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e-Commerce Docket Sheet

By ALM Staff | Law Journal Newsletters |
May 26, 2005

Five States Enact Data Security
Breach Notification Law Similar To CA's

The legislation was recently enacted in Arkansas, North Dakota, Montana and Washington, and, at the time of this writing, awaits the signature of Georgia's governor. The legislation in Arkansas, North Dakota, Montana and Washington closely parallels the requirements of the California data security breach notification law enacted in 2002. In each of these states, the legislation provides that entities that own or license “computerized data” that contains “personal information” about individuals must disclose any breach in the security of the data to the individuals in the manner specified in the statute. The pending Georgia bill applies only to “information brokers.”

The legislation is available at:

Video Game Developer's Secondary Liability
Negated By Failure To Allege Trademark Infringement

The developer of a video game that permits users to create video game characters that allegedly infringe registered trademarks cannot be held secondarily liable for trademark infringement by the video game users. Marvel Enterprises, Inc. v. NCSoft Corp., No. 04-9253 (C.D. Cal. Mar. 9, 2005). The court concluded that the secondary liability claims failed because the trademark owner did not allege that the video game users who created characters were using its marks in commerce in connection with the sale or advertising of goods or services. The court declined, however, to dismiss direct and secondary copyright-infringement claims against the developer of the video game, concluding that the plaintiff's allegations that it was the holder of copyrighted characters that were allegedly infringed by users of the defendant's game were sufficient to survive a motion to dismiss.

Object Code Licensee Entitled To
Reverse Engineer Source Code Under Copyright '117(a)(1)

A company that reverse-engineered, decompiled and modified the source code of programs written for it by a former consultant may claim the affirmative defense in '117(a)(1) of the Copyright Act as an “owner of a copy” of the computer program. Krause v. Titleserv, Inc., 2005 U.S. App. LEXIS 4570 (2d Cir. Mar. 21, 2005). The circuit court agreed that the company met the requirement that its actions were “an essential step in the utilization of the computer program[s] in conjunction with a machine” because the company's changes were “modest alterations” made only to the company's copies, and they did not harm the interests of the copyright owner.

Without Contract Principles, Parent Can't Enforce
Arbitration Rule In Software Pact Subsidiary Signed

A parent company, the defendant in the lawsuit, may not enforce an arbitration provision in a software-license agreement signed by its subsidiary, unless the company can show entitlement to the benefit of the provision under principles of contract and agency law. Appforge, Inc. v. Extended Systems, Inc., 2005 U.S. Dist. LEXIS 5039 (D. Del. Mar. 28, 2004). The court concluded that the parent company had not shown such entitlement with respect to copyright, trademark and unfair competition claims that the software licensor asserted under federal and state law, under either equitable estoppel or third-party beneficiary theories. The court concluded that the litigation should be stayed with respect to the parent company, however, because the same claims against the parent's subsidiary were found to be arbitrable, and the parent had agreed that it would be bound by any factual adjudications in the arbitration proceeding in which the subsidiary would participate.

Fix Of False Game Packaging Claim Creates
Material Fact Issue Against Summary Judgment

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