In a high-profile case, a jury recently found that Google’s use of portions of Oracle’s Java software code was allowable under the fair use doctrine and thus did not constitute copyright infringement.  Oracle sought as much as $9 billion in damages from Google for incorporating approximately 11,000 lines of Oracle’s Java software code into Google’s Android software.  Not only were billions of dollars in monetary damages at stake in this dispute, but also a controversial legal concept that could have repercussions for the entire software industry.01-Caliguri-Er-15EX-web

The issue is whether Oracle can claim a copyright on Java APIs and, if so, whether Google infringes these copyrights by implementing them into their Android software.  APIs, or Application Programming Interfaces, are a set of routines, functions, specifications, etc., that allow software programs to communicate or interact with each other.  APIs are one of the most common ways technology companies integrate software and applications with each other and allow for third-party developers to write programs (i.e. Apps) to run on their products.  Google, and those on its side, said an Oracle victory would stifle software innovation by discouraging third-party programmers and developers from using APIs.  Oracle, and those on its side, said a Google victory hurts innovation by weakening intellectual-property protections for software and discouraging companies from creating new software platforms.

The dispute itself traces back to 2010 when Oracle sued Google in United States District Court for the Northern District of California, case number 3:10-cv-03561, for both patent infringement and copyright infringement.  Oracle alleged that Google’s Android software illegally used key pieces from Java that related to 37 APIs created to help programmers more easily write in Java.  Java was originally developed by Sun Microsystems beginning in 1991.  Oracle purchased Sun in January 2010, and continued the Java platform.  Google first released a beta version of its Android mobile phone operating system in 2007, and noted from the beginning that it would incorporate some Java pieces.  Google wrote its own version of Java for Android, but in order to allow third-party developers to write programs for Android, Google also used the same names, organization, and functionality as the Java APIs.

In May 2012, a jury found that Google did not infringe any asserted claim of Oracle’s two patents-in-suit, but the jury did find that Google had copied the “structure, sequence and organization” of parts of the 37 Java APIs.  “Structure, sequence and organization” is a legal term used to define a basis for comparing one software work to another in order to determine if copyright infringement has occurred when one software code is not a literal copy of the other.  However, District Court Judge William Alsup overturned the jury finding on copyright infringement and ruled that the structure of the Java APIs used by Google was not copyrightable.  Judge Alsup reasoned that “so long as the specific code used to implement a method is different, anyone is free under the Copyright Act to write his or her own code to carry out exactly the same function or specification of any methods used in the Java API.”

Oracle appealed Judge Alsup’s copyright ruling to the Court of Appeals for the Federal Circuit, which had appellate jurisdiction instead of the Ninth Circuit Court of Appeals because the District Court case also contained patent claims.  The Federal Circuit reversed the District Court on the copyright issue, holding that the “structure, sequence and organization” of an API could be copyrightable. The Federal Circuit acknowledged that Oracle’s APIs were somewhat functional, but that does not “automatically” put them beyond the scope of copyright law.  Google petitioned for review from the United States Supreme Court, but the Supreme Court denied Google’s request in June 2015, and the case was remanded back to the district court for the current proceedings on the fair use defense and damages.

Trial in the current case began on May 9, again in front of Judge Alsup in the Northern District of California, on whether Google’s use of the APIs was protected by the fair use doctrine and therefore exempt from copyright infringement.  The fair use doctrine is a defense or exemption to copyright infringement that allows the incorporation of copyrighted material in another’s work if a four-factor balancing test is met.  In determining whether the use made of a work in any particular case is a fair use, the factors to be consider are: (1) the purpose and character of the use, including whether the use is commercial or for nonprofit/educational purposes and whether it is transformative; (2) the nature of the copyrighted work; (3) the amount used in relation to the copyrighted work as a whole; and (4) the effect of the use on the potential market for or value of the copyrighted work.  Per the jury instructions, Google had the burden of proof to show fair use.

During the trial, Google argued that its use of the Java APIs was transformative under the first factor because it used the Java APIs as part of a new platform for mobile devices.  Google argued under the second factor, the nature of the work, that APIs rank low on the creativity scale because they are more functional in nature.  Under the third prong, Google argued that it used only a small amount of the overall code that was necessary to effectively use the open-source Java language, and that the 11,000 lines of Java code it used was less than 0.1% of Android’s 15 million lines of code.  Finally, under the fourth prong, Google argued there was little market harm to Oracle because no one was using the APIs for mobile devices at the time.

Oracle argued under the first prong that the Java APIs were already being licensed and adapted by Sun at the time for mobile devices, and that the use by Google was commercial anyway. As to the second and third factor, Oracle argued the APIs represent a lot of skill and creativity, and that Google did not have a right to use exact lines of Java code or the overall structure, sequence, and organization of the 37 APIs.  In addition, Oracle argued, 11,000 lines of code is still a significant amount of code.  For the fourth factor, Oracle argued that the success of Android shows harm to the market because Oracle would have been able to license its Java code in the mobile space if Google had not copied its APIs without permission.

On May 26, after three days of deliberations, the jury came back with a unanimous verdict in favor of Google, finding Google’s use of the Java APIs in Android to constitute fair use.  Regardless, the case is still far from over as Oracle has already said it will appeal to the Federal Circuit.  Oracle’s appeal will likely focus on the District Court’s jury instructions and how closely those instructions capture the Federal Circuit and Ninth Circuit’s application and analysis of fair use.  Moreover, no matter which way the Federal Circuit goes, we can expect the losing party to ask the Supreme Court to review the issue.  So, while the current result is a big win for Google and other supporters of open-source software, the road to final resolution of this issue is still a long one.

Employers in Pennsylvania may or may not be enjoying high times as that state’s Medical Marijuana Act (“MMA”) went into effect on May 17, 2016.  This new law allows patients to use marijuana to treat autism, cancer, HIV/AIDS, and post-traumatic stress disorder, among other ailments.  Governor Tom Wolf signed the MMA into law on April 17, 2016, just three days before one of the most important dates on the calendar for marijuana enthusiasts.

The MMA does not allow all Pennsylvania citizens who feel under the weather to ingest marijuana however they like.  On the contrary, the MMA allows medical marijuana to be dispensed only to individuals who both have been issued an identification card from the Pennsylvania Department of Health and obtained a certification from a medical provider.  Nonetheless, Pennsylvania employers (like those in other states that have enacted similar laws) now will face some hazy dilemmas in terms of their drug-free workplace policies.Brenden Begley 05_final

That is because the MMA contains some potent anti-discrimination provisions but also creates some cloudy ambiguities.  For instance, the new law makes it illegal for an employer to refuse to hire, threaten, or discharge a prospective or current employee “solely on the basis of such employee’s status as an individual who is certified to use medical marijuana.”  On the other hand, the MMA does not specify whether employers may rely upon a positive drug test to impose an adverse employment action.

Meanwhile, the MMA does not require employers to refrain from imposing discipline “when the employee’s conduct falls below the standard of care normally accepted for that position.” The MMA also allows employers to discipline an employee who is “under the influence” of medical marijuana at work, yet it does not clarify whether a positive drug test could be used as evidence of impairment on the job.

This new law gives some latitude to employers with safety-sensitive work environments.  In particular, employers may prohibit employees from performing a number of tasks while under the influence of marijuana.  Such tasks include operating or controlling certain chemicals or high-voltage electricity, performing duties in dangerous places, or performing tasks that may put the life of the employee or the lives of others in jeopardy.  The law also states that employees in certain safety-sensitive positions may not have more than ten nanograms of active tetrahydrocannabis per milliliter of blood in serum.

Still, this list of exceptions could be interpreted as barring employers from restricting employees covered by the MMA in other common-sense ways.  Another budding problem stems from the lack of clarity as to how employers can ascertain whether an employee is impaired by the influence of marijuana while on the job.  Some observations may be helpful, but few appear to offer anything conclusive.  For instance, an employee who reeks of marijuana smoke might be subject to discipline.  That is because smoking marijuana in Pennsylvania will remain illegal; the MMA allows marijuana to be ingested only through alternative delivery systems such as pills or ointments.

Other observations might be helpful, such as the tell-tale red or glassy eyes or some level of confusion or distraction on the part of the employee.  But such circumstances may not conclusively identify the presence or cause of impairment.  And while blood-alcohol tests may be helpful in confirming how inebriated a worker is at the time of the test, drug tests for marijuana are not so precise in measuring the individual’s level of impairment at the time of the test.

For example, urine testing may reveal that the employee used marijuana at some point in the weeks prior to the test, but such tests typically cannot pinpoint whether such use occurred on a specific day.  Similarly, saliva testing may be able to detect more recent use – albeit without providing a absolute confirmation as to whether the employee was under the “influence of marijuana” on the job.

Beyond the ambiguities created by the MMA, its very enforceability may be subject to challenge – since it appears to be in direct conflict with federal laws that illegalize the use of marijuana.  Until the tension between federal law and Pennsylvania law is resolved by the courts, employers in the Keystone State should take some steps to keep their worksites from going up in smoke.

The first step would be to review and, if necessary, revise applicable handbooks and employment policies to make sure that they are compliant with both federal and Pennsylvania law.  At the same time, employers should consider reviewing their job descriptions for safety-sensitive positions.  Likewise, it would be advisable for employers to determine how positive marijuana tests will be handled.  In that regard, when an employee tests positive for marijuana, it might be wise to have appropriate managers designated and trained to communicate with the employee to ascertain whether he or she has the necessary documentation to be covered by the MMA.  Of course, it also would be prudent to consult with legal counsel to ensure that workplace policies and contemplated disciplinary actions do not run afoul of this new law.

On June 2, 2016 the Ninth Circuit issued an opinion in a music sampling Copyright infringement case that sets up a split between the Ninth Scott-Hervey-10-webCircuit and the Sixth Circuit which will likely send the issue to the Supreme Court.   At issue in the Ninth Circuit case was a claim of infringement based on Madonna’s use of horn samples from the song “Love Break” in her hit song “Vogue”.  The first horn sample is a “single” horn hit comprised of a quarter-note chord with lasts for 0.23 seconds, and the second horn sample is a “double” horn hit consisting of an eighth-note chord of roughly the same length as the first.  In the various commercial versions of “Vogue”, the single horn hit is used once and the second is used a varying number of times but not more than 5.  The plaintiff claimed that the unapproved use of these samples infringes the plaintiff’s rights in both the master recording and composition of “Love Break.”

Under Ninth Circuit precedent, the de minimis exception – where a use is of such a small amount that the average audience would not recognize the appropriation – applies to claims of infringement of a copyrighted composition, but it is an open question whether the exception applies to claims of infringement of a copyrighted sound recording.

Under the 2005 Sixth Circuit ruling in Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792 (6th Cir. 2005), for copyrighted sound recordings, any unauthorized copying – no matter how trivial – constitutes infringement.  In Bridgeport, the rap group N.W.A. sampled a two-second guitar chord from a Funkadelic tune and used it five times in their the song “100 Miles and Runnin’”. In its opinion, the Sixth Circuit wrote: “Get a license or do not sample.”   The decision effectively eliminated the de minimis doctrine for sampling recorded music in the Sixth Circuit.

Bridgeport was an incredibly controversial ruling that had a huge impact on the music industry and what was standard industry practice. And while Bridgeport provided very clear guidelines on music sampling usage (get a license for everything), artists and music producers vehemently claimed that the ruling hindered creativity.

Addressing the application of the de minimis defense to copyright infringement of sound recordings, the Ninth Circuit rejected the holding of Bridgeport and held that the de minimis defense “applies throughout the law of copyright, including cases of music sampling.” The court continued:

Because we conclude that Congress intended to maintain the “de minimis” exception for copyrights to sound recordings, we take the unusual step of creating a circuit split by disagreeing with the Sixth Circuit’s contrary holding in Bridgeport… We acknowledge that our decision has consequences.  But the goal of avoiding a circuit split cannot override our independent duty to determine congressional intent.  Otherwise, we would have no choice but to blindly follow the rule announced by whichever circuit court decided an issue first, even if we were convinced, as we are here, that our sister circuit erred.

While this split between the Ninth Circuit and Sixth Circuit will likely be resolved at the Supreme Court, during the interim we will likely see artists and producers emboldened by the Ninth Circuit decision and sound recording owners race to a district court within the Sixth Circuit whenever they believe a sample may infringe their rights.

So what is a trade secret?  Generally, a trade secret is information that the owner has taken reasonable measures to keep secret, derives independent economic value from not being generally known, and cannot be readily ascertainable by proper means, such as reverse engineering or independent development.  Many businesses rely on trade secret protection rather than patent protection for confidential information such as product recipes (e.g., the recipe for Coca-Cola), software algorithms (e.g., Google’s search engine), customer lists, business plans, wholesale price lists, and manufacturing processes for semiconductor chips.  Trade secrets have the advantage that they are protected indefinitely as long as they remain a secret, unlike patents and copyrights that expire after a specific time period.  Of course, a disadvantage of trade secrets is that they can be lost instantly and forever if they are disclosed or independently developed by another.  But, unlike other forms of intellectual property, such as patents and copyrights, until now federal law applied only to criminal prosecution for trade secret misappropriation.  As a civil matter, trade secrets were only protected under state law.  That all changed on May 11, 2016, when President Obama signed the Defend Trade Secrets Act (“DTSA”), which amends the Economic Espionage Act to create a federal civil cause of action for trade secret misappropriation.  The DTSA, codified as 18 U.S.C. §1836(b), went into effect when it was signed and applies to any misappropriation that occurs on or after that date.

Trade secret misappropriation can occur in a variety of circumstances.  One of the most common is when an employee leaves one company to a join competitor or a start-up and impermissibly takes protected business or technical information belonging to their former employer to the new company.  As another example, hackers capitalizing on computer security weaknesses pose a threat for the misappropriation of a company’s trade secrets.  To protect against such misappropriation, 48 states (all except New York and Massachusetts, which still rely on common law) have adopted some version of the Uniform Trade Secrets Act (“UTSA”), providing some uniformity in trade secret law.  But there are still a number of significant differences between the states’ laws as adopted, and it can be difficult, if not impossible, to enforce state laws when misappropriators flee the state or country with the trade secrets.  For example, it can be difficult or impossible to effect service of process and obtain discovery to prove misappropriation outside of a state’s jurisdiction.  One goal of the DTSA, which in many aspects mirrors the UTSA, is to provide a harmonized federal trade secret law, which will allow businesses that operate across multiple states to have uniform policies for protection and enforcement of trade secrets.

It, however, is important to note that the DTSA does not preempt state laws, but instead it provides an additional layer of potential protection on top of the state laws.
This complication has led some to argue that the DTSA will increase legal costs and increase the number of trade secret lawsuits.  For example, we can expect plaintiffs to bring both state and federal claims because differences between the state and federal laws may make it possible for a plaintiff to win under one law but not the other.  More claims implicating differing state and federal laws will likely lead to higher costs for litigation.  Further, more plaintiffs may be willing to pursue trade secret claims because it will be easier to file the claims in federal court, and some plaintiffs prefer federal court for complex lawsuits such as trade secret cases.  The volume of trade secret lawsuits may also increase because plaintiffs will effectively be given two bites at the apple (state claims and federal claims in the same lawsuit), which likely gives them a higher probability of success.

Unlike the UTSA, the DTSA includes a seizure provision that allows a court to issue an order to seize the allegedly stolen trade secret items (e.g., hard drives and flash drives containing trade secrets, software, hardware, and lists) in the defendant’s possession.  The plaintiff can request and receive an order for this seizure ex parte, which means without having to inform the defendant.  The goal is to allow recovery of the misappropriated items before the defendant can move, hide or destroy them.  Early recovery also can minimize the harm caused by the misappropriation.  The DTSA has numerous safeguards designed to avoid abuses of this seizure provision.  It also provides a cause of action for wrongful or excessive seizure.

Once misappropriation is proven, the DTSA provides for damages.  The Court can grant an injunction.  But if exceptional circumstances render an injunction inequitable, a court can order a reasonable royalty for the continued use of the trade secret.  The DTSA also provides for compensatory damages for either 1) actual loss of the trade secret and any unjust enrichment not compensated as part of the actual loss or 2) a reasonable royalty.  Exemplary damages up to two times the actual damages can be awarded for willful and malicious misappropriation.  For cases involving bad faith or willful misappropriation, a party can also recover attorneys’ fees.  It is important to note that under the DTSA, injunctive relief cannot be used to prevent a person from entering into an employment relationship merely based on the information the person knows.  Rather, an injunction must be based on evidence of actual or threatened misappropriation.  Further, an injunction preventing or limiting employment cannot conflict with an applicable state law prohibiting restraints on the practice of a lawful profession, trade, or business.  This limitation appears to recognize that certain states place limits on the applicability of non-compete agreements.  It is interesting to note that the White House also recently released a report criticizing certain types of non-compete agreements and state laws that broadly enforce them.

The DTSA also provides whistleblower immunity from liability for confidential disclosure of a trade secret to the government for the purpose of reporting or investigating a suspected violation of law or in a sealed court filing in a lawsuit.  The DTSA places the burden on employers to notify employees, including any individuals such as contractors and consultants, of these whistleblower immunity provisions.  Failure to do so comes with a penalty.  If an employer sues an employee for trade secret misappropriation, unless the employer has provided the employee with notice of the whistleblower immunity, the employer is prohibited from recovering attorneys’ fees and exemplary damages.  The notice must be in writing in any agreement governing the employee’s use of trade secrets or confidential information.

The DTSA will have an immediate impact on all businesses.  Every new or modified employment agreement and contract with a non-disclosure or confidentiality clause will need to be revised.  Further, trade secret protection only exists to the extent that reasonable efforts have been made to keep the information secret.  Don’t risk losing valuable intellectual property because you didn’t take the time to enter into a non-disclosure agreement, password protect accounts, encrypt data, train employees, mark documents as confidential, etc.  Take this opportunity to evaluate whether your company’s trade secrets are adequately protected and put into place additional safeguards as necessary.  While trade secrets can be extremely valuable, that value can evaporate instantly if the secret is disclosed.

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This isn’t just another tattoo-copyright infringement case.  This case raises an important lesson for all copyright claimants.

The backstory: Solid Oak is a licensing firm that represents the go to tattoo artists for NBA royalty, including LeBron James.  Solid Oak filed a lawsuit against Take-Two Interactive Software, the game publisher behind the popular “NBA 2K” basketball video game.  The lawsuit alleges that Take-Two  infringes the copyrights in six tattoos appearing on LeBron and other NBA players by depicting those players – tattoos and all – in the video game.   Early commentators on the case questioned the validity of Solid Oak’s case and commented on the applicability of fair use and other defenses.  Interestingly, Take-Two’s motion to dismiss does not focus on the merits of Solid Oak’s case, but rather focuses on Solid Oak’s damages claim; the motion attacks Solid Oak’s claim that it is entitled to statutory damages and attorney fees.

Section 412 of the Copyright Act addresses how and where an award of statutory damages and attorney fees are applicable. The section provides as follows:

In any action under this title…. no award of statutory damages or of attorney’s fees, as provided by sections 504 and 505, shall be made for….any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.

This means that where a work has been published, a copyright owner must have filed an application to register the work prior to an act of infringement or, if infringement occurs after publication,   within three months of its first publication in order to avail itself of statutory damages and attorney fees.   Where a work is infringed, if registration occurs later than three months after publication , the plaintiff may not collect statutory damages or attorney fees.

In the instant case, in its motion to dismiss Solid Oak’s damages and attorney fee claims, Take-Two claims that the alleged infringement occurred before the June/July 2015 registration dates. Take-Two notes that it depicted the NBA players and their tattoos in its NBA video games since at least 2013.   In opposing the motion, Solid Oak argues that its claims for statutory damages and attorney fees are properly pleaded since it filed its infringement claim within the three-year limitation period.  Solid Oak also contends that the infringement which occurred in Take-Two’s NBA 2K16 is a separate and discrete infringement.  Solid Oak alleges “Because Plaintiff is only suing for the wrong of the Defendants through their creation and release of the NBA 2K16 video game, well within the time afforded under the Copyright Act, and not for any earlier infringing acts, it is thus entirely proper for Plaintiff to seek statutory damages and/or attorneys’ fees based on Defendants’ infringement of properly registered copyrights”.

What Take-Two didn’t raise in its motion is that Solid Oak would still not be entitled to statutory damages or attorney fees because the infringement occurred after publication and registration was not made within 3 months of first publication.   The Copyright registration certificates attached to Solid Oak’s Complaint lists the date of first publication for each work.  These dates are years prior to the June/July 2015 registration dates.  Because registration was not made before infringement or within three months after the dates of first publication of each tattoo (as required by Section 412 of the Copyright Act), Solid Oak is clearly not entitled to either statutory damages or attorney fees.

The lesson to be learned here is that statutory damages and attorney fees are not available just because they are asked for; they must be earned by the timely filing of a registration certificate.  The failure to timely file (before infringement or if infringed, within three months of first publication) prevents a claimant from seeking statutory damages and attorney fees which may (as is likely the case here) strip a case of the majority of its value.