Bloomberg News

BitTorrent, Patent Reform, Best Buy: Intellectual Property

June 22, 2011

(This is a daily report on global news about patents, trademarks, copyright and other intellectual property topics. Adds Rambus Inc. item in patent section.)

June 22 (Bloomberg) -- BitTorrent Inc., whose Internet protocol is used by many to share music and films, is accused of infringing a patent belonging to a San Francisco company.

BitTorrent, also based in San Francisco, is accused of infringing patent 7,301,944, which was issued by the U.S. Patent and Trademark Office in November 2007. According to the patent office database, the patent was assigned to Tranz-Send Broadcasting Network in April 2001.

The patent covers a technology that enables data distribution over a network by breaking it down into small bits. Tranz-Send claims the BitTorrent peer-to-peer file-sharing method infringes at least one claim of the patent. Kontiki Inc. of Sunnyvale, California, is also a defendant in the case.

BitTorrent spokeswoman Allison Wagda said in an e-mail that her company had no comment on the litigation.

Kontiki didn’t immediately respond to an e-mailed request for comment.

Tranz-Send asked the court for an award of money damages “no less than a reasonable royalty,” and attorney fees and litigation costs. In a move that is unusual in a computer technology case, Tranz-Send didn’t ask for an order barring the use of its technology.

The company is represented by Benedict O’Mahoney and Mark W. Good of Terra Law LLP of San Jose, California.

The case is Tranz-Send Broadcasting Network Inc. v. BitTorrent Inc., 3:11-cv-02917-JCS, U.S. District Court, Northern District of California (San Francisco).

House Leaders Reach Deal on Letting Patent Office Keep Fees

House leaders agreed yesterday to give the U.S. Patent and Trademark Office greater control over its own funding, paving the way for a floor vote on legislation to overhaul the U.S. patent system.

Under the deal announced yesterday, a special fund would be established to hold user fees collected in excess of the agency’s budget. The fund could only be tapped by the patent office, which would have to submit a spending plan to Congress to access the money.

Guaranteed access to all the fees collected by the agency is the cornerstone of a wide-ranging bill, H.R. 1249, that mirrors a measure passed by the Senate on a 95-5 vote in March. If passed, the legislation would mark the biggest change to the U.S. patent system since 1952.

Like the Senate bill, the House measure seeks to end lawmakers’ longstanding practice of steering fees collected by the patent office toward non-patent purposes. Since the passage of a 1990 law requiring the agency to fund itself, Congress has retained more than $800 million in user fees.

The diversion of fees has been linked to an increase in the number of patent applications awaiting first review by agency examiners. It takes, on average, about 34 months to complete a review, and more than 700,000 applications have yet to receive a first response from the agency.

Companies from a range of industries, including drugmaker Eli Lilly & Co. and chipmaker Intel Corp., as well as universities, venture capital firms, unions and the U.S. Chamber of Commerce have expressed support for ending fee diversion.

The legislation, the result of more than six years of negotiations, testimony, and compromise, continues to have some detractors.

Some small businesses have objected to language that would grant patents to the first inventor to file an application. Under existing law, patents go to the first person to invent something, which has led to often years-long fights over the timing of ideas. The patent office, which supports the change, says it would align U.S. law with the rest of the world.

Another provision would create a new process to review patents after they’ve been issued. Independent patent owners or firms that often sue big companies, like Acacia Research Corp., say it gives big companies another way to intimidate independent inventors and avoid paying for the use of someone’s technology. Large technology companies including Cisco Systems Inc. and Google Inc. say it would help weed out patents of questionable validity.

The trade group representing generic-drug companies including Mylan Inc. and Teva Pharmaceutical Industries Ltd. opposes a provision that would let patent owners who make errors or withhold information from the agency go back and make corrections. The generic-drug makers say it would help brand- name companies avoid having their patents deemed unenforceable as punishment for misleading the agency.

The Senate bill is S. 23.

Rambus Chip Failure Due to Flaws, Not Plot, Hynix Tells Jury

Rambus Inc. memory chips failed in the marketplace because computer makers found them technically inferior and too expensive, not because of a conspiracy among rival companies, Hynix Semiconductor Inc. and Micron Technology Inc. said at a trial of Rambus’s antitrust lawsuit.

Rambus-designed chips hit the memory market with “a whimper and not a bang” and survived only as a “niche product,” Hynix lawyer Kenneth L. Nissly told jurors yesterday in California state court in San Francisco.

Rambus, based in Sunnyvale, California, is seeking as much as $12.9 billion from Hynix and Micron based on arguments they conspired to thwart its dynamic random access memory, or DRAM, chips. The $4.3 billion in damages sought by Rambus against the two companies would be automatically tripled under California law, according to Rambus.

Nissly made an argument that chipmakers have used with some success defending themselves against patent claims brought by Rambus. He said that before any of the chips at issue were produced, Rambus “had at its core” a plan to sue Hynix and Micron and destroy documents to hide that strategy.

“We’re talking about setting out to destroy documents so they don’t get used in litigation,” Nissly said.

Rambus claims Hynix, based in Ichon, South Korea, and Micron, based in Boise, Idaho, inflated the price of Rambus- designed DRAM, or RDRAM, chips and collusively underpriced their own Synchronous Dynamic Random Access Memory, or SDRAM, and Double Data Rate, or DDR, chips to undercut competition.

Micron’s lawyer, William Price, sought to downplay the importance of Hynix’s guilty plea and payment of a $185 million fine in 2005 to resolve price-fixing claims by the U.S. Justice Department. In 2004, a Micron salesman pleaded guilty to obstructing the government probe.

The Justice Department investigation is a “distraction” and an “unrelated investigation about manipulating the price” of memory chips, Price said. The probe concerned artificially raising prices, which is “exactly the opposite of what Rambus is saying,” Price said.

For more patent news, click here.

Trademark

Best Buy Tells NewEgg Its ‘Geek On’ Ad Infringes Trademarks

NewEgg Inc., an online retailer of consumer electronics and computers, is the target of Best Buy Co.’s ire for an advertising campaign.

Richfield, Minnesota-based Best Buy sent NewEgg a cease- and-desist letter the online retailer posted on its page on Facebook Inc.’s social-media site. In the letter, Best Buy complains about a television commercial that appears to show one of its blue-shirted employees as “slovenly and uninformed about computer products.”

NewEgg, based in Whittier, California, is also accused of infringing Best Buy’s “Geek Squad” trademarks through a “Geek On” advertising campaign, according to the letter. Best Buy told NewEgg that it was willing to consider a “reasonable period” for the phasing out of the ads it considered objectionable.

In response to Best Buy, NewEgg has now added a disclaimer to the front of its commercial, saying it’s a “work of fiction” and that “any similarity to real persons (living or dead), business establishments, places, events, or other material is coincidental and unintentional.”

Prosecutors Seek Control of Mongols Motorcycle Club Trademarks

Federal prosecutors in Los Angeles have asked a judge to seize the trademark for the Mongols Motorcycle Club, the Associated Press reported.

If U.S. District Judge Otis Wright responds to the prosecutors’ request, it will be the first time the government will take control of a gang’s identity through a court order, according to AP.

Although lawyers for the club have claimed the trademark belongs to all the club members, prosecutors are trying to prove it is the sole property of Ruben “Doc” Cavazos, the former president of the club, AP reported.

In an April deposition, Cavazos said the marks were in his personal control and “Mongol Nation is mine,” according to AP.

For more trademark news, click here.

Copyright

Warner Settles ‘Hangover II’ Tattoo Infringement Suit

Time Warner Inc.’s Warner Brothers unit has settled for undisclosed terms the copyright infringement suit brought by the tattoo artist who created Mike Tyson’s distinctive facial tattoo, Variety reported.

S. Victor Whitmill sued Warner Brothers in federal court in St. Louis in April, claiming a facial tattoo that is a feature in Warner’s “Hangover Part II” infringed his design.

He said in his complaint that he hadn’t authorized the use of the design in the film, and that he sought money damages for the alleged infringement.

The case is Whitmill V. Warner Bros. Entertainment Inc., 4:11-cv-00752-DCP, U.S. District Court, Eastern District of Missouri (St. Louis).

Texas Man Pleads Guilty to Criminal Copyright Charge Over Adobe

A 28-year-old resident of Wichita Falls, Texas, pleaded guilty to one count of criminal copyright infringement, according to a government statement.

James Clayton Baxter was accused of making unauthorized copies of Adobe system Inc.’s software and selling them through the TechKappa.com website. According to the statement, he was selling so-called “backup” copies of software through six different websites he owned.

In addition to the Adobe product, investigators found unauthorized copies of Microsoft Corp. and Autodesk Inc. software offered for sale by Baxter at 20 percent of the manufacturers’ retail value, the government said.

According to the government statement, Baxter received more than $66,000 for counterfeit software he made and sold between June 2006 and April 2007.

Baxter’s guilty plea was entered June 20. According to the court docket, he is set for sentencing Oct. 25. He faces a potential prison sentence of as many as five years and a $250,000 fine, the government said. He could also be ordered to pay restitution.

The government was represented by Aisha Saleem of the U.S. Attorney’s Office in Dallas. Baxter was represented by Frank D. Trotter of the Law Office of Frank D. Trotter in Dallas.

The case is U.S.A. v. Baxter, 7:11-cv-00004-O-KA, U.S. District Court, Northern District of Texas (Wichita Falls).

For more copyright news, click here.

--With assistance from Kathleen Hunter and Susan Decker in Washington. Editors: Glenn Holdcraft, Peter Blumberg

To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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