the new year upon seeing the first new moon after the vernal equinox – please enjoy a very happy, safe and joyous new year celebration.  Those of you who look forward to Useless But Compelling Facts can read more about the history of new year celebrations, or how the new year’s festivities, now televised around the world, began in New York’s Times Square.

New Year's Greetings
 
This is the first year we have published in a blog format, and with your feedback – mostly positive and always constructive – and more than 17,000 visitors in slightly less than 11 months, I am grateful and appreciative for your support.  Thank you for reading Legal Bytes.

–  Joe Rosenbaum

Looking Ahead to 2010: To Boldly Go . . . .

Each year, at the end of the year, I create a Legal Bytes piece intended to be more thoughtful and philosophical than the articles posted during the year. Thank you, in advance, for reading and allowing me to attempt to provide some insight and thoughtfulness to your day, in what I hope is an enlightening and entertaining manner. While my normal postings are designed to bring you news, updates and thoughts about timely events, this is one is longer – and arguably less exciting – and asks you to indulge me in a bit of philosophy, or what passes for an attempt at philosophy about the year past and the year ahead.

This article will contain no hypertext links to distract you; it will not have citations to offer more information about a snippet; nor will it dazzle you with factoids or intrigue you with today’s news. It’s just me philosophizing, my one chance during the year to ramble about where we’ve been and where I think we might be headed – without any credentials, qualifications or expertise to do so. 

So loyal Legal Bytes’ readers, you don’t have to buckle up or fasten any seat belts. Just pull up an easy chair, open your Blackberry, your Kindle, your Droid, your iPhone, PC, Laptop, Netbook, Web-TV, PDA, or whatever your favorite Legal Bytes’ reading device might be; pour a glass of tea (or whatever your liquid of choice might be), sit back and enjoy . . . and again, thank you. So here goes.

*****

I’m a Star Trek fan. I’ve watched all of the television episodes, starting from the day Captain Pike, bound to a wheelchair resulting from his own heroism, is taken to the very first virtual world I can recall being displayed in mass media. I’ve watched all of the Star Trek movies. I confess to being a victim of an "even number" preference, culminating so far in this last Star Trek – certainly among, if not the favorite of all of them. 

Computers that can search for anything and everything. Touch screens and voice commands. Warp speed and instant communication across multiple languages and without regard to geography or time zones. All that with a bit of humor, a bit of clever philosophy and a social network (crew) that have hugely diverse (one might say inter-planetary) ethnic, cultural and racial characteristics, and at the same time work seamlessly together as a team. More than science fiction, Star Trek is really science within fiction, and a fiction that might just be reality if we close our eyes long enough and hard enough. Most of all, to boldly go where most of us have never gone before isn’t really referring to space as the "final frontier," is it?

Now I know not everyone is a Trekkie, and I confess that while I am a big fan, I’m not really obsessed. I don’t go to conventions or wear uniforms, nor do I run around screaming "Beam me up," although I do confess to a feeble attempt at a Scottish accent when I respond "I can’t do it, Captain." So what is it that makes me able to watch over and over again and relish each scene and each episode, and look forward to each new motion picture? It’s not simply because I like science fiction. Nor is it solely because of an ensemble cast, made up of some extraordinarily fine individual actors who work extraordinarily well with each other and with scripts that combine serious science fiction with some tongue-in-cheek individualism, not always in human form.

Let me digress to a personal, but relevant anecdote. Many years ago I had the pleasure of actually meeting Leonard Nimoy. I won’t go into detail, but on behalf of a client, I had contacted Phil Gersh, the gentleman (a true gentleman) who represented Mr. Nimoy at the time, and Mr. Gersh must have relayed our conversation to Mr. Nimoy, resulting in a meeting in New York. It was over lunch, very relaxed and informal, but I admit to feeling an amazing sense of excitement, good fortune and privilege at being able to actually sit down and talk with someone I had long admired as an actor, writer, director and producer.

Continue reading “Looking Ahead to 2010: To Boldly Go . . . .”

Anti-Social? I’ll Still Share Our Social Media Presentations

In case you weren’t able to attend any of our three seminars on Social Media, we’ll still let you get a glimpse of what you missed. First, you missed Joe Rosenbaum and Anthony Traymore in San Francisco and Palo Alto, and in Century City (L.A.), where we were joined by Kate O’Brien, where we presented: “Social Media: It’s 10:00 p.m. Do You Know Where Your Brand Is?”

If that alone didn’t make you sad, you also missed all the substantive insights and experiences that were shared, the audio-visual effects, the examples and live experience of our presenters and local hosts, as well as the hospitality of three of Rimon’s West Coast offices.

What you don’t have to miss is a copy (in PDF form) of the presentations – each of which had slight variations. You can see and download each by selecting the live link on each city below.

While the base presentations were much the same in all three places, in San Francisco we focused a bit more on social media in financial services and corporate securities law. In Silicon Valley (Palo Alto), we did a somewhat deeper dive into the implications of social media in online gaming and entertainment, and in Century City, we focused on user-generated content, open-forum platforms and competitive advertising.

While the results are still being tabulated, we do know that a significant number of our clients and guests received continuing legal education credit (CLE) for attending, in addition to a meal – worth the price of free admission anywhere. We haven’t looked at all the evaluations yet either, but no one fell asleep, everyone stayed through the closing credits and a rousing rendition of the Social Media Blues, and many of our attendees stayed for follow-up questions.

We also received a number of inquiries about the possibility of individual companies or groups hosting a Social Media seminar presented by Rimon, and we are happy to do so for yours – we are an accredited CLE provider in most jurisdictions, if that is important to the legal folks – but many have asked about presenting to senior executives, business development, marketing, media and other professionals as well.

Not only can we tailor a seminar to your particular company, your brands and/or your industry, but we have developed, and will continue to develop, modules and focused presentation materials regarding online gaming and virtual worlds; promotions (e.g., sweepstakes, contests, product placements, branded entertainment); advertising and marketing (e.g., testimonials, endorsements, buzz, viral and word-of-mouth); labor and employment; corporate policy, public relations and crisis management; financial services; media and entertainment, including motion pictures and machinima; pharmaceutical, health and life sciences; technology and e-commerce; digital rights management (e.g., user-generated content, hybrid media); privacy, data protection and security; target marketing, location-based and behavioral advertising; regulatory requirements – both government and SRO (e.g., FTC, FCC, CSPC, FDA, PCI compliance, FACTA, GLB, HIPAA); cloud computing, and so much more – and we haven’t even mentioned our international or global experience, expertise or resources in other jurisdictions around the world.

If you are interested, please contact me (Joseph I. Rosenbaum) and we can work with you to help you engage us in your social media conversation with topics that are relevant to you. We will also be updating the research work already released in our Social Media White Paper with some of the materials and further work we continue to do in this area. Stay tuned – social media is not a fad.

A German Tale of Two Marks (neither Karl nor Groucho)

This post was also written by Katharina Weimar.

In 1904, the already acclaimed American novelist Jack London published The Sea-Wolf, a dramatic and powerful adventure story about a sea captain and the survivors he has rescued after an ocean collision. But then, that’s not news is it? What is news is the fact that two film producers in Germany, almost at the same time, recently produced films based on that novel, AND both used the German translation “Der Seewolf” as the title of their films. Really? Both of them? Yes, really.

Well it turns out that one of these producers had previously created a television production of Der Seewolf back in 1971. So that producer (we’ll call him Number 1) went to court in Munich demanding that the other producer (we’ll call him Number 2) relinquish the title and recognize the priority of the title in Number 1 – based on his earlier work and concerning the use of that name for his new film. But, as they say, the plot thickens. The defendant – producer Number 2 – had also applied for a German trademark registration after announcing his production in the film press in Germany.

Much like the psychological drama unfolding in the Jack London novel, the court decided that Number 2 must withdraw the trademark application and is prohibited from distributing the film using the name “Der Seewolf” or “Seewolf,” because Number 1 already has priority. You see, the 1971 work continues to enjoy re-runs and re-broadcasts so that, according to the court, copyright protection of the title “Der Seewolf” continues to exist for the benefit of Number 1. Not only that, but since the titles were identical and were based on the same novel, the court of course also concluded that there is a direct and clear likelihood of confusion – a key ingredient for a claim of trademark infringement. Following that logic, you might think that the requirements for both a copyright and a trademark infringement claim exist, so Number 2 is prohibited from using the title. However, quite unhappy about this state of affairs, Number 2 decided to appeal the ruling.

Now this is where truth becomes stranger than the underlying fiction, even though justice may well have been served in both the Jack London novel and this tale of two producers. The Higher Regional Court of Munich reversed the decision of the lower court, deciding that Number 2 is absolutely still entitled to publicize and distribute a cinematographic work using the title “Der Seewolf” or “Seewolf.” The court did not dispute that Number 1, as the legitimate user of the title dating back to 1971, had the right to bring an action against Number 2. You see in Germany, any legitimate user of the title of a work has the right to assert a claim to protect that title. Even further, the High Court agreed there indeed was a strong risk of confusion between the works given the 1971 title “Der Seewolf” and the new title “Der Seewolf” or “Seewolf,” since they were identical. So far so good.

BUT, the High Court didn’t stop there. You see, also under § 23, No. 2 of the German Trademark Act, the legitimate owner or user of a business mark (the title of a cinematographic work falls within the definition of business marks) cannot prohibit anyone else from also using an identical mark, as long as is it is used to describe the characteristics or properties of the goods or services (and, of course, unless there is some moral or public policy reason to create a restriction). Well, as you might have guessed, the Higher Court in Munich found no moral or public policy issue, AND it was their opinion that the titles were both descriptive: both films were adaptations of the same Jack London novel, The Sea-Wolf, and both titles were simply descriptive translations derived from that work.

So we end up with the curious situation (and result) in which it is true that Number 1 has the right to claim protection for the title “Der Seewolf” as an adaptation of the original Jack London novel based on the 1971 use of that title, but Number 1 also has to accept the legal conclusion that the exact same title may be used by anyone else producing an adaptation of that same novel!

What can we learn from this? First, intellectual property laws are different around the world, so don’t assume rights or protections without consulting legal experts and advisors who appreciate and understand the differences. Second, always remember that intellectual property, by definition, is a creature of specific laws and statutes. As with patents, rights in trademarks and copyright arise, and are interpreted and enforced under the specific laws of the jurisdiction involved. For example, aspirin is no longer a protected trademark in the United States, the United Kingdom and many other countries – the victim of “genericide.” But “Aspirin” remains a protected trademark in Germany, Canada and a host of other countries. Further, copyright laws protect against copying, not original creation, so two or more individuals, independently creating two identical works (without copying), would each be entitled to copyright protection, with neither able to stop the other – whether for paintings, novels or computer software programs. Besides, copyright protection is not forever. Jack London’s rights in The Sea Wolf copyright expired and his novel is publicly available. By adapting, translating or using a descriptive name to refer to these films, neither of the producers was able to claim exclusive rights to the use of the title, any more than Jack London’s heirs could claim the copyright still existed.

So when it comes to intellectual property rights, don’t assume, and do consult an expert. If you want to know more, just contact Katharina Weimer in Rimon’s Munich office or Joseph I. (“Joe”) Rosenbaum in New York, or any of the Rimon lawyers you work with. We are happy to help.

Touchdown!

The NFL Players Association was recently ordered to pay $7 million in compensatory damages and $21 million in punitive damages to retired football players who claimed they were excluded from lucrative marketing deals. The class action claimed the “Madden” interactive football games, and deals involving sports card and sponsorships, intentionally scrambled images of retired players to avoid paying royalties. Active players received royalties for their images, but retired players’ images were scrambled. Now normally that might be a key question of fact to be determined by a jury. Unfortunately, there was a smoking gun! Someone at NFLPA wrote to Electronic Arts, publisher of the popular Madden games, explaining that unless they scrambled the retired players’ images, payments would be required. Oops.

…And Now A Word From the FCC

The FCC is looking into regulations regarding disclosures for product placements and has been soliciting comments on its proposed changes. Should feature films produced for theatrical release and then aired on TV, and which have traditionally enjoyed an exemption from the sponsorship identification required of TV programming—have that exemption removed? should product placements be identified when the product is shown on screen? Should embedded advertising be completely prohibited in children’s programming? Increasing product placement and integration into programming has stimulated concern among consumer advocacy groups and Congressional legislators that the rules, many of which are decades old, do not address the new wave of advertising and promotion that has arisen as DVR technology and marketing has migrated away from the traditional “30-second spot.”

Continue reading “…And Now A Word From the FCC”