Letter from Amerikat: Birthday Bits 'n Bobs

The AmeriKat is celebrating her 2nd birthday this week (she will leave you to calculate her age in Kat years). During the past few days she has cast her mind back to reminisce over the past two years in music, film, politics, and law. When she was a fresh kitten, the radios were booming with Madonna, Queen, Beastie Boys and Peter Gabriel and movie theaters were welcoming audiences to watch Top Gun, Pretty in Pink and Aliens. And in law, in the January that the AmeriKat was born, Kodak lost a patent infringement case with Polaroid, a loss which signalled Kodak's exit from the instant camera business. Today, we may still have Madonna booming away, but this time it is through our iPods. Patent law has also come a long way from the instant camera days. Nowadays our patent wars focus on mobile phone technology, albeit still concerning their camera technology as well as their touch-screen capabilities. This brief journey down memory lane just goes to show that over the past two *cough* years, everything changes, but everything stays the same be it in music or in IP law.

Lawyer Barbie back in the Federal Circuit dealing with Bratz - Something else that has not changed all that much from last year is the continuation of the Barbie v Bratz battle (previously reported by the AmeriKat here) which last week heard the parties' opening arguments in Californian federal court before Judge Carter. Barbie's maker, Mattel, alleged that the maker of the Bratz doll - MGA Entertainment- stole the idea for the Bratz doll by entering into a deal with the designer of the doll who had previously worked for Mattel. Mattel subsequently filed for copyright infringement and trade secret violations, while MGA alleges unfair competition and also trade secret theft. The case being heard by the court last week follows the previously overturned $100 million verdict of Judge Larson in favor of Mattel. MGA appealed this 2008 ruling on the grounds of incorrect jury instructions and an overly broad injunction. The US Court of Appeals for the Ninth Circuit agreed holding that the federal court judge had erred in ruling that Mattel automatically owned the designer's sketch of the doll under the terms of the 'Employee Confidential and Inventions Agreement' between Mattel and the designer and remanded the case back to the federal court. At the end of 2010 both parties applied for summary judgment on the issue of copyright infringement for the first and second generation Bratz dolls. Judge Carter granted summary judgment in MGA's favor in respect of the second generation Bratz dolls, but the remaining issues, including breach of copyright for the first generation of Bratz dolls and the breach of confidence/trade secret claims, remained for trial.

Following Judge Larson's departure from the federal bench, Judge Carter will now be rehearing Mattel's claims, but unlike the first trial the court will be tasked with determining whether the Inventions Agreement entitles Mattel to the designer's ideas for names like "Bratz" together with sketches that he created outside working hours. Also, ripe for ruling is MGA's trade secret claim against Mattel. Last year, MGA filed a counterclaim alleging that Mattel conducted an elaborate corporate espionage scheme in which Mattel employees, including general counsel Robert Normile and their attorneys from Quinn Emanuel, engaged in a racketeering conspiracy in order to gain access to MGA's private showrooms to obtain confidential information of Mattel's competitor's plans. According to a report last year in Am Law Litigation Daily, Quinn Emanuel partner Michael Zeller said that MGA's claims were "second-rate tactics by desperate lawyers" that "won't survive the pleading stage." Well, apparently they have! Mattel's lawyers say that in so far as the information MGA shared was shared at toy fairs, this information does not constitute a trade secret and therefore MGA is not entitled to their claimed $475 million in damages. The trial continues.

MJ's estate increases litigious activities - Last week, Michael Jackson's estate sued a website who is selling a book written by the singer's mother, Katherine Jackson, alleging copyright infringement. As reported by the Associated Press, Howard Mann, who operates the domain name www.jacksonsecretvault.com (picture, right - a shot of the allegedly infringing website left) is on the recieving end of the suit that alleges that he and the website are infringing copyright and are also liable under unfair competition laws. The complaint is reported to allege that the site is using the late singer's likeness and sketches that he drew and is said to creating a fasle endorsement by virtue of the inclusion of a "special thanks" to the estate. In a statement, the estate's attorney Howard Weitzman said that

"The Estate had hoped Mann would voluntarily cease his conduct but that was not to be. People who trade off of Michael's personality, copyrights and trademarks should not be allowed to exploit the legacy of one of the world's most recognized talents for their own benefit."

For more information see these reports in Hollywood Reporter and AP.

Koons's Balloon Dog to pop gallery's bubble? - Artist Jeff Koons has claimed copyright infringement against San Francisco gallery Park Life over a set of bookends that look like Koon's Balloon Dog, i.e. they look like balloon dogs. What do we think IPKat readers? Can Koons claim copyright infringement for anything that resembles a balloon dog? The AmeriKat thinks his lawyers, reported to be Jones Day, must have a field day at children's birthday parties.... For a more in depth look at that saga please see this excellent article in the New York Times. For how to make a balloon dog or an allegedly infringing Koons dog, please click here. (Pictures below from left to right - Koon's Balloon Dog; Park Life's balloon dog bookends; a balloon dog)

USPTO renews its IP Australia vows - Last week USPTO and IP Australia announced the extension of their existing pilot Paris Convention Patent Prosecution Highway (PPH) agreement and the formation of a new PPH pilot agreement utilizing the Patent Cooperation Treaty (PCT-PPH) results. PPH agreements improve efficiency by allowing patent examiners to use work already undertaken in respect of the same claim or claims already reviewed at other patent offices and PCT Authorities. USPTO Director Kappos has stated that by including the PCT "more work can be shared between our two offices. This will benefit applicants by reducing patent pendency and improving quality.” According to the USPTO press release the addition of the PCT international phase work

"will greatly expand the usefulness of the PPH program to applicants and the offices. The new PCT-PPH pilot is scheduled to launch on January 24, 2011. The PPH pilot program and the PCT-PPH pilot program between the USPTO and IPAU are both currently scheduled to continue until April 13, 2012."

Pancake house drops suit against a house of God - Last year the AmeriKat reported on the trade mark suit filed by US eatery chain IHOP which stands for the International House of Pancakes against the International House of Prayer also known as IHOP. Unfortunately, however, there will be no courtroom fireworks in battle between pancakes and God, because four days before Christmas IHOP dismissed its case against the church citing "ongoing mediation with the defendants."

Diamonds Are Forever, But Are Trade Secrets?

Once again, let's talk about trade secret licensing, this time about the provision in a trade secret licence that sets out the duration for which the licensee undertakes to maintain the secrecy of the contents that have been disclosed. In particular, I sometimes encounter a provision whereby the licensee undertakes to keep the proprietary information in confidence for a fixed period of time, rather than for so long as the trade secret is not generally disclosed, without specifying any time limit.

I have always found this provision a bit puzzling. The reason lies in my understanding of the nature of trade secret protection. The fundamental characteristic of trade secrets is secrecy (Mark Lemley well stated this "so obvious that we forget it" point in his 2008 article, The Surprising Virtues of Treating Trade Secrets as IP Rights). If so, what would appear to follow is that the paramount interest of the proprietor of the trade secret is that it take all necessary steps to ensure that the trade secret is not disclosed, unless the proprietor chooses to do so.

In the licensing situation, unless the licensee is a rogue, it is presumed that the licensee has a similar interest in maintaining the secrecy of the proprietary contents. As such, the licensee will undertake not to take any action that might lead to the unauthorized disclosure of the trade secret, the occurrence of which redound to the presumed detriment of both parties. Woe to the licensee that either by design or negligence breaches this undertaking.

That is all well and good--until we encounter a provision in the license that goes something like this: " The licensee undertakes to maintain the confidentiality of the Trade Secrets for a period of five years from the execution date of this Agreement." At first blush, such a provision seems to be at odds with the bedrock foundation of trade secrets. If secrecy is the sine qua non of the right, then why would the licensor-proprietor agree in advance that its trade secret may lawfully be disclosed by the licensee as of a date certain in the future, irrespective of any consideration of (i) prior independent creation by the licensor; (ii) independent creation by a third party or (iii) disclosure through no fault of the licensee? Isn't this a prouncement of the premature death of the trade secret right?

After all, I cannot think of reasonable circumstances in which a patent, copyright or
trade mark licensor would knowingly grant the licensee the right to perform an act that would have the effect of impairing, perhaps fatally so, the licensed IP right. I have never encountered a provision that states that, after five years, a trade mark licensee is permitted to use the trade mark in any manner, whether or not such promiscuous use might ultimately lead to a cancellation claim for non-use or a claim that the mark has become generic and non-distinctive. And yet, with respect to a trade secret, it is not that unusual to enounter a provision that states that the proprietor agrees to the potential impairment, down the durational line, of the very right that it is licensing. It makes this Kat to want to ululate with bewilderment. What is going on here?

I have heard several explanations for the persistence of this provision in trade secret agreements, including the following:

1. The licensee has superior bargaining power and it is prepared to take it upon itself the obligation of confidentiality, and all that entails for the operation of the licensee, only for a fixed period of time.

2. The trade secret has commercial value only if this particular licensee succeeds in extracting value from it. If the licensee succeeds, it will likely have no incentive to allow the trade secret to be disclosed. If not, the trade secret has no continuing commercial value and its subsequent disclosure has no practical significance.

3. The technology under licence is so fast-changing that confidentiality will be of no consequence by the end of the period of duration specified in the licence. What the licensee is primarily obtaining is the potential for first mover advantage. The provision capping the time period for confidentiality provides the licensee with contractual peace of mind.

4. The technology under licence is less dynamic than in (3), but it is sufficiently so that, by the end of the time period specified in the licence, it will be impractical as an evidentiary matter to try and determine whether the licensee has "breached" its undertaking. The provision fixing the time period is designed to ease the evidentiary burden of both parties in advance.

I am certain that there must be other reasons, depending upon the circumstances and readers are invited to share their thoughts.

Underlying all of this is the transitory nature of the trade secret right. Trade secrets can remain confidential and hence continue to be valuable for scores of years, or they can evaporate in a moment. A trade secret licence can seek to bind the licensee to maintain the confidentiality of the trade secret for an indefinite period, provided that secrecy is preserved, or the proprietor can willingly agree that the period of secrecy will be limited in time. All of this makes getting one's professional arms around trade secrets so very, very challenging.