Although many European countries, including the United Kingdom and Germany, do not require registration for protection, registration will give you some advantages. It will prevent others from registering your mark or a similar mark. Further, enforcing an unregistered trademark in Europe is more difficult and expensive.

Your three best alternatives for mark protection in Europe are: a national registration in the countries where you contemplate selling your goods; an international trademark via the Madrid Protocol; or a Community Trade Mark (CTM).

I first discuss the nuts and bolts of each alternative and then list the advantages and disadvantages of each.

National Registration

A national registration in most of the 27 member countries that comprise the European Union (EU) is usually quick and inexpensive. Absent opposition to your registration, it should issue in less than a year and your filing and legal fees may be less than $1,000 for each national registration.

Madrid Protocol

The Madrid Protocol is an international treaty that allows you to register your mark in any of the 84 countries that are signatories to the Protocol. A list of countries, which includes the US and all 27 members of the EU (except Malta), is at http://bit.ly/fxEl9d.

Any person or entity domiciled or doing business in the US is eligible to file an application (called an “international application”) via the Madrid Protocol with the US Patent and Trademark Office (PTO). Its electronic forms are at http://teasi.uspto.gov/. In the application you designate the EU countries where you seek to protect your mark.  You must base the application on an already issued registered mark in the US or a pending US registration application.

The Three-Step Process

The application triggers a three-step process. The PTO first reviews the application to ensure that the information in the international application (such as the designation of classes and the description of goods or services) matches the information in the US registration or application. If it does, and you have paid the $100 fee per class to the PTO, it will quickly certify the application and pass it along to the World Intellectual Property Organization (“WIPO”) in Geneva, Switzerland.

You may also pay the PTO the fees due WIPO and the additional fees charged by the countries in which protection is sought. The PTO calculates them by using the WIPO fee calculator at http://www.wipo.int/madrid/en/fees/calculator.jsp.

WIPO

WIPO’s receipt of the application triggers the second step of the process. If WIPO determines the application meets the Madrid Protocol filing requirements, it will in approximately thirty days register the mark, issue a certificate of international registration, publish it in the WIPO Gazette of International Marks and notify each country named in your international registration of the request for extension of protection to that country.

The Country By Country Examination

In the third and final step of the process, each country examines the international registration to determine whether it complies with its rules and laws, applying the same standards as if it were examining a national application. Each country must decide within eighteen months whether to accept or reject the request for extension of protection. If the country accepts the request, it issues what’s called a statement of grant of protection. If a country takes no action within that eighteen-month period, the request for extension is automatically granted. If one country refuses registration, you can still register the mark in the remaining designated countries.

You must then use the mark in each country in which it is registered. Your international registration is valid for 10 years. But if the US registration or application is cancelled or abandoned within the first five years after you have received the international registration, it and all the member countries grants of protection fail. You can then transform the cancelled international registration into national applications by filing the application within three months of the cancellation.

The CTM Application

The third alternative for protection in the EU is the Community Trade Mark (CTM). A CTM application is a single application and when issued is effective in all 27 member states of the EU. It is an “all or nothing” system. You cannot pick and choose among the EU member states in which you want to register. The mark must be registrable throughout the EU; if there is a basis for rejection in one EU state, the CTM registration is void everywhere.

To obtain a CTM registration, the applicant need not own a U.S. or other country registered mark or an EU business.

The Office for the Harmonization of Internal Markets located in Spain examines the application. If all goes well, the registration will issue in about 26 weeks (see http://bit.ly/JgQHkI) and will cost about $1,200.

If the CTM is successfully challenged by a third party or a country, the applicant may convert the CTM application to a national application in each of the EU countries in which it wishes to continue to pursue registration. If the CTM application matures to registration, it is valid for 10 years from the filing date, but is vulnerable to attack if it is not used for any period of five years from the date of registration. Use in one country is sufficient to maintain the CTM mark in all EU countries.

The CTM registration creates a single supra-national right that is enforceable throughout the EU by a legal proceeding in any one member state. Because the CTM gives you a unitary right, you only have to pay one fee to renew.

Advantages and Disadvantages

So which of these alternatives should you choose? Here are some brief guidelines.

The fastest and least expensive is the national application. This may be your best alternative if you are targeting only one or two EU countries. But national applications become far less cost effective if you seek protection in more than a handful of countries. Further, the rights you receive from a national registration are only enforceable in the country that issued the registration. So if infringers in two countries separately infringe, you may have to bring two proceedings in two countries.

If you seek protection in more than three EU countries, but not throughout the EU, the Madrid Protocol is your best bet. A Madrid application allows you to file for protection in multiple jurisdictions by one application in one language; and you have the option of paying all fees in a single amount at one time in one currency. Further, the application will cost less than multiple national applications; and you will know within 18 months the countries were your mark will be protected. A Madrid registration also provides for a lower maintenance fee than a series of national registration. That’s because you pay WIPO a single renewal fee after the international registration expires in 10 years.

But the Madrid Protocol can become costly if there is opposition in the countries in which extension of protection is sought. At that point you will need to retain counsel in those jurisdictions which will wipe out any cost advantages. Further the mark must be used and enforced in each country separately. And the scope of protection for your mark abroad is limited to your description of goods or services in your US registration.

The CTM gives you protection in the most countries for the smallest fee and use in one country is sufficient to maintain the mark in all countries. Further if the defendant is infringing the mark in multiple countries in the EU, the mark holder can obtain an EU-wide injunction in a single action anywhere in the EU. But there may be a high risk of failure because rejection by one of country voids the entire application in all 27 EU countries.

So assess these pros and cons before going forward. Do you have European registration stories to share? Please include them in your comments below.

Thankfully the Second Circuit in Viacom v. YouTube  has reversed Judge Stanton’s see no evil, speak no evil opinion which had granted summary judgment to YouTube. But in response to the “most important” issue the appellate court stated it faced, that court dropped the ball.

The issue was whether the actual and red flag standards in § 512(c)(1)(A)(i) and (ii) of the DMCA each required actual knowledge of specific and identifiable infringements. The district court had wrongly said yes. The Second Circuit stated it was carving out an “independent” role for the red flag standard. But the standard the court adopted mirrors the actual knowledge test and ignores the plain meaning of the statute. Thus it is unlikely that the red flag standard will be of much use going forward in evicting Internet Service Providers (“ISPs”) from the safe harbor. But in any case there may now be good reason for these copyright goliaths to settle this litigation.

Background and District Court Result

For those unfamiliar with the background here’s a summary. Under § 512(c)(1)(A)(i) and (ii) of the DMCA, an ISP is disqualified from the safe harbor if it has actual knowledge that the material . . . on the system is infringing” or (b) lacks “aware[ness] of facts or circumstances from which infringing activity is apparent.” Courts refer to these two knowledge standards as actual and red-flag knowledge.

The district court admitted that “a jury could find that the defendants not only were generally aware of, but welcomed, copyright-infringing material” on their sites. But Judge Stanton nevertheless found that the defendants were not aware of any facts from which the infringing activity they welcomed was apparent.

Instead, the district court held that defendants would only be charged with actual or red-flag knowledge if they knew of “specific and identifiable infringements of particular individual items.” This result made no sense. If an ISP welcomes an infringer to its site, as Judge Stanton admitted You Tube did, isn’t there at least a jury question whether the ISP is aware of (quoting the statute) “facts or circumstances from which infringing activity is apparent.”

The 2d Circuit’s Red Flag Standard Mirrors Its Actual Knowledge Standard

Unfortunately the Second Circuit did not give life to the red-flag standard. Instead, the appellate court adopted a standard that mimics the actual knowledge test: each is satisfied by knowledge of “specific infringements.”

The only difference between the two standards is that red flag awareness is viewed objectively while the actual knowledge standard is judged subjectively. In the court’s view the actual knowledge standard is satisfied by the ISP’s subjective awareness of a “specific infringement.” The same “specific infringement” that is “‘objectively’ obvious” to a reasonable person satisfies the red flag standard.

Why Would Congress Enact Two Standards if the Same Level of Knowledge Satisfies Both

I suggest the appellate court got it wrong. Although the court stated its result was “compel[led]” by the “text of the statute,” the court ignored the text. The red flag standard begins with this proviso, “in the absence of such actual knowledge.” Thus, Congress must have intended that something less than actual knowledge of infringement was enough to raise a red flag. Further, Congress would not have enacted two knowledge standards (actual and red flag) if the same level of knowledge satisfied both. Yet the 2d Circuit gave the red flag standard virtually no independent application. Although the court noted three pieces of evidence that might eject defendants from the safe harbor, the court never stated that any satisfied the red flag standard. Instead the court left it all to the jury.

Little Role Ahead for Red Flag Standard

Thus it is unlikely the red flag standard will play any more of a role in ending an ISP’s safe harbor status in the future than it has in the past. And maybe that is not surprising. ISP’s like YouTube host countless videos acquired from as many sources. How can the proverbial reasonable man determine whether a particular video clip posted on an ISP is infringing? As Eric Goldman points out, even Viacom couldn’t tell whether a number of its videos were illicitly placed on YouTube.

But even if a video were to have Pirate Bay labels slapped all over it–raising a red flag and making its infringement “objectively obvious”–wouldn’t almost any ISP also have actual knowledge of the obviously infringing nature of this video? So what purpose will the red flag standard serve?

Good Time to Settle

In any case Viacom may now go forward with this litigation despite the bumps it may face in the road ahead. But my prediction is that with both goliaths a bit bloody, a settlement is in the offing. The parties need each other as evidenced by their recent business deal carved out in the midst of this litigation. YouTube wants the quality content Viacom creates and Viacom needs a venue to display it. Further, now that willful blindness may also remove safe harbor status, does YouTube want that issue fleshed out in  litigation possibly resulting in a precedent that could hurt You Tube and the rest of content hosting industry. Stay tuned.

Your predictions on what’s next are welcome.

For my earlier posts on this case click here, here, here and here. For a similar view from the Aaron Sanders blog click here.

Introduction by Andrew Berger 

I am pleased to host a guest blog post by Robert Kotch. Bob is an experienced management consultant and business executive with extensive background in business strategy development and deployment, financial management and technology leadership. His experiences include integrating diverse IT organizations, serving as CIO and financial head of a division of a Fortune 50 company, and many technology focused successes including CIO and executive team coaching, web strategy development, IT process deployment, business process improvement, management of major programs and evaluation of acquisition targets.

His post below focuses on tech project failure and he sets forth a prescription for failure you may wish to avoid. Here is his post:

I speak to many IT professionals, and each has a story about an IT project that went terribly awry. One of the most frequent project related questions I get is “tell me what you learned from your last project, and what you would do differently.” I do below.

There are many reasons why projects get into trouble. So instead of focusing on a particular project, I outline a composite picture of some of the activities that help assure project failure as a warning to help you avoid similar disasters. I will miss some prime failure opportunities. Please add them in the comments section below.

Prescription for Tech Failure

With that as a backdrop, here’s a laundry list for failure:

1. No need for a vision! If there is a need for a project, we all know it. So let’s not waste time with a vision or a definition of what we are trying to accomplish, project charter, success metrics or any of that overhead. It takes time away from doing the project.

2. Forget contract requirements documents – look at software available in the marketplace and decide if it is “good enough” to meet your needs. Don’t waste time with a detailed and comprehensive requirements document. It detracts from getting started on the project.

3. Select a vendor based only on demos. We will know if the product meets our needs – we just will.

4. Negotiate the vendor contract as early and as quickly as possible. Don’t bother appending requirements, performance metrics, delivery commitments and consequences of non-delivery. Let the vendor manage their end of the project and don’t worry about it. After all, you know this is the right vendor for you. They do this all the time.

5. Think of this as a system deployment. Don’t get distracted by the business needs or by process re-engineering or modification. It will distract you from the real goal – get the new system in and working.

6. Don’t be overly concerned about resources. The business wants the project done – they will find a way to participate and get their part done. Where there is a will, there is a way.

7. Don’t spend time defining the decision making, review and communication processes for the project. These administrative distractions will only slow you down.

8. Set the go live date, build a plan and relentlessly track it. The plan is the plan – take no prisoners. Get it done, no matter what. Meet the plan and timeline – that is the goal.

9. Take shortcuts where you can. Detailed documentation of use cases, process change and the like takes time and will detract from meeting the sacred system deployment goal.

10. Go light on user training. They will get it…after all, this is the right system and it will work just fine. Be willing to make compromises here to get it done.

11. Don’t worry about scope creep – if new understandings emerge, they can be accommodated in the project. Don’t let that slow you down.

12. Conversely, if your team identifies some needs that cannot be accommodated, don’t let them get away with it! There is no phase 2 – this is it.

13. During the project, let your team focus solely on getting it done. Don’t engage in periodic review by an unengaged expert body such as a Project Management Office review. Wastes time, distracts from the goal – get it done.

14. Don’t engage numerous committees to oversee the project. Executive steering committees, project teams, tech teams and the like are a waste of time. Focus instead on getting it done; speaking with whomever you can find to be engaged to help. Don’t get process bound.

15. Don’t worry about politics. The project lead can make all necessary decisions.

16. Defer thinking about support of the system after the project is in production. It will emerge naturally and take care of itself. The same goes for setting a transition support period between deployment and normal ongoing operation. Overhead – shun it!

 Real Life Illustrations

Let’s look at a couple of real life situations to illustrate these points.

First, here’s what happens when you have no contract requirements – The client spent a lot of energy surveying applications in the marketplace and created a weighted decision matrix based on vendor documentation, extensive discussion with the vendor and its priorities. As a result of that process, a vendor was chosen. All agreed to honor the choice, although there was a firmly held belief by some that the wrong choice was made.

At project initiation, in depth meetings were held with the vendor to review desired business process operation. This led to agreement to make certain enhancements to the core system, and a working consensus was achieved between the vendor representatives and the client. The vendor documented these at a high level and received client approval to proceed.

Then staff was deployed by the vendor to implement the system. There were several changes in staffing for a variety of reasons, and the agreed changes did not get implemented as desired in some instances. This set of issues delayed testing, resulted in added cost to change the changes in some cases, led to gaps in performance desired in other cases and delayed the project while increasing cost. And there was no recourse…

In the end the project deployed, with some flaws (some known in advance and some not). Requirements would have helped!

A second case – here are the consequences of a predestined timeline. A client was centralizing a function nationally. There were several instances of an old vendor system deployed in the various offices. The stated desire was to centralize the function using that system. This required moving to one instance of the deployed system.

There was no movement allowed in the end date. What to do?

In this case, two overlapping teams were formed to serially convert each office to a single instance of the system and centralize the function. Vendor personnel and contractors were heavily involved, and while it was exhausting, the team engaged got the job done well – at least they got the job as defined done well.

What got missed was consideration of a significantly reengineered business process. Yes there were changes to accommodate the needs of a single instance, but the opportunity to significantly reengineer the function and create the necessary buy-in across the organization was missed. The price was significant missed opportunity to materially improve the business as this change was made, and dissatisfaction among the participating organizations.

The point is clear – creative teams will work around any flaw and do as good a job as can be done under the circumstances. But opportunities to improve the business and manage cost get put aside – to the business’ detriment.

Any one of the above factors can cause project failure. Taken together, they virtually guarantee it. There is a better way.

Thanks Bob. If you have any questions or need more information, please contact Robert at rak@simassoc.biz or visit his web site at www.simassoc.biz.

Andrew will speak to the Intellectual Property and Technology Association at Cornell Law School on Tuesday evening March 26, 2012 on How Brands May Protect Themselves Against New Forms of Online Attacks and Infringements. Information about the program is here.

I this week did a licensing program with Rand Brenner, President & CEO at Licensing Consulting Group. Rand is a licensing expert assisting clients in the acquisition and sales of licensing rights. His recent assignments include acquiring licensing rights for clients to several national brands including Major League Baseball, The NFL and NCAA Football.

At the program I discussed ten considerations the parties to a license agreement should keep in mind when negotiating it. Here they are:

1. The license agreement must be a win-win for both sides or it will not work.

2. The more you don’t need to do the deal the more leverage you have when negotiating it.

3. If your sales channel is the Internet you have global rights.

4. Givers get; if you give exclusivity, you should get a higher royalty.

5. Don’t enter into a license without an exit strategy.

6. There is no one magic royalty number whatever the deal.

7. Set a royalty by looking at what licensees are paying in comparable deals.

8. The term of the license should allow the licensee a reasonable time to recoup its investment in the deal.

9. Negotiate with respect to build trust.

10. Take your time so that the license agreement creates a long-term, mutually-beneficial relationship.

Do you have other suggestions to add to this list? Please include them below. Interested in learning more about IP licensing? A useful book is IP Valuation and Management by Weston Anson. More information about the book here.

SUMMARY

 Plaintiffs: Apple Inc. and IP Application Development Limited (collectively referred to as “Apple”)

Defendant: Proview Technology (Shenzhen) Co., Ltd. (“Shenzhen Proview”)

Shenzhen Proview and Proview Electronics Co. Ltd (“Taiwan Proview”) are 100% owned by Proview International Holding Limited, a listed company in Hong Kong. In 2000, Taiwan Proview registered the trademark “iPad” in many countries. In 2001, Shenzhen Proview filed the trademark applications for “IPAD” (reg. no. 1590557) and “(i)PAD” (reg. no. 1682310) (the “Marks”) in mainland China on the goods of “computers; etc.” in class 9, which were approved for registration in 2001.

In 2009, Taiwan Proview executed an assignment agreement for the assignment of the “iPad” trademark rights to Apple in various countries including China. The assignment agreement was executed by the head of the legal department of Taiwan Proview under a Power of Attorney given to him by Taiwan Proview. Apple announced the global launch of iPads in January 2010, following which Shenzhen Proview refused to execute assignment agreement for the Marks in China to Apple. Apple filed non-use cancellations against the Marks in February 2010, and subsequently filed a civil suit against Shenzhen Proview with the Shenzhen Intermediate Court in April 2010 requesting Shenzhen Proview to transfer the mark to Apple.

COURT’S FINDINGS

 The case was heard in open court throughout 2011, and judgment was delivered in December 2011. It was held that Shenzhen Proview is the rightful owner of the Marks. The assignment agreement between Apple and Taiwan Proview is not legally binding on Shenzhen Proview. The fact that the legal representative of Taiwan Proview and Shenzhen Proview was the same individual does not bolster the claim, as there is no evidence that the legal representative was acting on behalf of Shenzhen Proview.

Evidence of email chain with individuals with the email address of “@proview.com.cn” has no legal force. The claim of Apple was not supported by the Court.

Apple appealed and the appeal to the High Court of Guangdong Province is now pending.

SHENZHEN PROVIEW’S RETALIATION

 Shenzhen Proview has lodged claims in various courts in China against Apple and its distributors in China. In December 2011, Shenzhen Proview initiated litigation against Apple’s Shanghai subsidiary based on trademark infringement, which has been accepted by the Pudong Court in Shanghai. On 22 February 2012, the court hearing was held for four hours, but no judgment was made. On the same day, Shenzhen Proview also filed a claim in the Pudong Court for a restraining order preventing Apple from selling iPads in China, and allegedly is willing to provide security of costs for such order.

Shenzhen Proview has also made trademark infringement complaints to the local State Administration for Industry & Commerce (“AIC”) in major cities, such as Beijing, Shanghai, Shenzhen, and it has been reported that the AICs who have accepted such complaints has begun investigations on the case. Up till today, there are more than 20 local AICs which have begun the investigation work.

In February 2012, Shenzhen Proview filed a request with the China Customs to prohibit the exporting and importing of iPads, which is pending examination. This may potentially lead to Apple’s iPads being seized at Customs for trademark infringement.

ONLINE RETAILERS’ REACTION

 Since early February 2012, popular online retailers in China, such as Amazon, www.gome.com.cn (online seller for Gome), www.suning.com, www.360buy.com, etc. are reported to have stopped selling iPads in China. Their decision to discontinue sales of iPads despite allegedly being authorized resellers may be because of the possible trademark infringement through making such devices available in China. Retailing infringing products is an infringing act under the Trademark Law, actionable by Shenzhen Proview.

It is widely speculated that settlement will be reached by the two parties.

KEY TAKEAWAYS FOR YOU AND YOUR CLIENTS

i) Consider Defensively Filing for Trademark Applications:

Trademark registrations are based on the “first to file” principle. Even if trademarked products are only manufactured and not sold in China, trademark applications should be considered to prevent being sabotaged by third parties if bad faith trademark registrations are recorded in Customs, preventing exports. A clearance search before filing is recommended.

ii) Do Sufficient Due Diligence Prior to Trademark Assignments and Treat them with Care:

The Assignor of trademarks must be the registered owner as recorded in the Chinese Trademark Office (“CTMO”). In this case, although both Taiwan Proview and Shenzhen Proview are subsidiaries of the same parent, the trademark owner of “iPad” in mainland China is Shenzhen Proview, not Taiwan Proview. Therefore, according to the Contract Law, only Shenzhen Proview has the right to transfer the Marks to Apple. The assignment agreement signed by Taiwan Proview has no legally binding force on Shenzhen Proview.

Further, to successfully record a trademark assignment in China, an assignment agreement is not normally required by the CTMO. However, an Assignment Form duly signed or sealed by both the Assignor and the Assignee is necessary. Where the authenticity of the seal or signature in the Assignment Form is challenged by the CTMO, or the Assignor denies its seal or signature on the Assignment Form, a notarized assignment agreement is necessary to prove the authenticity of the assignment.

iii) Customs Recordals Are Effective and Powerful

The Customs recordal system is a fast and efficient way to protect your registered IPR rights (e.g. design patents, copyright and trademarks) in China. Infringing goods will be monitored and seized by the Customs, whereas the goods from your authorized distributors recorded with Customs will not be affected.

Thanks Vivien. If you have follow up questions or want further information, please email Vivien at vivchan@vcclawservices.com. For an earlier post by Vivien Chen about the Chinese customs recording system click here.

Also the Apple/Proview trademark fight has now come to the U.S. Here is the fraud complaint that Proview filed last month against Apple in state court in California. The complaint alleges that Apple set up a special purpose company in the UK called the IP Application Development Ltd. to obtain the iPad marks in China while obscuring the relationship between Apple and the acquisition. Apple has yet to file a response to the complaint.

Your reactions and predictions about what may lie ahead in the Proview/Apple battle are welcome.

The genesis of this post is a recent copyright infringement case we handled that dealt with a relatively unexplored corner of the Digital Millennium Copyright Act (“DMCA), defendant’s removal of copyright management information (CMI) and the statutory damages that arise from that DMCA violation.

Three DMCA Issues that Divide the Courts

In researching the DMCA claims, we noted that three issues have divided the courts:

(a) is CMI as defined in §1202 of the DMCA restricted to digitally encoded information contained in an automated copyright protection or rights management system or does CMI extend to any identifying information about a copyrighted work, digital or not;

(b) does the DMCA only protect CMI if it’s on the face of a copyrighted work or does protection include CMI that is elsewhere on the page where the work appears; and

(c) what constitutes a violation of the DMCA for purposes of computing statutory damages.

This post will focus on the first issue with a later post dealing with the balance.

But first some brief background. Section §1202(c) of the DMCA broadly defines CMI as “information conveyed in connection with copies . . . of a work,” including its title, author or copyright owner and the terms and conditions governing the use of the work and numbers, symbols, or links referring to terms of use. Section 120(a) and (b) prohibit the knowing distribution of false CMI that enables copyright infringement, as well as the intentional removal or alteration of CMI with knowledge that this will facilitate copyright infringement. Finally, §1203(c)(3) of the DMCA authorizes an award of statutory damages of up to $25,000 for each violation of §1202.

Is Non-Digital As Well As Digital-Encoded CMI Protected by the DMCA?

Let’s now deal with the scope of protectable CMI.

The CMI provisions Congress enacted appear on their face to apply to identifying information about a work whether the information is conveyed in digital or non-digital form. But in IQ Group. v. Wiesner, the District of New Jersey held that information, such as the name of the author of a work, is not CMI unless it is in digital form and functions as part of an automated copyright protection or management system. In other words, in IQ’s view, if a defendant were to remove a printed authorship credit from a photograph before posting that photo on a website, that conduct would not violate § 1202 even though the credit would appear to be protected under that section.

IQ Group neither defined an acceptable form of digital CMI nor articulated the types of automated copyright protection or management systems in which the digital CMI would function. IQ Group only said that § 1202 “should not be construed to cover copyright management information performed by people” but instead should be “construed to protect copyright management performed by the technological measures of automated systems.” Thereafter, Textile Secrets v. Ya-Ya Brand suggested that a “bar code or other marker that could be electronically scanned” might qualify as CMI.

But a number of district courts, including Agence France v. Morel, found IQ Group’s narrow interpretation of CMI “directly at odds with the broad definition set forth in the statutory text itself.” Agence followed Assoc. Press v. All Headline News, which reasoned that, when a statute’s language is clear, courts in the 2d Circuit “do not resort to legislative history to cloud a statutory text” but instead enforce a statute “according to its terms.” Accordingly,
Agence held the authorship credits a photographer had placed adjacent to his photographs were protectable CMI whether in digital form or not.

The Third Circuit Protects Any CMI

The debate whether CMI is limited to digital information has now been settled at least in the Third Circuit by Murphy v. Millennium Radio. It read §1202(c) to extend to any CMI if placed manually or embedded digitally on a copyrighted work. The court stated the “statute imposes no explicit requirement that such information be part of an ‘automated copyright protection or management system’ … In fact, it [the statute] appears to be extremely broad, with no restrictions on the context in which such information must be used in order to qualify as CMI.

The court added that defendants “are essentially asking us to rewrite §1202 to insert a term — that is, ‘automated copyright protection or management system’ — which appears nowhere in the text of the DMCA and which lacks a clear definition.” Thus under Murphy, any CMI conveyed in connection with a copyrighted work, regardless of its form, may trigger a DMCA claim if that CMI is falsified or removed.

This decision makes sense and I suspect will be followed in other circuits. The face of § 1202 never narrowed CMI to digital information. As Murphy recognized, where the text of a statute is unambiguous, courts enforce the statute as written.

The Future of CMI Litigation

Will Murphy open the floodgates to CMI litigation? I think the answer is no. That’s because plaintiff must meet a high standard of proof to successfully prosecute a CMI claim. Plaintiff will have to show that defendant was contemplating copyright infringement when it removed or distributed the information without the required CMI. In the words of the statute, plaintiffs must demonstrate that, when defendant knowingly distributed false CMI that enables copyright infringement or intentionally removed or altered it, defendant did so with knowledge that its conduct will induce, enable, facilitate, or conceal infringement.

I am not aware of any case since Murphy where plaintiff has satisfied this burden at trial though I suspect we will see one soon.

In any case, the DMCA gives plaintiffs a second string to their bow. In addition to a copyright infringement claim, they may also have a claim for CMI removal or falsification for which they will be entitled to additional statutory damages. In a later post I will discuss the extent of the damages that may be awarded; but keep in mind they may be substantial.

You are welcome to share below your CMI litigation experiences under the DMCA.

For my earlier posts on Agence France v. Morel click here and here.
For another post on Murphy and its implications see Terry Hart’s fine post here.

Andrew will moderate a panel discussion at the ABA Litigation Section’s Annual Conference in D.C.  The topic will be “Internet and Social Media in the Forefront: Current Hot Issues and Developments.” The program will take place on Thursday April 19, 2012 between 3-4 pm.

Speakers with be Peter Jaszi, Professor of Law at American University Law School; David Perrot, Research Director at Decisionquest; Stanley Pierre-Louis, Vice President and Associate General Counsel for Intellectual Property and Content Protection at Viacom Inc.; and Mozelle Thompson, former Commissioner of the Federal Trade Commission and CEO of Thompson Strategic Consulting.

I hope you can join us. For a program brochure, please click here.

Thinking about outsourcing? Take a deep breadth and you may want sit down till the thought passes. Many outsourcing arrangements fail for a variety of reasons and even when they succeed the costs incurred may be more than the costs saved.

One of the biggest risks is protecting your intellectual property (“IP”) when it is outsourced. There are no silver bullets that will guarantee protection. But if you choose to outsource, there are some guidelines you might wish to follow to reduce the risk that your IP will be compromised when outsourcing to an overseas vendor (“Vendor”). Here they are.

Know the IP Your Are Outsourcing

The first step is to inventory the IP you plan to outsource. IP can take many forms (copyrights, trademarks, trade secrets and patents); it can be structured into databases, embedded in software code or written on a whiteboard in a conference room.

Identify what your IP consists of; where it is located; who controls it; who adds or enhances it; who protects it; how it is protected and how vulnerable it is to attack.

Examine you IP licensing agreements–those from you to others and from 3^rd parties to you. Determine whether these agreements prohibit outsourcing the IP without the permission of your licensing partner.

Some Other Considerations

Do you have personnel that can monitor the transaction? You will at least need a competent IT manager and an in house project manager. You will also need an accountant to audit the financials of the agreement and a security person to ensure there are no security breaches.

Consider whether you want to begin the relationship by outsourcing your lesser-valued IP, saving your “core” IP until after you have developed a trusting relationship with the Vendor.

Consider also whether you want to keep all the IP you intend to outsource on servers located in the US allowing your Vendor access to the IP on only permission basis.

Steps in Identifying an Outsourcing Vendor

Second, let’s assume you have inventoried and selected the IP you wish to outsource and determined you have the personnel to make the transaction work. What steps should you take to find an appropriate Vendor? There are many and will take time to complete.

You want to examine the potential Vendor’s reputation, financial and technical resources and compatibility with your corporate culture.

You also want to examine the Vendor’s ability to safeguard your IP against accidental, inadvertent or willful misappropriation, misuse, sabotage, loss or theft.

Your need to investigate the Vendor’s track record; talk to its references and assess its security and/or IP protection program and check on the background of the Vendor’s project manager. That examination will most likely require that you make site visits to the Vendor’s place of business, wherever located.

You further must assess the legal environment in the jurisdiction where your Vendor is located. Determine how likely the courts in that jurisdiction will provide you with legal protection and a remedy if something goes wrong. Retain local counsel in that jurisdiction to possibly even lead that evaluation.

Also assess whether you will be able to enforce the remedy against the Vendor either where it is located, where it may have assets or is doing business.

You also need to determine the privacy policies in the Vendor’s jurisdiction and the likelihood that the government there will attempt to access your IP for whatever reason or turn a blind eye if someone else does.

Also examine the Vendor’s insurance coverage to see whether it is sufficient to protect you for the damage you may suffer if your IP (including your trade secrets) are compromised. Security breaches of your core IP can be costly.

In addition, assess the adequacy of any disaster recovery plans the outsourcing company has. Tsunamis, nuclear accidents, natural disasters and political upheavals happen. What steps will the Vendor take in response?

Further examine the steps you are prepared to take if the relationship deteriorates; outsourcing relationships fail for many reasons; what is your exit strategy; do you have the resources to set up shop elsewhere quickly and relatively easily if this relationship fails?

Ask yourself whether the costs of initiating, negotiating, monitoring and enforcing an outsourcing agreement and the risks to your IP you will be assuming are greater than the savings you anticipate through outsourcing. In other words, is it worth it?

Key Provisions You Will Need in an Outsourcing Agreement

Third, if you have located an appropriate Vendor and are ready to negotiate an outsourcing agreement, what are some provisions to include to protect your IP? Outsourcing agreements can run for more than 40 pages. Here are just a few of the clauses you may want to have.

Make sure the agreement provides that you will own the rights to any IP the Vendor creates during the term of the relationship; for instance if the Vendor creates any joint interfaces, you should own them. In other words, all the IP the Vendor creates during the relationship should be considered works for hire.

Why own it all? Because you want to be able to take that IP with you to a new vendor at the end of the relationship.

The agreement needs to specify how the Vendor will guard and protect your IP; who will access it and under what circumstances. Detail is important here. For instance, the contract should provide that the Vendor will write over and not simply erase any data no longer needed.

The agreement should provide that when the contract ends for any reason you will have immediate access to your IP.

If you are outsourcing to countries like India or China, require your Vendor to register your copyrights and trademarks at the appropriate government agencies in those countries. You should ensure through local counsel that your Vendor has properly done so.

Finally, you should provide a US choice of law clause and a US forum for any breach of the agreement. To ensure the enforceability of these provisions, the agreement should specify all the points of contact the agreement and the Vendor have with the US.

This is by necessity a general summary. Your agreement will change depending on the country to which the IP will be outsourced and the nature of the IP.

Also remember that IP is highly perishable. Once the secret is out, the genie is out of the bottle. But these guidelines may help reduce your risks.

I welcome comments and any suggestions you would like to also offer to those contemplating outsourcing.

I will be speaking on this subject on February 15 at a webinar sponsored by Global Outsourcing Association of Lawyers (GOAL); click here for more information.

• Buyers of legal outsourcing services – law firm partners, counsels, IP counsel and practitioners based in the US, UK and other markets;
• Service Providers of legal outsourcing services – LPO executives, emerging LPOs from vendor locations in Asia, Africa, UK/Europe, America and others; and
• Investors, Software Vendors, Researchers, Academicians and other interested stake holders of LPO industry. For more information and to register, click here.