Facebook “Like” is Constitutionally Protected Speech

| September 20, 2013
The Fourth Circuit Court of Appeals has ruled that the simple act of clicking the “Like” button on a Facebook page is Constitutionally protected speech. Ruling on Bland v. Roberts, the Appellate judges overturned a district court ruling that found the mere act of Liking a Facebook page was not “speaking out” in an expressive way and therefore fell outside the bounds of the First Amendment.
In reaching its conclusion, the Appellate court took time to understand all of the implications and consequences of liking a Facebook page and concluded that, “Once one understands the nature of what Carter did by liking the Campaign Page, it becomes apparent that his conduct qualifies as speech.”
The Court clearly understood the meaning and impact of a Facebook Like rather than looking superficially at the act of clicking a mouse one time on a button as the entire action being protected.

Federal Circuit Slams Final Door on Patent Troll’s eCommerce Claim

| September 19, 2013

Online ecommerce businesses can breathe a lot easier today.

The Federal Circuit slammed the final door shut last week on a patent troll whose claims of ownership of the core ideas behind online shopping carts had threatened to bring ecommerce to it knees. In a final ruling on a rehearing of Soverain Software LLC v. Newegg Inc., No. 11-1009 (Fed. Cir. Jan. 22, 2013), the Court threw out a desperate ploy by Soverain to recover from a devastating setback issued in January by attempting to exploit a typo in the ruling.

Soverain — which is a group of attorneys who hold and prosecute numerous patents but don’t manufacture or sell a single product — had convinced several online retailers, notably Amazon.com, to fork over tens of millions of dollars over several years in the face of its claimed patent rights to shopping cart technology. But Newegg was the only defendant which failed to pay Soverain and took the case to trial.

In January, the Federal Circuit overruled a district court ruling that had upheld Soverain’s patents, citing with approval the prior art Newegg had argued invalidated the Soverain claims. (That prior art included the CompuServe Mall, which pre-dated Soverain’s software by several years.) But in its ruling, the Court cited the wrong claim number as being invalidated.

Although this was clearly a simple administrative error by the Federal Circuit, Soverain took advantage and filed a motion for a re-hearing on the grounds that the wrong claim had been invalidated and that its original core patent claims therefore remained in effect. The Court allowed the re-hearing and last week, it ruled with finality that the patent is invalid and unenforceable.

Nobody likes patent trolls. All too often they profit not by their innovation but by their argument to alleged infringers that the cost of defending an infringement suit isn’t worth expending even if they win.

In this case, Newegg and its feisty Chief Legal Officer Lee Cheng decided to make a stand. The ecommerce world owes Newegg a huge debt; Soverain’s stated intent was to extract 1% of all online commercial transactions involving a shopping cart.

Why the Federal Circuit allowed the re-hearing on the basis of a typo is beyond me, but at least it ended up with the proper ruling.

Chaos Reigns as Software Patents Take Another Body Blow in Federal Circuit

| September 16, 2013

UPDATE DEC. 6,2013. The U.S. Supreme Court announced today it will review the case cited in this article.

If you’re considering pursuing a patent for a software product, you might want to reconsider. The courts have made a seriously chaotic mess out of this subject in recent months, rendering the usefulness of such patents even more questionable than it has been.

A Federal Circuit  judge ruling on a software patent case has warned that the growing confusion over patentability of essentially abstract claims may already have caused the death of “hundreds of thousands of patents.” Judge Moore made those comments in a ruling on CLS Bank Int’l v. Alice Corp., No. 2011-1301, 2013 WL 1920941 (Fed. Cir. May 10, 2013).

In a plurality of opinions contained in a relatively rare 135-page en banc ruling, the 10-justice court essentially ruled that a particular software invention was simply unpatentable because of its abstract nature.

At issue in the case was Alice Corp.’s claims to a computerized method for dealing with the settlement of conflicting claims in a financial exchange.

Judge Moore wrote that the on-going and increasing uncertainty in court rulings over this issue is “causing a free fall in the patent system.” If all of Alice’s claims are not patent-eligible, she conjectured, “This case is the death of hundreds of thousands of patents, including all business-method, financial-system, and software patents as well as many computer implemented and telecommunications patents.”

The Federal Circuit more recently attempted to clarify the growing confusion surrounding software patentability in the case of Ultramerical v. Hulu, No. 2010-1544, 2013 U.S. App. LEXIS 12715 (Fed. Cir. June 21, 2013). That ruling did little if anything to provide insight into the rules and standards to be applied in answering the crucial question of what constitutes patentability of software.

Given the relative chaos that characterized these rulings, it is difficult to draw any definitive conclusions that have broader implications without hedging. But there is little doubt that the trend Judge Moore highlighted is real.

Alice is just one more reason not to rely exclusively on patents to protect software. We have been advising our clients for several years not to become overly dependent on patents for complete intellectual property protection. It is vastly more predictable to use clearly drawn agreements, copyright, and trade secrets law to provide insurance against IP theft or misappropriation.

Not only is the patent process time-consuming and very expensive, as Alice and an increasing number of rulings demonstrate, it’s not all that good at protecting the underlying IP even if the patent is granted. The mere fact that virtually all software is expressed abstractly makes the basic concept of patenting software at least questionable if not clearly outside the scope of the intent of patent law.

The average time lapse between an initial submittal of an application for a patent on software and its final issuance is in excess of five years today. In fact, the time to the PTO’s initial ruling — which is nearly always a rejection that must be argued in response — is 40 months. (http://www.inventionstatistics.com/Patent_Approval_Time.html)

As if all that weren’t enough, creating new software applications using existing programs as an inspiration or template is all but common trade practice. A program with a pending patent (or an issued one for that matter) can be analyzed from the user interface in a different programming language with relative ease.

If you have investors who insist on you following the patenting process as a condition of their willingness to invest, by all means do so. But cover the IP with contracts, copyright and trade secrets agreements as well.

One State Court Finds Requiring Zip Codes to Be a Privacy Issue

| April 23, 2013

If you require your customers to supply a Zip Code as a part of a transactions, you might want to rethink that practice.

A Massachusetts top court recently ruled that a Zip Code falls within the definition of “personal information” and that collecting a Zip code can be a violation of that state’s privacy laws. Although this decision is currently applicable only to Massachusetts, it’s a safe bet that other state courts may soon follow suit.

In the case we are discussing, a retail craft store, Michael’s, is alleged to have leveraged  ZIP Code information improperly.  Michael’s required a zip code in connection with standard purchases, which it then used to look up customer  phone numbers and addresses in order for Michael’s to send marketing materials. (The court carved out an exception for situations in which the merchant is required by a credit card agreement to obtain address information, as well as for instances where the information was necessary for shipping products).

I’m recommending that all of my clients immediately evaluate whether their practices require the collection of Zip Code information, and, if so, evaluate whether the collection and maintenance of such information falls into one of the two exceptions.

Even If You Think European Laws Don’t Or Shouldn’t Apply To You, It Is Important That You Keep An Eye On Privacy Issues Across The Pond.

| March 18, 2013

Everyone knows that the Internet is a global medium, that it is no respecter of national boundaries, and that, barring extreme action by individual countries, the free flow of information across its infrastructure is all but unimpeded.

Despite that obvious truth, many companies, including most U.S.-based corporations, tend to view any attempt on the part of a foreign government to impose any restrictions or regulations on Internet traffic and commerce as irrelevant. They see such efforts as either technically impossible, politically unenforceable or doomed to failure.

This cavalier attitude is a serious mistake.

American companies who have any business dealings with any of the 27 nations in the European Union must be alert to the implications of tough privacy standards being touted by the EU’s privacy chief. These regulations, pending in the EU Parliament at this writing, can ultimately cost American businesses billions of dollars in fines. This despite the fact that a number of large EU member states have begun pressing for a softening of some of the regulations in recent days, and that some loosening of restrictions will almost certainly take place before their adoption. The European Parliament is thought to be opposed to the new changes but it is possible enough member states could combine to block any regulations from being adopted.

Still, it is important to realize that the right to data privacy is enshrined in the founding documents of the EU. Article 8 of the EU Charter of Fundamental Rights guarantees that every European citizen “has the right to the protection of personal data concerning him or her.”

In recent news reports, Viviane Reding, EU commissioner for justice, has demonstrated adamant support for this right and a plan to thwart any attempt by American companies to lobby the U.S. Government into opposing the rules on traffic between the U.S. and the EU. “Exempting non-EU companies from our data protection regulation is not on the table. It would mean applying double standards,” she has told news outlets.

A number of U.S. companies, led by Google and Facebook, have been lobbying both in the U.S. and Europe in opposition to the tough regulations, which under the proposed law would carry fines of as much as 2% of a company’s global revenues.

It’s important for American companies to stay abreast of developments in this legal arena. Even though the U.S. is pressing hard on the EU to confine enforcement of the new regulations to EU companies only, there is stiff and widespread opposition to that perspective in the EU.

It’s not just the U.S. government on behalf of American companies who are opposed to the new regulations. A number of British Information Commissioners past and present have come together to admonish the EU and advice them to send the proposed rules “back to the drawing board.”

Whether or not the regulations are adopted is anyone’s guess. What is probably not subject to guesswork, however, is the fact that, if they are adopted, they will be enforced against any company, regardless of its country of origin, that wants to engage in Internet-based business with Europeans on any level.

That means that whether you have customers, business partners, servers or any other presence in Europe, you may be subject to adhering to the data privacy rules of the EU. It also means that remaining ignorant or complacent is a potentially costly mistake.