Bloomberg News

Spotify, Microsoft, Alcatel, HTC, TCW: Intellectual Property

July 29, 2011

(This is a daily report on global news about patents, trademarks, copyright and other intellectual property topics. Updates with Marvel item in copyright section.)

July 29 (Bloomberg) -- Spotify, the European music- streaming service that started in the U.S. two weeks ago, is already getting a taste of the U.S. legal system.

PacketVideo Corp. sued the company for patent infringement July 27 in federal court in San Diego. PacketVideo sued Spotify last month in the Netherlands over a European patent.

According to the complaint, PacketVideo produces software employed in media applications including those used for music and video. According to the complaint, the company’s software “is currently embedded in more than 260 million devices worldwide and more than 320 different products.”

Chief Technology Officer Osama Al-Shaykh said in an interview yesterday that PacketVideo acquired the patents in 2007 as part of its acquisition of Basel, Switzerland-based SDC AG and waited to sue because “it took us a while to do our homework before we strongly believed that there is an infringement on our patents.”

He said the company hopes the case can be settled.

Alison Bonny, a spokeswoman for Spotify, said by e-mail that Spotify uses its own proprietary technology. “Spotify is strongly contesting PacketVideo’s claim,” she said.

Frederick Lorig, Steven Anderson and Christopher Mathews, partners in the Los Angeles office of Quinn Emanuel Urquhart & Sullivan, represent PacketVideo. Bonny declined to say who was representing Spotify.

The case is PacketVideo Corp. v. Spotify USA Inc., 11-cv- 1659, U.S. District Court, Southern District of California (San Diego).

Patents

Alcatel Lawyer Calls Microsoft’s Infringement ‘Pervasive’

Microsoft Corp. engaged in infringement of an Alcatel- Lucent patent that is “pervasive” in the software maker’s Outlook program, said a lawyer for France’s largest telecommunications equipment maker.

“It really is pervasive in Outlook, particularly in Calendar,” Alcatel-Lucent lawyer Luke Dauchot told a jury in federal court in San Diego in his closing argument yesterday. He said the “Day patent,” as it was described during the trial, “provided an easy, fast, reliable way of using Outlook.”

Dauchot said the technology also was infringed in Microsoft’s Money and Personal PC applications. He told jurors Outlook wouldn’t have been as popular without the patented technology and that “Microsoft’s own survey showed that Outlook is the most frequently used Microsoft Office application by consumers.”

Juanita Brooks, an attorney for Redmond, Washington-based Microsoft, told jurors that Paris-based Alcatel-Lucent is trying sued over a patent that is of little significance to Microsoft because the French company’s patent portfolio was not making enough money.

“They’re trying to get tens of millions of dollars for a feature that is one of tens of thousands in Outlook,” she said.

A different jury in San Diego federal court in 2008 found that Microsoft had infringed the patent and awarded $358 million in damages. While upholding the verdict, an appeals court overturned the damages award, finding the calculation lacked sufficient evidentiary support, and sent it back for retrial.

Microsoft, the world’s biggest software maker, had argued on appeal that the damages were too high because the invention is one of many features within a product.

The patent involves a form entry that Redmond, Washington- based Microsoft said is simply a “date-picker” function that isn’t utilized with e-mail, the most popular function in Outlook. Alcatel-Lucent described the technology as a pop-up tool for form-filing that “plays a central role in the entire operation” of Outlook.

The case is Lucent Technologies Inc. v Gateway Inc., 07-cv- 2000 U.S. District Court, Southern District of California (San Diego).

HTC Didn’t Infringe FlashPoint Imaging Patents, Judge Says

HTC Corp., Asia’s second-biggest maker of smartphones, didn’t infringe digital-imaging patents owned by closely held licensing company FlashPoint Technology Inc., a U.S. International Trade Commission judge said.

FlashPoint failed to show HTC violated its patent rights for imaging devices used in mobile phones, commission Judge Paul Luckern said in a notice posted on the agency’s website yesterday. LG Electronics Inc., Nokia Oyj and Research In Motion Ltd., which had also been targeted, settled with Peterborough, New Hampshire-based FlashPoint before the judge could rule.

The decision -- pending review by the full six-member commission -- clears one of the cases HTC is involved in at the ITC as companies including Apple Inc. and Samsung Electronics Co. use their patents to try to beat back competition in the expanding smartphone market.

HTC, which makes phones such as the Droid Incredible and EVO 4G that use Google Inc.’s Android operating system, said two weeks ago that it was found to have infringed two Apple patents, a ruling the company is appealing.

“Intellectual property plays an increasingly important role in the development and implementation of new technologies, and HTC has placed highest priority in IP protection,” Grace Lei, general counsel for Taoyuan, Taiwan-based HTC, said in a statement yesterday about the FlashPoint case.

The dispute centered on technology related to the way digital cameras operate, including focus and flash settings, and automatic rotation of the image depending on how the camera is held, according to the complaint.

FlashPoint, whose founders include former employees of Apple Inc.’s imaging business, said it developed its own digital operating system for cameras, and ceased research in 2007 to focus on licensing its patents.

Companies that license FlashPoint patents include Eastman Kodak Co., Samsung Electronics, Hewlett-Packard Co., Nikon Corp. and Apple, according to the complaint.

The ITC is quasi-judicial U.S. agency in Washington that arbitrates trade disputes and has the power to block imports of products found to infringe U.S. patents.

HTC agreed this month to pay $300 million for S3 Graphics Inc. after an ITC judge in a third case found that Apple’s operating system for Mac computers infringed two S3 patents for graphics technology. The operating system for the iPhone, iPad and iPod touch didn’t use the S3 inventions, the judge said. HTC also has a case against Apple at the commission.

The case is In the Matter of Certain Electronic Imaging Devices, Complaint 337-726, U.S. International Trade Commission (Washington).

LG Files ITC Complaint Against Siemens’s Osram Unit Over LEDs

LG Electronics Inc., accused last month of infringing Siemens AG’s patents for light-emitting diode technology, filed a U.S. International Trade Commission complaint of its own on July 27.

The case targets Munich-based Siemens’s Osram unit and involves similar LED technology, according to a notice posted on the ITC’s website. While a copy of the complaint filed by Seoul- based LG wasn’t immediately available, companies in these cases typically seek to block U.S. imports of products they say infringe patents.

The dispute is over technology used in LED displays for TV sets and monitors that require less energy than traditional lighting. Osram last month filed complaints at the ITC and in federal courts against LG and Samsung Electronics Co. over LEDs. Samsung responded with its own ITC case against Osram, and LG had submitted a complaint with the Korea Trade Commission.

“We are well prepared,” Stefan Schmidt, a spokesman for Osram, said about LG’s complaint in an e-mail. “Osram holds around 8,000 LED-related patents globally and has a longstanding tradition in handling patent rights.”

The ITC typically completes its investigations in 15 to 18 months.

The new case is In the Matter of Certain Light-Emitting Diodes, Complaint No. 2837, U.S. International Trade Commission (Washington).

Copyright

Hollywood Studios Win U.K. Case Against BT Over Piracy Site

News Corp.’s Twentieth Century Fox and five other Hollywood film studios won a U.K. ruling forcing BT Group Plc, Britain’s biggest Internet-service provider, to block access to a website that promotes online piracy.

The judgment in London yesterday is the first of its kind and the studios said it could be used to obtain similar orders. Fox, Universal Studios, Warner Bros., Viacom Inc.’s Paramount Pictures and Sony Corp.’s Columbia Pictures were backed in the case by the Motion Picture Association of America.

The ruling “is a victory for millions of people working in the U.K. creative industries and demonstrates that the law of the land must apply online,” Chris Marcich, a regional managing director for the film association, said in a statement.

The website, known as Newzbin, liquidated after losing a related U.K. lawsuit last year, only to resurface with more than 700,000 members, the studios’ lawyers said. They argued BT and other ISPs must block the site altogether to prevent infringement.

“BT has actual knowledge of other persons using its service to infringe copyright,” Judge Richard Arnold said in the ruling.

While BT said it agreed Newzbin’s activities were illegal, it argued that a court injunction would be inappropriate, because the website isn’t a customer of the company.

“This is how you test the law,” BT spokesman Simon Milner said outside court yesterday. The judgment “sets a helpful precedent showing that you have to get a court order and prove significant infringement.”

Fox convinced a U.K. court in March 2010 that Newzbin infringed its copyrights. The website went into liquidation to avoid damages and has been revived as “Newzbin 2,” the movie studios claimed.

“The judgment sends a clear signal that ISPs have a role to play in protecting their customers from rogue websites that exploit and profit from creative work without permission,” said Geoff Taylor, chief executive officer of the British Recorded Music Industry trade group.

‘Incredible Hulk’ Copyright Belongs to Marvel, Judge Rules

Walt Disney Co.’s Marvel Entertainment owns the rights to the Incredible Hulk and X-Men comic-book characters, a federal judge said, ruling against the heirs of the superheroes’ co- creator Jack Kirby. Stan Lee, who worked for Marvel as an editor, is credited as co-author of the Hulk.

The children of the late cartoonist didn’t have the legal right to terminate the comic-book publisher’s copyrights for the characters, U.S. District Judge Colleen McMahon in Manhattan said yesterday in a court order. Marvel said it owned the rights because Kirby was an employee of the company.

“This case is not about whether Jack Kirby or Stan Lee is the real ‘creator’ of Marvel characters,” McMahon said in her order. “It is about whether Kirby’s work qualifies as work-for- hire under the Copyright Act of 1909.” The Kirby works “were indeed works for hire,” she said.

The decision affects the rights to the characters in movies as well as comic books. The 2008 Marvel-produced film “The Incredible Hulk” grossed $263.4 million worldwide, according to boxofficemojo.com. Burbank, California-based Disney bought Marvel last year for $4.2 billion.

In 2009, Kirby’s adult children sent 45 notices to Marvel to terminate license renewals for the characters in comics published from 1958 to 1963. Marvel sued in January 2010, seeking a judgment that the termination notices were invalid.

Marc Toberoff, a lawyer representing the Kirbys, didn’t immediately respond to messages seeking comment.

Kirby, who died in 1994, also created or co-created the Fantastic Four and the Avengers. His heirs said their father was a freelance artist paid by the page who received no benefits from Marvel.

The case is Marvel Worldwide Inc. v. Kirby, 10-00141, U.S. District Court, Southern District of New York (Manhattan).

Trade Secrets

Ex-HP Executive Sued by Former Employer Says Evidence False

The lawyer for a former Hewlett-Packard Co. sales executive accused of stealing secret information, filed a letter in court saying the evidence used against his client was “false and fabricated.”

Adrian Jones, who left Hewlett-Packard to join Oracle Corp. in February, was accused of downloading company information to an external hard drive. In the letter, filed June 10 in California state court, Jones said the drive was used by Hewlett-Packard to do a backup and was never in his possession.

Hewlett-Packard and Oracle are increasingly competing in the market for server computers. Hewlett-Packard ousted Chief Executive Officer Mark Hurd in August 2010, saying he had tried to cover up a relationship with a marketing contractor. Hurd, a friend of Oracle CEO Larry Ellison, joined Oracle as a co- president.

“The central allegation in HP’s employment lawsuit against Adrian Jones has turned out to be complete fiction,” said Deborah Hellinger, a spokeswoman for Redwood City, California- based Oracle. “If they did it knowingly, then HP and their lawyers should be sanctioned. If they did it mistakenly, then they simply owe Mr. Jones an apology.”

Hewlett-Packard said yesterday that Jones did store secret company information, even if it wasn’t on that hard drive. He returned other devices with sensitive files to the company, said Michael Thacker, a spokesman for Palo Alto, California-based Hewlett-Packard.

“Regardless of the device, Adrian Jones said he had no confidential information,” Thacker said. “But he did, and he had returned it.”

Jones worked at Hewlett-Packard as a senior vice president in its enterprise hardware group based in Tokyo, where he oversaw the unit’s sales in Asia. He began seeking a job outside Hewlett-Packard in the fall of 2010, according to the letter.

In December, the company began a probe of Jones. Hewlett- Packard said its investigation found he failed to disclose a close personal relationship with a subordinate, arranged a pay raise of about 97 percent for her and expensed travel to Australia to see her with no legitimate business purpose.

Hewlett-Packard asked for Jones’s additional computers, including his home computer in Tokyo, an iPhone and his girlfriend’s iPad, according to the letter. Jones received the job offer from Oracle Feb. 13.

In June, Hewlett-Packard filed a separate lawsuit against Oracle, claiming that the company went from partner to “bitter antagonist” and had breached its contract.

The lawsuit, filed June 15 in state court in San Jose, California, cited Oracle’s hiring of Hurd and Oracle’s March announcement that it would cease software development for Hewlett-Packard servers that use Intel Corp.’s Itanium chip. Oracle also has used “strong-arm tactics” in forcing customers to “shift from HP’s Itanium server hardware to Oracle’s own server hardware,” the suit said.

That suit, which also cites libel claims, followed Hewlett- Packard’s June 8 letter to Oracle demanding that the software maker keep supporting the Intel chip, reiterating its concern that the move will hurt customers and trammel competition.

The case is Hewlett-Packard Co. v. Jones, 1-11-cv-198103, California Superior Court, Santa Clara County.

TCW Accuses Gundlach of Secret Plot to Steal ‘Entire Business’

A lawyer for TCW Group Inc. told a jury yesterday that former investment chief Jeffrey Gundlach plotted with colleagues to steal the company’s trade secrets before he was fired and started a rival money-management firm.

“They tried to steal an entire business from TCW worth hundreds of millions of dollars,” TCW lawyer John Quinn said in his opening statement yesterday at a state court trial in Los Angeles. “They secretly plotted to leave en masse.”

TCW, the Los Angeles-based unit of Societe Generale SA, sued Gundlach, 51, and three other ex-employees in January 2010, a month after he was fired and more than half of TCW’s fixed- income professionals had joined his firm, DoubleLine Capital LP. TCW seeks $375 million in damages.

Gundlach, who had worked at TCW for 25 years and who was named Morningstar’s Fixed Income Manager of the Year in 2006, said in a cross-complaint that TCW fired him to avoid having to pay as much as $1.25 billion in future management and performance fees for the funds his group managed. Gundlach has since reduced his damages estimate to about $500 million.

DoubleLine’s lawyer, Brad Brian, said in his opening statement yesterday that Societe Generale wanted to maximize its investment in TCW and “they were not going to let Mr. Gundlach stand in their way.” The company discussed terminating Gundlach in August 2009, he said.

While TCW knew it would lose business by firing Gundlach, the company did it anyway because the lost business would be compensated by reducing what was owed to him, Brian said.

Brian also said Gundlach and the others didn’t use any proprietary TCW information.

The trial may have undesirable consequences for both sides, said Geoff Bobroff, an independent fund consultant in East Greenwich, Rhode Island. Gundlach, who has attracted $13 billion in assets since his firm opened, may see damage to his reputation, while TCW Group risks the disclosure of its inner workings and details such as fees.

The case is Trust Co. of the West v. Gundlach, BC429385, California Superior Court, Los Angeles County.

Comings and Goings

Google Litigator Leaving to Join Perkins Coie

Google’s head litigator, Timothy Alger, is leaving the company to join the Palo Alto, California, office of Perkins Coie. In a statement on its website, the firm said Alger would become a partner in its litigation practice, focusing on new and traditional media among other matters. According to the statement, Alger had worked at Google since 2008.

--With assistance from Susan Decker in Washington; Edvard Pettersson in Los Angeles; Aaron Ricadela in San Francisco; Bill Callahan in San Diego; Erik Larson in London and Don Jeffrey and Chris Dolmetsch in New York. Editors: Andrew Dunn, Mary Romano

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net.

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


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