Lahoti v. Vericheck Inc., No. 08-35001 (9th Cir., Nov. 16, 2009)
Opinion

On November 16th, the Ninth Circuit held that the district court’s finding that the mark “VeriCheck” was an inherently distinctive, legally protectable mark was based in part on erroneous legal reasoning and in part on valid reasoning. Accordingly, it vacated the lower court’s award of summary judgment in favor of the defendant and remanded. However, the Ninth Circuit affirmed the district court’s finding that the counterclaim defendant acted in bad faith. The court noted that it is proper for a court to consider the fact that the PTO has allowed others to register the mark at issue without requiring a showing of secondary meaning as weighing in favor of a finding of inherent distinctiveness.

The Ninth Circuit held that because the district court did not rely exclusively on the proper legal standard, its finding that Disputed Mark was distinctive must be vacated — even if there may have also existed proper legal grounds for finding the mark distinctive. The court also held that Lahoti acted at least “partially in bad faith” by gambling that the district court would agree with his interpretation of trademark law. He knew or should have known that he would risk cybersquatting liability if his gamble failed.

BNA and Michael Atkins, a Seattle trademark lawyer, provide relevant overviews of the case.

VeriCheck, Inc. (“VeriCheck”), a Georgia corporation that provides electronic financial transaction processing services, had unsuccessfully attempted to secure the vericheck.com domain name in 1999. David Lahoti claimed that in anticipation of future business pursuits, he registered a number of domain names with the “veri-” prefix, acquiring the vericheck.com domain name in 2003. After a failed negotiation in 2004 between Vericheck and Lahoti, VeriCheck filed an arbitration complaint pursuant to the Uniform Domain-Name Dispute-Resolution Policy in 2006. Although the arbitrator ordered the transfer of the Domain Name to VeriCheck, Lahoti sought a declaratory judgment that he did not violate the Lanham Act’s cybersquatting or trademark infringement provisions. Vericheck counterclaimed that Lahoti’s actions violated the Lanham Act, the Anti-Cybersquatting Consumer Protection Act (“ACPA”), the Washington Consumer Protection Act (“WCPA”), and Washington common law.

The Ninth Circuit reasoned that the proper standard of appellate review was for “clear error,” and it held that the district court’s decision that the “VeriCheck” mark was a distinctive, legally protectable mark under the ACPA and federal trademark law was based in part on reasoning contrary to federal trademark law and based in part on reasoning that could support the district court’s conclusion. Accordingly, because the district court did not rely exclusively on the proper legal standard, the appellate court vacated and remanded the judgment to the extent it determined the Disputed Mark was distinctive.

The appellate court also held that the record supported the district court’s summary judgment determination that Lahoti was motivated by a bad faith. Not only did he intend to profit from his use of the Disputed Mark, but also he was a repeat cybersquatter who has been admonished by other judicial bodies for cybersquatting. The court reasoned that Lahoti’s failed defenses in these other cases made it unlikely that he legitimately believed that his use of the Domain Name was wholly lawful in this case.

This case is significant because it maintains that the issue of whether a mark is suggestive or descriptive is a fact-intensive question that poses a difficult decision in many close cases. This case falls in line with a series of cases that have been reluctant to allow for the ACPA safe harbor defense that protects registrants who “believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful.” 15 U.S.C. 1125(d)(1)(B)(ii).

By Abby Lauer – Edited by Ian C. Wildgoose Brown

On Thursday, Intel announced that it will pay $1.25 billion to Advanced Micro Devices (AMD) to settle AMD’s antitrust complaints in the U.S., Europe, Japan and South Korea. According to the terms of the settlement, Intel agreed to refrain from engaging in tactics involving computer manufacturers that would exclude AMD from the microprocessor market. The companies also resolved to drop their patent dispute and enter into a five-year cross licensing agreement.

The NY Times provides an overview of the settlement and other information about Intel and AMD. Ars Technica provides strategic analysis; the WSJ Law Blog provides opinions of antitrust experts and PCWorld provides additional commentary.

The settlement is the latest development in a dispute between Intel and AMD that has spanned more than two decades and has involved 200 million documents and 2,200 hours of witness depositions. AMD had accused Intel of rewarding computer manufacturers that use Intel chips exclusively while penalizing those who buy products from AMD, a violation of the Clayton Antitrust Act, 15 USC 14. Intel refuted these accusations and has repeatedly denied that it engaged in illegal tactics to exclude AMD from the microprocessor market. Market leader Intel supplies 70-80% of all PC microprocessors; AMD is a distant second and supplies the remaining 20-30%.

News of the settlement was met with some surprise in the business world, although the companies claim to have been conducting dispute resolution meetings since April. The substantial amount of money that Intel has agreed to pay AMD may indicate the company’s unwillingness to risk a loss at trial. Such a loss could have required Intel to pay treble damages under 15 USC §§ 12–27; this amount plus the additional legal fees accumulated at trial could have cost Intel much more than the settlement amount.

The chance of an FTC suit against Intel is somewhat diminished in light of the settlement agreement, as AMD historically has been a significant agitator for government antitrust action. However, the settlement does not cover many of Intel’s business practices, including Intel’s broad pricing policies and its marketing payments to PC makers. The FTC has been investigating Intel business practices for the past year, though it has not yet filed a complaint against the company. Intel is currently appealing a $1.45 billion fine that was imposed by the European Union last May. Betanews reports that a spokesman for the European Commission has recognized the AMD settlement but has made clear that the Commission is going forward with its antitrust investigations. In addition, New York Attorney General Andrew Cuomo recently filed a wide-ranging antitrust suit against Intel. The AMD settlement therefore is not the end of Intel’s antitrust battles.

The settlement will help AMD address $5 billion of debt resulting from recent business acquisitions and reorganizations. Intel needs AMD to stay competitive to balance its market domination and to counter further antitrust and monopoly concerns. This settlement may represent a win-win resolution to one of the computer industry’s most bitter legal battles.

By Adrienne Baker – Edited by Ian C. Wildgoose Brown
Schrock v. Learning Curve Int’l, No. 08-1296 (7th Cir. Sep. 9, 2009)
Opinion

On November 5, the Court of Appeals for the Seventh Circuit reversed and remanded a decision of the District Court for the Northern District of Illinois, which had ruled that copyright for a derivative work requires permission from the underlying copyright holder to be valid. The district court’s ruling was based on reasoning in Gracen v. Bradford Exchange, 698 F.2d 300 (7th Cir. 1983). The Seventh Circuit instead held that a valid copyright in a derivative work is created by “operation of law” and not by authority of the copyright owner in the underlying work, unless a contract dictates otherwise. Additionally, the court held that there is no heightened standard of originality for copyright protection in a derivative work.

The Exclusive Rights Blog provides an overview of the case. Rebecca Tushnet’s 43(B)log criticizes the circuit court for not explicitly overturning Gracen and asserts photographs of copyrighted material should not be treated as derivative works.

The dispute in Schrock concerned photographer Daniel Schrock’s copyright infringement allegation against Learning Curve Int’l and HIT Entertainment (HIT). HIT owns the copyright in the “Thomas & Friends” train characters. HIT licensed the right to create and distribute “Thomas & Friends” toys to Learning Curve. Learning Curve hired Schrock to take pictures of the toys for marketing purposes. Years later, the company ceased using Schrock’s professional services but continued to use his photographs in promotional materials. Schrock subsequently registered his photographs for copyright protection and sued Learning Curve and HIT for copyright infringement. The doctrinal issue in this case arose from the district court’s finding that Schrock’s photographs were derivative works, thereby triggering the requirement of permission from the underlying copyright holder under Gracen.

However, the Seventh Circuit held that the district court had misread Gracen. The Seventh Circuit admitted that the permission-to-copyright dicta in Gracen was incorrect because it contravenes the copyright protection requirements as provided in 17 U.S.C. §102(a) of the Copyright Act (“copyright protection subsists . . . in original works of authorship fixed in any tangible medium”). The court acknowledged that parties effectively may alter these rights through contract. Because the record did not include the contracts among Schrock, Learning Curve, and HIT, the court remanded to the district court for further proceedings.

The circuit court also clarified that the “substantially different from the underlying work” language in Gracen does not impose a high standard of originality for copyright protection in a derivative work, but rather reiterates the notion that derivative works must have a “nontrivial distinguishable variation” from the underlying work in order to be granted copyright protection. This requirement applies both to Schrock’s photographs (a derivative work of the toys) and Learning Curve’s promotional materials (a derivative work of the original photographs).

Schrock aligns copyright law in the Seventh Circuit with the requirements for copyright protection provided in the Copyright Act. However, the scope of the holding is uncertain as it is not possible to determine how the “nontrivial distinguishable variation” requirement for copyrightable derivative works will be applied to works outside the realm of photography.

Convicted Murderer Demands that Wikipedia Remove His Name from Victim’s Article

On November 11, Wired reported that a convicted murderer in Germany has issued a cease-and-desist letter demanding that Wikipedia remove his name from his victim’s Wikipedia article. Wolfgang Werle murdered Bavarian actor Walter Sadlmayr in 1990, and was released on parole in 2007. The letter demands legal fees and compensation for “emotional suffering” caused by the publication of Werle’s name in connection with the murder since his release. German media have already stopped using Werle’s name. Since Wikipedia is an American organization, the Electronic Frontier Foundation describes the issue as “an apparent conflict between the U.S. First Amendment — which protects truthful speech — and German law — which seeks to protect the name and likenesses of private persons from unwanted publicity.”

Senator Criticizes Verizon’s Increased Cancellation Fees as “Anti-Competitive”

On November 10, Ars Technica reported that United States Senator Amy Klobuchar wrote a letter to Verizon, criticizing the company’s announced increase in early cancellation fees for cell phone contracts. Verizon recently announced that, beginning November 15, the fee for cancelling a subsidized smartphone contract would double from a maximum of $175 to $350. Senator Klobuchar, who is a proponent of the Cell Phone Consumer Empowerment Act, called the increase “anti-consumer and anti-competitive.” Senator Klobuchar also wrote a letter to the FCC, asking for an investigation into the competitive and economic impact of the decision on consumers. Verizon noted that consumers can avoid the early termination fees by purchasing smartphones without Verizon subsidies.

United Kingdom Proposes Mandatory Surveillance of Social Networks, Chat Rooms, and Video Games

On November 9, the BBC reported the United Kingdom government has proposed that communication service providers retain records from a variety of new sources including social networks, chat rooms and online games. The move is designed to monitor the parties to and date of each online communication, but not the “actual contents of what was said.” Specific legislation has not yet been introduced, but the proposal includes compensation for the communications providers that must implement the technically challenging requirements. The government has insisted that most concerns about the proposal have only to do with the “detail of what would be done with the information.”

By Davis Doherty – Edited by Jad Mills
Assn. for Molecular Pathology, et al. v. USPTO, et al., Case no. 09-CV-4514 (S.D.N.Y. Nov. 2, 2009)
Slip Opinion (hosted by Patent Baristas)

The United States District Court for the Southern District of New York denied defendants’ motion to dismiss plaintiffs’ claim that patents on a human gene violate the First Amendment and Article I of the Constitution for jurisdictional issues, lack of standing, and failure to state a claim.

District Judge Sweet found that the plaintiffs’ constitutional claims challenging the validity of Myriad Genetics’ gene patents provided subject matter jurisdiction and standing to sue the United States Patent and Trademark Office because of the lack of available statutory remedies.  The plaintiffs claim that Myriad’s patents are inappropriate because they cover “products of nature”, and seek invalidation of the patents under the Constitution of the United States. Judge Sweet held that these claims met the stricter pleading standards recently announced in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009).  In so holding, the court noted the “novel circumstances presented by this action against the USPTO”: The Patent and Trade Office is generally immune from suit due to the availability of statutory remedies for claims arising from patents. Such remedies do not provide for constitutional claims.

Ars Technica provides a brief overview of the case.  The ACLU, who represents the plaintiffs, writes in support of the decision.  Patent Baristas put forward a more skeptical view of the plaintiffs’ prospects. Patent Docs features a longer analysis of the decision.

Defendant Myriad Genetics owns interests in several patents on the human genes BRCA1 and BRCA2, both of which can indicate an increased risk of breast or ovarian cancer.  Myriad can thus control the availability of genetic testing for the BRCA1 and BRCA2 sequences, a process that can cost as much as $3000.  The patents also allow Myriad to restrict other laboratories’ research on the BRCA sequences.  The numerous plaintiffs include researchers, testing laboratories, medical societies, advocacy organizations, and cancer patients with various interests in seeing the invalidation of the patents-at-issue.

Arguing on behalf of the plaintiffs, the ACLU and the Public Patent Foundation claim that the patents violate the First Amendment’s protection of freedom of thought and Article I, section 8, clause 8’s instruction that Congress “promote the Progress of Science and useful Arts”.  In holding that the plaintiffs have standing to sue and that subject matter jurisdiction exists, the court relied on the fact that these constitutional claims fall outside the remedies provided by the Patent Act.  In holding the pleading sufficient, the court reasoned that the First Amendment claim is supported by the plaintiffs’ argument that the BRCA patents cover a product of nature, and the Article I claim is supported by the contention that the patent has inhibited research on the genes.

This suit is significant for both procedural and public policy reasons.  Using constitutional claims in an attempt to invalidate patents is a novel approach, and is probably the only approach that would allow the plaintiffs to include the USPTO as a defendant. A victory for the plaintiffs could result in an increased availability of genetic testing for breast cancer risks.  More broadly, if the plaintiffs present a successful challenge to the USPTO’s general policy of granting gene patents, the validity of patents on an estimated 20% of the human genome would be called into question.

Court Issues TRO Against Sales of Beatles Music “Simulation”

Ars Technica reports that on November 5, a Central District of California judge issued a temporary restraining order (TRO) against BlueBeat.com, a website offering 25-cent downloads and free streaming of thousands of copyrighted songs, most notably including the entire Beatles catalog. The order is part of a suit filed on November 3 by Capitol, EMI, Priority, and Virgin Records, claiming copyright infringement and various state law violations. In its ill-received opposition to the TRO, BlueBeat asserted in part that the sound recordings it sells were not copied from the originals, but instead were “independently developed” through a “psycho-acoustic simulation” process.

New York Files Suit Against Intel

New York Attorney General Andrew Cuomo filed an antitrust lawsuit against Intel on November 4, The New York Times and The Washington Post report. The complaint focuses on Intel’s relationships with Dell, Hewlett-Packard, and IBM, asserting that the company has used what amounts to coercion and bribery to ensure the use of its chips over those of its main competitor, Advanced Micro Devices. This is the second antitrust action taken against Intel in the U.S — the first, an FTC administrative complaint, was filed in 1998 and later settled. Since 2005, however, Intel has battled and lost antitrust disputes in the EU, Japan, and South Korea.

Anti-Net Neutrality Bill Introduced in House

On October 30, Rep. Marsha Blackburn (R-TN) introduced a House bill that would ban the FCC from issuing “any regulations regarding the Internet,” PCMag.com reports. The bill came eight days after the FCC issued its proposed net neutrality rulemaking, and a week after Sen. John McCain introduced a similar bill in the Senate. Blackburn framed the bill as an effort to preserve the Internet as “the last truly open public marketplace”; supporters of FCC regulation counter that the proposed nondiscrimination rule is necessary to preserve that openness.

U.S. v. Cioffi, et al., Case No. 08-CR-415 (FB) (E.D.N.Y. Oct. 26, 2009)
Slip Opinion (hosted by WSJ)

The Eastern District of New York granted defendant Matthew Tannin’s motion to suppress evidence obtained from his personal Gmail account. Ralph Cioffi and Matthew Tannin were charged with conspiracy, securities fraud and wire fraud in connection with their roles as Bear Sterns hedge fund managers. Prosecutors obtained a warrant to search Tannin’s personal Gmail account, but the warrant failed to specify what evidence could be seized or to what crimes the evidence must relate.  After some initial difficulty, Google delivered a copy of the email account to the Government. As the Wall Street Journal reported, one email contained a comment that funds Tannin managed could “blow up.” Tannin moved to suppress this evidence on the ground that it violated the Fourth Amendment.

District Judge Block held that the warrant was facially overbroad and thus violated the Fourth Amendment. The Court reasoned that because the warrant itself was not particular as to either the items to be seized or to a particular crime, and because the affidavit was not attached or incorporated into the warrant, the warrant was unconstitutional. The court also held that the warrant did not merit a “good faith” or “inevitable discovery” exception, largely because the executing officers should have known the warrant was overbroad.

The Wall Street Journal provides a brief overview of the case. The Eric Goldman Blog also provides a summary of the case. Orin Kerr of the Volokh Conspiracy criticizes the ruling, saying that the good faith exception should have been granted since the case law was not firmly established at the time of execution.

In holding that the warrant was overbroad, the court reasoned that the warrant should have included information about the particular items to be seized and what crimes were at issue. Interestingly, the court did not take a firm position on the particularity requirement for computer searches. Instead, the court focused on particularity requirements in general.  Even though the warrant was based on an affidavit containing useful and particular information about the evidence to be siezed and the crime being charged, the warrant was facially overbroad because it did not formally incorporate and attach the affidavit.

The court went on to deny admission under either the “good faith” or  “inevitable discovery” exceptions. In denying the first exception, the court held that the good faith exception does not apply to cases with facially invalid warrants that executing officers could not reasonably presume to be valid. The court reasoned that this was such a case  because of the lack of particularity in the warrant. In denying the inevitable discovery exception, the court relied on United States v. Eng., and held that the analysis must focus on “what would have happened had the unlawful search never occurred.” 997 F.2d 987, 990 (2d Cir. 1993). The court reasoned that the government relied on the invalidation of the warrant to show that discovery was inevitable. Thus, the government essentially focused on what would have happened given, rather than without, the unlawful search. The court, therefore, granted the motion to suppress the evidence obtained from the government’s warrant.

This case is significant for two main reasons. First, it deals a major blow to the prosecution’s case against the two former hedge fund managers. The emails seemed to contain powerful evidence of knowledge of the funds’ instability, evidence that is now inadmissible. Second, it helps affirm the Second Circuit’s position that an affidavit must be attached and incorporated into the warrant in order for it to “cure” the warrant’s lack of particularity. To do so, it interprets a less than explicit section of the Supreme Court’s opinion in Groh v. Ramirez, 540 U.S. 551 (2004). It thus adds weight to this distinct interpretation of Groh. Perhaps future Supreme Court jurisprudence will clarify and solidify the issue.

By Ian B. Brooks – Edited by Alissa Del Riego
United States v. Kilbride, No. 07-10528 (9th Cir. Oct. 28, 2009)
Opinion

The Ninth Circuit has affirmed the District Court for the District of Arizona, which had convicted and sentenced defendants Jeffery Kilbride and James Schaffer of transporting obscene materials for sale.

The Ninth Circuit held that a national community standard “must be applied in regulating obscene speech on the Internet, including obscenity disseminated via email.” United States v. Kilbride, No. 07-10528 at 14492 (9th Cir. Oct. 28, 2009).  Defendant Internet spammers Kilbride and Schaffer had appealed their convictions for interstate transportation for sale of obscene material in violation of 18 U.S.C. §§ 1462 and 1465. Judge Fletcher of the 9th Circuit examined the opinions of the fragmented Justices in the Supreme Court’s opinion in Ashcroft v. ACLU for guidance in reaching his conclusion that a national community standard would not pose the constitutional concerns that a local community standard would. Ashcroft v. ACLU, 535 U.S. 564 (2002)

Eric Goldman provides an overview of the case. Orin Kerr, of The Volokh Conspiracy, criticizes the Ninth Circuit’s reasoning in the case. Kerr argues that the Ninth Circuit should have followed the precedent set in Miller v. California, 413 U.S. 15 (1973), wherein local “contemporary community standards” were applied.

Although the Ninth Circuit agreed with the defendants’ assertion that the district court erred in its jury instruction on the obscenity community standard, the court found that it was not a plain error and did not require reversal. The court reached its holding based on  Ashcroft, which found the Child Online Protection Act (COPA) unconstitutional because it was based partly on community standards to identify material that was harmful to children.

Defendants Kilbride and Schaffer operated a spamming business through Ganymede Marketing, a Mauritian company with servers operating in the Netherlands. Two images from the defendants’ sexually explicit emails lead to the obscenity charges. Kilbride and Schaffer were sentenced to 78 and 63 months respectively. On appeal, defendants challenged the District Court’s application of a contemporary community standard to email communications under Hamling v. United States, 418 U.S. 87 (1974), because it would subject the defendants to the least tolerant community standard in the country. The government challenged defendants’ argument by citing a prior case in the district, United States v. Dhingra, 371 F.3d 557 (9th Cir. 2004), in which the Ninth Circuit did not foreclose a local community standard where a crime occurred over the Internet. The Ninth Circuit distinguished Dhingra noting that it does not apply to a federal law that regulates speech.

Rather than applying Hamling, the Ninth Circuit followed Ashcroft. The Ashcroft case addressed the constitutionality of the COPA, which regulated material harmful to minors. The opinion of the Court in Ashcroft did not find it significant that Internet communications were not focused to a particular area and rejected the national community standard approach. The Ninth Circuit reasoned that the view of the Court was contrary to defendants’ argument but noted that the opinion was not joined by a majority of the court.The Ninth Circuit found support for its conclusion that a national obscenity standard should be applied by examining the multiple concurrences and dissent of the other Justices in Ashcroft. Judge Fletcher noted that six Justices raised constitutional concerns over the application of a local community standard for defining obscenity in Internet cases.

This case represents a departure from the local community standard that had been applied following Miller and goes against the reasoning of the opinion of the Court in Ashcroft, but applies what some believe to be the practical reasoning necessary for balancing Internet communications, free speech, and obscenity concerns. Looking forward, OneNewsNow provides a brief opinion on how the Ninth Circuit’s decision may impact defenses raised by attorneys.

By Abby Lauer – Edited by Alissa Del Riego
Siracusano v. Matrixx Initiatives, Inc., No. 06-15677 (9th Cir. Oct. 28, 2009)
Opinion

The Ninth Circuit has unanimously reversed the U.S. District Court for the District of Arizona’s holding, which had dismissed a class action claim against Zicam manufacturer Matrixx for the complaint’s failure to adequately allege a violation of the Private Securities Litigation Reform Act of 1995 (“PSLRA”).

In an opinion written by Tashima, J., the Ninth Circuit held that the District Court improperly relied on a statistical significance standard to determine that the plaintiffs’ complaint did not allege “a material misrepresentation or omission of fact.” Siracusano v. Matrixx Initiative, Inc., No. 06-15677 at 18 (9th Cir. Oct. 28, 2009). Instead of determining materiality as a matter of law, the district court should have allowed the jury to conduct a “fact-specific inquiry.” Siracusano v. Matrixx Initiative, Inc., No. 06-15677 at 20 (9th Cir. Oct. 28, 2009). In addition, the Ninth Circuit held that the lower court erred in dismissing plaintiffs’ complaint for failure to allege scienter on the part of Matrixx executives. The court reasoned that the inference that Matrixx executives knew about the possible link between Zicam and anosmia (loss of smell) before issuing allegedly misleading statements is at least as likely as any plausible opposing inference.

Phoenix’s East Valley Tribune provides an overview of the case. For further discussion of the opinion and pleading standard precedents, see The D & O Diary. For more information about homeopathic remedies, including Zicam, see this recent Washington Post article.

Plaintiffs brought the original action in April 2004, alleging that Matrixx had information of a possible causal connection between Zicam use and anosmia but failed to disclose this risk and instead issued false and misleading statements to consumers.

The Ninth Circuit held that plaintiffs’ complaint satisfied the heightened pleading standards of past Supreme Court cases Twombly and Tellabs and thus should have survived a motion to dismiss. In its holding on the materiality issue, the court examined allegations in the complaint to consider whether information regarding a possible link between Zicam and anosmia was information a reasonable investor might consider significant. The court found that the allegations were sufficient to satisfy the pleading requirement under the PSLRA and held that the issue of whether Matrixx’s misrepresentations were material should be left for a jury to decide. On the issue of scienter, the court emphasized that Matrixx was aware of at least 14 complaints linking Zicam to anosmia at the time it stated that a causal connection between the two was “completely unfounded and misleading.” The court also found a strong indication that high-level Matrixx executives knew that the company was being sued in a product liability action on the issue of anosmia when they released the allegedly misleading statements. Viewing the complaint as a whole, the court held that the inferences of scienter drawn by the plaintiffs’ complaint were sufficiently strong for it to survive a motion to dismiss.

The decision is the latest in a series of setbacks for Matrixx. Following a warning from the FDA last June that Zicam products could cause anosmia, the company voluntarily withdrew two forms of the drug. Matrixx continues to maintain that anosmia is caused by the cold virus, which Zicam is designed to treat, and not by the drug itself.

The case will now return to the District Court for further proceedings. Whether or not the plaintiffs eventually prevail at trial may have substantial implications for Matrixx, which relied on Zicam Cold Remedy products for about 70 percent of its total sales at the time the action was initially filed.

Gamer Appeals Ban from Sony’s Playstation 3 Network

On September 22, 2009, the United States District Court for the Northern District of California dismissed Erik Estavillo’s lawsuit against Sony. Fox40.com reports that Estavillo was banned from Sony’s Playstation 3 Network after allegedly uttering “racial and homophobic slurs to other online gamers.” Estavillo alleged that his freedom of expression was abridged, and likened Sony’s network to a company town. The district court dismissed Estavillo’s First Amendment claims, stating: “Sony’s Network is not similar to a company town. The Network does not serve a substantial portion of a municipality’s functions, but rather serves solely as a forum for people to interact subject to specific contractual terms.” Estavillo recently appealed the dismissal to the Ninth Circuit and has also filed a second lawsuit against Sony.

German Government Pledges to Protect Online Journalism in Germany with a “New Kind of Copyright”

On October 29, 2009, the New York Times reported that Germany’s governing coalition “has pledged to create a new kind of copyright to protect online journalism” with the goal of “level[ing] the playing field with Internet companies like Google.” German publishers fear that Google may be “exploiting their content to build lucrative businesses without sharing the rewards.” Google aggregates news from many news outlets on its Google News website; however, Google News operates in Europe without collecting any advertising revenue. Although “[d]etails of how the proposal would work have not been spelled out,” analysts believes that the new copyright scheme may allow online journalists to “claim royalties for the use of their content by Google or other online ‘aggregators’ of news.” In support of the new scheme, counsel for the German Newspaper Publishers Association argues that there is “no fundamental right to information for free on the Internet.”

United Kingdom to Crack Down on Online Piracy; Could Lead to Outright Disconnection of Pirates

On October 28, 2009, the BBC reported on new legislation that will come into force in the United Kingdom in April 2010. Although “the details of it would need to be hammered out at European level,” the legislation will impose bandwidth restriction on suspected pirates. If necessary, more restrictions will be introduced in the spring of 2011 that could completely disconnect the suspected pirates from the Internet. The legislation already faces challenge from ISP TalkTalk, which has created a “Don’t Disconnect Us” campaign and threatened litigation. Although the legislation is designed to protect the United Kingdom’s creative content industries, legislators emphasize that the long-term solution is for “the industry to educate users and to offer new and cheaper ways to download content.”