President Obama called to congratulate China’s new president Xi Jinping yesterday, reportedly taking the opportunity to talk to the leader about the increasingly tense cyber security situation developing between the two countries, according to the New York Times.

Xi Jinping successfully completed the transfer of power and became China’s president on Thursday, opening a door to new conversations with Washington. Despite many other issues the U.S. must hammer out with China, cyber security has been top of mind for many government officials and rightfully so. A number of high-profile companies have been hacked, tracing the attacks back to China. This includes the The Wall Street Journal and The New York Times. Security firm Mandiant also recently released a report saying China has been attacking the U.S. for a number of years, specifically one group within the Chinese military.

The New York Times reports that President Obama specifically mentioned stealing U.S. companies’ proprietary information and intellectual property.

On Monday, U.S. national security adviser Tom Donilon said in a speech in New York that the international community should not stand for action like this any longer and that China needs to come to the table to discuss cyber security rules.

“From the President on down, this has become a key point of concern and discussion with China at all levels of our governments,” he said in the speech.

China’s Foreign Ministry spokeswoman Hua Chuying responded on Tuesday saying the country is “willing, on the basis of the principles of mutual respect and mutual trust, to have constructive dialogue and cooperation on this issue with the international community including the United States to maining the security, openness and peace of the Internet.”

President Obama phone image via The White House/Flickr

If you’re trying to understand how existing intellectual property law applies to 3D printing, let me save you some time: It’s a complete mess.

From top to bottom, 3D printing raises more legal questions than it answers. There are lots of companies making 3D printing hardware, even more companies offering online repositories of 3D designs, plenty of services that will print things for you, and almost zero precedent for disputes among them. From a legal standpoint, 3D printing is the Wild West.

While that may sound liberating for such a young industry, it’s also potentially dangerous. There’s a very real chance that the lack of any regulation could be replaced with bad regulation. And that could have some dire effects on the whole industry.

“Copyright precedents are created one case at a time, and eventually they can lead to the accretion of copyright expansion in a way that was never intended,” Public Knowledge attorney Michael Weinberg said.

Bad laws, Weinberg says, emerge out of a basic misunderstanding of how industries work. And for a young technology like 3D printing, misunderstandings are going to be common.

How bad could it get? Consider a law that would force companies like MakerBot and 3D Systems to shell out a percentage of their sales to offset the piracy factor, with the money going into a fund to compensate makers of plastic toys, like Mattel and Disney. Or a law that required 3D services to adopt software that limits the number of times 3D design files (STLs, etc) can be printed or which printers can print them.

For people who are excited about free, unfettered access to 3D printer technology, those are some scary possibilities. But Weinberg is convinced that 3D printers, on the whole, will come out all right.

“These are general-purpose machines, and the companies that make them are fairly well-protected,” he said.

Copying, printing, infringing

Right now there are quite a few sites that act as repositories for 3D designs. MakerBot’s Thingiverse, Shapeways, and i.materialise all invite people to upload their designs and share them with (or sell them to) others.

But once you let people upload their own files, you expose yourself to all of the risks that come with that freedom, such as files that infringe on copyrights. (Consider all of those Yoda figures that Star Wars fans like to put on Thingiverse, for example.)

One 3D-printed interpretation of the Penrose triangle. (Source:Thingiverse)

These sites handle copyright concerns the same way YouTube does: Copyright holders post takedown notices, and the hosting sites, as protected “safe havens” under the Digital Millennium Copyright Act (DMCA), cover their butts by taking the infringing files down. Simple enough.

Sometimes the process is a bit more complicated, though. Thingiverse hit a major milestone in February 2011, when it got its very first takedown request. The complaint came from Ulrich Schwanitz, a designer who claimed that a Thingiverse user had uploaded “his” design to the site without his permission. The problem? The design in question was a model of the Penrose Triangle, created in 1934.

Community response to Schwanitz’s claims was, suffice it to say, not glowing (“Ulrich Schwanitz is an ass,” a Thingiverse commenter eloquently quipped), and Schwanitz eventually dropped his infringement claims and donated the design to the public domain.

Another example: Earlier this month, 3DLT, a 3D design marketplace, posted designs on its site without the permission of the design owner. 3DLT eventually blamed the problem on sample listings that went live before they were supposed to, but the damage was already done: 3DLT was forced to give a public apology and reaffirm its commitment to protecting the intellectual property of all designers — not just its own.

“3DLT is committed to providing a consumer-friendly, 3D design marketplace where creative assets are safely protected and designers are properly compensated for their intellectual property,” the company said in a statement to VentureBeat.

But while Thingiverse and 3DLT are already dealing with IP issues, Todd Grimm, president of consulting firm T. A. Grimm & Associates, says that the concerns over 3D printing are, at this point, overstated.

“That future of consumers making their own designs and firing up their personal 3D printers to pirate objects is years, or even decades away,” he said.

Unlike most people who pay attention to 3D printing, Grimm isn’t convinced about the technology’s short-term potential to disrupt, say, the kids toys or spare car parts industries. And neither, he says, are the industries themselves.

“Honestly, most companies may not even be afraid of it. They’re really not thinking of this now,” he said.

The pirates discover 3D printing

Companies may not be paying close attention, but the days when physical objects can be pirated as easily as Weezer songs are coming, and the Pirate Bay is already pushing things along.

A slow start for 3D-printed piracy.

Last year the torrent site launched its “physibles” category, which hosts STL designs that 3D printer users can print out. Right now the category only houses a hundred or so files, and they’re limited to things like gun parts, Guy Fawkes masks, and printable copies of records like Pink Floyd’s “The Dark Side of the Moon.” The early days of pirated objects are, well, subdued.

It won’t always be this way, of course, and it’s only a matter of time until the piracy of physical objects will be as common as the piracy of music and movies is today.

How will companies handle this? That depends on how well they adjust to the realities of  IP law.

Public Knowledge’s Michael Weinberg says one of the big challenges for all object industries will be to collectively recognize the realities of intellectual property as it relates to both digital and physical objects. The first step? Realizing that IP law is nowhere near as robust as we think it is.

“People assume that everything they sell is protected by IP, but that’s often not the case with physical things,” Weinberg said.

“Companies are going to have to recognize when they have legit claims and when they won’t — and most of the time, they won’t,” he added.

This is something established industries won’t like to hear, of course and, if history is any indication, most of them will react by firing their legal teams in all directions.

Weinberg, however, hopes that they won’t. The music and movie industries have already shown us what happens when fear drives ligation: Lots of people get sued, lots of money gets spent, and no one really has much to show for it.

Instead of suing the 3D printing industry, smart companies of the future are going to figure out how to profit from it. 

This is a guest post by startup lawyer Jennifer Berrent

When launching a startup, legal issues often get brushed aside in order for founders to focus on building the product. But making the wrong legal decision early on in the process of starting your company may lead to thorny problems in the future.  Frequently, issues can be avoided by taking action in three key areas: choose the right entity, allocate equity and protect your intellectual property.

Choose the right entity

Once you are ready to move forward with an idea, you should formally form your startup as an entity.  One important benefit of setting up an entity is that you can protect yourself from liability, since, in general, only the assets of the entity (rather than your personal assets) would be at risk. Depending on your business, either a C-corporation or a limited liability company (LLC) would likely make most sense.  Almost all companies that are going to seek venture capital financing elect to be C-corp.

However, more and more companies that expect to have early and significant cash flow are electing to start out as LLCs.  You should discuss which entity is right for you with your tax and legal advisers.

Allocate equity

Startups often have more than one founder or associate who contributes early on to the success of the enterprise.  It is critical to have a clear understanding among founders, other early contributors and key employees regarding how the ownership of the entity will be allocated. This not only prevents misunderstandings that can erupt into messy legal battles, but also assures investors that claims of ownership from early business partners will not impact the value if their investment.

Not only does a frank and early understanding of the ownership of the entity avoid future problems, but if done correctly, vesting and other mechanisms can provide incentives to achieve critical desired goals.

Ideally, you should form your company and issue shares to founders, key contributors and employees as soon as possible to steer clear of any costly taxes or payments involved in acquiring the stock later when valuations may be higher.

Protect your intellectual property

Make sure that all intellectual property is owned by the company. Obtain licenses of any property obtained from third parties, such as a university. Have all founders, collaborators and future employees sign an assignment of invention agreement and a non-disclosure agreement, assigning any IP related to the business — whether developed before or after formation — to the company. You want to avoid disputes over ownership, as well as a potential competitor from a disgruntled employee or consultant down the road.

In order to make sure these agreements are enforceable, you must provide some consideration  in the form of cash or equity. An important and sometimes overlooked step is to document any and all agreements, and properly issue equity.

By taking care of these critical legal matters now, you free yourself and your business partners to concentrate on turning your startup into the thriving company you envision.

Jennifer Berrent is a partner at WilmerHale in the Corporate Practice Group and Emerging Company Group.

She has been working with emerging companies in particular for more than 15 years and is focused on serving as trusted advisor to entrepreneurs and the NYC entrepreneurial community.

Patent analytics firm IP Checkups wants to expose the patent portfolio owned by Intellectual Ventures, one of the largest patent trolls in the United States.

“The idea is that this information will enable startups and investors to make more informed decisions,” said Matt Rappaport, founder and CEO of IP Checkups, in a phone interview. “There is not a lot of transparency in the intellectual property field.”

IP Checkups plans to develop a resource known as Case IV Thicket, with funding raised through popular crowdfunding site, Indiegogo. Rappaport wants to raise $80,000 but hopes that the project will exceed its funding goals.

IP Checkups will use the funds to develop a free, public database of patent records — most likely, through an integration with Lex Machina’s technology, and will regularly publish their findings on a company blog.

Ultimately, they plan to create an online database of all the patents held by Intellectual Ventures and its shell companies. Using this data, analysts will be able to extrapolate broader trends, pinpoint the companies that are the most litigious, and point entrepreneurs in a direction that will help them avoid a costly and time-consuming intellectual property suit.

According to Rappaport, Intellectual Ventures owns about 40,000 patents in diverse fields from medical devices to wireless technologies. Many of these are hidden in more than 1,200 “shell companies”, which are used as a vehicle for business transactions and lawsuits. Rappaport told me that he has contacted Intellectual Ventures to inform them about the project but has yet to receive a response.

The alternative for investors and companies is PatentFreedom, a subscription-based service that claims to provide its customers with a competitive edge in intellectual property disputes.

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The language we use affects the way we think. Political strategists know this: Once you succeed in setting the terms of the debate, you’ve won.

It works in business, too. One of the trickiest turns of phrase in modern business is “intellectual property.”

In many ways, it’s a useful phrase, and it’s deeply embedded in modern economic life. Besides, the abbreviation “IP” is so much easier to say than “patents, trademarks, and copyrights.” But as free-software advocate Richard Stallman points out, the phrase glosses over some important distinctions between different kinds of ownership, and it grants a misleading sense of permanence to the rights it covers.

That’s why I say it’s time to examine this concept a little more clearly, especially when patent law dominates business headlines and the outcome of the Apple-Samsung trial holds enormous implications for the tech industry.

I realize that this question puts me in a tiny minority of business writers — maybe even on the lunatic fringe. Almost everyone agrees with the notion that patents, copyrights, and trademarks are a kind of property. The U.S. Patent and Trademark Office defines IP by writing, “It is imagination made real. … It is an asset just like your home, your car, or your bank account.”

But when even Google is talking about patent reform, it might be time to get a little more serious about this discussion — and to get some clarity about the terminology.

Let me explain: I’m not calling for the abolition of intellectual-property rights. I believe patents and copyrights are critical tools for ensuring that creators get fair compensation for their works of invention. VentureBeat pays my salary, and that of a dozen other writers, thanks to copyright. Silicon Valley’s 50-year technology boom would not have been possible without patents. One of the first things VCs ask (the smart ones, anyway) when examining a new investment opportunity is whether the company owns IP, and how defensible it is.

The problem lies with the way patents and copyrights, in particular, are implemented. Google executives are starting to have doubts about software patents, and they have said that the 20-year term of exclusivity granted with a patent is too long. (On the other hand, Google is also waging holy war against Apple on the hardware patent front, seeking to have all iPhones and iPads barred from entering the U.S. So it goes both ways.)

Patent examiners are incredibly overworked, and they often grant patents to ridiculous “inventions” that have no business being patented. When patent disputes arise, they’re often judged by a jury of 12 additional nonexperts, as the current Apple-Samsung case is.

Meanwhile, corporate copyrights now last for 95 years in the U.S., a term that gets extended every time that Mickey Mouse is just about to enter the public domain. (Thanks, Disney.) Unlike patents, which are intended to give a temporary monopoly to an inventor and then provide public access to it after a limited period, copyrights last essentially forever: Any copyrights granted today will outlive almost all of us reading this today.

When we lump these twin distortions together under a single term and dignify it with the same kind of language we use for real estate or personal property, we give it a false concreteness. Ninety-five-year copyrights start to seem like the natural order of things. Arguing for a shorter patent term sounds almost communist.

The result is a huge diminution of the public domain and a stifling of the kind of creative borrowing that all invention, artistic or technological, depends on.

We need patents and copyrights. We also need a better system for evaluating and granting patents. And we need a shorter term for both.

Let’s start by dropping the term “intellectual property” and talk about what we really mean: patents, copyrights, and trademarks.

Top photo: Model of a machine for making paper bags, patent #220925. Photo via Gaylord.com.

Google is getting ready to sell off Motorola Mobility’s cable television assets later this year, according to a report by Light Reading Cable published today.

Google purchased Motorola for $12.5 billion nearly a year ago to obtain some intellectual property patents crucial to its business strategy for Android. However, Motorola’s patents accounted for just $5.5 billion of the total sale to Google — meaning it isn’t necessary for Google to hold on to all of Motorola’s other assets.

In an effort to recuperate some of the money from the Motorola sale, Google could sell off Motorola’s Home division, which includes cable modems, set tops, video processors, and some other related assets. Light Reading’s report indicates that Google has hired Barclays Capital to manage the sale, which could take place as early as November, with bidding beginning in October.

The real question about the sale is whether Google will chose to include some of the valuable IPs related to cable devices. Motorola hasn’t exactly let its cable division become stagnant in terms of innovation. The company debuted a new DreamGallery software to eliminate crappy TV user interfaces back in May. Still, the cable/home division’s IP could prove useful in the future for Google, which is growing its own smart TV platform, Google TV.

Light Reading’s report states that Google can expect to bring in about $2 billion from the sale of the home division, provided that some IP is included. Depending on the level of interest, the search giant could split up the sale of the home division into a few parts. Such a move could attract interest from Pace, Juniper Networks, and Ericsson AB, according to the report.

Motorola cable box photo via WingedMammal

1) Give each team member an information disclosure form

The first key step to getting a patent is identifying ideas that are potentially novel and inventive. Discovering and understanding your employees’ inventions as early as possible will enable your patent lawyer to draft earlier applications with more accurate and comprehensive disclosures, which means stronger patents. Circulating an information disclosure form to your team will help your startup learn about technology being created internally.

2) Carefully review employment and independent contractor agreements

Review your startup’s employment and independent contractor agreements. Make sure that your employees and contractors have an obligation to assign their rights in any inventions that they develop in the course of their work to your startup. It may be difficult for your startup to obtain a patent on an invention, particularly if the employee or contractor involved no longer works for your startup, if their agreements don’t explicitly obligate them to hand over the rights to those inventions.

3) Create a team to quickly review new inventions

Because filing for a patent for a piece of technology is expensive, you need to figure out whether these new developments are worth patenting. When forming a team, include a diverse set of people in this discussion — someone from management, engineering, marketing, and sales. Because marketing and sales folks are often the first to disclose new inventions outside the company, it is important to keep them in the loop on patents. Contact your patent lawyer when your patent team agrees that a particular development is worth patenting. Then, your patent lawyer can determine whether it is indeed patentable and, if it is, can prepare and file a patent application.

4) Keep all of your documents organized

Once you have started to seek protection for your patentable inventions, it is essential to keep everything organized so that you know what intellectual property your startup has created. That means keeping copies of your intellectual property-related documents (e.g., the information disclosure forms, employment and contractor agreements for inventors named in your patent applications, issued patents, technology licenses and other contracts) in a dedicated, organized business file. This can be as simple as a folder on your computer or in a sophisticated document management system. Just having all this information within easy reach will make it easy for you when a potential investor wants the due diligence on your IP.

5) Incentivize team members to innovate

Consider giving members of your team some encouragement to think about whether their work is also generating patentable inventions for your startup. You may want to consider providing your team members with some kind of financial incentive, such as a bonus that is paid when a patent application is filed and the invention is granted a patent.

Jay Mandal and Nitin Gupta are co-founders of LawPivot, a question-and-answer service for legal advice.

[Top image credit: Digital Storm/Shutterstock]

At a time when technology companies are spending large sums of money battling it out over patents, a new technology promises to let you know your chances of winning a patent suit before you even start.

Lex Machina is a machine learning technology that took Stanford researchers six years to develop, and it brings Big Data to one of the most complex and convoluted areas of the law.

“Lex Machina crawls hundreds of thousands of legal documents to predict outcomes for intellectual property cases,” said Owen Byrd, a spokesperson for the company, in an interview with VentureBeat.

The company just announced that it has raised $2 million in first-round funding, led by Portola Valley’s X/Seed Capital.

The funding announcement comes just days after Kodak lost a landmark suit against Apple and RIM.

Byrd referenced the recent Kodak case to explain how clients are using the technology. The company has data from 130,000 court cases and crawls the Web to extract documents from court records. Byrd told me that if Kodak’s lawyers had used Lex Machina, the technology would have unearthed similar cases, and likely would have found that the digital imaging company would not have won its suit. Alternatively, an analysis of the data may find that companies have a better shot of winning the case in a different state, or with an alternative district judge.

Byrd told me that in future, the technology will expand to other areas of federal law, including antitrust cases, bankruptcy, and tax law. The company will also use the funding to expand its team.

Other participants in this round  include Jeff Hammerbacher, founder of Cloudera, and Naval Ravikant of AngelList.

Click here to read a round-up of Silicon Valley legal technology startups.

Top image based on photographs from Juan Nel and ostill, Shutterstock

Fight like hell, if you’re Build.com chief executive Chris Friedland, who’s more than a little peeved by the massive influx of patent claims he’s had to deal with.

“Frankly, the absurdness of some of this stuff is just ridiculous,” Friedland says. “Are you going to patent wiping your ass?”

Friedland started Build.com in the early 2000s. Selling it in 2007, he did the unusual thing and stayed on as CEO. Today it’s the second largest online retailer of home improvement products in the U.S., doing $350 million in annual business.

“Only Lowe’s is bigger than us,” Friedland told VentureBeat.

That made Build.com a tempting target for so-called “patent trolls,” companies that acquire patents for the purpose of licensing intellectual property (as opposed to creating and selling products in the marketplace).

“About two years ago we were approached by our first patent troll with big threats over our web server,” says Friedland. Build.com was using the popular open source software Apache to run its websites.

“That scared the parent company, and scared us.”

New to patents and patent legislation, the company felt it could be facing an existential threat. “It’s kind of scary,” Friedland told VentureBeat. “If someone has a patent that is so broad, they could shut down your business … your business could go to zero.”

Eager to put legal troubles behind them, and wanting to avoid distractions from their core business focus, the company paid an undisclosed amount in the high five figures.

Big mistake.

It was like spilling blood into shark-filled waters. Almost immediately, the company was swarmed with patent claims.

“All of a sudden out of the blue we’re battling five different suits … I think because of the success of this troll, our category got targeted,” Friedland says. “The trolls came in massive force, and the patents went from semi-reasonable to just crazy.”

One of the companies was Patent Group LLC, a Texas-based firm that has targeted multiple firms, including 9 separate claims against 140 different companies in a single week in 2011 … the week between the passage of the America Invents Act — a bill intended to limit patent trolls’ power — and the signing of the bill.

Suffice it to say, Friedland is not a fan, calling Patent Group “sons of bitches” and “fucking trolls.” (VentureBeat reached out to Patent Group for a comment but has not yet received a response.)

The “invention” that Patent Group attempted to assert against Build.com was patent number 6603490, the same one the company is attempting to sue TicketMaster for right now. In Friedland’s words: “basically anything that has rotating images on the internet.”

This time, Build.com decided to fight. They’re not the first company to fight back in recent months.

Just this month, HipMunk announced it is suing i2Z Technology LLC. i2Z attempted to collect for United States Patent No. 5,345,551, which deals with syncing and presenting data from multiple sources in application windows, and HipMunk chief executive Adam Goldstein said “we do believe in fighting against spurious intellectual property suits.”

NewEgg has also led multiple battles against spurious intellectual property lawsuits.

But it was new territory for Build.com.

When the company decided that the patent was so egregious it could not settle, it pressed the issue in court … and won. In fact, Build.com recently received not just a dismissal but a dismissal with prejudice, meaning that Patent Group LLC cannot appeal or re-try the case.

That victory, however, was just the beginning.

Four other patent holding companies were seeking payments from Build.com, including Select Retrieval LLC. Select Retrieval is an infamous troll that sued more than 100 companies in 2011 for patent number 6,128,617, a way of retrieving and displaying information from a database.

Some would say that getting data from a database and displaying it online is obvious. Friedland agrees, but he’s a little more graphic:

“Are you fucking kidding me?”

Build.com is not against legitimate patents, Friedland says, but not only did he feel this patent was obvious and ridiculous, the company’s tactics were “bullying, and we’re not going to accept bullying.”

Instead of going Lone Ranger this time, Build.com assembled a joint defense group with 14 other online retailers and is now working to invalidate the patent.

“If it was a real patent, we’d license it — we license patents now,” says Friedland.

But the cost is significant and is stifling innovation, so Build.com is no longer settling. And Friedland’s recommendation for anyone else caught in similar circumstances?

“Create a joint defense group and fight it together.”

If a recent Apple-Motorola lawsuit is an indication, companies may not have to spend good money on bad lawsuits for long. Federal appeals court judge Richard Posner recently threw out the suit, saying “It’s not clear that we really need patents in most industries.”

Until that opinion proliferates in the legal and political establishment, however, patent lawsuits — legitimate or otherwise — will continue to be a cost of doing business.

And company builders like Friedland will need to keep fighting.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

After putting the end to Apple’s epic court case against Motorola Mobility, renowned federal appeals court judge Richard Posner is now wondering whether patents for software (and some other industries) should even exist.

In an interview with Reuters, Posner said that industries like pharmaceuticals have a better claim to patents since discovering new drugs takes a huge investment. That’s less true for software advancements, where companies benefit from being the first to unveil new technology — with or without patents.

“It’s not clear that we really need patents in most industries,” Posner told Reuters, adding that devices like smartphones often have thousands of features protected by intellectual property. “You just have this proliferation of patents. It’s a problem.”

Posner’s comments aren’t too surprising if you’ve been following the Apple v. Motorola case, which he volunteered to oversee. In his order dismissing the case last month, he wrote:

Neither party is entitled to an injunction. Neither has shown that damages would not be an adequate remedy. True, neither has presented sufficient evidence of damages to withstand summary judgment — but that is not because damages are impossible to calculate with reasonable certainty and are therefore an inadequate remedy; it’s because the parties have failed to present enough evidence to create a triable issue.

Posner said he had no interest in joining the smartphone generation. He used a court-issued BlackBerry when the Apple trial began in 2010, which he said made him neutral in the case. He’s since been upgraded to an iPhone, though Posner says he only uses it to check e-mail and call his wife.

Since Posner’s decision, US District Judge Lucy Koh approved Apple’s injunction claims against Samsung’s Galaxy Nexus, which has led to a sales halt of that smartphone. Posner said he hadn’t read Koh’s orders.

Photo: Chensiyuan/Wikimedia Commons

And whether or not you believe that Kim Dotcom’s file-sharing business MegaUpload was a legal business or a thin front for profiteering from piracy, a New Zealand judge has just ruled that at least part of the search and seizure that resulted in the destruction of MegaUpload’s business and the arrest of Dotcom himself was illegal.

Oops.

One aspect of the search and seizure mission involved taking and cloning the hard drives of 135 computers in Dotcom’s $30 million mansion, under the authority of a general warrant. And that, says the judge, was over the line.

“These categories of items were defined in such a way that they would inevitably capture within them both relevant and irrelevant material. The police acted on this authorisation. The warrants could not authorise seizure of irrelevant material, and are therefore invalid.”

The current home page of MegaUpload.com

As has been well documented, American and New Zealand authorities arrested Dotcom, impounded his house, initiated an extradition request, and shut down MegaUpload.com. The site allegedly facilitated the piracy of more than $500 million of content through tactics like this.

The current legal wrinkle in the Dotcom case is not likely to end the MegaUpload founder’s legal woes. But it is one ray of sunshine for the embattled entrepreneur, arriving soon after Apple co-founder Steve Wozniak showed sympathy for his situation.

One thing is certain: Lawyers are making a lot of money off intellectual property cases. Dotcom will be lucky to have anything left of his considerable fortune by the time this legal mess is cleaned up.

Of course, if you’re a movie company executive, you’d say he’ll be lucky to have his freedom.

Image credit: ShutterStock

Last week, U.S. District Court Judge Jeffrey S. White ruled against Facebook in a case first filed in 2010 against Norway-based adult social network Faceporn. Facebook requested full ownership of the domain name along with “an award of attorney’s fees and costs.”

Judge White felt Facebook was left without a leg to stand on, stating the social network “has failed to show that defendants, both residents of Norway, purposefully directed their conduct at California.” The judge recommended the motion be denied and the action dismissed for “lack of personal jurisdiction.”

This is not the first time Facebook has gotten in other companies’ faces. It has come after other sites with “face” or “book” in their names, including Shagbook, Teachbook, and Lamebook. So far, all of the lawsuits have been dead ends except for Lamebook, which ended with a settlement with Lamebook that left the parody site standing.

According to the report, Facebook currently owns ten trademarks with another seventeen pending approval. The social network even owns a trademark for the word “wall.” The company plans to continue its lawsuit against Faceporn in Norway, which could lead to a “likelihood of confusion” test.

Thumbnail image of blank face via ShutterStock

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Court documents provided by Google show the company made less than $550 million from Android between 2008 and the end of 2011.

These figures pan out to about $10 per Android handset, or roughly $135 million, each year.

iPhones and other Apple-made devices, on the other hand, put more than four times as much revenue in Google’s coffers during the same time period.

The $550 million figure was brought into the light during legal talks between Google and Oracle. Oracle brought a lawsuit against Google in 2010 claiming that the search company had infringed on Java-related intellectual property. The Java IP, including specific copyrights and patents, had only recently been transferred to Oracle when that company finalized its acquisition of Sun Microsystems in early 2010.

Last summer, Google indicated it may have been willing to settle out of court in the matter. An Oracle victory in court could have added up to billions in damages, and given that (as we’d long suspected) Google’s revenue-per-device figure is quite low, any per-device licensing fee would put a significant dent in Android-related revenue.

But Googlers reassure us the open-source operating system is still in no real danger. “From a consumer standpoint, consumers should not be concerned about losing their Android phone,” a Google spokesperson said in a recent phone chat.

“There’s no indication that Android is under threat… We’re actively pushing back on Oracle to preserve choice in the marketplace in the long term.”

Google announced its annual revenue run rate for Android had reached $2.5 billion late last year. At that time, the total number of Android devices activated worldwide had just reached 190 million.

But that revenue is a drop in the bucket for Google. The search giant made $10 billion in the last quarter alone, and almost all of that revenue came from its online advertising empire.

“ACTA represents as great a threat to an open Internet as SOPA and PIPA and wasdrafted with even less transparency and input from digital citizens,” said California Congressman Darrell Issa. That’s why Rep. Issa is opening up ACTA to the public using an online platform called Madison, part of the #OPEN act introduced in January.

“This agreement was negotiated in secret and many of its vague provisions would clearly increase economic uncertainty, while imposing onerous new regulations on job creators, Internet service providers, innovators and individual Americans,” Rep. Issa said in a statement emailed to VentureBeat this morning. “Opening ACTA to taxpayers and stakeholder in Madison will help gather crucial input, while delivering the transparency they deserve.”

Negotiations around ACTA actually began four years ago, but the Obama administration only signed on in October of 2011, joined by nations like Canada, Japan, Korea and Australia. As Rep. Issa sees it, this is both an issue of intellectual property and legislative process:

No Transparency: ACTA is a multilateral intellectual property agreement that was negotiated in secret, excluding American taxpayers and key stakeholders who would be impacted by it. Despite the fact that ACTA has huge implications for the public, until now few steps have been taken to give the public input into this process.

Circumvents Congress & the Constitution: While ACTA carries several provisions that directly affect U.S. trade and intellectual property law, the Bush and Obama Administrations appear to have violated Congress’ constitutional authority over policymaking in these areas. Adding insult to constitutional injury, the Administration refuses to even classify ACTA as a treaty, which would then require ratification by the U.S. Senate. Senator Ron Wyden (D-OR) raised these troubling issues in an October 12, 2011 letter to President Obama.

Vague & Far-Reaching: Like it’s domestic counterparts SOPA and PIPA, much of ACTA is vague, with consequences for individuals and stakeholders that could reach far beyond the agreement’s original intent. ACTA also contains no safeguards against wrongful cases of intellectual property rights infringement.

We’ve embedded the document below so that you can go over the fine print yourself. Section 5 beginning on page 15 covers enforcement of intellectual property rights in the digital environment. A few highlights we came across:

• Each Party shall provide that, in civil judicial proceedings concerning the enforcement of intellectual property rights, its judicial authorities have the authority to issue an order against a party to desist from an infringementEach Party shall provide that, in civil judicial proceedings concerning the enforcement of intellectual property rights, its judicial authorities have the authority to order the infringer who, knowingly or with reasonable grounds to know, engaged in infringing activity to pay the right holder damages adequate to compensate for the injury the right holder has suffered as a result of the infringement. In determining the amount of damages for infringement of intellectual property rights, a Party’s judicial authorities shall have the authority to consider, inter alia, any legitimate measure of value the right holder submits, which may include lost profits, the value of the infringed goods or services measured by the market price, or the suggested retail price.

As the third most popular source of content on digital pin-board site Pinterest, Flickr and its photographers are subject to frequent acts of copyright infringement. But a site-wide update to Flickr promises to better protect members and their copyrighted works.

The Yahoo-owned photo-sharing site has just added Pinterest’s newly introduced do-not-pin code to Flickr pages with copyrighted or protected images.

“Flickr has implemented the tag and it appears on all non-public/non-safe pages, as well as when a member has disabled sharing of their Flickr content,” a Flickr representative confirmed to VentureBeat Friday. “This means only content that is ‘safe,’ ‘public’ and has the sharing button enabled can be pinned to Pinterest.”

Pinterest, as a refresher, is the digital pin-board site that encourages members to “pin,” via bookmarklet, the products, recipes, clothes, photos, and other items they love to collections called boards. The private beta site has grown into one of the most-trafficked social networks online.

The site has also given birth to the most inherently viral variant of the status update yet. This new breed of update, however, often promotes piracy as pins including copyrighted works spread from person to person.

To protect itself from copyright lawsuits, and appease disgruntled photographers and publishers, the young social media company introduced a snippet of code Monday that website owners can now add to their sites to prevent unwanted pinning. If a person on Pinterest attempts to share something from a site with that code in place, she will see a message that reads: “This site doesn’t allow pinning to Pinterest. Please contact the owner with any questions. Thanks for visiting!”

Flickr can’t prevent all acts of photo piracy just by enabling the code — determined sharers will just work around the inconvenience and manually download and post images — but the act signals the site is proactively looking out for its photographers.

By way of the “pin,” accidental thieves have exchanged copyrighted content on digital pin-board site Pinterest. To thwart any lawsuits in the making, the much talked-about startup is giving disgruntled site-owners a way to stop piracy before it starts by blocking their images from showing up on Pinterest.

Pinterest is the up-and-coming social site that encourages members to “pin,” via bookmarklet, items they love to collections called boards. In about a year’s time, the site has grown into one of the most-trafficked social networks.

The acts of “pinning” and “repinning” (re-sharing a pin created by another user) have come under fire, especially in photographer circles, as tools for copyright infringement. Members can easily grab copyrighted works from photo-sharing or media sites and clip them to their boards. Pinned images often include attribution, but sources later get lost in the shuffle, and some members go on to use images on their blogs or websites. Plus, considering that Google is the second most popular source of pins, a sizable percentage images are likely misattributed.

Now, Pinterest is providing website owners a simple snippet of code, located in the updated help section of the site, to help them nip unwanted sharing in the bud.

“We care about respecting the rights of copyright holders. We work hard to follow the DMCA procedure for acting quickly when we receive notices of claimed copyright infringement,” co-founder Ben Silbermann wrote in a blog post Wednesday. “We understand and respect that sometimes site owners do not want any of their material pinned.”

The new code, when added to the header of any page, will prevent a person of Pinterest from sharing content from that page. If someone attempts to pin something from a site with that code in place, she will see a message that reads: “This site doesn’t allow pinning to Pinterest. Please contact the owner with any questions. Thanks for visiting!”

The code should help the anti-Pinterest photographers and publishers of the world keep some of their copyrighted works off of the site, though it certainly won’t prevent the motivated sharer from downloading and re-uploading materials to Pinterest themselves.

Perhaps more importantly, though, the proactive measure could help Pinterest defend itself from copyright litigation. At the very least, the young company can now argue that it does not actively enable or encourage infringement.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Apple is no stranger to the patent wars, and today it actually won two disputes in Germany against Motorola Mobility for its “slide to unlock” patent.

It is a familiar tale: one company is mad at the other for infringing on its intellectual property. In this case, Apple took mobile device manufacturer Motorola to task about three devices employing its “slide to unlock” feature, patented in Europe. The feature, which can be found on Apple’s iOS devices, allows a user to unlock the phone by swiping a finger across an image on the screen, in this case a grey arrow in a white rectangle.

The court found two of Motorola’s smartphones to be in violation of this patent, but a complaint on the Motorola Xoom tablet was dismissed. Foss Patents points out that the Xoom has a circular image for its unlock field. A person must make a similar circular motion to unlock the device, unlike iOS devices, which require a side to side swipe.

Apple has the right to ban the two infringing smartphones from being sold in Germany.

Google’s acquisition of Motorola Mobility was recently approved by the European Union, making this an Apple versus Google issue as well. It seems most Android phones use the “swipe to unlock” patent in some capacity, and after this win, Apple may have the chutzpah to keep the patent wars rolling. The company already has a case against Samsung in Germany concerning the same unlocking patent.

This is Apple’s first win against Motorola in Germany, which the handset maker will probably try to appeal, given the widespread usage of “slide to unlock” in many of its Android devices.

via Foss Patents, Phone image via bfishadow/Flickr

Nathan Myhrvold

Intellectual Ventures is suing AT&T, Sprint and T-Mobile, accusing them of infringing on 14 separate patents. In a suit filed in U.S. District Court in Delaware today, Intellectual Ventures, a private company that has made a business of producing, collecting, licensing and litigating over patents, has made its boldest claim yet.

Intellectual Ventures told All Things D it decided to go to court after several months of business negotiations broke down. That’s a nice way of saying that these companies wouldn’t pay to be part of the protection racket that IV is running (you pay us, we don’t sue you).

If the case does go to trail, it will be an interesting test of IV’s muscle. AT&T in particular has both the resources and the patent portfolio to put up a serious fight.

The companies who agreed to be “investors” in IV, meaning they will pay to stay out of court, Adobe, Amazon.com, American Express, Apple, Cisco Systems, eBay, Inc., Google, Microsoft, Nokia, Verizon, and many more. Of course having Google as an investor didn’t stop IV from suing Motorola Mobility, that is, going after a company Google had already announced it was trying to acquire.

Intellectual Ventures was founded by Nathan Myhvorld, formerly the chief technology officer at Microsoft. It has an in-house team of inventors who dream up ideas and file for patents. It does not produce any actual products, its business is in licensing its patent portfolio. It has been the subject of scathing reports by National Public Radio, which called it a patent troll. The company continues to ramp up its aggressive legal action against the biggest names in the technology business.

Nathan Myhrvold image by Flickr user Lisa Padilla

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

A five year-old legal battle between Viacom and Google-owned YouTube over copyrighted content continues to clog up the U.S. court system because Viacom, parent company of Paramount Pictures and MTV, believes there’s an important principle at stake, president and CEO Philippe Dauman said Tuesday.

Dauman, in an interview at the D: Dive Into Media event, defended his company’s ongoing litigation against YouTube, the purveyor of user-generated content, despite a 2010 federal ruling establishing that the video-sharing site is protected under the “safe harbor” provision of the U.S. copyright law, and is ultimately protected from liability so long as it removes infringing content at the request of rights holders.

“The U.S. justice system works in a slow and deliberate way,” Dauman said somewhat facetiously.

Viacom first brought suit again YouTube in 2007 for $1 billion in damages over the unauthorized use of Viacom content, inducing the use of clips from “The Daily Show” and “The Colbert Report,” between 2005 and 2008. The case was dismissed in June of 2010, in what was deemed a landmark victory for YouTube. But the decision didn’t sit well with Viacom, and the company sought to resuscitate the suit in October 2011.

Dauman referred to the status quo of needing to report infringed content as a “whack-a-mole system,” and argued for a more seamless technology solution that ensures copyright content is not infringed upon in the first place. He said Viacom is still fighting Google (a company Dauman referred to as “great”) out of principle, and is hopeful for a decision to a single legal issue that he believes will establish an important precedent for the entire industry.

The Viacom president, who fielded a variety of questions from interviewer Peter Kafka, also expressed his ongoing support for both the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA). There was a lot of rhetoric and misinformation around SOPA and PIPA, Dauman lamented, that amounted to a “religious dogma” and created a “mob mentality.”

Ultimately, Daumen believes that PIPA, which would have been the dominant bill should it have passed, would have emerged as a very “responsible” bill.

“There are two great innovative industries where there are world leaders … that’s the content industry and broadly speaking the Internet industry,” Dauman said. The industries are symbiotic, he said, and should combine forces and create innovation. “We should be working together.”

Image via AllThingsD

Social-referral startup Curebit made the admittedly boneheaded mistake of ripping off design and assets from 37signals, one of the best-known schools of UI and startup thought-leadership on the Web. When the mistake was made public over the weekend, a storm erupted on the Internet, causing many to question just how much traditional intellectual property rules come into play at small startups.

Grant initially excused his company’s actions, stating that the Curebits team was still small and was using the lifted design and assets in A/B testing.

This time omitting any excuses, Grant writes, “We did more than take inspiration from their design — we actually used html & css code, and hotlinked to images on their site. We apologize to David and 37signals for ripping off their work. It was stupid, lazy, and disrespectful of their creative efforts.”

Grant also posted the apology to Hacker News, the nexus of discussion around the issue, as there were issues with the Curebit blog over the weekend.

However, Grant has left something out: his company’s also stolen work from San Francisco-based recording artist Random Rab. Curebit apparently lifted a track from the musician for its demo video on YouTube — a move that was recently brought to the artist’s attention.

“I certainly gave them no permission,” wrote Random Rab in an email to VentureBeat. “Seems like they have no ethical boundaries.”

The musician has reached out to Grant repeatedly, but to date, his song has not been removed from the company’s demo video.

UPDATE: Curebit has released a statement saying, “As of an hour ago, we have come to an agreement on acceptable licensing terms with Random Rab for the music we used, and an apology.”

We’re sincerely hoping that this is the last instance of Curebit’s IP-stealing habits that will come across our desk. Picking on a small startup isn’t as much fun as it looks like, folks; we just wish everyone could get along — and be honest, work hard, and own up to their mistakes.

Image courtesy of Mikhail Starodubov/Shutterstock

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The startup used music from Random Rab, a San Francisco-based electronic artist, in its demo video.

According to Random Rab, Curebit didn’t contact the artist before nabbing his music, nor are they responding to requests to remove his music from their promo video on YouTube. In now-deleted tweets, the musician said Curebit had gotten in touch with him and attempted to “buy him off.” However, that offer was apparently rejected, and no one from Curebit has responded to Random Rab’s simple request, as stated below.

UPDATE: Curebit has released a statement saying, “As of an hour ago, we have come to an agreement on acceptable licensing terms with Random Rab for the music we used, and an apology.”

“Mr. Grant, I recently saw the article about you stealing code,” writes Random Rab on Twitter to Curebit founder Allan Grant. “You also have stolen MY music for your video. Please remove!”

In an email to VentureBeat, Random Rab wrote, “They are using my song illegally in their video … I certainly gave them no permission. Seems like they have no ethical boundaries.”

Over the weekend, we regaled you with the thrilling tale of Curebit’s “borrowing” design and assets from 37signals, a move that was, shall we say, frowned upon by 37signals co-founder and Ruby on Rails creator DHH (David Heinemeier Hansson).

Grant excused Curebit’s behavior, saying the 37signals work was used because a) Curebit was just a small startup and b) the design was for an A/B test.

In a colorful Twitter stream, DHH retorted, “There is no valid way to rip off people’s designs and have it be ok. Not ‘We’re small;’ not ‘We’re A/B testing.’”

In an email exchange with VentureBeat, DHH and others later expressed concern that Curebit’s founders’ actions (and responses) indicated not a one-time slip-up over an intellectual property dispute, but a general disregard for the value of others’ work.

Curebit investor Dave McClure wrote in response to that debacle that he hoped the Internet (and DHH) would give Grant et al. the chance “to show they can learn from their mistakes and change.” We hope that Grant et al. will give the Internet a good reason to believe that, as well, but this latest revelation isn’t giving us much hope.

Thanks to our anonymous tipster for first pointing out this news over the weekend. Got a hot tip for VentureBeat’s staff to investigate? Reach out to us at tips@venturebeat.com.

Image via Fer Gregory/Shutterstock

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Big Data and Predictive/Real-time Analytics startups: Are you looking to jumpstart development & accelerate market traction? Sign up for the SAP Startup Focus program to receive technology, support, resources and community to help you develop new applications on SAP HANA, a cutting edge database platform. Get started here, and enter promo code “VB2013″ on the form.

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Proving that one man’s trash is another’s treasure, New York-based incubator Ingk Labs has salvaged an e-commerce patent gem from a defunct startup. It hopes to use that second-hand technology to corner the online-bartering market and take on eBay and Amazon.

Ingk Labs rescues undervalued intellectual property (IP) from dying startups, and then brings its IP buys back to life as new companies. Today, it has resurrected the technology behind SwapThing, a now obsolete site for multi-user online exchanges.

The accelerator has acquired SwapThing’s IP for an undisclosed sum and will fold it into Barterpop, an Ingk Labs company slated for early 2012 launch. Barterpop will allow consumers and businesses to exchange goods and services in multi-party trades.

The motivation, Ingk Labs CEO Craig Alberino told VentureBeat in an exclusive interview, was to acquire a seminal patent in the barter space and protect Barterpop, a SwapThing competitor that Alberino hopes will grow to compete with the likes of Amazon and eBay.

The patent in question, Alberino explained, covers the process of multilateral online exchanges, and has already weathered numerous IP challenges.

What does that mean, exactly? Say that you want a laptop and you have two items to barter with, and Dylan is willing to trade his laptop but doesn’t want your items. Barterpop, using the acquired IP, will play matchmaker and link you, Dylan and Heather, another barterer with items to satisfy you both, to create the perfect three-way swap. The experience will also enable retailers to insert themselves in between two consumers to complete a three-way trade.

The market opportunity for a barter site is on the rise, Alberino argued, even though he admitted that people before him, dating back to the early 2000s, have tried and failed to create a home-run swap site. “Barter is up in a down economy that has left many short on cash but rich in talent and treasures,” he said.

Ingk Labs has lined up investors to support the Barterpop venture and believes it now owns the technology and the IP to dominate the field. The logic goes that if Amazon or eBay were to enter the swapping market, and Alberino is confident they will, the companies would be forced to license Barterpop’s technology.

In addition to Barterpop, Ingk Labs will launch 11 more new companies in 2012 — three of them already have funding — by applying its dumpster-dive-like approach to IP rescue and acceleration.

Ingk Labs was founded in 2006, though the company has only focused its attentions on IP rescue in the past year. SwapThing founder Jessica Hardwick will join Ingk Labs in an advisory role as part of the IP acquisition deal.

Image via Keoni Cabral/Flickr

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Device maker Samsung says an Australian judge who banned the sale of the Galaxy Tab 10.1 in that country does not know the basic facts of the case, and her reasoning  is “grossly unjust.” Lawyers for Samsung are appealing a temporary injunction that has frozen the company out of the market due to claims that Samsung  ”slavishly copied” the iPad when creating its own tablet, according to the Sydney Morning Herald.

Samsung’s attorneys claim the judge in the case did not properly evaluate the merits of Apple’s infringement suit before issuing an injunction, which “stopped dead,” any efforts by the company to sell its tablet computers in Australia.

“We contend that the primary judge made a series of fundamental errors in her disposition of the interlocutory application. They were all errors of principle,” Samsung’s lawyer told the court.

A final hearing is not scheduled until March of 2012, and Samsung would be prevented from selling the tablet in Australia until the matter is resolved. The company’s lawyers want to undo this ruling and speed up the time table for a final ruling.

While Samsung continues to fight in the legal arena, others are left to wonder just how closely the company copied the iPad.  Samsung, which produces the A6 chips that will be in future Apple iOS devices, maintains the originality of the intellectual property in its product. Apple’s quadcore A6 chips are produced by Samsung in its Austin, TX foundry, and are the brains that power applications on the phone. Despite the tense relationship, Apple is still dependent upon Samsung to manufacture the chips, but has rival TSMC has begun making test batches, according to EE Times, which would give Apple significant leverage in the future.

However, it’s not the first time that Samsung has been accused of stalking Apple.

Check out this picture of a Samsung store in Italy with several logos for Apple’s Safari browser printed on the back wall. This is important, because at the very least it indicates that Samsung is very reckless with its brand, or it could further indicate the extent to which the company really does follow Apple’s every move.

Answer: Two potentially troublesome areas that jump out relate to vesting restrictions and intellectual property (IP), either of which could destroy your venture down the road if not handled properly today.

Vesting Restrictions

You need to make sure that all of the shares of common stock issued by the corporation to the founders are subject to vesting restrictions — which means that ownership of the shares would vest over time (instead of all of the shares being owned outright on day one). Otherwise, if one of the founders quits after a few months, he would take all of his shares with him. In short, this is a nightmare scenario — particularly if there is bad blood with the other co-founders.

The only solution in such a scenario is to negotiate a repurchase of those shares, which could be very expensive or impossible (if the departing founder wants to screw with his co-founders). And if the departing founder has a huge chunk of equity, it is unlikely that the company will find many sophisticated angels or VC’s interested in investing.

The most common vesting schedule is an equal percentage of stock (25 percent) every year for four years, on a monthly basis. However, it may be appropriate (for example, if the founders don’t know each other very well) to impose a one-year “cliff,” meaning that the first 25 percent tranche would vest on the one-year anniversary of the issuance date and then monthly thereafter. In addition, sometimes a portion of the shares will be deemed to be vested “up front” — meaning they are not subject to vesting — particularly where a founder has made a significant contribution prior to the company’s incorporation.

Vesting restrictions are addressed in a restricted stock purchase agreement, which each founder would be required to execute, and which would grant the company the right to repurchase any unvested shares (at the initial purchase price) at the time of the founder’s departure.

IP Ownership Issues

There are three deadly intellectual property-related mistakes, which usually surface when the investors conduct their due-diligence investigation.

1. You need to confirm that none of the founders’ prior employers have any rights to the venture’s IP because he or she was “moonlighting” while previously employed. This is a particular concern if the startup is in the same space as a founder’s prior employer.

You should carefully review all employment-related agreements (such as offer letters, non-disclosure and inventions assignment agreements, etc.) and the employee handbook to determine if there are any provisions that may give the prior employer rights to your startup’s IP. If there is a problem, some employers will agree to execute a waiver, which you can show investors down the road.

2. Any IP created or acquired by a founder (such as code, a logo, domain names) prior to incorporation must be assigned to the company. Usually this is done as part of the founder’s restricted stock purchase agreement, pursuant to which the IP is contributed as full or partial consideration for the shares of common stock issued to him or her in a tax-free transaction under Section 351 of the Internal Revenue Code.

Similar to the vesting issue above, a huge problem arises if one of the founders leaves the company prior to incorporation and takes his rights to the IP along with him; or if the assignment of IP is not properly made and the founder leaves prior to this issue being cleaned-up. In both cases, the company is once again in the difficult position of trying to negotiate with a departed founder.

3. Finally, you need to make sure that any IP created by outside developers (i.e., non-founders) is assigned to the company. Sadly, this issue comes-up all the time — just ask the Winklevoss twins. Indeed, had Mark executed an inventions assignment agreement, there probably would be no Facebook; or if there were, the twins’ (or their company) would own the IP.

This is particularly a problem prior to incorporation. The IP created by the developers often never gets assigned to the company, either because there was no written agreement or because the company was not a party to the agreement (because it didn’t exist at the time). Then when it’s time to fix the problem because investors are requiring it, the company needs to chase-down the developers (some of whom may be outside the U.S.) and start negotiating with them.

Scott Edward Walker is the founder and CEO of Walker Corporate Law Group, PLLC, a law firm specializing in the representation of entrepreneurs.

[Image via zimmytws/Shutterstock]

It’s a risky move, considering that most gamers might ignore sequels to a game that started with a bad piece of intellectual property (IP). That’s prompted many game developers to kill budding pieces of IP and stick to more reliable franchises like Call of Duty or Mass Effect. But Duke Nukem is one of the most iconic franchises of all time, so it might be worth losing millions of dollars trying to churn out another successful version of the game for Take Two. The company is largely in the shadow of super-publishers Electronic Arts and Activision-Blizzard when it comes to first-person shooter (FPS) games.

Ubisoft also opted not to kill a piece of intellectual property, Assassin’s Creed, when the first game was a flop. Despite the many positive elements in the game, it was bloated with repetitive missions and was fairl;y disappointing with gamers. Ubisoft was forced to take a chance with the Assassin’s Creed franchise, not knowing how successful it would be. The gambit proved successful, and it has spawned a number of spinoff titles in addition to the series’ main trilogy. Assassin’s Creed has since become one of Ubisoft’s most popular pieces of intellectual property — after taking a chance that many game publishers probably wouldn’t take today.

The Duke’s latest adventure has earned a score of 50 out of 100 across 19 reviews on review aggregation site Metacritic for the Xbox 360 version. It has a score of 58 out of 100 across 9 reviews for the PlayStation 3 version and a score of 63 out of 100 across 8 reviews for the PC version. Most critics have hammered the game for being a mediocre shooter that wasn’t the in-your-face attack on modern FPS games that everyone hoped it would be.

In the original 1996 game, the main character Duke Nukem was a studly, cigar-chomping, and highly weaponized bad ass and struck a chord with rebellious young gamers. The game was extremely violent and was controversial for its depiction of women as sex objects. It became a bit of a cult phenomenon, and expectations for a follow-up were extremely high.

The planned sequel, Duke Nukem Forever, was trapped in developmental hell for more than ten years under Scott Miller and 3D Realms. While originally responsible for Duke Nukem 3D and the rest of the series, the game studio just couldn’t settle on what to do with Duke Nukem Forever. The game was plagued with delays due to changes in the game engine and other issues. It was finally stripped of a release date, and the last gamers heard from the testosterone-bleeding Duke was a teaser trailer in 2007.

Take-Two Interactive Software — the publishers behind the Grand Theft Auto series — picked up the rights for Duke Nukem Forever from 3D Realms and handed the keys over to Gearbox Software, the company responsible for first-person shooter Borderlands. The turnaround time was pretty quick for Gearbox, which released a playable demo at the Penny Arcade Expo in Seattle in September. The game, which was one of the most iconic vaporware titles of all time, finally got a release date and went gold last month (and we’re pretty sure hell froze over around the same time).

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Kodak has filed a lawsuit against Shutterfly over five patents it claims Shutterfly’s online services are infringing on. Shutterfly is a popular way for people to purchase print photo books, stationery, and calendars out of their personal photos. Shutterfly has denied the claims and filed a counter-suit against Kodak over the company’s own Kodak Gallery Software.

Kodak claims to have over 400 patents in the space and has possibly made Shutterfly its initial target because it makes for an ideal opponent — the publicly-traded Shutterfly is much bigger than a private-owned startup in the space but doesn’t have the deep pockets of giants like Google and Facebook to fully challenge such a lawsuit.

The company hasn’t stated outright whether it intends to go after other players at this point, but says it is confident in the value of its patents. Most likely, it’s picking a single contender to prove a point before it marks out for an open-fire across the slew of other photo-sharing websites.

How will Google, Yahoo, and Facebook respond if the patent bug gets to them? Theo Savvides, head of intellectual property at Osborne Clarke, told BBC News that he predicts smaller firms are more likely to license Kodak’s technology than fight claims, but the giants may be more likely to fight the claims.

“The case may hinge on Kodak’s ability to show that when it filed the patents they covered technology that was genuinely innovative,” added Deborah Bould, a specialist in intellectual property at law firm Pinsent Masons.

Back in January, Kodak also filed a suit against Apple and Blackberry-maker RIM over patents on the displaying and previewing of images on their cellphone devices.

Recently Groupon Inc was sued for patent infringement. If it loses the case, the company could be forced to shut down, causing millions of users to take their business elsewhere.

CY Technology Group LLC and MobGob LLC allege the popular deal-of-the-day company is infringing on a patent issued in March 2010. Not only does the lawsuit request damages associated with infringement of the patent, but it seeks a permanent injunction, which could potentially mean the end of Groupon.

That’s unlikely, of course – even if the company loses the fight. Fast-growing firms have a way of surviving legal defeats through payouts. But smaller businesses aren’t always so lucky. That’s why it’s important to know how to assess infringement risks at an early stage. Even if you offensively pursue patent protection, you’re still exposed to patent infringement.

The best way to avoid this sort of risk – or at least reduce it – is through a freedom to operate (FTO) search and analysis.

An FTO analysis begins with identifying the activities of your company, including products sold and/or processes practiced. It then conducts a search of the patent record focused on these activities, including both issued patents and published patent applications – sometimes with a focus solely on the U.S., other times it includes other countries as well. The search identifies potentially problematic patent documents, then compares those to your business activities. Ultimately an FTO serves as a legal determination as to whether your company’s activities infringe upon the claims of the uncovered patent documents.

The risks don’t end with issued patents, unfortunately. Pending patent applications can be just as problematic. To mitigate this risk, it’s smart to search and monitor the progress of pending applications, which are generally publicly available 18 months after they’re filed.

It’s a practice that could have helped Groupon. The site was launched in November 2008, while the patent at the center of the battle wasn’t formally issued until March 2010. The patent application was first published in August 2006, though.

So, if Groupon had conducted a FTO search, it’s likely they would have uncovered the potentially problematic patent application – and been able to track its progress and (more importantly) assess the risk it posed.

For your business, if you discover a patent or pending patent that is a concern, it’s certainly worth considering obtaining a license or purchasing it outright. By failing to do either, you company risks being seen as willfully infringing the patent and could face dire penalties.

Every startup is confronted with risks that need to be addressed and weighed against the company’s business goals. Offensive and defensive IP strategies may not be part of a start-up budget, but they’re important to consider as you grow your business. By understanding the risks, you can take steps to mitigate and balance them with your business plan and goals.

If the patent sounds a lot like targeting social network users using their smartphones and allowing them to check in to addresses, then you’ve pretty much described all of the location-based services available today, including popular mobile apps Foursquare and Gowalla.

Here’s the abstract:

Systems and methods for automatically locating web-based social network members are provided. According to one embodiment, contact content including an associated GPS identifier and status for web-based social network members located at or near the same location automatically appears on a GPS-enabled device. A further exemplary system includes a GPS-enabled device configured to receive a GPS identifier and a status representing a location and a current state for a web-based social network member, a processing module that associates the received GPS-identifier and the received status, and a communications module that sends the associated GPS-identifier and status to a server comprising a web-based social network database. Contact content in a web-based social network database record in the web-based social network database is updated to include the associated GPS identifier and status for the web-based social network member.

The patent was filed in February 2007. Just a few months later, Loopt, which first launched as an app on Sprint’s network, was considered the first location-based service and was a way to see your friends and what was happening from restaurants, shopping and nightlife in your general area. Since then, numerous services ranging from social networks to mobile games have popped up. It’s not clear why Facebook decided to wait so long after it filed a patent to launch its own service.

As pointed out by TechCrunch, it’s unknown how Facebook plans to use the patent. Theoretically, the company could use it to squash the competition, especially with future features. But companies frequently use patents defensively, to forestall lawsuits from other patent holders. Facebook could also use the patent as leverage in business deals with other location-based services to encourage them to integrate closely with its Facebook Places feature.

Facebook recently acquired a broad portfolio of patents and patent applications from social-network pioneer Friendster, covering much of the basic functions of a social network.

Not just off, but OffBeat.

Sure, Google Beat is just the name for a fluffy Web video series for what people are searching for on Google. But VentureBeat, which has already expanded its coverage under the MobileBeat, GamesBeat, and GreenBeat monikers, among others, could decide to focus like a fricking laser beam on Google. And then what would we call that coverage? GoogleBeat, of course.

We’re not saying that we’re siccing our lawyers — um, wait, make that lawyer, singular — on the mighty armies of Google’s legal department. But we don’t think it’s fair for the monolith of Mountain View to crowd our beat.

In pursuing this cause, we’re merely staying current with intellectual-property trends. If Facebook can seek to trademark both the words “Face” and “Book,” surely VentureBeat can stake a claim to both “Venture” and “Beat.”

Heck, while we’re at it, we might try to snap up “Ven” and “Ture.” Those syllables are ours!

Kidding! In reality, Facebook has a singularly weak case in staking its claim to such basic words. Trademarks must be distinctive, a Harvard guide to trademark law notes, and generic terms on their own are generally not protected by trademark.

So why is Facebook trying anyway? It’s likely trying to protect its own name from what trademark lawyers call “genericide” — the process by which distinctive terms become generic in everyday usage, like “xerox” for a photocopy or “kleenex” for a facial tissue.

Google itself has struggled with genericide, issuing a set of guidelines about the use of the Google trademark. Sometimes they get a bit fussy:

One of the conditions for all uses is that you can’t mess around with our marks. Only we get to do that. Don’t remove, distort or alter any element of a Google Brand Feature. That includes modifying a Google trademark, for example, through hyphenation, combination or abbreviation, such as: Googliscious, Googlyoogly, GaGooglemania. Do not shorten, abbreviate, or create acronyms out of Google trademarks.

Great googly moogly.

Tell you what, Google Trademark Cops: You stay off our beat, and we won’t mess around with your marks. Too much.

P.S. Hey, ChartBeat — we’ve got our eyes on you, too, punks.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Another day, another legal action over mobile patents.

HTC, the Taiwanese mobile handset manufacturer and maker of Google’s Nexus One phone, filed a complaint with the International Trade Commission today to cease U.S. sales of the iPhone, iPad and iPod after saying the company infringed on its intellectual property.

“As the innovator of the original Windows Mobile PocketPC Phone Edition in 2002 and the first Android smartphone in 2008, HTC believes the industry should be driven by healthy competition and innovation that offer consumers the best, most accessible mobile experiences possible,” said the company’s North American vice president, Jason Mackenzie. “We are taking this action against Apple to protect our intellectual property, our industry partners, and most importantly our customers that use HTC phones.”

The move comes just days after Finnish handset maker Nokia filed suit against Apple in a Wisconsin court over five patents it held. HTC also has added legal firepower now after Microsoft Corp. gave the Taiwanese device manufacturer legal coverage under its patent portfolio in exchange for royalties. As a relatively young company in the space (it was founded in 1997), HTC has far fewer patents than its particularly litigious competitor, Apple.

Don’t miss MobileBeat 2010, VentureBeat’s conference on the future of mobile. The theme: “The year of the superphone and who will profit.” Now expanded to two days, MobileBeat 2010 will take place on July 12-13 at The Palace Hotel in San Francisco. Early-bird pricing is available until May 15. For complete conference details, or to apply for the MobileBeat Startup Competition, click here.