IP/Internet/New Media Blog

By Galen Gentry

On April 6^th  the District of Columbia Court of Appeal ruled that the Federal Communications Commission has no authority to determine how internet services providers manage traffic to their customers.  The case, Comcast v. FCC , is a blow to proponents of net neutrality.  In 2008 the FCC ruled that Comcast improperly discriminated against certain internet content when it blocked some of its customers from using the popular BitTorrent Inc. technology which allows users to download large files such as videos more easily.

Comcast appealed and the three judge panel unanimously found that the FCC overstepped its bounds in the 2008 ruling.  The court stated the FCC lacks direct authority from Congress to regulate internet traffic.  The ruling brings the issue of net neutrality back to the fore.  Some government and business leaders seek legislation which would prevent internet providers from curbing or charging higher prices for use of selected applications or access to certain websites. 

At issue is whether telecommunications companies should be allowed to manipulate how fast or slow websites pages load on customers computers.  Companies like Google support net neutrality which would prevent internet providers from curbing or charging higher prices for use of selected applications or access to certain websites.  The telecom giants such Verizon and Comcast are against such legislation.  President Obama supported previous efforts to enact net neutrality legislation and FCC chairman Julian Genachowski has made net neutrality a top priority. 

The issue of net neutrality is a partisan one.  It may take a long time for Congress to act.  In the interim the FCC may appeal the ruling or it may seek to reclassify high speed internet service so that it would be regulated like telephone services under existing laws.  The same companies which oppose net neutrality, the giant telecoms, would oppose such a move.  If the FCC makes an effort to reclassify high speed internet service the telecom companies are sure to challenge the action in court. 

 America needs competition among its high-speed internet providers. Open access has proved to be an effective way to do this in other countries. The FCC’s rules on net neutrality were an adequate substitute.  But with the Court’s ruling the United States now has neither.

The United States Patent Office issued a press release today stating that henceforth it would seek patent examiners by running ads in Playboy.  The Office went on to state that rumors that everything worth inventing had been invented now that the ipad was a reality were in fact true.

By Galen Gentry

Yesterday, Mayor Villaraigosa signed a measure to cut business taxes for internet based firms. Last year internet firms were reclassified from multimedia to business and professions. It’s an important distinction because the former pay a city tax rate of $1.01 of gross receipts and the latter pay $5.07 (yes, fellow attorneys you are unfortunately in the $5.07 category). The change was approved without dissent by the city council. The rate change is retroactive. The fact that it is retroactive will cost the city at least $3.4 Million in revenue according to an article today’s Los Angeles Times Business Section by Phil Willon.

The mayor and the city council were clear as to the reasons for the change of heart–they believe internet based companies are easy to move and that the drastic increase in city tax would result in an exodus which would ulitmately cost Los Angeles more revenue in the long run.

By Galen Gentry

The AP reported that Google stopped censoring the Internet for China by shifting its search engine off the mainland today, March 22, 2010. Google is acting on its statement, made Jan. 12th, that it would no longer adhere to China’s requirement that it keep some Internet results out of its citizens’ view. Visitors to Google’s old service for China, Google.cn, are now being redirected to the Chinese-language service based in Hong Kong, where Google does not censor the search results; however, it cannot be accessed inside China, because the mainland government filters restrict the links that can be clicked by mainland audiences.

Google plans to keep its engineering and sales offices in China so it can keep a presence in the country and continue to sell ads for the Chinese-language version of its search engine in the U.S. Google is unlikely to sever all ties with China in the future. It would not make economic sense. China’s explosive growth has created a market that is hard to pass up.

By Galen Gentry
According to WebProNews Facebook was the most visited site for the week of March 7 to March 13. The fact that FB was the number one site will influence the value of advertising on the site and surely increase the advertising by big business. Facebook advertisers can be very specific as to who they target. For instance you can advertise on Facebook just to lawyers or people who list horses in their interests and live in Toledo. That is drilling down. These are exciting times for Facebook and interesting times for big business as they try to spend their advertising dollars wisely on a user content focused web.

By Galen Gentry

On February 24, 2010 the United States Court of Appeals for the Federal Circuit found that Defendants infringed on patents for Crocs ubiquitous foam clogs. The Appeals Court overturned an earlier ruling by the US International Trade Commission and sent the matter to the ITC to fashion a remedy.

Crocs sued several Defendants for copying the design of the foam shoe which features holes in the top forefoot and a strap for the heel. An International Trade Commission Administrative Law Judge ruled against Crocs in 2008. He stated that the Defendants’ shoes did not infringe because of differences in their design and construction such as where the straps were placed, the shape of the holes and how far apart the holes were on the Defendants’ shoes. The Defendants in the case were Double Diamond Distribution Ltd., Holly Soles Holdings Ltd., and Effervescent, Inc.

In reversing the ITC Circuit Judge Randall Raider stated that the overall similarities between the shoes were such that an ordinary observer would be deceived into believing the products at issue were the same as the patented design. Raider compared several competitors’ shoes side by side with Crocs in illustrations contained in the ruling.

It remains to be seen what the ITC will do. In an article by Craig Anderson in the Los Angeles Daily Journal on Thursday February 25, 2010 Crocs lawyer Jim Ottenson is quoted stating that most of the defendants in the original case have come up with a “design around” to avoid infringement.

By Galen Gentry
PC Magazine reported that two law firms have filed a class action law suit against Yelp for allegedly extorting advertising payments in exchange for removing or modifying negative reviews appearing on the site. The named Plaintiff is a veterinary hospital in Long Beach, California. The plaintiff claims it asked Yelp to remove a false and defamatory review and in response the company sales representatives repeatedly contacted the hospital and requested that it advertise with Yelp in exchange for hiding or removing the negative review.

What is interesting is that the allegations in the complaint are not new. On February 18, 2009 The East Bay Express, a free weekly publication, based in Oakland, California published an article entitled “Yelp And The Business Of Extortion 2.0”

In the article The East Bay Express stated that interviews with dozens of business owners revealed several people were promised that negative reviews would be moved or removed if the business would advertise by Yelp sales reps. Further in another six instances positive reviews disappeared after owners declined to advertise.

Web 2.0 is all about user generated content. That business model, pioneered by Google, is used more and more as the cornerstone of the marketing efforts of businesses large and small. Yelp is a popular website which posts user generated content in the form of reviews of small businesses such as restaurants, dry cleaners, nightclubs, tire stores, and the like. Yelp attempts to monetize the content by obtaining advertising contracts from businesses which have been reviewed on the site. Yelp’s business model is not unique (Avvo.com has a somewhat similar site for lawyers) but it is one of the biggest players. Negative reviews on Yelp, particularly if a business has a small number of reviews, can really impact sales.

Last year Yelp’s CEO Jeremy Stoppelman responded to the article in the East Bay Express saying that claims of manipulation of reviews result from the fact that the businesses do not know how Yelp’s proprietary review algorithm works.

Yelp is hugely popular. It seems unlikely it would engage in wholesale extortion. It doesn’t need it. User generated content is the key to Web 2.0 and Generation X likes Yelp. Perhaps individual Yelp employees in their zeal to make a sale may have promised more, much more, than they could deliver.

By Galen Gentry

Aided By Exciting Competition, Higher Than Expected TV Ratings, And A Hockey Game For The Ages NBC’s Experiment In Social Media Will Pay A Dividend

NBC did a great job on www.nbcolympics.com. There was lots of video; it downloaded easily, and it was not exclusively of and about U.S. athletes.  NBC had tweets and blogs as a page on its site, allowing good access to the personal if not always interesting blogs and tweets of those involved in the games.

NBC also did a good job using its local news affiliates.  In addition to making NBC’s content available the affiliates focused on connections to local athletes.  NBC Los Angeles had articles and video of on the numerous athletes in the games with California connections  including skater Mirai Nagasu and ubersnowboarder Shawn White.  NBC Los Angeles had the tweets of some local athletes as well.

In my February 16th post I noted that NBC was making a concerted and expensive effort to measure the use of different media platforms at the Vancouver games so that ultimately it and advertisers could make meaningful decisions on how to spend money in emerging media. NBC hopes to determine what media the public used—mobile devices, computers and how they used it.  Monetizing new media content is the Holy Grail.  The 2010 Winter Olympic games will give NBC and its advertising clients lots of data to crunch.

 There was plenty of buzz, the television ratings were higher than expected,  and the both premier and secondary events were filled with excitement. Did NBC’s push into social media work?  Probably.

By Galen Gentry

NBC believes that the Olympic Games are a giant petri dish for new media consumption and the company is making every effort to effectively measure and evaluate new media trends and use.  Monetizing new media is the mantra of the world’s biggest corporations.  All of whom have serious money to spend in advertising and are involved to greater and lesser degrees in different media platforms.  The problem is that there are no standards by which to measure the audience of the most of the outlets.

Advertisers want  numbers, but collecting and quantifying the data on emerging media use is in its infancy.  NBC has hired a host of market research companies and  will release  among other things a daily total audience measurement which will count  how many people watched the Olympics on the various media platforms.  Sample size, the means of measurement and other issues will affect how much faith advertisers put in the numbers, but professionals involved in the legal and marketing aspects of  emerging media are very interested in NBC’s “daily total audience measurement.”

By Galen Gentry

On December 11, 2009 WIPO (the World Intellectual Property Organization) launched paperless UDRP proceedings.  This week the first paperless proceeding was completed.  Brought by telecommunications giant Nokia against an individual respondent the dispute was handled by WIPO’s Arbitration and Mediation Center in 37 days.  The arbitrator awarded a number of domains to Nokia.  According to WIPO a total of 182 disputes have been filed under the system since it launched.  The paperless method will be the only way to file complaints beginning March 1, 2010.

By Galen Gentry

Last Monday, the NFL registered a trademark for use of the phrase “Who Dat?” on apparel with the Florida Department of State.  The NFL began sending cease and desist letters to vendors in New Orleans who sell clothing and hats that have “Who Dat? on them.  According to the Wall Street Journal’s story published Friday the NFL claims that it has been using the phrase and enforcing its rights for twenty years.  The citizens of New Orleans have been vocal in their displeasure with the NFL’s position.  Louisiana politicians have also weighed in.  Congressman Charlie Melancon and Senator David Vitter have contacted the NFL urging them to drop its claim. To date the NFL remains unmoved. According to the NFL vendors selling shirts adorned with the phrase Who Dat and the name of the team are infringing.  And, the commonly seen shirts that simply say “Who Dat?” in black and gold without the word Saints won’t pass muster with the NFL because “Who Dat?” refers to the team.  Today, Louisiana Gov. Bobby Jindal  has asked the state attorney general to look into a possible lawsuit over the ownership rights to the popular phrase.

Ninth Circuit Throws Curve Ball in Bratz Dolls Trademark Suit and Stops Mattel From Taking Bratz Line

By Galen Gentry

Mattel scored a sweeping victory in its trademark infringement trial against MGA concerning the Bratz Dolls. MGA, the Bratz Dolls’ maker, was ordered to pay $100 Million in damages, turn over the dolls, and cease making them. But the 9th Circuit Court of Appeal issued a stay, and allowed Bratz to keep making the dolls. The Appeals court then took the extraordinary step of ordering the parties to mediate their dispute. The suit is a cautionary tale for small businesses. Mattel and other giant companies vigorously litigate their trademark rights. Had MGA been smaller and less well capitalized it would almost certainly have been destroyed by Mattel.

One of the most important trademark infringement trials of the year concerned Mattel Inc.’s complaint against MGA Entertainment over the Bratz dolls. At the trial level Bratz lost on all fronts. In 2008 the jury ruled after a trial in federal court in Riverside that Bratz was created by a toy designer while the designer was still working for Mattel. As a result control of the Bratz line was awarded to Mattel and MGA was ordered to pay $100,000,000.00 in damages.

MGA appealed and argued that several rulings made by the judge, Stephen Larson, should be overturned including the assignment of the Bratz ownership to Mattel, an injunction preventing MGA from making any more Bratz dolls, and an order instructing MGA to remove all Bratz products from store shelves by January 21, 2010. One of the grounds upon which MGA appealed was that Mattel employment contract with the doll designer, Carter Bryant, was invalid. The 9th Circuit issued an interim order on December 9th. The order allowed both retailers to continue selling MGA’s Bratz dolls through next year. The Court will issue a more detailed order later in 2010.

After the jury trial MGA was ordered to transfer ownership of the Bratz trademark and copyright to Mattel. The trial judge in the matter ruled that MGA had developed the doll from intellectual property that rightly belonged to Mattel and he ordered that Mattel take over the manufacturer and sale of the doll after the 2009-2010 Christmas season. But the Court of Appeals relieved MGA of its obligation to buy back and destroy all the remaining Bratz dolls on store shelves and said MGA can continue to sell the Bratz dolls that are currently in stores until a final court decision in the case is made.

The ruling is a huge victory for MGA. Reading between the lines of the appellate court ruling the court seems to be saying it is not pleased with the original decision at the trial level. The Ninth Circuit questioned why Mattel wasn’t simply given a royalty or an ownership stake in MGA Bratz toys. The appellate judges evinced concern regarding the employment agreement between Carter Bryant and Mattel. The appellate court’s decision to modify the injunction which would have wiped out MGA and its order that MGA and Mattel attempt to mediate their dispute may indicate that the panel believes that both Mattel and MGA have some merit to their claims.

Mediation is unlikely to work. Mattel has historically guarded its trademarks vigorously. Mattel obtained a total victory at the trial level and is unlikely to give that up. The big losers are toy retailers who will have to gamble on which manufacturer will have the right to sell hugely popular Bratz dolls next season.

Both MGA and Mattel are preparing new doll lines. MGA has Moxie Girlz and Best Friends Club. Mattel has Fashionista Barbies which it delivered to retailers this past October. However the Bratz dispute ends, the popularity of the dolls has slipped from its 2005 peak when they generated more than $1 Billion in sales.