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Date Published: 1999-10-01
by Michael J. Persson, Esq.
© 1999, Law Offices of William B. Ritchie
The Internet has created huge opportunities for programmers and other electronic content providers. Unlike
the traditional product manufacturing and distribution model, it is relatively easy to set up a Web Site
and begin selling your product or service. This ease of entry, however, can also work to your disadvantage.
Electronic products and services are easily copied and reused by others on their own sites. Programs like
Bandwidth ProtectorÔ Software by CGI Software may protect
against others linking to images on your site. However, how do you protect yourself from others downloading
your images or products and posting them on their web sites?
The two principal forms or protecting electronic products are copyrights and patents.
Each offers a different type of protection and each have different requirements for obtaining and enforcing
rights.
Copyrights protect artistic expression, such as photographs, graphics, and stories, but also can be
used to protect the arrangement of code in a script or other program. In this manner, copyright may be
used to protect against direct copying of your product.
A copyright automatically arises from the creation of the work and not from registration or publication
of the work. However, a copyright must be registered as a prerequisite to instituting any infringement
suit and for collecting damages for infringement. Copyright registration is a relatively simple procedure
involving the completion and submission of a registration form, the deposit of two copies of the work with
the U.S. Copyright Office, and the payment of a $30.00 registration fee. Typically, no examination is made
by the Office and the copyright registration issues as a matter of course.
Copyrights may be enforced in a number of ways to prevent Internet Piracy. First, if the pirates does
not own their own server, you may notify their host of the existence of your copyright and demand the removal
of the material from the host's server. Such a notification is particularly powerful if the host is
registered with the copyright office and has appointed an agent for the receipt of such notices. Under
the Digital Millenium Copyright Act a host is shielded from liability if it follows a specific procedure
upon receipt of an infringement notification. Part of this procedure requires the removal of the offending
material pending a showing of non-infringement by the pirate. As most pirates will not respond, this will
generally be effective at removing the material from the Internet.
If a pirate owns their own server, or responds to the host with a counter notification of
non-infringement, then the copyright must be enforced through legal action. The copyright laws are the
purview of federal law and, accordingly, suits for copyright infringement are typically filed in Federal
District Court. A copyright owner who files suit has a number of remedies available.
The first, and often most powerful, remedy is the injunction. An injunction is an order from the court
that requires the pirate to cease and desist from their action. At the outset of a suit, a copyright owner
will usually seek a preliminary injunction to require the pirate to cease their action pending outcome of
the suit.
The copyright owner may also seek actual monetary damages or statutory damages for the infringement.
Actual damages are typically calculated based upon lost profits of the copyright owner or upon the ill
gotten gains of the infringer. The lost profits are equivalent to the money lost by the copyright owner
that is directly attributable to the infringement; i.e. lost profit from sales. These damages are often
appropriate when the pirate has distributed large numbers of the owner's materials for free, causing the
owner to lose large numbers of sales. The ill-gotten gains are equivalent to the profits made by the
infringer through the infringement. These damages are appropriate in cases where the pirate is selling large
numbers of the materials to different markets than the copyright owner; i.e. the owner has no proof of lost
sales. Statutory damages are damages awarded by the court and require no evidence of actual damage.
These damages may be appropriate, for example, where a pirate distributes a piece of shareware in violation
of a license agreement that they entered into upon download from the owner. In such a case, where there is
no tangible lost profits or ill-gotten gains, the owner would still be entitled to an award of money by
the court.
A typical copyright infringement action may be brought for as little as $5,000, although more complex
actions can cost in upwards of $150,000.
Patents protect useful articles and can be used to protect specific useful features of a script or other
program. Accordingly, patents may be used to protect a program regardless of the way that the code is
written.
A patent is the grant of the right to exclude others from making, using or selling a new and useful
invention for a limited period of time; now 20 years from the date of filing. Patents are not effective
until granted by the government and the invention must first pass a rigorous examination prior to grant.
Given the current PTO backlog of over 18 months in the software field, such a grant may not occur for
2 - 4 years from the date of initial filing. Further, the cost of obtaining a patent will generally be
between $4,000 and $8,000.
Issued patents may appear, from their descriptions and drawings, to cover broad program concepts.
However, the scope of a patent is limited by its claims, which constitute the legal definition of the
invention. In order for another program to infringe the patent, each and every element and limitation of
the claim must be found in the program, either directly or equivalently.
In addition to the question of infringement, patent infringement suits usually will also involve counter
claims, by the infringer, that the patent is invalid and/or is unenforceable because of some inequitable
conduct on the part of the patent holder.
Once a infringement, validity and enforceability are proven, the patent owner is entitled to a remedy
for the infringement. As was the case with copyrights, an injunction may be sought to prevent future
infringement. Actual damages, computed in a similar manner as copyright damages, may also be sought.
Unlike copyrights, however, no statutory damages are available and an owner must prove actual damage in
order to obtain a monetary recovery.
Patent infringement suits are generally very expensive. The minimum legal costs in a case going to
trial are in the range of $50,000. However, it is not uncommon for legal costs to be as high as $2.5
million in some cases. These costs will cause many to forego patent protection. However, an owner of a
valid and enforceable patent may have a number of options for paying for an infringement suit.
First, the owner may seek to partner with another company to bring suit. It is not uncommon for small
companies to license their patent rights to larger concerns who, in turn, agree to assist in patent
enforcement. Second, the owner may find a law firm to take the case on a contingent fee. If a patent
is a good one, many firms are willing to take such a risk for a percentage of the damages, typically
between 33% and 50%. Finally, the owner may purchase infringement insurance that will cover them in the
event of infringement by others. Although such insurance is just begin to gain acceptability, it is
offered by a few companies.
The two principal forms or protecting electronic products are copyrights and patents. Each offers a
different type of protection. Copyrights protect artistic expression, such as photographs, graphics, and
stories, but also can be used to protect the arrangement of code in a script or other program. In this
manner, copyright may be used to protect against direct copying of your product. Patents protect useful
articles and can be used to protect specific useful features of a script or other program, regardless of the
way in which the code is written.
by Michael J. Persson, Esq.
©, 1999; Law Offices of William B. Ritchie
Michael J. Persson, Esq.
Law Offices of William B. Ritchie
72 N. Main Street
Concord, New Hampshire 03301
(603) 225-5212
fax: (603) 225-5146
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