2014 Crowdfunding and Intellectual Property 101

A presentation from 2014 on intellectual property concerns and crowdfunding in which I addressed copyright, trademarks, trade secrets, patents, the DMCA, and litigation.

1. Crowdfunding 101: Crowdfunding and IP Illinois State Bar Association

2. Crowdfunding 101 Crowdfunding and Intellectual Property All slides © 2014 Mudd Law Offices (except design elements)

3. Overview Exciting time for entrepreneurs, inventors, founders, and more….

4. Overview Intellectual Property Copyrights Trademarks Patents Trade Secrets

5. Overview Additional Perspectives on Top CF Sites

6. Copyright – The Basics U.S. Constitution, Art. 1, Sec. 8, Cl. 8 Congress has the power to “ promote the Progress of Science and the useful Arts ” by granting authors and inventors exclusive rights in their works for a limited time.

7. Copyright – The Basics United States Copyright Exclusive Jurisdiction

8. Copyright – The Basics Copyright Manifests Upon Creation Jon Lovitz and “I’m Picasso”

9. Copyright – The Basics Protecting Your Ideas Ideas not protected by copyright Idea Must Manifest

10. When should you think about this? Ideas not protected by copyright Idea Must Manifest

11. When should you think about this? When You Begin Your Project Your Original Work Works of Others

12. L aws that might apply United States Copyright Act 17 U.S.C. § 501, et seq.

13. L aws that might apply Accessing and making copies of someone else ’ s copyrighted work might involve : Copyright Act (copying ) Digital Millennium Copyright Act (accessing/enabling others to access)

14. Copyright Act Protects expressive elements, but not underlying functional elements. Broadly prohibits infringement of copyrighted works

15. Copyright Act Protects software from literal copying Williams Elec., Inc. v. Artic Int’l, Inc. Program in Written Form (Object Code) and Imbedded in ROM

16. Copyright Act Protects software from literal copying Apple v. Franklin Operating System

17. Copyright Act Protects structure, sequence, and organization Whelan v. Jaslow What does this mean?

18. Copyright Act Be Original in Writing Do Not Copy (Infringe) Ideas May Be Same

19. An important exception: fair use It ’ s OK to use copyrighted material for purposes such as research, news reporting, commentary, criticism, and scholarship under certain circumstances.

20. Fair use and reverse engineering If reverse engineering is necessary to gain access to functional processes and ideas, intermediate copies are fair use.

21. Fair use and reverse engineering Be sure that you ’ re legitimately in possession of the software, and don ’ t use someone else ’ s work in your final product unless absolutely necessary.

22. Secondary Liability Not all liability must be direct infringement Secondary Liability .

23. Secondary Liability Liability placed on an individual/entity that did not directly infringe the copyright but helped the infringer or benefited from the infringer For secondary liability, there must be primary liability , i.e. direct infringement by someone else .

24. Contributory Liability When a defendant, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another

25. Contributory Liability Knowledge of infringing activity is key element Often one party actively encourages another to infringe Material contribution to infringing activity

26. Contributory Liability Sony Corp. v. Universal City Studios, Inc. Universal sued Sony for contributory infringement Universal claimed a Betamax player allowed users to make infringing copies of their TV shows.

27. Contributory Liability Sony Corp. v. Universal City Studios, Inc. No Contributory Infringement Betamax was “capable of commercially significant noninfringing uses.”

28. Contributory Liability Sony Corp. v. Universal City Studios, Inc. It was impossible for Sony to know whether any particular machine will in fact be used for infringing purpose.

29. Contributory Liability Napster Grokster KaZaA

30. Contracts Revisited Some agreements forbid reverse engineering. Can they do that? So far, the courts say yes.

31. 512 Safe Harbors 17 U.S.C. § 512 gives service providers a few “ safe harbor ” protections against liability for copyright infringement.

32. 512 Safe Harbors 17 U.S.C. § 512 gives service providers a few “ safe harbor ” protections against liability for copyright infringement. One of them shields “ conduit ” service providers that transmit, route, or provide connections to infringing material through their systems, as long as….

33. 512 Safe Harbors The transmission is automatic and doesn ’ t involve any selection by the provider; The material is only temporarily stored on the provider ’ s system; and The provider doesn ’ t modify the material in any way.

34. A Condition To qualify for the safe harbor, you must have a policy for terminating service to repeat infringers in “ appropriate circumstances, ” which you let users know about.

35. Takeaways If you ’ re relaying someone else ’ s packets, you ’ ve got some strong legal protections. But there are a few things to keep in mind.

36. Takeaways If someone sends you a nasty letter for doing something protected by Sections 230 or 512, explain the situation, which may help avoid suit. You can work with an attorney to develop a form letter for such occasions. Be transparent.

37. Can ’ t circumvent technological measures that effectively protect or control access to copyrighted works. Digital Millennium Copyright Act

38. Can ’ t circumvent technological measures that effectively protect or control access to copyrighted works . No trafficking in tools that are primarily designed, valuable or marketed for (1). Digital Millennium Copyright Act

39. When you need to jailbreak or root a mobile device for purposes of software development/testing. When should you think about this?

40. Reverse engineering Encryption research Security testing Disabling the collection of your own personally identifiable information Important exceptions to basic rule

41. Library of Congress made clear in 2010 and 2012 that jailbreaking phones doesn’t violate the DMCA. Exemption process

42. Library of Congress made clear in 2010 and 2012 that jailbreaking phones doesn’t violate the DMCA . Doesn’t apply to jailbreaking other devices (at least, not yet). Exemption process

43. Library of Congress made clear in 2010 and 2012 that jailbreaking phones doesn’t violate the DMCA . Doesn’t apply to jailbreaking other devices (at least, not yet) . Doesn ’ t authorize the distribution of jailbreaking tools. Exemption process

44. a design, phrase, symbol, or word that ( or combination thereof) identifies & distinguishes source of goods or services from those of others Trademarks - The Basics

45. Generic Descriptive Fanciful Arbitrary The Basics

46. Surnames Other Nuances The Basics

47. From the Legal Perspective: Yesterday When should you think about this

48. From the Legal Perspective (cont’d): NO LATER THAN: When you identify a design, phrase, symbol, or word you want to use When should you think about this

49. From the Business Perspective: As soon as you begin branding discussions When should you think about this

50. United States Concurrent Jurisdiction State and Federal Trademarks Laws that might apply

51. International Laws that might apply

52. Focus on United States… Laws that might apply

53. Why won’t you discuss state trademark law? Interstate Commerce and the Internet Federal Trumps State Laws that might apply

54. Unless you intend to be limited in one state, there exists no incentive or need to focus on State trademarks Laws that might apply

55. Example: Apple App Store – Interstate Commerce Internet Advertising – Interstate Commerce Laws that might apply

56. So…given focus of United States… …next distinction… “Prosecution” and Litigation Laws that might apply

57. Like Patent Prosecution , the filing of the application and the registration process Trademark Prosecution

58. So …let’s use Trademark Registration ( again, focusing on federal trademark registration ) Trademark Registration

59. Word versus Stylized Mark Trademark Registration

60. In Use versus Intent to Use Trademark Registration

61. Pre -Approved Descriptions versus Custom Descriptions Trademark Registration

62. Classes of Goods and Services Trademark Registration

63. Timing Office Actions Publication Trademark Registration

64. Renewal Presumptiveness Trademark Registration

65. Exclusive Right to Use in Class Except for Use Prior to Registration Trademark Registration

66. Publication in Register Use of ® Additional Remedies in Litigation Trademark Registration

67. Renewal Presumptiveness Trademark Litigation

68. 15 U.S.C. §§ 1114,1125: Infringement 15 U.S.C. § 1125: Dilution ( Tarnishment /Blurring) 15 U.S.C. § 1125: Unfair Competition Law State Unfair Competition Law Passing off Reverse Passing Off Misappropriation Trade/Product Disparagement Trademark Litigation

69. www.uspto.gov www.google.com Resources

70. Search USPTO Search Engines Due Diligence What you can do

71. Avoid Similar Marks Be Creative Protect Your Marks What you can do

72. U.S . Constitution, Art. 1, Sec. 8, Cl. 8 Same authority that gives congress the power to enact copyright protection gives Congress the authority to enact patent protection Patents - The Basics

73. Exclusivity with United States PTO Except Internationally… The Basics

74. Not everything is patentable… New, Non-Obvious, Useful Inventions The Basics

75. …some things once patented may be available… The Basics

76. Due Diligence Helps Avoid the Trolls The Basics

77. America Invents Act “…More than First to File…” Advanced

78. From the Legal Perspective: Yesterday When should you think about this

79. From the Legal Perspective (cont’d): NO LATER THAN: As soon as you have an idea When should you think about this

80. From the Business Perspective: As soon as you have your idea When should you think about this

81. United States United States Patent Act 35 U.S.C. §§ 1, et seq. Laws that might apply

82. Various types of patents: utility, process, plant, design business method United States Patent Act

83. … and software… …but falls within one or more of other categories… United States Patent Act

84. Owner of patent obtains exclusive rights to patented material for a limited period of time United States Patent Act

85. Which means… Right to exclude others from making, using, selling, offering to sell, distributing or importing things that practice the patented invention United States Patent Act

86. Not everyone agrees with software patents …even among software developers United States Patent Act

87. software inventions too incremental to justify costs questions whether incentive exists for software patents United States Patent Act

88. Remedies On finding infringement of a valid patent… …shall not be less than reasonable royalty… United States Patent Act

89. Remedies determination of “reasonable royalty” United States Patent Act

90. Remedies 25 % RULE Reasonable royalty 25% of expected profits … not so fast… United States Patent Act

91. Remedies Estimate made of profits divided by expected net sales resulting profit rate x 25% = royalty rate United States Patent Act

92. Remedies Critique of 25% Rule United States Patent Act

93. Remedies Together with interest and costs United States Patent Act

94. Diamond v. Diehr , 450 U.S. 175 ( 1981) Opened door to software patents Interpreting the Patent Act

95. In re Bilski Upheld software patents but w/ caveats Some software-related inventions may not qualify as patentable subject matter Some may lack sufficient novelty or are obvious (to a person skilled in the art of computer programming) Interpreting the Patent Act

96. www.uspto.gov www.google.com/patents www.google.com Resources

97. Search USPTO Search Engines Due Diligence What you can do

98. NDAs and…. …The Politics of NDAs What you can do

99. What are Trade Secrets? Copyright and Patents v. Trade Secrets Trade Secrets

100. Kickstarter and IP Crowdfunding Nuances

101. TOU Crowdfunding Nuances

102. Conclusion Crowdfunding Nuances

103. Questions? More Information? Charles Lee Mudd Jr. Mudd Law Offices [email protected] Chicago, Illinois 3114 West Irving Park Road Suite 1W Chicago, Illinois 60618 773.588.5410 Telephone [phone] Facsimile Park City, Utah 311 Main Street P.O. Box 483 Park City, Utah 84060 435.640.1786 Telephone [phone] Facsimile © 2014 Mudd Law Offices