Venture Investment Dollars in RI Companies Soar in 2012

Venture capital investments in New England rose to $790 million invested in 114 companies in the fourth quarter of 2011, according to the MoneyTree Report by PriceWaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

Four of those companies are in Rhode Island, netting a total of $35,599,900.  Over the entire year, venture investments in Rhode Island companies totaled over $106 million, a huge increase over the $43.3 million invested in RI companies in 2011.

While investment levels in Rhode Island companies are improving, they are just starting to reach levels of a decade ago. The high mark was in 2000, when over $100 million was invested in 11 Rhode Island companies. In 2001, venture capital investments in Rhode Island companies totalled $46.9 million for the entire year.

At the same time, investment levels across the U.S.are on the decline.  Nationally, venture capitalists invested $6.4 billion in 968 deals in the fourth quarter, and a total of $26.5 billion in 3698 deals for the entire year.  This represents a decrease of 10% in dollars and a 6% decrease in deals over 2011.  The Software, Biotechnology and Medical Device sectors received the most investment dollars for the year.  Internet companies scored their second highest level of investment since 2001, with $6.7 billion being invested in 976 deals.

Locally, the four companies to receive investments in the fourth quarter of 2012 are: 

•    Illuminoss Medical, Inc. of East Providence, a company that is developing minimally invasive solutions for the stabilization and treatment of bone fractures, received an expansion investment from Foundation Medical Partners.

•    The NanoSteel Company, of Providence, received $10,000,000 in investments from EnerTech Capital and Fairhaven Capital Partners.  The NanoSteel Company develops nano-structured steel alloys designed to deliver superior performance.

•    PreCision Dermatology Inc., of Cumberland, received $25,599,900 in expansion investments from Essex Woodlands Health Ventures, Frazier Healthcare, Longitude Capital Associates L.P., and NovaQuest Capital Management LLC.  PreCision Dermatology is developing innovative therapies to physicians and patients that demonstrably improve the skin.

•    TranslateAbroad Inc., of Providence, a company that provides a mobile application that allows users to point their phone camera at any Chinese text (like a food menu) and receive real-time translations, received an early stage investment from 500 Startups L.P.

Let's hope 2013 continues the upward trend of more investment dollars to Rhode Island!

FTC Provides Privacy Guidance for Mobile App Developers

With about 100 new mobile apps being released every day, how do you keep track of how your personal information is being used?  Mobile apps have been notoriously slow in adopting privacy policies and user-friendly privacy settings.  After some recent pronouncements by the California Attorney General, the Federal Trade Commission issued a new Report on Mobile Privacy Disclosures and some best practice guidelines for mobile app developers last week..

While a great deal of the report is directed at platform developers (such as Apple, Google, Microsoft and Blackberry), there are some recommendations for app developers as well.  These include:

• Having a privacy policy and making sure the policy is available through the platform's app store
• Providing just-in-time disclosures and obtaining affirmative express consent when collecting sensitive data outside the platform's API (such as financial, health or children's data) or sharing sensitive data with third parties
• While app level disclosures do not need to repeat the platform level disclosures on data the app collects, if the app developer decides to share that data then the just-in-time disclosures and consents should kick in
• App developers need to understand the third party apps they integrate (particularly those that facilitate advertising and analytics) in order to provide truthful disclosures
• App developers should consider participating in self regulatory programs, trade associations, and industry organizations, which can provide industry wide guidance on how to make uniform, short-form privacy disclosures

The FTC also issued some tips to mobile app developers.  These are more in the nature of suggestions and best practices, such as understanding the platform and libraries you are using and how they collect data, and considering encryption for sensitive data. 

The thrust of the FTC's concerns is that privacy be incorporated by design, not by afterthought.  The FTC has demonstrated that it is serious about these issues, and has initiated enforcement actions against companies whose apps do not comply.  For example, the FTC recently settled with the social media company Path.  Path was collecting birth dates as part of the registration process, but its original app did not prevent children under 13 from registering.  Path caught the error on its own and revised the app to kick out children under 13 who tried to register.  But the FTC still enforced an $800,000 penalty for Path's violation of COPPA with its initial design, and is requiring Path to obtain independent privacy assessments every other year for the next 20 years.

The FTC publications, following the California Attorney General's pronouncements last month, make it clear the the state and federal regulators are watching the mobile industry closely.  All participants --- app developers, app platforms, and app advertisers --- should carefully review their privacy and data collection policies and those of the apps from which they collect information to make sure that the privacy practices are following the current guidelines and that the data collection practices are consistent with the privacy policies.

ICANN to Reveal New Generic Top Level Domains Tomorrow

Just a brief update of what is going on with ICANN's plan to add new top level domains (in addition to .com, .net. org, .biz, etc).

• ICANN has received over 1900 applications, generating in excess of $350 million in filing fees
• ICANN will reveal the complete list of applications and applicants tomorrow (June 13, 2012), but in the meantime some of the applicants have disclosed their applications
• There will be a process for lodging objections for concerns of trademark infringement or otherwise

After ICANN publishes the complete list of new gTLD applications, there will be a 60 day period in which anyone may file comments with ICANN concerning the applications.  There will also be an opportunity for third parties to file formal objections.

 

Once the list of applications is revealed, companies should review the list and determine if there are any proposed names that would infringe its trademarks or would otherwise be of concern.

 

More to follow after the complete list is revealed.

Saving Costs in the U.S. Trademark Registration Process

Because of the complexities of the U.S. trademark registration system, many trademark owners from other countries, and their counsel, are reluctant to file national or international applications in the United States. One of the reasons often given is the higher cost of obtaining trademark protection in the United States due to the statutory requirements and the formalities that must be observed. It is frequently overlooked, however, that a U.S. trademark registration covers a largely monolingual (English), highly sophisticated market of over 310 million people.

There are opportunities for international applicants and their counsel to save money and time in the United States registration process. Here is a link to an article I have written, that was recently published by the World Patent and Trademark News, and distributed to over 9500 attendees at the International Trademark Association annual meeting in Washington, D.C.  Comments, especially from outside the United States, are especially welcome, as I am thinking into turning this into a longer, more detailed work.

New Trademark Case Filed in D RI --- Can Erwin Pearl Stop JC Penney's Internet Keyword Purchases?

Erwin Pearl, Inc. v. J.C. Penney Corp., No. 12-207-S (D.R.I. filed March 20, 2012)

From the complaint, this case appears to be one where Erwin Pearl is complaining about J.C. Penney’s purchase from Google of “Erwin Pearl” as a keyword for a “sponsored link,” when J.C. Penney did not sell that brand of jewelry  This practice caused J.C. Penney’s advertisements to appear at the beginning of the search results page whenever a computer user entered “Erwin Pearl” as a search term.

Even though the courts continue to struggle with how to characterize “keyword” cases, it may be difficult for Erwin Pearl to prevail unless it shows that JC Penney used its trademarks in the text of the ads, or stated that it sold Erwin Pearl branded jewelry when it did not.

According to the Complaint, in 2011 Google “suspended” J.C. Penney’s ability to appear prominently in search results for a period of 90 days.  J.C. Penney allegedly used methods of improving its rankings in search results that Google felt were unfair.  As a result, J.C. Penney turned to purchasing keywords to promote “Sponsored Links.”  The Complaint alleges that in October, November, and December 2011 (Erwin Pearl’s most important selling season), whenever a computer user entered a search term of “Erwin Pearl” or “Erwin Pearl Jewelry”: into Google’s search engine, J.C. Penney’s advertisement showed up in the number one spot on the search results page as a “Sponsored Link.”  The Complaint further alleges that the advertisement referred to prices of “40-60% off” select Erwin Pearl jewelry, and misleadingly suggested that Erwin Pearl’s jewelry was available for purchase at J.C. Penney at prices far less than at the retails stores of Erwin Pearl or its distributors. Unfortunately, a copy of the advertisement was not attached to the Complaint.

Erwin Pearl’s complaint contains claims that J.C. Penney’s actions constitute federal and common law trademark infringement, federal and common law unfair competition, federal and state trademark dilution, and unjust enrichment..  The Complaint seeks an accounting, monetary relief and attorneys’ fees.

The case has been assigned to Judge Smith.

Analysis

The courts have struggled over the years with keyword cases since Google first introduced the practice.  Initially, some courts held that the purchase of a competitor’s trademarks as a keyword was not actionable under trademark law  because the purchase and use of the keyword was not a “use in commerce.”  Since the Second Circuit’s Rescuecom decision, however, [link] most defendants  concede that the use is a use in commerce.  For example, in Hearts on Fire Co., LLC v. Blue Nile, Inc., 603 F. Supp. 2d 274 (D. Mass. 2009), the Court found that “there is little question that the purchase of a trademarked keyword to trigger sponsored links constitutes a “use” within the meaning of the Lanham Act.” 

More recently, courts and defendants have turned to arguments that the purchase of the keyword and its use as a “trigger” for sponsored ads is not an infringement because it creates no likelihood of confusion.  In the Hearts on Fire decision, Judge Gertner examined the traditional likelihood of confusion factors, but found that “likelihood of confusion will ultimately turn on what the consumer saw on the screen and reasonably believed, given the context.”  She identified the following non-exhaustive list of “relevant elements” to showing a likelihood of confusion in the Internet context:  (1) the overall mechanics of web-browsing and Internet navigation, in which a consumer can easily reverse course; (2) the mechanics of the specific consumer search at issue; (3) the content of the search results webpage that was displayed, including the content of the sponsored link itself; (4) downstream content on the defendant’s linked website likely to compound any confusion; (5) the web-savvy and sophistication of the Plaintiff’s potential customers; (6) the specific context of a consumer who has deliberately searched for trademarks [products] only to find a sponsored link to a retailer of that product, and, in light of the foregoing factors, (7) the duration of any resulting confusion. 

The Erwin Pearl Complaint does not attach a copy of the advertisements in question, so it is difficult to undertake an analysis of the strength of Erwin Pearl’s claims.  Plaintiffs have not had much luck in many recent cases, however, as the courts have continued to find that there has been no likelihood of confusion when a potential customer has been momentarily diverted to a competitor’s website but the competitor has not actually used the plaintiff’s trademark publicly, other than to trigger the sponsored advertisement.   Erwin Pearl may have a stronger case if JC Penney used Erwin Pearl's trademarks in the text of the ad, or stated that they sold Erwin Pearl branded jewelry when they did not.

If the case results in a substantive decision, it may be the first in Rhode Island dealing with whether the purchase of keywords by competitor constitutes trademark infringement.

February and March 2012 IP Cases Filed in US District Court of RI

There was 1 new intellectual property (patent, trademark and copyright) case filing in February and March 2012 at the U.S. District Court for Rhode Island. This is the first IP case filing this year, which is a 75% decrease over the IP case filings for the first three months of 2011.

The new filing in March is a trademark case.  This case will be highlighted in an upcoming blog post.

So far there have been no new patent or copyright cases filed in 2012 in Rhode Island

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

Great White Band Fights Over Name

Russell v. Kendall, No. CV12-02477 (C.D. Cal. complaint filed March 22, 2012).

The Great White band has had its share of notoriety and legal problems over the past decade, largely due to poor decision-making.  According to the Courtroom News Service it looks like another bad decision has led to another legal problem.  This time, the band is fighting over whether its name is owned by the founder and lead singer Jack Russell, or by the members who continued the band when Russell had to leave for a while due to medical issues.

It seems the trouble started in August 2010, when Russell was hospitalized and underwent surgery for a perforated bowel.  While he recuperated, other singers filled in for him during the band's live performances.  Russell claims everyone knew his absence was temporary, and that he would resume singing with the band when he had recovered.  But when he announced he was ready to return in December 2011, the band imposed a series of "unfair requirements" for his return (including abstaining from taking medications), and gave interviews claiming that Russell was also engaging in substance abuse, and that his addiction troubles were the reason for their not letting him return.  The band filed to register the trademark Great White with the Patent and Trademark Office.  After Russell formed a new band called "Jack Russell's Great White," Russell's' complaint claims that the band threatened litigation against any location that booked Russell's band.  The band is also planning to release a new Great White album later this year.

The Complaint alleges federal law claims for  trademark infringement, trademark dilution and unfair competition and state law claims for trademark infringement, unfair competition, injury to business reputation, and interference with prospective economic advantage.  Russell seeks injunctive relief and damages in excess of $500,000.  The defendants have not filed answers or responsive motions yet.

In similar situations we counsel clients to decide up front who is going to own the name, and what happens in various scenarios when band members leave, the band dissolves, etc.  Whether the entity is going to own the name or one of its members, the decision needs to be made and documented.  Then there aren't any disputes in the future over ownership of the name.  Apparently this advice wasn't given to or followed by Great White.  And now it is going to cost a lot in legal fees to sort the matter out.