Issue #12-2 | May 17, 2012

Court of Appeals calls into question the ability of the Economic Espionage Act to protect trade secrets

On April 1, the 2nd U.S. Circuit Court of Appeals overturned defendant Sergey Aleynikov’s conviction under the Economic Espionage Act. Aleynikov was charged with taking sensitive (trade secrets) computer code from Goldman Sachs.

Early analysis of the case focused on the court’s reasoning that the defendant did not deprive the copyright owner of the use of the software by taking physical control over it. A more detailed reading of the case calls into question the statute’s ability to protect trade secrets at all.

The court ruled the software taken by Aleynikov while he was at Goldman did not violate the federal statute because it was to be used for internal purposes only, not placed “in interstate or foreign commerce,” as defined under Section 1832 (a).

Trade secrets, as a rule, would not be placed into interstate commerce (except in the case of licensing know-how and trade secrets). Therefore, does the EEA protect trade secrets at all? To what extent is the value of an organization’s trade secrets affected by this ruling?

Domain comparables

An article in Midland Daily News ticked off a few World Wide Web site sales that recently have been made public:

  • Kboing.com: $150,000
  • Sol.com: e98,000
  • Channel.com: $125,000
  • End.com: $100,000
  • Social.com: $2.6M
  • DomainName.com: $1M
  • Dudu.com: $1M
  • Atkien.de: $750,000
  • VU.com: $700,000

David Twigg of Online Marketing Consultants Pty Ltd said that lead generation and e-commerce can offer equal value, and a substantial factor in the value of any web site is the competitive advantage gained by it.

Jury returns illogical verdict in part one of Oracle v. Google

The Oracle v. Google trial is loosely divided into three phases: a determination of copyright infringement, a determination of patent infringement, and a damages phase. In the first phase, the jury found that Google infringed the copyright on the overall structure, sequence, and organization of Oracle’s Java language. Sounds good for Oracle, right? Well …

The jurors were at an impasse on whether Google proved it limited its use of the Java code to “fair use.” Fair use is allowed under the Copyright Act, and as Section 107 clearly states, fair use is not copyright infringement.

[T]he fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.

To summarize, the jury found Google infringed, but it couldn’t decide whether Google’s use of the Java code was “fair use.” Sorry, that doesn’t work. Fair use is not infringement, by statute. The jury found infringement; ipso facto, it’s not fair use.

The problem comes from the judge’s instructions to the jury, reproduced below:

  1. As to the compilable code for the 37 Java API packages in question taken as a group:

    A. Has Oracle proven that Google has infringed the overall structure, sequence and organization of copyrighted works?
    Yes __________ No __________
    (IF YOU ANSWER “NO” TO QUESTION 1A, THEN SKIP TO QUESTION NO. 2 [not reproduced])

    B. Has Google proven that its use of the overall structure, sequence and organization constituted “fair use”?
    Yes __________ No __________

Perhaps this alternative instruction would have yielded a logical result:

  1. Did Google reproduce/use the copyrighted Java code without permission or license? (The judge asked the jury to assume it was copyrighted.) No? Count dismissed. Yes? Proceed to Question 2.

  2. Did Google prove its use of the copyrighted Java code was limited to “fair use?” No? Find for the plaintiff. Yes? Count dismissed.

(Click here to see the Oracle v Google copyright issue alternative jury instructions presented as a flow chart.)

For more details on the jury findings, see here.

Angry Birds propels Rovio toward an IPO

Reuters reports Finnish gamer Rovio Entertainment’s income jumped 10x in the last year, priming it for an IPO analysts peg at $9B. (That’s a B.)

Rovio has been around since 2003, but few knew of the company until it launched the Angry Birds iPhone app in 2009. Did its game-making skills improve that much from 2003 to 2009? Did access to the millions of iPhone users provide the necessary catalyst? Certainly these were factors, but others were riding the same train.

IP watchers will zero in on the characters. Rovio reports over 30% of its revenues come from merchandizing. It considers Disney one of its chief competitors. One of the increased investments listed by CEO Mikael Hed is brand protection.

We’ll soon learn whether success with one character set can translate to another, as Rovio plans several new game launches this year, including a non-Angry Birds title … and that is one that interested valuators will watch closely.

News, Views and Muse

Women lagging behind men in the technology revolution

Small Business News, Tips, Advice—Small Business Trends reports “fewer than 5 percent of tech start-ups are women-owned, and even among employees, only 25 percent of the tech industry is female. Businesses owned by men get 95 percent of the VC money.” Scott Shane, Ph.D. (Case Western Reserve University) thinks many of the reasons behind this can be traced back to universities and how they respond to female inventors.

Patent application from Microsoft tips its strategic hand with respect to portable devices

CNET revealed details of Microsoft’s patent application for a transparent screen attached to a portable device for “augmented reality.” Potential uses? Overlay the picture of a new dress on a mannequin in Macy’s onto your frame, allow the computer to “see” the chess board and help you with your next move, label photographs, get details on real estate, etc.

Maker’s Mark wins trademark case

We can all rest easy now. Noting bourbon’s “unique place in American culture and commerce,” the Sixth U.S. Circuit Court of Appeals affirmed a 2010 District Court opinion allowing Maker’s Mark to stop rival liquor companies from using decorative seals similar to its trademarked red dripping wax seal.

Abraham Lincoln filed for a patent for Facebook in 1845, so the headlines claim

Nate St. Pierre supposedly followed a whimsical, historical trail and uncovered the Springfield Gazette, a fascinating document in the Lincoln Museum in Springfield, Ill., that served as an appendix to a patent application filed in 1845 by Abraham Lincoln. The Springfield Gazette (which the Lincoln Museum curator doubts the existence of) was one page only and all about Abraham Lincoln, compiled by Abraham Lincoln. It had his picture, interesting anecdotes, updates on what was going on in his life at the moment (between the dissolution of his law firm and his entering Congress), books he was reading, and poems and quotations that intrigued him.

St. Pierre sums up his “discovery”: “Put all that together on one page and tell me what it looks like to you. Profile picture. Personal information. Status updates. Copied and shared material. A few longer posts. Looks like something we see every day, doesn’t it?”

Making it difficult to check, the patent office supposedly turned down Lincoln’s application.

Good story. Fun reading. Not true.


Contact Us:

Business Valuation Resources, LLC
1000 SW Broadway
Suite 1200
Portland, OR 97205
(503) 291-7963


Ask the Editor

Valuation of IP

 






 



 

 

 


 

 

 

This email was sent to: %%emailaddress%%. 
To ensure this email is delivered to your inbox, please add editor@ipvalue-site.com to your email address book.
We respect your online time and privacy and pledge not to abuse this medium.