REFLECTIONS ON THE APPLICATION OF INTELLECTUAL PROPERTY LAW TO BUSINESS-TO-BUSINESS USES OF ELECTRONIC COMMERCE

Transcription

1 REFLECTIONS ON THE APPLICATION OF INTELLECTUAL PROPERTY LAW TO BUSINESS-TO-BUSINESS USES OF ELECTRONIC COMMERCE By Bob H. Sotiriadis * LEGER ROBIC RICHARD, Lawyers, ROBIC, Patent & Trademark Agents Centre CDP Capital 1001 Victoria Square - Bloc E 8 th Floor Montreal, Quebec, Canada H2Z 2B7 Tel. (514) Fax (514) info@robic.com 1. INTRODUCTION There have been very few statutory initiatives brought forward with a view to specifically adapting Intellectual Property laws to the realities of conducting electronic business. This explains why the best advice when addressing Intellectual Property issues relating to any new field of technological endeavour is to be aware of and apply, the basic principles underlying the type of Intellectual Property protection that is relevant to the new environment. In the case of business-to-business electronic commerce, the basic principles of trade-marks, copyrights and patents all play a significant commercial role. After all, business-to-business internet commerce draws many actors to its stage, the World Wide Web. The new economy has gone beyond the phase of web site development, the marketing and retail sale of consumer products and the development of company Intranets. It has now evolved to a point where businesses are integrating their on-line technologies with those of other businesses through Extranets in order to allow such companies to integrate their private networks with those of other businesses. Every day, there is news of new participants in the business-to-business electronic commerce world, from older industry leaders such as General Motors Corp., Ford Motor Co. and Daimler Chrysler AG with their so-called cyber-bazaar to Guess Jeans, a more glamorous example of the use of a business-to-business model, thanks to their new business-to-business site to be called the Apparel Buying Network. LEGER ROBIC RICHARD/ROBIC, 2000 * Lawyer, Bob H. Sotiriadis is a partner in the lawfirm LEGER ROBIC RICHARD, g.p. and in the patent & trademark agency firm ROBIC, g.p.

2 This activity has brought about a phenomenal push in the technologies needed to allow the big three s of this world and the fashion leaders of this world to carry out their business-to-business models. Companies such as Sun Micro Systems, Web Methods and i2 Technologies are three of the more visible participants in the field of software integration, providing the technology which will allow businesses to connect their different computing systems so that they can exchange information and conduct business over the Web. E-commerce in general and business-to-business e-commerce in particular, involves the intervention of a host of participants in the e-commerce process: website creators, software developers, integration specialists, marketers and so on. Different means of intellectual property protection may be available depending on what particular role a firm plays in this process. 2. RELEVANT INTELLECTUAL PROPERTY CONSIDERATIONS So what are the basic principles of trade-marks, copyrights and patents that one should be aware of in this transition from intranets and websites to business-to-business electronic commerce and the use of extranets? 2.1 Trade-Marks Considering trade-marks, it is always crucial to recall the basic definition and raison d être of a trade-mark. A trade-mark is any word, design, get up, distinguishing guise or symbol that is used by a person for the purpose of distinguishing his wares, services or business from those of another person. A trade-mark must therefore be distinctive and cannot be descriptive. The more distinctive a trade-mark is, the more it will be entitled to a wide scope of protection in the market. Trade-marks will only be valuable if they are used as trade-marks that is, to distinguish. They lose their value if they are used in a purely descriptive or generic way. The more a trade-mark is used and the more it is known, then the more goodwill becomes attached to the trade-mark and the more valuable it becomes. Not only must a trade-mark be used as a trade-mark but it must be used properly. For a trade-mark to be properly used in association with wares, it has to be marked on the wares themselves or on the packages in which the wares are distributed. This must occur at the time of transfer of the property in the wares and in the normal course of trade. However, there is room for other

3 manners of use if the trade-mark is in some way associated with the wares and a notice of this association is given to the person to whom the property or possession is transferred. E-commerce, in relation to trade-marks on wares, often does not trigger the traditional definition of use of trade-marks and it is up to the owners of trade-marks in an e-commerce context to ensure that the association of the trade-mark is made with the wares in some tangible way. A trade-mark is deemed to be used in association with services when it is used or displayed in the performance or advertising of those services. It should be obvious from this definition that many trade-marks, because of the advent of internet commerce and the importance of identifying a strong brand, have been transformed from traditional trade-marks relating to wares, to service marks. Rights in trade-marks are acquired through use of the trade-mark but the goodwill and the protection of a trade-mark will be restricted to the actual territory where one can show that goodwill has accrued in a mark. This is why registration schemes have been developed to allow a person to benefit from countrywide protection in a trade-mark. The limitless boundaries of the internet should dictate to anyone in internet commerce the importance of obtaining registration of significant trade-marks world-wide. Trade-mark protection lasts as long as the trade-mark is used and as long as it is used in such a way that distinctiveness and therefore goodwill, is maintained. Improper or non-exclusive use of a trade-mark can lead to its invalidity. A recognized trade-mark provides protection from the use by another person of the same trade-mark or confusingly similar trade-mark. Generally speaking, the existence of confusion is determined by examining various criteria such as the inherent distinctiveness of the trade-marks which are being compared, length of time that a trade-mark has been in use, the nature of the wares, services and business of the parties, the nature of the trade in which the trade-marks are used and of course, the degree of resemblance between the trade-marks in appearance or sound or any ideas suggested by them. Similarly, tolerating the co-existence of the same or a confusingly similar mark used by a third party may result in loss of goodwill in the trade-mark or even the loss of exclusive rights altogether. Just as branding (consider the importance of the Yahoo trade-mark) has become a hot issue in the e-commerce world and in the new marketing opportunities which have arisen from it, so has the all important notion of trade-mark protection in this particular context. 2.2 Copyright

4 As the term implies, copyright provides protection against the copying of a work which is protected by copyright or as we say in our jargon, a work in which copyright subsists. The work must be original and in a fixed form. Copyright simply means the sole right to produce or reproduce a work or any substantial part of the work in any material form whatsoever. The protection therefore extends beyond copying the whole work to copying of a substantial part of the work and it does not matter on what support or medium the copy is found. The protection extends to the sole right to perform or publish or produce or reproduce translations of the work, to convert certain types of works into other types of work, to make sound recordings, cinematographic film or otherwise mechanically reproduce or perform literary, dramatic or musical works, to adapt and publicly present as a cinematographic work any literary, dramatic, musical or artistic work and the rental of computer programs, amongst others. The Copyright Act also provides the copyright owner with the sole right to authorize any acts which the copyright owner has the sole right to carry out. Copyright can subsist in several types of works including literary works, artistic works, dramatic works and musical works. In Canada, the protection generally lasts for the lifetime of the Author plus 50 years after the Author s death. In many other jurisdictions, the duration of protection is even longer. The types of works most often encountered in the information technology field in general, and in the internet environment in particular, are literary works (which include tables, computer programs and compilations of literary works) and artistic works (which include paintings, drawings, maps, charts, plans, photographs, engravings, sculptures, works of artistic craftsmanship, architectural works and compilations of artistic works). Of particular interest is the notion of a compilation which we noted in both of these definitions and which generally means a work resulting from the selection or arrangement of literary, dramatic, musical or artistic works or parts of such works or works resulting from the selection or arrangement of data. Copyright law is also the basic source of protection for copyright subsisting in computer programs since, as mentioned above, a computer program is expressly set out as being something in which copyright can subsist. A computer program is defined in the Canadian Copyright Act as a set of instructions or statements, expressed, fixed, embodied or stored in any manner, that is to be used directly or indirectly in a computer in order to bring about a specific result. Briefly put, what is generally protected in the computer program as a literary work is the written code and accompanying documentation.

5 Copyright is owned by the first author of the work unless the author expressly assigns his rights to another person. This dictates the need for obtaining assignments when any part of a commercial endeavour which is potentially the object of copyright protection is carried out by a third party. The most important exception is of course, that of works created by employees in the course of employment. Copyright in such works will not be owned by the first author, that is the employee, but instead shall be owned by the employer. Copyright can be assigned or licensed in whole or in part. Copyright is an asset which is separate from the support or medium it is fixed upon. Sale of the tangible asset incorporating the works does not constitute sale of the copyright without an express provision to this effect. As we can see from the definitions above, copyright can cover almost anything from the software of a website integration company, the software of website developers, the artistic works which go into the creation of a website or in computer programs, company manuals and charts, the manner of compilation of information obtained as a result of internet applications and a multitude of other situations. Copyright subsists in the work upon creation, but in Canada and the U.S. at least, there are registration systems for it that are very simple. Registration of copyright provides handy presumptions of ownership and the subsistence of copyright. It further facilitates the litigation process and is, in fact, necessary for the litigation process in certain cases. Unlike trade-marks, there is no use requirement or notion of distinctiveness. Copyright will subsist in a work if the work is original and is fixated. Copyright does not apply to ideas, it protects their expression. Copyright therefore protects the owner from the copying of the Author s expression of his ideas, either in whole or substantially, in any form whatsoever. However, a finding of infringement generally requires proof that the alleged infringer had access to the work and that there was copying. Independent creation is a defence to alleged infringement. However, copyright does not provide an absolute right to use one s work or to reproduce it. Conceivably, copyright works can infringe on a prior work especially in the case of software programs, compilations, translations and the like. This means for example, that there are cases where a person who reproduces his own copyright software can be an infringer of the underlying software he has improved upon or adapted, for example. Many compilations are made up of individual copyright works. The moment one reproduces an underlying work in which copyright subsists, one is an infringer of the underlying work. Obviously, infringement for copyright can have disastrous

6 consequences as it can for trade-marks and for patents as we shall see, since the copyright owner can apply to the Court for the purpose of putting an end to the reproduction of the underlying work and the freezing of the copyright infringer s activities in addition of course to damage and profit claims. This principle explains the importance of licensing in the context of internet commerce. 2.3 Patents Patents provide the exclusive right and privilege to make, use and sell an invention. The period of protection is generally twenty (20) years from the date of the application. However, true protection only kicks in when the patent is issued, which in countries such as Canada, can sometimes take at least three (3) years from the application date. An invention means any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture or composition of matter. Generally speaking, an invention that is both new and non-obvious and which has a useful application and is reproducible should be patentable. Traditionally, algorithms, abstract theorems and the like were not considered to be patentable. Furthermore, computer programs were long felt to be unpatentable. However things have changed. In the United States and in other countries, but unfortunately to a lesser extent in Canada, software-based patents are being granted regularly for a wide variety of applications, from signature recognition systems to encryption technology to internet-based payment and security systems and, of course, the class of inventions generally known as business methods. Inventions must be patented in order to benefit from the exclusivity found in patent legislation. The application must contain a disclosure of an invention which will enable a person skilled in the field to which the invention pertains, to easily reproduce the invention upon expiry of the patent. In return for this disclosure, the patentee is provided with the monopoly explained above. On the other hand, many countries apply the absolute novelty rule patenting which means that inventions must not be disclosed prior to the filing of the first patent application, otherwise they are unpatentable or potentially subject to an invalidity attack. In Canada, the U.S. and Mexico applications must be filed within twelve (12) months from the first public disclosure of the invention. As in the case of copyright protection, patent protection does not provide the right of exploitation or commercialisation of a product or process. It is a negative right in that it only permits one to stop someone else from using, making or using the patented invention. Furthermore, as in the case of copyright, a patented invention may constitute an infringement of a prior patent if in reproducing the patented invention, one takes the substance of a

7 prior patent that is still in force in any particular jurisdiction. Patent infringement occurs when a person is found to have reproduced the invention set out in the claims of a patent notwithstanding that he may have introduced variants on the invention that are unrelated to the essence of the protection obtained and which do not affect in substance the way the invention works. Contrary to copyright law, patent infringement is determined without reference to issues such as access and copying: one looks solely at Defendant s product or process and compares it to the claims of the patent. Good faith is irrelevant to the strict question of patent infringement. An international patent filing system has been put into place through the Patent Cooperation Treaty which allows inventors to apply for patent protection in over a hundred (100) countries after the filing of a first priority patent application, as long as the delays and formalities of the filing of a PCT application are respected, and national phase entries are pursued in accordance with the terms of the treaty and national legislation adopted in accordance with the treaty. The PCT system and the use of incomplete or provisional patent applications permit firms to obtain breathing time in the context of executing ambitious patent strategies. They can be instrumental in allowing a firm to obtain an international priority date, and the right to delays for the confirmation of filing patent applications in several jurisdictions. Often these strategies are used to allow firms to successfully continue to develop their technology, ensure its feasibility, disclose technology to potential strategic partners, court investors and so on. In absence of an express statutory provision, the Courts in Canada have held that patentable inventions are owned by the inventor unless the inventor created the invention in the course of employment and one of the functions the inventor was hired to carry out was in fact to invent. 3. RECENT EXAMPLES OF HOW THE COURTS HAVE APPLIED INTELLECTUAL PROPERTY PRINCIPLES TO E-COMMERCE The Courts have already been asked to deal with several Intellectual Property issues which have arisen specifically in the case of internet commerce and which, in some cases, were beyond the imagination of intellectual property practitioners even ten (10) years ago. It is most interesting to see how the Courts have dealt with such issues as hypertext linking, cybersquatting, domain name and trade-mark conflict, digital photographs, meta tags and internet-related business methods and the like as they relate to the basic principles of Intellectual Property law. Many of the issues and decisions we will

8 briefly discuss below are relevant to businesses operating under business-tobusiness e-commerce models. For example, is the use of a competitor s trade-mark in the invisible text of a web page legitimate when it is placed there for the sole purpose of increasing traffic flow to a site.? At least one decision in the U.S. from an appellate level Court suggests that this may amount to trade-mark infringement and unfair competition. In the case of Brookfield Communications Inc. v. West Entertainment Corp., 50 U.S.P.Q.2d 1545 (9 th Cir. Apr. 22, 1999), the California Court of Appeals enjoined the defendant from using Brookfield s registered trade-mark MOVIE-BUFF in either a domain name or meta tag embedded in the West Coast Entertainment website. What is of particular interest in this case is that the Court developed the doctrine of initial interest confusion which in itself was a novel notion given that the usual basis for trade-mark infringement is that of confusion between two (2) trade-marks. Initial interest confusion is therefore an example of how Intellectual Property law has been adapted to the realities of an e- commerce world. It is a doctrine that we will definitely be hearing more in the future of e-commerce. An example of how the Courts have attempted to deal with internet related issues as they relate to copyright infringement is exemplified in the Ticket Master decision rendered on March 27, 2000 by the Federal Court, Central District for California docket As we all know, hyperlinking often connects users to a page several layers deep in a site; this means that people will not see the advertising-laden home page that is so important to the site owner. In the Ticket Master case, Ticket Master sued Tickets.com for allegedly illegally linking to Ticket Master web pages. Tickets.com would often refer its viewers to Ticket Master s site when it listed events but did not actually have the contract to sell tickets. Ticket Master complained that this practice unfairly attracts hits to Tickets.com s websites by using Ticket Master information. The Court stated that hyperlinking does not in and of itself involve a violation of the Copyright Act because no copying is involved and the activity is analogous to using a library s card index to get references to a particular item. Further decisions will be required to fully explore the legal implications of hyperlinking.

9 One statutory development which is relevant to internet commerce is of course the passing of the Anticybersquatting Consumer Protection Act in the U.S. In February of this year, a good example of how the Act may be applied and how it interacts with the law of trade-marks was exemplified in the decision of Virtual Works Inc. v. Network Solutions Inc., Volkswagen of America Inc. et al, 2000 U.S. District Lexis 2670 (E.D.Va. Feb. 24, 2000) In that case, the Court held that Virtual Works use of Volkswagen s famous VW trade-mark in the domain name vw.net which also happened to be the initials of Virtual s firm, constituted cyber-piracy, trade-mark dilution and trade-mark infringement. The Court held that the Anticybersquatting Consumer Protection Act protected famous trade-marks such as VW from competition arising through the registration of a domain name containing the same trade-mark. In this case, Virtual Works was found to be in bad faith in that it had never registered the VW trade-mark and have never conducted business using the VW initials. The Court therefore found that its use of the VW initials as a domain name had created a likelihood of confusion which was borne out by the fact that e- mails had been received by Virtual which were in fact intended for Volkswagen. Furthermore, Virtual had made unflattering remarks about Volkswagen at its website and even offered to sell the domain name to Volkswagen. The Anticybersquatting Consumer Protection Act was also invoked and helped rescue Joe Cartoon from the grips of a serial cybersquatter in the case of Shields v. Zuccarini last month (E.D. Pa. No March 22, 2000). Amongst other things, the defendant allegedly registered five variations of Shield s Joe Cartoon website name and filled them with unavoidable advertisements and even pages carrying political protests and unsavoury depictions of animal mutilations. Several years ago, IP practitioners would have also been surprised of the outcome in the case of OP Solutions Inc. v. Intellectual Property Network Ltd. rendered on January 20 th, 2000 by a Justice of the United States District Court of the Southern District of New York [Civil Action No. 96 CIV (LAP)]. In that case, it was held that certain elements of OP Solutions software program PATTSY were protectable by copyright as compilations including the selection, coordination and arrangement of 1) the main trade-mark screen; 2) the action grids on the main trade-mark screen, the General Matter screen, and the Predefined Actions/Country Law screen;

10 3) the data compilations used in the Predefined Actions/Country Law screen; 4) the Times and the Action data tables and 5) the main Clients/address and General Matters screens. The Court further held that the documentation and help screens of the programs were protectable by copyright as original works. The Court found that the defendant s programs infringed the registered copyrights in PATTSY with respect to the selection, coordination and arrangement of some, but not all, of the items mentioned above, more particularly, the 1) Action Grids on the main trade-mark screen, the Country Monitoring screen, the Conflicts screen, the Agreements screen, the Licences screen, the Non-trade-mark screen and the Ownership screen; 2) the data compilations used in the more than three hundred (300) country monitoring records and 3) the Times/Action and the Actions/Agenda data tables used in the World Mark 4.0 and World Mark 4.1 programs. In early March 2000, the Ninth Circuit Court of Appeal considered the question of what constitutes a photograph in the digital age (Jeffrey Hunter Mendler v. Winterland Productions Ltd.). Photographs are a common feature of on-line activity. Mendler had a contract to photograph the 1991 American s Cup yacht race for Winterland. Winterland was provided the right to use the photographs as guides, models and examples but only to be used to make illustrations for t- shirts. Winterland allegedly put out a line of t-shirts with illustrations on them created from digitally altered photographs taken by Mendler. The question arose as to whether scanned and altered images constituted photographs thus violating the contract and therefore Mendler s copyright or whether the images were illustrations as a result of the degree of alteration of the photographs by Winterland. The Judge writing for the majority stated that: Digital technology makes such alterations child s play, and most of the photographs we see in the media today have been digitally tweaked to get the exact image desired. Often, important elements of the depicted scene are relocated, removed or

11 replaced entirely with borrowed images. Even though we are (sometimes) aware that these doctored photographs no longer accurately depict reality, we nevertheless perceive and identify the images as photographic. In addition to recent case law such as that disclosed above, we are witnessing the advent of a greater openness to software related patents and the latest arrival on the patenting scene internet based technology and the patenting of business methods. For example, patents have been granted in the U.S. in software-based investment portfolio management systems and methods of handling traffic on the internet. In November 1999, Double Click Inc. sued for the infringement of a patent relating to a method of delivering advertising on the internet. The patent is entitled Method of Delivery, Targeting and Measuring Adversiting over the Internet. In September 1999, Priceline.com allegedly owner of a U.S. patent for a method for internet-based auctions, sued Microsoft under its patent. It will be interesting to see how the Courts deal with the validity and scope of protection of this new class of patents in the next year or so. 4. CONCLUSION Patents, trade-marks and copyrights are all intangible assets based on the notion of exclusivity which, if used and managed properly, constitute a valueadded tool for a business whether that business is found on the technology, marketing, sales, publishing or any other side of the electronic commerce spectrum. These rights allow a firm to stake out exclusive territory in their field and provide the opportunity to assign or licence their rights or fractions of the rights to potential business partners and constitute persuasive arguments in the never-ending quest for fresh capital. They can also constitute a threat to firms that underestimate the damage and disruption which can be brought about by their own infringing activities or the activities of those with whom they have parternered or entered into technology transfer arrangements. This further highlights and underlines the increasing importance of intellectual property due diligence in the new economy. Notwithstanding the lack of judicial intervention in this field, which to many has actually been a beneficial as opposed to a negative development, basic principles of intellectual property law are still managing to retain their

12 relevancy and should not be neglected in an overall business strategy in the world of internet commerce.

13 ROBIC, un groupe d'avocats et d'agents de brevets et de marques de commerce voué depuis 1892 à la protection et à la valorisation de la propriété intellectuelle dans tous les domaines: brevets, dessins industriels et modèles utilitaires; marques de commerce, marques de certification et appellations d'origine; droits d'auteur, propriété littéraire et artistique, droits voisins et de l'artiste interprète; informatique, logiciels et circuits intégrés; biotechnologies, pharmaceutiques et obtentions végétales; secrets de commerce, know-how et concurrence; licences, franchises et transferts de technologies; commerce électronique, distribution et droit des affaires; marquage, publicité et étiquetage; poursuite, litige et arbitrage; vérification diligente et audit; et ce, tant au Canada qu'ailleurs dans le monde. La maîtrise des intangibles. ROBIC, a group of lawyers and of patent and trademark agents dedicated since 1892 to the protection and the valorization of all fields of intellectual property: patents, industrial designs and utility patents; trademarks, certification marks and indications of origin; copyright and entertainment law, artists and performers, neighbouring rights; computer, software and integrated circuits; biotechnologies, pharmaceuticals and plant breeders; trade secrets, know-how, competition and anti-trust; licensing, franchising and technology transfers; e- commerce, distribution and business law; marketing, publicity and labelling; prosecution litigation and arbitration; due diligence; in Canada and throughout the world. Ideas live here. COPYRIGHTER IDEAS LIVE HERE IL A TOUT DE MÊME FALLU L'INVENTER! LA MAÎTRISE DES INTANGIBLES LEGER ROBIC RICHARD NOS FENÊTRES GRANDES OUVERTES SUR LE MONDE DES AFFAIRES PATENTER R ROBIC ROBIC + DROIT +AFFAIRES +SCIENCES +ARTS ROBIC ++++ ROBIC +LAW +BUSINESS +SCIENCE +ART THE TRADEMARKER GROUP TRADEMARKER VOS IDÉES À LA PORTÉE DU MONDE, DES AFFAIRES À LA GRANDEUR DE LA PLANÈTE YOUR BUSINESS IS THE WORLD OF IDEAS; OUR BUSINESS BRINGS YOUR IDEAS TO THE WORLD