Third Circuit Rules Microsoft's "Kinect" does not infringe Facebook App "Kinbox"

On January 17, online social networking company Kinbook, LLC, failed in its bid to unseat Microsoft trademark “Kinect.”  The Third Circuit found that the two trademarks were not confusingly similar, rejecting Kinbook’s allegations that “Kinect” would confuse consumers and push “Kinbox” out of the market.

Kinbook’s mark actually predated Microsoft’s “Kinect.”  Kinbook launched its Kinbox app in December 2009 on Facebook as a tool to allow users to share messages, videos, and pictures with friends and family.   Microsoft did not release Kinect, a motion-sensor interface device for the Xbox, until November 2010.  In response, Kinbook initiated a “reverse confusion” suit against Microsoft.  Reverse confusion occurs when a commercially dominant company uses the trademark of a smaller company with senior rights in the mark.  Reverse confusion suits are used to block the big company’s use of the mark, which often smothers the small company’s mark.  Kinbook alleged that consumers who saw the highly advertised “Kinect for Xbox” product would be confused as to the source of “Kinbox.” 

However, the two marks did not share much in common, as the trial court observed when it analyzed the two marks to determine whether consumers were likely to be confused by them.  First, the marks did not look the same.  “Kinbox” was written in orange and blue bubble letters, with the “i” and “o” drawn to resemble people.  “Kinect” used plain font, not bubble letters, and was almost always accompanied in advertising by the famous lime green and silver “Xbox 360” mark.  Second, “Kinbox” did not have market recognition; Kinbook admitted that consumers were not familiar with the mark and that it had not dedicated any significant effort to marketing the brand.  Kinbook failed to produce any evidence that consumers had ever actually been confused by the two marks.  Finally, no evidence suggested that Microsoft intended to confuse consumers by adopting the “Kinect” mark; it was likely entirely unaware of “Kinbox” when it adopted “Kinect” for its gaming console.

Thus, the court found that the marks were not likely to confuse consumers and affirmed the trial court’s summary judgment in favor of Microsoft.

This post was written by Lauren King. You can read more about Lauren here.

Welcome to FP MEG. Have a look around.

Welcome to the Foster Pepper Media, Entertainment and Game Industry Group, or “MEG Group” for short. The interactive media, game, and entertainment industries are changing every day.   Disruptive technologies challenge existing conventions, resulting in new legal precedents.  Company founders, executives, and leaders need to understand the changing legal landscape to ensure the strength, viability, and longevity of their respective companies. Foster Pepper’s MEG Group meets those needs.   At FPMEG.com, you'll find articles on a wide variety of topics including film, television, video games, books, theater and more. You'll also find video interviews, podcasts, and a variety of other features, so be sure to check back with us on a regular basis.

Click here to learn more about Foster Pepper's MEG Group. If you have any questions, you can contact one of our attorneys.

This post was written by Matt Hooper. You can read more about Matt here.

5 Keys to Literary Agreements

What are the top 5 provisions I should be concerned with in my literary agreement?

Authors often ask me: "What are the top 5 provisions I should be concerned with in my literary agreement?" Literary agreements are filled with important provisions, and every contract term has meaning that should be carefully considered.  While it’s hard to narrow down a list, there are five common provisions that authors should carefully weigh:

(1) Copyright. 

The author should own the copyright, plain and simple.  The author should grant the publisher the right to exploit the work in certain forms and fields for the duration of the agreement (which is usually the duration of the copyright, and any renewals thereto, unless earlier terminated in accordance with the termination provision in the agreement).  The author should never grant or assign the copyright in the Work to the publisher.

(2) Royalty. 

The author should expect 10% to 15% as a print royalty (sometimes on a sliding scale), and 20% to 30% as an eBook royalty.  Publishers will try to argue that their expenses do not change between printed works and eBooks, but that is just not true. Also, most publishing agreements provide that if the Work is licensed or assigned to a third-party publisher, the author's publisher can pay the author 50% of the royalty otherwise owed to him or her.  If the author agrees to this provision, he or she should make sure that the publisher cannot license or assign the Work to any affiliate, subsidiary, or parent organization. 

(3) Cross-Collateralization. 

If the author agrees to create multiple books for a publisher under one agreement, he or she should be sure that the publisher cannot cross-collateralize expenses across all of the books.  For example, pretend that an author's contract calls for the author to deliver 3 books to the publisher: the author gets paid $50,000 in royalties for the first book; $100,000 in royalties for the second book; and then the third book tanks, even though the publisher spent $100,000 in marketing support for the book.  If the publisher is allowed to cross-collateralize expenses across all books, then the publisher can demand that the author repay the publisher $100,000 from the royalties the author has received to date.  No author wants to be in that situation. 

(4) Option / Non-Compete. 

Every stock publishing agreement has a provision that provides that the author may not ever draft any book that competes with the book that they have drafted for the publisher, and then defines a "competing work" as "any work of fiction" or "any work of non-fiction," in line with the book that is the subject of the contract.  These provisions are over-reaching, sometimes unenforceable (dependent upon the jurisdiction), and should be revised.  Make sure to place a reasonable time limit on the non-compete provision (12 to 24 months after date of publication), and narrow the "competing work" definition as much as possible. 

For example, if the book that is the subject of the contract is on travel to Washington wineries, try to narrow the provision to: "For a period of one year from the date of publication of the Work, Author agrees not to publish any work that addresses the subject matter of wineries in Washington."

The publisher will push back, but you will find middle ground.  Most contracts also contain option provisions, which basically provide that the publisher has the right of first refusal on the author's next work.  These provisions are normal, but the option should be for a very limited time (usually within 60 to 90 days of delivery of the draft).

(5) Accounting & Audit Rights. 

Because publishing agreements are almost always royalty-based, the author should always include an accounting and audit provision in the agreement, providing that the publisher will provide quarterly or semi-annual statements to the author, and that the author may, once per year, audit the publisher's books and records as it relates to the Work.  If the audit reveals a discrepancy of over 10%, the publisher should have to pay for the audit.

This post was written by Matt Hooper. You can read more about Matt here

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Sale or License - What's in a Name?

What’s in a name? To be more precise, what does it matter if the digital transfer of a song is called a sale or a license? If you are a consumer, there is little practical difference. You have the song and can play it, burn it to a disc and copy it to a mobile player. However, if you are a recording artist, the difference can be of great financial significance since standard recording contracts provide one royalty rate for a license of a master and a much lower rate for a sale of a record.

The distinction has become contentious in the digital music market, where a large portion of the transfer of music is accomplished. A number of artists have discovered that their labels have accounted for transfers of songs to digital distributors as sales. Believing that such accounting is incorrect, a number of individual and class actions have been filed by artists (or entities holding the rights of artists) such as The Temptations, Boz Scaggs, REO Speedwagon, Eminem, Peter Frampton, Rod Zombie, and James Taylor. A suit against Sony BMG by Cheap Trick, Allman Brothers and others recently was settled for $8,000,000, but Sony still is faced with claims by other artists.

An example of the financial ramifications for an artist is provided by the suit filed by F.B.T Productions, holders rights to Eminem’s early recordings, against Aftermath Records, a subsidiary of Universal Music Group. Aftermath had calculated royalties on downloads of Eminem’s songs under the “Records Sold” provision of the agreement, which set a royalty rate of between 12% and 20%. F.B.T. argued that the royalties should be calculated under the “Masters Licensed” provision, which set a rate of 50%. It is estimated that the difference could be more than $2.00 per album download. F.B.T. lost in district court, but the Ninth Circuit Court of Appeals reversed the lower court, holding that the Masters Licensed provision unambiguously applied to agreements for permanent downloads with digital distributors. However, certain aspects of the dispute are ongoing.

Sources suggest that many of these disputes involve artists whose contracts were signed before digital downloads were a significant portion of revenue. The agreements did not cap revenue shared from licensed music and were never amended to reflect the current digital marketplace. Some of the disputes also implicate inter-company accounting practices. By choosing to license the music transferred to digital distributors, the labels retained rights that they would not have retained if they had sold the recording. However, that choice resulted in unintended consequences with respect to the labels’ obligations to the recording artists.

These disputes will undoubtedly serve as reminders of several lessons for artists, labels, managers and their legal advisers.

These disputes will undoubtedly serve as reminders of several lessons for artists, labels, managers and their legal advisers. The most important lesson is simply the need for careful and comprehensive analysis in contracting for rights to music. In particular, parties need to remember that choices have consequences. If a label wishes to retain greater rights by transacting a transfer as a license, then the transfer is a license for other purposes as well. Second, while no one has a crystal ball, the effect of emerging technology should be considered in assessing the rights and obligations of the parties. Third, existing contracts should be evaluated from time to time with respect to changes in the industry.

This post was written by Scott Galloway. You can read more about Scott here.

Back to Basics: Intellectual Property (“IP”) Protection of Video Gaming Software and Hardware

It’s common knowledge among digital-gaming software and hardware developers that their creations may be established as, and kept, proprietary under intellectual property law. In this initial “Back to Basics” post, we’ll survey the various modes of intellectual property protection under United States law.

Copyrights

A copyright establishes ownership of original works of authorship “fixed” in any tangible medium of expression. A copyright applies to the expression of an idea, whether published or not. Once an original work is so fixed (rather than merely imagined) by an author, be it graphical illustration (electronic or otherwise) of game characters or scenes, or game source code stored in memory or printed to paper, copyrights of the author in such work exist.

The Copyright Act grants copyright owners exclusive rights in five categories: reproduction, adaptation, public distribution, public performance, and public display. The owner of a copyright, through written agreement, can authorize or license others to exercise these rights. It should be noted, however, that without a federally registered copyright, authors/creators are at a severe disadvantage in negotiating these rights.

Patents

Patents are arguably the strongest mode of intellectual property protection. A patent provides, for a limited time, monopoly rights in the invention defined by the claims portion of the patent. During that time, only the patent owner, and parties specifically permitted by the patent owner, may make, use, sell, offer for sale or import the invention.

Examples of patentable subject matter include any new and useful process, machine or manufacture. In the context of digital gaming, patentable subject matter includes innovative console/controller features, hardware programmed with gaming source code, communication protocols, game/module interaction, innovative coded methods used to implement gameplay, and graphic-generation/rendering techniques

Confidentiality is crucial. To a critically greater degree than is the case with trademarks and copyrights, confidentiality surrounding invention functionality and diligence in securing governmental sanction is crucial in establishing patent rights. 

Trademarks

Although not typically top of mind when contemplating proprietary rights in video games, trademarks can play the important role of ensuring that gaming products achieve a competitive advantage over otherwise similar products on the market. One would be hard-pressed to argue that the video golf franchise employing the TIGER WOODS name and the RPG games under the DIABLO banner haven’t enjoyed greater sales levels than other similarly-themed games.

In a manner similar to the case with copyrights, rights in a trademark need not be governmentally bestowed; generally speaking, one may acquire ownership of a trademark merely upon using the mark in commerce. However, registration of the trademark with the U.S. Patent and Trademark Office provides important procedural rights and protection throughout the United States. For example, upon registration of your trademark, no other entity can use a mark that is identical to or likely to cause confusion with such trademark in the U.S in connection with a similar product or service.

This article was written by Scott Born. You can read more about Scott here.

FPMEG Client Sue Corcoran Discusses Her Upcoming Film

Foster Pepper client - Tender Brisket CEO Sue Corcoran - recently produced and directed the soon-to-be Christmas classic, "All I Want Is Christmas."  Check out Sue's thoughts on the film and the trailer for the movie, below.

AntiSocial Behavior: The Ville v. The Sims

Since early June, EA Games and Zynga have been at odds over Zynga’s game “The Ville.” The dispute between the companies centers on EA’s allegations that Zynga “willfully and intentionally copied and misappropriated the original and distinctive expressive elements of The Sims Social in a violation of U.S. copyright laws” in its development of The Ville. The Sims Social, a game owned by EA label Maxis, is a Facebook game in which players “Build [their] Sim a perfect home and unleash their ambitions by helping them to advance in their dream job.” The Ville, also a Facebook game, “gives players the chance to build the home of their dreams and enjoy it with friends.” 

Lucy Bradshaw, General Manager of Maxis, commented that “Zynga's design choices, animations, visual arrangements and character motions and actions have been directly lifted from The Sims Social. The copying was so comprehensive that the two games are, to an uninitiated observer, largely indistinguishable. Scores of media and bloggers commented on the blatant mimicry.” http://www.ea.com/news/eamaxis-sue-zynga-for-copyright-infringement

...Zynga alleged that EA engaged in anticompetitive and unlawful business practices.

In mid-September, Zynga returned fire in the dispute, filing not only a response to EA’s lawsuit, but a countersuit of its own. In responding to EA’s lawsuit, Zynga alleged that EA engaged in anticompetitive and unlawful business practices. More significantly, Zynga argued that both The Ville and The Sims Social belong to a genre of games known as “life simulation games,” which, according to Zynga, “employ… common modes of expression and functional elements” that are not legally copyrightable. Zynga argued that allowing one company to own those elements would “thwart competition, innovation, and creativity."  

Zynga is seeking a jury trial on the questions of what, if anything, EA can legally protect under copyright law. Zynga is also seeking injunctive relief against EA barring it from interfering with, or threatening litigation against, EA employees that are pursuing or have accepted employment with Zynga.

At the end of the day it will be interesting to see who prevails. If Zynga’s position is correct (that EA cannot copyright game aspects that involve “common modes of expression and functional elements”) it would appear that game developers may have much broader latitude in incorporating common design elements than one might intuitively think. Whether the aspects of The Sims in question are truly “original and distinctive expressive elements,” as opposed to “common modes of expressions and functional elements” is a pivotal question, not only for EA and Zynga, but also for any game developer looking for an opportunity to find a foothold in a marketplace of increasingly similar games.

This post was written by Duncan Connelly. You can read more about Duncan here.

Kirtsaeng v. John Wiley & Sons: First Sale Doctrine at Risk?

The Supreme Court is set to consider one of the most challenging copyright questions in the age of global information: whether a U.S. copyright holder can prevent the importation of “gray market” products manufactured for overseas markets. The case, Kistsaeng v. John Wiley & Sons, focuses in part on the “first sale” doctrine.  In copyright law, the “first sale” doctrine allows an individual to buy and sell things without having to get permission from the copyright holder. For example, even though author Dan Brown owns the copyright on his book, The Da Vinci Code, an individual can sell his or her copy to a neighbor at a garage sale without having to ask Mr. Brown first.

Kirtsaeng – a Thai national - came to the United States to attend college. He quickly discovered that his textbooks could be obtained at a much lower cost in Thailand, so he asked his friends and family to buy the books and ship them overseas. Kirtsaeng then sold the books through sites such as eBay.com. He repaid his friends and family for the costs of buying and shipping the books, and kept the remaining revenues for himself.

Not surprisingly, textbook manufacturers were displeased with his participation in the after-market for used textbooks. Publisher Wiley brought suit, claiming that United States copyright law (namely, the first sale doctrine) did not extend to books manufactured outside of the country. Wiley’s argument, accepted by the lower court, was that the first sale doctrine does not apply to allow legal sale of the books in the United States.

The Second Circuit agreed, finding that the first sale doctrine did not apply to copies of works made and legally acquired abroad, where those foreign-manufactured works were then imported to the United States.  

Regardless of the outcome, the decision will have far-reaching implications for United States retailers and consumers. In a brief urging review before the Supreme Court, one retail industry group asserted that gray market practices – such as those Kirtsaeng engaged in here – represent a “multibillion dollar benefit to American consumers.”  

This post was written by Lauren King. You can read more about Lauren here.

Fostering Fashion Innovation Or Inviting Haute Litigation?

U.S. copyright law has long excluded fashion design, but recently, designers have clamored for more protection in the face of hordes of discount knock-offs. Walk into any Forever 21 and see last year’s runway looks recreated in polyester and retailing for $19.99. So, when copyright law fell short, Christian Louboutin turned to trademark protection in its now-famous litigation with Yves Saint-Laurent. And, Lululemon is going after Calvin Klein wielding patent law as a sword.

To redress these concerns, Senator Chuck Schumer has again introduced a bill to expand copyright protection to fashion designs. It’s no surprise that the sometimes-frumpy Senator Schumer should take up this mantle; he hails from New York, the nation’s fashion epicenter. His initiative serves the high-end fashion industry’s interests well – it enables designers to copyright their designs and then sue the imitators that copy their signature looks at significantly lower prices.

But copyright is a nuanced, squishy area of the law. Where one person may see a copied design, another sees a derivative idea, and under the law “derivative works” aren’t copyright infringements. This distinction means copyright litigation can become exceedingly detailed and expensive. Critics of Schumer’s initiative see the pitfalls of copyright law as especially dangerous in the world of fashion. They worry that extending protection will enable powerhouse designers to bully smaller start-up labels: even if their suits lack merits, they could be expensive enough to defend to sink a new designer. And, some worry that the nature of copyright law simply can’t accommodate fashion: an author can get copyright protection for his new novel, because there are a million unique ways to tell a story, but should a designer get protection for a new blouse? After all, there are really only so many ways to make a shirt. At what point does a design cease to be a copy and instead is a necessary product of function?  Will these delicate issues stifle innovation, or will more creations be produced if designers know they can keep poachers from taking their patterns? Drop us a line in the comments with your thoughts on how these developments might affect the industry.

This post was written by Alexandra Gilliland. You can read more about Alexandra here.

FPMEG Client Becky Nunn Discusses Nunn Design

Foster Pepper client - Nunn Designs CEO Becky Nunn - discusses the inspiration behind her fabulous designs, and what it takes to build and lead a fashion company.