Goldman Sachs, Facebook, Hyundai: Intellectual Property

Sergey Aleynikov, a former Goldman Sachs Group Inc. (GS) computer programmer, walked out of a New York courthouse the day after his conviction for stealing the bank’s high-speed trading code was reversed by a U.S. appeals court.

Wearing a grey sweatsuit, white tennis shoes and a huge grin, Aleynikov, 42, left the building where he had been convicted in December 2010 and entered a waiting car with his lawyer, Kevin Marino.

“Justice occasionally works,” Aleynikov told reporters as he left Feb. 17. “This was such big news to me I haven’t had any time to think about what would happen.”

Aleynikov, a naturalized U.S. citizen born in Russia, said he hoped to be with his three daughters, ages 8, 6 and 3. Until Feb. 17, he had been serving an eight-year sentence at the federal prison in Fort Dix, New Jersey.

“I’m very grateful to my mother and my aunt who supported me from Russia, and my friends who stood by me and believed in my innocence,” he said. “One lesson you learn is to really start valuing your life, day-to-day is a victory.”

After hearing oral arguments from both prosecutors and Marino Feb. 16, the U.S. Court of Appeals in Manhattan issued a one-page order vacating Aleynikov’s convictions for economic espionage and the interstate transportation of stolen property. The appeals court said it would issue an opinion explaining the ruling later.

The appeals court also issued a mandate that would have foreclosed any further challenge to its decision. The office of Manhattan U.S. Attorney Preet Bharara persuaded the court to set aside the mandate so it can argue for a rehearing of the appeal, either before a three-judge panel or all the court’s available judges. Ellen Davis, a spokeswoman for Bharara’s office, declined to comment on the ruling.

Marino said he was confident the appeals court’s decision would stand.

“It’s over now,” said Marino, of Marino, Tortorella & Boyle PC in Chatham, New Jersey. “We’re on firm ground. This was a wrongheaded prosecution that should never have been brought.”

U.S. District Judge Denise Cote, who presided over the trial, ordered Aleynikov released from prison Feb. 17. After a brief hearing this afternoon with prosecutors, Aleynikov and his lawyers, she agreed to release him on his own recognizance.

Aleynikov was convicted by a jury in December 2010 of violating the Economic Espionage Act and the Interstate Transportation of Stolen Property Act. He was sentenced last March.

On his last day of work at New York-based Goldman Sachs in June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s high-frequency trading system, prosecutors said.

He circumvented Goldman Sachs’s security, sent the code to a server in Germany, compressed and encrypted it, and took it with him to a meeting with new employers in Chicago, the U.S. said. Prosecutors argued Aleynikov wanted it as a “cheat sheet” to start a trading system at his new job.

The case is U.S. v. Aleynikov, 1:10-cr-00096, U.S. District Court, Southern District of New York (Manhattan).

Facebook Wins Lawsuit Against Power Ventures Over Login Data

Facebook Inc. (FB), the operator of the world’s largest social- networking site, won a 2008 lawsuit accusing Power Ventures Inc.’s Power.com of accessing and storing users’ login data without authorization.

The ruling on Feb. 16 by U.S. District Judge James Ware paves the way for hearings on damages for Facebook.

“The undisputed facts establish that defendants circumvented technical barriers” to access Facebook’s site, Ware wrote in a 19-page opinion issued without a trial.

Facebook sued Power Ventures in December 2008 in federal court in San Jose, California, saying Power.com offered users the ability to retrieve their Facebook messages and other information from Facebook’s computer servers without permission.

Facebook, based in Menlo Park, California, accused Power.com of infringing its copyrights and trademarks and violating computer fraud and unfair competition laws. It sought a court order prohibiting further access and unspecific damages.

Power Ventures is based in the Cayman Islands, according to court papers. Power.com is up for sale on the Internet.

Facebook filed papers with the U.S. Securities and Exchange Commission for an initial public offering on Feb. 1.

“We are pleased that the court ruled in our favor,” Craig Clark, lead litigation counsel for Facebook, said in an e-mailed statement. “We will continue to enforce our rights against bad actors who attempt to circumvent Facebook’s privacy and security protections and spam people.”

“Facebook has established a dangerous precedent for the future of users rights to own and control their data,” said Steven Vachani, chief executive officer of Power Ventures, in an e-mailed statement. “We intend to aggressively continue this fight.”

The case is Facebook Inc. v. Power Ventures Inc., 08CV5780, U.S. District Court, Northern District of California (San Jose).

Patent

HTC Loses Patent Case Against Apple at Trade Agency

HTC Corp. (2498) lost a patent-infringement claim against Apple Inc. (AAPL) at the U.S. International Trade Commission, the first of the Taiwanese handset maker’s cases targeting the iPhone.

Apple didn’t violate an HTC patent for controlling how mobile phones manage power supply, the Washington-based commission said Feb. 16. The ruling completes a review of an October finding by an agency judge, who had determined that Apple devices didn’t infringe HTC’s intellectual property.

The commission also found that HTC wasn’t using the invention at issue in the case, a requirement to have an infringement violation found against another company. The agency’s full opinion will be made available after both sides have a chance to redact confidential information.

“We are disappointed by the commission’s ruling, and look forward to reading the full opinion to understand its reasoning,” Grace Lei, HTC’s general counsel, said in an e- mail. “We’ll explore all options, including appeal.”

HTC, the second-largest maker of devices that run on Google Inc. (GOOG)’s Android software, has a second case against Apple that is scheduled to begin Aug. 30. Cupertino, California-based Apple and Taoyuan, Taiwan-based HTC have been using patent lawsuits to help protect their share of the smartphone market, which expanded 55 percent last quarter.

Apple filed first in March 2010, seeking to block imports of HTC’s Android phones. Apple contends that Android devices infringe its patents. The commission, which can ban imports of products found to infringe U.S. patents, found in December that HTC was infringing an Apple patent related to data-detection. HTC said it’s been able to design around that feature.

The HTC case against Apple is In the Matter of Portable Electronic Devices, 337-721, U.S. International Trade Commission (Washington).

Apple Files Competition Claim Against Motorola Mobility

Motorola Mobility Holdings Inc. (MMI) said Apple Inc. filed a complaint with the European Union’s competition authority accusing the company of violating a pledge to license industry- standard patents on fair terms.

Motorola Mobility said in a regulatory filing that it was notified of the complaint Feb. 17 by the European Commission. Jennifer Erickson, a Motorola Mobility spokeswoman, said the company is willing to negotiate a patent license with Apple.

Apple and Motorola Mobility have sued each other in the U.S. and Europe over technology used in smartphones, a market that researcher IDC said grew 55 percent last year. Motorola Mobility won two out of three rulings in lawsuits it filed against Apple in a Mannheim, Germany, court, and in one case forced Apple to remove some older iPhone and iPad models from its online store in Germany.

Companies often collaborate on standards that are used to make products work together, with participants pledging to fairly license any patents on the standards they help create. Apple contends Motorola Mobility (MMI) is violating that commitment. Motorola Mobility, which has said it’s been in licensing talks with Apple since 2007, denied the charge.

“MMI has a long-standing practice of licensing our patents on fair, reasonable and non-discriminatory terms and we offered those to Apple,” Erickson said.

German courts have become the focal point of litigation between the two companies, with each seeking orders that would limit sales of the others’ products. On Feb. 16, a court in Munich said Motorola Mobility’s mobile phones infringe an Apple patent for a method of unlocking touch screens.

Google Inc., which is buying Libertyville, Illinois-based Motorola Mobility for $12.5 billion, pledged to continue the company’s licensing practices. Regulators in Europe and the U.S. granted approval to the purchase while expressing some reservation about how industry-standard patents are handled.

Hyundai, Kia Sued by Toyota Foe in Fight Over Hybrids

Hyundai Motor Co. and Kia Motors Corp. (000270) were named in a patent-infringement lawsuit filed by a company that had been embroiled in a years-long fight with Toyota Motor Corp. over hybrid-engine technology.

Closely held Paice LLC and Baltimore’s Abell Foundation, a non-profit that’s invested in Paice, filed the suit Feb. 16 in federal court in Baltimore, accusing the Seoul-based automakers of infringing three patents.

The complaint targets Hyundai’s Sonata Hybrid and the Kia Optima Hybrid. Hyundai and Kia, which are affiliated and whose hybrid vehicles use the same powertrain technology, were aware of the patent litigation with Toyota. The litigation ended with a 2010 settlement reached after eight years of legal fighting, Paice said.

“Since as early as 2004, Paice has contacted Hyundai on numerous occasions and offered to discuss its patented hybrid technology,” Paice said in the complaint. The company is seeking cash compensation and an order that prevents further use of the technology without permission.

“Hyundai Motor America is still examining the issues raised in the lawsuit, which we received a short time ago, and is not able to comment on the specifics of the suit at this time,” Chris Hosford, a spokesman for Hyundai said. Officials with Kia couldn’t immediately be reached for comment.

Paice was founded by Alex Severinsky, a Soviet emigrant who began his career developing antitank-warfare instrumentation. In the 1990s, he developed a high-voltage method to power gas- electric vehicles that he contends is the basis for modern hybrid technology.

Ford Motor Co., maker of the Fusion hybrid car, also agreed to license Paice’s technology to resolve lawsuits.

The case is Paice LLC v. Hyundai Motor Co. (005380), 12cv499, U.S. District Court for the District of Maryland (Baltimore).

For more patent news, click here.

Copyright

Megaupload Defendants Face More Criminal Counts, U.S. Says

Megaupload.com, a file-sharing website charged with illegally distributing copyrighted movies and music, faces more counts of criminal copyright infringement and wire fraud.

A revised indictment filed in a U.S. court in Alexandria, Virginia, on Feb. 16 charged Megaupload.com and founder Kim Dotcom with three new criminal copyright counts and five new wire fraud counts for allegedly running an illegal enterprise for five years that unlawfully copied works and made them available for download to customers. The original Jan. 5 indictment included five counts.

Since September 2005, what prosecutors have dubbed the “Mega Conspiracy” has generated more than $175 million in criminal proceeds by distributing millions of copies of copyrighted works, such as movies, television programs, music, books, video games and software, according to the indictment.

Megaupload reproduced copyrighted works directly from other websites including Google Inc.’s YouTube for illegal sharing and to give the false impression that a related video-sharing website hosted user-generated, rather than copyrighted, content, prosecutors said in an e-mailed statement on Feb. 17.

The conspiracy was led by Dotcom, a resident of Hong Kong and New Zealand and a dual citizen of Finland and Germany, who founded Megaupload Ltd., according to the indictment.

Dotcom, imprisoned in New Zealand since Jan. 20 at the request of the U.S., failed to win release Feb. 16 after a judge declined to immediately rule on his bid for bail.

The case is U.S. v Megaupload.com, 12-0003, U.S. District Court, Eastern District of Virginia (Alexandria).

‘Spider-Man’ Trial Over Script Royalties Scheduled for January

Director Julie Taymor and the producers of “Spider-Man: Turn Off the Dark” are set to square off in federal court in Manhattan in January, 10 years after Marvel Entertainment (MVL) began negotiating for its superhero to fly on Broadway.

In court on Feb. 17, U.S. District Judge Katherine Forrest scheduled a jury trial to start Jan. 7, to resolve Taymor’s claim that she’s owed money as co-author of the show.

On Feb. 16, producers and the Stage Directors and Choreographers Society announced a settlement regarding her director royalties. The lead producers are Michael Cohl and Jeremiah Harris.

Taymor, 59, was removed from the stunt-filled $75 million musical in March, 2011, after critics lambasted it during an extended preview period. She sued the producers on Nov. 8, saying they violated her intellectual property rights by making changes without her permission and didn’t pay royalties due her as a co-book writer.

In her suit, Taymor claims she’s owed at least $2,917.50 a week from April 17, 2011, to the present, plus damages.

Dale Cendali, a lawyer in the New York office of Kirkland & Ellis who represents Cohl and Harris’s 8 Legged Productions, declined to comment after the hearing. Taymor’s spokesman, Chris Kanarick, didn’t return an e-mail on Feb. 17.

The case is Julie Taymor v. 8 Legged Productions LLC, 1:11- cv-08002-RJH, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

Lawyer Says National Candidates Violate Songwriters’ Rights

The issue of political campaigns using popular songs without permission has come up again this year. Newt Gingrich is being sued for using Survivor’s “Eye of the Tiger” and K’naan has asked Mitt Romney to stop using his “Wavin’ Flag.” Lawrence Iser, an attorney at Kinsella Weitzman Iser Kump & Aldisert in Santa Monica, California, who represented both Jackson Browne and David Byrne when their songs were used in commercials for GOP candidates, spoke with Bloomberg Law on the issue.

To hear the interview, click here.

Pirate Bay Website Infringes U.K. Record Copyrights, Judge Rules

Sony Corp. (6758)’s British unit and eight other record labels won a U.K. trial on their claims that users and operators of Pirate Bay, the Sweden-based website used for online file sharing, violate their copyrights.

The operators of the site, who weren’t represented at the trial, “incite or persuade” users to commit copyright infringement, Judge Richard Arnold ruled yesterday in London. The users have “a common design to infringe.”

While Pirate Bay isn’t a defendant, the court’s finding was required before the record labels could seek a court order forcing British Sky Broadcasting Group Plc (BSY) and five other Internet-service providers to block access to the site, according to the judgment. Arnold said the case was similar to a landmark ruling last year in which ISPs were ordered to block access to a file-sharing website known as Newzbin.

Pirate Bay enables downloading of digitized music and films using software called BitTorrent that enables complete works to be assembled from pieces on other users’ computers. The site has faced civil and criminal proceedings in other countries, including in Sweden. Arnold said the website was openly opposed to the record labels’ copyrights.

For more copyright news, click here.

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

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

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