the 106: Where Business meets the law(t)

Exit 2.0 - The Art of Reinventing Oneself

2006-12-14T09:21:00.000-08:00

Many of you have heard that I have re-launched "the arts and technology law group" just weeks ago. With it, this blog re-launches. I am blessed to have found an area of law that I love and clients and colleagues that have grown with me. Re-launching one's own practice is no easy task I'll admit but if there is one thing I know it is this: so long as I am still passionate about customer service, practicing law and helping buinesses fend off those who rip them off, I will succeed. I realized this year though that that alone was not enough, I must also have fun doing it. Life is simply too short. I am sure you agree, right? As a result, I've come up with a set of values I strive to live by in 2007. Of course, I hope you'll help me keep to them but I also hope you'll share with me the adages (sp?) that keep you happy, healthy, wealthy and wise. Thank you in advance for your support and for nourishing me this year.

FOCUS --- PEOPLE -- DON'T OVER DO IT -- HAVE FUN

1) Focus: Many years ago, I met with Arthur Herschaft the CEO of Paxar, a public company that is known as the leader in printing bar code labels on prodcts. He built this billion dollar company with a smart team but he built it from the modest beginnings. How did he get there? Focus. I strive to be the best infringement litigator in Northern California. When someone's mark, brand, product, software, design is stolen, injunctive relief (aka TRO's, preliminary injunctions) are like mini-trials. It's a bit like an all out raid on an entrenched enemy. No saving your big guns for later in trial. I thrive on this stuff and have made it my focus.

2) People: All we have on this earth is the personal connections with others. I do my best to be present with those around me and to be honest and caring. I do not always succeed, I know, but I try. My grandmother told me that you must be nice to everyone you meet because you never know who they are. If a prospective client, employee, co-worker is not nice to a doorman, receptionist, that is a red-flag for me. I'd rather move on. Lastly, get off email and blackberries and let's see each other face to face. The older I get the more I seek face time with my clients, my colleagues, my partners. Even a little is better than none. When can we have coffee? Or lunch?

3) Don't Overlawyer: I am a pushy lawyer when I have to be. Sometimes I push too hard I'm sure but it's my style. I remind myself everyday that the impression I make - from how I dress to how I speak and write - reflects on my clients. I strive to remind opposing counsel too that we are just like bus drivers getting thru a tough path. Don't get me wrong, if opposing counsel turns up the heat, I thrive on turning up the heat too. But - let us remember to treat each other with civility and respect. When I negotiate an agreement or argue a motion for a client, I want the world to think two things: The lawyer is credible and so his his client, I want to work with them. If I cannot do that, I have failed.

4) Have fun: If I do not laugh with my clients and revel in their success with them, and connect with them on a personal level, I am not right for them and they are not right for me. This true for my public clients as well as for my family owned, closely held clients. In the end, it is people who have their lives and livings at stake in what they do. Let us not forget that. If we work hard, get the substance right, we must remember to connect with each other and have a bit of fun. The work we do is mostly serious but let us find the time for a smile and a laugh. Maybe break some bread together. Don't you agree.

See you out there, I hope. Don't be a stranger.

Some articles I've been quoted in this year (kudos to my former firms PR people):

On Stolen Art
On China
On Apple v. Beatles' Apple

Best regards, Gregory Rutchik

Both Houses pass Trademark Dilution Revision Act of 2005

2006-04-17T14:34:00.000-07:00

Prior to this Bill, it was not possible for an owner of a famous (or not so famous) mark to obtain injunctive relief without the "presence of actual or likely confusion, or actual economic injury." Under Mosely v. Victoria Secret, __ US __ (2002) The Trademark Dilution Revision Act ("TDRA") of 2005 ends that struggle but with major ramifications for the marketplace of brands.

Then
1) Prior to the TDRA, circuits were split on whether actual damage was a necessary element.
2) Mosely held that "whatever difficulties proof may be entailed, they are not an acceptable reason for dispensing with proof of an essential element of a statutory violation." (16)
3) The statute in question the FTDA requirED that "the owner of a famous mark" is entitled to injunctive relief.... if that use 'causes dilution of the distinctive quality" of the famous mark. 15 U.S.C. 1125(c)(1). The text "unambiguously REQUIRED a showing of actual dilution, rather than a likelihood of dilution." (Mosely, 14).

Now: Post TDRA Amendment
1)Injunctive relief is available 'regardless of the presence or absence of actual or likely confusion, of competition, or actual economic injury." (15 U.S.C.1125(c)(1), as amended).
2) To show a mark famous now, the "court may consider" (i) the duration, extent or advertising and publicity of the mark; (ii) the amount of goods/services offered under the mark; and (iii) the extent of actual recognition."

Ramifications:

Eff.org plays up the concerns cited by the Supremes in the Mosely decision:
1) "the use of DUPONT shoes, BUICK apsirin, and KODAK pianos would be actionable under this litgiation."
2) Publicknowledge.org suggests that because a mark "does not need to be identical" to be protected, it is "quite possible that courts will enjoin KADEK pianos, BIECK aspirin and DOPUNT shoes" as well. This seems like an unlikely application.

Rutchik Quoted: U.S. Expects `Incremental' Progress in Trade Summit With China

2006-04-11T12:34:00.000-07:00

U.S. Expects `Incremental' Progress in Trade Summit With China

April 10 (Bloomberg) -- The Bush administration said it expects China to agree at a summit tomorrow to extend a crackdown on makers of pirated movies and enforce a ban on the use of illegally obtained software by businesses and government.

Other topic for the meeting in Washington with Chinese Vice Premier Wu Yi, U.S. Trade Representative Rob Portman and U.S. Commerce Secretary Carlos Gutierrez include China's ban on U.S. beef imports, standards for telecommunications investment and regulatory transparency, two senior U.S. officials told a group of reporters today on condition of anonymity.

The meeting is an opportunity for China and the U.S. to dampen tensions over the record $202 billion trade gap between the two countries before Chinese President Hu Jintao visits U.S. President George W. Bush next week.

``They want to get some items delivered and out of the way so that the Hu visit goes smoothly,'' said Patrick Mulloy, a former Commerce Department official who is now a member of the U.S.-China Economic and Security Review Commission.

China is offering a series of ``incremental'' concessions now, with more likely to be announced when Hu is in Washington, the U.S. officials said. One item not on the agenda is China's currency policies, which U.S. lawmakers and some businesses blame for helping to subsidize low-cost exports of cheap Chinese toys, computers, auto parts and other goods to the U.S.

The $285 billion trade relationship between the U.S. and China has grown contentious because of China's currency and market access policies. The need to resolve those and other differences has become more important as China is now the second-largest foreign holder of U.S. debt and is likely to pass Mexico this year as the second-largest U.S. trading partner.

``We have a tenuous relationship with China,'' said Gregory Rutchik, a senior counsel at the law firm of Liner Yankelevitz Sunshine & Regenstreif LLP in San Francisco. ``We rely on them as a manufacturer and they buy our debt.''

U.S. Lawmakers

U.S. lawmakers have been pressuring the Bush administration to work harder to open the Chinese market to more U.S. exports and convince the Chinese government to cut-down on what the U.S. says are illegal subsidies to companies.

``Our economic relationship is now at a critical point, and failure by China to address key outstanding trade concerns and fulfill longstanding commitments creates the risk of serious damage,'' U.S. Senator Max Baucus, a Montana Democrat, and 16 of his colleagues wrote in a letter to Wu on April 7.

They called on China to lift its ban on U.S. beef, cut government intervention in markets, revalue its currency and achieve ``significant'' reductions in movie and music piracy.

Bush shares in that last concern, saying today he wants Hu to ``make a declaration'' on intellectual property protection.

``It's difficult for a nation that likes to trade, like ours, to go into a country uncertain as to whether or not patents will be protected or product will be protected from copy,'' Bush said at Johns Hopkins University in Washington.

The U.S. is preparing to file a lawsuit with the World Trade Organization alleging Chinese intellectual property laws fall short of the global requirements China agreed to when it joined the WTO in 2001, people familiar with the case said last week. The administration has been discussing the legal strategy with the film, music and software industries and Congress.

Administration officials have said in those strategy meetings that they intend to file the suit if the summits in Washington fail to resolve the issue, the people said.

China and Piracy: Rutchik Quoted

2006-04-10T21:22:00.000-07:00

U.S. Prepares WTO Lawsuit on China's Copyright Laws, People Say
April 7 (Bloomberg) -- The Bush administration's dispute with China over its movie piracy and other copyright infringement may escalate into litigation as early as this month unless Chinese leaders offer an acceptable solution during summits with the U.S. that start next week, people briefed on the matter said.

The U.S. is preparing to file a lawsuit with the World Trade Organization alleging Chinese intellectual property laws fall short of the global requirements China agreed to when it joined the WTO in 2001, the people said. The administration has been discussing the legal strategy with the film, music and software industries and congressional staff members, they said.

Administration officials have said in those strategy meetings that they intend to file the suit if the summits in Washington fail to resolve the issue, the people said.

The preparation of a suit reflects frustration in Washington that promises China made to curb the illegal manufacturing U.S. goods haven't led to a decline in lost revenue from piracy. U.S. companies say those losses total $250 billion annually.

``There is still a lack of a meeting of the minds'' over how China is dealing with the issue, said James Jochum, a former U.S. Commerce Department official who now works on China issues at the law firm of Mayer, Brown, Rowe & Maw LLP in Washington. ``The U.S. thinks it is going poorly, and the Chinese think it is going well. There is an incredible disconnect.''

Yan Xiaohong, the deputy commissioner of China's National Copyright Administration, and other Chinese officials say they are making progress to stem piracy. They point to recent mandates for businesses to buy legal software and new measures that transfer more copyright violation cases to criminal courts.

Strategy Shift

The decision to base a complaint on allegations that China fails to fulfill WTO standards requiring criminal prosecutions and transparency of rules represents a new U.S. approach. Previously, U.S. officials had discussed basing a suit on data showing the volume of illegal merchandise. That data has proven difficult to obtain, the people involved in the matter said.

The lawsuit would be one of the most complex cases in the 11-year history of the WTO, which oversees rules of international commerce for 149 member nations.

The U.S. has made the protection of intellectual property the centerpiece of its trade agenda. It sees China as the center of global production for illegal copies of a wide variety of items including Harry Potter books, Microsoft software, Louis Vuitton handbags, automotive parts, and pharmaceutical medicine.

``China is manufacturing 80 percent of the pirated goods'' out there, said Gregory Rutchik, a senior counsel at the law firm of Liner Yankelevitz Sunshine & Regenstreif LLP in San Francisco. ``We are talking about a multi-billion dollar industry. The scope is just staggering.'' [See e.g. Testimony before Senate puts the number between 85 and 90% of all copyrighted works!]

Trade Summit

U.S. and Chinese trade officials are scheduled to meet April 11 for an annual policy meeting in Washington that is intended to produce pledges on how the two nations conduct business with each other. In each of the last two meetings, China pledged new crackdowns on intellectual property rights violations, promises the U.S. says haven't been fulfilled.

Chinese President Hu Jintao is scheduled to meet with President George W. Bush in Washington on April 20 to talk abut a broad range of issues, including trade relations.

In addition to illegal goods being made in China for sale in China, pirated goods are now being exported to the U.S. for sale, Commerce Secretary Carlos Gutierrez said in a speech on March 14.

``We know there's rampant piracy in China, and we know it affects our imports to China in a very direct way,'' U.S. Trade Representative Rob Portman said in an interview April 5.

Options Explored

In a separate interview last month, Portman said that the U.S. is considering bringing a WTO complaint against China over this issue. He didn't provide specifics then, and a spokeswoman for Portman declined to comment yesterday about the possibility.

``The U.S. government has been supportive of our China agenda, and we're working with them to explore all of our options to stop our losses'' due to piracy, Gayle Osterberg, a spokeswoman for the Motion Picture Association of America, said.

In recent discussions with industry representatives, the U.S. trade office complained that it hasn't been getting the data it needs from them to bring a case that would argue systematic piracy in China is a violation of WTO provisions.

In a meeting with U.S. business representatives in Beijing last month, the general counsel for the U.S. Trade Representative's office, James Mendenhall, pleaded with companies to provide him with the information necessary to file such a case. Speaking with reporters after the meeting, Mendenhall said he told the business representatives, ``You need to arm us with the facts.''

Data Lacking

In addition, the U.S. has been unable to get data on the extent of copyright piracy and government crackdowns that it demanded from China last year under a separate WTO provision.

The Chinese plan to come down harder on all large companies found to use pirated software, Yan, the deputy copyright commissioner in China, said March 27.

China shut down 17 assembly lines for pirated digital video discs last year and has closed six more this year, Yan said.

Not all U.S. businesses are in favor of litigation because of fears it could damage commercial relations between the two countries.

``We are optimistic,'' said Robert Holleyman, the Washington-based president of the Business Software Alliance, which represents companies such as Microsoft Corp. ``China has made a number of very specific commitments related to software. We are optimistic that ultimately we are on the right path.''

George Scalise, president of the Semiconductor Industry Association, agreed. ``WTO cases generally take too long,'' he said.

To contact the reporter on this story:
Mark Drajem in Washington at mdrajem@bloomberg.net

Carpe Diem!

2005-12-12T18:22:00.000-08:00

As 2005 rolls to an end, I am left with several realizations. The web has now made it possible for everyone to become a somebody ala a blogster. And, with Andreeson's new toy, "http://www.ning.com" the web has also made it possible for everyone to be their web site. The problem is, with all this blah, blah, blah, are are "better" society? Do we feed more hungry mouths, do we keep more healthier? Are we richer? Cleaner?

I remember when I first interviewed with Goldman Sachs in 1986 and I blew the interview by answering the "how would I invest $1 million dollars" question by stating (at the end of what I though was a solid diversified approach) that I'd give some of the money away. Wasn't it important to be socially conscious? In all activities? No. Never when you're an investment banker. "No one ever hires their investment banker to give their money away," David Darst (then head of Securities Sales and kind of my mentor during the interviewing) told me. The same adage - making a difference in the world -- I feel holds true for the Internet. 2005 is definitely the year of http://www.Google.com and http://www.ning.com shows us that we are on the verge of making it possible for each of us to have our own search engine -- yippee. 2006 may very well be the year of "so what." Not to be negative or anything but China and its stability really will have a lot to do with our future.
I'm getting my news by running bablefish on baidu.com's new's link so I can read their news in English.

Where do you get get your news and how do you change your life because of it?

Being sued for trademark infringement, defending yourself, and winning!

2005-10-20T09:44:00.000-07:00

Note: This decision came down more than one year ago but was just published. I thought it was pretty cool that it was published so I thought I'd share it with you. You've heard it before but here it is again -- Past performance is never a guarantee of future performance.

JUPITER HOSTING, INC. v. JUPITERMEDIA CORP.
US v. Them

JUPITER HOSTING, INC., a Delaware corporation, Plaintiff, v. JUPITERMEDIA
CORPORATION, a Delaware corporation, Defendant.

No. C 04-1820 CW

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

2004 U.S. Dist. LEXIS 28669

September 11, 2004, Decided
September 11, 2004, Filed

COUNSEL: [*1] For Jupiter Hosting Inc, a Delaware Corporation, Plaintiff: Gregory Alan Rutchik, the arts and technology group , San Francisco, CA; Roy S. Gordet, Roy S. Gordet, Attorney at Law, San Francisco, CA.

For Jupitermedia Corporation, a Delaware corporation, Defendant: John C. Rawls, Sarah Anne Silbert, Fulbright & Jaworski L.L.P., Los Angeles, CA; Brandon Claus Fernald, Fulbright & Jaworski L.L.P., Los Angeles, CA; Mark N. Mutterperl, Fulbright & Jaworski L.L.P., New York, NY.

For Jupitermedia Corporation a Delaware corporation, Counter-claimant: Brandon Claus Fernald, Fulbright & Jaworski L.L.P., Los Angeles, CA; Sarah Anne Silbert, Fulbright & Jaworski L.L.P., Los Angeles, CA.

For Jupiter Hosting Inc a Delaware Corporation, Counter-defendant: Gregory Alan Rutchik, the arts and technology group, San Francisco, CA; Roy S. Gordet, Roy S. Gordet, Attorney at Law, San Francisco, CA.

JUDGES: CLAUDIA WILKEN, United States District Judge.

OPINIONBY: CLAUDIA WILKEN

OPINION: ORDER DENYING DEFENDANT'S MOTION FOR A PRELIMINARY INJUNCTION

Defendant Jupitermedia Corporation moves for a preliminary injunction against Plaintiff Jupiter Hosting, Inc. enjoining Plaintiff from making commercial use of its[*2] brand name, "Jupiter Hosting," including use in Plaintiff's domain name, "jupiterhosting.com." Plaintiff opposes the motion. The matter was heard on November 5, 2004. Having considered the parties' papers and oral argument on the motion, the Court DENIES Defendant's request for a preliminary injunction.

BACKGROUND

Plaintiff Jupiter Hosting, Inc. has contracts with approximately eighty-five web-hosting companies nationwide both to construct and to maintain websites and website infrastructure. Plaintiff registered its domain name, "jupiterhosting.com," in October, 2001 and thereafter installed a webpage at www.jupiterhosting.com, from which it conducts business with customers by way of its domain name servers: nsl.jupiterhosting.com and ns2.jupiterhosting.com.

Defendant Jupitermedia Corporation is an Internet company located in Darien, Connecticut that offers a variety of services to information technology specialists, website developers and Internet markets through its webpage at www.jupitermedia.com. Defendant registered its domain name, jupitermedia.com, on October 25, 2000. According to Defendant, its business is comprised primarily of four Internet divisions that provide (1) [*3] technology market research, (2) general information for website developers, (3) information on Internet conferences and trade shows, and (4) online subscriptions to resources from a variety of design-oriented websites. Defendant has registered the marks "JUPITER," "JUPITER RESEARCH," "JUPITERRESEARCH" and "JUPITEREVENTS" with the United States Patent and Trademark Office (PTO).

Plaintiff filed a complaint on May 7, 2004 seeking a declaratory judgment that it was not in violation of any of Defendant's trademark or intellectual property rights in connection with Plaintiff's commercial activities. On July 16, 2004, Defendant filed this motion for a preliminary injunction, alleging that Plaintiff's use of "Jupiter Hosting" to identify its products, services and domain name violates the Lanham Act, the Anticybersquatting Consumer Protection Act, and California's Unfair Competition Law.

On August 24, 2004, the PTO denied Plaintiff's request to register the mark "JUPITER HOSTING," concluding that Plaintiff's mark would likely be confused with Defendant's "JUPITER" mark because the marks were highly similar in sound, meaning and appearance. The PTO allowed Plaintiff the option of responding[*4] to the denial, and Plaintiff contends that its PTO application is still pending.

LEGAL STANDARD

"The function of a preliminary injunction is to maintain the status quo ante litem pending determination of the action on the merits." Wash. Capitols Basketball Club v. Barry, 419 F.2d 472, 476 (9th Cir. 1969). The moving party is entitled to a preliminary injunction if it establishes either: (1) a combination of probable success on the merits and the possibility of irreparable harm, or (2) that serious questions regarding the merits exist and the balance of hardships tips sharply in the moving party's favor. Clear Channel Outdoor, Inc. v. City of Los Angeles, 340 F.3d 810, 813 (9th Cir. 2003); Rodeo Collection, Ltd. v. West Seventh, 812 F.2d 1215, 1217 (9th Cir. 1987); see also Wm. Inglis & Sons Baking Co. v. ITT Cont'l Baking Co., 526 F.2d 86, 88 (9th Cir. 1975); County of Alameda v. Weinberger, 520 F.2d 344, 349 (9th Cir. 1975).

The test is a "continuum in which the required showing of harm varies inversely with the required showing of meritoriousness." Rodeo Collection, 812 F.2d at 1217[*5] (quoting San Diego Comm. Against Registration & the Draft v. Governing Bd. of Grossmont Union High Sch. Dist., 790 F.2d 1471, 1473 n.3 (9th Cir. 1986)). To overcome a weak showing of merit, a plaintiff seeking a preliminary injunction must make a very strong showing that the balance of hardships is in its favor. Rodeo Collection, 812 F.2d at 1217. In appropriate cases, the Court should also consider whether injunctive relief would serve the public interest. Int'l Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 822 (9th Cir. 1993).

DISCUSSION

Defendant argues that it is entitled to a preliminary injunction against Plaintiff because there is a high probability that Defendant will succeed on its claims, and that Defendant stands to suffer irreparable harm if the preliminary injunction is not granted. Defendant also argues that the balance of hardships tips sharply in its favor.

I. Lanham Act
The Lanham Act, in pertinent part, imposes civil liability on those who (1) "use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark" where such use (2) "is likely to cause confusion, or to cause[*6] mistake, or to deceive." 15 U.S.C. § 1114. The Ninth Circuit has identified eight factors that are relevant to whether consumers are likely to confuse related goods: (1) strength of the mark, (2) proximity of the goods, (3) similarity of the marks, (4) evidence of actual confusion, (5) marketing channels used, (6) degree of care likely to be exercised by the purchaser, (7) evidence of bad faith intent in selecting the mark, and (8) likelihood of expansion and overlap of the products. AMF, Inc. v. Sleekcraft, 599 F.2d 341, 348-49 (9th Cir. 1979). In the context of the Internet, three of these Sleekcraft factors retain particular importance: (1) similarity of the marks, (2) relatedness [proximity] of the goods and services, and (3) the use of the Internet as a marketing channel. GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1205 (9th Cir. 2000).

A. Probability of Success on the Merits

1. Similarity of the Marks

The Ninth Circuit considers the "similarity of the marks" factor to be a "critical question" in the likelihood of confusion analysis. Id. In assessing the similarity between marks, the court looks at the[*7] relevant marks as they appear in full in the marketplace, Filipino Yellow Pages, Inc. v. Asian Journal Publ'ns, Inc., 198 F.3d 1143, 1147-50 (9th Cir. 1999), in order to compare their appearance, meaning and sound. Dreamwerks Prod. Group, Inc. v. SKG Studio, 142 F.3d 1127, 1131 (9th Cir. 1998).

Defendant argues that the parties' marks are highly similar in appearance, meaning and sound, principally because they both contain the same central feature -- the word "Jupiter." That contention is supported by the PTO findings which reached that exact conclusion. Plaintiff argues that the marks are not substantially similar because, as displayed on their respective Internet websites, the marks have different fonts, color schemes and layouts. Plaintiff further argues that its mark is written on two separate lines of text while "Jupitermedia" is written as one word on a single line of text.

These relatively trivial differences do not diminish the substantial similarities that the marks share. The term "hosting" does little more than describe a feature of Plaintiff's services, potentially leading to confusion with other services associated with the mark "Jupiter, [*8] " the names of which Defendant has registered with the PTO (e.g. "JUPITER RESEARCH"). The substantial similarities between the marks support Defendant's claim that a likelihood of confusion may very well exist in this case.

2. Relatedness of Goods and Services

The Ninth Circuit has ruled that, in the Internet context, "even services that are not identical are capable of confusing the public." GoTo.com, 202 F.3d at 1206. The court in GoTo.com ruled that, because the Internet is a unique medium in which companies routinely offer a variety of services under a single banner or mark, it introduces problems into the standard analysis of relatedness: "Whereas in the world of bricks and mortar, one may be able to distinguish easily between an expensive restaurant in New York and a mediocre one in Los Angeles, the Web is a very different world." Id. (internal cites omitted).

Plaintiff argues that it is not a direct competitor of Defendant; its services are not complementary to those sold by Defendant and do not serve the same business function. Plaintiff installs computer hardware and maintains websites, while Defendant offers primarily research and other informational[*9] services over the Internet. However, given the Ninth Circuit's statements regarding how the Internet clouds distinctions between services, Plaintiff's argument that it offers different Internet-related services than does Defendant is not persuasive. Both parties agree that the relevant test is whether the public is likely to make an association between related producers and products. Dreamwerks, 142 F.3d at 1127-28. There is a likelihood that Defendant could demonstrate such an association in this instance.

3. Same Marketing Channel

The court in GoTo.com ruled that the Web, as a marketing channel, is "particularly susceptible to a likelihood for confusion," in large part because it allows for competing marks to be displayed at the same time on the same screen. 202 F.3d at 1207.

There is no real dispute that the parties share the same marketing channel: the Internet. Plaintiff argues that it also advertises at a trade show called Internext, but Internext markets only to representatives of adult content Internet websites. Plaintiff also argues that it advertises in different Internet locations than does Defendant, but the Ninth Circuit has previously[*10] held that the Web itself is a marketing channel for purposes of likelihood of confusion analysis. Id.

4. Strength of Mark

While the three factors just addressed constitute the "controlling troika" of Sleekcraft factors when assessing the likelihood of confusion in Internet trademark infringement cases, id. at 1205, and while those factors tilt generally in Defendant's favor, that initial inference of potential or probable confusion is not determinative. See Halo Mgmt. LLC v. Interland, Inc., 308 F. Supp. 2d 1019, 1036 (N.D. Cal. 2003). That is the case because, according to the Ninth Circuit, where the market is inundated by products using the particular trademarked word, there is a corresponding likelihood that consumers "will not likely be confused by any two in the crowd." Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1144 (9th Cir. 2002). "The popularity of a particular mark-related term may impact the strength of marks using that term"; where the market is "crowded" with a particular mark term, thereby "weakening" said term, "any individual user of the [] term thus lacks significant ability to prevent the use of [the[*11] term] by others in the field." Halo, 308 F. Supp. at 1034. Here, Plaintiff has provided evidence that the mark "Jupiter" is used by several dozen companies in California (where Plaintiff's principal place of business is located) and several dozen more in New York, many of which advertise on and/or provide services relating to the Internet. Pinkney Decl., Exs. 1-29. The term "Jupiter" is the identifiable mark for "www.jupitertele.com," "www.jupiter.com," "www.jupitertech.com," "www.jupiterprod.com," and "www.jupiterns.com," among others. Id., Ex. 2, 3, 8, 9, 24. Defendant argues that some of the companies identified by Plaintiff provide dissimilar products and services. This is true, although many plainly do provide computer, technology and Internet-related products on or through the Web. While the companies may not offer services identical to Defendant's vast array of Internet services, Defendant cannot argue on the one hand that the Internet broadens and blurs categories for purposes of likelihood of confusion analysis (e.g. relatedness of goods and services) and, on the other hand, that companies operating on the Internet are not comparable for purposes of[*12] crowded market analysis because they do not offer services identical to Defendant's.

The facts in Halo are analogous. In Halo, the plaintiff sought preliminary injunctive relief enjoining the defendant from using its Internet website "www.bluehalo.com"; the plaintiff held a registered trademark for the mark "HALO." 308 F. Supp. 2d at 1024. The Halo court noted that, while the "controlling troika" of factors clearly favored the plaintiff, the fact that the relevant trademark field was crowded cut against the plaintiff's likelihood of confusion claim. Id. at 1036. In denying the plaintiff's motion for a preliminary injunction, the court reasoned, "Dozens of companies utilize some variant of the halo' term, and many of these companies do so in the Internet and computer context without distinguishing their marks from [plaintiff's]. . . . Consumers confronted with marks ranging from halosec.com' to haloelectrics.com' to bluehalo.com' will, as the Ninth Circuit has suggested, not be confused by the use of the relevant trademarked term." Id. at 1036-37 (internal citations omitted) (emphasis in original).

Where a plaintiff's[*13] mark resides in a crowded field, "hemmed in on all sides by similar marks on similar goods," that mark is weak as a matter of law. PostX Corp. v. docSpace Co., Inc., 80 F. Supp. 2d 1056, 1061 (N.D. Cal. 1999). Plaintiff has provided substantial evidence that Defendant's trademark is positioned in a crowded field.

5. Remaining Sleekcraft Factors

The remaining Sleekcraft factors are relatively unimportant to the likelihood of confusion analysis in Internet-related cases. GoTo.com, 202 F.3d at 1205.

Defendant has provided no real evidence of actual confusion on the part of consumers other than several telephone calls to Defendant inquiring about services similar to those offered by Plaintiff. There is no evidence that those callers intended to call Plaintiff or were confused or misled in their inquiries by Plaintiff's advertising of its products or services. However, the Ninth Circuit has ruled that a showing of actual confusion is not necessary at the preliminary injunction stage, GoTo.com, 202 F.3d at 1208, and it is not necessary that Defendant make such a showing here. The parties argue over the degree of care exercised[*14] by consumers seeking Internet-related services over the Web. The Ninth Circuit is clear on this issue: "Navigating amongst websites involves practically no effort whatsoever, and arguments that Web users exercise a great deal of care [] are unconvincing." Id. at 1209. Thus, Plaintiff's argument that consumers are likely to exercise a high degree of care because its services are relatively expensive is not persuasive.

Neither party has made a clear showing regarding Plaintiff's intent in choosing its mark. The issue is not important in this analysis, and a showing of malicious intent is not required at the preliminary injunction stage. Halo, 308 F. Supp. 2d at 1038.

The evidence on the question of whether Plaintiff intends or is likely to expand into Defendant's primary field of services is ambiguous. Plaintiff argues that there is little likelihood that the parties' services would overlap because they occupy very different Internet-related fields. Again, Plaintiff installs computer hardware and maintains websites, while Defendant offers primarily research and other informational services. Furthermore, Plaintiff asserts that it does not directly[*15] compete for advertising space with Defendant. However, in some sense, the parties' services already overlap because they are both Internet and computer-related services that are offered exclusively over the Web through the parties' websites. This factor does not weigh heavily for either side.

The remaining Sleekcraft factors thus add little to the Court's analysis. The "controlling troika" of Sleekcraft factors favor Defendant's argument for a preliminary injunction. However, Plaintiff has provided substantial evidence suggesting that Defendant's mark has been rendered weak by a crowded field, thus diminishing the likelihood of confusion among consumers. Defendant therefore has not shown probable success on the merits of its claim under the Lanham Act.

B. Balancing of Hardships

Because Defendant has not shown a probability of success on the merits, the Court must now determine whether Defendant has raised serious questions on the merits of its claim and, if so, whether the balance of hardships tips sharply in Defendant's favor.

Defendant has raised serious questions as to the merits of its Lanham Act claim that are addressed in the previous sections of this order. However, [*16] Defendant has not shown that the balance of hardships tips sharply in its favor. The parties dispute how injurious a preliminary injunction would be to Plaintiff. According to Plaintiff, forfeiture of its domain name would cause its customers' domain servers to cease functioning, thus shutting the company down and putting it at risk of insolvency and legal liability to its customers. Plaintiff also contends that its customers are contractually entitled to compensation if its servers go down, and thus inactivating the servers for any length of time puts Plaintiff at risk of bankruptcy.

According to Defendant, Plaintiff would merely have to change the domain names of its servers and the transition costs would therefore be minimal. Defendant argues that, when customers of Plaintiff's predecessor migrated to Plaintiff's servers, the cost was only several thousand dollars. This dispute need not be resolved at this time because Defendant has not shown that it will suffer irreparable harm or be substantially injured if the preliminary injunction is not granted. Defendant's claim of irreparable harm derives solely from its contention that once a plaintiff has demonstrated a likelihood of[*17] confusion under the Lanham Act, it is presumed that the plaintiff will suffer irreparable harm if injunctive relief is not granted. That contention is true, Metro Publ'g, Ltd. v. San Jose Mercury News, 987 F.2d 637, 640 (9th Cir. 1993), but because Defendant has not shown a likelihood of confusion, irreparable injury cannot be inferred.

Moreover, Defendant's own moving papers suggest that it has not been injured by Plaintiff's use of the mark "Jupiter Hosting." Both parties agree that Plaintiff registered its domain name in October, 2001. According to Defendant, from 1999 to 2003, its annual revenues rose nearly three hundred percent, to almost $ 48 million. In the first quarter of 2004, its revenues were $ 14.4 million, an increase of almost seventy-five percent over the corresponding period in 2003. DeMilt Decl. P 14. Not only has Defendant failed to show irreparable injury by inference, it appears from its moving papers that it has flourished during the time that Plaintiff has utilized the mark "Jupiter Hosting," and Defendant makes no attempt to show that this trend will change if a preliminary injunction is not granted. Defendant has not demonstrated that the[*18] balance of hardships tips sharply in its favor, and a preliminary injunction is therefore not appropriate.

II. Anticybersquatting Consumer Protection Act

The ACPA holds a person civilly liable who (1) has a "bad faith intent to profit from" a registered mark, and (2) registers or uses a domain name that is either identical or confusingly similar to the registered mark. 15 U.S.C. § 1125(d) (1) (A).

Defendant's argument as to how the "confusingly similar" prong of ACPA section 1125(d) is satisfied relies solely on its "likelihood of confusion" argument under the Lanham Act. In its reply papers, Defendant offers a single sentence asserting that the "confusingly similar" prong offers broader protection to trademark holders than does the "likelihood of confusion" test, but offers no further analysis on the topic. Because the Court has ruled that Defendant has not exhibited a probability of success of its argument that there is a likelihood of confusion between the parties' marks under the Lanham Act, it similarly rejects Defendant's contention that there is a likelihood that the marks will be found confusingly similar under the ACPA test.

Because the Court[*19] rules that Defendant is not likely to satisfy the second prong of section 1125(d)(1)(A) of the ACPA for the purpose of a preliminary injunction, analysis of the first prong's bad faith intent requirement is unnecessary. Moreover, even if Defendant could raise serious questions on the merits of its ACPA claim, it has not demonstrated that the balance of hardships tips sharply in its favor.
III. Unfair Competition Law

Defendant also argues that it is likely to prevail on the merits of its claim under California's Unfair Competition Law. However, Defendant offers no analysis relating to its Unfair Competition Law claim and does nothing more than refer to it in passing several times in its papers. The Court nevertheless addresses Defendant's probability of success on the merits of its Unfair Competition Law claim.

Under California Business and Professions Code section 17200, "unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice." The unfair competition law "embraces anything that can properly be called a business practice and that at the same time is forbidden by law." Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1135 (2003).[*20] In other words, section 17200 "borrows" violations from other laws and makes them independently actionable as unfair business practices. Id.

Defendant must therefore demonstrate a probability of success on its claim that Plaintiff has violated a law independent of the Unfair Competition Law before the State law claim will be triggered. Here, the Court has ruled that Defendant has not shown a probability that it will succeed on either its Lanham Act claim or its ACPA claim. Thus, Defendant has not demonstrated that it is likely it will prevail on its Unfair Competition Law claim. Furthermore, while Defendant has raised serious questions on the merits of at least its underlying Lanham Act claim, it has not shown that the balance of hardships tips sharply in its favor. A preliminary injunction is not appropriate based on this claim.

CONCLUSION

For the foregoing reasons, Defendant's motion for a preliminary injunction is DENIED.

IT IS SO ORDERED.

Dated: 11/9/04

CLAUDIA WILKEN

United States District Judge

What keeps you awake? Is it business risk?

2005-07-26T17:24:00.000-07:00

Sleeping well at night?

I am often counseling clients about risk. Much of the real risk in our business lives is not insurable. That is, the risk that a customer will buy our goods or services, is not insurable. Risks presented by a competitive marketplace however, can be insurable.

Today, I am talking to those of you who have:
* brands you care about
* web sites that promote your business, your products and your services
* customized, branded software you license

As we march off towards summer vacation, let me leave you with some thoughts that might help you sleep better:

1) "Advertising injury" coverage: Is it there at all? Unless your business is literally your surname, you should get out your Commercial General Liability policy and confirm that your policy includes coverage for "advertising injury." You should demand the whole policy from your insurance broker. The declarations page will not tell you this information. After you have discussed your coverage with counsel, come back when you have the definitions section of the policy that defines "advertising injury."

** If you do not have a policy or your policy does not have "advertising injury" coverage, you might consider asking your broker specifically for such a policy OR inquiring about a Cyberliability or Media Liability Policy.

2) Do you have at least five figures to fund your defense? No matter how "in the right you may be" defending against infringement will be costly. While insurance is no panacea, here are some sleep at night type benefits: Insurance may pay cost of defense, helps you protects your 'crown jewels', protects cash flow, reduces your initial pressure to settle.

3) Running naked Is it a sound business practice to build a brand and not insure it? If your insurance policy has coverage for "advertising injury" and you have confirmed the meaning of this coverage with counsel, coverage may mean the difference between defending yourself and giving up your brand without a fight. Without the insurance paying the lawyer to defend a claim of infringement of another's brand, most businesses simply cannot afford the six figures it may cost and will chose the path of least resistance.

4) Insurance is better than nothing Insurance, no matter how good, will not cover you if you use someone else's brand and lose a suit for infringement. No insurance policy will give you money for lost business, interruption from the law suit and most importantly DOES NOT compensate you if you lose and the other side attempts to get the profits you derived from using 'their' brand. You are on your own.

5) Counterclaims not usually covered If you bring suit, you may not be covered. Before brining suit, even if you are faced with a cease and desist letter from opposing counsel, find out when your coverage begins. If you file a counterclaim, most policies are 'defense' policies do not provide coverage (i.e. most do not pay attorneys' fees). Some patent insurance policies however cover counterclaims but impose a sublimit on attorneys' fees.

5) The devil is in the details You MUST know the answers to the following questions about your insurance regardless of the type of coverage. (a) What is included in "advertising injury" coverage? (b) Who is the 'named insured' on your policy? (c) Find out if territory exclusions mean that if you sell your product outside the territory and are sued for a sale occuring outside, you are not covered? (d) Do your agreements with customers/partners indemnify them for patent infringement? If so, do you have coverage? Might your customer/partner agree to limit your indemnity to insurance coverage? I do not know why this tact is not tried more often or why it would be an unreasonable position. (e) Right to appoint counsel?

6) Do you use independent contractors to do software development or design? You should confirm whether there is coverage in your policy for independent contractors and temp workers. An amendment to who is covered may be required.

7) What happens if you win> If you successful defend against an injunction, you should find what your policy says in terms of winning/losing. Most policies require the insured -- you hopefully -- to consent to settlement. If you win an award, many policies clearly require the insurance company to get back its defense costs first before you see any money.

I know many of these issues will make you anxious because you do not know the answers to these questions off the top of your head. If you've read this far though, hopefully you've at least pulled out your insurance policy or sent off an email to find out. Afterall, if your paying for insurance so you can manage risk, it makes sense to confirm your coverage. It may be too late if you wait until after you get a cease and desist letter.

Caveat : "Terms of policies vary. Please check your individual policies for these provisions and terms. The take away here is to see these issues. This is not meant to be legal advice but for your information only.

Some great law related blogs

2005-07-06T17:32:00.000-07:00

Know one knows everything. That is why we have the Internet and blogs. The below blogs are really worth checking out:
* Patrick's blog certainly hits the nail on the head in its title alone. (http://patricklamb.typepad.com/perfectservice/) Lawyers who do not think about customer service and how to continuously deliver excellent customer service are missing the boat and the clients should not put up with it.
* Patrick's blog sent me over to wiredgc.com. Some good insider discussions.http://www.wiredgc.com/

Japanese version of this blog

2005-06-27T15:27:00.000-07:00

Click on here for Japanese version

News Flash: GROKSTER-types could be liable UNANIMOUSLY HELD

2005-06-27T09:35:00.000-07:00

Sending the Grokster plaintiffs back to the District Court and reversing the 9th Circuit Court of Appeals, the Supreme's UNANIMOUSLY found that "One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, going beyond mere distribution with knowledge of third-party action, is liable for the resulting acts of infringement by third parties using the device, regardless of the device's lawful uses. Pp. 10-24."

Without reversing the famous Betamax v. Sony Decision, the Court found that Grokster and its peer-to-peer technology markedly different from the timeshifting technology of Betamax.

"Here, there has been no finding of any fair use and little beyond anecdotal evidence of noninfringing uses." "In sum, when the record in this case was developed, there was evidence that Grokster's and StreamCast's products were, and had been for some time, overwhelmingly used to infringe, ante, at 4-6; App. 434-439, 476-481, and that this infringement was the overwhelming source of revenue from the products, ante, at 8-9; 259 F. Supp. 2d, at 1043-1044"

Playing arm chair quarterback, reading how the majority tore at the declarations of those music groups and distributors that praised the technology for getting their music out there, the Grokster team underestimated the Court's scrutiny of these declarations.

More later.

106 Workshop: Achieving Aggressive Revenue Targets; By Invite Only February 24, 2005

2005-01-27T11:31:00.000-08:00

Successfully Defending Against Trademark Infringement Claims; Separately Quoted in Computerworld

2004-11-09T16:46:00.000-08:00

Jupiter Hosting Successful in Defending Against Injunction Click on the above title to download Court's order

Client's often ask the benefit of doing a search of a name before launching a new company or product. Businesses with a web presence (and who does not have one) often wonder whether a General Commercial Liability policy will cover them in the event they are sued based on their domain name or web site. Both questions can be definitively answered by todays Order by US District Court Judge Claudia Wilkens Denying Jupitermedia's Motion for Preliminary Injunction against Jupiter Hosting. Jupiter Hosting is represented by Gregory Rutchik. Co-counsel is Roy Gordet.

1) Trademarks in a Crowded Field are Weak. Our successful defense against this injunction was that we "provided substantial evidence that Defendants trademark is positioned in a crowded field." We were able to present literally hundreds of businesses that use the term JUPITER in either their entity name, product name or domain name. When the Court asked Juptiermedia, the movant, what they knew about these entities, they responded "not much." That certainly did not help them.

2) The Moving party must show real harm. It did not help Jupitemedia that they did not show that they suffered any harm between October 2001 and today as a result of the use by Jupiter Hosting of the domain name jupiterhosting.com

3) Special insurance offered by the likes of Media Pro for Cyberliability provide much more extensive coverage against a claim of injunctive relief arising from trademark infringement. In fact, had my client not obtained this coverage (brokered by Cal North Insurance www.calnorth.com) they would have had to foot the bill themselves without the support of a policy.

Blogs are great sources for discovery
In a related story, I was recently quoted by Computerworld « (Full Article) about the Legal Risks of Blogging. The bottom line is that whether you are litigating or preparing to do a deal with someone, you should scour the blogs. There is more often than not some great stuff in company blogs. Sometimes, a party denies something in their moving papers or to your face but sure enough the truth comes out in their blog. Blogs by CEO's of entities can be most damaging when they take an opposite position in their papers. I am all for blogs obviously but I caution companies to consider a policy broad enough to allow them to flourish but detailed enough to prevent your employees and consultants from making statements that are bound to come back and bite.

2004-09-29T22:22:00.000-07:00

Huge Sighs of Relief Heard By Adult Web Entrepreneurs (Click on Header to Download Case)

2004-06-29T09:04:00.000-07:00

Content Based Prohibition Sent To Trial

Today the Supreme Court affirmed (in a 5 to 4 vote) the unconstitutionality of COPA (Child Online Protection Act) because the statute -- likely violates the First Amendment. An injunction filed in Pennsylvania against COPA’s enactment is allowed to stand pending a full trial on the merits. Let's hope a jury in the Federal Trial court puts COPA down for good.

IN SUM: Blocking and filtering software are a 'less restrictive alternative' on speech at the 'receiving end, not universal restrictions at the source.' The Supreme Court found COPA’s effectiveness diminished not only because it’s requirements did not prevent minors from accessing 'foreign harmful materials' or tricking the system by providing their own credit cards to gain access here but also because it would simply move US providers of 'harmful material' overseas.

Had COPA stood, adults would have had to identify themselves or provide their credit card information to gain access to certain speech online. The seeping definitions of prohibited speech and activities under COPA are quite choaking. If COPA stands it would apply to 'material that is harmful to minors' defined as:

'any communication, picture, image, graphic image
file, article, recording, writing, or other matter of any
kind that is obscene or that—

(A) the average person, applying contemporary com-
munity standards, would find, taking the material as
a whole and with respect to minors, is designed to
appeal to, or is designed to pander to, the prurient
interest;

(B) depicts, describes, or represents, in a manner
patently offensive with respect to minors, an actual or
simulated sexual act or sexual contact, an actual or
simulated normal or perverted sexual act, or a lewd
exhibition of the genitals or post-pubescent female
breast; and

(C) taken as a whole, lacks serious literary, artistic,
political, or scientific value for minors.” §231(e)(6).

The focus of COPA is on those 'engaged in the business' of such material defined as:

'means that the person who makes a communication, or offers to make a communication, by means of the World Wide Web, that includes any material that is harmful to minors, devotes time, attention, or labor to such activities, as a regular course of such person’s trade or business.

COPA = Child Online Protection Act (COPA). 112 Stat. 2681–736, codified at 47 U. S. C. §231. The specific requirements are as follows:

'(A) by requiring use of a credit card, debit account,
adult access code, or adult personal identification
number;
(B) by accepting a digital certificate that verifies age,
or
(C) by any other reasonable measures that are feasi-
ble under available technology.' §231(c)(1).

In addition, Congress enacted 18 USCA 2252B which prohibits 'misleading Internet domain names to prevent Web site owners from disguising porn Web sites in a 'way likely to cause uninterested persons to visit them.' So do not think Congress is a one trick pony on this issue by any means.

This is the second trip to the US Supreme Court for COPA. In Ashcroft I, 535 US at 585, the US Supreme Court reversed a Third Circuit Court of Appeals finding that COPA’s 'community standards language rendered the statute unconstitutionally overbroad.' In that case, the Supreme Court in Ashcroft I limited their decision to a finding that the language 'did not, standing alone, make the statute unconstitutionally overbroad.' The case was sent back to the District Court. The Third Circuit again affirmed the District Court of Pennsylvania’s Injunction but this time concluded that the 'statute was not narrowly tailored to serve a compelling Government interest and was not the least restrictive means available… to serve the interest of preventing minors from using the Internet to gain access to materials that are harmful to them.' It was this second affirmation that landed COPA in the Supreme Court this time.

Justice Thomas’ earlier decision saved the day (A shocker!): This Court found comfort in an earlier decision. Quoting at page 12, 'The closest precedent on the general point is our decision in Playboy Entertainment Group. Playboy Entertainment Group, like this case, involved a content-based restriction designed to protect minors from viewing harmful materials. The choice was between a blanket speech restriction and a more specific technological solution that was available to parents who chose to implement it. 529 U. S., at 825. Absent a showing that the proposed less restrictive alternative would not be as effective, we concluded, the more restrictive option preferred by Congress could not survive strict scrutiny.' Quoting Justice Thomas’ concurring decision in Playboy: 'In the instant case, too, the Government has failed to show, at this point, that the proposed less restrictive alternative will be less effective. The reasoning of Playboy Entertainment Group, and the holdings and force of our precedents require us to affirm the preliminary injunction. To do otherwise would be to do less than the First Amendment commands. The starch in our constitutional standards cannot be sacrificed to accommodate the enforcement choices of the Government.' Id., at 830.

COPA is Congress’ second attempt to 'make the Internet safe' for minors by criminalizing certain Internet speech. See the Communications Decency Act of 1996. The CDA failed because CDA “it was not narrowly tailored to serve a compelling governmental interest and because less restrictive alternatives were available.'

Sandler Sales Meeting Minute; Selling vs. Negotiating

2004-06-16T17:45:00.000-07:00

Selling vs. Negotiating: (first in a 3 part series on pricing) (By Chip Doyle: <http://r.vresp.com/?ChipDoyle/de28404f69/197753/2427c641ee/87d9f91>)
I met with an HR executive at the beginning of the year who wanted to know how we trained salespeople in “negotiation.” After a little questioning, I was really struck by his misconception that their salespeople SHOULD be negotiating, which in layman’s terms is lowering price or offering some concession in exchange for a promise to buy.

Trusted advisors and top salespeople do everything they can to AVOID negotiating. Their job is to uncover the costs of the prospect’s problem and then to determine what budget is available to solve it BEFORE they propose a solution. The predominant problem many sales people have is that they simply aren’t comfortable talking about budget and cost impacts until the end of the sale. So they are forced to negotiate at the end, attempting to close the sale in spite of inadequate financial information.

Salespeople who rely on negotiation at the end of the sale usually exhibit these symptoms:
• Think that buying is primarily an intellectual process, not an emotional process
• Don’t understand the costs associated with the problem or what’s at stake financially (early in the sales process)
• Feel the product or service they sell is extremely expensive
• Are uncomfortable talking about other people’s finances

If you have salespeople that regularly require permission for a reduced price to get the sale or blame the competition’s price after losing the deal, look to the symptoms above to gain insight into the attitudes that drive these behaviors and outcomes. Understand, I’m not suggesting that top salespeople NEVER need to negotiate. The key is to differentiate the strong salespeople who rarely need to negotiate from the weak ones that must negotiate almost every time to close a sale.

Examine the beliefs and behaviors of your salespeople when dealing with money issues, so they can minimize the need to negotiate at the end and sell more, more often!

Good Selling!

Chip Doyle

Copyright 2004 Sandler Systems, Inc. All rights reserved.
To learn more, send an email to Chip Doyle with your sales problem and company address/phone to: info@train2improvesales.com

If you don’t sell for a living or manage salespeople and you really have no idea why you are receiving this email, then click on the words “Take me off this list” below. Please accept our apologies. If you know another executive who should receive this monthly email, please forward it. They will be added to our mailing list with their permission only. Take me off this list <http://unsub.vresp.com/u.html?156062e2ab/2427c641ee/87d9f91>

  This message was sent by Chip Doyle using VerticalResponse's iBuilder <http://www.verticalresponse.com/landing/?mm/156062e2ab> ®
   <http://www.verticalresponse.com/landing/?mm/156062e2ab>
   Sandler Sales Institute
Chip Doyle
3478 Buskirk #1000
Pleasant Hill CA 94523   Read <http://www.verticalresponse.com/content/pm_policy.html> the VerticalResponse marketing policy.

------ End of Forwarded Message

IBM the Defender of Open Source

2004-05-14T22:02:00.000-07:00

IBM the defender of Open Source!

(and the case of the Greek font)

SCO Grp, et al v. Intl Bus Mach Inc Filed: 03/25/03; US District Court; District of Utah Motion to Compel Hearing Dec 6, 2003

This case will have major implications for the software industry and investors alike. Many products now use and incorporate open source. How will it affect your competitive advantage?

Note: Open source has major implications for software. I realize that 'open source' might be too technical for some of my audience, but, for the software industry, it is the equivalent of the RIAA 's attack on music downloaders for the software industry with far broader implications. This case seeks to undo many of the new rules of software development. I’ve provided a basic primer on open source on the side to give you the buzz words.

OVERVIEW. Most know that SCO (aka Caldera) has sued IBM for allegedly “giving away or disclosing proprietary UNIX source code and methods” for external business purposes, such as to the Linux community. Caldera sued IBM for breach of contract, unfair competition, interference with contract and misappropriation of Utah’s trade secret law. IBM coutersued sued Caldera for, among other things, misrepresentation under the Lanham Act and Breach of the the GNU GPL. (See the Basic Primer on Open

WATCH OUT; HERECOMES THE SOFTWARE ENGINEERS.

In a show of force reminiscent of the Gladiators, the open-source community has come out against SCO. They have attacked SCO’s claims one by one using logical technical analysis. Clearly, SCO's counsel never took a basic course in open source or knew their approach would attract this wrath. This is one group you do not want as an enemy. The open-source community has picked apart every sentence of SCO’s complaint, including and a line-by-line attack on recent public statements about their claims to defend their movement (and to help IBM win this suit). Afterall, if SCO is successful in its attack on Linux, the open source movement is called into question. If Linux can be attacked by SCO, then all of the big and small software companies are at risk because Microsoft, Oracle, Sun and Novell (in addition to IBM) all use open-source and Linux. That is hardly the setback we need just when IT spending has begun to warm. Specifically, SCO alleges that:

(1) As a result of several acquisitions, it owns all rights to the UNIX and UnixWare operating systems. Caldera claims its rights include the copyrights and the right to enforce them in the use and distribution of UNIX by UNIX vendors such as IBM;
(2) Linux is materially based on UNIX source code, particularly Linux 2.4.x releases and the development kernel, Linux 2.5.x;
(3) IBM (and others) have improperly contributed SCO’s Unix intellectual property to the development of Linux, a free operating system;
(4) IBM has improperly distributed UNIX modifications such as UNIX System V source code by contributing code to Linux 2.4.x and 2.5.x because the latter are unauthorized derivatives of UNIX;
(5) And among other things has incorporated and has induced others to incorporate Caldera’s proprietary software into Linux open source software offerings.

To begin to enforce its rights, Caldera terminated IBM’s right to use or distribute any software based on UNIX System V or its own version of UNIX, known as “AIX,” as of June 13, 2003 unless it cured these breaches. Of course, IBM alleges that termination occured without proper notice of breach.

NOVELL RESPONSE. Although not a party in the lawsuit, Novell shot back almost immediately with a press release stating that SCO never acquired the copyrights it seeks to enforce.

IBM’S TWO-PRONGED DEFENSE/ATTACK:

(1) SCO HAS BREACHED THE GPL ITSELF. IBM has counterclaimed that SCO itself has breached the GPL. This appears to be the first such tactic as a defense in a case of this kind. IBM asserts that because SCO itself has a Linux product and released certain code under the GPL it agreed not to assert certain proprietary rights (such as the right to collect license fees) over code distributed by others under the GPL. Because SCO has done just that, it has breached the GPL (§5).

By breaching the GPL, IBM argues, SCO’s rights to distribute pursuant to the GPL have been terminated under §4. In their sixth counterclaim, IBM asserts that as a result of this breach, IBM and countless developers have suffered economic loss and are entitled to an award. The efficacy of this counterclaim is yet to play itself out as a matter of law. But it by invoking it, IBM has called in the open-source community as an ally and has levied their collective strength against SCO.

(2) SCO'S FAILED PROOF IBM’s basis defense appears to be that SCO cannot show that IBM released UNIX code into Linux. IBM argues that SCO has not presented the code because it is not there. Based on the two examples SCO has shown the public (but has not produced to IBM), SCO fails in its proof. A December 6 hearing will make the buck stop if the District Judge forces SCO to identify specifically the code it asserts IBM released into LINUX.

Specifically, in it’s recent motion to compel (11/6/03 filed; 12/6/03 hearing); IBM seeks to force SCO to identify specifically what source code SCO alleges IBM distributed into in Linux. SCO has not done so thus far. When SCO has identified the basis of its claim at a public software conference the example of code SCO identified was in fact other (non-SCO-related ) open source software.

A) SCO DOESN’T OWN BSF: “Theirs” Is not “There” During a now-public, August 2003, presentation SCO counsel and company presented their case that Linux is an unauthorized copy of SCO’s UNIX and that IBM is one of many alleged infringers. Quickly, the open source community turned SCO’s case upside down and identified that of the two examples SCO cited: “one isn't SCO's property at all, and the other is used in Linux under a valid license. If this is the best SCO has to offer, they will lose.” Specifically, in Slide 15 shown here below

SCO compares System V code (theirs) to the Linux Kernel Code to attempt to show one-for-one copying. SCO covered up “their” code by converting the original font into Greek characters (really!). The open source community quickly converted the Greek font back into the original and proved that the code SCO pointed to was not SCO’s at all. Rather, the code is from the well known internet firewall software known as the Berkeley Packet Filter (aka "BPF"). BPF was created at the Lawrence Berkeley Laboratory and funded by the US Gov. The open source community gorged SCO’s claim by showing that in a reversal of fortune, “SCO later copied the software into Unix System V.” (See Bruce P's analysis)

B) ANY CODE THAT TOUCHES UNIX IS OWNED BY SCO: EXAMPLES ARE NOT SCO OWNED

SCO alleges that it owns essentially all of the code in Linux that has been touched at all by IBM, SGI and other Unix licensees. SCO, it is said, argues that when it acquired Novell’s rights under an AT&T Agreement, SCO acquired the rights to all derivative works of UNIX (and thus Linux). It should be noted that the agreement itself does not have an ownership provision which clearly sets forth that AT&T (then licensor) retains rights to derivative works. That being said, the second sentence asserts that all derivative works are subject to the grant to use the SOFTWARE PRODUCT solely for internal business purpose. Under this line of thinking, it is unclear how IBM will assert that it owns the derivative works (aka Linux contributions).

SCO set this out in their slide 6:

SCO argues that derivatives such as RCU, NUMA JFS are all unauthorized derivatives of UNIX. But here is where they went wrong.

C) SCO DOES NOT OWN JFS. It is well known that SCO’s claim to own, or have rights to, JFS, IBM's Journaling File System, is in error. Bruce P adeptly points out that the JFS in Linux was originally developed for the OS/2 operating system, and was later ported to Linux. It doesn't share code with the JFS implementation in System V.

D) SCO DOES NOT OWN RCU (EITHER).

RCU or Read Copy Update, software that keeps processors in a multi-processor system from interfering with each other, was developed by Sequent, a company later purchased by IBM. It seems that, Sequent developed RCU under Dynix, a Unix-derived operating system. IBM later removed RCU from Dynix, separating it from any code owned by SCO, and added it to Linux. Similarly, SGI's XFS, the eXtent FileSystem, was separated from IRIX, a Unix-derived operating system, and ported to Linux.It will be interesting to see what SCO puts forward and whether the court will compel its production.

SCO will need a lot more ammo than what has shown thus far. For now, the GPL seems safe. Let us wait and see what the district court judge does on Deceber 6, 2003. What do you think?

More on Open Source; A Little History

2004-05-14T11:31:00.001-07:00

A LITTLE HISTORY: THE FIRST TEST OF GNU GPL

There was hope that the enforceability of GNU GPL would be fully tested by MySQL v. Progress Software (United States District Court; District of Massachusetts (Boston); CIVIL DOCKET FOR CASE #: 1:01-cv-11031-PBS). The court did find “the GNU GPL to be an enforceable and binding license” but did not grant MySQL a preliminary injunction on its copyright claim. [The parties ultimately settled their suit out of court].

Open Source Licenses. There are three major license regimes at work in the open source movement: Apache and the BSD; GNU General Public License (GPL) and the GNU Lesser General Public License (LGPL). The full GPL license terms can be found at http://www.gnu.org/licenses/licenses.html#GPL. Click here for info on other regimes.

GPL. The GPL, at work in the SCO v. IBM case requires

(i) NO restrictions on execution (use);

(ii) The FREE redistribution of the source code of any product that falls within its terms;

(iii) no fee (although you can charge for selling a CD with the code on it);

(iv) Licensor of source code must give license to any related patents, and a disclaimer of warranty and limitation of liabilities is required; and

(v) Attribution that the code is subject to the GNU GPL.

GPL vs. LGPL. The GPL does not permit incorporating your program into proprietary programs. If your code is a subroutine library, you may consider it more useful to permit linking proprietary applications with the library. If this is what you want to do, use the GNU Lesser General Public License instead of using the GPL.

LGPL applies to certain specially designated software packages--typically libraries--of the Free Software Foundation and other authors who decide to use it. As stated in the preamble to the LGPL, for example, on rare occasions, there may be a special need to encourage the widest possible use of a certain library, so that it becomes a de-facto standard. To achieve this, non-free programs must be allowed to use the library. A more frequent case is that a free library does the same job as widely used non-free libraries. In this case, there is little to gain by limiting the free library to free software only, so we use the Lesser General Public License. In other cases, permission to use a particular library in non-free programs enables a greater number of people to use a large body of free software. For example, permission to use the GNU C Library in non-free programs enables many more people to use the whole GNU operating system, as well as its variant, the GNU/Linux operating system.

Linking to libraries.
When a program is linked with a library, whether statically or using a shared library, the combination of the two, is legally speaking, a combined work, a derivative of the original library. The ordinary GPL therefore permits such linking only if the entire combination fits its criteria of freedom. The Lesser General Public License permits more lax criteria for linking other code with the library.

KEY TAKE AWAYS OF GPL
(1) Is your code a "Program" under GPL?

If it is a Program, and you release your Program to the public (ala software license or software product), you must release the source code of your Program. That means you must release the source code and although you can sell the code for a price, your business model has sifted significantly from Microsoft-type (low marginal cost/no competitors) to Novell’s Linux (low cost/low revenues/many competitors).

Your code is a Program and subject to the GPL if:
(1) It is a copy of GPL code; OR
(2) A"work based on the Program," meaning either the Program or any derivative work under copyright law: that is to say, it is a work containing the Program or a portion of it, either verbatim or with modifications and/or translated into another language.

You MUST release your modified GPL code under the GNU GPL terms ONLY if you release it to the public.

So, if you keep your modified code to your self, you can use it privately. For example, many companies offer services that run off a modified version. Running the service and not releasing the code as a product allows the service company to maintain certain rights in their modifications.

(1) Two Separate programs (little p program) = GPL not required for your code.

Mere aggregation vs. combining two modules in one program.

Mere aggregation ok. If you merely put your code side by side on the same CD-ROM or hard disk with GPL code you have copied, your code is not then subject to the GPL (and you do not have to provide the source code for release). If the two sets of code are separate programs and not parts of a single program, the mere aggregation has no effect on the other program.

Pipes, pipes, sockets and command-line arguments. If used for communication between two separate programs the mere aggregation (placing your code next to GPL code) does not make your code GPL. BUT, if the semantics of the communication show an exchange of complex internal data structures, one could argue the two parts are combined into a larger program (meaning that the whole thing is GPL).

(2) Two Programs in ONE = GPL required:
one bad apple spoils a whole bunch of code.

Combing two modules maybe not be ok. If your code is connected together with some GPL covered code so that they form a single larger program, then the whole combination must also be released under the GPL. And, to use their words, if you can't, or won't, do that, you may not combine them.

Combing two parts depends on the mechanism of communication (exec, pipes, rpc, function calls within a shared address space, etc.) and the semantics of the communication (what kinds of information are interchanged).

For example,
Same executable = definitely combined in one program.

Modules designed to run linked = almost surely means combining them into one program (e.g., bad).

Open source primer

2004-05-14T11:31:00.000-07:00

Open Source Basic Primer

Open source is a reference to software (in source code form) that is available for use, modification and distribution under several specific community-based rules (aka license regimes) designed to ensure that anyone can benefit from modifications and enhancements to the software. Open source regimes are in contrast to private, closed software license regimes like the one that comes with Microsoft products or freeware (where no rules exist at all). One of the most well-known open source regimes is the GNU regime. Open source is not, however, software with no rules and it is not public domain.

Warning: The most obvious implication is that if your software product is considered a derivative work of the GPL, then you MUST release the source code (with some exceptions). This could be a bad thing. Is your code a merely aggregated with GPL code or combined with the code? (See below) Derivative works include: (i) incorporating GPL code into your proprietary code so that it becomes one (I call this the cut and paste); (ii) interacting with GPL code through dynamic calls so that your code is combined with the the GPL code. Linking with non GPL code has specific implications.

Examples. The most spoken-about open source product is Linux, which is used as the operating system on approximately 25% of the server computers in use. Apache, which represents at least 60% of the market for web servers, is the open source operating system of choice due to its stability. Also-rans are PERL and Mozilla, the parent code of what we all know as the Internet browser.

Identifying and AVOIDING problematic disputes

2004-05-14T11:24:00.000-07:00

Identify and Deal with Problematic Business Relations (or Prepare to Litigate) Business relationships are like gardens, they take planning to work, require care and often must be weeded or repaired. Sales people tout that 90% of your future revenues will derive from your existing customers so one should do a better job communicating with existing customers for new business. The same may be said about risk. More risk exists from your existing relationships than from the likelihood that some third-party will raise a dispute.

Action Plan: Few ever think of having a plan in the event things with a customer, supplier or partner show signs of a problem. We can all easily point to the signs -- instantly returned emails yesterday go unanswered for an odd amount of time, the tone of their voice changes, new people show up being ccd, hesitations appear everywhere. We all depend on others to run our business and problems are inevitable. Talk internally about an action plan in the event a problem arises. Do not wait until it becomes a dispute.

1) Problem owners. Identify the key person in your organization that should own customer, partner, supplier organizations. Teach active listening in your company. I attended a most useful training that focused on non-verbal communication. Identify a small chain of people internally that should provide input, information and contribute to a decision about problems. The goal should almost always be to diffuse them. If you can empower your most-customer facing employee to resolve simple issues do it. There is no better feeling on the basic level when the customer service representative says "I am sorry for the trouble, I would like to offer you a credit of that fee." You know as a customer what good customer service feels like. Use those experiences as your guide.

2) Solve easy problems quickly. You are running a business, you are not running a litigation practice (leave that to me). Identify easy problems quickly and solve them. The message should almost always be, "we are sorry about what happened and we want to work with you, let us look at how to fix it." Naive you say? I beg to differ. Ownership if problems is the quickest way to avoid a dispute. I am not advising you to take responsibility or to accept blame where it is not due (or to take it at all). I am asking you to connect with your customer, partner, supplier on a human level. Remember, these are disputes with entities and people with whom you chose to do business. Of course, as we do business we often learn that the relationship is not perfect. Breathe. Identify the simple problems and get rid of them. There are more important things to do on your to do list!

3) The difficult balance. When a customers server goes down on your watch there is a difficult balance between repairing the problem and documenting caused the crash. If you plan now about how to set those priorities, both goals can be accomplished.

4) Know when to change gears. Things get bad quickly so do not be caught unprepared. Read the signs and prepare yourself and your organization. How will you document damages? How will they? Do you have a document retention policy? How should you talk about disputes over email internally as they brew? How about instant messaging technologies? Do your customer facing employees use them with customers and if so, what types of things should and should not be said?

Grokster Wins One for the ISPs

2004-05-14T11:23:00.000-07:00

Grokster wins one for the ISPs. The current version of Grokster does not "contributorily infringe"! so said the US District Court for the Central District of California in Metro-Goldwyn v. Grokster (April 25, 2003).

Generally, contributory copyright infringement requires one to demonstrate that an entity-s end-users are themselves engaged in direct copyright infringement (valid copyright plus access plus substantial similarity to the protected work ). The target of a suit for contributory infringement must be shown to have "knowledge of the infringing activity" or "that they induced, caused or materially contributed to the infringing conduct of another."

While individuals are not off the hook, this decision gives ISPs and content providers a clearer road map to stay out of harms way. Individuals must still pause before late night downloads. Verizon and the RIAA have not given up on their subpoenas of individual infringers. (See In Re: Verizon) In fact, the court in Grockster found that some end-users (aka individuals) could be direct infringers.

Content providers and ISPs however can breath a bit easier -- they can only be held to contributorily infringe if whether actual knowledge of specific infringement accrues at a time "when either Defendant materially contributes to the alleged infringement, and can therefore do something about it." Peer-to-peer providers should study this decision as a road map to avoid or limit liability.

Content owners beware! Because of Grokster, it will be harder to nail down the modern-day copying machine that spits out infringing copies at no cost. Copyright owners will have a more difficult time obtaining a TRO and preliminary injunction on the basis of contributory infringement. And going after each individual infringer is not an economical option. Photographers, authors, on-line software distributors must take extra steps to prevent and document the direct involvement of the ISP in the infringing activity. Although a copyright notice is not required for protection, watermark technologies should be evaluated. How will you track your content?

Napster, for example, materially contributed to the infringement because “without the support services defendant provides, Napster users could not find and download the music they want with the ease of which defendant boasts.” The Napster test likened Naptser to a swap meet. When reviewing your liability are you merely a passive conduit or:

Practice Points - Do you provide other services, like parking (virtual or physical), space, advertising, and clientele with the content you serve? Napster did. Napster, Inc. fell afoul because it "supplied the proprietary software, search engine, servers, and means of establishing a connection between users’ computers.” Or are you more like Grokster?

Grokster:

(i) has no access to the source code for the FastTrack software application and cannot alter it; and

(ii) does not operate a central file-sharing network but rather uses "super nodes."

What makes Grokster different is the use and connection of preset with a list of “root supernodes,” each of which functions principally to connect users to the network by directing them to active supernodes." While Napster was in control of the connection, "when users search for and initiate transfers of files using the Grokster client, they do so without any information being transmitted to or through any computers owned or controlled by Grokster."

Reality of Music and the Web. The record industry is going to miss the point if they have not already. Two things must be worked out to forever relegate the CD to the path of shuttered Wherehouse music: empowered artists and the technology to deliver high quality digital downloads. Apples Music Store has solved the second quite elegantly. I have bought more music there than I ever bought at Tower Records. Artists have always known that they were getting ripped off by the records company deal. Empowered artists doing Internet only distribution will make money, please fans and change the industry forever. I for one can not wait. What do you think? Let me know.

Branding: Search before you use

2004-05-14T10:55:00.002-07:00

Branding: Search before you name.

All products and services are not created equal. Some products and services aspire to be brands that distinguish themselves in the market place. Brands that are trademarks and service marks can give their owners the right to prevent others from using such brands to peddle their goods in addition to attracting more customers. The owner gets this right as they use the mark. Once registered, it turns into a powerful weapon in the arsenal of the brand strategy.

For little money, you can set a strategy in motion to create a distinctive brand for your new product or service. There are many steps in a branding campaign but one of them might be creating a good trademark or service mark. As you know, a trademark and service mark are protectable words, logos, slogans that distinguish your good (trademark) or service (servicemark) from others in the market. One of the simplest steps in creating a brand is to determine whether it is descriptive of the goods or services. Does your proposed mark describe (one or more) ingredient, quality, characteristic, function, feature, purpose or use of the specified goods or services? If yes, there may be a problem in obtaining a trademark or service mark. One more thing: do a quick search on the US Patent and Trademark site to see if there is a prior registrant to your mark: Search US Trademark office

Using NDAs: Protecting your crown jewels

2004-05-14T10:55:00.000-07:00

Non-disclosure Agreements: When to use them.

Clients often ask when a non-disclosure agreement (aka nda) should be used. A NDA is not always appropriate for the first meeting. First, it might be overkill at the starting point of your conversation. Second, you must be clear about why you would use an nda. Understand what you or your client NEED to protect (and to communicate first to move forward) and then devise a strategy to protect it. Do you know what you consider your business crown jewels?

One rule of thumb can help. If you derive an advantage from the information, the design, the code, the description, combing two elements together (sugar and carbonated water), then it could be worth protecting. Let us leave aside for a moment whether what you seek to protect is proprietary and just operate on the premise that what is worth protecting should be kept confidential. Powerpoints, written descriptions, oral presentation should all be tailored along the basic rule of disclosure: only disclose what is absolutely necessary to move things forward. If what you absolutely must disclose is a basis for your competitive advantage, then a nda could be appropriate. If the other side thrusts a non-disclosure upon you when you arrive, you might quickly re-tailor your presentation to tell them as little as possible until you have had time to go over the document and the benefits of disclosing to them. As an aside, be prepared for when you go to the Yahoos of the world and their sign in sheet has a non-disclosure attached. Read what you sign! We will cover this instance in a later 106.

NDAs are Contracts. If you disclose what you determine should be treated as confidential by the other side, you might send an email confirming to them that the discussion was confidential. Counsel will be helpful to determine how to handle that situation and what form of non-disclosure agreement you might send off. As you know, non-disclosures are contracts and as they may be the first agreement between your entity and the other party, they should be given careful thought.

If you have not already, take your non-disclosure out (if you have one) and make sure that you can answer the following questions. Not only will it help you determine whether you need to use an nda in a discussion but you can explain yours should your counterpart raise an issue.

Things to think about:
1. what types of information does it cover and is the definition of confidential information broad? (make sure it covers what you generally would disclose);
2. does it cover information disclosed orally as well as in writing?
3. whether it cover information you disclose as well as information disclosed by others;
4. must you mark or clearly identify information to be confidential;
5. whether the agreement limits your use and the use of the other party only to evaluating a relationship or some other use;
6. What other restrictions to disclosure exist? (for example, you can only disclose to employees with a need to know and who have signed a confidentiality agreement)
7. whether the agreement prohibits your disclosure to consultants (if you use consultants on most jobs this could be a problem);
8. when is information not considered confidential under the agreement;
9. is there a term when your obligation and/or their obligation to keep information confidential ends?

If you do not have a form non-disclosure, you might want to have one handy. Let us know if you would like to sign up for the next course on understanding an NDA.

Acquiring Web Based Businesses

2004-05-14T10:47:00.000-07:00

Acquiring a web based business:
From Term sheet to Closed deal (Part One)

One of the most important aspects of any acquisition is understanding the assets that you wish to acquire. This obvious concept is often overlooked. Two important assets in an Internet based acquisition tend to be email addresses and web based content. Ultimately, the goal of this exercise will be to determine value. If these assets are not clearly documented and understood, their value and the value of the acquisition could be shifted downward. In addition, without understanding the potential issues raised by these types of assets, the acquiring party could be in for a pandoras box of problems and liabilities.

Email addresses. One might recall the difficulty that Toysmart http://www.thestandard.com/article/display/0,1151,16718,00.html had in selling its assets when several states Attorneys General enjoined the sale due to a violation of their privacy policy. Notwithstanding that experience, most privacy policies still say the same thing Toysmart said about personal information: We do not sell, rent, loan or transfer any personal information regarding our customers or their kids to any unrelated third parties. It was this exact language that caused the problem. In addition, state Attorneys General were concerned that Toysmart would sell confidential financial information about its users without their consent. Many companies have ran into this problem for all kinds of reasons you should/could avoid: http://www.cnn.com/2000/TECH/computing/10/27/online.privacy.idg

Get consent. Although solutions often depend on state law and on the other terms in your privacy policy, one major step forward is an explicit consent in your privacy policy to allow the sale of information provided by a user in the event of a sale.

Ex) http://privacy.yahoo.com/privacy/us/ysearch
We transfer information about you if Yahoo! is acquired by or merged with another company. In this event, Yahoo! will notify you before information about you is transferred and becomes subject to a different privacy policy.

An acquiring entity should have the consent of each individual whose email address to be acquired prior to taking title. Often, users are asked to consent to the terms of the new privacy policy sent as part of their normal email correspondence with users. Of course, check to make sure that the current terms allow for modification.

Web based content. Images, text, sound, video assets on the Internet are really no different because they were created on the web. For every online asset , make sure the target company or entity has the right to sell that asset. In a recent Gamer related acquisition we did, the target company hired a consultant to develop a web site specific to a particular on-line game. In turn the consultant hosted the site and asked users to contribute mods (e.g. modifications) to the games in the form of images, sound and code scripts. Without a written agreement between the consultant and the target, the target company cannot own the rights necessary to sell the web site to an acquirer. Without an agreement between users of the site and either the consultant (if he owns the site) or the target, the target company will not own the rights to the contributions from the users. You may hear lawyers talk about chain of title to describe this issue. Make sure that for each asset you seek to acquire, you can document the chain of title from the creator to the party selling the asset. Otherwise, you are apt to buy the Brooklyn Bridge.

UCC searches. For about $120, you can order a search of liens on the assets which you seek to acquire. Companies like CSC.com can run the search in a day or so. Not only is it important to understand that the targeted assets are free and clear but UCC searches and searches of litigation help you to know as much about the target company. Spend your resources wisely.