February 2012

Case Note: Reverse Engineering and Trade Secret Misappropriation

Reverse engineering of a proprietary computer program is not necessarily, and in this case was not, a misappropriation of trade secrets.  Aqua Connect, Inc. v. Code Rebel LLC, 2012 U.S. Dist. LEXIS 17962, No. CV 11-5764-RSWL (C.D. Cal. Feb 13, 2012). Facts In the words of the court: Plaintiff alleges that Movants downloaded a trial version of Plaintiff’s Aqua Connect Terminal Server software (“ACTS”) and subsequently reverse engineered ACTS in violation of the End User License Agreement (“EULA”), which Movants had to agree to in order to use the trial version of ACTS. Plaintiff alleges that Movants misappropriated the trade secrets within ACTS and used that information to create and distribute a competing  software product. Procedural Posture Defendant brought a motion to dismiss for failure to state a claim based on Federal Rule of Civil Procedure 12(b)(6). Result The court found that the plaintiff had “only pled that Movants acquired Plaintiff’s trade secret through ‘reverse engineering,’” and therefore “Plaintiff has not pled sufficient facts to support a cognizable trade secret misappropriation claim.” Analysis California’s version of the Uniform Trade Secrets Act “specifically states that ‘[r]everse engineering alone shall not be considered improper means’” of acquiring trade secret information. The fact… Read More »Case Note: Reverse Engineering and Trade Secret Misappropriation

Patentable Subject Matter: New Federal Circuit Case

Yet another post-Bilski pronouncement: the Federal Circuit has held that patent claims directed to “an investment tool designed to enable property owners to buy and sell properties without incurring tax liability” do not recite patentable subject matter under 35 U.S.C.  § 101.  Fort Properties v. American Master Lease, No. 2009-1242 (February 27, 2012). Background United States Patent No. 6,292,788 recites a method for taking advantage of exceptions to taxes on real estate transactions.  For example, independent claim 1 recites: A method of creating a real estate investment instrument adapted for performing tax-deferred exchanges comprising: aggregating real property to form a real estate portfolio; encumbering the property in the real estate portfolio with a master agreement; and creating a plurality of deedshares by dividing title in the real estate portfolio into a plurality of tenant-in-common deeds of at least one predetermined denomination, each of the plurality of deedshares subject to a provision in the master agreement for reaggregating the plurality of tenant-in-common deeds after a specified interval. Two other independent claims were “nearly identical to claim 1 — though claim 32 contains an additional limitation requiring a computer to ‘generate a plurality of deedshares.’”  The defendants moved for summary judgment on… Read More »Patentable Subject Matter: New Federal Circuit Case

Computer Fraud and Abuse Act: Civil Rights of Action Have an Uncertain Bar

Federal district courts have been split, and the courts of appeals thus far silent, on what allegation of “loss” a plaintiff must make to state a case under the Computer Fraud and Abuse Act.  18 U.S.C. § 1030.  The CFAA, a criminal statute barring unauthorized access of specified categories of computers, provides for a civil right of action for “[a]ny person who suffers damage or loss by reason of a violation of” the Act.  18 U.S.C. § 1030(g).  Thus, a claim under the CFAA can be a nice adjunct to many other causes of action, such as claims for copyright infringement and trade secret misappropriation.  However, at least two recent cases illustrate that the bar for plaintiffs under the CFAA is uncertain. Plaintiffs sometimes cannot plead or prove “damage” under the CFAA’s definition of that term.  18 U.S.C. § 1030(e)(8) (“Damage means any impairment to the integrity or availability of data, a program, a system, or information”).  Thus, courts turn to the CFAA’s definition “loss,” which is any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense,… Read More »Computer Fraud and Abuse Act: Civil Rights of Action Have an Uncertain Bar

Detroit Patent Office to Cover Software

Detroit is excited about the branch office of the United States Patent and Trademark Office opening downtown in July.  And with good reason.  Moreover, based on the USPTO’s recent job posting for people with computer backgrounds to serve as administrative law judges in Detroit, it appears that the Detroit Patent Office will go beyond the traditional mechanical and electrical disciplines usually associated with the auto industry.  True, that is where the USPTO is focused in hiring patent examiners for the new Detroit office, but Michigan has high tech companies of every stripe, pursuing all sorts of technological innovations.  And the auto industry itself is producing some amazing software innovations.  It is encouraging to see the USPTO’s actions reflect these facts.

Case Note: Copyright First Sale Doctrine

A California court recently reaffirmed the principle that a restrictive software license is not a “sale” for purposes of the federal copyright laws, and that the license could not be used to assert a defense to copyright infringement based on the first sale doctrine.  Adobe Systems Inc. v. Hoops Enterprise LLC, No. 4:10-cv-02769-CW (N.D. Cal., Feb. 1, 2012). Facts Adobe licensed so-called “OEM” software, i.e., software that, by the terms of its license, could only be used when bundled as part of a sale of hardware.  Defendants obtained OEM software that had had been unbundled.  They then marketed the software on eBay “package[d] with items such as a piece of photo paper, a blank DVD, or a media card reader, which Adobe had not authorized for bundling.”  Adobe’s agreements with the hardware manufacturers made clear that that “Adobe provides only licenses to the manufacturer and that the manufacturer ‘shall not at any stage have title to the physical property or the Intellectual Property in the Software Products.’” Procedural Posture Adobe moved for partial summary judgment on Defendants’ counterclaims of copyright misuse based on the first sale doctrine, as well as on Defendants’ affirmative defense invoking the first sale doctrine. Result “Because… Read More »Case Note: Copyright First Sale Doctrine

Introducing the Non-Lawyers’ Pages

While this site presents issues mainly of interest to other lawyers, those issues are vitally important to the non-lawyers who work in the information technology industry.   Therefore, I am introducing The SWIP Report’s “Non-lawyers” pages.  Here you will find basic information relating to protecting and transferring intellectual property related to software.  I have started with some of the basics on software copyrights and patents, as well as the fundamentals of licensing.  I plan to add more soon.  And feel free to e-mail me with any questions you would like to see addressed (although, as always, do not e-mail me with any confidential information and understand we do not have an attorney-client relationship).

Will the Supreme Court Revisit Software Patents?

Last fall, in Ultramercial, LLC v. Hulu, LLC [1], the Federal Circuit Court of Appeals surprised many people by upholding a patent claim, reproduced in footnote [2], directed to a “method for distribution of products over the Internet via a facilitator.”  One of the defendants in that case, game provider WildTangent, recently asked the U.S. Supreme Court to take the case.  Specifically, WildTangent asks the Supreme Court to consider: Whether, or in what circumstances, a patent’s general and indeterminate references to “over the Internet” or “at an Internet website” are sufficient to transform an unpatentable abstract idea into a patentable process for purposes of 35 USC § 101. [3] I am not an expert Supreme Court watcher, so I will (mostly) refrain from prognosticating on what the Court will do.  WildTangent argues that, under the Ultramercial decision, “all the patent holder in Bilski had to do was add a step saying ‘over the Internet,’ and the patent would have survived.”  As WildTangent also acknowledges, the Court is already busy considering questions of patentable subject matter, having heard oral argument late last year in Mayo Collaborative Services v. Prometheus Laboratories, a case that also concerns 35 U.S.C. § 101, albeit in… Read More »Will the Supreme Court Revisit Software Patents?

Software Patents, Copyrights, Morality, and Pragmatism

Regardless of your philosophical leanings on the issue of software patents, if you’re in the software business, you need to worry about them.  A lot of people, such as the inventor of modern e-mail, are opposed to software patents.  I have certainly written patent applications with many software engineers who did not like the idea.  V. A. Shiva, the e-mail inventor, sums up the point of view in this video clip: if you want to protect software intellectual property, use the copyright laws. This is a legitimate point of view.  Indeed, can even proponents of software patents deny with a straight face that the law surrounding the patentability of software is, at best, uncertain, and, at worst, deeply troubled?  I hope to tackle policy prescriptions as this blog evolves, but for now, let’s accept the facts and move on to consider practical implications. Regardless of your philosophical leanings on the issue of software patents, if you’re in the software business, you need to worry about them.  (I hope the repetition isn’t too subtle; this is a very important point.)  Why?  A lot of reasons.  First, even if you aren’t applying for software patents, your competitors are.  Even companies that are… Read More »Software Patents, Copyrights, Morality, and Pragmatism

More on Google and Privacy

Google’s new privacy policy and terms of use are, as I have commented, scary stuff.  Two authors at Slate magazine, coming at the issue from the “open technology” perspective, recently explained why they agree that Google’s simplification of some sixty disparate policies into one is not so benign.  As the authors note, “while the new policy does not expand the personal information it collects, it introduces new ways for Google to combine and share data across its own services.”  The problem is that Google does not in turn plan to provide users with granular control of privacy settings within different services, opting instead for a global Google account profile.  As a lawyer, I worry about the legal implications of Google’s global tracking.  But beyond the law, individuals and business alike really need to think about the ground they are ceding to the World Wide Web.

Internet Patent Claims Invalidated by Texas Jury

In a case that has been widely publicized, a Texas jury has invalidated claims of two patents that cover much of today’s World Wide Web.  I won’t duplicate the detailed treatment that others have already provided, but this case deserves attention for a lot of reasons. What are they?  Well, to start, Texas judges and juries have a reputation of being friendly to patent owners, including so-called “non-practicing entities” such as Eolas.  Not so much this time.  Moreover, the patent claims at issue, which essentially cover displaying and interacting with images in a browser, truly are quite broad.  Eolas hasn’t been afraid to litigate, and a lot of companies you’ve heard of had paid Eolas a lot of money to license their patents.  The huge verdict in Eolas’ favor from an Illinois court, and Eolas’ subsequent settlement with Microsoft, even after the verdict was (sort of) overturned on appeal, made Eolas something of a juggernaut.  As you can see here, here, here, and from the vitriol here, a lot of people are happy to see Eolas get a comeuppance. Yet patent foes should not celebrate too quickly.  Defendants (here including Google, Amazon, and Yahoo) willing to make a gigantic roll… Read More »Internet Patent Claims Invalidated by Texas Jury