Chicago Business Lawyer Blog

The Internet has opened a new legal frontier; businesses must now be as concerned about online ownership, trademark and copyright issues as they are about their brick-and-mortar operations.

In some cases, businesses survive and thrive entirely online. In all case, protecting the online name and reputation of your business is critical to success. Annual Internet sales are increasing by double digits each year -- and passed $100 billion a year in 2007. When issues involving intellectual property and technology threaten the health and welfare of your business, a Chicago business law firm familiar with Internet issues must be contacted at the earliest stages of such cases.

In Go Pets Ltd. v. Hise, GoPets LTD. filed a lawsuit against Joseph Hise and a California corporation over www.gopets.com. The suit was filed under the Anticybersquatting Consumer Protection Act.

The court ruled Hise registered the domain in 1999, long before GoPets LTD registered its service mark, and therefore he was not in violation of the cyber squatting laws. The law was put in place to prevent individuals from buying domain names for a few dollars each and then holding them hostage for outrageous fees.

Where the court found Hise in violation, was for registering additional domain names. The U.S. Court of Appeals for the Ninth District found he had acted in bad faith and affirmed the district decision that Hise violated the Lanham Act with his use of www.gopets.com. The case was returned to the district court for a determination of damages.

In this case, the defendant had registered the domain and built a business plan as part of a marketing class in 1999. The defendant, together with a relative who was a veterinarian, also owned a company that had owned and registered more than 1,300 domain names. Most seemed to be geared toward plausible businesses but were not the names of existing corporations.

By 2004, a South Korean company, Go Pets Ltd., had made several attempts to register the name. In 2005, the companies filed a dispute over ownership of the domain with the Internet Corporation for Assigned Names and Numbers (ICANN), which oversees domain names. A dispute was also later field with the World Intellectual Property Organization (WIPO), which administers ICANN's dispute policy. A WIPO arbitrator found in favor of Edward Hise. It was ruled Hise had been registering the name for years and had not initially registered it in bad faith.

Hise later sent a letter stating that Go Pets Ltd's registration of www.gopetslive.com could confuse consumers and hurt the www.gopets.com name. While purchase of the name could clear up any confusion and provide for less search result competition. The letter offered to sell the domain for $5 million. Meanwhile, screen captures of Internet archives reveal that Hise began building site content for the domain and turning it into a viable web property. After the decision by WIPO, company owned by Hise began registering other names similar to www.gopets.com

In 2007, the South Korean company filed the complaint in U.S. District Court, claiming a violation of the cybersquatting statute and unfair competition under the Lanham Act. The Lanham Act violation stems from putting content on the site and calling it the "Official GoPets site." The Act contains the statutes covering federal trademark law.

In other words, the court found Hise may have had the right to the domain name but did not have the right to conduct business or infringe upon the trademark rights of GoPets Ltd.

Continue reading "Go Pets Ltd. v. Hise Highlights Importance of Internet Property Rights for Chicago Businesses" »

A privacy lawsuit in Chicago accusing comScore, an online tracking and analytics firm, highlights the ongoing issues involving technology and privacy.

Intellectual property and technology attorneys in Chicago are seeing an increasing number of such cases. From privacy concerns involving Facebook, to allegations against Apple for tracking users of iPads and iPhones, technology continues to complicate privacy issues. Last year, Google's Street View car also came under fire after it accidentally collected reams of data from unsecured Wi-Fi networks.

In this case, the proposed class-action lawsuit accuses comScore of numerous alleged violations, including:

-Secretly collecting social security numbers.

-Collecting consumer data without permission.

-Changing security settings and opening backdoors into user systems.

-Stealing information from electronic documents.

-Redirecting user traffic.

-Injecting code into computer applications.

The Chicago Tribune reports that credit card information and passwords are also involved.

Two plaintiffs -- one from California and one from Illinois -- have filed suit claiming violation of their rights to privacy. The lawsuit seeks an injunction and damages, alleging that the company violated the Stored Communications Act , the Computer Fraud and Abuse Act and other statutes.

"The scope and breadth of data that comScore collects from unsuspecting consumers is terrifying," the 30-page complaint alleges.

A spokesperson for comScore denied the allegations and promised an aggressive defense. The company said it makes "commercially viable efforts" to purge itself of private consumer data whenever it's inadvertently collected.

comScore is a publicly traded company that provides Internet audience measurement statistics and customer tracking. It provides the information to some 2,000 customers, including advertising agencies and commerce sites.

The software behind such technology is usually downloaded onto a user's computer via other free products -- such as screen savers. In some cases, the user downloads the product to win entry into sweepstakes or because of other inducements.

It's the second high-profile tracking issue to surface in recent days -- earlier this month Microsoft came under fire after a Stanford University report accused the company of using "supercookies," to persistently track users. Microsoft agreed to immediately disable the technology.

Privacy advocates continue to sound the alarm -- particularly as more and more sensitive activities move online -- including banking and medical records. Several lawmakers have begun to consider Do Not Track legislation, which would permit consumers to opt-out in a fashion similar to Do No Call regulations. Still, privacy issues are bound to continue as new technology uses consumer data in a way never before anticipated.

The case is Mike Harris and Jeff Dunstan, individually, and on behalf of a class of similarly situated individuals v. comScore Inc, case no. 11-cv-5807. It was filed in U.S. District Court, Northern District of Illinois.

Continue reading "Chicago Privacy Lawsuit Highlights Ongoing Issues Involving Technology " »

Our Chicago technology attorneys were interested in a recent example of how patent owners can relatively quickly seek resolution of certain infringement claims.

In March of 2010, Apple filed a complaint against HTC Corporation claiming that the company infringed 10 of its patents with respect to Droid and other smartphone elements. On July 15, 2011, the U.S. International Trade Commission ("ITC") issued an initial ruling in Apple's favor on two of the patents at issue.

Because the ITC has the power to ban products from coming into the United States, a final ruling against HTC could mean that HTC products will be unable to enter the country. Given such a ruling could have widespread implications for HTC, the company plans on appealing the decision. However, if the appeal is not successful, HTC might have to settle with Apple. This means that in addition to paying Microsoft $5 for each Android device they sell, HTC might also have to pay Apple royalties from its sales. The General Counsel for HTC, Grace Lei, recently commented that "we are highly confident we have a strong case for the ITC appeals process and are fully prepared to defend ourselves using all means possible." However, these may just be fighting words.

This is not the first time that the ITC has had the potential to affect large companies in patent disputes. In fact, the ITC is quickly becoming a popular forum for owners of intellectual property trying to prohibit infringing products from the United States market. Using the ITC as a forum for resolving patent disputes has its advantages. Since it usually takes less than a year for cases going though the ITC to go to trial, the ITC is generally able to provide quick verdicts. The ITC also has in rem jurisdiction over the imports in question. This means that a complainant can bring one action against several respondents in different jurisdictions. Lastly, using a jury is not an option in ITC trials. Rather, an administrative law judge presides over the proceeding. As the judge usually has specialized knowledge in patent law, the result is arguably a fairer trial than if a jury was present.

However, going the ITC route is not without its problems. Since the ITC is a federal agency, ITC final decisions do not bind a U.S. District Court. This means that parties unsatisfied by an ITC ruling can choose to bring suit again in district court. Lastly, to have standing with the ITC, the complaining party needs to show that there is or will be a U.S. industry connected to the products protected by the alleged intellectual property rights. Such a requirement does not exist if a suit is being filed in a U.S. district court.

An ITC action is one of the first measures to be considered when considering patent infringement strategies involving imported goods or articles.

This post was prepared by summer research assistant Yelena R. Our Chicago business lawyers frequently counsel clients about protecting or defending their patent, trademark, copyright, trade secret and other intellectual property rights with corporations, limited liabilities companies and individuals in Illinois.

Apple Inc. has sent a letter to Congress, saying it must collect the controversial tracking data that has some privacy experts warning consumers about the iPhone and iPad tracking their whereabouts, according to The Consumerist.

Chicago technology attorneys understand how important it is to make sure user service agreements, privacy statements, and other legal documents protect companies from legal penalties as they deploy next-generation technologies. In this case, Apple prudently made sure its end user agreement or clickwrap agreement provided it with the authority to collect and maintain user location data.

Bloomberg News reports the revelation that the company tracks up to a year's worth of a user's movements, and stores them in an unencrypted file, could lead to greater regulatory scrutiny in both the United States and Europe.

Apple has said it saves the location of WiFi hotpots and cell phone towers used by the equipment to provide a better user experience (such as not having to login a password each time you use a wireless system at home or work).

PC Magazine reports that Apple has agreed to encrypt the data in the next version of its operating system. The company acknowledged that the data is sent to Apple, so that it can maintain a crowd-sourced list of wi-fi hotspots and cell phone towers. But it said the actual location of the user can be up to 100 miles away, depending on a tower's location and other variables.

Google's Street View mapping service has run up against similar privacy concerns. The company was fined $147,000 in France last month for violating that country's privacy rules.

Continue reading "Apple's Consumer-Tracking Controversy Illustrates Importance of End User Agreements" »

The service interruptions experienced by Amazon this month has companies debating the merits of using remote computer services that are beyond their control, according to The New York Times.

A Chicago business lawyer should be consulted when establishing such third-party agreements or when a company fails to fulfill their obligations under a terms of service level agreement (SLA). Such contracts and agreements in Chicago should address system availability, redundancy and compensation. Remedies should also be addressed as part of outsourcing agreements.

"This is a wake-up call for cloud computing," analyst Matthew Eastwood told the Times. "It will force a conversation in the industry."

Not only should companies take a look at what services they are sending off site, they should carefully determine what crucial information or services need to remain inhouse. They must also take a look at the contracts covering cloud computing services, as well as how much to pay for backup and recovery services.

Amazon has a side business offering computer resources to businesses and is now an early leader in the growing business of cloud computing for companies large and small, including Netflix and Pfizer. The companies hit hardest by Amazon's service interruption were reportedly newer companies focused on growth, which are less likely to have extensive backup and recovery services.

Businesses reported various problems, from being unable to access data, to sites being shut down. The problems appear to have originated from Amazon's data center in Northern Virginia, near Dulles airport. Data center experts likened the interruption to the computing equivalent of an airline crash.

Continue reading "Chicago Business Attorneys Best Suited to Handle Technology Agreements" »

The newly enacted Internet sales tax law in Illinois has e-commerce giants like Amazon and Overstock claiming they will cut ties with business affiliates in the state, the Chicago Tribune reported.

Our Chicago e-commerce lawyers encourage any business dealing with Internet tax issues to seek the advice of an experienced law firm. Start-up companies in Illinois, in particular, may need an online business attorney to help ensure they are in compliance with applicable state and federal laws.

Previously, the law required a company to prove they had no presence in the state before they could be exempted from charging customers sales tax. The new law, dubbed the Main Street Fairness Act, requires online retailers to collect and remit sales tax on purchases made by Illinois residents if the retailer has a physical presence in the state. The definition of "physical presence" has been expanded to include affiliated companies. Meanwhile, the average sales tax nationwide jumped to 9.64 percent in 2010 -- up more than a full percentage point from the 8.63 collected in 2009. Brick-and-mortar businesses have long complained that the ability to make sales without charging sales tax gives online retailers a 5 to 10 percent advantage.

Illinois' state sales tax of 6.25 percent is significantly higher than the national average of 5.52 percent. Illinois joins New York, Rhode Island and North Carolina in passing measures to collect sales tax from online retailers. The Illinois Department of Revenue estimates it misses out on as much as $170 million in uncollected sales tax each year because of online purchases.

Many of the businesses impacted by the new law are small Internet companies in Illinois, like Chicago-based CouponCabin. Overstock said it works with well over 100 such affiliates and will cut ties with them all. Amazon declined to say how many affiliates it had in the state but was also sending termination letters. The founder of BradsDeals.com said such sites had been a growing Chicago industry.

Continue reading "Illinois' Internet Sales Tax Complicates Reporting, Could Harm Chicago e-Commerce Businesses" »

This week a federal jury in Oakland, California awarded Oracle $1.3 billion in damages from SAP as a result of SAP's infringing the intellectual property of Oracle. The trial was limited to the question of damages. SAP already had admitted that personnel at a now closed Tomorrow Now subsidiary had intentionally gained access to, copied and resold software related to running the data centers of large corporations. SAP also obtained other propriety information and trade secrets, such as manuals and technical support guidance.

The case is stunning in many respects. It is a clear example of blatant copryright infringement and apparently patent infringement. It appears that numerous and senior mananagers at SAP were aware of the subterfuge. And, it demonstrates just how damaging a breach of corporate integrity can be in terms of money, publicity and prestige.

Perhaps, the most interesting aspect is how vulnerable a copyright infringer is if discovered. SAP argued that Oracle's damages should be in the $25 to $40 million range based upon the relatively few customers and amount of income that SAP gained from the effort. Oracles claimed that it would have charged SAP fees amount to as much as $2 billion if it had licensed the software and related materials to SAP. The jury appeared to give much of the benefit of the doubt to Oracle and settled on $1.3 billion, 35 to 40 times what SAP argued.

This reminds me of a case I handled where an advertising and marketing firm made a lengthy infomercial for an appliance that played on national outlets in heavy rotation. The infomercial allegedly included a short bit of background music for which a license had not been obtained. Most likely, the licensor would have charged a very nominal fee if the matter had been negotiated in advance, perhaps less than $50 ro $100. Howevever, after the fact, the licensor was free to demand a fee many, many times that, coupled with potential risks of litigation expenses and treble damages, even though any unlicensed use probably had been an oversight. Accordingly, the client concluded it was worth settling the case promptly for a reasonable amount, but one that was still greatly higher than if a license had been purchased upfront.

The principle in the infomercial case is the same as the one in the SAP trial, the exponentially different sums involved notwithstanding. Be very careful about misappropriating software, music, video or other content that has commerical value. Even if the misuse was inadvertent, if detected, you can now be held hostage for license fees far above an arms length level.

The Chicago intellectual property attorneys of Jeremy A. Gibson & Associates, PC frequently advise companies and employees on legal matters involving software and copyright protection, including trade secret and infringement issues. Our Illinois business and corporate attorneys are available throughout the region to meet at offices in Chicago, Deerfield, Rosemont, Schaumburg and Oak Brook and elsewhere. Please phone or email us to schedule your business law consultation.

The U.S. Copryight Office announced yesterday amendments to anti-circumvention regulations pursuant to the Digital Millenium Copyright Act that would exempt "jailbreaking" the Apple iPhone from being illegal under federal law. The exemption was requested by the Electronic Frontier Foundation.

Here is an excerpt of the news release, which can be found at www.copyright.gov:

"The Librarian of Congress has announced the classes of works subject to the exemption from the prohibition against circumvention of technological measures that control access to copyrighted works. Persons making noninfringing uses of the following six classes of works will not be subject to the prohibition against circumventing access controls (17 U.S.C. § 1201(a)(1)) until the conclusion of the next rulemaking . . .

(2) Computer programs that enable wireless telephone handsets to execute software applications, where circumvention is accomplished for the sole purpose of enabling interoperability of such applications, when they have been lawfully obtained, with computer programs on the telephone handset.

(3) Computer programs, in the form of firmware or software, that enable used wireless telephone handsets to connect to a wireless telecommunications network, when circumvention is initiated by the owner of the copy of the computer program solely in order to connect to a wireless telecommunications network and access to the network is authorized by the operator of the network . . .

The Copyright Office is conducting this rulemaking proceeding mandated by the Digital Millennium Copyright Act, which provides that the Librarian of Congress may exempt certain classes of works from the prohibition against circumvention of technological measures that control access to copyrighted works."

Apple has proffered a number of reasons for preventing its customers from accessing applications, which basically can be summarized as Apple wanting to control the iPhone experience in the name of preventing the user experience from being degraded by unapproved vendors and apps that might not be available through the iTunes marketplace.

In general, from a business law perspective, this decision can be seen as of a piece with other legal restrictions that prevent a seller from trying to monopolize its customers. For example, in other settings, sellers in the past have tried to require customers as a warranty to maintain goods on a certain schedule using only the seller for services. This type of blatant restriction or tie-in generally is not permissible under antitrust and fair competetion laws. Instead, for example, rather than a car buyer having to use an auto dealer for onoging service, a purchaser should be free to choose independent shops and providers.

Similarly, although the Copyright Office's decision is rooted in intellectual property and copyright infringement considerations, it should be seen as an indication of suspicion of post-sale limitations on a purchaser's choices. Accordingly, business owners and managers should exercise care when contemplating legal ways to lock in or restrict their customers discretion after a sale.

Chicago business lawyer Jeremy A. Gibson is experienced in distribution & sales and intellectual proprty counseling would be pleaded to discuss your business law questions about the Apple iPhone jailbreaking case or similar post-sale requirements.

Online retailers should prepare for a new front as state lawmakers and revenue authorities become more creative in finding ways to make sure that Internet transactions don't escape sales or similar taxes. Catalog companies should pay attention to this as well.

State officials have been frustrated by their inability to require e-commerce vendors like Amazon and the like collect sales taxes when they do not have a physical presence in a state. (Note: for clarification, consumers in states where Amazon or a similar vendor has a distribution center, for example, do have to pay sales tax.) In recessionary times, this seems like a major loss of revenue. And, local bricks-and-mortar retailers, who must collect sales taxes, feel at competitive disadvantage to their virtual peers.

Some states have mounted litigation to overcome Supreme Court precedent about taxing out-of-state merchants. But others aren't waiting for resolution of such efforts and are trying a new tack. They are looking to the "use" tax, which is what consumers are supposed to pay when purchasing from out-of-state sellers. However, it has been much easier to enforce the sales tax from relatively few retailers, compared to policing the use tax against all citizens.

In a twist, there are recent reports that state authorities are trying to require online retailers to provide customer data so that tax bodies can pursue use tax claims against them. For instance, North Carolina recently made a request for such information to Amazon that sent alarm bells ringing, including about potential privacy claims.

It is too early to say how this will all play out. However, sooner or later, in this time of state budget deficits, it is quite likely that the loophole for online (and catalog) sales will be plugged one way or another.

Jeremy A. Gibson & Associates, P.C. handles trademark, trade secret, domain name and other intellectual property matters such as the one discussed above. We are available to serve and meet with clients throughout the Chicago, Illinois area, including Arlington Heights, Buffalo Grove, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette. Contact us anytime for a complimentary consultation with a Chicago business attorney.

Here's the exception that proves the rule. What's the rule? Here's the rule: The time and expense to complete any legal matter will exceed whatever is estimated.

In a prior life, among other things, I managed the intellectual property portfolio for a large, global technology and consulting company. Given our profile, we had quite a few instances of typosquatters and other unsavory types putting up websites with variations of our name and domain name. So, we used a commercial Internet monitoring service to keep an eye on this and we would take action to suppress those instances that seemed infringing, damaging or otherwise objectionable.

Our service identified the website of what appeared to be a small firm in a large city in China that not only held itself out as in same business as we were, but also operated under the same name and exact same logo. In other words, they completely misappropriated our identity and trademarks, which I guess in hindsight was rather flattering. Well, this was something we could not tolerate. We actually has significant operations in China and had to stamp this out.

As a cost-effective first step, I tried emailing the firm and people in question. Not surprisingly, I got no response and there website remained up. Same result when I asked my colleagues in China to do so. Then, fearing we were about to step into a bottomless moneypit, I chatted with our outside trademark counsel, a very large firm with offices in China. Our outside counsel suggested engaging what sounded to be the equivalent of a local private investigator to visit the target and speak with anyone there. This would entail a relatively modest fee for an international matter, which was in the low four figures.

Not having any real choice, we authorized this. Before too long, we got back a thorough report of what was going on. More important, the local investigator apparently notified the personnel there of our IP rights and concerns and even obtained a promise to cease and desist from using our name and marks. I was a little skeptical that this was going to be enough, especially with the well-known piracy issues in China.

Yet, indeed our problem was solved. The offending activity stopped and we moved on to the next offensive website linking our company to inappropriate services. I can honestly say that, even with all my experience working on cross-border matters, I was amazed how easy, inexpensive and quick it was to make this go away with a few phone calls and emails. I hope lightning will strike twice someday.

Jeremy A. Gibson & Associates, P.C. handles trademark, trade secret, domain name and other intellectual property matters such as the one discussed above. We are available to serve and meet with clients throughout the Chicago, Illinois area, including Arlington Heights, Buffalo Grove, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette. Contact us anytime for a complimentary consultation with a Chicago business lawyer.

As a Chicago business lawyer licensed in Illinois, I have to attend a certain amount of Continuing Legal Education every two years. So, last week I went to brush up on security and privacy matters at a Chicago Bar Association seminar entitled, "Encryption for Lawyers."

It was an excellent reminder of the stakes involved not just for lawyers, but all business owners and managers in this age of ever increasing electronic data. First, many financial, healthcare and other companies are subject to specific security, breach notification and corrective action regulations through HIPAA and similar legislation designed to protect personally identifiable information ("PII"). Second, the potential opportunities for breaches are mind numbing when considering all the technologies we use: computers, flash and other external drives, email, cell and smart phones, WiFi and wireless routers, Bluetooth headsets and online or "cloud" services. Third, every week brings new stories of hackers, like that of Google's experience in China, or lost laptops.

Days could be spent on studying regulations, guidelines and best practices. For example, just think about keeping track of, much less, securing all the places you have data either residing or being transmitted. Volumes have been written just on how to delete and destroy data from disks and drives before disposal. (One speaker's tip: Super Glue works well to disable thumb drives.)

For now, the key takeaways from the seminar were: "Handle PII like it is cash" and "Encrypt your computers and drives." I want to emphasize the latter because, in addition to basic use of passwords, it provides the biggest bang for the buck. There are free or relatively inexpensive encryption programs that require a password in order to fully start your laptop or other device. Thus, this is a fairly simple way to protect everything in case of loss or theft, which greatly reduces your exposure to negligence or regulatory violation claims. And, generally speaking, laws requiring notice of PII breaches to employees and customers are not triggered if lost data was encrypted.

For more detailed information and advice regarding information security and privacy legal considerations, contact our Chicago and suburban business lawyers.