Startup Toolbox

Jay Parkhill April 23rd, 2008

A family vacation and a few important pieces of work that couldn’t be postponed meant that this blog got short shrift last week. Here are a couple of great tidbits from the blogosphere that I was finally able to focus on since getting home.

HBS Working Knowledge - Who Owns Intellectual Property?

Harvard Business School’s Working Knowledge newsletter has a good read on intellectual property in the digital age. It should really be called “How Do You Adapt When You Know Your IP is Going to Be Co-opted?”. Among other points, it notes that the (RED) campaign was expressly designed to be picked up freely by companies. The implication seems to be that it is similar to the GPL concept in software, where the license is free, but users of the software are restricted in what they can do with it downstream. In GPL’s case, the end product must generally also be free. In (RED)’s case proceeds must go to The Global Fund. Whether this is true or not, it is a nice example of an effort to promote viral growth of a brand among businesses as well as consumers.

I note as well that the HBS newsletter has conflicted feeling about the ownership of its own content. Most articles do not allow comments; a few are expressly designed to invite them. This article, appropriately, is one. HBS gets good comments. It should allow them more frequently, even if it meets losing some control over the content it puts out.

E-Commerce Law: Federal Court Upholds YouTube’s Terms of Use

This one is a bit wonkier. The relevant facts are that someone sued YouTube in Washington State even though the Terms of Use on YouTube’s site (you’ve read them, right?) specifically say that actions must be brought in San Mateo County, California. The court said that by using the site, plaintiff Bowen had agreed to the terms, including the choice of law provision.

This is another data point in the ongoing “legal discussion” of the validity of shrinkwrap, clickwrap and web site terms of use provisions. There is no ability to negotiate terms in any of these situations, so there is always some question whether certain provisions over-reach. In this case, the court decided that Bowen had expressly agreed to the terms with knowledge of them, and the San Mateo provision was therefore valid.

I still haven’t actually read the case, so I will reserve judgment on the facts- esp. whether Bowen was *actually* aware of the terms of use, or whether he just clicked “yes” at the appropriate moment.  If the former it’s caveat emptor (visitor?) unquestionably, but if the term was in there and he clicked yes without really reading then this case doesn’t move the line at all reasonableness of non-negotiated click-through terms.

I like that, I should say.  Non-moving lines are extremely helpful to those of us that depend on clickwrap and clickthrough agreements to get products in the market.

• YouTube , contracts

Jay Parkhill March 4th, 2008

I recently received a standard form of license agreement from a prominent technology company that featured the following paragraph:

I can’t remember when I have seen IP rights applicable throughout the entire universe. Let’s just hope they can read PDFs around Alpha Centauri. And that the Alpha Centaurians will sign on to the Paris Convention governing reciprocal trademark rights- that is, after the laser-coded version of the agreement beamed their way has actually reached them.

• Intellectual Property

Jay Parkhill March 3rd, 2008

Prof. Eric Goldman of Santa Clara University is a reliable source of updates on "Internet law".  This is a good summary of a tough situation:

Technology & Marketing Law Blog: Lifestyle Lift Tries to Use TM Law to Shut Down User Discussions; Website Countersues for Shilling–Lifestyle Lift v. RealSelf

LifeStyle finds itself being maligned in RealSelf’s online forums.  Established law says that RealSelf can not be held liable for statements made by third parties, so what’s an aggrieved business to do?

Lifestyle Lift goes after the forum owner for misuse of its trademarks.  The argument is mostly a dog- one can use another’s trademark to identify the business it relates to, but not profit from the mark.  The expense of litigation, however, usually makes people decide that removing the allegedly-infringing content is a better course of action.

RealSelf doesn’t do that though.  It gets made and countersues for . . . violating its terms of use.  The claim is that Lifestyle Lift posted "shill" reviews of its own product (the horror) in violation of RealSelf’s terms.

RealSelf may well win on the merits of the infringement claim, but it’ll still be out a bunch of cash on the defense, and the breach-of-terms-of-use counterclaim isn’t going to bring a whole lot of that back.

I don’t know any of the underlying facts of this case (were the critiques accurate?) so I won’t take sides.  As a UGC junkie, I am strongly in the camp that people should be free to post their opinions of products, including negative ones. There are limits, though.  Businesses also need ways to protect their reputations against untruthfulness and outright slander.

• Defamation , Intellectual Property

Jay Parkhill December 21st, 2007

Apple announced that it has settled two-year old litigation over Apple rumor blog Think Secret’s publication of information about the then-pending release of the Mac Mini computer. Some pundits have expressed concern that the settlement involves closing down Think Secret’s site, and that this may set an unhappy precedent for other blogs.

That worry seems a bit overblown to me- being put out of business by a big-guy litigant is an ever-present risk for little guys everywhere. Just because it happened once doesn’t make it any more or less likely to keep happening.

What I found interesting in the case, in light of my earlier post about trade secrets, is that Apple initially brought suit claiming trade secret infringement. I.e. that the existence of and Apple’s plans for the Mac Mini were not-generally-known information with economic value that Apple had taken steps to keep secret. The court disagreed and held that the information did not constitute a trade secret.

Here’s another difference between trade secrets and other types of IP, then- a party has to prove to the court first that it owns a trade secret, and then that the secret has been improperly disclosed. Patents and trademarks are registered through processes in front of Patent and Trademark Office attorneys, not by a judge or jury.

It isn’t immediately clear to me if this is a positive or negative attribute of trade secrets. It may be as simple as pay now (for patent or trademark registration) or pay later (when trade secret litigation comes up). Depending on how complex the topic is, I can see a USPTO examining attorney reaching a different conclusion from a judicial factfinder (judge or jury) about whether certain information is proprietary. At the least USPTO precedents and procedures are a bit better mapped so the outcome may be a little more predictable. Banking on a court to uphold a trade secret requires an extra roll of the dice.

• Apple , Intellectual Property , legal

Jay Parkhill December 20th, 2007

Trade secrets are a deceptively simple idea: like the fabled Coca-Cola formula, they are proprietary ideas that have never been shared. Because they are “secret” they are entitled to intellectual property protection.

But what does that really mean, and how does one keep something “secret”? Clients ask me this with some frequency (hm- $30k to obtain a patent that I then need to spend more money to enforce, or $0 to keep a secret?) and I’d like to share some of the basic concepts. There are some excellent “deep” resources out there, so I will focus on the common questions I get from clients.

What is a Trade Secret?
Under California law, a trade secret is (i) information that (ii) has economic value, (iii) is not generally known, and (iv) is subject to reasonable efforts to keep secret. It can be an idea, a process, software, knowledge of ideas that don’t work, and many other things. Essentially it needs to provide an economic advantage to the holder, and steps need to be taken to protect the secrecy. Since efforts to protect secrecy can easily lead down a slippery slope, it is worth noting that extreme, expensive measures to prevent industrial sabotage are not required.

How Can I Lose My Trade Secret?
The one word answer is “disclosure”. Inadvertent or intentional disclosure will both blow the protection. In the latter case damages may be available for breach of secrecy obligations, but accidental disclosure will do the job as well. Workers should be told the information they are handling is confidential, steps should be taken to recover records from departed workers and reasonable measures should be taken to make sure that information is maintained on a “need to know” basis if the secret is a critical one.

It is also worth noting that independent development of the information will terminate trade secret rights. Reverse engineering does not violate trade secret protection laws, and a “hot” idea that is not generally known when developed can become known later and lose protection as a secret.

How Do I Know I am Not Infringing Someone Else’s Secret?
This is tricky. Patents and (registered) trademarks require public filings, so a company can find it if there is existing protected IP in a given area. Trade secrets are secret by nature, so it is entirely possible that one could develop technology that inadvertently duplicates someone else’s trade secret right.

The answer is, again, that independent development by itself does not infringe a trade secret. The key here is to have enough notes, research records and other facts to back up the argument that one developed one’s information independently and without reference to the competitor’s secret information. In a small field where the players know one another well this may be easier said than done.

Talk to Your Lawyer
These ideas scratch the surface of trade secret law and probably beg more questions than they answer, like “what do I do if someone discloses my secret”, “how can I make sure my employees protect my secrets” and “what are the remedies for theft of a trade secret?” Anyone asking these questions should definitely talk to a lawyer- the answers are too complex and likely depend on specific facts. Still, I hope this gets some people pointed in the right direction with regard to what trade secrets can and can’t do, or at least helps figure out what further questions need to be asked.

• Intellectual Property , legal