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Net News

By ALM Staff | Law Journal Newsletters |
March 30, 2005

CA Judge Orders Online Reporters to
Reveal Sources in Apple Computer Case

Last month a California Superior Court judge ordered three independent online reporters to divulge confidential sources in a lawsuit brought by Apple Computer, ruling that they were not protected by the First Amendment because they published trade secrets.

The ruling alarmed speech advocates, who saw the case as a test of whether people who write for Web-based publications enjoy the same legal protections as reporters for mainstream publications. Among those are protections afforded under California's “shield” law, which is meant to encourage the publication of information in the public's interest.

The reporters ' who run sites followed closely by Apple enthusiasts ' allegedly published product descriptions that Apple said employees had leaked in violation of nondisclosure agreements and possibly the U.S. Trade Secrets Act.

Santa Clara County Superior Court Judge James Kleinberg ruled that no one has the right to publish information that could have been provided only by someone breaking the law.

“The rumor and opinion mills may continue to run at full speed,” Kleinberg wrote. “What underlies this decision is the publishing of information that at this early stage of the litigation fits squarely within the definition of trade secret.”

“The right to keep and maintain proprietary information as such is a right which the California Legislature and courts have long affirmed and which is essential to the future of technology and innovation generally.”

In December of last year, Apple sued several unnamed individuals, called “Does,” who leaked specifications about pending music software – code-named “Asteroid” – to Monish Bhatia, Jason O'Grady and another person who writes under the pseudonym Kasper Jade. Their articles appeared in the online publications AppleInsider and PowerPage.

Apple demanded that Bhatia, O'Grady and Jade divulge their sources. The reporters refused to cooperate, saying that identifying their sources would create a “chilling effect” that could erode the media's ability to report in the public's interest.


Hollywood Studios File New
Round of Web Lawsuits

Hollywood's major movie studios filed a new round of lawsuits across the United States last month against people who trade illegally copied films and TV shows on the Internet. The civil suits against unnamed “John Doe” defendants seek up to $150,000 per downloaded digital file.

The studios, represented by the Motion Picture Association of America (MPAA), took the opportunity of the Oscars to again press the case that the illegal copying of films and their black-market distribution on the Internet is costing them millions of dollars a year in lost revenue.

The studios claim they lose $3.5 billion worldwide in annual revenues from sales of illegally copied movies on video and DVD formats in street bazaars and black markets.

The studios argue that the lost revenue means fewer artists will work to create movies or TV shows. Traditionally the films that are rewarded by Oscar voters at the Academy of Motion Picture Arts and Sciences are those that take thematic and commercial risks.

“When rampant online theft occurs, these films become that much harder to finance … we cannot and will not let that happen,” MPAA Chief Executive Dan Glickman said in a telephone conference call with reporters.

MPAA officials said “several” of the Oscar nominated films had illegal copies on the Internet that could be downloaded, but they named only comedy “Sideways,” which is nominated for best picture.

“Sideways” is a low-budget movie but was considered a financially risky one for its backers at Fox Searchlight because of its offbeat subject matter. Fox Searchlight is a division of News Corp Ltd's Twentieth Century Fox movie studio.

MPAA officials declined to say how many suits it had filed or whether the illegal copies were made by video camera taping in theaters or by copying videos or DVDs that are given away by the studios this time of year to win Oscar votes.

Also last month, the MPAA filed lawsuits against computer networks utilizing a software technology known as BitTorrent, but these new suits were against end users, or “people who actually downloaded “the films.


British Court Forces ISPs to
Reveal Music Sharers

British music companies last month said they had won the right to force Internet service providers to disclose the names and addresses of individuals accused of uploading large numbers of songs onto file-sharing networks.

The British Phonographic Industry, the music trade group, said a High Court granted an order requiring six UK Internet providers to reveal information about 31 people.

“[This] result is a blow for illegal uploaders who believe that the 'law simply does not apply to them,'” says Geoff Taylor, the BPI's general counsel.

The group said the order gives the ISPs 14 days to provide the information. Once it has the names, the BPI said it would contact the individuals and offer them the chance to settle charges against them.

UK music companies earlier last month settled their first lawsuits with Internet users who illicitly share songs, including with some parents who said they were shocked to discover what their children were doing.

“We learned from our first round of cases that people from all walks of life are engaged in this activity,” Taylor says.

The music industry typically obtains the Internet Protocol address of users' computers by monitoring file-trading networks like KaZaa, eDonkey and Soulseek, and then goes to court seeking release of their identities.


Movie Downloading Judged Legal in France

Last month the French Court of Appeal of Montpellier acquitted a 22 years old Internet user after he was sued for copying nearly 500 movies on Internet, burning them on CDs and sharing them with friends.

The court based its decision on the article L-122-5 of the French Intellectual Property Code, stating that “authors can't forbid copies or reproductions that are only intended for the private use of the copyist.”

In a similar case in January, however, the District Court of Pontoise found another Internet user guilty and ordered him to pay more than 15,000 euros.

There are still more than 50 criminal procedures pending in France. More than 20 of them are being defended by the French Association of Audionautes, a pro-file sharing organization.


eBay Loses Patent Case;
Injunction May Follow

Just prior to press time, the U.S. Court of Appeals for the Federal Circuit, sitting in San Francisco, denied eBay Inc's appeal of an adverse decision in a patent infringement lawsuit brought by e-commerce developer MercExchange. MercExchange had filed suit, claiming that eBay infringed on e-commerce patents used in eBay's “Buy it Now” feature that allows users to purchase an auctioned item at a fixed price. eBay reported that those sales accounted for 31% of the total value of goods sold on the site in the 4th Quarter of 2004.

The court upheld a $25 million damage award against the popular online auction site, but more importantly, resurrected a permanent injunction against eBay that had been denied by the lower court. “The big factor here is the awesome power of a nationwide injunction,” says Sean Hodge, a partner at Howrey Simon Arnold & White in San Francisco. MercExchange lawyer Scott Robertson, a partner at Hunton & Williams, told Reuters: “We're going to go back to the district court and ask for the permanent injunction and ask for an additional two years of damages.”

Meanwhile, eBay says they changed the technology behind the “Buy it Now” feature after MercExchange first filed suit in 2003, so it doesn't expect the appeals court ruling to have any significant impact on its business. eBay has also asked the U.S. Patent and Trademark Office to reexamine the validity of MercExchange's patents, raising the possibility that the patents may be invalid and thus, incapable of infringing.

The lower court had awarded $29.5 million to MercExchange but the appeals court invalidated one of the infringement claims, thus lowering the amount eBay must pay out.

CA Judge Orders Online Reporters to
Reveal Sources in Apple Computer Case

Last month a California Superior Court judge ordered three independent online reporters to divulge confidential sources in a lawsuit brought by Apple Computer, ruling that they were not protected by the First Amendment because they published trade secrets.

The ruling alarmed speech advocates, who saw the case as a test of whether people who write for Web-based publications enjoy the same legal protections as reporters for mainstream publications. Among those are protections afforded under California's “shield” law, which is meant to encourage the publication of information in the public's interest.

The reporters ' who run sites followed closely by Apple enthusiasts ' allegedly published product descriptions that Apple said employees had leaked in violation of nondisclosure agreements and possibly the U.S. Trade Secrets Act.

Santa Clara County Superior Court Judge James Kleinberg ruled that no one has the right to publish information that could have been provided only by someone breaking the law.

“The rumor and opinion mills may continue to run at full speed,” Kleinberg wrote. “What underlies this decision is the publishing of information that at this early stage of the litigation fits squarely within the definition of trade secret.”

“The right to keep and maintain proprietary information as such is a right which the California Legislature and courts have long affirmed and which is essential to the future of technology and innovation generally.”

In December of last year, Apple sued several unnamed individuals, called “Does,” who leaked specifications about pending music software – code-named “Asteroid” – to Monish Bhatia, Jason O'Grady and another person who writes under the pseudonym Kasper Jade. Their articles appeared in the online publications AppleInsider and PowerPage.

Apple demanded that Bhatia, O'Grady and Jade divulge their sources. The reporters refused to cooperate, saying that identifying their sources would create a “chilling effect” that could erode the media's ability to report in the public's interest.


Hollywood Studios File New
Round of Web Lawsuits

Hollywood's major movie studios filed a new round of lawsuits across the United States last month against people who trade illegally copied films and TV shows on the Internet. The civil suits against unnamed “John Doe” defendants seek up to $150,000 per downloaded digital file.

The studios, represented by the Motion Picture Association of America (MPAA), took the opportunity of the Oscars to again press the case that the illegal copying of films and their black-market distribution on the Internet is costing them millions of dollars a year in lost revenue.

The studios claim they lose $3.5 billion worldwide in annual revenues from sales of illegally copied movies on video and DVD formats in street bazaars and black markets.

The studios argue that the lost revenue means fewer artists will work to create movies or TV shows. Traditionally the films that are rewarded by Oscar voters at the Academy of Motion Picture Arts and Sciences are those that take thematic and commercial risks.

“When rampant online theft occurs, these films become that much harder to finance … we cannot and will not let that happen,” MPAA Chief Executive Dan Glickman said in a telephone conference call with reporters.

MPAA officials said “several” of the Oscar nominated films had illegal copies on the Internet that could be downloaded, but they named only comedy “Sideways,” which is nominated for best picture.

“Sideways” is a low-budget movie but was considered a financially risky one for its backers at Fox Searchlight because of its offbeat subject matter. Fox Searchlight is a division of News Corp Ltd's Twentieth Century Fox movie studio.

MPAA officials declined to say how many suits it had filed or whether the illegal copies were made by video camera taping in theaters or by copying videos or DVDs that are given away by the studios this time of year to win Oscar votes.

Also last month, the MPAA filed lawsuits against computer networks utilizing a software technology known as BitTorrent, but these new suits were against end users, or “people who actually downloaded “the films.


British Court Forces ISPs to
Reveal Music Sharers

British music companies last month said they had won the right to force Internet service providers to disclose the names and addresses of individuals accused of uploading large numbers of songs onto file-sharing networks.

The British Phonographic Industry, the music trade group, said a High Court granted an order requiring six UK Internet providers to reveal information about 31 people.

“[This] result is a blow for illegal uploaders who believe that the 'law simply does not apply to them,'” says Geoff Taylor, the BPI's general counsel.

The group said the order gives the ISPs 14 days to provide the information. Once it has the names, the BPI said it would contact the individuals and offer them the chance to settle charges against them.

UK music companies earlier last month settled their first lawsuits with Internet users who illicitly share songs, including with some parents who said they were shocked to discover what their children were doing.

“We learned from our first round of cases that people from all walks of life are engaged in this activity,” Taylor says.

The music industry typically obtains the Internet Protocol address of users' computers by monitoring file-trading networks like KaZaa, eDonkey and Soulseek, and then goes to court seeking release of their identities.


Movie Downloading Judged Legal in France

Last month the French Court of Appeal of Montpellier acquitted a 22 years old Internet user after he was sued for copying nearly 500 movies on Internet, burning them on CDs and sharing them with friends.

The court based its decision on the article L-122-5 of the French Intellectual Property Code, stating that “authors can't forbid copies or reproductions that are only intended for the private use of the copyist.”

In a similar case in January, however, the District Court of Pontoise found another Internet user guilty and ordered him to pay more than 15,000 euros.

There are still more than 50 criminal procedures pending in France. More than 20 of them are being defended by the French Association of Audionautes, a pro-file sharing organization.


eBay Loses Patent Case;
Injunction May Follow

Just prior to press time, the U.S. Court of Appeals for the Federal Circuit, sitting in San Francisco, denied eBay Inc's appeal of an adverse decision in a patent infringement lawsuit brought by e-commerce developer MercExchange. MercExchange had filed suit, claiming that eBay infringed on e-commerce patents used in eBay's “Buy it Now” feature that allows users to purchase an auctioned item at a fixed price. eBay reported that those sales accounted for 31% of the total value of goods sold on the site in the 4th Quarter of 2004.

The court upheld a $25 million damage award against the popular online auction site, but more importantly, resurrected a permanent injunction against eBay that had been denied by the lower court. “The big factor here is the awesome power of a nationwide injunction,” says Sean Hodge, a partner at Howrey Simon Arnold & White in San Francisco. MercExchange lawyer Scott Robertson, a partner at Hunton & Williams, told Reuters: “We're going to go back to the district court and ask for the permanent injunction and ask for an additional two years of damages.”

Meanwhile, eBay says they changed the technology behind the “Buy it Now” feature after MercExchange first filed suit in 2003, so it doesn't expect the appeals court ruling to have any significant impact on its business. eBay has also asked the U.S. Patent and Trademark Office to reexamine the validity of MercExchange's patents, raising the possibility that the patents may be invalid and thus, incapable of infringing.

The lower court had awarded $29.5 million to MercExchange but the appeals court invalidated one of the infringement claims, thus lowering the amount eBay must pay out.

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