California Business Litigation Blog

Last month, the Ninth Circuit Court of Appeals ruled that an automobile broker’s use of the following five letters “Lexus” was not trademark infringement. It stated that it was actually a “lawful nominative fair use”.

Farzad and Lisa Tabari are independent, online auto brokers in Southern California who formerly used the domain names “buy-a-lexus.com” and “buyorleaselexus.com”. Toyota Motor Sales USA filed a trademark infringement lawsuit against the Tabaris. Toyota also sought an injunction to prevent use of the Lexus mark.

The District Court concluded that the brokers had infringed Toyota's mark. That court enjoined use of the Lexus mark in any domain name or metatag. The Tabaris appealed these decisions.
On appeal, the Ninth Circuit reversed the lower court’s decisions. The appellate court stated that consumers looking for a Lexus online are sophisticated enough to know an official Lexus website from the Tabaris sites. The court also affirmed that internet searchers are used to trial and error searches, and as such would not be confused.

Lacking any affirmative suggestion of affiliation or sponsorship, the Ninth Circuit reasoned, simple use of the mark in the domain name would not cause Internet users to believe there is sponsorship or affiliation with Toyota/Lexus.

Quoted from the Ninth Circuit decision, which may be viewed HERE : “The Tabaris are using the term Lexus to describe their business of brokering Lexus automobiles; when they say Lexus, they mean Lexus. We’ve long held that such use of the trademark is a fair use, namely nominative fair use. And fair use is, by definition, not infringement.”

Continue reading "Ninth Circuit Rules in Favor of Defendants' Use of Lexus Name" »

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Posted In: Business Litigation   Featured Posts   Intellectual Property   Internet

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Facebook, the social networking website has won an award of $711 million in damages. The damages awarded from Sanford Wallace who is a prolific spammer and social network scammer, reports state. The man was banned from accessing Facebook as well, as punishment for bombarding Facebook users with spam. The lawsuit, filed by Facebook in early 2009, names Wallace, Adam Arzoomanian and Scott Shaw, all accused of accessing accounts of users without permission to do so and sending spam emails and making posts to public message walls of users.

Facebook has a long list of victories over spammers, including one in 2008 for some $873 million against Adam Guerbuez and Atlantis Blue Capital. In this ruling, the three men violated the Computer Fraud and Abuse Act, the California Anti Phishing Act and the Controlling the Assault of Non Solicited Pornography and Marketing Act.

However, experts believe that Facebook will not see the judgement awarded. In fact, Wallace and his partner, Walter Rines, were fined some $230 million in May of 2008 in a case involving MySpace. In that case, the accused tricked users into providing login information through phishing scams. Then, as they accessed the accounts of users, they sent more than 730,000 messages with links to gambling, porn and ringtone websites. The two made more than half a million though their MySpace violations only.

It is unlikely that Facebook will receive much of the judgment, but that is not what Facebook is hoping for. They are using the case as a ploy to show other pro spammers what can happen to them for violating the rules. However, experts state that pro spammers already know what to expect and they do not see it as a deterrent. In fact, whenever these pros lose, they simply disappear for some time and emerge as a different entity somewhere else, rarely paying any of the fees they owe.

Ninety-Five percent of all email is spam, says Jamie De Guerre, who is chief technology officer at Cloudmark. De Guerre also stated that while the industry is doing well to fight spam, the spammers are doing well to find new ways to continue the process. The problem, and perhaps the solution, lies in the hands of consumers and legitimate organizations, who may wish to take more conservative communication efforts, such as avoiding any type of URLs in email communications. The problem is worldwide, and is even more common in other countries. In Russia, for example, even legitimate, respectable companies use spam.

Continue reading "Facebook Unlikely to Collect $711 Million Spam Award" »

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Posted In: Business Litigation   Contract Litigation   Intellectual Property   Internet

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The Kindle is an eBook reader heavily marketed by the company. While it is a new device and one that is selling well, the company promoting it, Amazon.com, has faced a lawsuit on behalf of the product already. The company has settled a lawsuit brought on by the deletion of two eBooks, George Orwell's Animal Farm and 1984.

The company deleted the material for the eBook reader's accounts, who had paid for them, and refunded the customer's cost. Amazon cited that there were problems regarding the copyright use of the material. In September, Amazon announced that it would replace the deleted eBooks for anyone who purchased them, and that they would offer $30 gift certificates for those who did not wish to receive the eBooks again. The Kindle also allows for users to place notations within the eBooks for their personal use. Amazon also stated these would be restored.

Just this month, Amazon also has announced that it will settle a lawsuit brought on by two Kindle users who saw deletions of these materials. The company is paying $150,000 to a Michigan high school student named Justin Gawronski and a man named Tony Bruguier. Their attorney has stated that the two will not see any of the funds, but will instead donate the money to charity.

The settlement was filed in the U.S. District Court in Seattle on September 25th. It was a closed settlement and no further details were made available. The attorney for Gawronski and Bruguier was quoted as saying that he believes Amazon has learned an important lesson from this lawsuit.

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Posted In: Business Litigation   Contract Litigation   False Advertising   Intellectual Property

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On August 31, 2009 in New York, New York, it was reported that a former attorney for Toyota was suing the company for their involvement and for their supposed hiding and destruction of implicating documents. The primary item that is being discussed are the results that one fond from roll over tests and the damage that could truly be incurred.

The suit has been filed by a Mr. Biller who worked for Toyota from 2003-2007. He claims that not only did he see the items that he is claiming that the company withheld, but in some cases went so far as to destroy the items and to go and have them not included in findings that would negatively impact the company.

The problem with a lawsuit such as his is the fact that it creates a sense of doubt no matter what may have really occurred. If this is the case, then there is the possibility of old cases that had been dismissed or found to not have any merit, to possibly be reopened. This is because there were so many people who were injured in rollover accidents involving Toyota vehicles.

If any of the accusations that have been made by Mr. Biller are true, you will see a large influx of items and cases pertaining to the roll over accidents. There are accusations that the company was even withholding information in regards to results as well as how quickly corrective action could be taken from the auto manufacturer.

One thing that some may take into consideration is the fact that Mr. Biller ended up quitting his job at Toyota claiming he was suffering from psychiatric problems while he was at the job. In 2008 he went to work for the District Attorney in San Francisco where he was let go after several months. He received a negative mark upon his release from the office.

No matter which group has the bigger issues in all respects, someone is going to end up not looking good at all, and a shadow of doubt has been cast on the Toyota Company no matter how the court finds in the case.

Continue reading "Toyota Accused of Concealing Evidence in Rollover Lawsuits" »

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Posted In: Business Litigation   Employment Law   Intellectual Property

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Oracle has filed a motion to compel against Rimini Street last month in a strategic move directly related to a 2007 lawsuit against Oracle rivals SAP and TomorrowNow. The motion accuses its owner of using TomorrowNow to illegally acquire Oracle software and support materials.

Rimini Street was founded by former TomorrowNow executive Seth Ravin, who left the company after SAP purchased it in 2005. The Las Vegas company provides support for both Oracle and SAP applications at discounts of up to 50%.

Oracle subpoenaed Rimini Street earlier this year, seeking data about the company's business model and practices. But Rimini objected to the request on a number of grounds, including confidentiality concerns and the possibility Oracle was seeking discovery related to Rimini Street "for a purpose other than the present lawsuit," according to court documents.

Ravin was deposed in May, according to Oracle's motion. In the session, Ravin confirmed that Rimini Street was serving a number of former TomorrowNow customers, but "would not provide a single detail about how those customers are being supported".

SAP has said that its TomorrowNow workers were authorized to download materials from Oracle's site on behalf of TomorrowNow customers. SAP also admits that some "inappropriate downloads" had occurred. SAP has also said that Oracle's software remained in TomorrowNow's systems and has denied Oracle's allegations of a wider pattern of wrongdoing.

Oracle's Aug. 21 motion demands that Ravin be ordered to sit for two more hours of deposition; and provide" documents sufficient to show Rimini's business model," including whether it has ever "relied on copies of customers' licensed software to provide software support"; information about any automated tools the company has used to download material from Oracle's support site; and documents tied to Rimini's preparation of tax updates for customers.

While acknowledging that third-party support is legal, Oracle claims that SAP and TomorrowNow provided discounted support through illegal acts, such as making thousands of unauthorized copies of Oracle's software, and conducting "routine, massive and indiscriminate downloading" of support-related materials on behalf of customers who weren't entitled to them, according to the motion to compel.
In a related note, the U.S. Department of Justice has approved the proposed acquisition of Sun Microsystems and terminated the waiting period under the Hart-Scott-Rodino Act. Sun’s stockholders approved the transaction on July 16, 2009.

Continue reading "Oracle's Motion Demands Information From Rimini Street" »

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The Ninth Circuit Court of Appeals rendered an opinion clarifying what a plaintiff must show to establish a whistleblower claim under the Sarbanes Oxley Act (SOX). In the opinion (HERE) by Judge Jay S. Bybee the Court found that plaintiffs did not have to "prove the existence of fraud before suggesting the need for an investigation." They only had to demonstrate they believed fraud had occurred to prompt the employer’s obligation to investigate.

This complicated story involves married intellectual property attorneys Shawn and Lena Van Asdale working for International Game Technology (IGT) as associate general counsel. One or both of them discovered documents which lead them to believe that an investigation into a patent held by Anchor Gaming should be started. Anchor was a former competitor of IGT before the 2 companies merged.

The slot machine patent in question was a major asset of Anchor and if not valid, could have fraudulently overvalued Anchor before the merger.

Shawn expressed concern to his bosses that an older Bally machine may have a valid patent which had not been disclosed before the merger. His belief was that IGT had been intentionally misled about Anchor's value. The Van Asdales both raised the issue again with IGT's general counsel (Anchor's former top lawyer), stating they believed the nondisclosure of the Bally machine was suspicious and there was a potential of fraud.

The Van Asdales were terminated within a short time following those meetings.

The couple sued, asserting a whistleblower claim under the SOX, contending they were terminated for reporting potential shareholder fraud in connection with the IGT / Anchor merger. The Nevada-based federal trial court sided with the employer and granted its summary judgment motion, finding the Van Asdales had not shown they had discussed the suspected fraud specifically enough with IGT before they were terminated.

The Ninth Circuit Court of Appeals disagreed and reversed, vacated and remanded the trial court’s decision. While this decision may clarify what a plaintiff must do to establish a whistleblower claim, it may expand the use of privileged information by in house counsel, which was previously constrained under “attorney/client privilege”.

Continue reading "New Standard for Whistleblower Claims Determined by Ninth Circuit Court of Appeals" »

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Redbox Automated Retail, LLC (Redbox) has built a growing business renting DVDs for only $1 per day from their bright red kiosks. In the lawsuit filed in Federal Court on October 10, Redbox claims that Universal Studios Home Entertainment (USHE) and 3 subsidiaries are trying to force changes that will constrain Redbox and its business model.

In a meeting on August 26, USHE gave Redbox until close of business on August 27, 2008 to agree to the following:

Redbox is immediatedly prohibited from renting any DVDs for 45 days after the public release date

Redbox is prohibited from selling any USHE DVDs and must destroy all previously rented copies

Under the currently successful Redbox business model, Redbox stocks new release DVDs in kiosks on the date of public release, in large quantities and sells previously viewed DVDs for $7 as early as 12 days after release.

This model is in large part responsible for the growth of Redbox from 125 kiosks in 2004 to over 6500 at the end of 2007. The projections for 2008 call for 12,000 kiosks.

Putting teeth in their “my way or the hi-way” proposal, USHE stated it will terminate relationship with both Redbox DVD distributors; VPD and Ingram.

Instead of agreeing to the new terms, Redbox filed suit in Federal Court. In the suit, Redbox is claiming that UHSE and subsidiaries have violated the Sherman Antitrust Act and are misusing copyright laws.

Redbox is asking for the court to award the following relief:

a. A declaration that Defendants' conduct constitutes copyright misuse, and
thereby renders copyrights for Universal DVDs - however marketed, sold
or distributed - unenforceable during the period of misconduct;
b. Injunctive relief prohibiting USHE from engaging in any efforts to limit
the supply of Universal DVDs to Redbox;
c. A declaration that the Revenue Sharing Agreement and USHE's
threatened action against VPD and Ingram violate the Sherman Antitrust
Act;
d. Damages to the full extent permitted by law;
e. Attorneys' fees and costs; and
f. Such further relief as this Court deems just and appropriate.

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Academy Award winning director Woody Allen filed a lawsuit in U.S. District Court in Manhattan seeking $10 Million from American Apparel for use of his image without permission. The lawsuit states that the actor and director does not endorse commercial products or services in the United States.

Allen’s image (shown at right courtesy of Frillr.com), appeared on two billboards in New York and Los Angeles for one week in May 2007. Allen appears as a Hasidic Jew, a character from his movie “Annie Hall”. The lawsuit calls the billboards "especially egregious and damaging."

In a statement, American Apparel defended their use of Allen’s image as “Social Parody” protected by the First Amendment. They also stated “We had no intention of selling garments through the use of Mr. Allen’s image … We will make every effort to resolve this with Mr. Allen in an amicable way.”

In addition to its clothing line, American Apparel, based in Los Angeles is known for its colorful CEO Dov Charney and its political efforts in favor of immigration reform.

Was this “Social Parody”, infringement or just an effort to generate publicity? While we may never know for sure, I predict it will go away quietly with a monetary settlement.

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Posted In: Business Litigation   False Advertising   Intellectual Property

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MercExchange filed a lawsuit against online auction giant eBay in 2001 claiming eBay’s “Buy It Now” infringed on MercExchange patents and technology. In 2003 a jury awarded MercExchange $35 million in damages. The judge reduced the jury award to… $25 million. A federal judge certified the penalty and eBay threatened appeal.

During the above proceedings MercExchange tried to block eBay’s use of “Buy It Now”. In 2006 the Supreme Court made a landmark decision to allow eBay to continue use of “Buy It Now”. Before this ruling patent owners were virtually always granted court orders to block infringements. These actions to block use typically lead to faster more lucrative settlements for the patent owners.

Since the Supreme Court ruling in eBay’s favor, judges throughout the US have denied requests for court orders to block use where the infringer was not a competitor of the patent owner.

Financial terms of the settlement were not disclosed by either party. EBay said it would buy three patents from MercExchange related to “Buy It Now”/fixed priced sales as well as related technology. EBay General Counsel Mike Jacobson stated “The agreement gives us access to additional intellectual property that will help improve and further secure our marketplaces.''

This Supreme Court decision adds a new aspect to the trend written about previously on this blog whereby infringers are strategically using the court system to buy intellectual properties and/or licenses to use intellectual properties.

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Posted In: Business Litigation   Intellectual Property

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Could this be the licensing trend for the new millennium? In settlement of all patent infringing lawsuits between them, Apple and Burst announced a cash settlement of $10 Million to be paid to Burst upon signing of the “settlement”. Apple then gets non exclusive rights to all of Bursts patents except 4 (one issued and 3 pending) related to new DVR technology.

Burst had claimed that Apple infringed patents related to transmission of compressed files in iTunes, QuickTime and the iPod. Apple claimed it possessed the technology before Burst applied for patents.

Turning back the clock, in 2005 Burst announced a $60 Million settlement with Microsoft, providing an end to patent infringement lawsuits between them and giving Microsoft nonexclusive use of Burst’s patent portfolio.

In this 2005 press release, Richard Lang, Burst CEO stated his intention to use the Microsoft proceeds in 3 areas of the business. Number 2 was “To Reserve a sufficient amount of operating capital to launch a vigorous ongoing enforcement of its patent rights against all infringing parties, as well as pursuing software licensing and other avenues available to the Company to maximize the return to Burst shareholders.

He would appear to be a man of his word. The question remains, are patent infringement lawsuits the new licensing vehicle for high tech companies? Ultimately time will tell but in my perception, the trend is clear.

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Posted In: Business Litigation   Intellectual Property

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In a David v. Goliath story with a surprise ending, Transmeta and Intel have settled their mutually opposing patent infringement lawsuits. Intel will pay Transmeta a total of $250 Million; $150 Million now plus $20 Million a year for the next 5 years.

In addition to all pending lawsuits being settled, Intel will receive non exclusive rights to Transmeta’s entire patent portfolio (press release here). Transmeta gets an influx of cash and a guaranteed income for 5 years which will allow further research & development. Additionally, Transmeta can proceed without the threat of any additional patent lawsuits from Intel.

So who won? While it may be a little early to speculate, Transmeta is clearly better off than it was before the lawsuits were filed. Prior to this settlement, Transmeta’s market value was slightly over $40 Million. They have pretty much guaranteed their future for at least 5 years. In all likelihood, Intel will parlay their “investment” in Transmeta’s patent portfolio into profits which will exceed their cash outlay.

This is a textbook example of a settlement in a business lawsuit which not only stands to benefit both parties, but consumers as well.

One final note. Transmeta has 2 attorneys on it’s in house legal team while Intel’s in house legal team has over 200. I have long believed that in law, smaller is better because it allows much greater flexibility in litigation.

It’s nice to see that David won even if Goliath didn’t lose!

Continue reading "Intel and Transmeta End Patent Lawsuits With Intriguing Settlement" »

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It’s an old Hollywood tale: Someone makes a film. Someone else finances and produces it and even before the editing is finished the question of who controls the film rights becomes a legal battle. The twist is that the filmmaker is only eleven (yes 11) years old! With 23 movie credits (see New Yorker Article), Kay had always planned to direct. In his directorial debut “Saving Angelo” creative differences arose between Kay and Malibu neighbor/producer Conroy Kanter, who contributed $11,000 to the making of the film.

In last month’s settlement, Kay got full ownership and creative control of the 15 minute film and Kanter got a producer’s credit. By the way, Kevin Bacon plays a fireman in “Saving Angelo”.

Now that the legal issues have been settled, Kay can return to more important things like finishing the editing in preparation for the film’s submission to festivals.

Returning to the law, this case like so many, illustrates the importance of having a contract that spells out each parties rights and responsibilities. Sadly, huge numbers of contracts are not written well enough to avoid litigation, and that my friends is one of the reasons our courts are clogged and more states are creating Business Courts (see March 10, 2007 post " Business Lawsuits Heard in Their Own Court...Will California be next?”)

The remaining question is: Will Dominic Scott Kay become the next Ron Howard?

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Posted In: Contract Litigation   Intellectual Property

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Does 40 years of filing frivolous lawsuits constitute intellectual property? Steve Samwell learned about the lawsuit filed against NBC Universal by Clifton Mallery and his wife Amnau Karam Eele claiming their work has been wrongfully used on the television show “Heroes”. Mr. Samwell is asserting that Mallery & Eele have stolen his intellectual property and are profiting from that theft.

Samwell claims to have pioneered this type of lawsuit in 1967. Mr. Samwell filed suit against Mel Brooks, Buck Henry and other creators of the “Get Smart” TV show. He claimed that “Get Smart” was based on a short story he had sent to “Look” magazine in 1958. Although his story was never published, the case was settled for an undisclosed amount.

On March 26, Samwell announced that he will file a lawsuit against “everyone in the past 40 years who has filed a lawsuit claiming that their idea was stolen.”

Sadly, frivolous lawsuits cost everyone, including taxpayers whose dollars support courthouses, judges and their staff. I hope Mr. Samwell will reconsider this litigation…..Earth to Samwell…..are you listening?

Continue reading "Los Angeles: Is “Heroes” Lawsuit Against NBC Frivolous? Are Frivolous Lawsuits Intellectual Property? Are These Examples of Business Litigation Gone Insane?" »

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Is California (specifically the Silicon Valley) to blame? Probably the most in demand area for lawyers is Intellectual Property (IP) litigation, more specifically, patent litigators. According to The American Lawyer, law firms are offering signing bonuses, partnerships and other expensive perks to attorneys with patent litigation experience.

Why? Simply stated, there is more work than experienced lawyers can handle in this field….and the billing rates are among the highest in the profession.

The median cost to move a patent case through trial is $5 million dollars. And that’s up from $2 million in 1996. Average profit per partner at one IP law firm in 2005 was $1.5 million.

Try not to get burned in this area of law!

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Posted In: Intellectual Property

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