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The growing use of mobile applications has created great opportunities for all types of businesses. Many companies have leveraged apps to enhance their reach and interactions with customers and potential customers. But with these growing opportunities comes some legal pitfalls. Many companies are not focusing on the vast array of legal issues that relate to what their apps do. The FTC and other government agencies are becoming more active in policing these activities.

In a recent pronouncement, the FTC has warned marketers that certain apps may violate the Fair Credit Reporting Act. The FTC warned the apps marketers that, if they have reason to believe
the background reports they provide are being used for employment
screening, housing, credit, or other similar purposes, they must comply
with the Act.

According to the announcement, “If you have reason to believe that your background reports are being
used for employment or other FCRA purposes, you and your customers who
are using your reports for such purposes must comply with the FCRA.”

The FCRA is designed to protect the privacy of consumer report
information and ensure that the information supplied by consumer
reporting agencies is accurate. Consumer reports are communications
that include information on an individual’s character, reputation, or
personal characteristics and are used or expected to be used for
purposes such as employment, housing or credit.
The companies that received the letters are Everify, Inc., marketer of the Police Records app, InfoPay, Inc., marketer of the Criminal Pages app, and Intelligator, Inc., marketer of Background Checks, Criminal Records Search, Investigate and Locate Anyone, and People Search and Investigator apps. According to the letters, the agency has made no determination whether
the companies are violating the FCRA, but encourages them to review
their apps and their policies and procedures to be sure they comply with the FCRA.

In light of the FTC, FDA, FCC and other government agency’s increased activity in monitoring mobile apps and other social media usage, it is strongly advisable that you submit all of you apps and social media plans to a qualified attorney to review for potential compliance issues.

 

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The number of lawsuits alleging copying of games continues to increase. In one of the latest such lawsuits, Seattle-based game developer Spry Fox filed a copyright infringement lawsuit
against 6waves Lolapps over Spry Fox’s Triple Town game. What exacerbated the issues here is that, apparently, Spry Fox shared information about the game under an NDA, prior to release of the game, when the parties were considering a business relationship.

Even giants like Zynga have been accused of liberally borrowing ideas for its games. NimbleBit, developer of the popular iOS game Tiny Tower, has pointed out the many similarities between their hit and Zynga’s upcoming Dream Heights game. NimbleBit recently sent an open letter addressed to all of Zynga’s 2,789 employees that points out the numerous similarities in the games, offering eight screen shots that show virtually identical features with only slight graphical differences.

These, and other suits that follow these fact patterns, highlight the need for game developers to take certain steps to protect their IP and minimize the need for lawsuits while maximizing the chances of prevailing if they must sue:

  • Consistently use NDAs that prevent the disclosure or use of confidential information that you disclose to third parties, and try to include a provision that gives you ownership of any IP derived from the confidential information. Many NDAs do not include this.
  • Maximize your IP protection with a comprehensive IP strategy that includes patents, trademarks and copyrights. Many game developers have misconceptions about what is protectable and therefore inadvertently forgo certain protection to which they might otherwise be entitled.
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A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

Piracy battle goes to CES, Wikipedia may join SOPA protest, Google social search faces privacy concerns

A contentious battle over Internet anti-piracy legislation shifted from Washington to the Consumer Electronics Show, The Washington Post reported. The Consumer Electronics Association, which is behind the show, has been a vocal opponent of the two bills circulating in Congress that would help Hollywood titans, record labels and pharmaceutical firms enforce copyright infringement laws online.

Mobile virtual currency market to hit $4.8bn by 2016

In fact, a study released yesterday from Juniper Research predicts that the amount of money being spent on virtual currency in mobile apps is going to more than double in the next four years, going from $2.1bn last year to $4.8bn by 2016.

Bethesda Buys Interplay’s ‘Fallout’ Rights, Ends IP Suit

Interplay Entertainment Corp., original developer of the “Fallout” line of video games, on Monday forfeited its rights to continue work on the series — resolving a trademark dispute with former business partner Bethesda Softworks LLC.

Domino’s Pizza uses augmented reality offers to boost food sales

Domino’s Pizza, which has already been testing the waters of mobile marketing for some time now, has started a new campaign that includes the use of augmented reality, to add a whole new dimension to its latest 555 pizza offer.

CES: Better augmented reality with high-tech contact lenses

Augmented reality has made progress on smartphones, with apps letting people layer information and graphics over a view of the real world. A startup from the Seattle region is looking to take the next step toward an AR future with special contact lenses that make it possible to view objects projected onto glasses a short distance away from the eye.

Banks start playing games with your money

A new video game has gotten its hooks into Brian Kealer, a 26-year-old San Francisco software engineer. He’s not killing birds or using his vocabulary to impress his friends. No, Kealer is after real prizes, like the iPad2 he just scored. And he’s playing with his bank account. 

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MP900395954.JPGSocial Media usage in the financial services industry is on the rise, which is now putting many registered investment advisers (RIAs) under the microscope for potential federal securities laws violations. RIAs that have not taken the time to review and update their social media policies and procedures may soon find the Securities and Exchange Commission (SEC) knocking on their door. Just recently, the SEC charged
an Illinois-based investment adviser with offering to sell fictitious securities on LinkedIn.

On January 4, 2012, the SEC also released a National Examination Risk Alert addressing investment adviser use of social media. This alert outlines the specific factors that need to be addressed by RIAs who wish to remain in compliance with federal securities laws. The SEC’s guidance could be particularly important given the “crowdfunding” legislation Congress is currently considering.

For a full breakdown and analysis of the SEC’s alert, please click here.

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A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

 

Will 2012 be the year of virtual worlds?

What got me thinking about this was a blog post by Maria Korlova over at the HyperGrid Business Blog. In it, she maintains her firm conviction that businesses will soon come around to using these virtual worlds as business tools. Just as the nay-sayers were wrong about the Internet, Software as a Service, and Lady Gaga, we will eventually integrate this technology into how we work.

Courts, Sports And Videogames:
What’s In A Game?

Although one of the clearest legal thinkers, Louis Brandeis, conceived the modern right of publicity,[1]
“unclear” would be an adjective all lawyers would apply to the current state of right of publicity law, regardless of which side of the issue they usually argue. Indeed, although the right of publicity concept was further developed by another very clear legal thinker, William Prosser,[2] he himself alluded to it as the concept “that launched a thousand lawsuits,”[3] few of which can be reconciled with one another.

Insurers Can’t Join Coverage Suit Over Athlete Image Use

A Georgia federal judge said Wednesday that four insurers can’t intervene in a coverage suit in California over underlying antitrust class actions concerning the use of college athletes’ likenesses in video games.

What the Copycat Saw: Creative Theft in Mobile and Social Games

The distinction between theft and inspiration is often unclear in video games. Traditions are formed,
broken down, and remade every few years. The most successful ideas are eagerly absorbed by others, from regenerative health in first person shooters to the subdivision of platformer levels into world and stage.

Virtual worlds training for federal cyber pros in the works

After finishing a successful year of training the federal cyber workforce, the government is taking another step toward cultivating better-prepared digital defenders.

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One of the primary concerns that companies have regarding patent filings is the time it takes to get a patent. Recent changes to the patent laws have created a fast track option to “whisk” your patent through the process. To use this option you must file a petition and pay a fee.

According to the PTO:

Following passage of the Leahy-Smith America Invents Act in
September 2011, the United States Patent and Trademark Office (USPTO)
began accepting requests for prioritized examination of patent
applications through the Track I Prioritized Patent Examination Program.
Simply put, Track I allows inventors and businesses, for a fee, to have their patents processed to completion in 12 months.

According to a recent update from the PTO many applicants have used the fast track process and the results are summarized as follows:

  • 1,218 of the 1,231 requests for prioritized examination that have
    been decided were granted, which represents a 98.9% approval rate.
  • 648 have already received a first office action, and
    another 34 will be mailed within days.
  • On average, the PTO is getting a
    first action out in Track I cases just 30.7 days after approval of the
    petition – for a total elapsed period to first action of 66.4 days after filing of the request-petition, with the longest time to  first action being 70 days from grant of the
    petition.
  •  23 allowances have already been mailed on Track I applications, the fastest of which was mailed just 37 days after the
    application was filed and 7 more allowances are currently in the pipeline.
  • Of the Track I cases
    allowed so far, the average time to allowance is 39.2 days from petition approval.
  • As for rejections, so far there have been three final
    rejections issued on Track I applications. The average time to final
    rejection has been 34.3 days, and the longest time to final was 50 days,
    both measured from approval of the Track I petition.
  • The first Track I application is due to issue on Jan. 10, 2012.
    This application was filed Sept. 30, 2011.

Given the fast paced developments in areas such as social games, augmented reality, mobile applications and other hot sectors, it may be worth considering use of this procedure to get your patents issued more quickly.

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PhoneDog LLC filed a lawsuit last July against a now former employee,
Noah Kravitz. PhoneDog, which reviews mobile devices, including phones and tablets, is claiming ownership of Kravitz’s Twitter followers. They claim he owes them $340,000 based on an assumed value of $2.50 per follower per month.

The dispute arose when Kravitz resigned and allegedly changed his Twitter name from PhoneDog_Noah to noahkravitz, to keep the 17,000 followers that he built up since 2006 when he started with the company. The company is alleging that the followers should be treated like a customer list, and therefore PhoneDog’s property. The fact that Mr. Kravitz used the company name in his Twitter handle likely will not help him. However, the company probably could have done more to ensure that they owned the account and followers.The outcome of this case will likely be based on the specific facts here.

But regardless of the outcome, companies should take away a very important lesson from this case. The lesson is that it is critical to address employee social media issues. Lawsuits and their costs and uncertain outcomes can be avoided by having well thought out and clear policies and agreements with employees who use social media in connection with company activities. Don’t wait until an issue like this is upon you to focus on a social media policy.

Companies that do not have a social media policy need to fix that as soon as possible. Those that have cobbled one together but without expert advice, need to have the policies reviewed to plug the holes. In short, all companies using social media would benefit from spending a little time having their social media policies and agreements reviewed by an attorney who spends time everyday on social media issues. 

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On December 6, 2011 Zynga settled its copyright suits against Vostu USA Inc. and others.  The first suit, case number 5:11-cv-02959,
filed in the U.S. District Court for the Northern District of California back in June, alleged that several of Vostu’s games infringed Zynga’s copyrights.
Specifically, Zynga had alleged, that Vostu’s MegaCity, Cafe Mania, Pet Mania, Vostu Poker and MiniRazenda games are merely clones of Zynga’s popular titles.
Zynga followed this suit with another one in Brazil claiming copyright infringement and unfair competition.  Vostu initially responded to the suits asserting that its games were non-infringing but has ultimately agreed to settle the US and Brazilian matters by compensating Zynga and altering some of its games.

The parties have issued a joint statement that “Zynga and Vostu have settled the copyright lawsuits and counterclaims against each other in the United States and Brazil”.
Additionally, “[a]s part of the settlement, Vostu made a monetary payment to Zynga and made some changes to four of its games” but the parties did not elaborate on the amount of the payment or the nature of the changes.

This settlement followed (and may have been prompted by) some early success in the cases by Zynga.  Zynga was able to obtain a preliminary injunction from the Brazilian court ordering Vostu to cease making the challenged games available.  In response Vostu initially convinced a U.S. District Judge to grant a temporary restraining order prohibiting Zynga from enforcing the Brazilian court’s order; however this TRO was quickly dissolved.  The Brazilian order was stayed by the appeals court pending Vostu’s appeal.

This settlement is a good example of how IP rights can be used to protect a video game from being cloned.  There is a history of successful games being the subject of imitation which goes back to the earliest days of the industry.  Many companies have come to believe that cloning is just part of business and there is nothing that can be done to stop it.  However, this is not entirety true.  Copyright, trademark,
trade secrets and patent rights can all provide differing levels of protection for games.  Copyright can protect a game from literal duplication or use of its protected images, code, literary elements, music, etc.  Trademark can protect the actual name, logo or certain other identifying elements from a competitor’s potentially confusing use in a game (or elsewhere).  Additionally, trade secrets can be used to protect a company or game’s “secret sauce” from being co-opted.
Finally, patents may be used to protect features and functions of a game, including game mechanics, business methods and other functionality and processes.

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Facebook recently filed a Patent Application that Triggered a Congressional inquiry.  The patent application, which describes technology for tracking users on other websites,
resulted in a letter from Reps. Edward Markey, D- Mass., and Joe Barton,
R-Texas, seeking information on its current privacy practices and future intentions for tracking user activity and data. Markey and Barton co-chair the Congressional Bipartisan Privacy Caucus.

The application
was published on Sept. 22, 2011 and describes a method “for tracking information about the activities of users of a social networking system while on another domain.”

In the letter to facebook CEO Mark Zuckerberg, Markey and Barton sought clarification on the purpose of the patent and how Facebook intends to use it. They also inquired about how Facebook intends to integrate the location data of its users into its targeted advertising system, noting that Facebook has previously stated that it does not track people across the Internet.

It is important to note that just because Facebook has filed a patent does not necessarily mean that they have commercially implemented what the patent discloses. However,  this action is just one of the latest from Washington focusing on privacy. There seems to be a very focused effort by legislators and regulators to ensure that companies only collect user information needed for legitimate business purposes and that the information collected is not retained indefinitely. 

As with many other aspects of social media, the laws and regulatory climate are continuing to evolve.  If you have not recently reviewed your data collection, privacy practices and privacy policies, now is a good time to do so. 

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On September 30, 2011, a new set of digital marketing guidelines went into effect for distilled spirits companies in the United States and Europe.

 

The self-imposed guidelines,
detailed below, were developed jointly by the Distilled Spirits Council of the United States (DISCUS), the national trade association representing America’s leading distilled spirits companies and nearly 70% of all distilled spirits brands sold in the United States, and the European Forum for Responsible Drinking (EFRD), an alliance of Europe’s leading distilled spirits companies.

The guidelines consist of a set of “basic principles” together with definitions and directions for implementing those principles. They aim to protect consumers’ information while urging responsible marketing practices in the context of digital media such as websites, social networks, blogs and mobile apps. Furthermore, the issuance of these guidelines reflects the fact that digital marketing is increasingly a valuable and appropriate tool for reaching consumers who are legally old enough to purchase distilled spirits.

Per the guidelines, distilled spirits companies should:

1. intend their digital marketing communications for adults of legal purchase age;

2. place their digital marketing communications only in media where at least 71.6% of the audience is reasonably expected to be of the legal purchase age (and DISCUS notes that Nielsen online syndicated data from August 2011 disclosed that 82.22% of the Facebook audience, 86.86% of the Twitter audience, and 80.96% of the YouTube audience,
was 21 years of age or older);

3. require age affirmation (full date of birth to determine if a user is of legal purchase age) when a user first reaches the companies’ interactive webpages;

4. display, on their webpages that permit the posting of user-generated content, a disclaimer stating that all inappropriate user-generated content will be removed;

5. monitor and moderate,
preferably every business day but no less than every five business days,
user-generated content on the companies’ webpages and promptly remove inappropriate material;

6. instruct users that digital marketing communications should not be forwarded to individuals below the legal purchase age;

7. respect user privacy in their digital marketing communications;

8. ensure that their digital marketing communications and product promotions are identified as brand marketing;

9. include social responsibility statements in their digital marketing communications where practicable; and

10. display, follow, and encourage users to read before submitting their information, a privacy policy that provides for the following: age affirmation will be used prior to the collection of any other information; user information can only be collected from people who are of the legal purchase age; an “opt-in” mechanism will be used before the user receives a direct digital marketing communication,
and an “opt-out” mechanism will be available if a user wants to discontinue receiving such communications; clear information must be provided about the collection and use of personal data; information collected shall never be sold or shared with unrelated third parties; and steps will be taken to keep user information secure and protected from loss or theft.

Although the guidelines are self-imposed and do not constitute a legal regulation, law or statute, failure to comply with these guidelines may have adverse consequences. DISCUS, for example, has said that it will (i) investigate U.S. distilled spirits companies that are reported to be not in compliance with the guidelines and (ii) disclose the results of such investigations on its website. Consequently, we recommend that distilled spirits companies in the United States and/or Europe review the new guidelines and seek counsel on how they might impact current company practices.