Rosetta, Google, Apple, VirnetX: Intellectual Property

Rosetta Stone Inc. (RST), a maker of language-learning software, agreed to drop a lawsuit it brought against Google Inc. (GOOG) for selling its trademarks to other companies for search-engine advertising.

The companies agreed that all claims in the infringement case will be dismissed, according to a filing yesterday in federal court in Alexandria, Virginia. No terms were given with the stipulation of voluntary dismissal. Rosetta Stone had claimed the keywords were being sold to competitors and counterfeiters.

U.S. District Judge Gerald Bruce Lee ruled in 2010 that the sale of Rosetta’s trademarked phrases as keywords wouldn’t confuse consumers. The U.S. Court of Appeals for the Fourth Circuit in April overturned part of that ruling and sent the case back to the lower court.

“Google and Rosetta Stone have agreed to dismiss the three-year-old trademark infringement lawsuit between them and to meaningfully collaborate to combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the Internet,” the companies said in a joint e-mailed statement.

Google, which runs the world’s largest search engine, sells advertisers the rights to use certain words or phrases as keywords for paid ads on its site. The so-called sponsored links direct users to the advertisers’ websites.

Advertisers bid what they’ll pay Google for each click on an ad triggered by the keyword. The highest bid and other factors determine whether the keywords can be used. Mountain View, California-based Google derives most of its revenue from ad sales.

The case is Rosetta Stone v. Google, 09-00736, U.S. District Court, Eastern District of Virginia (Alexandria). The appeal is Rosetta Stone v. Google, 10-2007, U.S. Court of Appeals for the Fourth Circuit (Richmond, Virginia).

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Patent

Apple Should Pay $708 Million Over Patents, VirnetX Tells Jurors

Apple Inc. (AAPL) should pay $708 million for using another company’s virtual-private-network technology in its FaceTime video-calling function, a lawyer for patent owner VirnetX Holding Corp. (VHC) told a federal jury in Tyler, Texas, yesterday.

“In 2009, Apple introduced a new way to use VPN-on-demand and they used VirnetX patents to make it work,” VirnetX lawyer Doug Cawley of McKool Smith in Dallas said in opening arguments.

VirnetX, which got a $200 million settlement from Microsoft Corp. (MSFT) in 2010, claims Apple infringes four patents. They cover the use of a domain-name service to set up virtual private networks, through which a website owner can interact with customers in a secure way or an employee can work at home and get access to a company’s electronic files.

The company contends it’s owed compensation based on sales of Apple’s iPhone, iPod Touch, and iPad, and Mac computers that use the FaceTime function. Apple, based in Cupertino, California, denies infringing the patents and contends they are invalid.

“We have been wrongly accused of infringement,” Eric Albritton of the Albritton Law Firm in Longview, Texas, told the jury. “We do not use VirnetX technology. We owe zero.”

The case has received so much attention that U.S. District Judge Leonard Davis, who’s presiding over the trial, ordered the parties Oct. 19 to tell their investors to stop calling the court. He said in a court filing that his office is receiving more than 10 calls a day.

The case at trial is VirnetX Inc. v. Cisco Systems Inc. (CSCO), 10-cv-417, U.S. District Court, Eastern District of Texas (Tyler).

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Apple Leaves U.K. Judge at a ‘Loss’ Over Samsung Website Posts

Apple Inc. was criticized by U.K. judges in a patent lawsuit with Samsung Electronics Co. (005930) for posting a notice on its website that was “untrue” and “incorrect.”

The U.K. Court of Appeal in London ordered Apple to remove the statement within 24 hours and place a new notice acknowledging the inaccurate comments. The Cupertino, California-based company was told by the same court last month to post the initial notice as part of a ruling that Samsung’s Galaxy tablets didn’t copy the design of Apple’s iPad.

“I’m at a loss that a company such as Apple would do this,” Judge Robin Jacob said today. “That is a plain breach of the order.”

The ruling is the latest in a lawsuit that dates back to a July judgment in which a London judge said the design for three Galaxy tablets didn’t infringe Apple’s registered design, saying they were not “cool” enough.

Michael Beloff, a lawyer for Apple, told the court today that the comments posted by Apple were in line with original order.

The notice “is not designed to punish, it is not designed to makes us grovel,” Michael Beloff, a lawyer for Apple, said in court today. “The only purpose is to dispel commercial uncertainty.”

Apple’s request for 14 days to make the changes was rejected.

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Internet

Google Data Use Should Be in Antitrust Talks, Group Tells EU

Google Inc.’s power to wield customer data should be taken into account by European Union regulators as settlement talks on an antitrust probe reach the final stages, a consumer rights group said.

The dominance of Google is “largely fueled by its access to users’ personal data,” Monique Goyens, director general of the European consumers’ association BEUC, said in a letter to Joaquin Almunia, the EU’s antitrust chief.

“The privacy policy of Google is directly linked to its dominance in the online search and should therefore be considered as an aggravating factor in your analysis,” Goyens said in the letter dated Oct. 31.

While the EU negotiates with Google to resolve an antitrust dispute over allegations that the owner of the world’s largest search engine discriminates against rivals, the company has clashed with data-protection watchdogs. The EU has urged Google to fix flaws in its updated privacy policy or face possible fines. Authorities worldwide have also fretted over privacy lapses with Google’s Street View mapping service.

Almunia has said the company has a limited time to settle the antitrust probe into whether it thwarts competition in the market for Web searches.

“As discussions on a possible settlement with Google are at an advanced stage, we would like to convey our concerns as regards the remedies under consideration,” Goyens wrote to the Brussels-based commission.

“Infringements of competition rules call for strong and rigorous remedies which go beyond the field of consumer information,” she said.

Al Verney, a spokesman for Google in Brussels, said the company continues “to work cooperatively with the commission.”

United, Delta Said to Be Warned on California Mobile App Privacy

United Continental Holdings Inc. (UAL), Delta Air Lines Inc. (DAL) and OpenTable Inc. (OPEN) are among companies in violation of a California protocol governing mobile applications for failing to conspicuously post their privacy policies, a person familiar with the matter said.

Companies using as many as 100 mobile apps were told in letters sent Oct. 29 by California Attorney General Kamala Harris that they have 30 days to make their privacy policies readily accessible to consumers of their online services, said the person, who declined to be identified because the matter isn’t public. In a statement Oct. 30, Harris didn’t include the names of the companies her office has contacted.

“Protecting the privacy of online consumers is a serious law enforcement matter,” Harris said in an e-mailed statement. “We have worked hard to ensure that app developers are aware of their legal obligations to respect the privacy of Californians, but it is critical that we take all necessary steps to enforce California’s privacy laws.”

Harris said in February when she announced a privacy protocol that she’s trying to bring the industry in line with a California law requiring mobile apps that collect personal information to have a privacy policy. Her actions indicate concerns over Internet privacy are extending to applications, the downloadable programs that companies in growing numbers are using to communicate with customers and market their wares to users of mobile devices.

United is “taking all steps necessary and appropriate to ensure compliance with California law as it relates to our mobile app,” United spokeswoman Mary Clark said in an e-mail.

Chris Kelly, a spokeswoman for Atlanta-based Delta, said in an e-mail that the company will provide the information Harris requested.

California is the only state to require privacy policies for mobile applications as well as websites, Chris Conley, a technology lawyer at the American Civil Liberties Union in San Francisco, said in a phone interview. Consumers are becoming more aware of which apps collect personal information, he said.

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Online-Gambling Startup Betable Recruits Three Zynga Competitors

Betable Ltd., the venture capital backed online-gambling startup, reached agreements with three social-gaming companies that will use its platform to expand into real-money betting in competition with Zynga Inc. (ZNGA)

Slingo Inc., a maker of virtual-wagering slots and bingo titles with 54 million monthly users worldwide, will use Betable’s U.K. gambling license and technology, according to a statement yesterday from London-based Betable. Digital Chocolate Inc., started by Electronic Arts Inc. (EA) founder Trip Hawkins, and Murka Ltd., the maker of “Slots Journey,” also signed on.

Game makers are racing to establish themselves in the developing market for online gambling in the U.K. and other countries where it is legal. Zynga, seeking to reignite growth, formed an online-betting partnership last week with Bwin.Party Digital Entertainment Plc. (BPTY) Betable says it can streamline the licensing and offer developers a technology framework they can plug in to and quickly get started.

“This is not going to lead to an incremental shift in the market,” Betable Chief Executive Officer Chris Griffin said in an interview. “This is really a tectonic change.”

Online gambling isn’t legal in the U.S. Until recently, when some countries began allowing real-money Internet wagering, online gamers could put money in to purchase virtual currency and gamble, but couldn’t cash out their winnings.

Mobile gambling will grow to $100 billion worldwide by 2017, driven by a surge in social gambling and legalization in key U.S. states, Juniper Research estimated in May.

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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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