Bloomberg News

Google, Christie’s, Apple, Samsung: Intellectual Property

July 30, 2012

Google Inc. (GOOG:US) asked a U.S. court to dismiss a lawsuit by authors over the digitizing of books, saying that the company’s book-scanning program is a fair use of copyrighted material and a benefit to the public and authors.

The lawsuit by the Authors Guild, as well as one filed by the American Society of Media Photographers, stems from Google’s plan announced in 2004 to scan millions of books from public and university libraries to provide snippets of text to people who use its Internet search engine.

In a motion filed July 27 in federal court in New York, the company seeks dismissal of the Authors Guild’s case, arguing that authors benefit from the project because their books can be more readily found, bought and read, while the public gains “increased knowledge.” Google also argued that the display of snippets of text is fair use under copyright law and that the authors haven’t been harmed by the display.

“Google Books furthers the objectives of the copyright laws because of the public benefits (including benefits to authors),” the company said in its motion. “Plaintiffs have adduced no evidence that Google Books has displaced the sale of even a single book.”

Michael Boni, a lawyer for the authors, said July 27 that he was planning to file a sealed motion for a judicial ruling in their favor, by hand rather than electronically, because “it uses a lot of documents Google marked ‘confidential.’” A redacted version will be filed at another time, he said in a phone interview.

Oral arguments on both parties’ motions for summary judgment are set for Oct. 9.

Last year, a federal judge declined to approve a proposed $125 million settlement between the plaintiffs and Google, saying it was “an attempt to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the court.”

Further negotiations between the authors and Google were unsuccessful. The publishers remain in talks, Google has said.

The authors’ case is Authors Guild v. Google, 05-08136; the visual artists’ case is American Society of Media Photographers v. Google, 10-cv-02977, U.S. District Court, Southern District of New York (Manhattan).

Copyright

Megaupload Prosecutors Seek to Keep Company as Defendant

Megaupload Ltd. should remain a defendant in the federal criminal case accusing the Internet company and its founder, Kim Dotcom, of running a massive illegal file-sharing service, U.S. prosecutors said.

Prosecutors seeking to defeat a request for dismissal said on July 27 that the U.S. has the authority to bring copyright infringement charges against Megaupload even though the company has no offices in the country.

“The heart of the issue is whether foreign companies like Megaupload can commit crimes in the U.S. and in this district and then never be brought to justice,” Assistant U.S. Attorney Ryan Dickey told U.S. District Judge Liam O’Grady during a hearing in Alexandria, Virginia. “That just can’t be the case, your honor.”

The dismissal of charges against Megaupload would add to the challenges prosecutors have faced since shutting down the company’s file-sharing website and charging Dotcom and six other individuals in January. A judge in New Zealand last month threw out warrants used to seize the Internet entrepreneur’s property, delaying Dotcom’s possible extradition by at least seven months.

Investigators executed more than 20 search warrants in the U.S. and eight other countries and seized about $50 million in assets in connection with what they said was among the largest criminal copyright cases ever brought by the U.S.

Megaupload operated in the U.S. for more than six years, earning more than $175 million in illegal profit since 2005 from the exchange of pirated films, music, books and software, according to an indictment. More than 500 servers leased by Megaupload were in Virginia, giving the U.S. jurisdiction to prosecute the company, the government argued in court papers.

At the July 27 hearing, lawyers argued over whether federal rules governing criminal cases bar indictment of foreign companies that don’t have offices or agents in the U.S. The rules require prosecutors to issue a summons to an agent or officer of the company, and mail a copy to the company’s last known address in the U.S., when bringing criminal charges against an enterprise.

Megaupload contends prosecutors haven’t tried to serve the company, which is registered in Hong Kong, and can’t meet the requirements.

By indicting Megaupload, officials were able to shut down its operations through criminal forfeiture, seizing domain names and freezing assets without any review by a judge, William Burck, a lawyer for the company, told O’Grady.

“The process chosen here illustrates the threat the rule was designed to prevent,” said Burck, a partner at Quinn Emanuel Urquhart & Sullivan LLP. “They wiped out a foreign corporation with no office in the U.S. by bringing a criminal indictment.”

The case is U.S. v. Dotcom, 12-00003, U.S. District Court, Eastern District of Virginia (Alexandria).

For more, click here.

Vekselberg Wins $2.6 Million Fake-Art Case Against Christie’s

Viktor Vekselberg, the billionaire who owns part of a Russian oil venture with BP Plc (BP/), won a claim to recoup losses from U.K. auctioneer Christie’s International after paying 1.7 million pounds ($2.6 million) for what he thought was a painting by Russian artist Boris Kustodiev.

Judge Guy Newey in London said that the painting was “the work of someone other than” Kustodiev. As a result, the judge said, Vekselberg’s Aurora Fine Arts Investment Ltd. had the right to return the painting “and recover the money it paid.” Newey cleared Christie’s of negligence in his written judgment.

“It is a matter of huge regret to Aurora that it was forced to sue Christie’s,” Andrey Shtorkh, Vekselberg’s spokesman, said by phone from Moscow July 27. “We are pleased with the ruling, which confirmed that the experts from Russian museums were correct in asserting that the painting is not the work of Kustodiev.”

Vekselberg, chairman of Renova Group, has a net worth of about $14 billion, according to data collected by Bloomberg. In March, he stepped down as chairman of United Co. Rusal, the world’s biggest aluminum maker, citing disputes with co-founder Oleg Deripaska, including the refusal to sell Rusal’s stake in OAO GMK Norilsk Nickel.

“We are surprised and disappointed by his view of the painting’s attribution,” a spokesman for London-based Christie’s said in a statement after the ruling. “We maintain our belief in the attribution to Kustodiev and are considering our options.”

For more copyright news, click here.

Trademark

Woman Charged in Guggenheim Name Scam Won’t Serve Jail Time

Lady Catarina Pietra Toumei, one of three charged in a scheme to use the Guggenheim family name to swindle investors through phony billion-dollar deals, pleaded guilty to a misdemeanor and was given two years of probation.

Toumei, 46, admitted on July 27 to helping her two co- defendants violate a judge’s order, issued in a civil trademark lawsuit, that barred them from using the Guggenheim name. Toumei was sentenced by U.S. Magistrate Judge James Cott in Manhattan.

Prosecutors from the office of U.S. Attorney Preet Bharara in Manhattan charged Toumei, Vladimir Zuravel and David Birnbaum in January 2011 with a scheme to use the Guggenheim name to lure investors into fake investments in oil, bank guarantees, diamonds and gold. Charges against Birnbaum, who allegedly used the name “David B. Guggenheim,” were dropped in September and Zuravel was sentenced to a year of probation in April after pleading guilty.

“I always was surprised that the case was filed,” Toumei’s lawyer, Jan Ronis, said after the July 27 hearing. “At all times, she truly thought they were Guggenheims.”

The Guggenheim family is descended from Meyer Guggenheim, a Swiss immigrant who made a fortune in mining and smelting in the 19th century. They are known for charitable giving, including the establishment of the Solomon R. Guggenheim Museum in New York.

Ronis said Toumei, who lives in the San Diego area, met Zuravel and Birnbaum on the Internet and had never seen them in person.

Ellen Davis, a spokeswoman for Bharara’s office, declined to comment on the case.

The case is U.S. v. Toumei, 11-Mag.-207, U.S. District Court, Southern District of New York (Manhattan).

For more trademark news, click here.

Patent

Apple, Samsung Take Global Smartphone War to First U.S. Jury

Apple Inc. (AAPL:US) and Samsung Electronics Co. (005930), having waged their patent battle on four continents, are now on a collision course in California with little prospect of a settlement before a jury trial set to begin this week.

U.S. District Judge Lucy Koh in San Jose, who practiced as an intellectual-property litigator in Silicon Valley for eight years, is scheduled to start jury selection today. Jurors will decide each company’s claims that its rival infringed patents covering designs and technology for mobile devices, with potential damage awards reaching billions of dollars.

The companies have sued each other in the U.K., Australia, and South Korea, among other countries, in a bid for dominance of a mobile-device market that Bloomberg Industries said was $312 billion last year. In San Jose, Apple seeks damages of $2.5 billion based on claims Samsung copied the iPhone and iPad. The Cupertino, California-based company also wants to make permanent a preliminary ban it won on U.S. sales of a Samsung tablet computer, and extend the ban to Samsung smartphones.

“Eventually all the parties to the smartphone wars will have to settle,” Mark Lemley, a Stanford Law School professor, said in an e-mail. “But the parties have fought this one long and hard, and I don’t see why they would settle now, with an injunction already in place. I expect them to take their chances at trial.”

Claiming Apple is infringing two patents covering mobile- technology standards and three utility patents, Samsung is demanding royalties of as much as 2.4 percent for each device sold.

The case is Apple Inc. v. Samsung Electronics Co. Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose).

For more, click here.

U.K. IP Lawsuits Almost Triple on Smartphone Patent Disputes

U.K. courts are a battleground for the global technology patent wars as intellectual property claims almost tripled last year, according to a report by law firm EMW Law LLP.

There were 183 new patent and registered design claims filed in the U.K. in 2011, the most in more than five years, as firms seek to maintain their advantage over competitors in a difficult economic climate, EMW said. There were 65 similar claims filed in 2010.

“Some technology businesses have amassed a huge war chest of patents, which they can use to swamp the competition with patent infringement claims,” said Mark Finn, IP law principal at EMW. “Even if the claim doesn’t stick and is eventually rejected by the courts, it can still keep rivals’ products off the market for long enough to gain a competitive advantage.”

Smartphone makers including Apple Inc., Samsung Electronics Co., Nokia Oyj (NOK1V) and HTC Corp. (2498) have filed dozens of suits against each other in the U.K. during the past two years as part of a global litigation strategy in the mobile-device market that Bloomberg Industries said was $312 billion last year. The rise in IP litigation comes as the U.K. economy shrank the most in three years, forcing companies to fight “for every edge they can find,” Finn said.

Companies in patent-heavy industries look for “any way” to maintain their advantage, Finn said.

Finn said companies rush to sue before the disputed product establishes itself in the country, because U.K. patent courts may take a year to reach a judgment.

For more patent news, click here.

Internet

Google’s Failure Over Street View Data May Breach U.K. Accord

Google Inc. may have breached an agreement with the U.K. privacy regulator by failing to delete personal data gathered through its Street View service.

Google contacted the U.K. Information Commissioner’s Office on July 27 to say it still had some data that should have been deleted in December 2010, the agency said in a statement the same day. The watchdog said it’s in touch with other data protection regulators in Europe “to coordinate the response to this development.”

“The fact that some of this information still exists appears to breach the undertaking to the ICO signed by Google in November 2010,” the agency said in the statement. “Our response, which has already been issued, makes clear that Google must supply the data to the ICO immediately, so that we can subject it to forensic analysis before deciding on the necessary course of action.”

Google was fined $25,000 by the U.S. Federal Communications Commission this year for impeding its investigation into improper data gathering. In an agreement ending the U.K. inquiry into Street View in November 2010, Mountain View, California- based Google agreed to further ICO audits of its privacy practices. One was published in August 2011 and will be reviewed this year to ensure ICO recommendations were followed.

In June, the U.K. regulator re-opened a probe into the data collected through Google’s location service. While Street View cars photograph buildings and homes to provide street-level mapping to Google users, they went beyond that by using wireless connections to gather people’s personal communications.

Google still has in its possession “a small portion of payload data collected” by its Street View cars in the U.K., Peter Fleischer, the company’s global privacy counsel, said in the letter. “Google apologizes for this error.”

Music

Universal Said to Offer Sale of EMI Classics, Parlophone

Vivendi SA (VIV)’s Universal Music Group offered European regulators to dispose of local assets that may fetch more than 250 million euros ($309 million) to soothe antitrust concerns over its takeover of EMI Group’s recorded-music business, said one person familiar with the matter.

Universal offered to sell Parlophone Records, home to Coldplay and Gorillaz, in the U.K. while keeping the label’s Beatles songs, the person said, declining to be identified as the matter is not public. The company would also sell some labels including EMI Classics and Virgin Classics in Europe and EMI’s units in France, Belgium, the Czech Republic, Poland, Portugal, Norway and Sweden to get approval for the 1.2 billion- pound ($1.9 billion) deal, the person said.

Universal Music, the world’s largest record company, on July 27 said it submitted a package of concessions to European Union regulators. Universal has a list of about 20 entities, ranging from independent music labels to major rivals such as Sony Music Entertainment and Bertelsmann AG’s BMG Rights Management LLC, which have indicated interest for assets potentially up for sale, according to two people familiar with the process.

“We believe the package fully addresses the commission’s concerns and follows our constructive discussions with regulators, independent labels and competitors,” Universal said in an e-mailed statement, adding that it’s “confident of receiving clearance.”

The offer will now be circulated to third-party record labels and customers for so-called market testing.

A Universal representative declined to comment on details of the concessions. A representative for BMG declined to comment and Sony’s representatives couldn’t be immediately reached for comment.

Universal on July 27 also offered to sell the Virgin Classics label in Europe and the British catalog of Pink Floyd. A sale of Chrysalis Records wouldn’t include songs by Robbie Williams, the person said.

For more, click here.

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

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


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