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TMT Perspectives

Insight & Commentary on Business, Legal and Policy Developments Affecting the Telecom, Media, and Technology Sectors

BitLicense: The Death of Pseudonymity?

Posted in Cybersecurity, Finance, Legal Developments, Privacy

Last week, the New York State Department of Financial Services (NY-DFS) released its highly anticipated proposed BitLicense regulatory framework which addresses many of the problems that have plagued the virtual currency in the media over the last year. In an attempt to engage the grass-roots Bitcoin community directly, Benjamin Lawsky, the Superintendent of the NY-DFS, posted a link to the proposed regulatory framework on reddit last week, a week before it was published in the New York State Register.  While Superintendent Lawsky’s efforts to engage the Bitcoin community on reddit are laudable, they are unlikely to make up for what many will see as the destruction of one of Bitcoin’s fundamental properties – pseudonymity.

Although Bitcoins have never actually been fully anonymous, they are currently pseudonymous. However, the proposed BitLicense regime would require any company transacting in Bitcoins (other than miners or companies who accept Bitcoin as payment), to record the identity and physical address of both parties to all bitcoin transactions. Moreover, BitLicensees will be prohibited from knowingly allowing the transfer of Bitcoins when doing so will obfuscate the identity of a customer or counterparty. While such anti-money laundering measures are almost certainly necessary for Bitcoin to gain wider adoption, particularly on Wall Street, many of the libertarians who provided the initial support for the digital currency will likely be disappointed by this element of the proposed BitLicense framework.

An informative summary of the proposed BitLicense framework and some of its implications can be found here.  Those interested in the potential impact of the proposed regulations on start-up companies can find a nice review here.  For an impartial synopsis, please see our Client Alert

Amazon and Apple Fixing the Price of iPad Covers?

Posted in Antitrust, Apple, Companies, Competition Policy, Intellectual Property, Lawsuits, Legal Developments

Hard 2 Find Accessories, Inc., a third party vendor on Amazon’s marketplace, has sued Amazon and Apple for violating the Sherman Act, among other laws. H2F alleges that Amazon and Apple conspired to drive H2F off Amazon’s marketplace for purposes of stabilizing the price of iPad covers. The complaint makes some interesting allegations that stand a chance of surviving a motion to dismiss. There are problems with the complaint, however. And some of these problems may be sufficient for Amazon and Apple to have the complaint dismissed. Given the heart of the complaint is how Amazon polices its marketplace, I suspect a hard fight.

H2F’s Complaint. H2F makes iPad covers and sells them on Amazon’s marketplace. Amazon allows certain third-party vendors to sell their products on Amazon.com. At some point, Apple identified H2F as an infringer of Apple’s intellectual property and informed Amazon. Amazon subsequently warned H2F. H2F vigorously denied the allegations. Ultimately, Amazon terminated H2F entirely, refusing to allow H2F to sell products on Amazon’s marketplace. According to the complaint, Apple admitted to H2F and Amazon that H2F’s products did not infringe Apple’s intellectual property. Notwithstanding that admission, Amazon refused to reinstate H2F. H2F alleges that Apple targeted H2F because of H2F’s “aggressive price point” on the iPad covers, and that Amazon terminated H2F pursuant to an illegal agreement between Amazon and Apple to stabilize the price of iPad covers. Continue Reading

Aereo: Retransmission Consent Is the Next Intriguing Question

Posted in Companies, Copyright, FCC, Legal Developments

In a recent article, we said that the Supreme Court’s decision in the Aereo case doesn’t answer the most interesting question: Can Aereo now offer a lawful service by paying copyright fees to broadcasters in accordance with the compulsory copyright license for cable television services provided for in the Copyright Act and administered by the U.S. Copyright Office?

Not long after that article, Aereo teed up this very question before Judge Nathan in the U.S. District Court proceeding. But it’s not clear that either Aereo or the broadcasters have thought through the next intriguing question, retransmission consent.

An Update on the Copyright Question

In our last article we provided a quick summary of the Compulsory Copyright License contained in Section 111 of the Copyright Act. The compulsory license allows cable television companies to retransmit broadcast programs, so long as they file a Statement of Account with the Copyright Office and pay the required royalties (which the Copyright Office dutifully doles out to the copyright owners).

In a seismic shift in business and legal strategy, Aereo told Judge Nathan that Aereo is going to file with the Copyright Office as a cable television company and pay copyright royalty fees. Aereo asserts that “After the Supreme Court’s decision, Aereo is a cable system with respect to those transmissions [of television broadcasts].” Broadcasters objected, stating that Aereo has always said it’s not a cable system and can’t use the compulsory copyright license under Section 111.

Is Either Party Thinking Through Retransmission Consent?

Both parties seem to have rushed into the compulsory copyright license arguments without thinking through the next intriguing question. Suppose Aereo is a cable television system for purposes of the Copyright Act. Is it also a cable television system under the Cable Act administered by the FCC? Continue Reading

Meal Planning Patent Invalidated Under Supreme Court’s Alice Corp Decision

Posted in Intellectual Property, Lawsuits, Legal Developments, Patent

In one of the first decisions applying the Supreme Court’s recent ruling in Alice Corp. Pty. Ltd. v. CLS Bank Internt’l, 573 U.S. __ (2014) (which held that basic business methods may not be patented, even if computers are used to apply them), Judge Englemayer of the United States District Court for the Southern District of New York invalidated a patent claiming the abstract idea of meal planning under 35 U.S.C. § 101 on summary judgment. A copy of the decision can be found here: Dietgoal Innovations LLC v. Bravo Media LLC, No. 13 Civ. 8391 (S.D.N.Y. 7/8/2014).

The case involved a process for computerized meal planning: “in essence, it recites a computer program that allows the user to create meals from a database of food objects according to his or her preferences and dietary goals, to change those meals by adding or subtracting food objects, and to view the dietary impact of changes to those meals on a visual display.” The Court held that the patent recites “nothing more than the abstract concept of selecting meals for the day, according to one’s particular dietary goals and food preferences,” which is “surely a ‘long prevalent’ practice” and is “at least as longstanding as the economic practices of risk-hedging (invalidated in Bilski) and intermediated settlement (invalidated in Alice).” Since the patent “does not recite any specialized formula or method for implementing the ‘well known’ process of meal planning” it “is not the kind of ‘discovery’ that § 101 was designed to protect.” Continue Reading

Judge Robinson’s “Limited Prosecution Bar”: The New Normal?

Posted in Legal Developments, Patent

Patent attorneys play many roles in the life of their clients’ patents, from drafting and prosecuting patent applications before the Patent Office, to defending the validity of granted patents before the Patent Office, as well as litigating patent infringement cases in the Federal courts. However, when litigating patent infringement cases, attorneys are often exposed to confidential material of their clients’ adversaries during the discovery process. To prevent attorneys who view such confidential material from using it to exercise competitive decision making on behalf of their clients, courts routinely institute “prosecution bars” which prevent such attorneys from prosecuting their clients’ related patent applications at the Patent Office.

While prosecution bars are nothing new in patent cases, where highly confidential technical material often plays a substantial part of discovery, the scope and severity of such prosecution bars, and protective orders in general, vary a great deal from circuit to circuit and district to district. Prosecution bars also vary in how they address or distinguish between pre-grant and post-grant activities at the Patent Office. Judge Robinson, who earlier this year already made news by changing her form scheduling order to shift discovery burdens towards the initial stages of discovery, has potentially set a benchmark in how prosecution bars may be handled in her court and others around the country.

In a sua sponte motion, Judge Sue Robinson of the District of Delaware established a “limited prosecution bar” for all of a plaintiff’s attorneys who view a defendant’s highly confidential source code, barring those attorneys from participating in any reexamination, inter partes review or any other post-grant review before the Patent Office. Versata Software Inc., et. al. v. Callidus Software Inc., D.I. 106, 1-12-cv-00931 (DED June 19, 2014) (Robinson, J.). Judge Robinson’s order cites to and closely tracks Judge Ron Clark’s similar order in the Eastern District of Texas, issued late last year. Affinity Labs of Texas, LLC v. Samsung Electronics Co., Ltd., et al., D.I. 129, Civ. No. 12-557 (E.D. Tex. Nov. 18, 2013) (Judge Ron Clark).

Judge Robinson’s order comes at a time of incredible change as the patent bar adapts to the new administrative review procedures established by the America Invents Act (AIA). Such procedures provide new avenues to challenge the validity of patents in the Patent Office after they are granted. Data from the Patent Office show that the use of such procedures is increasing rapidly, with over 1500 petitions filed since the procedures’ inception.

Judge Robinson’s prosecution bar is notable for several reasons, both pro-plaintiff and pro-defendant:

Pro-Plaintiff:

  • The bar is specifically not invoked by viewing non-source code material, even if highly confidential.
  • The bar does not apply to all of plaintiff’s attorneys, just those who view source code.

Pro-Defendant:

  • The bar may set a presumption in the District of Delaware and other courts that a post-grant prosecution bar of some sort is necessary.
  • The bar continues for one year after resolution of the litigation.

Whether Judge Robinson’s limited prosecution bar will catch on in other courtrooms remains to be seen, however with the ever more important role the AIA’s new review procedures are playing in patent litigation, it would not come as a surprise if it does.

 

The Aereo Decision Doesn’t Answer the Most Intriguing Question

Posted in Business Skills, Companies, Copyright, Legal Developments

The Supreme Court’s decision in the Aereo case doesn’t answer what we think is the most intriguing question: Can Aereo start to offer a lawful service by paying copyright fees to broadcasters in accordance with the compulsory copyright license for cable television services provided for in the Copyright Act and administered by the U.S. Copyright Office?

Some Cable Television History

Cable television started out as a community antenna service and was called CATV. CATV companies said they didn’t need a copyright license to retransmit television signals because the community antenna was simply doing what any television viewer could do for herself. The Supreme Court agreed with the new CATV industry in two decisions, Fortnightly and Teleprompter. The U.S. Congress overruled those decisions. Congress amended the Copyright Act to provide that unlicensed retransmission of television broadcasts violates the copyrights of the broadcasters and the program producers. We said in earlier posts that Aereo’s unlicensed retransmission of television broadcasts violates the Copyright Act. The decision that Aereo just received was inevitable, given the history of CATV. There was simply no way that the Supreme Court, having been expressly overruled by Congress, would defy Congress again on the same point. Continue Reading

Net Neutrality: Can Antitrust Save the Internet?

Posted in Antitrust, Competition Policy, FCC, FTC, Net neutrality

At a hearing last Friday, House Judiciary Committee Chairman Bob Goodlatte told the FCC that it should abandon its effort to enforce net neutrality and allow the antitrust agencies—the Federal Trade Commission and the Department of Justice—to police it alone. Chairman Goodlatte suggested that the antitrust laws were sufficient to prevent discrimination, and that any FCC regulation would ultimately hurt consumers more than help them. The Chairman is incorrect.

Net neutrality is shorthand for the concept that all Internet traffic should be treated equally irrespective of the nature of the traffic. So the bytes that make up a 10KB email should be shuttled about cyberspace in the same unbiased way the bytes that make up a 10GB HD movie are. Broadband providers generally do not like the concept of net neutrality. Streaming a 10GB movie will use up a lot more bandwidth than a 10KB email. While vast, there is still a limit on the total amount of bandwidth available at any given point in time. Also, broadband providers charge end users for access. At least up until recently, a user who is streaming a 10GB represents the same revenue as the individual who sends the 10KB email but uses one millionth the bandwidth. Get enough of those high-use consumers on your system and you will crowd out the other paying customers who then cannot send their 10KB emails. Broadband providers have chosen several ways of dealing with the bandwidth hogs. Providers can charge end users more if they use more bandwidth. They also slow or impede the delivery of large files or entire classes of files to ensure capacity is never constrained. This slowdown could frustrate the high-use consumer who might switch to a more reliable service. Continue Reading

A Coffee Monopoly?

Posted in Antitrust, Companies, Competition Policy, Lawsuits, Legal Developments

Back in February 2014, makers of a generic version of Keurig’s K-Cup coffee cartridges sued Keurig for monopolizing the market for k-cup cartridges. Since the initial suit was filed, dozens have filed follow-on suits. The gravamen of the original complaint is that there is a relevant antitrust market that consists of k-cups, the coffee-containing cartridges that one puts in a Keurig machine to make a single-serving cup of coffee. The original plaintiffs make a generic version. They allege that Keurig has engaged in various exclusionary practices that have cost them access to the generic k-cup market. What Keurig does is give away machines and then charge individuals for cartridges. Keurig makes their money off the sales of the replacement cartridges; the machines are loss leaders. Continue Reading

Investment-Based Crowdfunding: A Primer

Posted in Finance, Legal Developments

Crowdfunding has become a popular new way for entrepreneurs, small businesses, and philanthropists to raise capital by obtaining small contributions from a large number of individuals over the Internet. Online platforms like Kickstarter and IndieGoGo allow individuals to contribute to projects and causes in exchange for some sort of gift or recognition. Title III of the Jumpstart Our Business Startups Act (the “JOBS Act”), which was passed in 2012 but has yet to go into effect, takes crowdfunding one step further, by allowing startups to use crowdfunding campaigns to offer investors something beyond mere gifts—actual shares in the company. (Before the passage of the JOBS Act, investment-based crowdfunding was only legal with accredited investors—people who can verify that their net worth is at least US$1 million, or that they make at least US$200,000 a year.)

Investment-based crowdfunding is a game changing development which may prove to be a mixed blessing. Continue Reading