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A pretty funny comic from Scott Johnson at Extra Life:

Further to the previous post on the Supreme Court’s decision in Bilski v. Kappos, here is a link to an article discussing potential impacts of the decision on the gambling industry. The article quotes Shawn Gorman and Charles Miller of Banner & Witcoff, LTD’s Chicago Office. Free registration at gamingcompliance.com is required to view the article.
In its long awaited decision, the United States Supreme Court has ruled in the Bilski case. The Supreme Court affirmed the Federal Circuit's decision, but on different grounds, holding that Mr. Bilski's invention, a method of hedging investment risk, is unpatentable because he is trying to patent an "abstract idea."

Here is a comprehensive writeup by one of my colleagues, Brad Wright.

Download the full decision here.
Minsky v. Linden Research, Inc.

United States District Court for N.D.N.Y.

Case No. 1:08-cv-819-LEK-DRH, Settled January 22, 2009


In July 2008, Richard Minsky filed a trademark infringement lawsuit against Linden Research and an avatar in Linden’s virtual world Second Life raising issues of virtual intellectual property rights.

Minsky, an artist and reviewer involved in the art business for over 35 years who is “recognized internationally as a leader in the field of Book Art,” wanted to establish an online presence. According to his complaint, he joined Second Life with the avatar ArtWorld Market in 2006. Shortly after joining, Minsky decided to open a gallery in Second Life to resell artwork he had acquired from other Second Life users. He also decided to start a critical review of the arts that would be published as a website, a real life magazine and a magazine inside Second Life. Minsky came up with the name SLART for his gallery and art review magazine.

Minsky claimed he chose “SLART” because of its “great sound” and because of the funny “colloquial meanings it has, including a slut’s fart, a fart made while sleeping, and someone who is between a slut and a tart.” After searching Second Life and Google and finding no other meanings or uses of SLART, Minsky decided to use it as his brand name. Minsky filed for SLART trademark registration in March 2007 and it was granted in March 2008.


Later that March, Minsky came across an art gallery in Second Life called "SLART Garden" operated by the avatar ‘Victor Vezina.’ With the help of a lawyer offering her services in Second Life, Minsky sent a cease and desist message to Vezina in the virtual world but received no response. Minsky then wrote to Linden’s general counsel in April to stop Vezina’s alleged unauthorized use of Minsky’s trademark. Linden not only refused to acknowledge Minsky’s trademark or remove the allegedly infringing material, they also wanted Minsky to abandon his trademark with the USPTO.


After many unsuccessful discussions with Linden, Minsky filed his complaint in July 2008 which alleged:


  • Trademark infringement and dilution & contributory trademark infringement and dilution by Linden and Vezina (included as a John Doe defendant). Minsky alleged that Vezina’s SLART Garden infringed on his SLART trademark. The complaint states that by denying the validity of Minsky’s trademark, allowing Vezina to maintain SLART Garden, and refusing to identify Vezina so that Minsky could include him in the lawsuit, Linden contributed to trademark infringement.

  • Tortious Interference by Linden when it hid Vezina and refused to take down infringing materials, which Minsky claimed Linden did in order “to try to intimidate and coerce [Minsky] into giving up [his] lawful trademark and rename [his] publication and other activities in a manner that would give them control of the content.”

  • Fraud by Mitch Kapor (former Chairman of Linden), Philip Rosedale (former CEO and current Chairman of Linden) and Linden Research. Minsky claims they enticed people (including Minsky) to join Second Life by promising protection of their IP rights in the virtual world but then failed to provide that protection.

For relief, Minsky sought an injunction to stop Linden and Vezina from using the SLART mark and to compel Linden to enforce his IP rights against other infringing SL residents. He also wanted $1,000 per day, from April 24, 2008 (when Linden was first notified by Minsky of the alleged infringement), for each act of alleged infringement.


In September 2008, the court granted a temporary restraining order keeping Second Life users from infringing on the SLART trademark and a preliminary injunction was granted in October. Linden then filed a petition with the USPTO to cancel registration of Minsky’s trademark (alleging that Minsky lied when he said he didn't know any other meanings SLART might have, since SL- was commonly linked to Second Life), but the Trademark Trial and Appeal Board decided to suspend hearings on the cancellation until after the case was decided. On October 10, Linden filed its answer as well as counterclaims seeking to terminate Minsky’s account and dismiss the complaint alleging trademark infringement, unfair competition and false designation of origin, and breach of contract by Minsky for using ‘SLART’. The avatar ‘Vezina’ was dropped willingly by Minsky from the lawsuit on December 3, 2008 as Minsky never served him. Finally, on January 22, 2009, Minsky and Linden ended litigation by reaching a settlement which apparently wasn’t made public.


While Minsky’s first website SLARTmagazine.com is no longer in existence, he now appears to be operating from http://minskyreport.com/index.html.

Check out this site for periodic updates from the proceedings as well as court documents (including complaint & counterclaim).

Click here to download an interesting journal article examining virtual IP rights in Second Life.
Debonneville v. Pierce

United States District Court for C.D. Cal.

Case No. 2:07-CV-03776-R-MAN), Settled May 5, 2008


This wasn’t an IP lawsuit, but it was a bitter dispute between the owners of Internet Gaming Entertainment. IGE is a virtual property company that engages in buying and selling virtual currency and items in MMO games for real money. Even though these games prohibit real money trading, the virtual goods industry is booming – according to the amended complaint, Goldman-Sachs once valued IGE at $220 million.

Alan Debonneville, a Swiss citizen living in Hong Kong and co-founder of IGE, initially filed a complaint in June of 2007 against co-founder Brock Pierce. The original complaint was sealed three months later, but Virtually Blind, who saw the complaint before it was sealed, said it was full of scandalous accusations. For example, Kotaku said “the Complaint ... includes third-hand allegations of cash from an earlier venture being spent on illegal drugs, a claim that Pierce's dog was shot by the "Spanish FBI," and allegations of minors being transported across state lines for sex. The complaint even takes a swipe at former-child-actor Pierce's filmography (Pierce played a young Emilio Estevez in The Mighty Ducks and The Mighty Ducks 2, and the lead in First Kid). In short, this is not your average business spat.”

According to the amended complaint, filed in September 2007, Debonneville met Pierce while playing Everquest online. Debonneville was selling virtual goods in Everquest in 2000 and discussed his business plan with Pierce, who was living in Spain. Pierce requested that Debonneville come to Spain to negotiate a business arrangement. “Impressed with the promises of riches that Pierce made, in November of 2001, Debonneville traveled to Spain from Switzerland to meet with Pierce.” Following those talks, IGE was formed, allegedly with certain promises of profits and stock for Debonneville.

The amended complaint claimed, inter alia, breach of fiduciary duty, breach of contract and fraud. Virtually Blind said that allegedly “Pierce deprived Debonneville of millions of dollars Debonneville was owed under his agreements with IGE. Debonneville names an even dozen claims ranging from breach of fiduciary duty to fraud. Along the way he accuses Pierce of failing to pay taxes owed to the Spanish government, using corporate funds for personal expenses, falsely telling Debonneville that one of the other executives in IGE was blackmailing Pierce, and partnering with a third party, Jonathan Yantis, to exploit bugs in game software to make unauthorized duplicates of in-game items and currency to offer for sale via IGE.”

Pierce threw the accusations back at Debonneville in his answer and counterclaim by alleging, as Virtually Blind put it, that Debonneville, “while overseeing IGE’s trading arm, overpaid certain people for virtual goods bought on behalf of IGE — including one of the lawyers who now represents Debonneville on this case — in order to secure favor and personal benefits, in breach of Debonneville’s fiduciary duty to IGE.”


Minutes from March 2008 stated that the parties had reached a settlement on all essential terms and that the parties needed to file a stipulation of dismissal by April 14. But the hostilities continued and the settlement failed – no stipulation was filed by the deadline.

The judge ordered a status conference to see why the settlement hadn’t been finalized and the result of that conference was a temporary restraining order against Pierce. The TRO prevented Pierce from “failing to comply with the terms of the settlement” and specifically kept Pierce from “contacting any bank for Debonneville or his attorneys for purposes of reversing any payment Pierce made to Debonneville under the terms of the parties’ settlement agreement in this lawsuit [...], attempting to reverse any payment made to Debonneville or his attorneys [...], taking any action to sell, assign, [or] transfer [...] any asset owned directly or indirectly by Pierce, unless such action is performed solely to raise funds to be paid to Debonneville, [or] filing any suit relating to the settlement, Debonneville or his attorneys, other than a personal bankruptcy suit.” The court granted the TRO because those acts would cause “irreparable injury” as they “would be part of a wrongful scheme by Pierce, already commenced, to attempt to illegally recover settlement payments already paid to Debonneville or to avoid paying Pierce’s settlement obligations.”

Another hearing was set for May 5 to determine whether the restraining order should be made permanent. The minutes from that hearing revealed that Pierce paid Debonneville the undisclosed settlement amount. After that hearing, a motion for sanctions against Pierce for his failure to attend a scheduled deposition remained (although it may have since been dropped because Pierce paid the settlement). But the emails contained in the exhibits to the motion and response show the hostility that existed between the lawyers and in this case overall.

Virtually Blind wasn’t surprised at the settlement given that the litigation would’ve likely become incredibly expensive and the parties probably wanted to avoid negative publicity. It’s still unfortunate because the issue of virtual property didn’t go in front of a judge. It would’ve been interesting to see how the judge would've acknowledged and responded to virtual property in a case concerning a business based on real money trading which violates the Terms of Service MMOs.

Check out Virtually Blind's website for more extensive analysis of the case as it progressed.
It seems that Gibson’s efforts to enforce its musical concert participation patent (U.S. Patent No. 5,990,405) have officially ended. Previously we told you that Gibson’s Tennessee case against Harmonix (and its "Rock Band" game) was on its way back on track after being on hold for a while. While it was on hold, a California court ruled that the same patent did not cover Activision's "Guitar Hero" game, and it seemed likely that the Tennessee court would end up doing the same for "Rock Band."

On Friday, the Tennessee court dismissed the case in view of a settlement that the parties had reached. This dismissal would appear to end the battle over this patent.

Settlement terms are confidential, although we can speculate that the things that happened while the case was on hold did not make Gibson’s life easy. First, proceedings at the Patent Office suggested that the “musical instrument” required by the Gibson patent had to be capable of making music. This may have caused Gibson to drop its claims against the “Guitar Hero” and “Rock Band” guitars (I’ve never been able to make actual music with those things), and the holdout claims may have been leveled against the drums in the “Rock Band” game (on the theory that the drums could at least still make music).

Second, when the California court ruled that the Activision “Guitar Hero” game was not covered by the patent, the California court doubted whether the patent covered any interactive video game at all (the patent’s description focuses on letting a user simulate participation in a musical concert, which arguably is not an interactive game type of thing). Even if Gibson was now only focusing on the "Rock Band" drums as being “musical instruments” to get around the first issue, this finding by the California court would still have been thorny for Gibson to get around.

The vast majority of cases settle before the end of trial and appeals. Mounting evidence and court rulings developed during the case help resolve points of contention, and make the chances of success clearer for both parties to see, and eventually the parties are able to make the business decision to end it at terms they can live with. With the settlement in this case, here’s hoping Gibson, Activision, Harmonix and the others can move on and give us all the next generation in great musical games!
The Magnavox Co., et al. v. Chicago Dynamic Industries, et al.

201 U.S.P.Q. 25 (N.D. Ill. 1977)


For those of you who love home video games as much as we do, the following lawsuit will be of interest.


The case concerns the Magnavox Company (makers of the Odyssey) who released a ping-pong style game you may have heard of: Pong. The defendants in this case released similar ping-pong games and Magnavox sued for patent infringement.


At issue in the case were three similar patents that all dealt with a “Television Gaming Apparatus.” While there were several questions at issue in the case, the court focused on the issue of whether the patents were obvious or anticipated in light of one another, as either finding would lead to invalidity.


I. Background


On April 17, 1973, United States Patent 3,728,408 ("the '408 patent"), was issued to Ralph Baer. In his oral judgment of the case, District Judge Grady commented: “The ‘408 patent, I think, is the pioneer patent in this art . . . with the players participating in the game in an environment such as a home or some place where a large computer would clearly not be available.” After issuance of the ‘408 patent, for the first time, video games would be brought to the home.


Two years later, on August 5, 1975, William Rusch received a similar television patent. This patent, United States Patent RE28,507 ("the '507 patent'), “discloses a movable hitting spot which is controlled by the player and which, by striking a hit spot, can change the direction of that hit spot.” The ‘507 patent used the term “distinct motion,” which Judge Grady interpreted as referring not to “a predictable motion,” but rather to motion that is different from the motion that characterized the hit spot immediately prior to the striking of the hit spot. This idea of changing the direction of the hit spot was not present in the development of games at this time. Before this patent, a player would simply turn a knob which set in motion a series of events that he had no further control over. After the ‘507 patent, however, players could now control the movement of the ball based upon the area of the hit spot the ball struck!


II. Analysis


One question presented to the court was whether the feature of patent ‘507 was obvious at the time of its production. Others had imitated the ‘507 patent in similar ping-pong style games, but Judge Grady found that the novel feature of ‘507 was not obvious. In particular, the judge relied on the testimony by people from RCA who admitted that they had the mechanical capability to create this feature, but were going in a different direction of development at the time.


The next issue concerned what knowledge, if any, the patent examiner had when the ‘507 patent was examined for re-issue. The ‘408 patent, awarded before the ‘507 patent, should have been mentioned in the application, but it was not. The court sought to determine if the patent examiner had knowledge of the ‘408 patent and was actively trying to cover it up in his issuance of the ‘507 patent. Judge Grady determined that since the ‘507 patent was neither anticipated by nor obvious in light of the ‘408 patent, the patent examiner would have reached the same conclusion and awarded the ‘507 patent.


The next issue involved another television gaming apparatus patent, United States Patent RE28,598 ("the '598 patent") which was issued on October 28, 1975. This patent made improvements to the visual reproduction in ‘507. Judge Grady found that ‘507 anticipated the ‘598 patent and also that ‘598 patent was obvious in the light of ‘507. The court determined that the ‘598 patent rectified some of the visual reproduction in ‘507 which, while an improvement, was not patentable. The ‘598 patent simply used the same type of circuitry in a more efficient way to achieve better results. As a result, 28,’598 patent was found invalid by Judge Grady as being anticipated by and obvious in view of the ‘507 patent.


Finally, Judge Grady turned to the question of whether the defendant’s Pong-like games infringed the ‘507 patent. The court found that the games did infringe the claims of the ‘507 patent “to the extent that they contain or use a player-controlled movable hitting symbol which, when it coincides with a hit symbol, causes a change in direction of that hit symbol.” Because all of the defendant’s games featured this characteristic, they were all held to infringe on ‘507.
The defendants made several arguments to provide that their games differed from the ‘507 patent. The judge, however, found these arguments to be immaterial and ruled against them on all counts. The first attempt by the defendant was focused on the influence of the direction of the ball by the place on the paddle where the ball strikes. In the ‘507 patent, when a ball in the game comes into contact with a hit symbol it changes the direction of that hit symbol in a distinct way. The defendants argued that the games do not meet this claim because the direction of the ball cannot be predicted after it strikes the paddle. Judge Grady disagreed, however, ruling that “distinct” meant “simply a motion that is different from the motion characterizing the ball immediately before the coincidence.”


III. Conclusion


This early lawsuit showed that courts were prepared to handle video game patent law, and also was a testament to the strength of patents in the video game industry. For more information on Mr. Baer's early products, check out Ralph Baer's web site, which has many more details about his inventions and his trials and tribulations getting them produced!
There's an interesting article on Law360 today:

Virtual-World Conflicts Lead To Real-World Suits.

Here's an excerpt from the article:

Law360, New York (June 08, 2010) -- As the market for online games expands and the debate over who has the right to control the virtual content heats up, website operators, their users and third parties could find themselves locked in real-world legal battles.

Disputes stemming from ownership of virtual property and operators’ terms of service agreements are starting to pop up more often, leading intellectual property experts to speculate that they may become the next hot-button issues to be played out in the courts.

The complete article can be found here.
Red-Baron-Franklin Park, Inc. v. Taito Corp.
883 F.2d 275 (4th Cir. 1989).

I. Background

Some of you may remember twin martial artists Billy Lee or Jimmy (who also went by Hammer and Spike). For those not familiar with the duo, they can be found in the 1987 beat ‘em up game “Double Dragon.” Hammer and Spike were the subject of this 1989 lawsuit. Taito is a Japanese corporation that sells video games and electronic printed circuit boards used in coin-operated video game units. Taito is the owner of United States Copyright Registration No. PA-327-710, issued June 26, 1987, for the video game audiovisual work Double Dragon.


Red Baron operated arcades where it allowed the public to play games. Red Baron, without license from Taito or Taito America, purchased circuits of Double Dragon from Japan and fitted them into their already existing game units, making the game playable to the customers. Taito took offense, arguing that they had intended the Double Dragon game to be sold in the United States as a complete video game unit, not just its circuit board.

Taito claimed that each of the boards displayed the following restrictive note: “This game is for use in Japan only. Sales, exports, or operation outside this territory may violate international copyright and trademark law and the violator subject to severe penalties.”

The question in the case was whether Red Baron infringed Taito’s copyright in “Double Dragon,” when Red Baron imported the game from Japan and installed it in its video arcades for public enjoyment. The district court ruled that Red Baron did not infringe upon Taito’s copyright. This, of course, led to an appeal to the Fourth Circuit . . .

II. Argument

On appeal, Taito argued that it had a separate and distinct right to “perform” Double Dragon, and that it had not conferred this right on Red Baron. As a result, Red Baron infringed Taito’s copyright by its activities in making use of the circuit boards available to the public for a fee.

The court had to determine the following: 1. whether Red Baron’s use of Double Dragon constituted a public performance within the meaning of § 106 (4) and if so to consider 2. whether the first sale doctrine has any application to the performance right as distinguished from actual ownership of the copyrighted work.

A Public Performance

To “perform” a work and to perform it “publicly” are defined by the Copyright Act, 17 U.S.C. § 101 et seq.

“Perform” is defined as: “to recite, render, play, dance, or act [a work], either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.”

“Public” performance is defined as: “To perform . . . a work ‘publicly’ means- (1) to perform . . . it at a place open to the public . . . .”

The court concluded that Red Baron publicly performed Double Dragon because once a coin was inserted into the machine the television monitor displayed a series of images while the speakers made audible accompanying sounds. Also, because Red Baron’s video arcade was open to public and it was Red Baron’s aim to attract members of the public to its establishment, Red Baron’s arcade was considered a public place.

B. The First Sale Doctrine and the Performance Right

The second issue the court ruled on was Red Baron’s assertion that by selling the circuit boards, Taito intended to transfer the performance right. The court concluded that the first sale doctrine did not apply to the performance right and that Taito America possessed and retained a valid copyright in the public performance of Double Dragon in the United States. They also concluded that since Taito had not granted a performance license to Red Baron, the latter was guilty of copyright infringement.

III. Conclusion

In this early gray-market goods case, the United States Court of Appeals for the Fourth Circuit reversed the judgment of the district court and remanded the case for further proceedings.


Well it looks like one of the two Harmonix/Konami cases might be settling. In Harmonix Music Systems, Inc. v Konami Digital Entertainment Co, Ltd., civil action 1:09-cv-10206 (D.Mass), the parties on June 1, 2010, jointly filed a status report with the court, indicating:

Plaintiffs Harmonix Music Systems, Inc. and Viacom Inc. (collectively, the "Plaintiffs") and Defendants Konami Digital Entertainment Co., Ltd. and Konami Digital Entertainment, Inc. (“Defendants”) respectfully inform the Court that they have executed a binding and enforceable Settlement Term Sheet. The parties are currently working to execute a formal settlement agreement. The parties thus respectfully inform the Court that they expect to be able to provide another status report in 90 days.


Looks like they have come to some agreement in this case. Still no word whether the sister case, Konami v. Harmonix, is affected or not.
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