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September 2001 Volume 2, Issue 9
Editors: Cherie W. Blackburn Robert W. Pearce, Jr. John C. McElwaine For more
information contact Nelson Mullins Riley & Scarborough, L.L.P. 1-800-237-2000 Nelson Mullins has more
than 250 attorneys firm-wide, with over 25 attorneys having
significant representation of e-commerce clients in areas including
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Office Contacts: Neil Grayson Cherie
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Contact: Stefan Lode CyberWatch is an Internet Law Group news digest published as a service to Nelson Mullins’ clients and friends. The articles are summaries of particular developments in the law and are not intended to be a solicitation or to render legal advice. This publication can be considered advertising under applicable laws
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Dinner And An Internet Movie
Imagine being able to select your favorite films from the movie libraries of some of the largest movie studios. Five major movie studios announced they are forming a joint venture to offer films for viewing on home computers connected to the Internet. The announcement came from Warner Brothers, a unit of AOL Time Warner; MGM Studies; Paramount Pictures; Sony Pictures Entertainment; and Universal Studios, Inc. This venture, which is in its early stages of development, is aimed at heading off the Napster problem suffered by the music industry. Once the service is up and running, it will take consumers twenty to forty minutes to download a movie. The movies will not be first run but will be available a few months after theatrical release, which is about the same time that pay-per-view movies are released.
The World Wrestling Federation Gets Pinned
The World Wildlife Fund, the world’s largest private international nature conservation organization, recently won an international trademark infringement lawsuit against the World Wrestling Federation. Both organizations have been using the initials WWF as service marks for their respective organizations. Recognizing a conflict in 1994, the two organizations had entered into an agreement concerning use of the initials WWF. However, since 1997, the World Wrestling Federation had been in violation of that agreement. In a recent decision, Mr. Justice Jacobs of the High Court in London ruled that the World Wrestling Federation must stop using the WWF initials based upon its unauthorized junior use. He granted the World Wildlife Fund an injunction, which it is estimated will cost the World Wrestling Federation as much as $70 million in re-branding costs. The injunction, which takes effect October 1, 2001, bars the World Wrestling Federation from using the initials WWF anywhere except in the United States, where it will be able to refer to itself verbally as WWF and to advertise only sporting events in connection with WWF. The World Wrestling Federation has vowed to appeal.
U.S. Chamber Of Commerce Assists Yahoo! In Fighting French Court Ruling
Last November, a French Court ruled that Yahoo! must prevent French users from viewing or participating in any auctions of Nazi-related memorabilia. The ruling further demanded that Yahoo! prevent French citizens from viewing “any other site or service that may be construed as an apology for Nazism.” The French law in question prohibits the sale of Nazi and other racially insensitive materials. In response, Yahoo! has asked a U.S. Court to issue a declaratory judgement supporting its position that the French Court has no authority to require a U.S.-based Web site to take certain actions. Recently, Yahoo! received support from the U.S. Chamber of Commerce and other business organizations. Steven Bokat, General Counsel for the U.S. Chamber of Commerce, explained, “if the French ruling is enforced, the strictest law of any country would be applicable to all American Web sites.” Bokat said that this could seriously jeopardize on-line activities of American businesses. If U.S. Web site operators must abide by the laws of every nation with Internet access, “it makes it almost impossible for anyone to comply,” Bokat said.
U.S. Chamber Of Commerce Assists Yahoo! In Fighting French Court Ruling
Last November, a French Court ruled that Yahoo! must prevent French users from viewing or participating in any auctions of Nazi-related memorabilia. The ruling further demanded that Yahoo! prevent French citizens from viewing “any other site or service that may be construed as an apology for Nazism.” The French law in question prohibits the sale of Nazi and other racially insensitive materials. In response, Yahoo! has asked a U.S. Court to issue a declaratory judgement supporting its position that the French Court has no authority to require a U.S.-based Web site to take certain actions. Recently, Yahoo! received support from the U.S. Chamber of Commerce and other business organizations. Steven Bokat, General Counsel for the U.S. Chamber of Commerce, explained, “if the French ruling is enforced, the strictest law of any country would be applicable to all American Web sites.” Bokat said that this could seriously jeopardize on-line activities of American businesses. If U.S. Web site operators must abide by the laws of every nation with Internet access, “it makes it almost impossible for anyone to comply,” Bokat said.
Governors Want End To Internet Tax Ban
Governors of more than forty states will urge Congress not to extend a 1998 moratorium on Internet taxes unless states are given the opportunity to come up with a system to allow them to collect such on-line taxes. The moratorium on Internet taxes is set to expire on October 21, 2001, and the Governors hope to use its renewal as leverage to address the sales-tax issue. Supporters of Internet sales taxes believe that billions of tax dollars are lost and that brick and mortar establishments are put at a disadvantage to their cyberspace competitors. On the other hand, opponents say that Internet sales taxation would destroy a young and fragile industry. Furthermore, with roughly 7,500 state and local taxes and jurisdictions, compliance would be virtually impossible. If some taxation system is adopted, on-line retailers want the tax collection systems streamlined so that there is only one tax rate set per state regardless of whether the transaction is on-line, from a catalog or in a store. The Governors have sought flexibility to set different tax rates.
Japanese Woman Arrested Under Cyber Privacy Law
A Japanese woman has become the first person to be arrested under Japan’s new Cyber Privacy Law. The woman is alleged to have snooped through a colleague’s e-mails. The police claim that the woman used a computer at her office to attempt to access the e-mail account of a co-worker, but the co-worker had changed her e-mail account password. The woman was caught after she contacted the co-worker’s e-mail provider pretending to be the co-worker so that she could learn the new password.
Bookster
The problems of peer-to-peer file swapping has moved into the publishing arena. In addition to music, Internet pirates are providing royalty-free copies of the world’s top best sellers. One company’s research showed that 7,267 pirated electronic books could be freely accessed using a Napster-like program. Fiction novels were the most pirated including the work of authors such as Steven King, J.K. Rolling, Tom Clancey and Douglas Adams. The most common method of piracy was the time consuming process of scanning in the pages of actual books. However, in a minority of cases the electronic novels were cracked copies of e-books.
Senator Hollings Proposes Anti-Piracy Legislation
Senate Commerce Committee Chairman Ernest “Fritz” Hollings, will propose legislation requiring that consumer electronics hardware makers develop anti-piracy technology to be included in their products. The purpose of this law would be to require consumer electronics and computer makers to develop technology that would prohibit people from making illegal copies of music, film and other content available via digital and electronic means.
Fourth Circuit Affirms Peta Decision
The Fourth Circuit Court of Appeals has affirmed a lower court decision involving the “Peta.org” domain. People for the Ethical Treatment of Animals sued the owner of the domain name “Peta.org” which had registered the domain name and was operating a Web site known as “people eating tasty animals.” The Fourth Circuit agreed with the lower court ruling in favor of Peta on the grounds that the registration constituted trademark infringement, unfair competition and was a bridge of the Anti-cybersquatting Consumer Protection Act..
Qwest Refuses Credit
The Attorney General for the State of Washington has requested that Qwest Communications provide a refund to customers who lost high-speed Internet connections as a result of last month’s “Code-Red” computer worm attack. Washington customers using Qwest’s DSL service experienced intermittent loss of Internet service for approximately ten days. Business customers allege that the outages cost them thousands of dollars in lost sales. After receiving numerous complaints, the Washington Attorney General wrote Qwest requesting that the company credit its consumers’ accounts. Qwest’s response was that the problem was not with its hardware and that the company would not be issuing a credit for services lost on account of the virus.
Fair Use By Visual Search Engine
In 1999, Leslie Kelley, a photographer, sued Ditto, a search engine that indexes digital images. Kelley alleged that Ditto’s search engine, which allows users to retrieve images and produces a list of “thumbnail” pictures related to the users’ request, violated her copyrights. The trial court ruled that, while the use of already copyrighted images by a visual search engine is apparently a copyright violation, under the particular circumstances of this case, it was justified under the “Fair Use” doctrine. Legal scholars appear to be split on this case. The most problematic fact is that Ditto did not let people see the image on Kelley’s site in its full context. Instead, the link was to an image file, which only allowed the display of the picture.
Patents by U.S. Companies Could Threaten Australian Businesses
Priceline.com is on the verge of receiving the first of a series of patents in Australia for its reverse-auction patent process. The three-month opposition period for Priceline’s application is set to expire with no opposition having been made. Priceline also has a number of other business method patent applications pending in Australia. Australian businesses could face millions of dollars in damages through patent infringement claims if Priceline’s patents are approved, according to one intellectual property expert in Australia. Since the patent applications are broadly drafted, there is a possibility that a number of Australian companies will have to change their business practices or be left to defend themselves. There are currently about twenty Australian companies which conduct reverse-auctions on the Internet. Amazon.com and other U.S. companies are following Priceline’s lead in filing numerous e-commerce patent applications in Australia.
Another Internet Hacker Indicted for Extortion
A Seattle Federal Court recently handed down a 13-count indictment accusing a Russian resident of hacking into a U.S.-based Internet service provider. The hacker then attempted to extort money from the company’s customers by allegedly threatening to damage computers connected to the network unless he was paid a certain amount from each victim. The Russian and one of his associates were arrested in Seattle after coming to the U.S. for what they believed was a job interview at a U.S.-based high-tech company. The company was in fact a front corporation for the FBI, which promptly arrested the two men. The hacker faces a maximum penalty of five years in prison and a fine of up to $250,000 on each of the charges.
Broadband Internet Access Changes Online Habits
A new study by Neilsen suggests that broadband technology actually may be part of the salvation of the technology industry after all. According to the study, speed does matter on the Internet, with users who have high-speed broadband connections to the Internet viewing 130% more Web pages than those that connect with narrow bandwidth. Additionally, new broadband users spent 23% more time surfing the Web, for a total of more than 15 hours a month. Even though broadband users are still in a minority, the study found that broadband users more than doubled to nearly 18 million in July 2001 from a year earlier. The study concludes that as Internet users upgrade to broadband, the faster connections are definitely changing users’ online habits.
Intellectual Property in the New Economy: Old Rules Don’t Apply
According
to a recent article in The Wall Street Journal, it is becoming increasingly clear that
products whose primary value lies in intellectual property, such as
software, pharmaceuticals, movies, records and many of the other things
that drive the new economy, are fundamentally different from the
products of the old economy, such as autos and steel, or service-economy
products such as banking and insurance.
These fundamental differences, according to the article, are
wreaking havoc with the traditional notions of economics that underlie
antitrust laws, trademark laws, patent laws, copyright laws and general
public policies. Businessmen,
economists and policymakers are struggling with the implications of
these profound differences. Bill
Gates described these differences in a recent speech at a CEO summit:
“With intellectual property, the upfront costs are what it’s
all about. Say a piece of
software costs $10 million to create and the marginal costs, because
it’s going to be distributed electronically, are basically zero.
Once the costs of development have been recouped, every single
additional unit is essentially pure profit.
But if someone comes along with a significantly superior product,
your demand can literally almost drop to zero.”
His comments showed a belief that you will either win big or lose
big, depending on what intellectual property assets you develop,
acquire, retain and protect in the future.
These different segments of the business and public policy world
will continue, according to the article, to try and grapple with the
changes that intellectual property businesses are having on the
fundamental dynamics of the market economy.
It’s becoming clear, though, that the old rules of economics
provide no clear guidance for many of the new economy issues and that
new rules are being made up as we go along, with examples from the
Microsoft antitrust case to the Napster copyright battles.
In a world where intellectual property serves potentially as the
source of greatest value, obtaining, properly using and protecting those
assets will be more important than ever before.
Credits: SiliconValley.com; USA Today;
Ananova; The Washington Post Online; Newsbytes; The Times; News.com;
Australianit.news; Newsbytes.com; The Wall Street Journal. |
