The Prior Art

Americans can't defeat Wal-Qaeda, but Brits will duel with Google: Trademarks stateside and across the pond

Google's feeling tough enough to fight its wars on two fronts when it comes to trademark law.  As I mentioned below, our May issue includes a story about the Rescuecom v. Google lawsuit at the 2nd Circuit, where Google is looking for a big win; today, Slashdot points to this TV news story about how Google intends to allow U.K. advertisers to buy ads on trademarked keywords, as they already do in the U.S. Of course, some mark-holders already are threatening to sue, as several have in the U.S. (they've all either lost, or lost badly.) No word in this story on when Google will implement this new policy, or such changes are in the works anywhere else.

Currently, if a British searcher types in "Ford cars," she'll see an organic link to Ford and possibly a paid ad for Ford, but won't see an ad for, say, Honda, while an American making the same search may see such competitors advertising. (Yahoo doesn't sell trademarked keywords in the U.S., but they'd like to—they weighed in with an amicus brief supporting Google in the Rescuecom case, together with eBay.)

Last month, I talked to Keker & Van Nest lawyer Michael Page, who is representing Google against Rescuecom in New York, and we talked about the differences between American & European trademark laws.

"European trademark laws are very different beasts," says Page. "They really think of it as owning the words, and you can’t use them. American laws are about protecting consumers." Some of the European trademark decisions have been "very harsh," he notes. "Germany and France are very both anti-speech; it's a sort of thought control. eBay has lost a series of decisions... They can’t allow anyone to list for sale World War II or Nazi memorabilia anywhere. It’s a fairly hostile environment for commerce and speech."

So, for example, it might be tougher for Georgia computer store owner Charles Smith to sell T-shirts and beer steins with slogans like Wal-Qaeda and Wal-ocaust outside a Wal-Mart in, say, Paris. (Is there such a thing?) But Smith resides in Georgia, where he is free to thumb his nose at the world's largest retailer and create bizarre and disturbing images like the ones pictured here. After Wal-Mart told him to cease and desist, Stanford Professor Larry Lessig hooked Smith up with lawyers from Public Citizen and the ACLU, who helped Smith win a complete victory in March after a two-year battle against the mega-store. In an 82-page smackdown, a federal judge basically told Wal-Mart that 1) Smith is a parodist, 2) it's a free country, and 3) deal.

Wal-Mart apparently paid $200,000 just to conduct a survey to measure alleged "consumer confusion," and probably paid millions to their Quinn Emanuel lawyers. And for what? Here's the best part: Smith sold all of 62 T-shirts, including 15 to one of Wal-Mart's outside law firms! Not exactly a weapon of mass dilution. (which law firm bought the shirts?? Inquiring minds want to know! Please email pics of any lawyers seen wearing Wal-Qaeda T-shirts.) Wal-Mart lost more than just money in this litigation: the judge ruled that the store has no common-law trademark claim to its yellow smiley face; that's not good timing, since the company's trademark on that symbol is being challenged at the Trademark Trial and Appeal Board.

Speaking personally, I think the term "Walocaust" is a heavy-handed and unfortunate metaphor that's likely to offend folks with connections to the real Holocaust. Using a Holocaust reference to discuss anything that's not actual genocide just isn't helpful to anyone, including would-be parodists and critics.

But Wal-Mart's attempt to label Smith as a lawbreaker for "diluting" and tarnishing their trademark is a good example of how trademark laws, like copyrights and patents, today reach far beyond their historical roots. Unlike copyrights and patents, which are monopolies granted as incentives to creators, trademarks are granted so that consumers clearly understand the true source of a good or service they're buying. We're all better off with only Wal-Mart being allowed to slap up a sign on its stores that says "Wal-Mart," because we know who we're buying from; but the thinking is, we're also better off knowing that if push comes to shove, we can always start selling Wal-Qaeda T-shirts.

Highlights from the May issue

The May issue of IP Law & Business is out. The cover story profiles 50 top IP people  under 45, and is available online. (free reg. required)

More highlights from the May issue:

• Protecting the American Way of Suing: The patent bar speaks to E.D. Tex: enough is enough. AIPLA has filed a brief urging the U.S. Court of Appeals for the 5th Circuit to force East Texas judges to transfer more cases out of the district. It's an effort to head off more heavy-handed venue reform that could come from Congress, but there are already early signs that the local judiciary is thinking of ways to keep the patent docket heavy even if they lose this case, which involves a product liability lawsuit against Volkswagen. In Re Volkswagen AG and Volkswagen of America, Inc. 07-40058.  (see 5/21 follow-up on E.D. Texas lawyers' response to AIPLA)

• High Stakes at the 2nd Circuit: Google brings in the big guns for a keyword-advertising showdown in Manhattan. If the search giant pulls off a solid win in Rescuecom v. Google, it will be clear that selling trademarked keywords is perfectly legal, pro-consumer—and not so different than traditional advertising practices.

• Copyright revolt in Academia: How the Internet is shaking up the staid, and costly, world of academic publishing.

Note: This post updated on 5/21 to include links to newly posted stories.

New Media, Old Media, and the Google factor

Last week I heard NYT columnist Jason Pontin refer to Google as a "giant parasite," video here, I wrote why I disagreed with him here, and he promptly responded here. Well, I’m not going to win the “fastest blogger” award for this response, but I did want to come back to this briefly.

First, my original post on Pontin’s comments was a bit too snarky, so I apologize for that, and I appreciate his response. I do continue to disagree with him and here’s why.

“I have to make money to survive, despite our ownership by MIT. Sam Zell doesn't determine what profit margins are acceptable to Wall Street's analysts and investors. Both Zell and I must live in real markets, not within the speculative future of a media blogger, and those markets have become punishingly difficult.”

Agreed. But, getting more non-profits to own media outlets is a good strategy toward relieving part of that market pressure. So is taking companies private, something that Cox Communications did a couple years ago.

For public companies that can’t escape the demand for 20 percent plus profit margins every quarter, I don’t see how they’re going to make it in the long run. I don’t see a way out for Gannett or MediaNews. Investors in those companies have become convinced they can see monopoly-sized profits every quarter. And they can, for a time, while they drive these papers into the ground. But unless a publication has some kind of insulation from the public markets, like the family ownership structure of the Times or the Post, I don’t see a rosy future for it. The solution is to buckle down, invest in web sites, and capture some of the billions pouring into online ads; which have were up 25 percent year-over-year throughout 2007.

"If you want the journalism upon which all three parts of the media industry depend, who is going to pay for it? Readers won't, if they can get content for free (and as you say, both the Times as well as many other magazines have abandoned pay-to-play.). Advertisers won't pay enough, because AdSense and AdWords and similar networks are cheaper and more effective than display."

Well, one could argue the advertisers are in a more transparent market now, and they are getting a better deal for their money. They just didn't have many options before, and the newspapers could force them to accept higher rates.

The Times' abanonment of its pay model seems a success story to me, not a failure. They had over 200,000 online-only paying subscribers, I believe, (including myself.) They made a calculation that it was better to make that paid content freely available so that it could be found through search engines. The online ad revenue will more than make up for the subscription money of TimesSelect folks (that’s the plan, anyway).

Yes, it’s unfortunate that readers aren’t willing to pay much for print content. But throughout the entire pre-digital age, not many newspapers made it past the 25 cent mark in any case. And we’ve always been competing with free (television). So consumers have been trained to put a pretty low price on the news in any case. The future of for-profit print media is going to come from advertisers.

It is happening. Some web publications are starting to make money, like the sites represented by Federated Media. I know in the legal media there are a huge number of lawyers who are blogging a variety of topics, and it’s tough for us reporters to figure out what we have left to contribute when the events are followed so closely.

The Sunday papers in San Francisco, like most big cities, are full of inserts. Those inserts account for an enormous amount of the newspapers’ profits. In a sense, the journalism business has been subsidized by the coupon business. That game is ending. We’re actually going to have to get read, by someone who cares, and can’t just say ‘we’re the experts, pay us.’

"How are we pay for this very expensive enterprise of creating first-rate, quality journalism? It's not clear, although I am working on the problem, because Google isn't going away."

Very few metro papers are going to be able to have the kind of independent globe-spanning coverage they had in the 1980’s. Papers are becoming more locally focused. And that makes sense, since readers—increasingly coming through search engines—have lots of other choices, often better choices, about how to get world news.

Overall, I think Jason’s critique is aimed more at the Internet as a whole than at Google. And I’m not being pollyanna-ish about the real dangers that are posed to journalism. But I think those dangers are posed by competitors—people who have a right and ability to express themselves, whether they do it for money or not. I don’t think those people, or the search engines they use, are “parasites” on the media business. There are grandmas who want to talk about when to plant azaleas in Baltimore, to paraphrase a recent interview I had with an executive at a new media company. Much of that “evergreen” or seasonal content in the Home or Style sections has been giving a free ride to us serious-furrowed-brow journalists, too.

NYT's Jason Pontin on Google: swing and a miss.

Since I’m already bashing my own industry, I thought I'd comment on this ridiculous commentary on Google by New York Times columnist Jason Pontin that came to my attention today. 

In a two-minute clip, Pontin manages to be wrong on about five different levels. It’s hard for me to believe that someone who edits a technology magazine would have a view of the Internet economy that’s so simplistic and flat. To wit:

“Google is like a gigantic parasite that hollows out existing businesses.”

Google is just a service provider, albeit a dominant one. Its search abilities rest on top of an almost infinitely efficient distribution system for information. They’re in the business of distributing and sorting, not producing, content produced by the media. Calling Google a parasite makes about as much sense as Pontin running out of his office at Technology Review and screaming at the truck driver who deliver his magazines. I mean, isn’t that guy a “parasite” as well? He doesn’t produce anything, after all. He costs more than Google, too.

“They hollowed out the existing classified business.”

Google doesn’t have classified ads. Blame craigslist.

“Then they began to hollow out the existing news businesses.”

No, the news business started giving itself away for free, because it didn’t have any other choice. If you don’t want Technology Review to be “hollowed out,” then keep Google out, or insist that users pay for your content. It didn’t work out for the New York Times, but hey, give it a go. (It still works for some parts of the legal press).

Then he gets to his real gripe: online ads don’t pay him as much as the print ads. He doesn't get enough money. Well, arguably the advertisers had been paying too much for print ads, and are enjoying a more efficient market. In any case, they have a lot more options.

“In the long run, that’s bad for Google. Unless they can find some way that I can have some value to attach to this incredibly expensive enterprise of creating clever, thoughtful, groundbreaking content, they’re not going to have anything to live parasitically off forever.”

It's true--good journalism is expensive. But newspaper stock prices are only dropping because investors don't see the monopoly profits of yesteryear. Ousted LA Times editor Jon Carroll told the New York Review of Books that if the new boss was willing to take 10 to 15 percent profit margins--extraordinary in most businesses--the paper would be a journalistic "juggernaut."

Essentially, Google is a "parasite" because it’s harder for Pontin to make money. The new media universe is tough, and there’s a lot more competition. But competition is generally a good thing, especially in the information business.  Pontin may have successfully isolated himself from those pressures, since Technology Review is owned by a non-profit, MIT.

But as he points out, Google doesn’t make any content. Pontin's ad dollars have been competed away, and he’s shooting the messenger. Pontin is a smart guy and I like his writing in the Times, but here he sounds like a sore loser who has had two magazines die on his watch.

eBay v. lawyers with patents

Google will be headed back to the Western District of Wisconsin to fight off a patent lawsuit it thought it had beat, thanks to yesterday’s appeals court decision in HyperPhrase Technologies v. Google. (Bloomberg News story here; court order is here)

That case is connected, by both venue and attorney, to the Netcraft Corp. v. eBay lawsuit that a Wisconsin federal judge tossed out last week on summary judgment. I wrote about that case in Monday’s Daily Journal, and it’s worth following up on here.

Like the MercExchange case that has dogged eBay for more than six years, the Netcraft litigation involves a patent-wielding lawyer-inventor.

Netcraft Corp. v. eBay Inc., 07-00254 (W.D. Wisconsin)

Andrew Egendorf is a Massachusetts lawyer-inventor who began laying a broad claim to the world of electronic commerce in the mid-90’s. (find a short bio with photo here). In May, he sued eBay for infringing on his patents on “Internet billing methods.”

Netcraft is the patent-holding company set up to assert Egendorf’s patents; in addition to the eBay litigation, he filed a Delaware lawsuit against five cell phone companies in October. Netcraft Corp. v. AT&T, 07-cv-00651 (Delaware). Netcraft’s parent company is called Tradecraft; another entity called Datacraft has popped up in some patent searches).

Netcraft's lawyer is Fish & Richardson partner Frank Scherkenbach—who also represents Google against HyperPhrase, a locally grown Wisconsin patent-holding company. eBay hired an Irell & Manella team led by Morgan Chu, who tells me that Irell started working with eBay in 2006.

Even though he lost this one, Egendorf can’t be too disappointed. After all, it looks like he cashed in a few weeks before he even filed the suit against eBay. He’s one of five named inventors on a “friend finding” social networking patent, number 6,618,593, which was sold for $2.86 million at the April 2007 OceanTomo auction.

Egendorf is a lawyer with deep connections to rise of the Internet. He helped found Symbolics in 1980 with some heavy-hitters out of MIT’s Artificial Intelligence Laboratory, and became the company’s general counsel in 1983.

Symbolics was the first dot-com ever, and the company soon had a famously uncomprising opponent: free software advocate Richard Stallman. Stallman has nothing but disdain for software patents like those Egendorf builds and litigates; he also took a mighty dim view of the folks who founded at Symbolics.

“They would get outside investment, not have scruples, and do everything possible to win,” Stallman said in a lecture transcribed here. Stallman had a bitter falling out with Symbolics, describing its founding as a “stabbing in the back,” but also said the company inspired him to created GNU, his free operating system.

In 1968, Egendorf and a friend wrote to Ralph Nader, describing themselves as "disgusted Harvard graduate students who must endure endless years of drivel in order to mechanically defend the guilty and profitably screw the consumer,” according to this article in the San Diego Union-Tribune. He urged Nader to enlist him in a “judicial jihad” and became one of the original “Nader’s Raiders.” Egendorf is interviewed in the Nader documentary "An Unreasonable Man," which I have not seen.

And file this under interesting timing: the "Andrew Egendorf" entry in Wikipedia was flagged for deletion on May 3, 2007—the same day Egendorf filed his lawsuit against eBay. If I were of a more conspiratorial mindset, I might think that suspicious. But it looks like the Wikipedians who voted to kill the page were mainly annoyed that it was written by his old buddy and former Symbolics president Russell Noftsker. The articlde-deletion debate is nothing special, and can be read here.

Short histories of Noftsker, Egendorf and venture capitalist Jean de Valpine, are on Noftsker's Wikipedia user page. The note on Egendorf mentions that his wife Linda is a well-known sculptor.

She's a would-be inventor, too. Linda Egendorf has her own patent application in the works--it's for a "method of creating a soft sculpture."

A University Challenges Google

Saturday’s Boston Globe reports that Northeastern University is the latest plaintiff to sue Google for patent infringement. The University joined a small tech company, Jarg, which is owned by an associate professor, Kenneth P. Baclawski.

The idea of targeting Google with a lawsuit apparently came from a Boston-area law firm—Jarg president Michael Belanger refused to say which firm. Belanger also told the Globe that it took him 2 ½ years to find a firm that would take the case on a contingency basis.

The lawsuit was filed in the Eastern District of Texas, a popular venue with patent plaintiffs.

Northeastern University et al v. Google, Inc., 07-cv-00486-TJW.

Companies that make no products, but sue others for patent infringement, are often derided as “patent trolls” by their critics, who say this “license or lawsuit” approach amounts to a patent holdup, a tax on true innovation. But like beauty, trolldom is in the eye of the beholder, or the defendant, as the case may be. Often, the folks who call “troll” are connected to big companies, especially big tech companies, that are getting deluged by patent infringement lawsuits.

The phrase itself is controversial. While I have used it several times during my short time here on the IP beat, I’ve kept it in quotes (literally or figuratively), following the style of WSJ's Law Blog and letting others do the dirty work of directly applying this "popular pejorative phrase." 

Universities occupy a problematic middle ground in this debate. They typically don’t have products or services in the areas their patents cover, but still insist on getting paid by those who use their patented technologies, and few question their right to do so. Many critics who would lambaste a patent-holding company for suing in pro-plaintiff East Texas don’t have any problem with the University of California or MIT bringing a lawsuit in San Francisco or Boston.