(April through July 2010)

This 4-part series begins with a seminar on identifying the categories of intellectual property in a small business.  The first step in developing a strong intellectual property portfolio is to review what you have, or what you can develop.  Then you can find the best way to protect it.  This seminar will cover each basic area of intellectual property by starting at the earliest stage – the idea.  Specific intellectual property topics will be covered in three subsequent seminars.  To register for the seminars please contact us at events@smhllaw.com.

Intellectual Property Part 1:  Identifying Your Intellectual Property,  April 26, 2010.

Intellectual Property Part 2:   Introduction to Patents for Inventors and Entrepreneurs, May 17, 2010.

Intellectual Property Part 3:   Copyright and Copyright Registrations, June 21, 2010.

Intellectual Property Part 4:  Developing, Defending and Enforcing  Your Brand, July 2010.  Date TBD.

Research and Development generally occurs in areas in which there is a demand or where demand can be created.  Pharmaceutical development has traditionally followed this axiom with pharmaceutical companies pursuing development of drugs to treat common conditions such as high cholesterol, pulmonary embolism, arthritis, gastric reflux, hypertension and allergies.  Cholesterol lowering statins alone generated $16 billion in U.S. sales in 2005[1].  However, due to the increased presence of generics, the expiration of patents, advances in genomics and proteomics and the development of personalized medicine, the research and development focus is changing.  Pharmaceutical companies have become increasingly interested in a much smaller market, a market that is expected to reach an annual rate of $81.8 billion globally by 2011[2]. 

            Tax credits, government grants, market exclusivity and fee waivers have helped to drive this market.  Federal recognition of pharmaceuticals in this market has developed into an early-stage regulatory concurrence that can increase investor interest creating more funding opportunities, even in a down economy, and increasing the interest of big pharmaceutical companies in an area that for a long time received little interest and little funding.  In 2009, Pfizer, GlaxoSmithKline, and Novartis each either licensed or received approval for pharmaceuticals in this market, treatment of orphan diseases. 

An orphan disease is a condition affecting a small number of people.  In the U.S., it is defined as affecting fewer than 200,000 residents.  In the European Union, it is defined as affecting not more than 5 in 10,000 individuals in the Community and in Japan as affecting fewer than 4 in 10,000 individuals.  However, there are approximately 7,000 rare diseases affecting approximately 25 million people in the U.S. and 30 million people in the European Union[3] alone.   Global sales of orphan drugs reached 58.7 billion in 2006, up from $54.5 billion in 2005[4].  Several orphan drugs have reached blockbuster status, generating more than $1 billion in revenue annually.  Orphan drugs can also be re-introduced to treat non-orphan diseases, increasing their market potential.

Orphan drug designation requires that the drug be for the treatment of a disease that affects a small number of people and that there is more than theoretical rationale for belief that the drug has promise for treating the orphan disease.  In the 10 years prior to the passage of the Orphan Drug Act of 1983, ten drugs that fall under the definition of an orphan drug were approved for sale.  In the ten years following the passage of the Act, 612 drugs were designated orphan drugs and 99 received market approval.  In 2009, 159 drugs currently under development were designated orphan drugs and 17 received market approval.

The U.S. Orphan Drug Act of 1983 (P.L. 97-414, as amended) provides incentives for the development of these drugs including tax credits, marketing incentives, extended protection and grants.  The European Union has similar legislation under Regulation 141/2000/EC on orphan medicinal products (Orphan Regulation), which provides for fee waivers, community marketing authorization, extended protection and protocol assistance.   In an effort to reduce costs to manufacturers, the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMEA) agreed in 2007 to use a common application process for determination of orphan drug status. 

            There is also specialized funding earmarked for orphan disease research.  The NIH announced a second phase of funding for the Rare Diseases Clinical Research Network (RDCRN) in October of 2009.  Funds totaling more than $117 million are to be distributed over the next five years to 19 research consortia and a Data Management Coordinating Center.[5]  Grants are also available through the National Organization for Rare Diseases (NORD).  The NIH additionally provided $672 million in funding through its SBIR/STTR (Small Business Innovation Research/Small Business Technology Transfer) programs in 2009 and will again provide 2.7% of its extramural set-asides for R& D to the SBIR/STTR programs in 2010.

The annual budget under the Federal Orphan Grants program is currently $14 million.  Grants are for up to $200,000 or up to $400,000 in total (direct plus indirect) costs per year for up to 4 years.  A fourth year of funding is available for phase 2 or 3 clinical studies.  For fiscal year 2011, the application receipt date for Federal Orphan Grants is February 3, 2010[6]. 

Orphan drug designations will continue to fuel new drug development, licensing, acquisitions and mergers leading to increased opportunities in a previously neglected area of drug development.  Candidate funding is available at multiple levels, from seed money for academic scientists to grants for clinical testing.  Application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product.  To help with the application process, the FDA is launching an orphan drug workshop series for those who have developed at least one candidate drug.  The workshop will be in Claremont, CA in February 2010 and Minneapolis, MN in August 2010.  For more information on the FDA application process, protecting or licensing your product, please contact Swider Medeiros Haver LLP for further information.

[1] Steven Findlay. The Statin Drugs, Prescription and Price Trends October 2005 to December 2006, Consumer Reports Best Buy Drugs (February 2007).

[2] Syamala Ariyanchira Global Markets for Orphan Drugs, BCC Research Report ID:PHM038B (September 2007), available at http://www.bccresearch.com/report/PHM038B.html. 

[3] Eurodis Rare Diseases: understanding this Public Health Priority, ” citing Background Paper on Orphan Diseases for “WHO Report on Priority Medicines for Europe and the World,” (7 October 2004), Eurordis, November 2005 available at http://www.eurordis.org/IMG/pdf/princeps_document-EN.pdf. 

[4] Syamala Ariyanchira Global Markets for Orphan Drugs, BCC Research Report ID:PHM038B, Published: September 2007, available at http://www.bccresearch.com/report/PHM038B.html.

[5] http://www.nih.gov/news/health/oct2009/od-05.htm

[6] http://www.fda.gov/ForIndustry/DevelopingProductsforRareDiseasesConditions/default.htm

 1.0  INTRODUCTION

 Online sales of music will likely surpass physical sales in the next few years, if not much sooner.  There are a variety of royalties that may be associated with online music distribution.  Online music distribution involves multiple rights, and the type(s) (and amount) of royalties that are typically payable necessarily depend on which rights are invoked by applicable online use.

As a starting point, the Copyright Act distinguishes the copyright in a sound recording from the copyright in a musical composition.  It is important to keep this distinction in mind in analyzing the various types of royalties that may be payable for online uses of music.  It is entirely possible for the copyright in a sound recording to be owned by a person or entity that differs from the person or entity owning the copyright in the underlying musical composition.  For example, for major releases, the sound recording copyrights are typically owned by the record label, while the copyrights to the underlying musical compositions are typically owned by a music publishing company.  However, as online distribution has given artists the tools for self-publication, many artists retain ownership of both their sound recordings and their musical compositions, choosing to use a digital distributor (such as IODA or CD Baby) to administrate the digital rights to their content.

 2.0   SOUND RECORDINGS

             The Copyright Act provides a limited public performance right in sound recordings. [1]  This means that the sound recording copyright holder has the exclusive right to public perform their sound recordings online.  One exception to this exclusivity, however, is the statutory (or “compulsory”) license for certain qualifying non-interactive streaming transmissions. [2]  Where a statutory license is available, the potential licensee need not ask for permission from the applicable copyright holder (though the licensee would need to comply with the statutory requirements and restrictions for the use of the music).  The statutory license for non-interactive streaming is commonly used by webcasters/internet radio service providers, who pay sound recording performance royalties to SoundExchange, a performance rights organization that collects royalties for statutory non-interactive streaming.  For other online performances (e.g., “on demand” streaming), sound recording performance licenses must be obtained from the copyright holder or their agent (such as a digital distributor), and royalties are paid directly to the copyright holder (or the agent).  Sound recording copyright holders are also entitled to royalties for digital copies (e.g., downloads) of their recordings.  These royalties are usually paid to the copyright holder, though for many independent artists, they often first flow through a digital distributor. 

 3.0.  MUSICIAL COMPOSITIONS

             For online uses that implicate the public performance right, a separate performance license is also required for the musical composition embodied in the applicable recording.  Performance rights (other than so-called “dramatic” or “grand” rights) in musical compositions are typically administered by performing rights organizations. [3]  For the public performance of musical compositions online (e.g., streaming), licenses are typically be obtained from (and corresponding royalties are paid to) the applicable performing rights organization. 

          The sale of permanent downloads implicates reproduction and distribution (“mechanical”) rights.  These rights may be obtained via (a) a direct license with the music publisher, (b) a statutory license (where available) pursuant to 17 USC § 115, or (c) a mechanical license issued by the Harry Fox Agency[4].  This type of license is also required for certain other online uses of musical compositions (e.g., ringtones, limited downloads, and on-demand streams).  Mechanical royalties are paid to the copyright holder or their agent, depending on the relevant arrangement. 

 4.0  CONCLUSION

             While there are a variety of specific types of online royalties, these royalties may be also be lumped together in a single payment.  For example, if an artist receives a payment from their digital distributor in respect of download sales, then, pursuant to the artist’s digital distribution agreement, the royalty payment would typically be inclusive of “record royalties” for the recording and “mechanical” royalties for the applicable musical composition. However, for certain online uses the artist may also be entitled to other royalties from third parties.  For this reason, artists should consider affiliating with SoundExchange as well as a PRO. 

[2] 17 U.S.C. § 114(d)(2)

[3] The Performing Rights Organizations that represent performance rights for musical compositions in the  United States are ASCAP, BMI, and SESAC.  These organizations also have reciprocal arrangements with PROs in other territories that allow for the collection of performance royalties for uses abroad.

[4] Note that Harry Fox mechanical licenses are a “variation” on the compulsory license (and, accordingly, are not private contracts).

Computer & Internet Law Section 

Dear Computer & Internet Law, Business Law and Intellectual Property Section members;

Computer & Internet Law Section

Luncheon CLE – Thursday, January 21, 2010, 12 – 1 p.m.

Targeting or Targeted: Mapping the Technology Landmines

Luncheon CLEs at Kell’s are back.  After an end-of-the-year hiatus, the Computer and Internet Law Section is pleased to be hosting Martin Medeiros, a partner at Swider Medeiros Haver LLP, who will present on technology merger and acquisition issues.  Technology merger and acquisition activity is slowly ticking upward based, perhaps, on the perception that we are past the bottom of the current recession.  As technology companies look for merger targets or ready themselves for sale as a target, counsel will encounter questions involving the intellectual property hygiene of a company’s owned, licensed or “otherwise acquired” technology.

During the due diligence phase, exposure of a company’s legal issues, particularly as they relate to intellectual property protection, can rapidly change the company’s valuation. On the seller-side, such surprises compromise your client’s negotiating position and obligations to equity holders and others.  On the buyer-side, such surprises may substantially alter the deal and are often deal breakers.  This presentation proceeds from a seller-side, before-the-fact, advisory perspective.  However, the material covered forms a great “watch list” for the potential buyer.

Learn the dangers that can impact the value of technology companies in this informative presentation.

Martin Medeiros is a partner at Swider Medeiros Haver LLP, an intellectual property and business law firm.  Mr. Medeiros is a past chair of the Oregon State Bar Computer and Internet Law Section, an executive committee member of the Oregon Law Institute, and is admitted to the U.S. Federal District Court for Oregon.  Mr. Medeiros is a member of the Oregon and Washington Bar Associations.

When: Thursday, January 21, 2010, 12 – 1 p.m.

Where: Kell’s Irish Restaurant & Pub, 112 SW 2nd Ave, Portland, OR 97204

 (503) 227-4057  (503) 227-4057

 Cost: $22 for CILS members; $27 for other bar members and non-lawyers;

$17 for students or recent bar admittees. This cost includes lunch.

 MCLE Credit: CILS will apply for one (1) general CLE credit

 Registration: E-mail your information to cils.cle@gmail.com and pay at the door, or mail a hardcopy of the following form with payment to:

CILS – CLE

c/o Karen Dana Oster

Law Office of Karen Dana Oster LLC
PMB 506
16869 SW 65th Ave
Lake Oswego OR  97035

Please make checks payable to “Oregon State Bar.”

Computer & Internet Law Section

Luncheon CLE - Thursday, January 21, 2010, 12 - 1 p.m.

Targeting or Targeted: Mapping the Technology Landmintes

Name:_______________________________________ OSB#:_______________

CILS member? Yes/No         Student? Yes/No        

Amount Paid/Due: $____________

Name:_______________________________________ OSB#:_______________

CILS member? Yes/No         Student? Yes/No        

Amount Paid/Due: $____________

Name:_______________________________________ OSB#:_______________

CILS member? Yes/No         Student? Yes/No        

Amount Paid/Due: $____________

  ]]> http://www.smhllaw.com/2010/01/15/form-for-cle-luncheon/feed/ 0 http://www.smhllaw.com/2009/11/30/social-media-public-private/ http://www.smhllaw.com/2009/11/30/social-media-public-private/#comments Mon, 30 Nov 2009 22:43:39 +0000 martin http://www.smhllaw.com/?p=306  

By Martin Medeiros

The United States of America established a government to “form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.”[1] So, where in the Constitution of the United States do we fit in “public outreach … communicate with citizens… encourage feedback,” as the new federal government 2.0 guidelines mention as a primary goal[2]?  And who should large private institutions, government and private sector lawyers, and institutional employees “friend” on Facebook to meet this and other iconic goals?  The answers: nowhere and everywhere; nobody and everybody.

The so called Web 2.0, which goes beyond the information utility and infrastructure of the internet to arrive at human networks and community, has brought great change in our society: the disruption, if not marginalization, of the traditional print periodicals; a growing importance in intellectual property; and the rapid efficiency of information flow.  But, it also has complexities that must be attended to and not overlooked by its ease of use and entertaining value.  The most promising offspring of Web 2.0 is the so called “social media.”  Consider a working definition of social media as any web presence that relies on a community of users as a primary operating function, and for content creation and communication.  There are a number of examples, such as Scribd.com, Facebook.com, venturemash.net, Twitter.com, Linked-In.com, etc.  Observing and working with this media can be entertaining for everyone, including public servants, attorneys, scientists, educators and everyone else. However, the attorneys who serve the interest of the large institution must readdress the solemnity of their office and appreciate the risks in misuse of this powerful media, the whole story for which will not be fully written for years to come.

Recent changes in social media have presented certain fact patterns that neither our founders nor today’s government lawyers know how to easily deal with.  Social media has become a great allocator of information, commonality, and may be a vehicle to “establish justice” or “promote the general Welfare.”[3]  However, several governmental units have discovered the capacity of social media to do the opposite of these seminal directives.  In the cross fire are large institutions that may contract or be heavily regulated.  Moreover as commercial operations such as YouTube, Facebook, MySpace, LinkedIn, Wikipedia, Twitter, RSS feeds, and Second Life have triggered multiple disputes in tort, contract, public meetings, and judicial and legislative issues, both attorneys and the larger commercial community must recognize that the laws still apply.  The only difference is the fact pattern. 

1.0         What is in a Social Media Idea?

Ultimately, social media is about sharing ideas, but ideas in and of themselves may be neither valuable nor enforceable as a legal right.  A few considerations include speech and property.

1.1          Free Speech.  The Internet has been a great engine of free speech, found within the First Amendment to the United States Constitution.  However, if your institution is public or in certain heavily regulated industries, moderating any social media outlet may restrict speech and thus be subject to the rigors of this Amendment, which can be exceedingly complex.  For example, if any restriction occurs, then it may be judicially scrutinized to determine whether the time, the place, and the manner of the restriction are reasonable.  Also, you may be contractually bound by the organization’s charter, articles, bylaws, operating agreement contract if the organization has some sort of social charter or other governance restriction.  This is an increasing phenomenon in the so-called “social enterprises.”

1.2          Accidental Intellectual Property.  Intellectual property may be created, and potentially alienated, in social networking sites without the parties knowing what form of intellectual property they are creating.  Accidental here means “without knowledge of the law,” not necessarily without the intent to form such property. 

Accidental creation generally occurs in copyright or trademark:

(i)                Copyright. A copyright is created automatically upon the affixation of original works of authorship of expressive content in a tangible medium.  This could potentially be anything you write down. Although copyright is automatically created, remedies are limited if you do not register the copyright with the Copyright Office within ninety days of publication.(www.copyright.gov).

(ii)         Trademark. A common law trademark may occur upon the affixation of a unique source identifier on a good or if a unique source identifier is used in conjunction with the provisioning of services.

Accidental alienation would mean giving up a right you do not intend to give up, generally occurs in patent and trade secret:

(i)                Patent. A patent may be created upon the disclosure of a specification or methods by which a new, useful and non-obvious device is created.  A one-year clock will automatically begin to run on such disclosures, and the patent must be filed within that year or patent rights may be lost (www.uspto.gov).

(ii)              Trade secret. A trademark may occur when there is disclosure of a secret that gives you a competitive advantage and has an independent economic value.  Once the secret is made public, it is difficult to claim trade secret protection.

These intellectual property issues may be remedied with proper procedures on creative and innovative work disclosures.  A process mapped out by an attorney to ensure that the filing deadlines are intentionally preserved or waived is a beneficial practice for such institutions.

2.0         Employment Issues.

2.1          Hiring Employees. Controlling employees’ use of social media online has to do with productivity declines for those who do not have a legitimate business reason to use it.  There can be various violations of Title 7 of the United States Code, as well as certain negligent hiring causes of actions, that can be brought against an employer.  The following employment life cycle can be viewed thus:

(i)           Associations.  If the prospective employee is searched on Facebook, then a decision not to hire him/her because of various “groups” he/she belongs to could cause problems based upon some form of discrimination.

(ii)         History.  Surprisingly, individuals on social media sites, such as blogs, post things that compromise their ability to get a job, and some even post things that show off their prior illegal acts.  The case can be made for negligent hiring, for example, if a visit to a prospective book keeper’s social media page would reveal they lost their previous job for embezzlement.   The largest damage may be due to misapprehension about the individual’s professional conduct.  For example, a litigator may be subjected to disciplinary measures or find difficulty in future employment if they post something that shows contempt for the court system or individual judges.[4]  As a governmental employer or board member, does it compromise the position of the organization to hire such an individual if that hiring could be viewed as negligent?

2.2          Employee created torts.  Employees may attach liability onto the organization if they have the indicia of authorization.  For example, a purchasing agent in a government procurement group could potentially be held liable for interference with business expectancy or a business relationship by posting a comment that Vendor X was late in delivery.   Defamation could be a real risk if the employee posts something indicating the sales person is incompetent at their profession or suffers from a personal medical condition disclosed in confidence.

2.3          Identity Theft Protection.  The various states have passed many identity theft protection acts where personally identifiable information (PII) may not be disclosed.  This is a real risk for human resource professionals and those who work in licensing roles and other roles where PII is handled.  Oregon’s act[5] has a number of specific requirements that must be followed to avoid substantial liability.

3.0         Contracting in the Social Media Context.

3.1          Contracting Online.  There are at least two levels of potential dispute when contracting online.  One is the host’s terms of use, which are the terms you must click on in order to avail yourself of the website.  The second is the potential of contract formation among interest group users. An example of online contracting: “in order to be a part of the Highway 101 improvement project you must be a government employee directly involved with the project or a contractor and agree to our group’s privacy polices.”  Hosted social networking sites may or may not allow modification of their terms of use. 

Contract law has not changed with the advent of the internet.  The basic requirements for contract formation are the same: offer, acceptance and consideration.  It is immaterial whether you call something a contract, terms of use, policy or other document.  The basic contractual requirements and tests will apply.  Electronic interactions are sufficient objective manifestations for evidence of a meeting of the minds to occur.  Involving primarily two laws, the so called Uniform Electronic Transactions Act,[6] adopted by the majority of states,[7] and the Federal E-Sign Act,[8] one can no longer challenge the enforceability of a contract by the simple fact that it is conducted electronically. 

A long litigated issue has been the enforceability of “shrink wrap” licenses, those pasted on the box of software, and later, “click-wrap” licenses, whereby a user must click the “I agree” button after reading the terms of use contract.  Today, it is generally settled law that click-wrap licenses are enforceable.  The first case on the merits in 1998 held that a Terms of Service contract in click-wrap format could be enforceable in court.[9]  But, not all of these online contracts are always enforceable.

The higher risk clauses that are litigated deal with issues such as consumer contracts that amount to unreasonable contracts of adhesion.  Generally, the first thing litigated is the jurisdiction clause, followed by forum selection and venue clauses.  If the transaction is minor or immaterial, user assent may be almost passive.  However, if  a significant right is waived,  such as a jury trial, especially prior to knowledge of a dispute, the enforceability of such clauses is unlikely in various jurisdictions is suspect.

The best practices in online contracting can be summarized as “the dearer the right, the greater the overt act of acceptance that is required.”[10] This comes down to whether the “I agree” checkbox seen at the bottom of the contract is unselected, or the “I do not agree” checkbox is pre-selected whereby the user must click on the “I agree box” and simply cannot go any further with the download or use of the site until that overt act occurs.  A greater level of overt act requires the user to scroll down the entire contract until the “I agree box” is available for selection. The user must have an opportunity to print the agreement and be given either notice of changes or of their duty to check the terms of use for updates.  Material changes must have some sort of notice which is fairly straight forward for most user accounts.

Social media contracts and contracts between users can be made.  So too can intellectual property rights be infringed.  Intellectual property includes copyright, patent, trademark and trade secret.  The use and misuse of these can lead to potential liability.  One of the greatest risks for social media users is copyright infringement.  Governmental bodies seeking to use the medium are well advised to comply with the Online Copyright Infringement Liability Limitation Act (OCILLA) or the so-called notice and takedown provisions, where a specific process is followed in the event of alleged infringement.[11]  A safe harbor filing period provides protection, and all entities should file their copyrights with the United States Copyright office – the fees are relatively small, but the protections against copyright infringement are great.  The registration fees for Online Service Provider designation (which is the recordation of an interim designation of agent to receive notification of claimed infringement under section 512(c)(2)) are minimal.[12]   Here, the “group” may qualify as an online service provider.

Torts can be committed online.  These generally involve privacy torts, such as defamation or portrayal in a false light or use of image without permission; and economic torts, interference with business expectancy or contractual relations.  Government lawyers must know that anything posted may trigger certain liabilities. 

3.2          Procurement or Purchasing Issues.  The main issue here is due diligence.  For example, are government or institutional contractors vetted, at the very least, by some investigation in their public space?  Is a contractor near bankruptcy in a high capital cost contract, and could this be gleaned from social media traffic?  

4.0         Public Records: Cloud Computing Difficulties

Most states have public records laws that promote transparency in government.  Here pubic and private intuitions should know the basics of a typical public records regime.  The public records law in Oregon applies to every public body, as defined, which includes the governmental unit and any agency thereof, boards, and commissions.[13]  A “Public Record” essentially is a writing that contains information regardless of form.[14]  All government employees must accept the fact that everything is potentially discoverable, and even if an exception is claimed, there is a very strong presumption in favor of disclosure.  Thus, the public or a judicial body can request, or order, disclosure.[15]  The identity, motive or need for disclosure is irrelevant.[16] 

An added complexity is the advent of “cloud computing”, whereby, institutions, large and small, are relying on third parties to store, house and manage the three tiered technological architecture (data, applications and operating systems) that institutions used to manage with their own assets and labor.  In major cities[17] migrating to third party email systems as society moves cloud computing, arguments claiming privacy are more difficult.  By necessity, the private email account that deals with anything involving policy should be presumed to be a public record.

It does not matter whether the account in question is a governmentally sponsored system or a private email account.[18]  Even home computers are subject to discovery.[19]  The issue is the conduct of use.  If the use in any way involves the conduct of the public’s business, consider even private home computers to be discoverable.

Exemptions are not determined by a bright line test, and the public records will be released unless the “public interest” requires non-disclosure.[20]  Conditional exemptions include things like trade secrets, civil rights investigations, locations of archeological sites, and documents created pursuant to litigation that may qualify as work product by the public entity. There are also exemptions related to public safety issues.

5.0         Public Meetings.

Oregon favors that “decisions be arrived at openly,” which means public debate by a Government body, which consist of two or more members, with authority to make decisions for or recommendations to a public body or administration.[21]  Notice must be “reasonably calculated to give actual notice to interested persons including news media which have requested notice of the time and place for holding regular meetings.”[22] 

The issue of notice is important, as online notice is not as inclusive for public meeting standards as it may seem. There are many individuals who do not have access to the Internet, either by choice or circumstance.  For a government agency to think that the Internet automatically has a broad reach is a misconception.  For example, one report shows that  on “click-through regarding banner advertisements on websites, only  8% of Internet users are responsible for 85% of all clicks.[23]  There may be certain justice requirements if individual rights are allocated or policy is made solely by electronic meeting or electronic notice of the meeting.  For private concerns, this has market reach and notice issues; for example, relying on electronic means for a product recall may be inadequate.  Shareholder and board of director meetings offer additional complexities for the large private institution.  Increasingly, poor notice is becoming an important issue and the SEC has responded regarding proxy materials online.[24] Many jurisdictions do not have similar provisions for public policy decisions that may not rise to the level of rule-making.

5.1          Inadvertent Quorum.  If a governmental body forms a quorum, which could be two or more who can make recommendations on policy, the public meeting statues are triggered and policies arrived upon could be subject to attack on a number of grounds; as described above, lack of actual notice to the public may be one of them. The word “quorum” is a function of bylaws or organizational charters whereby the minimum number of governing body members is specified.  In the absence of such definition of a quorum, the “majority” may be a quorum:, “in the absence of a special definition of ‘quorum,’’ the statutory definition[25] of “three or more persons” may apply according to the Oregon Attorney General’s Manual. 

5.2          Archiving and Data Migration Issues.  Government agencies must archive records.  Social media, if meeting the requirements of public meetings or meeting the archive requirements, must be retained.[26] One large problem with cloud computing is the data migration issue.  For example, if one moves a group from one social networking site to another, those proprietary systems may be less able, or more likely entirely unable, to port data.

6.0         Ethical Dilemmas

The ethical dilemmas presented by social networking are legendary, from jury misconduct, confidentiality disclosures, ex parte communications, communications with represented parties and judges “friending” litigants and others too numerous to mention here.  This is becoming one more variable that can potentially ruin an otherwise perfect legal claim or right.  The parties are best served by having an attorney draft social media policies.

7.0         Conclusion. 

The essential nature of social media may be permanent or may be replaced by something else, but most important are the facts which will shape the law.  Governmental and private sector institutions enjoy the same complexities.  Whether or not this is the wave of the future, or our version of the Citizens Band radio fad of the 1970’s, or something in between, we will see as these cases wend their way through our judicial system.  Swider Medeiros Haver has counseled approximately one dozen social media sites.  The firm strongly suggests the reader not interpret these notes as legal advice but to seek competent legal counsel in your jurisdiction to draft social media guidelines for the organization.

[2] Guidelines for Secure Use of Social Media by Federal Departments and Agencies, Information Security and Identity Management Committee (ISIMC) Network and Infrastructure Security Subcommittee (NISSC) Web 2.0 Security Working Group (W20SWG)

(September 2009).

[3] Cite

[4]See, e.g.,  Where a bar member blogged about a judge describing the judge as, among other things, “evil”. Florida Bar Association v. Conway, 996 SO. 2d 21`3 (2008).

[5] ORS 646a http://www.leg.state.or.us/ors/646a.html

[6] Promulgated by the National Conference of Commissioners on Uniform State Laws.

[7] States that have not accepted the uniform act but have chosen their own include: Georgia: Ga. Code Ann., § 10-12-1; Illinois: 5 ILCS 175/1-101; New York: NY CLS State Technology § 301 et seq.; Washington: http://apps.leg.wa.gov/RCW/default.aspx?cite=19.34.

[8] Pub. L. No. 106-229, 114 Stat. 464 (2000) (codified at 15 U.S.C. § 7001 et seq.).

[9]Hotmail Corp. v. Van$ Money Pie Inc., No. C-98 JW PVT ENE, C 98-20064 JW, 1998 WL 388389 (N.D. Cal., 1998).

[10] Cite.

[11] 17 USC § 512.

[12] Current fee schedule may be found at: http://www.copyright.gov/docs/fees.html.

[13] ORS 192.410(3).

[14] ORS 192.410(4)(a).

[15] See, ORS 192.420(1).

[16] Smith v. School District No. 45, 63 OR App 685 (1983).

[17]http://weblogs.baltimoresun.com/news/technology/2009/10/los_angeles_moving_to_gmail_an.html.  

[18] ORS, 192.001(b).

[19]Nike v. City of Beaverton.

[20] ORS 192.501 et. seq.

[21] ORS 192.610(3).

[22] ORS 192.640.

[23]The results of an update to the comScore highly publicized “Natural Born Clickers” research, conducted two years ago with Starcom USA and Tacoda, indicate that the number of people who click on display ads in a month has fallen from 32% of Internet users in July 2007 to only 16% in March 2009, with an even smaller core of people (representing 8% of the Internet user base) accounting for  85% of all clicks.  http://74.125.155.132/search?q=cache:E0bm9WAqyRsJ:www.mediapost.com/publications/%3Ffa%3Darticles.showarticle%26art_aid%3D115210+85%25+of+click-throughts&cd=2&hl=en&ct=clnk&gl=us.

[24]  17 CFR PARTS 240, 249 and 274

[25] ORS 174.30.

[26] ORS 192.005.

The U.S. District Court for the Southern District of New York recently granted summary judgment in favor of Verizon on the question of whether Verizon was liable for public performance fees for ringtones. [1]  ASCAP, one of the primary performing rights organizations in the United States, had opposed Verizon on the issue.

At issue, in part, was whether Verizon’s transmission of a ringtone to a user’s cellular phone constitutes a public performance.  The parties focused on the second part of the definition of the term “publicly” in 17 USC § 101, which reads in part:

(2) to transmit or otherwise communicate a performance…by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

The court ruled in favor of Verizon on the issue, saying that the transmission itself was not a public performance, further noting that “[e]ven if the customer could listen to the download as it was being received, and contemporaneously perceive it as a musical work, that would not constitute a public performance.”

The court then turned to ASCAP’s argument that a public performance occurs when a cellular phone plays a ringtone, and that Verizon is liable (both secondarily and directly) for such public performance.  In addressing the issue of secondary liability, the court turned its attention to the Copyright Act’s exemption for performances occurring within “the normal circle of a family and social acquaintances” and the Act’s additional exemption for:

[any] performance of a nondramatic literary or musical work otherwise than in transmission to the public, without any purpose of direct or indirect commercial advantage and without payment of any fee or other compensation for the performance to any of its performers, promoters, or organizers, if [ ] there is no direct or indirect admission charge…

According to the court, the first exemption would apply to the playing of a ringtone in the presence of family and friends.  Further, with respect to instances where there is the presence of a broader audience, the court said that the second exemption would apply, emphasizing that customers do not have any expectation of profit in connection with the playing of a ringtone. 

The final portion of the court’s ruling addressed the issue of direct liability for Verizon.  ASCAP’s theory was that when a ringtone plays in public on a cellular phone, Verizon is engaging in a public performance. As was the case with the other theories of liability at issue, the court dispensed with ASCAP’s argument, noting that “Verizon’s only role in the playing of a ringtone is the sending of a signal to alert a customer’s telephone to an incoming call.”  The opinion further noted that “[t]hat signal is the same whether the customer has downloaded a ringtone or not,” and that “[t]he other components of Verizon’s putative ‘control’ over the playing of the ringtone in public are too attenuated from the ‘performance’ to render Verizon liable.”

Note that this ruling concerns only public performance rights.  In the ruling the court readily acknowledged that mechanical rights are implicated in the reproduction and distribution of ringtones.  The current statutory mechanical royalty rate for a ringtone download is 24 cents.

NOTE:  The information in this, and any other article on this website, is for information, discussion and academic purposes only and should not be relied on as legal advice.  Seek legal and financial counsel in your jurisdiction before acting on any ideas presented in this website.  This article does not create an attorney-client relationship. 

1420 American Bank Building

621 SW Morrison Street

Portland, Oregon 97205

Voice: 503-226-8122                                                Contact: Martin F. Medeiros

Fax: 503-295-2737                                                   mmedeiros@smhllaw.com

January 30, 2009                                                                      FOR IMMEDIATE RELEASE

PATENTS CREATED AND ISSUED TO WASHINGTONIANS INCREASES WHILE PATENT STATISTICS AGAIN DECLINE IN OREGON

NON-COMPETE LITIGATION INCREASES BY 80% IN OREGON

The number of patents issued to Washingtonians is on a steady increase while patents issued to Oregonians has declined for the second year in a row.  Patents issued to Oregonians had steadily increased in years 2001-2004, then declined in 2005 followed by a spike in 2006.  “2007 and 2008 represent a decline, and show a general trend line downward in Oregon,” says Martin Medeiros, the partner at law firm Swider Medeiros Haver LLP which has tracked intellectual property metrics in the Pacific Northwest since 2006. 

“The decline in Oregon is slightly worrisome, but what is more problematic is that the majority of patents issued in Oregon are assigned to owners out of state.  In this respect, Oregon is a brain colony,” Medeiros adds.  The Assignment Ratio, developed by Swider Medeiros Haver, shows that only about 35% of patent ownership stays in Oregon, while about 75% stay in Washington.

Trademarks issued to Oregonians and Washingtonians are at a highpoint with approximately 2000 trademarks issued by the USPTO to Oregon and 6500 in Washington in 2008.

The most startling activity, however, is in the area of non-compete agreements.  “The largest anomaly is the 80% increase in reported cases dealing with non-compete issues in Oregon; this may be a result of the changes in the law placing more requirements on the enforcement of non-competes” Medeiros opined.  A complete set of graphs is available at: www.smhllaw.com on the metrics link. Trade secret litigation is also tracked.

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Sue or settle?  Uncertainty can make such decisions daunting, but “game theory” can aid by quantifying the risk and return.  Game theory mathematically models strategic situations such as decisions to settle law suits and labor union negotiations.   Using assumptions and approximations, game theory attempts to predict the behavior of two or more negotiators, making it a valuable tool that can influence negotiations and enable informed decision making.  Certain researchers teach this method.

Imagine that your neighbor trespassed onto your property and cut down a tree.  You want your neighbor to pay for the damage – should you sue or settle?  If you sue and win, you could potentially collect $20,000.  If you lose, you collect $0.  Settlement provides a middle ground: less risk but less reward.  Common sense tells us that there is an optimum settlement, and game theory provides an analytical method to find the settlement sweet spot. 

If you sue, you will have to prove elements to win; for example, that the neighbor trespassed, and that you suffered damages.  After legal analysis, let’s say you predict that there is a 70% chance of proving the trespass, and an 80% chance of proving the damages.  To determine the chance of winning, multiply the probabilities of every element: 0.7 x 0.8 = 0.56 = 56% chance of winning.  Now, to determine the probable payoff of litigation, multiply the chance of winning by the potential damages: 0.56 x $20,000 = $11,200. 

Knowing the probable payoff of litigation enables you to better assess the value of settlement offers.  If your expenses for pursuing the negotiation are, for example, $4,200, then a settlement in the range of $4,200 – $11,200 is a success.  This example is approximately based on a case that was litigated and settled out of court for $10,000 plus related costs.

The decision to litigate is only one of game theory’s countless applications.  Game theory is a powerful means of analysis that you are likely to find in every negotiator’s toolbox.

*Ms. Yazigil left her post as an electrical engineer for Intel to study law at Lewis and Clark College of Law.