Amazon.com, Inc. in March launched the Amazon Appstore, prompting a trademark infringement lawsuit by Apple. The Amazon Appstore is a service that collects and distributes mobile applications for the Android mobile operating system, competing with the Google-developed Android Market to offer both free and paid application downloads. Though the service does not compete directly with Apple’s App Store because Apple maintains the only authorized application store for its devices, the service managed to get Apple’s attention in another way. This article will discuss briefly both the facts and the legal implications of this trademark dispute.

In July 2008, Apple filed for a U.S. trademark in the term “App Store” for “retail store services … on handheld digital devices” (trademark serial number 77525433). The application was approved despite opposition from Microsoft, which argued that the term could not be granted protection because it is generic. While this opposition is pending and Microsoft has decided to avoid the issue by calling its app store the “Windows Marketplace for Mobile,” Amazon has been undeterred.

On March 18, Apple filed suit for trademark infringement and dilution and unfair competition against Amazon for the latter’s use of the name “Appstore.” The suit alleges that though Apple was not the first to create a mobile applications store, it was the first to label one an “App Store.” Apple also alleges that it “has extensively advertised, marketed and promoted the App Store service … spending millions of dollars on print, television, and internet advertising,” and that “the enormous public attention given the App Store service, and the success of the service, have cemented the public’s identification of App Store as a trademark for Apple’s service.”

In order to show trademark infringement under either the federal Lanham Act or state common law, Apple must show that Amazon’s use of the term “Appstore” is likely to cause confusion in a reasonable consumer as to the source of the software. Here, the fact that Amazon has appended its name in front of the contested term, and that Amazon removed the space, may help the Internet retailer to argue that customer confusion will be limited. In order to show dilution of its mark, Apple must show first that its mark is famous and distinctive. Apple also must prove that Amazon diluted the mark either through blurring (impairing its distinctiveness) or tarnishment (harming its reputation). Continue reading →

Gareth S. Lacy

Yesterday the Ninth Circuit refused to rescind a $65 million settlement agreement between Facebook founder Mark Zuckerberg and Harvard graduates Cameron and Tyler Winklevoss. The Winklevosses argued they should be released from their 2008 agreement with Zuckerberg because Facebook allegedly misrepresented its market value during settlement negotiations. But the Ninth Circuit upheld the settlement because the Winklevosses, “with the help of a team of lawyers and a financial advisor,” had “settled . . . and signed a release of all claims against Facebook.”

The conflict began in 2004 when the Winklevosses sued Mark Zuckerberg for allegedly stealing their idea to build an exclusive social network at Harvard, events dramatized in the 2010 Academy Award-winning film, The Social Network. Facebook countersued. The parties reached a $65 million settlement agreement in February 2008. But the Winklevosses soon attacked the settlement on the grounds the Facebook allegedly overstated the company’s value during negotiations. They claimed Facebook violated SEC Rule 10-b, which prohibits fraud in connection with the purchase or sale of securities.

After the district court refused to modify the $65 million settlement, the Winkelvosses appealed to the Ninth Circuit. In a terse opinion written by Chief Justice Alex Kozinski, the court refused to rescind the settlement:

The Winklevosses are sophisticated parties who were locked in a contentious struggle over ownership rights in one of the world’s fastest-growing companies. They engaged in discovery, which gave them access to a good deal of information about their opponents. They brought half-a-dozen lawyers to the mediation. Howard Winklevoss—father of Cameron and Tyler, former accounting professor at Wharton School of Business and an expert in valuation—also participated. A party seeking to rescind a settlement agreement by claiming a Rule 10b–5 violation under these circumstances faces a steep uphill battle.

Had the Winklevosses prevailed, the settlement agreement value might have quadrupled to more than $466 million.

Law, Technology & Arts Blog has provided a copy of the Ninth Circuit’s decision here. Copies of the Winkelvoss’s appellate brief, the response from Facebook, the Winkelvoss’s reply and a transcript of the oral argument are also available.

Record companies are responding to poor album sales by seeking additional rights from artists beyond those to their music. Under these “360-degree deals,” record companies get access to revenue from sources including touring and merchandise, book deals, fan clubs, and even movie and television careers. The increased use of 360 deals reflects the recording industry’s shift away from goods such as records and toward services such as streaming music, cell-phone ringtones, and concert ticket sales.

Before digital music and MP3 files, a recording contract involved an upfront payment to the musician and funding to produce a record. Success was measured by the number of records sold (“units”); artists earned royalties after record companies recouped their investment in producing the record. Unit sales have fallen in half over the last decade, and today consumers purchase more individual MP3 tracks than albums. As a result, record companies are seeking 360 deals so that they receive rights to non-recording activities, such as entertainment rights or rights to publicity.

A typical 360 deal clause might grant the record label a “right to participate in any and all of an artist’s activities in and throughout the entertainment industry including, without limitation, activities as a singer, performer, musician, writer, composer, author, publisher, producer, mixer, or actor, in connection with tours, performances, merchandizing, fan clubs, advertisements, sponsorships, endorsements, or any public appearance.” Other rights might include use of the artist’s name, likeness, logos, websites, or videogames. The record company’s interest in these activities is obviously negotiable, but might include a percentage of publishing receipts, tour revenues, and other entertainment net receipts. Continue reading →

Posting will be temporarily suspended while members of the Washington Journal of Law, Technology & Arts prepare for final exams. Regular posting will resume March 31. Thanks for your continued interest in our Journal!

On February 11^th, the Department of Homeland Security’s U.S. Immigration and Customs Enforcement division (ICE) executed seizure warrants against 10 domain names allegedly tied to child pornography. During the operation, however, the domain name of a popular DNS provider was mistakenly seized, resulting in the shutdown of approximately 84,000 Web sites. The massive blunder adds to the growing controversy over the federal government’s practice of confiscating Internet domain names.

The 84,000 Web sites were all subdomains of mooo.com, a free domain host operated by FreeDNS. After ICE ordered the domain name shut down, visitors to the sites were redirected to a server that hosted the following warning:

“Advertisement, distribution, transportation, receipt, and possession of child pornography constitute federal crimes that carry penalties for first time offenders of up to 30 years in federal prison, a $250,000 fine, forfeiture and restitution.”

Although mooo.com was restored two days later, the incriminating banner remained on some of the subdomains for up to five days. Owners of the Web sites, including many small businesses, were understandably furious over the damaging accusations.

The ill-fated seizures were conducted as part of “Operation Protect Our Children,” a joint effort between ICE and the Department of Justice aimed at removing child pornography from the Internet. This comes on the heels of “Operation In Our Sites,” a similar ICE initiative announced last June that seizes the domain names of Web sites accused of offering pirated or counterfeited content or products.

The programs are controversial for at least two reasons. First, they provide virtually no procedural safeguards. ICE confiscates domain names pursuant to a seizure warrant issued ex parte; the Web site owners are never notified. Because the judge hears only the government’s allegations, there is a high risk of erroneous deprivation. In fact, last November ICE shut down a hip-hop blog for allegedly linking to pirated songs. It turned out that the songs had actually been sent to the Web site by the artists and record label representatives themselves. Had the owner been given an opportunity to respond to the accusations, the ordeal could have been avoided. Some commentators have questioned ICE’s need for such speedy procedures.

Second, the seizures rest on dubious legal theories. Although vicarious and contributory copyright infringement may generate civil liability, only direct infringement rises to the level of criminal conduct. ICE, however, has been targeting sites that merely provide links to infringing content or embed content from other sites. The government has taken the position that these actions constitute direct copyright infringement, though no court has ever adopted such a broad interpretation. By imposing criminal liability on “linking” sites, this theory would effectively outlaw all search engines, and although ICE insists that search engines such as Google would not be subject to seizure, it has struggled to articulate a coherent explanation for the perceived distinction. The notion that one can directly infringe by simply embedding another site’s content is equally suspect, and would appear to be foreclosed by Ninth Circuit precedent.

ICE has no plans of abandoning its controversial tactics.