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

OctoMark

Mother of eight Nadya Suleman, claiming “also known as” status as the “Octomom”, has filed for two trademarks on “Octomom” to be used with diapers, dresses, pants, shirts, and textiles on an “intent to use basis” meaning that she is not yet using the intended trademark; and in connection with an intended TV variety show. The Buzz refuses to imagine how you turn reproductive excess into a variety show. So called “Intent to use” trademarks are supposed to avoid the old problem of manufacturing a commercial sale of something trademarked good just in order to file a registration application. It used to be that you had to actually use the mark in commerce before you could file a registration application. Now you get 6 months and a possible 5 additional 6 month extensions in order to actually start using a mark. We’ll see if “Octomom” diapers start showing up in the next 6 months. The strongest way to register a trademark is to use all capital letters in your application. This is to show that there is absolutely no stylized design or capitalization scheme associated with your mark. In other words, every single way of capitalizing or stylizing the mark is a potential infringement. Check this space for thoughts on building an IP portfolio next time.

-- Paul Marotta

www.Goldmansachs666.com

We loved reading a good conspiracy theory in our misspent youth, but never really believed any of them. But the way that all politicians of all stripes joined in lockstep in the fall of 2008 to send trillions of dollars of our money to AIG, Goldman, etc. and the expedience and prestidigitation with which Lehman (whose legal bill has passed $80 million already) was allowed to fail raised a few interesting questions for us. Now, with Goldman’s profit announcement, apparently built mostly on (i) non-recurring AIG unwinding, and (ii) relaxation of the same mark-to-market accounting rules that were so important after Enron’s collapse, but have now fallen out of favor, we wonder if the conspiracy buffs might be right. Surely the wrong people lost money in the fall of 2008 or the politicians would not have genuflected quite so low. Goldman has now tried to slam a critiquing website called www.goldmansachs666.com that is posting negative Goldman information. The site recently filed suit against Goldman in a preemptive strike seeking declaratory relief that it is not infringing the Goldman Sachs mark used in connection with financial services. Law firm Chadbourne & Parke, representing Goldman, had sent a nasty-gram demanding that the site close down. We guess Chadbourne was confused and tried to hire the site to manage its 401K.

-- Paul Marotta

Corporate Governmentance?

We have watched with interest (and some horror) the uncharted waters into which our economy is swimming (sinking?). We now have one of the recently largest companies in the world bowing at the alter of government (OK, it bowed a long time ago, but now is being sacrificed). We speak of General Motors. After Enron, intense focus on corporate governance was the watchword; Sarbanes-Oxley the bible. Let’s make sure that the system of running our corporations was free of undue influence, based on the independence of the caretakers, and that all persons with any influence be properly vetted and approved. Shareholders are being given new powers of proposition and Boards are supposed to respond to them, not the managers. Well, we guess all that changes when the government is involved. We watched with open mouths as the POTUS fired the GM CEO. Wasn’t that the Board’s job? Did the Board abdicate its responsibilities? Was that a fiduciary breach? Doesn’t the Board select the CEO? Don’t the shareholders control things? BTW, the latest SEC filing as of this writing is an order granting confidential treatment concerning the government loan agreement, so we may never know whatever is really going on. The Buzz says playing in that sandbox is no good for your company or the country.
-- Paul Marotta