Legal Issues for Entrepreneurs

It is important for the manager, particularly the manager of a new venture, to understand and use the law as a tool in corporate strategy. Law is too vital and strategic to be left to the legal department or external counsel alone. A company should cultivate compliance strength.

It is vital to appreciate and understand the role of the law in the value creation chain. Expertise in the rules [of any game] provides a competitive advantage. In business, legal knowledge helps organisations gain profits in three ways:
· Property – Law which usually penalises monopolies is quite generous in granting ‘legal monopolies to encourage innovation and development. Copyright – the form of intellectual property at the heart of the Napster case – provides a great example of the evolution of modern property rules and their growing importance to business.
· Rules defining Markets – The law creates competitive advantage by defining the boundaries of markets.
· Legal capabilities – The development of specialised legal capabilities – resources and skills allows a company to spot opportunities, take initiatives and fend off attacks especially well, relative that is, to rivals.

Five Factors [as developed by Michael E Porter] for enterprise success continue to be the legal touchstone –
· The Merits;
· Public Legitimacy;
· Strategic Position;
· Resources;
· Access.

Here is my list of ten points [relating to the law] that entrepreneurs should keep in mind -
· Understand the Law – contemplate legal risk in any action;
· Know the Rules [and play by them];
· Cultivate Compliance for Strategic Strength [Comply with all laws, commercial or general, including and especially environmental ad waste management related laws];
· Use Contracts to Define and Strengthen Relationships;
· Use the Intangible Edge [Capture the Value of Intellectual Capital];
· Protect the Brand [Corporate Reputation, Brands, Trademarks and Domain Names];
· Harness Human Capital – Be mindful of employment law and especially of problem areas like sexual harassment. Design fair and effective human resource policies;
· Manage Disputes – Do not always litigate or rush to arbitration, deploy mediation and other conciliatory measures;
· Be Open to good legal advice – cultivate an attorney-client privileged relationship;
· Develop a legal sense – Spot legal issues before they become legal problems.

Tata Sons wins case against travel portal

Tata Sons, the holding company of the Tata Group firms, has won a case at the World Intellectual Property Organisation against the travel portal, MakeMyTrip, which has been using the term 'tata' in one of its website, 'oktatabyebye.com'. Gurgaon-based mmt admin (commonly known as MakeMyTrip) has been using the domain name 'oktatabyebye.com'.

Tata Sons has contended that it is confusingly similar to its 'Tata' brand and the travel portal runner has no rights or legitimate interests to use it. In May, Tata Sons had moved the Geneva-based WIPO Arbitration and Mediation Center demanding transfer of disputed domain name. The company had argued that the site infringed the right of its registered trademark/service mark 'Tata'. The WIPO has now ordered the transfer of domain name to Tata Sons. "The impugned website incorporates the Tata's orporate name and registered trademark in full and it proves that it is identical in part and confusingly similar to its well-known brand in which the company has a statutory right," Tata Sons had said in its complaint. Replying to the charges, MakeMyTrip had said the usage of the word 'tata' as a gesture finds its mention in the origin of a place called Ta Ta Creek as far back as in the year 1860 and denied that the domain in question is confusingly similar to the trade mark 'Tata' of the complainant. The Gurgaon-based firm stated that "the impugned domain name is derived from the common parlance 'OK Ta Ta Bye Bye' since it signifies travel, journey and related activities. But in its argument at the WIPO, Tata Sons said, 'it is apparent that the sole purpose of registering the disputed domain name is to misappropriate the reputation associated with the complainant's well-known and famous trademark Tata.'

The Internet site owner has registered a separate domain name (makemytrip.com). According to Tata Sons, both the sites offer similar services. However, MakeMyTrip says both cater to separate class of persons. While makemytrip.com offers discounts and easy access to travel plans, oktatabyebye.com lets these travelers make an online records about their journey. The WIPO is a specialised agency of the United Nations for developing a balanced and accessible international system in the field of intellectual property rights. As per details available with the WIPO, Tata Sons during the case had made an effort to settle the issue with the MakeMyTrip, which refused to accept the just demands on the grounds on 'vague reasons.'

This story was sent to us by Shri Siddharth Kumar, Press Trust of India.

Foley & Lardner Sued for Allegedly Revealing Trade Secrets [United States]

A patent holding firm has sued Foley & Lardner for allegedly revealing confidential information and for undermining the company's settlement negotiations during a separate lawsuit.
Virginia-based SPH America, a company formed in 2008 by former Fish & Richardson associate Choongoo Park, filed suit against Foley Friday at the U.S. District Court for the Eastern District of Virginia, alleging breach of contract, misappropriation of trade secrets and contract interference, among other claims.

Foley represented Japanese electronics manufacturer Kyocera in 2008 after SPH brought a patent infringement case against the company over technology used in its cell phones. According to last week's complaint, Foley allegedly publicized confidential information it gained during the course of that case by incorporating it in another lawsuit.

The new suit, filed for SPH by Kevin Mun of Virginia's Echelon Law Group, states that during settlement negotiations in the 2008 case, SPH revealed that it had patent rights to 3G wireless technology that allows cell phones to carry high speed internet applications. SPH said it kept those patent rights "confidential," and shared information about them under a non-disclosure agreement. Moreover, SPH claims it informed Kyocera -- represented by Foley partners David Kleinfeld and Kurt Kjelland and senior counsel Steven Foley -- that it did not plan to sue the company over those patents.

In February 2009, Foley filed a complaint in the Southern District of California on behalf of Kyocera, asking for a declaratory judgment that it had not violated any of the 3G patents. The suit, signed by Kjelland and Foley, identified the patents by name and quoted pieces of SPH's settlement talks with Kyocera.

"Neither Foley nor Kyocera notified SPH America, let alone obtained SPH America's consent, prior to filing the complaint, nor did they even attempt to file the complaint under seal or with redaction," SPH claims in its complaint.

The new suit also claims that Foley lawyers published SPH's patent infringement charts, which they acquired during discovery. The charts were made public when the firm asked the U.S. Patent & Trademark Office to re-examine two of SPH's patents. According to the SPH, the infringement charts were "attorney eyes only" under the terms of a court order.

SPH also claims that Foley lawyers violated a protective order issued by the U.S. International Trade Commission, where the patent firm had also sued Kyocera.

Aside from revealing confidential information, SPH also claims that Foley partners distorted SPH's infringement position towards Kyocera, which "undermined" the patent firm's position during settlement negotiations.

Expansion of Top-Level Domain Names opposed by INTA

The International Trademark Association (INTA) announced in its August 1, 2009 Bulletin that INTA passed a resolution to oppose the current proposal by the Internet Corporation for Assigned Domain Names and Numbers (ICANN) for an unlimited expansion of new generic Top-Level Domain Names (gTLDs).

ICANN sets and manages global policies for Internet gTLDs and has proposed expanding from the 21 existing gTLDs, e.g., .com, .org, and .net, to an unlimited number of gTLDs. A number of organizations in addition to INTA have expressed opposition to ICANN’s proposed expansion of gTLDs. Some view the new policy as a money grab. Others focus on the concerns regarding increased potential for trademark infringement and dilution and complaints that ICANN’s existing system has not been effective at protecting trademarks against cybersquatters already trading among the current gTLDs.

According to the INTA Bulletin, INTA will be issuing a revised Draft Applicant Guidebook for new gTLDs in September 2009. Text of INTA’s resolution opposing the proposed unlimited expansion of gTLDs can be found at www.inta.org.

Expansion of new gTLDs has been a hot topic among domain name and trademark professionals, including business and legal professionals and cyber entrepreneurs. If this topic interests you, consider attending Cyber Symposium 2009 in Lehi, Utah on September 25, 2009. Cyber Symposium 2009 is a full day seminar for business and legal professionals interested in strengthening their presence in the high tech industry. David Kelly, partner and chair of the trademark and copyright practice group at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, will be lecturing at the Cyber Symposium on the new gTLDs and on monetizing domain names. For more info see: www.utahcyberlaw.org.

French Data Protection Authority Issues Guidelines on Personal Data Transfers Pursuant to U.S. Discovery Obligations [France]

On August 19, 2009, the Official Journal published guidelines issued by the French Data Protection Authority (Commission nationale de l’informatique et des libertés (the “CNIL”)) regarding transfers of personal data carried out in the context of U.S. discovery proceedings (the “Guidelines”). The CNIL’s publication comes in the wake of a recent increase in the volume of requests made to French-based companies involved in U.S. litigation to disclose information or documents for the purposes of civil pre-trial discovery.

According to the Guidelines, disclosure of personal data pursuant to foreign court proceedings must comply with applicable laws and treaties ratified by France, including the Hague Convention of March 19, 1970, which enables a contracting State to declare that it will not execute letters of request issued for the purpose of obtaining pre-trial discovery. In France, any judge receiving a letter of request from a foreign authority must verify that such a request is admissible under French law and, in particular, must refuse the request if it poses a threat to State sovereignty or security. In this respect, a French blocking statute (the July 27, 1968 Act) prohibits disclosure of any information of economic, commercial, industrial, financial or technical nature as part of foreign legal proceedings unless the disclosure complies with applicable treaties and laws. Any breach of this statute is punishable by imprisonment of six months and a fine of €18,000.

In addition, companies based in France that disclose documents containing personal data must also comply with the requirements of the French Data Protection Act of January 6, 1978, or risk heavy criminal sanctions for failing to do so. Data controllers are not required to file a specific “discovery” notification as long as their data processing activities have been regularly filed with the CNIL. Nevertheless, there must be a legal basis for any transfer of personal data to the U.S., and companies must notify the CNIL of such transfers. In some cases, the data controller may rely on the “establishment, exercise or defense of a legal claim” exception contained in Article 69.3 of the French Data Protection Act as a legal basis for a single and limited transfer of all relevant information relating to a particular litigation. Otherwise, the CNIL’s authorization is required for sizeable and frequent transfers of personal data that are based on an adequate safeguard (i.e., Safe Harbor, model clauses or binding corporate rules). Further, adequate safeguards must be put in place to cover onward transfers, such as when transferred data being stored in the U.S. are further disclosed to a judicial authority (i.e., court order) or to other third parties (e.g., model clauses or a letter of engagement to abide by the Safe Harbor principles).
More information on these Guidelines can be found (in French) at www.legifrance.gouv.fr

Cyber Regulation Appellate Tribunal Court inaugurated [India]

The new Office and the Court Room of the Cyber Regulation Appellate Tribunal was inaugurated on July 27 [2009]. Speaking on the occasion, Mr. Justice K.G. Balakrishnan, Chief Justice of India said while administrating the regulations Tribunal will face a challenge to strike a balance between the interests of the Government and end users of internet. Highlighting the need for Tribunal, Shri A. Raja said that it will help prevent all possible cyber contraventions. Congratulating Tribunal for getting prime place to house it, Shri Sachin Pilot, Minister of State for C&IT said Tribunal is destined to a path breaking work to check cyber fraud, cyber crime and even cyber terrorism.

Speaking on the role of Department of Information Technology (DIT),Secretary, DIT said that it will facilitate and support the functioning of the Tribunal. He said in view of intermixing of legal and technical issues a multimember Tribunal has been constituted to look into the cyber contraventions. The tribunal has been established under Section 48 of the Information Technology Act. The Information Technology Act 2000 came into force on 17th October, 2000. The definition of the Information Technology Act provides as under: “Computer” means any electronic, magnetic, optical or other high speed data processing device or system which performs logical, arithmetic, and memory functions by manipulations of electronic, magnetic or optical impulses, and includes all input, output, processing, storage, computer software, or communication facilities which are connected or related to the computer in a computer system or computer network; Section 3 of the Act provides with regard to Digital signature and the Authentication of electronic records. Section 4 provides the legal recognition of electronic governance in short known as E. governance.

For adjudicating of the dispute under the Information Technology Act, Section 46 was enacted which has given the power for adjudication of the crimes. The power has been give to the Secretary, Information Technology and he has power to adjudge the quantum of compensation under Sections 46 and 47 of the Act. Section 46 provides for appointment of an adjudicating officer not below the rank of a Director to the Government of India. Every adjudicating officer shall have the powers of a civil court, which are conferred on the Cyber Appellate Tribunal under Section 48. The Act provides for penalty for damage to computer, computer system etc: penalty for failure to furnish information return; residuary penalty and publishing information which is obscene in electronic form etc.

'Tweet' isn'tTwitter Trademark [United States]

As it turns out, Twitter had applied for a trademark claim for "Tweet", the popular term for the 140 character updates that Twitter is famous for. And to everyone's surprise, the claim was preliminarily rejected by the U.S. Patent and Trademark Office. As for the reasons for the rejection, the Patent Office felt that several existing applications already use the phrase "Tweet" as a prefix for their various Twitter offerings - TweetDeck, TweetPhoto and the likes. If that was not all, some of these companies had already applied for such a trademark claim before Twitter itself did. Acting too late, Twitter?