Archive for the ‘Business Law’ Category

Oct
11

THE SECOND CIRCUIT’S RECENT DECISION IN HORROR, INC. v. MILLER – FRIDAY THE 13TH 40 YEARS LATER

This September 2021 decision addresses complex aspects of Copyright Law involving both copyright ownership issues and termination rights wherein the Creator of a work can reclaim rights in an originally assigned copyright 35-40 years after the work’s assignment.  The commentator has previously posted blogs discussing the importance of properly categorizing the work’s Creator as a work-for-hire under the Copyright Act.   Failure to do so may result in a situation wherein the plaintiff in a copyright infringement case may actually not be the owner of the registered copyright. Under such circumstances, a copyright infringement case may be dismissed because the plaintiff, as a non-owner, may not have standing to sue for copyright infringement.

The public policy underlying the Copyright Act’s termination right under 17 U.S.C. § 203 is to give Creators a second chance when the work they licensed or sold (assigned) becomes more valuable than anticipated. Improper classification of the Creator also impacts a Creator’s termination rights because the Creator of a work-for-hire cannot invoke a termination right. Disputes over termination rights often turn on an analysis of the nature of the Creator’s relationship to the work.

The defendant in Horror (Victor Miller) was the screenplay writer of the 1980 horror movie “Friday the 13th”.   The screenplay was created for Manny, Inc. which later transferred its copyright in Miller’s screenplay to Georgetown Productions, Inc.  It was Georgetown Productions that registered the screenplay as a work-for-hire.  The rights were later acquired by Horror, Inc.  In 2016, Miller notified both the “first” company which had retained his screenplay writing services decades before and Horror, Inc. that he planned to exercise his termination rights.

Horror filed an action in the U.S. District Court of Connecticut, seeking a declaration that the screenplay was a work-for-hire by an employee and not subject to termination. The district court disagreed with Horror’s position, finding that Miller had instead been an independent contractor and the screenplay did not qualify as a work-for-hire.  Horror appealed. The Second Circuit affirmed the lower court’s decision.

Employment Status Analysis

In arriving at its “independent contractor” conclusion, the Second Circuit discounted the plaintiffs’ position that Miller had been an employee at the time he wrote the screenplay.  The plaintiffs’ argument focused on Miller’s membership in the Writers Guild of America (WGA) at the time he was hired to create the screenplay as grounds for his designation as an employee and the registered work’s classification as a work-for-hire.   Miller’s original agreement with Manny was conducted under a collective bargaining agreement governing WHA’s writers and signatory employers like Manny.

The Second Circuit concluded that Horror wrongly relied on labor law’s framework defining “employee.” Instead, Copyright law controls the analysis; its concept of employment is grounded in the “common law of agency” and serves different purposes from labor law.

The Second Circuit relied on the Supreme Court’s 1989 seminal case of Community for Creative Non-Violence v. Reid where the High Court laid out the scope of employment framework for establishing copyright ownership under 17 U.S.C. § 102.   In discussing CCNV, the Second Circuit noted that “the Copyright Act uses a more restrictive definition of employment” in order to protect authors whereas labor law construes employment broadly “to serve workers and their collective bargaining interests and establishing rights” including safety and pay rights.  Thus, Miller’s membership in the WGA and Manny’s status as a signatory employer to their collective bargaining agreement did not create an employment relationship that converted the screenplay into a work-for-hire.

In determining that Miller was an independent contractor who had the right to terminate Horror’s copyright, the Second Circuit considered CCNV’s enumerated factors for establishing whether the Creator of the work was indeed an employee:

  • Miller’s previous screenwriting employment and graduate degree in theater established his expertise and skill in screenwriting requiring little oversight/direction;
  • Manny, Inc. never provided Miller with typical employment benefits such as health insurance of paid vacation time;
  • Manny, Inc. never withheld or deducted any taxes or social security payments from the two lump sums he received for his screen-writing services.
  • Nothing in Miller’s employment agreement with Manny, Inc. could be construed as granting Manny the right to assign additional projects.
  • Miller was the only person credited as the screenplay writer.

Certain types of commissioned works may also qualify as a work-for-hire under the Copyright Act when the Creator is an independent contractor and not an employee but only if the Creator and the commissioning party have both signed an agreement stating that the work is a work-for-hire. Additionally, the work must fall into one of the Copyright Act’s nine enumerated classifications for this type of work-for-hire.  Screenplays are not one of the enumerated classifications. Here, the agreement between Manny and Miller never specified that the screenplay would be a work-for-hire.  Even if the screenplay would have qualified as one of the enumerated classifications, the absence of the required agreement eliminated any chance of establishing the screenplay as a work-for-hire under the “independent contractor” scenario.

As a result of the Second Circuit’s decision, Miller now has the right to terminate his copyright.  He will presumably try to negotiate a licensing agreement seeking royalties commensurate with the movie franchise’s success.

Comments

Copyrights enjoy a long lifetime but  nobody has a crystal ball.  Parties who are contemplating obtaining the rights to a copyrighted work(s) should consider the money-making potential with the knowledge that the work’s Creator (including his/her estate) could seek to terminate the copyright 35-40 years into the future. Parties who are acquiring the rights as a successor-in-interest should consider the possibility of termination and determine if the work was a bona fide work-for-hire: 1) by an employee; or 2) via a “work for hire” agreement signed by both the Creator/independent contractor and the hiring party for certain classifications of works.   Why?  Because a “true” work-for-hire is not eligible for termination.  On the other hand, independent contractors may not wish to have their work designated as a work-for-hire and instead assign the rights in return for monetary compensation to preserve their termination rights.

As the Horror decision shows, a registration which specifies a work as a work-for-hire does not necessarily make it so. Had this been a copyright infringement lawsuit brought by Horror against another party, chances are that an astute copyright infringement attorney would have challenged Horror’s ownership and standing as the owner of the registered copyright.  Why?  Because the Creator was never an employee.  Nor would the work  have likely qualified as a work-for-hire under the “independent contractor” alternative provided for under the Copyright Act.

Copyright law is complex even though at first blush it appears relatively simple due to the ease of completing a copyright registration application.  However, numerous pitfalls abound for the unwary and even the issuance of a registration does not mean that the registration is absolutely immune from problems as the Horror decision demonstrates.

Copyrights can be extremely valuable intellectual property assets.  Make sure you understand the pitfalls to avoid problems down the road where your ownership may be questioned or the Creator may have the right to exercise termination rights.   Contact us for a complimentary consultation on your copyright matters.

 

WE THANK YOU READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE OR AN ATTORNEY-CLIENT RELATIONSHIP.  

 

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

 

 

Jul
09

Have a Website? Consider Implementing a DMCA Policy!

In 1998 Congress enacted the Digital Millenium Copyright Act (DMCA) to address the copyright issues arising because of Internet usage.  Section 512 of the DMCA protects online service providers (OSPs) and website operators from inadvertent copyright infringement.  For OSPs, this protection involves:

  • Taking them off the hook for transient infringing transmissions passing through their computers;
  • Provides a safe harbor if the ISP promptly removes infringing material at the owner’s request; and
  • Relieves them from liability for unknowingly linking to a site that does contain infringing material, except they may be required to identity an alleged online infringer through a subpoena.

For website operators, the DMCA provides that website operators are immune from copyright infringement if:

  • They don’t have actual knowledge of the infringing materials on their services;
  • Don’t receive a financial benefit directly attributable to the infringing materials; and
  • They implement and comply with any takedown procedure. This means that the website should include wording stating that it adheres to the DMCA and provide contact information for a DMCA agent.

One of the first cases to test the DMCA’s reach involved Google/You Tube as the Defendants in a lawsuit brought by Viacom. Viacom argued that YouTube actively encouraged the distribution of infringing content owned by Viacom, it was disqualified from immunity under the DMCA.  Google argued that it and YouTube has immunity under the DMCA’s safe harbor provision.  Google prevailed. Viacom Int’l, Inc. v. You Tube, 676 F.3d 19 (2d Cir. 2012).

          The DMCA Take Down Procedure   

All website operators should ensure that the content they use on their website is original.  If it is not, then they should get permission from the copyright holder to make use of that content or use the content only under a license. When hiring a website developer, it is important to ensure that the developer does not use works (photos, sound recordings, images, etc. owned by another in the website).  Such unauthorized usage of photographs or other images could result in problems for the website owner down the road.  Any authorization the website designer claims he has may not accrue to the website owner.  Accordingly, specific authorization for the website owner to use such content may be required.

Where a website or platform displays user-generated content over which the website owner has no oversight, the owner should have a DMCA policy in place.  This policy will ideally explain how the website owner manages copyright complaints and takedown notices. The website owner presumably expects others to respect and honor its own intellectual property rights.  It is only proper that the website owner will respect the intellectual property rights of others by promptly removing or disabling access to any allegedly infringing content upon receiving a proper take down notice.  The DMCA policy should be part of the website’s term and conditions.

To commence the “takedown” or “removal” of infringing content by a third party such as a website owner or OSP, the owner of the allegedly infringing must send a notice, typically to the designated DMCA agent.  Any old notice won’t work.  It must meet certain criteria known as elements to qualify as a proper DMCA takedown notice.  These elements are:

  • The signature of the copyright owner’s owner or agent authorized to act on behalf of the owner.  The signatory should designate whether they are the copyright owner or the owner’s agent.
  • Clear identification of the work(s) being infringed.  This may include providing a link to a website or other location where the work is being legally displayed.  It is suggested that the copyright owner attach a copy of the copyrighted work a copy of the registration.
  • Clearly specifying the infringing activity and the location of the infringing activity on the Site.  This includes providing the web address (URL) indicating where the infringing activity is occurring.  A copy of the infringing material or web page where the infringing material resides should also be provided to aid in the removal of the infringing material.
  • Contact information: The takedown notice should contain the notice sender’s contact information including the sender’s email address, address, and telephone number.

The following two elements relate to the takedown notice sender’s forthrightness and honesty.  The Site owner is under no obligation to comply with a false or exaggerated takedown notice or any other defective notice.

  • Good faith belief: The takedown notice should include a statement that the notice sender has a good faith belief that use of the material in the manner complained of is not or has not been authorized by the copyright owner who has the sole right to authorize such usage.
  • Accuracy of the notice sender’s statements: The takedown notice should include a statement that the information in the takedown notice is accurate, and under penalty of perjury, that the notice sender is authorized to act on behalf of the copyright owner. Providing false information and making a false claim is punishable under federal law, and those making false notices can be sued and held civilly liable.

The foregoing applies to takedown notices sent to website owners.  However, OSPs can also become involved should they receive a takedown notice.  Here, the OSPs often do not determine if there is actually infringement occurring on the website accessible through the OSP.  Instead, they typically make sure that the DMCA notice contains the information required by law.  If they take down content, the website owner must be notified.  At that the point, the website owner can ask for more details and even file a DMCA Counter-Notice if a false or erroneous DMCA claim is expected.  As with the good faith and accuracy statements of the takedown notice, the counter-notice must also include similar statements.

Finally keep in mind that a  takedown notice may not necessarily be making a valid a claim about copyright infringement.  For example, does the notice refer to content on the website that is actually from the public domain?

Call to Action

Have a website but no DMCA policy?  Have you received a takedown notice? Do you believe a website owner is infringing your copyright?  Contact us at 305-279-4740 or sdtroy@troyandschwartzlaw.com or DM me on Linkedin for a complimentary consultation.

Disclaimer

THANK YOU FOR READING THIS BLOG.  IT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.  IF YOU HAVE A SITUATION THAT MAY HAVE LEGAL CONSEQUENCES, YOU SHOULD CONSULT WITH AN ATTORNEY OF YOUR CHOOSING.

 

 

 

 

 

 

Apr
17

The Next Frontier in Patent Law – Can Artificial Intelligence Qualify as an Inventor?

On April 5th, a federal judge in the U.S. District Court of Virginia heard summary judgment arguments on this very issue in Thaler v. Iancu.  Thaler brought this action to challenge the current legal definition of inventorship of patent applications after the United States Patent & Trademark Office had rejected two of his patent applications for failing to identify a person as inventor in non-compliance with the Patent Statute’s statutory requirements.  Instead, he had named an artificial intelligence (AI)-based system, DABUS, as the inventor and disavowed any notion of being named a sole or at least a joint inventor.  Thaler may well have brought as a test case given AI’s increasing role in R&D in industries ranging from the life sciences to chemistry to engineering.

The judge is expected to rule in favor of the USPTO on the basis of the patent statute’s definition of inventor which states:  “The term “inventor” means the individual or, if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention.”  Any change in the definition of inventor to include AI will require intervention by Congress.

The issue is not, however, as simple as expanding the definition to include the AI.  For example, an Inventor must contribute to the conception of the invention.  As the Manual for the Procedure for Examining Patents (MPEP) states, “[t]he threshold question in determining inventorship is who conceived the invention.  Unless a person contributes to the conception of the invention, he is not an inventor.”  MPEP § 2019.

In understanding the legal definition of inventorship, it is important to understand that the inventor is not required to reduce the invention to practice.  “Difficulties arise in separating members of a team effort, where each member of the team has contributed something, into those members that actually contributed to the conception of the invention, such as the physical structure or operative steps, from those members that merely acted under the direction and supervision of the conceivers.”  MPEP § 2019 citing a 1991 case from the Board of Patent Appeals and Interferences.

Can AI spontaneously conceive of an invention without any human input or is it actually being directed to reduce a human-inputted concept to practice?  Under this scenario, AI cannot be an inventor even if the definition for inventor is expanded to include AI.

Additionally, assignment of patent rights is a common practice.  Generally, any scientist or engineer employed by a company is required to execute and assignment of any patent rights resulting from his or her endeavors to the company-employer.  The company generally files the patent application as the assignee wherein the inventors must always be named.  Another common patent assignment scenario is one where the inventor, as the patent owner, assigns another person, often a business entity, to commercialize the patent.   Patent licensing is another common business transaction surrounding issued patents.   These routine contractual business transactions will clearly become complicated if AI is allowed to be named as an inventor.  Why? Because the party to an agreement must have the requisite intent to enter into the agreement.   Can AI have that requisite invent to assign its patent rights or enter into a licensing agreement?

Other considerations include:  1) An AI machine’s ability to have standing to sue or be able to testify as the inventor in a patent infringement lawsuit; 2) Ownership rights in any resulting patentable invention if the AI machine was designed by an independent person and purchased by the inventor.  Here, any purchase contracts should unequivocally state that any resulting patentable technology resulting from the usage of the AI machine belongs to the purchaser of that machine.  But what if the AI machine is named as the inventor?  The point is that any such contracts involving AI must be carefully tailored to anticipate possible scenarios.

This commentator is not in favor of having AI named as an inventor perhaps because of a bias in favor of the human brain as the ultimate source of creativity and ingenuity.  Instead, Congress should first address the upheaval in intellectual property law caused by simply bad court decisions in U.S. patent law concerning patent eligibility under § 101 and just this month, the questionable application of the fair use doctrine in a copyright law case.  Click here for a link to the blog on the copyright case.  There is also no question that human ingenuity is what created AI in the first place and that AI is here to stay.

As an alternative to complicating the patent law business transactions that are so essential to acquiring investment funding and commercially exploiting patented inventions, a separate statute for thoughtfully addressing the unique aspects of AI-involved inventions is suggested.  This suggestion of a separate patent classification has precedent through plant patents and design patents – types of patents that are separate and distinct from utility patent applications, the very type of patent application at issue in the Thayer case.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

 

Intellectual property law is a complex area of the law.  Contact us at 305-279-4740 for a complimentary consultation on protecting your inventions, creative works, brands, and proprietary information through patents, copyrights, trademarks and trade secrets or our litigation services involving intellectual property disputes.   We represent both individuals and business entities.  Our mission is to serve innovators and creators in protecting the fruits of their hard work and ingenuity through our Client Services Creed:  Conscientious, Rigorous, Energic, Empathetic, and Diligent legal services. 

 


© 2021 by Troy & Schwartz, LLC

 

 

 

Feb
09

THE TENSION BETWEEN TRADE SECRET PROTECTION AND PATENT PROTECTION

In Dec. 2020 the U.S. Court of Appeals for the Ninth Circuit held that the publication of a trade secret in a patent application extinguishes trade secret status.  Attia Architect PC, et al.  v. Google LLC, et al.   Architect Attia developed a system and method for automated design, fabrication, and construction called Engineered Architecture (EA).    In 2010 Attia entered into a partnership with Google wherein he disclosed his trade secrets related to the technology to Google.  A year later, Google filed patent applications related to the technology’s trade secrets.  Attia executed patent assignment agreements effectively transferring any rights in the patents to Google.  The patent applications were published 18 months from the filing date pursuant to 35 U.S.C. § 122(b)(1)(A) making the alleged trade secrets publicly available.  Google then allegedly excluded Attia from the project and used EA to create a platform for use by building professionals to streamline the design process by relying on artificial intelligence.

Attia sued Google for trade secret misappropriation under California’s trade secrets statute and the federal Defend Trade Secrets Act (DTSA). The district court dismissed his federal claims with prejudice and declined to exercise supplemental jurisdiction over state law claims.  Under both California state trade secrets law and the DTSA, the disclosure of the alleged trade secrets in the published patent application publication extinguished their status as protectable trade secrets.  (Click here for a previous blog concerning the same decision which  addressed another issue involving the DTSA). Nor was this a situation where Google had filed the patent applications without Attia’s permission.

Is it possible for trade secrets and inventions to co-exist?  Maybe.  Inventors may try to maintain what they as deem as trade secrets by failing to disclose key elements of the invention in the patent application and specification.  This approach can be difficult to navigate because inventors may risk invalidating a patent by withholding critical information from the patent examiner during prosecution of the patent.   But see Pike v. Texas EMC Management, LLC (Texas state appellate court finding that EMC had “purposely excluded certain information” from its patent application in order to maintain it as a trade secret and was thus entitled to maintain its claim against Pike for trade secret misappropriation.

Any information disclosed in a patent application publication or issued patent, is by definition, published and not subject to trade secret protection.   If the invention disclosed in a patent application is or will not be the subject of a foreign application, the patent applicant can file a non-publication request under 37 CFR 1.213(a) to prevent its publication 18 months later after the filing date.  For utility applications relying on the filing date of a provisional patent application (PPA), the clock starts ticking from the PPA’s filing date.  The non-publication request will allow the application to be maintained as a trade secret over the invention during the patent application prosecution process which can take many years.

If a patent does not issue, trade secret protection will continue until when and if the trade secret(s) become publicly available, through e.g., the inventor’s failure to maintain the trade secret in confidence.  If, on the other hand, the examining attorney concludes that claims are patentable, the inventor can make the determination as to whether issuance is “worth” giving up trade secret rights in the published patent document by deciding to withdraw the patent from issuance under 37 C.F.R. § 1.313.

Take Aways

  • Dlsclose any trade secrets related to your invention to your patent attorney.  Ask the attorney whether inclusion of the trade secrets in the patent application is essential to meet the USPTO’s invention disclosure requirements.
  • Consider filing a non-publication request providing you have no intention of filing a foreign application. If you do end up filing a foreign patent application, remember that that your U.S. patent application may also become subject to publication.
  • Be sure to continue safely guarding your trade secrets quite apart from any confidential patent application.  Trade secret protection is an on-going endeavor
  • Contact us for a complimentary trade secret checklist to get you started in understanding trade secret protection.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR   INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

 

Intellectual property law is a complex area of the law.  Contact us for a complimentary consultation on patents, trademarks, trade secrets, and copyrights.  Our mission is to serve innovators and creators in protecting the fruits of their hard work and ingenuity through our Client Creed:  Conscientious, Rigorous, Energic, Empathetic, and Diligent representation.

 

May you and your loved ones stay safe & be well during these challenging times.


© 2021 by Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship

 

Jan
24

TRADE SECRET MISAPPROPRIATION CLAIMS ARISING FROM CONDUCT PREDATING THE DEFEND TRADE SECRETS ACT OF 2016 ARE ALLOWABLE ACCORDING TO THE NINTH CIRCUIT COURT OF APPEALS – A WIN FOR PLAINTIFFS

On Dec. 16, 2020 in Attia, et al.  v. Google, LLC, et al.,  the Ninth Circuit Court of Appeals held that a misappropriation claim under the Defend Trade Secrets Act of 2016, §18 U.S.C. 1836, et seq. (“DTSA”) may be brought for misappropriation that started prior to the DTSA’s enactment as long as the claim also arises from post-enactment misappropriation or from the continued use of the same trade secret.

The DTSA mirrors the Uniform Trade Secrets Act (“UTSA”) and also expands the Economic Espionage Act, which criminalizes misappropriation of certain trade secrets. Many states, including Florida, have based their trade secrets laws on the UTSA.  Until the enactment of the DTSA in 2016, trade secret misappropriation claims were generally brought under state statutes, e.g., Florida’s Uniform Trade Secret Act (“FUTSA”).

The DTSA allows plaintiffs to bring a federal claim for any trade secret misappropriation that occurred on or after May 11, 2016.   In Attiva v. Google, LLC, the Ninth Circuit decided that a claim under the DTSA can still be brought, even if the misappropriation actually started before the enactment of the DTSA, as long as the misappropriation continued through the DTSA’s enactment date (May 11, 2016) and involved the same trade secret.  In reaching its decision, the Ninth Circuit explained that the Uniform Trade Secrets Act (“UTSA”), includes an anti-continued use provision while the DTSA lacks a similar provision.  Noting that Congress was aware of the UTSA at the time the DTSA was enacted, the court concluded that the apparently deliberate omission of an anti-continued use provision indicated that the DTSA was not intended to be limited in this way.  In its reasoning, the Ninth Circuit pointed out that the DTSA language discussing “a continuing misappropriation constitutes a single claim of misappropriation” relates only to a statute of limitations argument and does not intrinsically prohibit DTSA misappropriations claim from being brought on the basis of continued use.

Although the DTSA is a relatively new statute and has not “seen” much litigation, the Attiva decision clearly expands the DTSA’s reach and is expected to be relied on by other federal courts asked to rule along the same lines.   Additionally, the decision represents a significant shift in trade secrets law which may cause more plaintiffs to commence trade secrets misappropriation actions in federal court because:

  • it allows for claims of trade secrets misappropriation to be brought under the DTSA at least in district courts “under” the Ninth Circuit even if the misappropriation began before the 2016 enactment of the DTSA;
  • it expands potential liability for defendants of trade secret claims under the DTSA;
  • it provides plaintiffs with protection where state statutes following the UTSA may not.

 

WE THANK YOU FOR READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.  If you have any questions about trade secret misappropriation as either a potential plaintiff or defendant, contact us for a consultation.  Also contact us for a complimentary trade secret checklist to ensure you or your company are taking the appropriate steps to protect your trade secrets.

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

 

 

 

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