Douglas Rogers

Tuesday, 23 October 2001 10:48

Ownership rights -- and wrongs

It is easy for businesses to encounter legal problems in connection with software development and use. Here are some steps to help minimize such problems.

1. Control the use of software by employees.

A business should prohibit employees from copying software licensed for one computer and using it on another. Such use violates federal copyright laws and, if the infringement was willful, could subject the business to fines of up to $150,000, plus attorney fees. Infringement can be willful under the law if the business exhibited a reckless disregard for the rights of the copyright holder, whether or not the business owner actually knew of the infringement.

Courts "award an amount that will put the defendant on notice that it costs more to violate the copyright law than to obey it." Recently, a business was found to have improperly distributed software, and the company -- as well as its president -- were found liable and ordered to pay Microsoft $140,000 in statutory damages, plus attorneys fees, for seven infringements of copyrights.

In another case, a U.S. district court awarded a copyright holder, Dream Dealers Music, statutory damages of $20,000, plus attorneys fees, against a radio broadcaster for unauthorized broadcasts of copyrighted songs, an amount the court said was almost three times as much as it would have cost the station to acquire licenses.

2. Watch downloads from the Web.

The decision of the U.S. Ninth Circuit Court of Appeals in the Napster case confirmed that downloading music files from the Web can violate copyright laws, even though the person downloading files paid no money for them. Advise employees that downloading material, including documents, from the Web can violate copyright laws in certain situations.

If there are questions about whether downloading in a particular situation is prohibited, the employee should ask counsel or management familiar with copyright issues.

3. Get software development deals in writing.

Generally the person developing a copyrightable work is the owner of that work. An exception is a work-for-hire situation. If a business asks an employee to develop a computer program, and the work is within the employee's scope of employment, generally the resulting software is owned by the employer under the work-for-hire statute.

Questions frequently arise, however, about whether software development is within the scope of employment and whether the employee is actually an employee in the eyes of the law -- or an independent contractor. Although not required, to protect against confusion, a business should put into writing details of a software development arrangement with an employee and have the employee sign the statement.

The work-for-hire doctrine also applies to independent contractors, but with a more limited scope: The work must be "specially ordered or commissioned" and can only be for limited categories of works, including "a contribution to a collective work, as part of a motion picture or other audiovisual work ... as a supplementary work, as a compilation ...." Further, the parties must "expressly agree in a written instrument signed by them that the work shall be considered a work made for hire."

Thus, if a business asks an outside consultant to develop software, the business should make sure that:

* The work fits within one of the categories that can be considered work for hire when developed by an independent consultant, and

* The business has a written agreement with the consultant signed by both parties stating the software is to be developed on a work-for-hire basis and the business will be the owner of the software.

If the work does not fit within one of the categories, the business should obtain a written assignment of all the developer's rights in the software.

We recently had a case in which a developer alleged that a client, the company contracting for source code, infringed upon the copyright of the developer by using the source code provided by the developer without fully paying for it. The developer sued in federal court, but the development agreement had specifically stated the source code would be a "work made for hire" and that the contracting company would own the copyright.

As a result, the court denied the request of the plaintiff for an injunction. Putting the development agreement in writing and specifying ownership is crucial.

4. Don't allow developers to copy from Web page or other designs.

The design of Web pages can raise separate copyright issues. Even though one computer program may not be substantially similar to -- and therefore may not infringe upon a second program -- the first program may nevertheless produce screen displays which are substantially similar to the displays of the second program and infringe the copyrights for its displays. Trademark law -- as well as copyright law -- can protect screen displays.

When a business has a consultant develop a Web site, not only should the business identify in the contract who owns the software used to generate the screen displays, but also who owns the screen displays. Moreover, in the contract, the developer should assure the business that the program and screen displays will not infringe upon anyone else's copyright or trademarks.

Considering such issues will not eliminate legal problems, but can minimize the likelihood and severity of any ensuing difficulties. Douglas L. Rogers (DLRogers@vssp.com) is a partner in the Columbus office of Vorys, Sater, Seymour and Pease LLP where he practices in the areas of copyright, trademark, intellectual property, computer, Internet, antitrust and general commercial litigation.

A matter of law is presented by Vorys, Sater, Seymour and Pease LLP in cooperation with SBN Magazine.

Wednesday, 31 July 2002 11:33

Web site legalities

A recent Court of Appeals decision makes the use of frames in Web sites potentially more dangerous from a copyright infringement standpoint.

Internet copyright issues -- downloading music, software piracy, cybersquatting -- all have received media attention. But last February, with very little fanfare, the U.S. Ninth Circuit Court of Appeals made a decision that could affect the way in which Web sites link to one another. In the first decision of its kind in this country, the court held a company guilty of copyright infringement for using frames to display pictures from another Web site.

The case involved two issues and generated two specific decisions. The first concerned the use of thumbnail pictures of images from the claimant's Web site appearing on the defendant's site. The defendant's site used thumbnails (the quality of which was degraded from the originals) to index and display the results of search engine queries.

The Ninth Circuit held that this use was a fair use and did not violate copyright law. The court, however, held that the use of frames on the defendant's site to display complete images from the claimant's site constituted copyright infringement.

When the user clicked on a thumbnail, the site displayed the exact picture from the other site, with the same resolution as the original. The Ninth Circuit noted "the user typically would not realize that the image actually resided on another Web site."

The Ninth Circuit acknowledged the complete images were not downloaded to the defendant's server, so the case did not involve illegal copying. However, it held that use of the images infringed the claimant's exclusive right to display the copyrighted work publicly and "created a public display" of copyrighted works.

The Ninth Circuit concluded such framing did not constitute fair use: "[Claimant's] markets for his images include using them to attract advertisers and buyers ... By giving users access to [claimant's] full size images on its own Web site, [defendant] harmed all of [claimant's] markets. Users will no longer have to go to [claimant's] Web site to see the full-size images, thereby deterring people from visiting his Web site."

The court stated the defendant was liable for contributory infringement: "[Defendant] actively participated in displaying [claimant's] images by trolling the Web, finding [claimant's] images, and then having its program online link and frame those images within its own Web site. Without this program, users would not have been able to view [claimant's] images within the context of [defendant's] site."

Although frames are a type of link, the court did not analyze the legality of links in general. Simple links should be viewed differently than frames. When users click on a simple link, they are taken to the other site and know they are viewing another site.

Unless that link allows users to circumvent password protection or other mechanisms to control access, users are simply responding to what in essence is the second site owner's invitation to visit.

The lesson is that a company is taking a significantly greater risk by using frames to display images from other sites than it is by simply linking to them. Although linking is not without risk, the risk of liability from framing is significantly greater. How to reach: Douglas Rogers is a partner in the Intellectual Property group of Vorys, Sater, Seymour and Pease LLP. He can be reached at (614) 464-6400.

Friday, 31 January 2003 08:56

New law slams spam

Spam is the electronic equivalent of junk mail, in which advertisers send marketing messages to thousands or millions of users who have not requested them.

The term spam derives from a Monty Python sketch, in which Vikings in a restaurant sing ever more loudly about Spam (the Hormel canned meat product), eventually drowning out everything else. In the same way, e-mail spam can drown out legitimate business uses of Internet communication.

What started as a quirky issue has turned into a real problem.

Recipients may end up paying for unsolicited e-mails in a number of ways. Your home e-mail provider probably doesn't charge by the message, but businesses need to allocate computer resources based on their volume of electronic traffic.

Spam clogs up those pipelines, requiring companies to spend time and money finding and deleting it. A company may even need to purchase more resources just to make room for legitimate e-mail. In addition, employees' time is wasted as they wade through junk e-mail solicitations.

Ohio lawmakers are fighting back. As of Nov. 1, 2002, a new statute has been put into place to regulate spam and other unsolicited e-mail ads, regardless of how many messages are sent and how legitimate the advertisement is.

The statute provides that:

* Unsolicited e-mail ads must include the name, complete business address and e-mail address of the person transmitting them.

* The e-mail must notify recipients that they may decline to receive future e-mails from the sender, and must include a procedure for declining future ads at no cost.

* An individual may recover $100 for each violation in a civil action, up to $50,000, plus attorneys' fees.

* If the sender attempts to or does forge an originating address or routing information in connection with an e-mail ad, each use constitutes a criminal offense of forgery.

* There is a prohibition against using an e-mail source provider to transmit an e-mail ad in violation of the policies of that service provider, and the law imposes penalties for doing so.

What does this mean for businesses that use e-mail as a marketing tool? Here are some thoughts, but check with your counsel to get specific legal advice.

* Never change or falsify routing information.

* When you do use e-mail ads, make sure to include within the ad your company's name, physical address and an e-mail address.

* E-mail ads should always include a way for recipients to opt out of future e-mails -- a procedure for getting off your list. Put a plan into place and test it regularly.

* Make sure you learn about and comply with the policies of your e-mail service provider.

It's a good idea to periodically review all your e-mail marketing practices with your in-house attorney or an outside firm. Laws about advertising requirements and prohibitions change frequently, and not knowing about a change is no excuse.

Many other states have also enacted laws against spam, and the requirements of those laws vary, so advertisers should review the laws of other states, too. Douglas Rogers is a partner in the Columbus office of Vorys, Sater, Seymour and Pease LLP, where he practices in the areas of copyright, trademark, computer, internet, antitrust and general commercial litigation. He can be reached at (614) 464-5407.