Copyright - The Law Cares Not For Trifles

Here is one of my favorite quotations from a district court judge's opinion? "How Hollywood’s flattering and artful use of literary allusion is a point of litigation, not celebration, is beyond this court’s comprehension." This sentence sums up the court's opinion that use of a particular quotation lifted from a novel was de minimus use.

Judge Mills in Faulkner Literary Rights, LLC v. Sony Pictures Classics Inc., case no. 3:12cv100, dismissed a complaint based on a motion for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). In this way, a defendant can bring a motion prior to answering the complaint, and a judge can dismiss nuisance cases before defendants have to incur all the legal fees and costs associated with discovery.

The quotation of Faulkner's work Requiem for a Nun that is alluded to by Woody Allen's movie Midnight in Paris is: “The past is never dead. It’s not even past." In the movie, a nearly identical phrase is introduced when one of the modern day characters, returning from the past, states: “The past is not dead. Actually, it’s not even past. You know who said that? Faulkner, and he was right. And I met him too. I ran into him at a dinner party.” The book was written in 1950, and Faulkner's work had nothing to do with temporal displacement to a living past.

Judge Mills gets bonus points for distinguishing between the idea, that the past lives on in the present and is never dead, and Faulkner's expression of the idea. The expression of an idea is how it is written or recorded and can be protected by copyright. The idea, itself, is never properly a subject of copyright.

Plaintiff's counsel misfired by trying to emphasize the importance of the idea as a critical part of Faulkner's theme in the overall work. Plaintiff's counsel also emphasized the enduring impact of the selected quotation, and its use by President Obama, as evidence of its qualitative importance to the novel. This, too, missed the mark. "Qualitative importance to society of a nine-word quote is not the same as qualitative importance to the originating work as a whole," according to Judge Mills. Instead, the court looked at the expression of the phrase within the context of the expression of the work as a whole and finds its use by the movie both quantitatively and qualitatively short of copyright infringement.

Sony's use of copyrightable expression from Faulkner's work was de minimus. The Supreme Court of the United States held in Wisconsin Dep't of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214, 231 (1992) that “the venerable maxim de minimis non curat lex (“the law cares not for trifles”) is part of the established background of legal principles against which all enactments are adopted, and which all enactments (absent contrary indication) are deemed to accept.” Interestingly, although brought as a motion to dismiss under Rule 12(b)(6), the case was dismissed by the court pursuant to Federal Rule of Civil Procedure 58, as a summary judgment. This was only possible, because there were no facts in dispute (i.e. defense counsel stipulated that the facts in the complaint were true), and the court found that the plaintiff had not raised a reasonable expectation that discovery would lead to additional facts on which a judgment in its favor could be premised.

Defendant risked a summary judgement of infringement on the facts presented in the complaint by admitting the facts in the complaint are true, but in this case, if the appellate court does not overturn this verdict, then the Defendant made the right call. The decision can be found at www.jurisnote.com/Cases/faul2100.pdf

Gene Silencing?

The Supreme Court of the United States decided that discovery and isolation of genes is not sufficient to make naturally occurring genes patentable. Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. ____ (2013). However, DNA may be patentable if it is changed in a way that makes it new, useful and nonobvious, potentially saving issued patents claiming synthetic DNA sequences including, without limitation, sequences of complementary DNA (cDNA). What will be the impact of this historic decision? Will the decision extend patents in the chemical arts? The specific holding is that a "naturally occurring DNA sequence is a product of nature and not patent eligible merely because it is isolated, but cDNA is patent eligible because it is not naturally occurring." The decision does not have a direct impact on patent eligibility of methods or applications stemming from knowledge relating to DNA. However, the decision does imply, at least, patent eligibility of any DNA sequence in which the order of the naturally occurring sequence is altered, as a new composition of matter that is not naturally occurring. The decision upholds its earlier decision in Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). Therefore, a bacterium modified by adding a genetic sequence is patent eligible, because it never existed in nature. Presumably, this logic extends patent eligibility to any alternations in genetic sequences that do not exist in nature. In contrast, merely combining complementary products of nature in a mixture, such as different naturally existing bacteria, is not patent eligible. Citing Funk Brothers v. Kalo Inoculant, 333 U.S. 127 (1948). The bottom line is that DNA sequences that are not naturally occurring are patent eligible, if new, useful and nonobvious. This decision has wider implications for composition of matter claims for naturally occurring chemical compositions isolated from plants and other organisms. While the decision focuses on naturally occurring DNA sequences, the decision is likely to influence future decisions on other products or chemicals that are isolated from nature. Unless purification alters the properties or structure of a substance, mere isolation from nature might be insufficient to render it patent eligible. Side Bar: Interestingly, the decision suggests that the practices of the patent office, absent any endorsement by Congressional enactment of legislation, is entitled to little or no deference.

Angel Investors and Startups Rejoice -- Safe Harbor Found

The SEC has finally released its final rule for public solicitation under the 506 safe harbor of Reg D. This new rule paves the way for companies to raise unlimited capital from accredited investors without the constraints formerly imposed against public solicitation. The rules against public solicitation could be a trap for the unwary and less than cautious. Now, companies can generally solicit funds from the public. Extra precautions must be taken to verify that investors are all accredited investors. According to the SEC, verification methods acceptable for meeting the safe harbor requirements include the following: Reviewing copies of any IRS form that reports the income of the purchaser and obtaining a written representation that the purchaser will likely continue to earn the necessary income in the current year. Receiving a written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or certified public accountant that such entity or person has taken reasonable steps to verify the purchaser's accredited status. This final rule paves the way for general solicitation under the 506 safe harbor of Reg D, making it easier to find investors and providing an important mechanism for raising capital for small businesses and entrepreneurs. Care still needs to be taken to meet all of the other requirements of the safe harbor including restricting stock transfers, timely filing of Form D and the like. The ability to publicly solicit investors could provide angel investors with more and better opportunities. As always, buyer beware! Insist on financials being prepared by an independent accountant, check the Form D, check with state regulators about the promoters, independently verify the value of intellectual property if it is an important part of the investment and look for a comprehensive private placement memorandum that puts the investors on notice of the risks and other facts relevant to the solicitation. Remember, restrictions on sales of shares and lack of liquidity makes angel investing a long term investment with associated higher risks. Use due diligence to weed out. If you are an accredited investor and wary of making direct investments in Tampa Bay startups, then consider joining the Tampa Bay Innovation Seed Fund, which is being established by Irv Cohen and others for early stage investment right here in the Tampa Bay region. Contact Irv Cohen at icohen@southeastceg.com.

Crowd Funding Campaigns

Let's be real. Crowdfunding campaigns are hard and usually are not the best way to raise money for a technology startup. However, I am getting more and more questions about crowdfunding through websites like Kickstarter. My advice is to consider this as merely one tool among a wide variety of tools that could be used to raise funds for a new startup. I would prefer Tampa Bay to have an innovation seed fund, and Irv Cohen and others are working with me to help make this a reality. In the absence of a professionally managed seed fund, there are networks of angel investors and individual angel investors that will consider investments in startups. The recent publication of final rules for Reg D by the SEC, allowing general solicitation of investors, should make finding accredited angel investors easier, while remaining within one of the safe harbors. More about this later. But here is some information on crowdfunding. Crowdfunding is usually successful only if you can tap your own network for up to 80% of the amount that you need to raise. Typically, strangers account for no more than 20% of a campaigns total funding. There are exceptions, but usually a successful campaign starts with a large network of existing friends, supporters and fans. It takes work to reach out to your network, and social media can help with this. The various crowdfunding sites provide invaluable information about having a successful campaign. So, do your homework. Remember, also, that you must determine what makes a campaign a success. Are you looking for presales before going into production or are you looking for funds to develop a product? Make sure that the total costs of raising money are considered. How much is shipping and handling going to cost, if you are providing promotional items to people funding your campaign? Is the cost of funding too much? Can you fulfill the orders if you are offering presales? With these questions in mind, here are some popular crowdfunding sites to consider. Indie gogo (worldwide): http://www.indiegogo.com/indiegogo-faq Kickstarter (US and UK): http://www.kickstarter.com/ Crowdfunder.com (US): http://www.crowdfunder.com/p/crowdfunder-basics/#a-5 Rockethub.com (world): http://www.rockethub.com/education/faq#use-RocketHub App Specific: http://www.appbackr.com/ Charity Specific: http://crowdrise.com/ Started your own crowdfunding site: http://invested.in/ Others: Circleup.com targets existing consumer products companies for crowdfunding. Prosper.com connects borrowers and lendors (crowdloaning?). General Information: ________________________ 7-8% transaction fee in America and Europe: http://www.youtube.com/watch?v=Kci5PYY9X1E _______________________ Crowdfunding Training: http://www.youtube.com/watch?v=8b5-iEnW70k ____________________________________ Satirical humor: http://www.youtube.com/watch?annotation_id=annotation_832232&feature=iv&src_vid=WQHTROGrDXY&v=x2FGfdNtBh4