JOLT Digest

Palin E-mail Hacker Indicted on Federal Charges by Tennessee Grand Jury
By Andrew Ungberg –- Edited by Jon Choate

United States v. Kernell
E.D. Tenn., October 7^th, 2008, No. 3:08-CR-142
Indictment

On October 7^th, 2008 a Tennessee grand jury charged David C. Kernell with violating 18 U.S.C. § 2701 (part of the Stored Communications Act) and 18 U.S.C § 1030(a)(2) (a subsection of the Computer Fraud and Abuse Act) for allegedly accessing the Yahoo e-mail account of Alaska Governor Sarah Palin, the Republican vice-presidential nominee, without authorization. Images and information from Gov. Palin’s e-mail account first hit the Internet on September 17^th, and began making headlines shortly thereafter. Several websites, including Wikileaks.org and popular blog network Gawker.com, posted screen shots and content from the hacked e-mail account.

Professor Orin S. Kerr, of the George Washington University Law School and the Volokh Conspiracy blog, sees a potential problem with the indictment. He notes that in order to charge the case as a felony, the government must claim Kernell accessed the account “to further criminal or tortuous activity.” According to Kerr, however,

[T]he indictment doesn’t exactly state what the crime or tort is that the intrusion was designed to further. It just states that the intrusion was “in furtherance of the commission of a criminal act in violation of the laws of the United States, including 18 U.S.C. Section 2701 and 18 U.S.C. Section 1030(a)(2)” But Section 2701 and Section 1030 are the intrusion statutes themselves! It makes no sense to allow a felony enhancement for a crime committed in furtherance of the crime itself . . . .

Info/Law draws parallels between this case and the Lori Drew MySpace case.

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Expelled Lawsuit Dropped

Lennon v. Premise Media Corp. (S.D.N.Y.)

The suit filed by Yoko Ono and the children of John Lennon against the producers of Expelled, a motion picture that used a clip of the song “Imagine” without permission, was withdrawn and dismissed last month.  However, Anthony Falzone, Executive Director of Stanford’s Fair Use Project and counsel for defendants, notes:

[T]he right result came far too late. The mere pendency of these cases caused the film’s DVD distributor to shy away from releasing the full film — the version that includes the Imagine segment. So the film goes out on DVD on October 21 in censored form, illustrating the damage that even an unproved and unsupported infringement claim can do.

Previously: District Court Denies Yoko Ono Lennon’s Motion for Injunctive Relief

Virginia State Supreme Court Holds Anti-Spam Statute Unconstitutionally Overbroad
By Jay Gill — Edited by Nicola Carah

Jaynes v. Commonwealth of Virginia
Supreme Court of Virginia, September 12, 2008, No. 062388
Slip Opinion

The Supreme Court of Virginia overturned the conviction of prolific spammer Jeremy Jaynes, unanimously reversing not only the Virginia state court of appeals, but its own earlier holding in the case. In doing so, the court held that the Virginia anti-spam statute under which Jaynes was convicted was unconstitutionally overbroad, as it did not distinguish between commercial and non-commercial instances of anonymous, unsolicited bulk e-mail. The court ruled that non-commercial anonymous bulk e-mail falls squarely within First Amendment protection and that no reasonable construction of the Virginia statute could remedy the constitutional defect.

In a press release praising the decision, the ACLU, which filed an amicus brief in support of Jaynes, wrote, “[s]peech on the Internet deserves no less First Amendment protection than in any other medium.” Jon Praed of the Internet Law Group took issue with the court’s characterization of the situation, telling the Washington Post: “I guess a burglar can break into your home as long as they are reciting the Gettysburg Address.” John Levine, president of the Coalition Against Unsolicited Commercial E-mail, and an expert for the prosecution in Jayne’s jury trial, argues that IP forgery is a red herring and points out that there are a variety of alternatives to send anonymous emails. Nonetheless, he commented, “I don’t see it as a fatal setback for anti-spam law.” According to Levine, Virginia’s statute was unique in prohibiting noncommercial spam, and other statutes, including the federal CAN-SPAM act (which took effect after Jaynes’s arrest), do not contain the flaw that led to the result in this case.
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Second Circuit: Cablevision DVR Does Not Directly Infringe Copyright
By Stephanie Weiner — Edited by Andrew Ungberg

The Cartoon Network LP v. CSC Holdings, Inc.
Second Circuit, August 4, 2008, 07-1480-cv(L) & 07-1511-cv(CON)
Slip Opinion (also hosted at the EFF)

On August 4, the Second Circuit reversed the District Court for the Southern District of New York, ruling that Cablevision’s “Remote Storage” Digital Video Recorder system (RS-DVR) does not infringe the copyrights of the various broadcast and cable channels that produce or provide individual programs.

First presented by Cablevision in March 2006, the RS-DVR allows customers who do not have a stand-alone DVR device to record cable programming on central hard drives housed and maintained by Cablevision at a remote location.

RS-DVR customers may then receive playback of those programs through their home television sets using a remote control and a standard cable box equipped with the appropriate software. This is different from a traditional DVR in that instead of sending signals from the remote to an on-set box, the viewer sends signals from the remote, through the cable, to a server at Cablevision’s central facility.

The plaintiffs, several networks and studios that hold the copyrights to numerous movies and television programs, sought declaratory and injunctive relief. They claimed that Cablevision’s operation of the RS-DVR would directly infringe their exclusive rights to both reproduce and publicly perform their copyrighted works. The District Court for the Southern District of New York awarded the plaintiffs summary judgment, and enjoined Cablevision from operating the RS-DVR without licenses from its content providers. On appeal, the Second Circuit reversed and remanded.

ipFrontline carries a thorough summary of the case, including a technical breakdown of Cablevision’s RS-DVR system.

Law.com also provides coverage.

Eric Goldman suggests that the opinion leaves open more questions than it resolves.
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Third Circuit Vacates FCC Fine
By Jon Choate — Edited by Stephanie Weiner

CBS Corp. v. Federal Communications Commission
Third Circuit, July 21 2008, No. 06-3575
Slip Opinion

On July 21, the Third Circuit vacated an FCC order fining CBS $550,000 for the nine-sixteenths of one second broadcasting of Janet Jackson’s bare right breast during the halftime show of Super Bowl XXXVIII in February 2004. The court held that the FCC had departed from its prior policy in fining CBS for the “fleeting image” and that this change was “arbitrary and capricious” under the Administrative Procedure Act § 706. The court also held that Janet Jackson and Justin Timberlake were independent contractors with respect to CBS while performing at the half-time show and that CBS could not be held vicariously liable for their actions without proof of scienter.

The case was remanded for further proceedings consistent with its ruling; however, the court noted that any further action would be declaratory in nature, as the FCC cannot retroactively penalize CBS.

Ken Ferree, president of The Progress & Freedom Foundation (“PFF”) hailed the ruling as a reinforcement of First Amendment rights. Adam Thierer, a senior fellow at the PFF, expects the FCC to appeal the decision, as it did a Second Circuit opinion holding that the FCC’s policy sanctioning “fleeting expletives” was arbitrary and capricious.

Jonathan Rintels, Executive Director of the Center for Creative Voices in Media, also applauded the decision, focusing in particular on the “chilling” effect the FCC’s decisions might have on freedom of expression.

The Parents Television Council (“PTC”) was somewhat less pleased with the decision, which, in its view, “hijacked the will of the American people” and the “intent of Congress.”

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Federal Circuit Clarifies Patent Obviousness after KSR
By Debbie Rosenbaum — Edited by Stephanie Weiner

Eisai Co. v. Dr. Reddy’s Laboratories, Ltd.
Federal Circuit, July 21, 2008, No. 2007-1397
Slip Opinion

On July 21, the Federal Circuit affirmed the United States District Court for the Southern District of New York’s ruling in favor of plaintiff Eisai Co., holding that the patent-in-suit, U.S. Patent No. 5,045,552, was non-obvious and was not obtained through inequitable conduct.

This case illustrates the Federal Circuit’s current test for chemical obviousness since the Supreme Court rejected the Federal Circuit’s application of the “teaching, suggestion, or motivation test” for obviousness in KSR Int’l Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007) as too rigid, mandating a more flexible approach that takes ordinary creativity and skill into account. A brief background on KSR can be found at Patent Docs.

Kevin E. Noonan at Patent Docs welcomes the decision.

The Patent Hawk characterizes the court’s opinion as positing a “problem-reasoning-predictability” test for chemical obviousness.

Aaron F. Barkoff at Seeking Alpha makes the observation that patents on chemical compounds are holding up well even after KSR.

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Eleventh Circuit Applies Copyright Act’s Collective Works Provision to CD-ROM Collection
By Dmitriy Tishyevich — Edited by Andrew Ungberg

Greenberg v. National Geographic Society
11th Circuit, June 30, 2008, No. 05-16964
Slip Opinion

On June 30, the Eleventh Circuit issued a divided en banc opinion, affirming by a 7-5 vote the panel decision in Greenberg II, which had vacated Greenberg I.

Writing for the majority, Judge Barkett held that National Geographic was privileged to reproduce its print issues. Section 201(c) of the Copyright Act distinguishes between the copyright of each individual work within a collective work — here Greenberg’s photographs — and copyright of the collective work in its entirety, here National Geographic’s “Complete National Geographic” (“CNG”), a CD-ROM collection of all the back issues of the National Geographic magazine. Citing New York Times v. Tasini, Judge Barkett wrote that § 201(c) granted the publisher privilege to reproduce an article contributed by a freelancer when it was part of (1) the collective work to which the author originally contributed; (2) any revision of that work; or (3) any later collective work in the same series. Emphasizing the importance of the context in which the works were presented, Judge Barkett found that the CNG CD-ROM collection qualified as a “revision” under § 201(c) and Tasini’s interpretation of the term.

William Patry comments favorably on the majority opinion on his blog, and notes that a grant of certiorari is unlikely as there is no split in the circuits, and the issues decided are close to Tasini. He previously criticized Judge Birch’s approach as at odds with copyright’s constitutional goal of promoting the progress of science. Law.com provides a summary of the decision and the procedural history of the case.

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ICANN Opens Up Available Top Level Domains
By Joshua Gruenspecht — Edited by Andrew Ungberg

June 26, 2008
ICANN press release

The Internet Corporation for Assigned Names and Numbers (“ICANN”), the international organization in charge of allocating resources and establishing protocols on the Internet, last week removed the existing limits on internet generic top-level domains (“gTLD”s) and announced plans to accept applications from operators for new namespaces. Initially, the earliest domain names fell into a few select functionally classified categories, such as .com and .net; subsequent rounds of expansion added new categories such as .biz and .post. Now, however, ICANN will permit private operators to create and vend top-level domains of their own design.

According to ICANN’s Final Report on Introduction of New Top-Level Generic Domains, new gTLDs will continue to be approved by ICANN itself. It is as yet unclear whether registrars who are approved to distribute domain names using new gTLDs will not be required to follow the same Unified Domain Name Dispute Resolution Procedure (“UDRP”) that registrars who handle .com, .net, .org, .biz, .info, and .name are currently required to follow. ICANN itself, however, will follow an entirely new set of procedures. Approval of a new gTLD will take into consideration the string’s similarities to existing gTLDs, how closely it resembles existing trademarks, and whether it fits within existing international standards of “morality and public order,” among several other tests.

Names @ Work is already touting this as the next big trademark challenge for corporations concerned about maintaining their brand online, while Cyber Law Online is dismissing it as a minor shift with few real-world implications. Pangloss predicts that this will ultimately result in legitimate users dispersing across the newly broadened namespace, making it easier to identify determined trademark-infringing cybersquatters, although others are less optimistic.

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Supreme Court Reinvigorates Patent Exhaustion
By Andrew Ungberg — Edited by Joshua Gruenspecht

Quanta Computers, Inc. v. LG Electronics, Inc.
Supreme Court of the United States, June 9, 2008, No. 2006-937
Slip Opinion

The Supreme Court reversed the Federal Circuit, which had held that patent holders could seek infringement damages from subsequent purchasers further “downstream” provided that the initial transfer had imposed some type of restriction on the initial purchaser. The Federal Circuit’s ruling, had it been upheld, would have effectively extinguished the doctrine of patent exhaustion and allowed patent holders the ability to control the use of their patents far beyond traditional limits.

Justice Thomas delivered the unanimous decision, holding that the 155-year-old doctrine of patent exhaustion limits the patentee’s power to dictate the terms of use through the first level of sales only. In an opinion steeped in tradition, the Court held that the reasoning of United States v. Univis Lens Co. 316 U.S. 241 (1942) controlled the case. The Univis Court held that a patentee’s rights were extinguished because the finished product (cut eyeglass lenses) embodied essential features of the patented product (unfinished eyeglass lens blanks). While this has long been the standard for process patents, the Court for the first time here extended that same logic to method patents. The Court also stated that a use “substantially embodying” the patent, rather than fully practicing it, was sufficient to exhaust the patent-holder’s rights.

Overviews of the case are available at Patently-O, the SCOTUS Blog and Law.com.

The full transcript of the oral argument is available here.

Professor Mark R. Patterson of Fordham University authored an article last November advocating a broad overruling of the Federal Circuit decision on Patently-O, which outlined the negative implications of allowing the lower court’s decision to stand.

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Federal Circuit Clarifies Recovery for Lost Profits, Non-Exclusive Licensees: Parent Company Denied Recovery for Lost Profits of Subsidiary
By Jeff Gritton — Edited by Joshua Gruenspecht

Mars, Inc. v. Coin Acceptors, Inc.
Federal Circuit, June 2, 2008, No. 2007-1409
Slip Opinion

The Federal Circuit affirmed in part and vacated in part the District Court of New Jersey and remanded for recalculation of damages in a patent infringement suit.

The court affirmed the district court’s holding precluding Mars Inc. (“Mars”) from recovering damages on a lost profits theory, holding that Mars could not recover for its wholly owned subsidiary’s lost profits. The court stopped short of answering the question of whether a parent company could ever recover for its subsidiary’s lost profits, limiting its holding to the facts of the case at issue.

The court also affirmed the district court’s judgment denying Mars’s motion to amend its complaint to add its subsidiary Mars Electronics International (“MEI”) as a co-plaintiff in its action against Coin Acceptors, Inc. (“CoinCo”) for infringements occurring before 1996, agreeing with the lower court that MEI lacked constitutional standing as a non-exclusive licensee.

The Federal Circuit vacated the lower court’s conclusion that Mars had standing to recover damages for the period between 1996 and 2003. Because Mars had assign its title to the patent to MEI in 1996, it lacked standing for that period of time.

Finally, the court affirmed the district court’s assessment of a reasonable royalty rate for the calculation of damages related to the infringement. Because Mars’s lack of standing for the period from 1996 to 2003 changed the royalty base, the court remanded for recalculation of damages for the period prior to 1996.

The Patent Hawk provides a “sassy” take.

Dennis Crouch of Patently-O and Barry Barnett of Blawgletter also provide coverage of the opinion.

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