Adobe, EarthGrains, Megaupload: Intellectual Property

Adobe Systems Inc. (ADBE), the largest maker of graphic-design software, won’t have to pay more than $7 million in royalties after a federal jury decided June 29 it didn’t infringe a patent owned by Tarkus Imaging Inc. of San Jose, California.

The jury of seven women in Wilmington, Delaware, deliberated about four hours following a two-week trial before also deciding Tarkus’s patent 6,628,823 is valid.

The suit, which was filed in 2010, accused Adobe and several camera manufacturers of patent infringement. Tarkus was founded in 2009 by an ex-employee of the Hewlett-Packard Co. (HPQ) to commercialize the color processing technology he invented.

According to court papers, Tarkus founder Jack M. Holm had an understanding with HP that he was the owner of the invention covered by the patent, which he then licensed to his employer on a non-exclusive basis.

The case is Tarkus Imaging Inc. v. Adobe Systems Inc., 1:10-cv-00064-LPS, U.S. District Court, District of Delaware (Wilmington).

EU Chiefs Reach Agreement on Patent System, Van Rompuy Says

European Union leaders cleared the final hurdle to an agreement on a common patent system, paving the way for improved and cheaper enforcement of intellectual-property rights.

“After 30 years of discussions on a European patent, we reached an agreement on the last outstanding issue, the seat of the Unified Patent Court,” EU President Herman Van Rompuy said June 29 in Brussels after a two-day summit of European leaders.

The U.K., France and Germany each had lobbied to be the host of the seat of the court. The final compromise splits the court among the three nations.

The seat of the court’s central division, along with the office of the court’s president, would be located in Paris, while other departments dealing in more specialized work will be based in London and Munich. The first president of the court should come from France, the leaders said.

“The stalemate has been broken and that is a good thing,” said Geert Glas, head of the intellectual-property practice at law firm Allen & Overy LLP. “With a central seat in Paris, the unitary court has a good chance to combine the best practices of the common-law -- U.K. -- and civil-law -- Germany -- traditions.”

Creating a lower-cost European patent is one of several reforms that could aid innovation and economic growth, EU Internal Market Commissioner Michel Barnier said on May 16. Under the current system, companies can pay as much as 18,000 euros ($22,600) for a patent valid in only 13 countries, including 10,000 euros for translation, according to the European Commission.

The number of patents filed in the EU lags far behind other parts of the world, Barnier said. Some 135,000 patents were filed with the European Patents Office in 2009, compared with 459,000 in the U.S., 348,000 in Japan and 315,000 in China.

The EU said that the common system “will bring down patent litigation costs for businesses significantly.” The European Commission has calculated that, with the single court, litigation expenses incurred by European companies can be reduced by about 289 million euros a year, it said.

Google Said to Face U.S. Antitrust Probe for Motorola Patent Use

A U.S. antitrust regulator is investigating whether Google Inc. (GOOG)’s Motorola Mobility unit is honoring commitments made to license industry-standard technology for mobile and other devices on fair terms, three people familiar with the situation said.

The Federal Trade Commission has issued a civil investigative demand, which is similar to a subpoena, to the owner of the Android mobile operating system as it scrutinizes whether Google is improperly blocking rivals’ access to patents for key smartphone technology, one of the people said.

The agency is also seeking information from companies including Microsoft Corp. (MSFT) and Apple Inc. (AAPL) as it probes whether Google intends to license technology under patents that help operate 3G wireless, Wi-Fi and video streaming on fair and reasonable terms, another one of the people said. The people declined to be identified because they weren’t authorized to speak publicly about the matter.

Another focus of the FTC probe, the person said, is Google’s decision to continue litigation started by Motorola Mobility over industry-standard patents after Google bought the company. Those lawsuits could end up blocking imports of popular consumer products such as Microsoft’s Xbox and Apple’s iPhone and iPad.

Industry-standard technology helps ensure that different manufacturers’ products, such as mobile phone antennas and global-positioning system software, work together. Companies that create technology that helps develop the agreed-upon industry standard pledge to license patents for those inventions on reasonable terms.

FTC Chairman Jon Leibowitz said March 30 the agency was “looking at” the legality of companies seeking to prevent rivals from using patents that cover technology considered essential for an industry.

Dominic Carr, a spokesman for Redmond, Washington-based Microsoft, confirmed the company received a civil investigative demand from the FTC, declining to comment further. Steve Dowling, a spokesman for Apple, based in Cupertino, California, and Cecelia Prewett, an FTC spokeswoman, declined to comment on the investigation.

“We take our commitments to license on fair, reasonable and non-discriminatory terms very seriously and are happy to answer any questions,” Niki Fenwick, a Google spokeswoman, said.

For more patent news, click here.

Trademark

EarthGrains Gets Trademark Infringement Damages Doubled by Court

EarthGrains Baking Cos., a maker of packaged bread and bakery products, persuaded a federal judge in Utah that the jury award in a trademark-infringement case was insufficient.

In a June 26 order, U.S. District Judge Dale Kimball doubled the $2.3 million damages award made by a jury in April. The judge found “substantial evidence” of Leland Sycamore and his Sycamore Family Bakery Inc.’s “deliberate and intentional disregard for EarthGrains’ trademark rights.”

Judge Kimball said this evidence alone would justify a doubling and tripling of the damages award. The jury award was “much lower” than what EarthGrains had sought, and “the equities in the case favored EarthGrains,” he ruled.

The disputed trademarks had originally belonged to Sycamore and were sold in 1998, leaving Sycamore with a limited license to use them, if he was given written approval. The marks’ new owners objected, and after Sycamore continued their use, the infringement suit was filed in June 2009. The marks eventually were acquired by EarthGrains.

In April the jury found infringement and made its award. EarthGrains then filed papers seeking an increase in the award.

The case is EarthGrains Baking Cos. Inc. v. Sycamore Family Bakery Inc, 2:09-cv-00523-DAK, U.S. District Court, District of Utah (Salt Lake City).

For more trademark news, click here.

Copyright

Megaupload Judge Defers Decision on Seizure of Users’ Data

A U.S. judge deferred a decision on whether the government should set up a way for Megaupload.com users to regain access to millions of gigabytes of data the company managed before being shut down as part of a criminal copyright-violation case.

U.S. District Judge Liam O’Grady in Alexandria, Virginia, heard arguments June 29 over a request by a Megaupload user, Kyle Goodwin, to order the government to create a mechanism allowing those who used the website for legitimate purposes to retrieve their data.

“We’ll look at it a little further and issue an order shortly,” O’Grady said at the end of the 1 1/2-hour hearing.

Investigators in January executed more than 20 search warrants in the U.S. and eight other countries and seized about $50 million in assets associated with Megaupload. Company founder Kim Dotcom was arrested in New Zealand.

Megaupload reproduced copyrighted works directly from 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 allege.

Since September 2005, the conspiracy generated more than $175 million in criminal proceeds by distributing millions of copies of copyrighted works, including movies, television programs, music, books, video games and software, according to the indictment.

Of that, more than $150 million came from premium subscriptions and $25 million from online advertising, according to the indictment. A lifetime subscription cost about $260, the indictment said.

A New Zealand judge ruled June 28 that Kim Dotcom had his home searched illegally by police as part of the investigation. Dotcom is free on bail and awaiting an extradition hearing scheduled for August.

Prosecutors argued that users who had data stored with Megaupload should be required to act as unsecured creditors and file civil actions against Megaupload or Carpathia Hosting Inc., the Dulles, Virginia-based company that Megaupload paid to store the data.

Assistant U.S. Attorney Andrew Peterson compared Megaupload’s data storage to that of a service provider, rather than a holder of property.

“A file-copying service is what Megaupload provided,” he said.

Goodwin isn’t “asking that service be restored,” O’Grady responded. “He’s asking for his data back, and that’s property, right?”

The case is U.S. v. Dotcom, 12-00003, U.S. District Court, Eastern District of Virginia (Alexandria).

For more copyright news, click here.

Trade Secrets/Industrial Espionage

Corinthian Colleges Seeks Trade-Secret Shield During Probe

Corinthian Colleges Inc. (COCO), an operator of for-profit schools, sued Illinois Attorney General Lisa Madigan seeking a state-court order shielding its confidential data while she investigates its practices.

Madigan, a Democrat, has been investigating for-profit schools for evidence they misled enrollees about post-graduation career prospects.

The company, based in Santa Ana, California, said she has asked for employee compensation data, internal policy, training and marketing manuals, strategic planning documents, personal information on ex-students and other data.

“The school desires to cooperate with defendant and at the same time protect its valuable confidential and proprietary information from disclosure to third parties and competitors,” Corinthian said in a complaint filed in Chicago.

Corinthian operates more than 100 schools in the U.S. and Canada, including Everest College, Heald College and WyoTech, with an enrollment of 96,000 students according to its website.

Claiming the attorney general’s procedures violate Illinois’ Trade Secrets Act, the company asked for a court finding that her treatment of confidential business records is invalid and orders barring those practices and directing Madigan to protect the company’s data.

The company has been unable to negotiate an agreement with the attorney general, according to its complaint.

Maura Possley, a spokeswoman for Madigan, declined to comment immediately on the company’s claims. The attorney general sued Denver-based Alta Colleges Inc. in January, for allegedly violating state consumer fraud laws.

The case is Corinthian Colleges Inc. v. Illinois Attorney General, 12-CH-23872, Cook County, Illinois, Circuit Court, Chancery Division (Chicago).

To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net.

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

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