Heavily Redacted: Warner Bros. Fights to Keep its Anti-Piracy Practices Secret

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Have you ever wondered how a massive Hollywood studio like Warner Bros. combats online piracy?  (A team of ninjas with computer science degrees, perhaps?)  Well, if Warner Bros. has their way, you won’t be finding out anytime soon.  Warner Brothers is fighting the Electronic Frontier Foundation’s (“EFF”) motion asking a Florida federal court to unseal documents from Disney  v. Hotfile (S.D. Fla., Jul. 8, 2011) that describe Warner Brothers’ anti-piracy practices. The EFF is looking to unseal information about Warner Bros.’ system for sending takedown notices to websites following the Digital Millennium Copyright Act (“DMCA”) notice-and-takedown system.  In light of Congressional requests for input about the notice-and-takedown system established under the DMCA, the EFF feels that information about the practices of large copyright holders is critical for meaningful public dialogue about the DMCA.  In particular, the EFF hopes the documents in question will reveal which of Warner Bros. actions might have been in violation of 512(f) of the DMCA, which prohibits copyright holders from sending takedown notices absent a basis for believing the material is infringing. Warner Bros., filing in opposition to EFF’s motion, asserts that if the court releases information about its DMCA enforcement practices to the public the information will enable those committing online piracy to “evade detection.”  In a declaration in support of Warner Bros.’ request to keep the documents sealed, Warner Bros.’ Senior Vice President of Anti-Piracy operations David Kaplan stated that those familiar with Warner Bros.’ piracy detection practices could “infringe without fear of detection.”  Warner further asserts that EFF’s claim that the records should be unsealed for the public interest are a “thinly-veiled effort to gain…tactical advantage in private litigation that EFF regularly brings against copyright owners.” The decision regarding whether or not to unseal the documents is now in the hands of Judge Kathleen Williams, who must balance the respective interests of the EFF and Warner Bros.  Her decision could have serious implications for the future of litigation under the DMCA and, potentially, the future of the DMCA itself.  If she elects to keep the records sealed, the specifics of Warner Bros. anti-piracy practices under the DMCA will remain private.  But if you still want to know the details, consider the saying “If you can’t beat them, join them.”

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March 29th, 2014 at 11:04 am

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Lawsuit against Aereo heads to the Supreme Court

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The New York-based startup Aereo has recently been making waves in the digital television world by creating a low-cost option for consumers to watch and record live broadcast television, providing a service similar to Internet-based streaming websites such as Hulu. Aereo, however, stands apart from these services: Aereo leases to each subscriber an individual remote antenna, allowing these subscribers to view and record certain live television broadcasts on Internet-connected devices without having to purchase a subscription to the entire broadcast packages offered by cable companies. Although Aereo has enjoyed tremendous success in the two years since its founding, Aereo has recently been embroiled in legal battles over whether its business model constitutes a public performance, which would legally require Aereo to obtain retransmission consent from the content providers. Last month, the District Court of Utah became the first to temporarily shut down the service. Judge Dale A. Kimball of the District Court of Utah granted a preliminary injunction sought by broadcasting companies such as Fox claiming that Aereo is stealing their broadcast signals for profit, shutting down Aereo’s services in Salt Lake City and Denver. Such injunctions have been previously denied in the New York and Boston. Aereo founder and CEO Chet Kanojia states that the television industry is terrified of Aereo, and that the company was “extremely disappointed” in the recent decision. Kanojia claims that the antennas used in this service must be treated the same as antennas that people use to pull TV signals for free. This argument rings true in one deep respect – any individual can travel to Radio Shack and upgrade their television antenna. Yet, retransmission is currently illegal, and Aereo has created a service that works around this by renting antennas and virtual connections, a method that is hanging on by a mere technicality. Broadcasting companies such as ABC, Fox, NBC, and CBS have the highest stake in seeing Aereo fall; they currently claim that Aereo is stealing their content, and that their practice could even lead to the end of broadcast television. Major broadcasters have expressed concern that cable providers, who currently pay broadcasters to the tune of $4 billion in transmission fees per year, may set up services similar to Aereo and will no longer pay fees, depriving broadcasters of all profit. American Broadcasting Companies v. Aereo will be heard in front of the Supreme Court in April, featuring “two American archetypes in a battle that could upend the television industry.” As the New York Times states, this decision will have “far-reaching implications for a television industry already in upheaval, facing challenges from online streaming, Internet-enabled TVs, ad-skipping devices, and now, the tiny antennas that Aereo uses to capture broadcast signals." The Aereo issue demonstrates the fundamental difficulty in technology and law – technology is outpacing law faster than ever, while legal standards struggle to keep up with ever-evolving industries.

No Ads, No Games, No Gimmicks

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Prior to its $19 billion acquisition by Facebook in February, WhatsApp promised subscribers three things: no ads, no games, no gimmicks.  For the past five years, WhatsApp prided themselves on operating a simple, practical messaging service that protected user’s privacy by not accessing their data for advertising and profit-generating purposes.  WhatsApp enjoyed enormous success under this model, drawing approximately 450 million subscribers since its introduction. Facebook’s acquisition of WhatsApp turned heads because of the stark contrast in how the two companies handle user privacy and data protection. Facebook is notorious for having a profit model built on accessing user data for monetary gain, and has become a figurehead for those opposing data collection practices in the wake of the NSA leaks. On March 6, 2014, privacy advocate groups EPIC (Electronic Privacy Information Center) and CDD (Center for Digital Democracy) filed a complaint with the Federal Trade Commission to block the deal until Facebook provided further details on how it would use data acquired from WhatsApp subscribers.  These groups are seeking a court order enjoining Facebook from implementing future changes to WhatsApp’s privacy policy, claiming that a change in the policy to advocate user data collection would be an unfair and deceptive business practice on the part of Facebook.  The complaint states that, “WhatsApp users could not have reasonably anticipated that by selecting a pro-privacy messaging service, they would subject their data to Facebook’s data collection practices.” Facebook has repeatedly assured that it will not change WhatsApp’s privacy policy and will allow WhatsApp to function as a separate business entity. However, Facebook made similar assurances following their $1 billion acquisition of Instagram in April 2012.  Facebook then amended Instagram’s privacy policy and incorporated the data from Instagram users into their business profit model.  It’s unclear whether WhatsApp can continue its success under the ownership of Facebook.  Recent events have put user data collection under intense public scrutiny.  With endless messaging alternatives available, WhatsApp’s continued future success may hinge on Facbeook's management of user privacy.

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March 19th, 2014 at 10:37 am

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Prenatal Genetic Diagnostics, Surviving in the post-Myriad Era

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Ariosa Diagnostics has crucially secured a New York State certification for their Harmony™ noninvasive prenatal genetic diagnostic test. Having already gained acceptance as a key provider of prenatal diagnostics in California and abroad, this is good news for both the company and for women carrying pregnancies at high risk for genetic defects. Ariosa competitor Sequenom, Inc. is continuing with sales of its MaterniT21™ prenatal diagnostic test, expanding their reach by licensing their test through Mayo Medical Laboratories. Technologically, this is exciting news: by making use of the fact that fetal DNA can be isolated from the maternal bloodstream, it is possible to pre-screen high risk pregnancies for genetic defects with a simple maternal blood sample, rather than having to subject patients to riskier (and considerably more painful) procedures such as amniocentesis. Also, as sequencing-based diagnostic technologies, these tests can offer extremely high resolution in identifying risk factors and guiding medical decisions. For patent watchers, there have been some interesting twists to this story. Recent Supreme Court cases have not been kind to the field of medical diagnostics: in Mayo v. Prometheus (involving the same Mayo lab that is now distributing the Sequenom test) the Court held that a method of examining a physiological state in order to guide medical decision-making was unpatentable subject matter, and in Association for Molecular Pathology v. Myriad Genetics, genomic DNA sequences like the ones examined here, were themselves found not to be not patentable. The prenatal diagnostic tests that Ariosa and Sequenom are selling were the subject of the first genetic diagnostics case to find its way to the federal courts in the post-Myriad era. In Ariosa v. Sequenom (N.D. Cal., Oct. 30, 2013), the Northern District of California followed Myriad and held that circulating fetal DNA is not patentable subject matter, granting summary judgment of invalidity of Sequenom’s patent on circulating fetal DNA. Thus, while both companies are now free to move forward, they are without patent protection for the broadest elements of their underlying technology. While it is good news for patients, there is a point to be made about the role of gene patents here. Despite the turmoil in the courts and the dire predictions of some in the biotechnology industry about the consequences of the loss of patentability of genomic sequences, these companies are moving ahead despite drastic changes in their patent positions, and they have been successful. The Supreme Court diagnostics cases may have complicated things, but so far the sky has not fallen and the field of genetic diagnostics continues to advance.

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March 17th, 2014 at 7:30 am

Patents for Humanity

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The Obama administration recently announced a renewal of Patents for Humanity, a USPTO program promoting the use of patented technologies to address worldwide humanitarian needs.  Patents for Humanity is part of the President’s program to strengthen the patent system and to promote innovation by recognizing patent owners and licensees who using their patented technology to improve global health and living standards for the less fortunate.  In addition to public recognition for their contribution to humanitarian needs, the winners will receive an acceleration certificate that gives expedited processing of select matters (e.g. moving patent re-examination proceedings to the front of the queue) before the USPTO. The first Patents for Humanity was implemented in February 2012 as part of an initiative to solve long-standing development challenges.  Participants described in their applications how they've used their patented technology or product to address humanitarian issues (defined as issues “significantly affecting the public health or quality of life of an impoverished population”) in one of the four categories: medical technology, food and nutrition, clean technology and information technology.  The first 1,000 applications that met the competition requirements were considered, and the applications were independently reviewed by three judges selected from academia for their expertise in medicine, law, science, engineering, public policy, or a related field.  The judging process applied three neutrality principles – technology-neutral, geographically-neutral, and financially-neutral.  The program considered inventions from any field of technology that met the competition criteria. The targeted impoverished population may be located anywhere in the world.  And any means of getting technology to those in need may qualify without regard to financial consideration.  Lastly, the program considered the diversity of contributions in order to highlight global humanitarian contributions across all types of technology, organizations, and practices. The 2012-2013 program recognized 10 winners and 6 honorable mentions.  The medical technology category was divided into a category for medicine & vaccines and a category for diagnostics & devices.  The winners of the pilot program include research institutions like University of California, Berkeley and industry leaders, such as Microsoft and Proctor & Gamble.  USPTO expects to open applications for the 2014 Patents for Humanity program in April.  The latest USPTO announcement states that the 2014 program will be structured similarly to the pilot program that was introduced in 2012, with a few changes based on the feedback from the pilot program.

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March 11th, 2014 at 9:33 am

Give Me A Break [From Litigation]

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Litigation and trademark registration decisions throughout the world are now struggling with an important question: should Nestlé be permitted to have a trademark in their Kit Kat candy bar shape? It seems that the answer varies by country. Recently, Nestlé has become embroiled in litigation in South Africa over its trademarked chocolate Kit Kat bars. IFFCO, a United Arab Emirates company created and sold candy bars in the same shape under its Quanta Break and Tiffany Break names. Nestlé claimed that these delicious candy bars are “virtually identical” to their Kit Kat candy bars. IFFCO then sought to annul Nestlé’s Kit Kat trademarks in South Africa. [1] In November 2013, the South African Court determined that, although the Kit Kat finger-shaped candy bar is a well-known and fully valid trademark, IFFCO was not seeking to pass their candy bars off as Kit Kat bars. Nestlé, upon appeal, seeks to argue that their use of essentially identical chocolate finger shapes amounted to trademark infringement and dilution. [2] Furthermore, despite receiving European-wide protection last year for the candy bar, Nestlé may not receive trademark protection for the Kit Kat in the United Kingdom either. Their attempt to trademark the shape of their Kit Kat bar was opposed by Cadbury, likely as a response to Nestlé’s earlier opposition to Cadbury’s registration of their purple wrapper color. [3] This case was recently referred to the European Union Court of Justice for additional guidance .[4] Surely, the shape of the Kit Kat bar is distinctive; but the distinctive packaging, in addition to the Kit Kat imprint upon each chocolate wafer, should be enough to prevent consumer confusion. Is it appropriate for trademark law to give Nestlé an effective monopoly on a particular candy shape? Clearly the South African Court did not think so and it will be interesting to see how this plays out in the United Kingdom.

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March 8th, 2014 at 5:35 pm

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Is Netflix Safe?

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Just as Frank Underwood turns to you to share his secret plan to become president of the United States, a buffering signal pops up on your computer. 2% then 23% then 68% then 2% all over again. All you want to do is finish this one episode so you can go back to work and actually get some sleep! But, the hour-long episode has already taken up an hour and a half of your time, so do you stick it out or give up? If the Comcast-Time Warner merger is finalized this dilemma could become a non-issue for about one-third of the country’s broadband subscribers. [1]. On Sunday, Comcast and Netflix announced that Netflix would be streamed directly to Comcast subscribers, which should give them “faster and more reliable access” to Netflix. [2]. This change in streaming strategy may have been partially motivated by Netflix recently reporting that the “delivery speed of its content to Comcast subscribers had declined by more than 25 percent.” [3]. Although we should applaud the ability to watch a one hour show seamlessly, some consumer advocates are worried that customers will be the ones paying for this increased speed. [4]. In the announcement, neither Netflix nor Comcast explained the details, except to note that Netflix “receives no preferential network treatment.” [5]. As of now, it appears that Netflix is in a very strong position for the foreseeable future. However, this may be fool’s gold. There is no guarantee that the Comcast-Time Warner merger will go through. [6]. But even if the deal is approved, Comcast will have much more bargaining power during the next round of negotiations with Netflix. Netflix’s policy was to not pay broadband providers for access to their network, but their recent agreement with Comcast could signal a shift. [7]. Furthermore, last month the Court of Appeals for the District of Columbia limited the FCC’s power to regulate the Internet, giving providers much more freedom in designing their service offerings. [8]. During oral arguments Verizon suggested that it would pursue various service models. [9]. This could lead to different pricing structures which could potentially harm Netflix’s relations with its customer. [10]. This combination of events shows that Netflix must continue to strengthen its content and customer bases to ensure that it will have enough leverage to reach favorable terms with broadband providers.

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March 7th, 2014 at 3:08 pm

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“Dumb Starbucks” and The Parody Defense

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In February, the Los Feliz neighborhood of Los Angeles, CA found itself at the center of national media attention when a new local business by the name of “Dumb Starbucks Coffee” opened its doors to the public. Patrons waited in line for hours  to purchase a cup of coffee from this “parody coffee shop,” which is not affiliated with Starbucks but uses the name and logo of Starbucks, and is “nearly identical to a typical Starbucks location.”  Before being shut down by LA County health inspectors for operating without a valid permit, the shop caught the attention of Starbucks, which stated in an email that the company “appreciates the humor” but would be “evaluating next steps” to ensure that the new shop could not use its name. “Dumb Starbucks” claims it is not a regular coffee shop, but rather an "art gallery", and that the coffee it sells (which received mixed reviews from patrons) is “actually the art.”  But what difference does this proclamation of artistic purpose make to Starbucks’ contention with the shop’s use of its protected trademark? The answer is that US trademark law provides a fair use exception to trademark infringement/dilution. Under this exception, it is legal to use a famous mark if such use is done in connection with “identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner.” “Dumb Starbucks” claims it is living and breathing the exercise of that fair use exception, considering itself “a work of parody art.” There can be some social benefit derived from allowing such parody and commentary, which is likely why the exception was carved out in the first place. Though many would easily write “Dumb Starbucks” off as going too far to be considered a parody within the meaning of the fair use exception, it could be argued that the shop is providing “a legitimate political statement about consumerism”, or just that it’s mocking “Starbucks culture” and brand obsession in today’s world. However, the issue in this particular situation may soon be moot anyway because, as previously mentioned, the shop is not currently operating, and additionally, a Starbucks spokeswoman has stated that the company handles the majority of its trademark disputes informally. If "Dumb Starbucks" were to find its way into a court room over this conflict, it doesn't seem likely that its parody defense would pass muster, as by its own admission in the FAQ posted on its premises, the shop was “simply using [Starbuck’s] name and logo for marketing purposes . . . .” In fact, the man behind “Dumb Starbucks” has revealed himself to be Nathan Fielder, a comedian who was planning to use footage of this stunt for his television show. These revelations detract from the credibility of the store’s claim that it is “technically "making fun" of Starbucks and is considered parody art. The case law on fair use exceptions does not lend any solid answer to this inquiry, as there are no hard lines used by the courts to determine when the defense will succeed, and similar situations have led to different results. What is clear from the case law is that parody is “not an automatic defense," and if this matter somehow finds its way into court, "Dumb Starbucks" will have to do more than just toss around the right words.

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March 6th, 2014 at 7:28 pm

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Smart Licensing Lifts Lego to the Top of the Toy World

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So when exactly did the brightly colored building blocks we played with as kids transform into a wildly successful multimedia entertainment platform? On February 7, the Lego Movie stormed theaters and notched one of the top opening weekends ever for a non-sequel animated film. Outside the cinema, Lego-themed video games and building sets featuring licensed properties have become incredibly popular with both children and adults. The most obvious indicator of the company’s recent success is its new position as the most valuable toymaker in the world. So how did they do it? Some of the success can be attributed to a forward-thinking business model that managed evolve the brand while honoring tradition. But mostly the new Lego is the product of lucrative licensing. Lego’s breakthrough with licensed intellectual property began in 1999 with an agreement to license Star Wars characters and vehicles. Since the closing of that deal, Lego has sold over 200 million Star Wars Lego boxes and negotiated a new deal in 2012 that will allow the company to produce Star Wars themed products until 2022. On the heels of the Star Wars success, Lego smartly committed itself to obtaining licensing arrangements with established brand universes, including Harry Potter, Lord of the Rings, DC Comics, Marvel and Disney. The move paid off. In 2012, royalty expenses amounted to $263 million while profits reached $4 billion. Licensing intellectual property has been a backbone of the toy business for decades, so why is Lego’s model making such a huge difference to its bottom line? For starters, the screening process for determining which properties Lego licenses is incredibly detailed, and its managers turn down far more licensing opportunities than they accept. By partnering exclusively with brands of wide global appeal, Lego has been able to ensure that the quality of its own brand isn’t diluted via association. Smart property selection helps, but what really sets Lego apart from other toymakers is the way it blends licensed properties with its own style to create what are essentially new properties. As a result, Lego’s Star Wars platform is more than mere reproductions of iconic Star Wars characters and vehicles in Lego form. It has become its own brand, Lego Star Wars. Additionally, many Lego interpretations of classic characters have assumed their own personality, and are often far different than their film or comic book counterparts. For example, the original Batman is dark and brooding, but Lego Batman is comedic and suitable for children. Lego has also been able to secure separate licensing deals from brands that are themselves fierce competitors. While Warner Brothers and Disney engage in an arms race of intellectual property acquisition to order to bring ensemble blockbusters to the big screen, Lego works behind the scenes knowing that it stands to benefit from the success of both companies. In 2015, Disney will launch Avengers 2: Age of Ultron, and Star Wars Episode VII, two of the most highly anticipated movies of all time. In the same year, WB--who distributed the Lego Movie --will launch the tentatively titled Batman v. Superman, it’s own long-gestating ensemble act featuring a slew of globally recognized comic book characters from the DC comic book universe. With the necessary licensing agreements already in hand, Lego will be ready to capitalize on the success of all three, suggesting an even brighter future for the brightly colored building bricks.

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March 5th, 2014 at 2:40 pm

Oops–fraudulent data behind recent patent grant

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Patent-seeking inventors may spend countless hours perfecting that grand idea that sparked its way into their brains while returning from a hunting trip--in the case of that useful adhesive we know as velcro--or while watching a cat pull feathers through a cage--as in Eli Whitney's cotton gin (read more here).  And individual inventors rush to file patents knowing that the system will likely protect their ideas. They may or may not be prepared, however, for the length of time a patent application is pending before issuance. They might end up spending countless more hours negotiating with the patent office. This is the modern reality for patent holders. The sheer number of patent application filings each year coupled with an insufficient number of qualified examiners means that the USPTO is overburdened. Depending on the field, patent procurement can take several years (See USPTO's Performance and Accountability Report and Patently-O's post).  The backlog of patent applications at the patent office has even led a prestigious federal judge to declare that the system is broken. In spite of these problems, the USPTO is attempting to right the ship. The patent office has opened several satellite offices across the country and has hired more examiners to meet the onslaught of application filings, and has churned out record numbers of patent grants each successive year since 2008. So, credit where credit is due--it seems like the patent system is improving after all. But then it comes to light that the USPTO has granted a patent based on fraudulent work. On February 18th a patent was awarded to Hwang Woo-Suk for his work creating an human embryonic cell line through cloning. In short, Dr. Woo-suk claimed that an individual's genes - say from a skin cell - when extracted from its differentiated cell could combine with an egg cell to yield a stable embryonic cell line that has the individual's DNA profile - in effect, a clone. It sounds plausible enough. Plausible enough to get a patent. However, the work was fraudulent. In other words, the science behind the patent was wrong. While it is true that actual reduction to practice is not necessary to get a patent, the utility requirement should ensure that useless inventions are not patented. The USPTO's manual further states that fraud is grounds for patent invalidity. It seems clear that Dr. Woo-suk's patent will be invalidated, but what about the patent office? Is our patent system too lax? Was this just a one time mishap, or is this the cost of increasing the number of patent grants? Hopefully, something like this won't happen again.

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February 24th, 2014 at 11:02 am

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