Articles Posted in Business Law

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The question is whether you can copyright computer programs and videogames. The Copyright Act was amended to expressly include the right to register computer programs and videogames.

What is a computer program and how can you copyright it?

A computer program is a set of statements or instructions to be used in a computer to provide a result. See 17 U.S.C. § 101; Stern Electronics, Inc. v. Kaufman, 669 F.2d 852, 855 (2d. Cir. 1982). Copyright protection extends to the copyrightable expressions embodied in the computer program. Computer programs are classified as literary works for the purposes of copyright. See Whelan Associates v. Jaslow Dental Laboratory, 797 F.2d 1222, 1234 (3d Cir. 1986). Also, copyright laws do not protect the functional aspects of a computer program (e.g., algorithms, formatting, functions, logic, system designs).

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The copyright application process is three parts: (1) application form; (2) nonrefundable filing fee; and (3) a nonreturnable deposit of the work’s copy. In general, the copyright owner should submit a separate application for each work. However, the following exceptions apply for registering multiple works in one application:

  1. Collective Works: When a number of separate and independent contributions are assembled into a collective whole;
  2. Group Registrations: When multiple unpublished works, serials, newspapers, newsletters, contributions to periodicals, photographs, database updates, or secure test items meet registration requirements in one application;
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The basic rules for commercial emails should be known by all business organizations. They should include having proper identifiers, opt-out mechanisms, and a valid mailing address in all commercial emails. In fact, the CAN-SPAM Act states that the senders of commercial emails will be acting legally if:

1) The header of the commercial email (indicating the sending source, destination and routing information) doesn’t contain materially false or materially misleading information;

2) The subject line doesn’t contain deceptive information;

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Both California and the federal government have enacted statutes that regulate arbitration agreements and awards. The Federal Arbitration Act (FAA) and California Arbitration Act (CAA) are similar in many aspects but they have differences that can sometimes lead to conflict. Other state and federal statutes can also conflict with the FAA. Under the Federal Preemption Doctrine, provisions of state law that directly conflict with a federal statute are invalid or unenforceable. The U.S. Supreme Court has issued several rulings in recent years about preemption of state laws, and even other federal laws, by the FAA. The Supreme Court has also identified situations in which the CAA can apply instead of the FAA.

Federal Preemption Doctrine

The Supremacy Clause, found in Article VI, clause 2 of the U.S. Constitution, states that federal law is “the supreme Law of the Land.” The preemption doctrine is intended to guide courts in determining when federal law supersedes state law. In a 2009 decision, Wyeth v. Levine, the Supreme Court expressed its “assumption” that preemption would not occur “unless that was the clear and manifest purpose of Congress.” Whether the court has always strictly held to this principle is a matter of some disagreement.

The U.S. Supreme Court Finds Preemption by the FAA

In 2017, the Supreme Court decided Kindred Nursing Centers Ltd. v. Clark, which involved a challenge to mandatory arbitration clauses signed by individuals with powers of attorney on behalf of elderly nursing home residents in Kentucky. Under Kentucky law, according to the Supreme Court, “the rights of access to the courts and trial by jury [is considered] to be ‘sacred’ and ‘inviolate.’” State courts ruled the arbitration agreements to be invalid. The Supreme Court found the state court rulings to be invalid under § 2 of the FAA, which states that arbitration agreements are only subject to challenge under “such grounds as exist at law or in equity for the revocation of any contract.”
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Mediation gives the parties to a dispute, either during an ongoing lawsuit or in an effort to avoid one, a chance to present their cases to a neutral third party trained in dispute resolution. In order to promote candor during the mediation process, anything that is said during mediation is considered confidential under state law. California requires the parties to a mediation to follow specific procedures to ensure that any written agreement resulting from mediation is admissible in court. This may be necessary in order to have the parties’ agreement entered as a judgment or to have it be enforceable as a contract.

Confidentiality of Mediations Under California Law

Under the California Evidence Code, statements made during mediation, whether oral or written, are not admissible in any noncriminal judicial, administrative, or arbitration proceeding. Any and all communications between the parties involved in mediation or between them and the mediator must remain confidential.

State law makes an exception for written settlement agreements prepared during or at the end of mediation, provided that all parties consent in writing to disclosure of the document. If the document meets all of these requirements, a court may rely on it to enter a judgment in a civil proceeding. Otherwise, the document is not admissible as evidence.
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Mediation is a form of alternative dispute resolution (ADR) that allows the parties to a dispute to present their claims to a neutral third party, known as the mediator, who will try to help them reach an agreement. Once the mediation is over, how can one party make sure that the other party or parties hold up their end of the agreement? The best way to enforce a mediation agreement depends largely on the circumstances in which the mediation took place. If the mediation occurred as part of a lawsuit, the court can enter an order that encompasses the agreement’s terms. If it was not part of a lawsuit, then the written agreement will be enforceable as a contract.

What Is Mediation?

In general, mediators are trained in conflict resolution which includes identifying areas in which parties to a dispute have common ground and encouraging them to resolve their differences. The goal of mediation is to come to an agreement that everyone can live with even if they do not particularly like it.

Mediation is a less formal procedure than arbitration which resembles a trial in many ways. While arbitration almost always results in a decision by the arbitrator, mediation is not guaranteed to result in an agreement. If a party to the mediation walks away, then the remaining parties cannot mediate any issue that involves that party. If the parties have not reached an agreement at the end of the period of time allotted for the mediation, they can either arrange for more time with the mediator, or they can walk away and pursue other avenues such as litigation.
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Alternative Dispute Resolution (ADR) allows two or more parties in conflict to take their case before a neutral third party outside of the court system. This often has the benefit of sparing them the expense of litigation and to avoid a trial. Many contracts now include clauses requiring the submission of disputes to arbitration which is a type of ADR that resembles a trial. If the parties have agreed in advance, the arbitrator’s award will be binding on them. In fact, federal and state laws have encouraged the arbitration of disputes and have established procedures for enforcing binding arbitration awards.

What Is Binding Arbitration?

An arbitration is similar in many ways to a courtroom trial. A trained and certified arbitrator, or a panel of arbitrators, conducts a “trial” in which both sides present their claims, defenses, and evidence. The arbitrator then makes a decision and issues an award.

This award is only binding on both parties if they have agreed in writing. If an arbitration agreement does not specify that the award will be binding, either party is free to disregard it and seek other means of redress.
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The Internet of Things is a relatively new development that has changed the world. However, the laws were either non-existent or archaic. Now, it’s important to inform our readers that Jerry Brown has signed a cybersecurity law covering “smart” devices. The bill, SB-327, was introduced last year and states in relevant part that:

Existing law requires a business to take all reasonable steps to dispose of customer records within its custody or control containing personal information when the records are no longer to be retained by the business by shredding, erasing, or otherwise modifying the personal information in those records to make it unreadable or undecipherable. Existing law also requires a business that owns, licenses, or maintains personal information about a California resident to implement and maintain reasonable security procedures and practices appropriate to the nature of the information, to protect the personal information from unauthorized access, destruction, use, modification, or disclosure. Existing law authorizes a customer injured by a violation of these provisions to institute a civil action to recover damages.

This bill, beginning on January 1, 2020, would require a manufacturer of a connected device, as those terms are defined, to equip the device with a reasonable security feature or features that are appropriate to the nature and function of the device, appropriate to the information it may collect, contain, or transmit, and designed to protect the device and any information contained therein from unauthorized access, destruction, use, modification, or disclosure, as specified.

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For this week’s blog post, we will continue with the topic of recent Supreme Court decisions that are affecting the business, e-commerce, and internet world.  Specifically, we will discuss Ohio v. American Express, a case involving the Sherman Antitrust Act and major credit card companies.

In the United States, credit card use is composed mainly of four cards: Visa (45%), American Express (26.4%), MasterCard (23.3%), and Discover (5.3%).  In 2010, the government and 17 states sued American Express, Visa, and Mastercard, alleging that the credit card companies were unreasonably restraining trade and therefore violating the Sherman Antitrust Act.  The government claimed that the credit card companies’ “anti-steering provisions” suppressed competition from rival credit card networks. These anti-steering provisions were between the credit card companies and merchants, and prohibited merchants from “steering” cardholders at the point-of-sale to use cards with lower merchant transaction fees.  Notably, American Express charged the highest transaction fee for merchants.

In fact, both Visa and MasterCard settled with the government in a consent decree in 2011 to change their anti-steering provisions.  American Express, however, continued to litigate up until the Supreme Court case was decided on June 25, 2018. American Express’s business model is different than most credit card companies, which generate revenue mainly from the credit portion of the transactions.  It instead focuses on offering better rewards to consumers than other credit cards, typically attracting a higher-spending for the wealthier consumer.  It then generates the majority of its revenue from merchant fees, arguing that higher merchant fees are justified by the higher spending clientele that it brings to merchants (AmEx also has a higher minimum spending amount for cardholders than other credit cards).

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This is a current update on the principle of net neutrality that is worthy of a discussion. So, how or why is an update necessary?  The answer is that net neutrality rules may be changing soon, and various organizations are currently lobbying for their positions.  Why does net neutrality matter to businesses or consumers?  Is there a way or reason for removing net neutrality? What may you need to consider as a business or consumer after the demise of net neutrality?

Historical Background

For those that have not been following the idea of net neutrality, the idea is simple. No one packet of data can be favored or disfavored by a company that provides internet access. Previous rules would forbid this, and allow entities to sue if there was an intentional slowdown of their service. Indeed, this has allegedly occurred in the past as described in a lawsuit between Time Warner Cable (now Spectrum) and the State of New York.  Essentially, Spectrum was intentionally slowing down service, and only improving the service after payment was received by it.  Under the Open Internet Rules, this process was prohibited.

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