One Man’s Poison...

Poison Pills have been structured and adopted for 25 years now to shun uninvited bidders. They typically use mass dilution as a deterrent when acquisitions cross a threshold such as ten or twenty percent of a company’s issued and outstanding stock without board approval. For example, when the uninvited bidder buys in excess of ten percent of the target’s stock, then investors who owned before the bidder, can buy more shares at a deep discount. This dilutes the bidder and makes the transaction more expensive. Potential bidders were usually extremely careful not to trigger such a poison pill. A newer flavor of poison pill lowered the threshold to 4.99% and was structured to protect a company’s NOL’s, the idea being that the NOL’s will be lost in a change of control. In December, 2008, Versata Enterprises triggered an NOL poison pill of Selectica. Selectica’s NOL was $150 million. Versata acquired 5.1% and Selectica’s board lowered the pill threshold from 15% to 4.99%, but grandfathered Versata and others. Then Versata increased its ownership to 6.7% triggering the pill. The case went to trial with a central fight over the validity of the structure and application of the pill. Watch this space….
-- Paul Marotta

Look and Feel

As a young lawyer the Buzz worked on the first copyright “look and feel” case to go to trial. At the time the sort-of novel concept was that a copyright existed in the look and feel of software (read: interface) as well as in the source code. Well of course it did, the graphical interface was a copyrightable work of authorship as well as the text of the source code. So we felt déjà vu while reading about Apple’s displeasure with Palm’s new Pre and the intuitive way that users can slide their fingers around, controlling the interface. Apple had actually followed our earlier case, in part because their user interface looked something like that developed at Xerox Parc [boy, if that doesn't date us nothing will]; and also because HP had a user interface that kind of looked like Apple’s, even including a garbage can. Whoaa. About Palm’s new interface, Apple COO Tim Cook reportedly said, “We will not stand for having our IP ripped off, and we’ll use whatever weapons we have at our disposal. I don’t know that I can be clearer than that.” So we say watch this space for updates on Apple v. Palm, coming soon to a theater near you. There are defenses available for interface features that are functional and not aesthetic, but aesthetic is in the eye of the jury and is easily claimed. Fire up those defenses Palm.

-- Paul Marotta

Creating an IP Portfolio

The Buzz’s father once had an idea he wanted to patent: Little cups on airplane wheels that would start the wheels spinning before landing so that the tires wouldn’t squeal when they hit the pavement. When he looked into it, there were already a dozen variations of his idea patented. That ended his inventing career. Our state and federal intellectual property laws, including patents, trademarks, mask works, trade secrets, copyrights, and the like, give you a monopoly of one sort or another. That’s pretty cool. You get to charge monopoly profits from anyone who wants it. Famous author? Try charging $300 for your next book. [Well maybe there are some market forces at work in limiting your profits, like competition from other books.] But still you should pursue a portfolio of protection for the intellectual property that defines your business. Even if you will never start exacting huge patent infringement settlements from the Fortune 500, or shut down potential competitors in their infancy, a portfolio is useful for cross licensing when disputes do arise and to make a buyer feel good about acquiring you. And some, like trademarks and copyrights, are relatively cheap, although there are a few landmines for the DIY IP protector.
-- Paul Marotta

Avast ye Hardies Yo-Ho

Another kind of pirate than the Somalis made the news recently when the four men behind The Pirate Bay were convicted in April of violating Sweden’s copyright law. The Pirate Bay is (was?) a file sharing site similar to Napster. The four were convicted of helping millions of users download music, movies and computer games without paying. The Stockholm district court sentenced Gottfrid Svartholm Warg, Peter Sunde, Fredrik Neij and Carl Lundstrom (who financed TPB) each to one year in prison, and imposed a fine of 30 million kronor (about $3.767 million) to a bunch of media conglomerates such as Sony, EMI, Columbia Pictures, and Warner Brothers. TPB became digital content’s public enemy number one after Kazaa and Grokster were forced down. TPB suggested somewhat humorous responses to cease and desist letters, informing the writer that Sweden was not a state in the United States. TPB’s technology allowed parts of a large file to be transferred from several different users. Defense lawyers argued that TPB didn’t host any copyright-protected material. They lost anyhow.
-- Paul Marotta