Significant Cyberspace Developments of 2014

It's a bit late for a year-end wrap-up, but better late than never, right?  For those who may have missed some of these, here are my picks for some of the more important developments in Cyberspace law that occurred in 2014. This is not meant to be an exhaustive list, and there are certainly other important developments not on the list.  

In no particular order:

·        Data Breaches --- 2014 may be “the Year of the Data Breach”.  Either that or we are just discovering and reporting them more.  The Identity Theft Resource Center identified 783 data breaches in 2014, exposing over 85 MILLION records!  One real problem is who pays for it.  The retailers (Home Depot, etc.) just shrug and say “Not our problem.  Banks, you pay for remediation”  The banks are fighting back.  Indemnification battles are getting fierce on data protection clauses in contracts.  If the industry does not sort things out, we may need the regulators to step in.

·        Alice Corp. v CLS Bank  -- A major decision in patent law from the U.S. Supreme Court.  The Court invalidated a patent that implemented an escrow process by using a computer, holding that the invention only covered an abstract idea and was not eligible for patent protection.  The decision has already being used to invalidate over a dozen patents (including one to run a bingo game on a computer), and my guess is many more are no longer being enforced but will never see a formal decision.  The decision is a bad one for patent trolls, who are often trying to enforce relatively weak or unenforceable patents.

·        ABC V. Aereo --- Not a fair use case, but a corollary of the “Don’t build a business model based on fair use” theorem.  The Supreme Court held that Aereo's system was just too contrived, and violated the broadcasters' exclusive right to perform copyrighted works by transmission.  The Court's holding was narrowly drawn,   probably due to a gut feeling that what Aereo was doing just was not kosher, and the Court avoided applying its decision broadly to "cloud computing" and other Internet business models.  We shall have to wait and see how the decision is applied to new streaming services like Slingstream.

·        I-O-T --- I don’t like the acronym, but it works.  Everything is being connected to everything. In May, the White House Report on Big Data recognized opportunities and concerns about data collection.   BUT WHO OWNS THE DATA???    In the absence of regulation, contracts will determine who can do what with the data.  But vendors like Sirius need to learn how to do online contracting correctly.  Once the vendors figure it out,  mass market consumers may have little ability to say "No."  Watch for the FTC to step in, at least to "encourage" transparency in data collection practices.

·        Online Contracting --- Cases like Barnes & Noble (and others) reaffirm that there is a right way and a wrong way to obtain assent to online terms.  Now Safeway also reaffirms Douglas v. California (9th Cir. 1997), that you can’t simply modify the terms at will without providing notice to the users and expect to be able to enforce the new terms.  Despite the prevailing practice, the American Bar Association's Cyberspace Law Committee (disclosure: of which I am a member) has been preaching this for over a decade!

·        Riley v California --- The U.S. Supreme Court recognized that a cell phone is not the same as a pack of cigarettes, and ruled that police cannot search the data on a cell phone without a warrant.  This is a big victory for privacy.  But where does the Supreme Court's analogy stop?  Does it extend to personal content stored on the cloud (query how the police could get access)?  What about personal data stored on a PC? 

·        Right to be Forgotten --- This is a big enough topic in Europe it needs to be mentioned.  In May the European Court of Justice ruled that Google needs to comply with EU data privacy laws and must remove links to a 1998 story about the plaintiff.  Whether the concept takes hold in the United States remains to be seen, especially with the tradition of robust First Amendment jurisprudence.

·        ApplePay --- Fad or flop?  Time will tell.  I vote flop.  Not enough vendors have the proper equipment, and there is not a huge installed base of iPhone 6 users yet.  

What do you consider to be the top Cyberspace law developments of 2014? 

(Edit) Here is Professor Eric Goldman's list of Top 10 Internet Law developments for 2014

http://www.forbes.com/sites/ericgoldman/2015/01/23/top-10-internet-law-developments-of-2014/

RHODE ISLAND. BEER. TRADEMARKS.

Last week’s grand opening of the Tilted Barn Brewery in Exeter got me to thinking.  The craft beer industry is exploding in Rhode Island.  Branding and identification are very important to these companies.  They spend a lot of time coming up with catchy and clever names for their companies and their brews.  But are these companies doing enough to protect their brands?  Probably not.

Trademarks are the most common form of intellectual property we encounter in our everyday lives.  Everywhere we look, on our toothpaste and breakfast cereal in the morning, on the store signs and sides of buildings as we drive to work or school, on television and the Internet, and in the beer and wine and soda we drink, we see hundreds of trademarks a day.  Trademarks influence consumers, help products or services stand out, and create a brand identity for a business

At last count, there are at least 14 breweries and brew-restaurants in operation in Rhode Island, with others rumored to be in the planning stages. Most of these breweries have multiple offerings available to the public.  Yet, according to the records of the U.S. Patent and Trademark Office, there are only 22 registered trademarks or pending applications for beer owned by 10 companies in Rhode Island.  Eleven (11) of these are owned by either Narragansett or Foolproof.  This leaves 11 registrations owned by 8 other businesses.  Let’s take a quick look.

NARRAGANSETT

Narragansett’s repurchase by local investors in the 1990’s heralded a new era of brewing in Rhode Island.   Narragansett has registered 6 of its marks, some of which have been in use since the original Narragansett Brewery days, and has one pending application:

• MADE ON HONOR, SOLD ON MERIT
• OFFICIAL BEER OF THE CLAM
• LOVECRAFT
• HI-NEIGHBOR!
• ‘GANSETT
• 

FOOLPROOF

Foolproof seems to be taking some active steps to protect itself.  Foolproof has 4 registrations or pending applications.  The company has registered FOOLPROOF, the name of the company, and its jester crown logo.  

They have followed up with registrations for the mainstay product “RAINCLOUD” and for a newer product “LA FERME URBAINE (LFU).”  But the company let pending applications for its BACKYAHD and BARSTOOL brands lapse.  What’s up with that?

OTHERS

Other RI brewers who have been using the registration system to protect their trademark rights include:

Farmer Willie
	GINGER WITH SOUL
Proclamation Ale	PROCLAMATION ALE
Providence Brewing Company	PROVIDENCE BREWING COMPANY
	THE GREAT PROVIDENCE BREWING COMPANY
Brutopia Brewery	BRUTOPIA BREWERY
Grey Sail Brewing Company	GREY SAIL
Trinity Beer Company
Newport Harbor Corp.	CASTLE HILL WINDWARD WEISS
J.H. Restaurants

Clearly, the breweries are not taking advantage of the opportunities the legal system provides to protect the marks and company names against others who adopt confusingly similar names or brands.

One reason may be the cost.  A federal application can cost $500- 1000 or more if the application encounters problems.  Many of these businesses are bootstrapping their way off the ground with sales of product and merchandise items funding the next batches.  There is no spare cash for trademark registrations.  But what the businesses are not taking into account is that the cost of trademark registration is modest when compared to the costs of advertising promotion and marketing over the years.  

Aside from the cost, there are sometimes other reasons why companies do not apply to register their trademarks:

• The product or brand is seasonal, and does not have a long enough shelf life to be worth protecting.
• The mark is too descriptive, or refers to a geographic place (OCEAN STATE or PROVIDENCE) that is difficult to protect.  But note that these marks can be registered in many cases.
• The mark is similar to another mark that is already registered, and the company does not want to call attention to itself by filing an application

It is important to register trademarks as soon as possible.  Later users may be able to register the mark, and keep the registration.  The modest cost of obtaining a U.S. registration is far, far less than the amounts a business would spend litigating over the rights later.

Investments in RI Companies Rebound in 4th Quarter, Top $81 Million in 2013

After a slow third quarter, venture capital investments rebounded in the last quarter of 2014, according to the MoneyTree Report by PriceWaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

Venture capital investments in New England companies rose to $917 million invested in 106 companies for the 4th quarter, an 7% increase over the 3rd quarter in terms of dollars invested, but a 5% decrease in terms of number of deals.

Three of those 106 companies are in Rhode Island, capturing a total of $27,356,000 in the last quarter.  Over the entire year, venture investments in Rhode Island companies totaled over $81 million, a decrease from the $106 million invested in Rhode Island businesses in 2012.

The increase in investment levels in Rhode Island companies is encouraging, especially after the disastrous third quarter.  Similar evidence of the increased attention to Rhode Island companies was announced recently by the Founders League, to the effect that approximately $140 million was invested in Rhode Island start up companies in 2013. (This number includes investments that are not reported in the MoneyTree survey).

Although those investment levels in Rhode Island companies are improving, they are just starting to approach levels of a decade ago.  The high mark was in 2001, when over $119 million was invested in 11 Rhode Island companies.  In 2002, venture capital investments in Rhode Island companies totaled about $96 million.

Similar trends are seen throughout the United States.   Nationally, venture capitalists invested $8.4 billion in 1077 deals in the fourth quarter, and a total of $29.4 billion in 3955 deals for the entire year.  This represents an increase of 7% in dollars and 4% in deals over 2012 levels. For the year, investments into the software industry (which includes Internet companies) reached the highest levels since 2000 with $11.0 billion invested in 1523 deals.  Internet-specific companies captured $7.1 billion in 2013, marking the highest level of Internet investment since 2001.

Locally, the three companies to receive investments in the fourth quarter of 2013 are:

• Greenbytes, Inc., of Providence, received a $3,500,000 follow on investment from existing investors Battery Ventures and Generation Investment Management.  Founded in 2007, Greenbytes develops desktop virtualization storage optimization software to maximize the performance and capacity of virtual desktops.
• Shape Up the Nation, of Providence, received a $3,856,000 investment in November from Cue Ball Group and Excel Venture Management.  Founded in 2006, Shape Up is a leading provider of clinicaly-proven, social networking and incentives-based employee wellness programs that help people exercise more, eat healthier and improve their overall well-being.  Shape Up will use a significant portion of the investment to build upon its existing mobile capabilities and launch its mobile app and device integration infrastructure.  
• Utilidata, Inc., of Providence, received a Series B financing of approximately $20,000,000 from existing investors Braemar Energy Ventures and American Electric Power, and from new investors  Formation 8 Partners and Saudi Aramco Energy Ventures.  Utilidata is a leading supplier of technology to help reduce energy waste from power lines between electric utilities' substations and their customers.

(Sources:  MoneyTree Report and company websites)

Related posts:

What Happened? Venture Investments in RI Companies Plummet in Q3 2013 (November 8, 2013)

Venture Investments in RI Companies Jump in Q2 2013 (October 2, 2013)

Venture Investment Dollars in RI Companies Fall in First Quarter 2013 (July 5, 2013)

Venture Investment Dollars in RI Companies Soar in 2012 (February 19, 2013)

More Venture Dollars Find RI in 4th Quarter (February 3, 2012)

Quotes in BNA's Cyberlaw Review 2014

Near the end of 2013, Bloomberg BNA asked leading attorneys, government officials, and online experts for their views on the most important legal developments in online law during 2013 and on what policy areas they believed would be the most important to their practices in 2014. The responses were supposed to be short, like tweets or sound bites. BNA complied the contributions into a report, essentially a collection of short thoughts and insights on various aspects of online law, organized by subject matter.

Two of my contributions appear in the Report, which was made available to the public today. One is under the Online Contracts heading, and one under the Digital Copyrights heading.

Thanks to Bloomberg BNA for permission to link to the report.

RI TrademarkTracker™ --- 2013 RI Trademark Filings Down 14% Over 2012 Filings

Applicants with Rhode Island addresses filed 172 applications to register trademarks with the U.S. Patent and Trademark Office (PTO) during the fourth quarter of 2013. This represents a 17% decrease over the 208 trademark applications filed by Rhode Island owners during the fourth quarter of 2012, and a 27% decrease over the 235 trademark applications filed for the fourth quarter of 2011.

For the year, Rhode Island applicants filed 908 applications with the PTO. This represents a 14% decrease over the 1053 Rhode Island trademark applications filed in 2012, and a 19% decrease over the 1127 trademark applications filed by Rhode Islanders in 2011.

Nationally, the slight upward trend in filings continues. A total of 73,998 trademark applications were filed with the PTO in the fourth quarter of 2013, representing a 0.6 % increase over the 73,540 trademark applications filed in the fourth quarter of 2012. A total of 319,002 applications were filed with the PTO in 2013, representing a 1.2 % increase over the 315,375 applications filed during 2012.

The most likely explanation for the downward trend in filings in Rhode Island remains the sluggish economy in Rhode Island.  Companies are watching budgets carefully and only filing where necessary to protect their major brands. Nationally, the economy is picking up, but the trend has not really been felt here yet.

The top five Rhode Island filers during October, November and December of 2013 are 3 consumer product companies, one financial services company and one educational institution.  RBS Citizens Financial Group  filed the largest number of applications among Rhode Island applicants with 27 filings.  Providence College was next with 15 applications. CVS Pharmacy, Inc. was third with 10 applications, followed by Hasbro (8 filings) and Alex and Ani  (7 filings).

For the year, the top Rhode Island filer was Hasbro with 61 applications.  RBS Citizens Financial Group was next with 39 applications.  CVS Pharmacy was third with 28 applications.  Alex & Ani, The Big East Conference (now known as The American Athletic Conference), and Wizards of the Coast (a Hasbro subsidiary) each filed 27 applications.

Data supplied by PTO.

Related Posts:

RI Trademark Filings Down 12.9% Through 3rd Quarter 2013 (October 18, 2013)

RI Trademark Filings Decrease 9% in First Half of 2013 (August 15, 2013)

RI IPCaseTracker™ --- 2013 Was a Typical Year

2013 turned out to be a typical year for new intellectual property (patent, trademark and copyright) case filings in the U.S. District Court for Rhode Island.  We got off to a fast start, with 10 new intellectual property case filings in the first six months of 2013 at the, 6 filings in June alone. But filings dropped dramatically in the second half of the year, with only 1 new trademark filing in the fourth quarter.

In the end, 2013 saw 7 new patent case filings, 3 new trademark case filings, and 3 new copyright case filings. This matches the 2011 total of 13 new filings, and just barely exceeds the 2012 total of 12 new case filings.

Let’s hope for more intellectual property case filings in 2014.  Then there will be more cases to highlight here!

These numbers only include cases that have been designated in the court's database as a patent, trademark or copyright case. There are other cases pending where the complaint may include trademark or other intellectual property claims, or where intellectual property counterclaims may have been asserted. But unless the case is designated as such in the court's database, we are not counting it here. 

Related Posts:

RIIPCaseTracker™ -- Only 2 New IP Cases Filed in RI in 3rd Quarter 2013

6 New IP Cases Filed in RI in June2013

Is it Software? Is it a Service? It Matters for Purposes of Trademark Registration.

NetJets Inc. v. IntelliJet Group, LLC, No. 2:12-CV-0059 (S.D. Ohio Dec. 19, 2013)

This recent decision highlights the importance of spending some time thinking about whether a mark used in connection with software is being used on a product (software), is being used for “software as a service,” or is merely incidental to the underlying service.

In NetJets, the federal district court cancelled an incontestable, 18 year old registration for INTELLIJET for “computer software for managing aircraft leasing and sales” as void ab initio and as abandoned, even though:

·                 NetJets had used the mark as the name of its internal software since 1995;

·                 NetJets had spent over $20 million to upgrade its software;

·                 NetJets launched a “portal” in 2013 where clients could log in and see the INTELLIJET name displayed on the screen, but the mark was not displayed to non-customers who access the NetJets website;

·                 NetJets included discussion of the IntelliJet’s software functionality in newsletters to owners and in literature provided to passengers on its planes;

·                 NetJets brochures have mentioned the IntelliJets software;

·                 Several magazine articles about NetJets have mentioned the IntelliJets software;

·                 NetJets demonstrates the software for customers and potential customers.

The court determined that NetJets did not have enforceable rights in the INTELLIJET mark because it did not use the mark in commerce as the term “use in commerce” is defined in the federal Lanham Act.  Section 45 of the federal Lanham Act, 15 U.S.C. § 1127, defines “use in commerce,” in relevant part: 

The term “use in commerce” means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark.  For purposes of this Act, a mark shall be deemed to be in use in commerce – (1) on goods when – (A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto; or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale; and (B) the goods are sold or transported in commerce ...

Key factors in the court’s determination that the use of the INTELLIJET mark on NetJets’ software was not a “use in commerce” were:

·                 NetJets is not in the business of selling software;

·                 The IntelliJet software is simply the conduit through which NetJets provides a high level of service to its customers;

·                 NetJets does not promote the software as a separate product, but only as part and parcel of the services NetJets provides;

·                 NetJets does not sell the IntelliJet software separately from the services that NetJets provides.

As a result, the court concluded that NetJets’ use of the INTELLIJET mark is not a “use in commerce” on the software, and cancelled the registration.

As a result of the NetJets decision, and similar decisions in other courts, a trademark owner that uses software in its business should take care in determining whether to file a trademark application at all to cover the software, and what goods or services are covered in any trademark application that is filed.  To be safe, especially in close situations, the trademark owner may want to consider filing separate applications to register the mark for the software and for the underlying services.  This strategy would still provide for registration and protection of the mark for the services in the event that the registration of the mark for software is challenged or cancelled.