A Legal Blog by Aaron | Sanders, PLLC


It Happens Even to Fancy Companies: Downstream Intellectual Property Liability

Don’t Ignore it; Manage it.

Let’s say you’re a retailer. You buy stuff from a reputable manufacturer or middleman and turn around the sell it to the general public. You’re pretty safe from most intellectual-property concerns, right? If what you’re selling turns out to be counterfeit, that’s not your problem, right? You did all you could to avoid counterfeits, mostly by making sure your sellers are reputable. Besides, you didn’t do anything wrong—whoever made the counterfeit did. The same thing goes for patent infringement—not your fault, right?

It might not be your fault, but it is, unfortunately, still your responsibility, as a recent case involving Fossil and Macy’s demonstrates. Intellectual property law cares not (much) about morality and “fault,” but can and will impose liability on parties we’d otherwise think of as blameless. As a business owner or manager, all you can do is take sensible steps to reduce your company’s exposure.

What Is Downstream Liability?

Welcome to the horrible world of “downstream liability.” Unfortunately, it is an infringement of trademark and patent rights to sell infringing items; and it’s an infringement of copyright to “distribute” copyrighted materials. Patent, copyright and trademark laws don’t care very much about “fault.” If someone up your…

Hmm, but is it genuine? Better check the clasp. Photo by Ben Schumin, licensed under Creative Commons Attribution-Share Alike 2.5 Generic license.

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Spotify: A New Hope (Part 13 of our Online Music Services Series)

Or, the Attractions (and Distractions) of Licensing

Spotify has been available in the United States for a few months now. Until the recent kerfuffle involving its Facebook integration, the reviews have been positive. If you review the features list with which we started this Online Music Services Series, you’ll see that Spotify comes as closer to giving consumers what they want than any other service. In fact, it’s not even that close:

Portability: check: with Spotify Premium, you can listen to longs off-line and you gain access to Spotify’s mobile apps.
On-demand: check: you can listen to any song you want to in either your or Spotify’s catalog;
Music discovery: half-check: Spotify has a feature that allows others to share music with you, which should help you discover music you like, but nothing quite as robust as Pandora’s Music Genome.
Extensive catalog: check: Spotify’s catalog has about 15 million songs.
Low cost: half-check: Spotify Free has all of the features above except portability; for that, you need to shell out $9.99 a month, and you lose all access should your subscription expire.*

* If I were starting this series over again, I might have added “ownership” to this list. It’s important to me personally,…

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Virtual Goods & the First-Sale Doctrine

Or, Why Your Kindle Isn’t Your Nightstand

Eighth Annual eCommerce Best Practices Conference
Stanford University, June 24, 2011

The second break-out session was wide-ranging, in part because it took a broad view of “virtual goods.”  A narrow definition of the term might be limited to “goods” that exist only in a virtual world, such as Second Life or World of Warcraft.  These “goods” are assuredly and obviously “virtual.”  But the essential insight here is that there is a whole category of “goods” that consumers think of as real but aren’t.  An obvious example of this is a book you buy for your Kindle.  Amazon works very hard to make it function like a book–an enhanced book, to be sure–but in many respects feels like a book.  If you don’t believe me, compare the experience of reading a book on Kindle with reading the same thing as a PDF.  It’s hard for me to put my finger on it, but when you read a PDF, you know you’re having a “computer experience.”  When you read a Kindle ebook, it’s easy to forget that.

The problem is that, if consumers are fooled into thinking a “virtual good” is a…

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Secondary Liability and eCommerce Licensing Strategies

Or, How to Keep Your Customers’ Bad Acts from Getting on You

Eighth Annual eCommerce Best Practices Conference, Part 2
Stanford University, June 24, 2011

The first panel was probably my favorite, in part because the topic was so timely.  Secondary liability in intellectual-property law occurs when you yourself don’t infringe a patent, copyright or trademark, but you knowingly cause or induce to do so, or contribute materially to the infringement.

It’s a very big deal in eCommerce because typically the primary infringers are a multitude of individual consumers, who are hard to track down and identify, don’t have a lot of money, and can’t be sued very efficiently (not that some folks haven’t tried….).  It would be preferable if you could just sue the alleged source of the problem:  perhaps the owner of the website that is hosting the infringing content, or the maker of the software the enables the mass infringement, etc.  File-sharing is the classic example of this.

The law, naturally, is reluctant to cast so wide a net.  If we held the manufacturer of a useful device liable for its infringing misuse, we would all be the poorer.  If we destroyed every website that hosted potentially infringing…

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Eighth Annual E-Commerce Best Practices Conference

Eighth Annual E-Commerce Best Practices Conference, Part 1
Stanford, CA, June 24, 2011

As my Twitter followers know, on June 24, I attended a full-day conference at Stanford University, the Eight Annual E-Commerce Best Practices Conference.  It was definitely worth going out to California to attend.  I was tweeting throughout, but I thought it’d be a good idea to gather the tweets together into a single blog entry.

There’s a lot to discuss, so I’ll break this down into four or five blog entries.  I’ll start first with the thought-provoking keynote speech.

United States District Judge Jeremy Fogel, of the Northern District of California, gave the keynote speech to the conference.  His main concern was the tension or even disconnect between (a) consumer experience of eCommerce (and the Internet in general), (b) the technologists who enable and profit from eCommerce, and (c) the applicable law.  The law is simply ill equipped to resolve this tension.  This isn’t a new concern by any means, but it was being expressed thoughtfully by a sitting federal judge who routinely hears technology cases.

What drives eCommerce lawsuits, according to Judge Fogel, is the consumer’s sense of “identity and expectation.”  He referenced a few celebrated cases in his own…

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