Boston Scientific, Lime Wire, Google: Intellectual Property

Boston Scientific Corp., which makes coronary stents to repair clogged arteries, yesterday won more than $19 million in patent-infringement damages from Johnson & Johnson (JNJ)’s Cordis Corp. after a jury trial.

The jury of four men and four women deliberated about two hours after a four-day trial in federal court in Wilmington, Delaware, before reaching a verdict on lost profits and royalties for Cordis’s sale of the small-vessel Cypher stent.

Boston Scientific, based in Natick, Massachusetts, sued Cordis in 2009 in Minnesota and the case was transferred to Delaware the following year. U.S. District Judge Sue Robinson said that another jury in 2005 ruled Cordis infringed the patent.

“We are pleased to see the jury recognized the value of our intellectual property,” Hank Kucheman, cardiology group president for Boston Scientific, said in an e-mailed statement. “This is an important outcome in protecting our market position.”

“Cordis is considering what, if any, next steps it may take in the legal process,” Sandy Pound, a Cordis spokeswoman, said in an e-mailed statement.

The case is Boston Scientific Corp. (BSX) v. Cordis Corp., 10CV315, U.S. District Court, District of Delaware (Wilmington).

To see the patent, click: 5,922,021.

Patents

BOX Options Exchange Files Patent Infringement Suit on Auctions

BOX Options Exchange, an equity derivatives market, said in a lawsuit that three competitors infringed its new patent related to electronic auctions, according to a notice from the Boston-based company.

BOX filed the complaint after getting the patent yesterday for a mechanism that allows investors using exchanges to get better prices than those publicly available, the company said. The lawsuit against the Chicago Board Options Exchange, International Securities Exchange and Nasdaq OMX PHLX, was filed yesterday in federal court in Massachusetts.

The lawsuit comes as competition in the options industry continues to increase. The largest individual exchange by volume last month was CBOE, followed by Nasdaq OMX PHLX and the ISE, according to data compiled by Chicago-based OCC. Nine exchanges vie with each other for volume and market share and a tenth platform plans to begin trading next year.

“BOX is committed to price improvement and is willing to engage in discussions in order to ensure that price improvement is available to all segments of the marketplace,” Anthony McCormick, chief executive officer of BOX, said in the notice.

Gail Osten, a spokeswoman for CBOE, ISE’s Molly McGregor and Nasdaq OMX’s Frank De Maria declined to comment.

BOX said in a statement yesterday that its so-called price improvement period auction has saved investors $335 million since it began in 2004. A similar feature on ISE is called a price improvement mechanism, CBOE’s is called an automated improvement mechanism, and PHLX’s is a price improvement secondary auction process.

The case is Boston Options Exchange Group LLC v International Securities Exchange LLC, 11cv10824, U.S. District Court for the District of Massachusetts (Boston).

For more, click here.

Analog Devices Wins Patent Ruling Against Dover’s Knowles

Analog Devices Inc. (ADI), the maker of chips used in cars and consumer electronics, won its U.S. International Trade Commission case against Dover Corp. (DOV)’s Knowles Electronics over microphones in digital devices.

The commission yesterday said Knowles and Mouser Electronics Inc. violated a patent owned by Analog Devices and said the products that infringe the patent should be barred from the U.S. It upheld a judge’s findings from December.

Each company has accused the other of infringing patents related to microphones that are made on silicon chips, which render them smaller than traditional microphones and provide higher-quality recording. Knowles lost its case after the commission found no violation by Norwood, Massachusetts-based Analog Devices.

The exclusion order must be reviewed by President Barack Obama and the U.S. Trade Representative to see if there is any conflict with public policy. The underlying patent case can be appealed by Downers Grove, Illinois-based Dover to a court that specializes in U.S. patent law.

The ADI case is in the Matter of MEMS Devices, 337-700 and the Knowles case is in the Matter of Silicon Microphone Packages, 337-695, both U.S. International Trade Commission (Washington).

Patent Office Stymied in Revamp of ‘Beyond Horrific’ Technology

John Owens was confronted on his first day as chief information officer at the U.S. Patent and Trademark Office by technology in “a state beyond horrific.”

Put in charge in 2008 of a computer network supporting more than 9,000 employees and processing at least 200,000 patent applications a year, the former technical director for AOL Inc. found technicians who hadn’t had training in a decade; computer servers exposed to severe heat; a reliance on inputting data manually; and insufficient backup of the agency’s database.

“This organization was doing everything it could to keep the ship alive, and that was it,” Owens said in an interview. “We got so far behind that the only way to move forward is with a major overhaul.”

A $2.25 billion effort to rebuild the information technology systems is now being derailed after Congress last month put limits on the Alexandria, Virginia-based agency’s budget. As a result, director David Kappos, 50, ordered cutbacks in plans to speed applications being reviewed by the office’s 6,800 patent examiners and to revamp the billing system.

“The nation’s No. 1 technology agency is shockingly out of date in its technology,” said Paul Michel, the retired chief judge of the U.S. Court of Appeals for the Federal Circuit in Washington, which handles patent cases. “New companies, new technologies, new jobs are being held hostage at the patent office because of funding problems.”

The patent office had anticipated spending $606.1 million by now toward $2.25 billion of major information technology projects. It’s about $120 million short of that goal, according to the government’s federal contracting website. The agency may fall further behind without greater budget increases, Kappos said.

On one of the five projects that make up the total initiative -- to automate steps in the review of applications for inventions such as jet-engine technology, medicines and iPads -- the agency has spent $4.1 million of $34.8 million scheduled. A second project to update the trademark process has used $805,000, compared with an $8.3 million target.

Kappos said the agency had opted to develop its projects using the “agile” system, which approaches the overhaul in incremental steps. This will let the patent office continue with some changes during the budget crunch and ramp up quickly once new funding is approved, Kappos said.

“We’re just going through what’s left of our money and we’re trying to pick which projects we keep going on, which we slow down on, which we keep funding and which we have to stop,” Kappos said. “There will be important projects we have to stop.”

For more, click here.

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Copyright

Bronfman Tells Jury Lime Wire ‘Devastating’ to Warner Music

Warner Music Group Corp. (WMG) Chief Executive Officer Edgar Bronfman told a federal jury weighing damages caused by Lime Wire LLC’s copyright infringement that the effect on Warner’s business was “devastating.”

Bronfman, 54, testified that the drop in revenue caused by free peer-to-peer music sharing services such as Lime Wire forced Warner to fire employees and release fewer recordings. He said he had hoped the services would shut down voluntarily after the Supreme Court ruled in 2005 that Grokster, another music- sharing program, could be held liable for infringement

“When Lime Wire kept operating it frustrated me greatly,” Bronfman told jurors yesterday in a Manhattan courtroom. “It was devastating, frankly.”

Music labels owned by Warner Music, Sony Corp. (6758), Vivendi SA (VIV) and Citigroup’s EMI Group Ltd., are seeking hundreds of millions of dollars from Lime Wire and its founder, Mark Gorton, after U.S. District Judge Kimba Wood ruled last May that Lime Wire induced the infringement of copyrights on thousands of songs. The court ordered New York-based Lime Wire to shut its music service last year.

Glenn Pomerantz, a lawyer representing 13 labels, told a jury of eight women and one man in his opening statement on May 3 that the harm caused by Lime Wire was “truly staggering.” Gorton used other people’s property to make money for himself, he said, claiming the record industry’s revenue fell 52 percent from 2000, the year Lime Wire was founded, to 2010.

Gorton’s lawyers are trying to convince the jury that other factors were responsible for the decline in industry revenue besides peer-to-peer, or P2P, file-sharing.

“The record companies know and have known that their problems started well before Lime Wire,” Joseph Baio, a lawyer representing Lime Wire and Gorton, said in his opening statement to the jury.

Baio cited the record companies’ own past comments about counterfeit and copied CDs, the economic recession, bankruptcies of music wholesalers and retailers, the maturation of the CD market, competition from other forms of entertainment such as video games, and the industry’s own inability to exploit the new technologies.

The record labels will try to get statutory damages under federal copyright law for 9,561 recordings released since 1972, according to court papers. Maximum statutory damages of $150,000 for each recording would result in a $1.4 billion award. Other damages on pre-1972 recordings will also be sought, the companies said in court filings.

Baio said Gorton made only about $6 million from the songs the record companies have listed as infringed. Lime Wire, which provided free software for file sharing, made money by selling a faster, premium version of the program.

The companies have also accused Gorton of making a fraudulent transfer of assets into family limited partnerships to shield the funds from liability. Pomerantz told the jurors Gorton transferred the money three days after the Supreme Court’s Grokster ruling.

The case is Arista Records LLC v. Lime Wire LLC, 06-05936, U.S. District Court, Southern District of New York (Manhattan).

Google Sued by French Publishers for $14 Million Over Books

Google Inc. (GOOG) was sued for 9.8 million euros ($14 million) by three French publishers who said the search-engine company scanned books without permission.

Editions Albin Michel SA, Editions Gallimard SA and Flammarion claimed Google has scanned 9,797 copyright-protected works for its digital library. The publishers are seeking compensation of 10,000 euros per book, Google said yesterday.

“We have been working with French publishers for some time to find ways to increase audiences and revenue opportunities for publishers, authors and booksellers,” Google said in an e- mailed statement. Google, based in Mountain View, California, said it believes the Google Books project complies with French law and international copyright rules.

Google reached an agreement six months ago with Lagardere SCA (MMB)’s Hachette Livre publishing to allow the scanning of out-of- print French books. A Paris court said in December 2009 that Google’s book project had violated French copyrights and ordered the company to stop scanning works without permission. The company has appealed.

Calls to the publishers for comment on the suit weren’t immediately returned.

Trade publication Livres Hebdo reported the claim earlier yesterday on its website.

Separately, Google said May 10 that it set aside $500 million related to the possible resolution of a U.S. Justice Department investigation of its advertising business, resulting in a lower first-quarter profit.

“Although we cannot predict the ultimate outcome of this matter, we believe it will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows,” Google said in a regulatory filing.

Software Piracy Losses Jump to $59 Billion in 2010, Report Says

The value of pirated software worldwide rose 14 percent to $58.8 billion last year, almost double the total in 2003, amid rising theft of programs in emerging markets, according to a trade group that tracks piracy.

Countries with emerging economies, including China, Russia, India and Brazil, now account for more than half of the money lost to piracy, according to the Business Software Alliance, a Washington group that is releasing its annual piracy report today. The U.S. topped all other countries with $9.52 billion lost to piracy, with China second at $7.78 billion.

Still, only 20 percent of software in the U.S. is stolen, tying for the lowest rate with Japan and Luxembourg. In China, almost four out of five programs in use are pirated, and 65 percent of software in Russia is stolen. Piracy represents a problem for companies such as Microsoft Corp. (MSFT), the biggest software maker, because personal-computer sales growth is fastest in countries that have high rates of software theft.

The percentage of software in China that is pirated dropped to 78 percent last year from 79 percent in 2009, according to the report. In 2003 it was 92 percent, though the overall value of stolen software has increased as the Chinese software market expands, the report said.

Stolen software in Russia amounted to $2.84 billion, while India accounted for $2.74 billion of the total. Though it has a lower percentage of piracy, the U.S. still racks up the largest losses in dollars because it is the biggest software market, Holleyman said.

Georgia leads the list of countries with the highest percentage of pirated software, with 93 percent, following by Zimbabwe at 91 percent. Yemen, Bangladesh and Moldova came in at 90 percent.

For more copyright news, click here.

Trademark

Iconic New York Deli Sues to Avert a Culinary Coronary

The owners of New York’s famous 2nd Avenue Deli are asking a federal court judge to confirm that they have the right to use the names “Instant Heart Attack Sandwich” and “Triple Bypass Sandwich.”

In a declaratory judgment action filed May 10, the owners sued the Heart Attack Grill LLC, a Scottsdale, Arizona-based restaurant that has trademarked several names using the word bypass, including the “triple bypass burger.”

In the action, the 2nd Avenue Deli owners contend that no likelihood of confusion exists. The Heart Attack Grill’s Triple Bypass Burger is a cheeseburger, forbidden in the Kosher New York restaurant, where mixing of meat and dairy products is prohibited.

Robert Kain, the Fort Lauderdale, Florida, lawyer who represents the Heart Attack Grill, said in a telephone interview yesterday that he “sent a cease and desist letter in March and we had a short discussion with their attorneys.” The lawsuit was a “surprise to us,” he said, adding that “we believe our rights are superior.” His client has negotiated with several other restaurants nationwide in recent years.

William Chuang, the Manhattan lawyer representing the 2nd Avenue Deli, said that while the two parties had spoken, no agreement was reached. Once the restaurant learned -- on Heart Attack’s Facebook page, he said -- that it was planning on opening in New York, the owners of the deli decided to file suit.

Chuang added that he hoped the parties could reach a settlement.

The case is Lebewohl v. Heart Attack Grill LLC, 11 Civ 3153, U.S. District Court, Southern District of New York (Manhattan).

For more trademark news, click here.

Privacy

Google Will Pull Plug on Swiss Street View If Court Appeal Fails

Google Inc., the world’s biggest Internet search engine, threatened to withdraw its Street View service from Switzerland if its appeal against a court ruling saying it breached privacy requirements fails.

Switzerland’s Federal Administrative Court decided on April 4 that Mountain View, California-based Google’s Internet map service, which offers ground-level photography, must blur people’s faces and vehicle registrations more effectively before posting images online.

“The court ordered a series of wide-reaching alterations to Street View in Switzerland,” Google said in an e-mailed statement yesterday. “If these changes are implemented, Google will be forced to discontinue the service” in the country.

The Street View function is still available to Swiss users, though Google agreed in 2010 not to upload any new photos until the dispute over privacy is resolved.

Fifty-three percent of Swiss residents have logged on to Street View, while more than 1,000 Swiss companies use the technology on their websites, Google said.

“We’ve already taken measures to protect the identities of individuals and vehicles,” Patrick Warnking, Google Switzerland country manager, said in the statement. “We really hope these will be valued in the appeal process.”

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net.

To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.

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