The Copyright Office has proposed changes to the mandatory deposit requirements for copyright registration for online-only works — a huge category which encompasses websites, blogs, online journals and publications, and online photo archives.   While they vary for each category of copyrightable work, the mandatory deposit rules (37 CFR 202) typically require a copyright owner to deposit copies of the “best edition” of the work being registered with the Copyright Office.  Due to the fact that online-only works are a rapidly growing category and ever-changing, the Copyright Office is proposing to drop the mandatory deposit requirements for registration of online-only works and substitute a right for the Copyright Office to demand a mandatory deposit of certain works as may be necessary or as it sees fit for the Library of Congress collections.

As with every proposed change in copyright regulations, there is a public comment period.  The period for commenting on these proposed regulations closes October 11, 2009. Several industry associations have commented, including the American Society of Media Photographers (ASMP), the Association of American Publishers (AAP), the American Library Association (ALA), the Software and Information Industry Association (SIIA), and the Professional Photographers of America and the Newspaper Association of America.  One concern identified goes to one of the most critical reasons for mandatory deposit:  proof of the work, for purposes of litigation.  In copyright infringement litigation, the mandatory deposit frequently comes into play as evidence of what exactly constituted the work at the time of registration.  Not having a mandatory deposit will greatly increase the possibility that a plaintiff or defendant in an online copyright plagiarism dispute might change the contents of an online work to help its legal case.  Another concern is the Copyright Office’s proposal to require a deposit of all code associated with an online-only publication (including scripts and metadata) raises both technological and digital rights issues.  What constitutes a “complete copy” of the “best edition” of an online work?

The proposed federal regulations to change the copyright mandatory deposit procedure are here [PDF].  Existing public comments on the proposed mandatory deposit regulations are at the Copyright Office site.  I consider this to have far-reaching implications for all websites, bloggers, and online publishers: it’s the most significant change in copyright law for these industries since the DMCA.  The Copyright Office particularly needs feedback on the technological issues.  If you are in the industry, as many of my clients are, you owe it to yourself to read the materials and educate yourself (and possibly the Copyright Office).

A recent survey showed that 60% of workers leaving a job take information with them.  According to an article on employee data theft in the Washington Post, almost 80% of terminated employees who admitted to taking employer data admitted that they knew it was against company policy, or had signed a written agreement prohibiting the act.

Contact lists are a classic form of “confidential information” or trade secrets.  Trade secret law is one of the few areas of intellectual property law which is not governed by federal statutes:  trade secrets and confidential information are protected by state law.  This means that the law varies from state to state.  However, most states closely follow the definitions and principles of the Uniform Trade Secrets Act and the Restatement of Torts.  According to the Restatement, a trade secret

may consist of any formula, pattern, device, or compilation of information which is used in business and which gives [the business] an opportunity to obtain an advantage over competitors who do not know or use it.

Restatement of Torts 2nd, section 757.

Written agreements and NDA’s with employees typically cover contact lists and other confidential information
Most employers require their employees to sign a written confidentiality agreement or nondisclosure agreement (NDA).  These agreements require the employee not to disclose trade secrets and confidential information, and also not to use any confidential information in any manner except for the benefit of the employer.  This includes any use in a subsequent job.  Well-drafted NDA’s will continue to be in effect even after termination, to provide continuing protection by contract.  Employees taking email lists, electronic documents, photocopies of information, customer or supplier contacts, or pricing information will be potential targets for a lawsuit for breach of contract.   If an employer suffers lost profits, or the secret status of a valuable formula or strategy is made public and devalued, the employee could be liable for tens of thousands of dollars in damages.

State laws protect confidential information and trade secrets even where there is no written agreement
While the law favors the protection of confidential information and trade secrets by written agreement, most states protect this form of intellectual property against disclosure or use, even in the absence of a written agreement.  Employees frequently assume that the lack of a written agreement means that information is free to use.  Most states have statutes on the theft or misappropriation of trade secrets.  In most states, an employer must only show that (1) the information incorporates a trade secret; (2) the employer took reasonable steps to preserve the secrecy of the trade secret; and (3) the employee misappropriated the secret or used improper means, in breach of a confidential relationship, in order to bring a successful lawsuit against the employee.

Michigan trade secret law
A famous Michigan case illustrates the dangers of employees providing confidential information to third parties.  In 1999, a website operator named Robert Lane was sued by Ford Motor Company for posting confidential documents and photographs on a website.  The confidential information was provided to Lane by current and former employees, in violation of their employment confidentiality agreements. Was Lane himself an employee, or former employee?  No.  Had he signed a written agreement with Ford Motor Company regarding its confidential information?  No.  Nevertheless, the court held that Lane had probably violated the Michigan Trade Secrets Act.  See Ford Motor Company v. Lane, 67 F. Supp. 2d 745 (E.D. Mich. 1999), for details.

Not all information disclosed in confidence may be protected
Employers typically claim that any business-related information is “confidential information” or a trade secret.  The law does not reach that far.  Information which will not be protected, even if spelled out in a written agreement, includes information which:

• enters the public domain through no wrongful act of the employee
• is received by the employee from a third party without similar restrictions regarding non-disclosure
• is furnished to a third party by the employer, without similar restrictions regarding non-disclosure
• is approved for release by written authorization of the employer
• was possessed by the employee prior to the effective date of employment, or a written agreement
• is developed by the employee independently of confidential information received during the employment relationship

Attempts by the employer to protect this information will typically fail.   Written contract terms which do not exclude these common law exemptions from coverage are against public policy and are typically not enforced by courts.

Confidential information must be maintained “confidential” to qualify for protection
The most common mistake made by employers is to require all employees to sign a confidentiality agreement or NDA, but then fail to exercise the ordinary care required to maintain the “secret” status.  Publishing “confidential information.”  The best way to meet the requirement to preserve confidentiality, is to require a written agreement with every party coming into contact with the protected information.  Allowing one employee to take a contact list to a subsequent employer will result in a loss of protected status for that information.

The cat’s out of the bag?  There still may be liability
Keeping this legal framework in mind, it might seem like a trivial exercise to avoid liability:  merely make the information public, and then it’s no longer protected under the law.  While public disclosure may result in a loss of trade secret status under the law of many states, the law may still be enforced against the wrongful discloser — and in many cases, even against a third party, where the party had reason to know that the information was considered to be a trade secret.

Written NDA’s and Confidentiality Agreements make responsibilities clear
The basic function of a contract is to clearly set out the ground rules for a commercial relationship in order to avoid costly legal disputes that might arise from different interpretations of the law.  In the confidential information and trade secret arena, there are fifty states, so there are fifty different laws, and as many or more interpretations.  Given the patchwork nature of the common-law and statutory framework in protecting business information, while employers without written agreements may ultimately be able to enforce their intellectual property rights against employees in the absence of a written agreement, it’s foolish not to have one.

Resources

• The Citizen Media Law Project:  Misappropriation of Trade Secrets
• The Citizen Media Law Project:  State Law — Trade Secrets
• Michigan Uniform Trade Secrets Act

The US Patent and Trademark Office (USPTO) announced that Certificates of Registration for federally-registered trademarks and service marks will change to a new format beginning this month.  The new certificate will be printed on stock white paper in either black and white or color, as appropriate.  The certificate will still carry the gold foil seal of the office.  The redesign is intended to reduce costs associated with the non-standard shape and paper type of the current certificate folder.  You can look at samples of the redesigned USPTO Certificates of Registration for trademarks and service marks here.

Governor Jennifer Granholm signed a new Michigan law modifying foreclosure and loan modification rights (2009-PA-0029, 2009-PA-0030, 2009-PA-0031) to help financially distressed homeowners on May 21, 2009. The new foreclosure law takes effect on July 5, 2009. I have posted a copy of the new Michigan foreclosure law. [PDF - all acts] Individual bills/acts in the new Michigan foreclosure law are here:

2009-PA-0029 (House Bill No. 4453) [PDF]
2009-PA-0030 (House Bill No. 4454) [PDF]
2009-PA-0031 (House Bill No. 4455) [PDF]

I’ll be speaking at the Detroit MusicBizCamp ‘Unconference’ next week about mistakes not to make: http://bit.ly/uCI8I

Link to MusicBizCamp here. The mission of MusicBizCamp is to jump-start education for “new jobs for a new music industry.”

With massive layoffs, Wall Street bonuses, and employment contracts in the news, many people are taking a close look at their own employment contracts for the first time and focusing on new concerns and questions about job security and performance: What does the contract say about your right to continuing employment? What would justify your termination? Can an employer change the terms of your contract without requiring you to sign a new agreement?

“At will” employment is the rule, not the exception
In most cases, an employment agreement is going to be what we call an “at will” agreement: the employee is employed at the will of the employer — and can be let go at any time, at the will of the employer. What if there’s a written agreement, but it doesn’t specify whether employment is “at will”? If the employment agreement doesn’t specify that an employee can only be terminated “for cause,” then the employment agreement is “at will.” At will employment is the default in most states (Michigan included).

Some written employment agreements specify that an employee may only be terminated for cause. Barring special circumstances (such as employment under a union or other associational agreement), termination “for cause” must be spelled out in writing in the terms and conditions of the employment agreement. The employment agreement should have a termination section that indicates when an employee can be terminated “for cause,” and it should contain a definition of the causes that justify termination within the agreement. (Note to employers: acts justifying termination for cause should be clearly spelled out. This benefits the employer as well as the employee, and avoids having a court modify the employment agreement in a legal dispute.)

Employment agreements which can only be terminated for cause are frequently used in a wide variety of industries and situations. For cause agreements are used for key employees in technology companies, founders and managers in startup ventures, professionals in finance and accounting, doctors and lawyers, and employees in unionized businesses and companies. For cause employment contracts are typical where the employee has more leverage than an ordinary worker and cannot easily be replaced.

There’s no employment contract
There is always a contract between a worker and a hiring party — even if there’s no written agreement. In the absence of a written contract, employment is always “at will”: the employee can be let go immediately. Unless, of course, the employee isn’t really an employee — many business owners are shocked to find out that in the eyes of the IRS and/or the state department of labor, their ‘contractors’ are really employees, or vice versa. If you’re the employer in this situation, ‘misclassification’ of an employee as a contractor is a very expensive mistake.

“Two weeks’ notice”
Many people believe that a company or employee owes the other party “two weeks’ notice” for terminating the work relationship. That’s not a legal rule, it’s a conventional practice. “At will” employees can be escorted off the premises immediately upon notice of termination, with an arrangement to pick up their belongings at a later time. While this can come as a shock to the employee, it’s something that attorneys routinely recommend to employers as a standard employment policy, for security reasons.

As part of the No Worker Left Behind law [PDF], Michigan has created a Green Jobs Initiative which provides statewide, regional and local resources and training opportunities in alternative energy, green building and construction and retrofitting, and sustainable business practices.

If you’re unemployed or looking to re-educate and change careers, you can identify training opportunities for green jobs by county or region.

If you have a business, the No Worker Left Behind program will assist you in moving into green industries — by providing consulting and employee training resources to facilitate the development of employee skills and expertise for green jobs within your company. Here’s a resource page containing links to several local and regional green initiatives. There’s a mailing list to receive information about green jobs in Michigan here.

The Associated Press (AP) announced Monday, April 6, 2009 that it is launching an initiative to control the online use of content created by its newspaper members. The association’s plan is to aggressively seek licensing for any and all uses of its content — including uses such as repeating headlines with a link to the AP article itself — which most copyright experts believe are “fair use” under Section 107 of the 1978 Copyright Act.

The AP’s karma has been sinking in the online world lately. Between the high-profile copyright lawsuit against Obama poster artist Shepard Fairey and dodgy DMCA takedown claims against bloggers for reprinting brief quotes from news stories and then linking the source, the AP is poised to become the most-hated intellectual property association since the RIAA.

Here’s the text of Section 107 of the Copyright Act:

§ 107. Limitations on exclusive rights: Fair use

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

Notice the phrase above: “for purposes such as criticism, comment, news reporting, teaching…scholarship or research, is not an infringement of copyright.” Traditionally, “comment and news reporting” are highly protected fair uses of copyrighted works — due to the conscious interplay between copyright “fair use” and the requirements of the First Amendment to the US Constitution, which states that “Congress shall make no law…abridging the freedom of speech, or of the press.”

Let me pause and note the irony of this: The AP lives and dies by the First Amendment, and relies upon the First Amendment daily in its own “fair use” of the copyrighted works of others.

If not a valid copyright argument, what legal legs can the AP be standing on? A quasi-copyright doctrine called “misappropriation” and/or the “hot news doctrine” which, ironically, was of the AP’s own making in 1918. In the case of INS v. AP, 248 U.S. 215 (1918), the INS (long dead and gone news agency) was the target of a legal attack by the AP for copying news. The INS gained access to AP news through early editions of newspapers, rewrote the news, and published in on the West coast at the same time or prior to the AP’s own publication. The Supreme Court held that news (and facts) were not copyrightable — but went on to use the general legal principles of unfair competition to create a “proprietary right” against “misappropriation” in “hot news.”

The INS v. AP decision has been much-criticized by judges, copyright experts and legal scholars in the intervening 90 years, but it is very much alive. While there was no development of the doctrine for decades, in 1997 the Second Circuit breathed new life into the “misappropriation” doctrine in National Basketball Association v. Motorola, Inc. d/b/a Sportstrax, which held that Motorola could not transmit scores or other data about NBA games in progress via a system of subscription pagers (remember pagers?) or an online AOL presence. And as recently as February 2009, the AP won a legal victory against AHN for using AP content as the basis for writing news stories and publishing them on the web.

I’ll be writing more soon about the hot news / misappropriation doctrine. For now, I’ll just state the obvious: taking on the thousands of bloggers cutting and pasting and quoting and hyperlinking news stores from around the web is going to prove much less popular than the RIAA’s campaign against college students and grannies: bloggers are not only invested in the outcome, they are committed content providers in the habit of expressing their opinions daily in thousands of locations around the internet.

It has the makings of a fair fight, and it will be interesting to watch.

This blog focuses on the concerns of hard-working ordinary people creating new companies and new ideas. They want to sell these products and services globally, but let’s face it, prosperity begins at home. Sometimes it’s hard to get up in the morning to face such injustice in the morning paper: The tarring and feathering of automakers, auto companies, and auto workers by Washington — while Wall Street fat cat insiders and their rockstar derivatives traders walk off with their pockets stuffed with our money, and post haughty defenses of their multi-million-dollar bonuses, like Jake DeSantis, an executive vice president of the American International Group’s financial products. People around here are taking 10 percent pay cuts and losing their jobs because of people like you: get over yourself. Frank James of the Tribune’s Washington bureau was one of the first to post the obvious question: Why no GM Treatment for Wall Street?

What’s good for the goose, is apparently not good for the Michigander.
Apparently the Administration believes that this may be the only course to save the auto industry over the long run, but is the cost worth it? The message being sent here is very dangerous: if you are down in the trenches trying to create long-term productivity, you are last on the list of Washington priorities. But, according to the Wall Street Journal, if you are Citibank CEO Vikram Pandit, taking hundreds of billions of taxpayer dollars because of dodgy financial practices, you are incapable of being replaced:

Citigroup Inc., by contrast, has received three government rescues since October, under which the U.S. will own up to 36% of the company’s stock. Officials have in the past considered removing CEO Vikram Pandit, but demurred, in part because of the paucity of candidates to replace him, people familiar with the matter say. A spokesman for Citigroup couldn’t be immediately reached for comment.

Courtesy of Rep. Barney Frank and the New York Times’ Dealbook: a copy of the AIG Financial Products Corporation 2008 Employee Retention Plan (aka the “AIG contract”).