Articles Posted in IP Ownership

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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. 

Game companies should consult with IP attorneys who understand the IP strategies and patentable aspects for games. For an overview of some of the IP protection available for games, see here.

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

Virtual Justice

Rutgers University law professor Greg Lastowka looks at whether players can and should be granted legal ownership of virtual items, whether or not there’s any existing legal precedent and how the virtual item landscape may change in the near future.

Italian court: Online editors not responsible for reader comments

Online commentators Wednesday welcomed a ruling by Italy’s highest court that the editors of online publications cannot be held legally responsible for defamatory comments posted by their readers. In a ruling handed down at the end of October, the Court of Cassation acquitted a former online editor of L’Espresso news magazine of the crime of failing to prevent defamation committed by one of her readers.

OUII Seeks Clarity On ‘Process Of Establishment’ Claims

The U.S.
International Trade Commission

should review a recent finding in a video game patent infringement case and clarify how to determine if a domestic industry is in the process of being established in Section 337 cases, the ITC’s Office of Unfair Import Investigations said in a petition publicized Tuesday.

Germany’s Merck wants Facebook page back

Germany’s Merck KGaA has threatened legal action after it said it lost its Facebook page apparently to rival Merck & Co. in the U.S., though it has yet to identify defendants in the case.

Virtual World Startups Seek Refuge From Patent Attacks

The developers behind the next evolution of the Internet — linked,
immersive, 3D environments — are trying to think of ways to minimize the adverse impact of software patents on their industry.

Social media in for worse cyber attacks in 2012

Social media sites and cellphones will prove to be fertile grounds for cyber criminals to exploit globally important events in 2012 to steal personal information and data and make financial gains, cyber security firm Websense has said. The Websense document, ” 2012 Cyber Security Threats,” has said identity information posted by users of sites such as Facebook, Twitter or LinkedIn may prove more valuable to cybercriminals than even credit cards.

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The Supreme Court has validated the ability of software developers to prevent customers from owning the copy of software they acquire. Because software developers can limit the customers rights to a mere license, they can impose restrictions that can prevent the customer from reselling the software. This is a huge win for software companies as it limits the resale market, which cuts into sales of new software. This ruling may also benefit the virtual goods industry which also commonly uses a licensing vs. sale model. However, it is important to note that in order to get the benefits of this decision, the software distributor must carefully craft their End User License Agreement.

On October 3, 2011, the U.S. Supreme Court declined the petition for certiorari regarding the Ninth Circuit Court of Appeals decision in Vernor v. Autodesk,
Inc. As we outlined in a previous post, the Vernor decision held that software developers can grant mere licenses and that doing so does not violate the First Sale Doctrine,” which states:

“[T]he owner of a particular copy…lawfully made under this title…is entitled,
without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy…”

This doctrine applies if the initial distribution is a sale. As the Ninth Circuit held in Vernor, software developers can legally prevent customers from owning (and distributing) the copies of software that they purchase. This is accomplished by drafting software purchase agreements (e.g., End User License Agreements) in a way to avoid the first-sale doctrine, such as by structuring the agreement as a license or placing valid restrictions on the customer’s use of the software. Under such an agreement, software developers can retain ownership in the copies they distribute and customers merely have a license to use the software.

Extending the Vernor holding to virtual goods and currency, this ruling seems to provide additional ammunition for the validity of merely licensing virtual items to users instead of selling the items. This approach is commonly used with virtual item models.  In light of Vernor, it is clear that the “license” which is included in the terms of service must be carefully drafted.  But if done properly,
this can help prevent unauthorized resale of virtual items via secondary markets or otherwise.

For more information on the legal issues with virtual goods, click here.

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

 

LinkedIn’s 2Q Earnings Soar as Growth Accelerates

The results announced Thursday provided the first update on LinkedIn’s progress since the company’s headline-grabbing initial public offering in May.
LinkedIn’s shares have more than doubled from their IPO price of $45, stirring a debate about whether investors are overvaluing Internet companies. LinkedIn earned $4.5 million, or 4 cents per share, in the April-June period. That contrasted with earnings of $938,000, or 2 cents per share, at the same time last year.

Controversy Erupts Over SpotON3D’s Patent Claims

Competing OpenSim hosting companies are concerned that SpotON3D‘s viewer plugin patent isn’t original, will hinder innovation, and that the company isn’t playing fair with the broader open source community. Other developers, however, say that SpotON3D’s innovation can help energize OpenSim adoption — and the patent, if it is granted, may not be that burdensome to the community.

Diablo III Will Have Real Money Auction House

For as amazing as Diablo II
was, the economy was rather quickly ruined by the sale of virtual items. Most of the better loot required a significant time investment – or luck – so many players naturally flocked to the more convenient option. Blizzard, being the savvy developers that they are, has come up with a work-around for that: A flood of reports are coming in that Diablo III
will feature an in-game auction house that will allow you to sell and buy virtual items (including virtual currency) for real cash.

EA Chief Vows to Keep Up With Big Changes In the Video Game Industry

Electronic Arts chief executive John Riccitiello said in a conference call today that the video game industry has fundamentally changed as gamers embrace new digital alternatives to console games – from mobile games to social games. And, he said, EA’s strategy is changing with it.

SAP Launches The Ultimate Travel Challenge Dashboard

I find the concept of gamification fascinating so when I heard that a fellow team at SAP was launching a game to showcase one of the company’s solutions it peaked my interest.  The game was built on SAP Crystal Solutions and showcases how the product can help your business by simulating the pressure of making informed decisions in a face-paced environment.

Augmented Reality Kills the QR Code Star

Augmented reality leader Layar just took its system to a whole new level by installing a real-world object recognition protocol that’s a little like Google’s Goggles. In one swoop it may have turned AR apps from intriguing,
inspiring, and occasionally useful toys into serious tools for information discovery and, of course, advertising. Let’s call it hacking the real world.

PayPal: 12M Monthly Users Are Paying For Virtual Goods

PayPal,
which collects a lot of data on online payments, says the monetization of digital content has come a long way since the company was launched in 1998 and sold to eBay in 2002. Now it generates more than $1 billion in quarterly revenue and has more than 100 million active users.

 

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Copying within the games industry is prevalent. Some people attribute this to the fact that this is just the way it is and has always been within the industry. This is often premised on the notion that the “idea” for a game is not protectable. But as the game market grows, so to do the losses from copying suffered by the game innovators.

One of the biggest factors contributing to this is that many game developers do not develop comprehensive strategies for protecting the valuable intellectual property that they create. This is generally due to several reasons. One is that historically, intellectual property has just not been a big focus for many in the industry. The other is that many people are not aware of the range of options available for protecting IP in the game space and what aspects of games are protectable. This is often due to some common misunderstandings about intellectual property, particularly with respect to the patentability of game features.

While it is true that one can not protect the “idea”
for a game, this does not end the inquiry. Many aspects of games are protectable by patents, copyright and trademarks. Of these, patents are probably the most overlooked and least understood. While this applies to all types of games, there are particularly compelling opportunities to patent many of the innovative aspects of social and online games. This is due in part to the many recent developments in the relevant technology and business models for these games. Prudent developers and publishers will seize these opportunities to develop a comprehensive IP protection strategy.

Check out our recently released “Intellectual Property for Games” brochure that summarizes some common patent misconceptions and the importance of a strong IP Protection Strategy.

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In the fast and furious world of app development, time is of the essence. So claims the Plaintiff YoHolla in a lawsuit against an app developer Pinwheel Designs Corp. and its subcontractor Burton Design Group (BDG). Allegedly the defendants’ inability to produce a bug-free app in a timely manner delayed YoHolla’s launch of its social network.

This case involves a classic fact pattern of a development contract gone awry. YoHolla claims that BDG missed several deadlines for completion of an Iphone and Android app, that what BDG produced was riddled with bugs and required additional payments well beyond the initial estimates. YoHolla further alleges that the contract stated that TIME WAS OF THE ESSENCE and that these delays caused delay of YoHolla’s planned launch of its social network and over $550, 000 in delay damages.

After things escalated, YoHolla went elsewhere to get the development finished and formally terminated the development contract.

BDG demanded final payments and ordered YoHolla to cease and desist from use of any source code developed by BDG, alleging that such use would constitute copyright infringement (despite an apparent assignment of all rights to YoHolla in the contract).

Where this gets more interesting is that BDG contacted Apple and alleged that YoHolla’s iphone app infringes BDG’s copyrights. After 3 or so rounds of “he said, she said” regarding copyright ownership, to no avail, YoHolla filed suit.

The Yohalla Complaint raises claims for declaration of ownership of copyright and non-infringement, breach of contract, tortious interference with a business relationship (for BDG’s allegedly false notices to Apple), defamation and a claim for indemnification against Pinwheel.

This will be an interesting case to watch.

 

 

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Gibson Guitar Corp. recently filed suit in the U.S. District Court for the Middle District of Tennessee alleging that Seven45 Studios’ video game “Power Gig: Rise of the SixString,” infringes Gibson’s concert simulation patent.  Gibson filed its complaint againgibson.jpgst 745 LLC (d/b/a Seven45 Studios) asserting “Power Gig” violates its U.S. Patent Number 5,990,405, titled “System and method for generating and controlling a simulated musical concert experience.”  The claims center on “Power Gig” and its related components, which includes a guitar-style controller.  Gibson is claiming that the game, in conjunction with a gaming console (Sony’s Playstation 2 and Microsift’s Xbox 360), contains elements that infringed its rights under the ‘405 patent.  In addition to a claim for direct infringement, Gibson alleges contributory patent infringement and inducement of infringement.  Gibson is seeking a preliminarily and permanently injunction, treble damages and attorneys’ fees. 

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In October, tech media sources, such as CNET, were reporting that Facebook had acquired part of Zenbe’s intellectual property portfolio, in addition to hiring some of Zenbe’s key engineers. While Zenbe will stay intact, Zenbe Mail has been shut down, and the associated intellectual property, has been acquired by Facebook.  

Zenbe is just one in a long list of recent acquisitions by the social networking giant that have focused primarily on the value of intellectual property assets. Some of those acquisitions include: Divvyshot, Hot Potato, NextStop, Drop.io and FriendFeed. This underscores to critical importance of a sound intellectual property strategy that helps protect your product development and is aligned with your overall business goals.

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In a very significant decision, the 9th circuit Court of Appeals ruled that software developers can legally prevent customers from owning the copies of software that they pay for. Instead, if the software license agreement is properly drafted, the software developer retains ownership in the copies they distribute and the customers merely have a license to use the software.

This is significant for many reasons. The first is that this means the “first sale doctrine” does not apply. Under this doctrine a copyright owners rights are extinguished in a particular copy of the software after an authorized first sale. As a result, the customer can rightfully sell the software if they no longer need/want it. In contrast, with a license that restricts transfer this is not permissible.

This ruling by analogy may be applicable to virtual goods as well. Many terms of service specify that virtual goods are merely licensed and not owned by customers.

Vernor 

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An appellate court ruled that an employee’s agreement to assign “inventions” to Mattel may not cover “ideas” the employee had for the Bratz line of dolls. This ruling may impact many companies ownership of certain rights if their IP or invention assignment agreements are not clear enough.

In vacating the lower court ruling, the court stated:

Prior to trial, the district court held that Bryant’s employment agreement assigned his ideas to Mattel, and so instructed the jury. What was left for the jury to decide was which ideas Bryant came up with during his time with Mattel. It found that Bryant thought of the names “Bratz” and “Jade” while he was employed by Mattel, and that MGA committed several state law violations by interfering with Bryant’s agreement as well as aiding and abetting its breach. After trial, the district court imposed a constructive trust over all Bratz-related trademarks….

The appellate court added that:

A constructive trust would be appropriate only if Bryant assigned his ideas for “Bratz” and “Jade” to Mattel in the first place. Whether he did turns on the interpretation of Bryant’s 1999 employment agreement, which provides: “I agree  to communicate to the Company as promptly and fully as practicable all inventions (as defined below) conceived or reduced to practice by me (alone or jointly by others) at any time during my employment by the Company. I hereby assign to the Company . . . all my right, title and interest in such inventions, and all my right, title and interest in any patents, copyrights, patent applications or copyright applications based thereon.” (Emphasis added.) The contract specifies that “the term ‘inventions’ includes, but is not limited to, all discoveries, improvements, processes, developments, designs, know-how, data computer programs and formulae, whether patentable or unpatentable.” The district court held that the agreement assigned Bryant’s ideas to Mattel, even though ideas weren’t included on that list or mentioned anywhere else in the contract.

In its legal analysis the appellate court stated:

Mattel points out that the list of examples of what constitutes an invention is illustrative rather than exclusive. Ideas, however, are markedly different from most of the listed examples. Cf. People ex rel. Lungren v. Superior Ct., 926 P.2d 1042, 1057 (Cal. 1996) (courts avoid constructions that would make “a particular item in a series . . . markedly dissimilar to other items on the same list”). Designs, processes, computer programs and formulae are concrete, unlike ideas, which are ephemeral and often reflect bursts of inspiration that exist only in the mind. On the other hand, the agreement also lists less tangible inventions such as “know-how” and “discoveries.” And Bryant may have conveyed rights in innovations that were not embodied in a tangible form by assigning inventions he “conceived” as well as those he reduced to practice.

As a result the court concluded that the agreement could be interpreted to cover ideas, but the text doesn’t compel that reading and that therefore the district court thus erred in holding that the agreement, by its terms, clearly covered ideas.

This case will get sent back to the District Court for further determination. However, regardless of the result, it may be a good “idea” to consult with an IP attorney to make sure that your IP assignment agreements give you the maximum benefit and ownership of all rights that you want to own.

Mattel Bratz Decision