Politics and Law

A Silicon Valley start-up said it sued Barnes & Noble on Monday, claiming that the bookseller misappropriated trade secrets in creating the Nook e-reader.

Cupertino, Calif-based Spring Design said it had a nondisclosure agreement with Barnes & Noble and had been discussing its e-reader plans with the bookseller since early this year.

"Since the beginning of 2009 Spring and Barnes & Noble worked within a non-disclosure agreement, including many meetings, emails and conference calls with executives ranging up to the president of BarnesandNoble.com, discussing confidential information regarding the features, functionality and capabilities of Alex," Spring Design said in a statement. "Throughout, Barnes & Noble's marketing and technical executives extolled Alex's 'innovative' features, never mentioning their use of those features until the public disclosure of the Nook."

The press release from Spring Design did not say in what court the suit was filed, or mention what damages were being sought.

Spring Design announced its Alex e-reader just days before Barnes & Noble formally unveiled the Nook. Both e-readers use the Android operating system and combine an e-ink screen with a color touch screen.

Eric Kmiec, Spring Design's vice president of sales and marketing, said that the company has been working on the Alex since 2006.

"Spring Design unfortunately had to take the appropriate action to protect its intellectual property rights," Kmiec said in a statement. "We showed the Alex e-book design to Barnes & Noble in good faith with the intention of working together to provide a superior dual screen e-book to the market."

A Barnes & Noble representative was not immediately available to comment. (Update, 9:30 a.m. Nov. 3: A Barnes & Noble representative said that the company does not comment on litigation.)

Barnes & Noble's Nook, which competes head-on with Amazon's Kindle, is due to go on sale later this month for $259.

Here's a look at the Alex:

(Credit: Spring Design)

as compared to the Nook:

(Credit: Barnes & Noble)

Note: This story originally misstated the day that the lawsuit was filed. It was filed on Monday.

The accidental disclosure of a House ethics investigation has kicked up quite a fuss on Capitol Hill as it turns out that more than 30 congressman and aides are under investigation. But after committee chairman Zoe Lofgren (D-Calif.) disclosed the breach on the House floor late Thursday, her colleague, Rep. Jo Bonner (Ala.), who is the committee's ranking Republican, spoke next, telling fellow members that the breach was an isolated incident.

Not exactly.

In February, a company that monitors P2P networks said that it had found blueprints and avionics about the president's helicopter, Marine One, on a computer in Tehran. An investigation later found that a third-party defense contractor with access to that data was using a computer that also had P2P file-sharing software on its hard drive...

Read more of "File Sharing's Mysteries Again Stump Uncle Sam" on CBSNews.com.

The Electronic Frontier Foundation on Tuesday rebutted legal assertions by Texas Instruments that enthusiasts who figured how to install their own operating systems on TI calculators violated the Digital Millenium Copyright Act.

In a letter sent to the processor and calculator maker, Jennifer Granick, civil-liberties director at the EFF, argued that TI calculator enthusiasts Brandon Wilson, Tom Cross, and Duncan Smith didn't deserve letters TI sent them August 27 demanding that they remove various online posts about installing alternative operating systems. The three had taken down the posts but plan to restore them October 26, unless TI supplies evidence of a violation, Granick said.

The TI-83 Plus calculator

(Credit: Texas Instruments)

In the posts, the three discussed use of reverse-engineered digital keys that made it simple to install alternative operating systems on the TI calculators. Wilson and Smith posted the actual keys that could be used to perform the installation.

But none of that violated the DMCA's anticircumvention provision, which states, "No person shall circumvent a technological measure that effectively controls access to a work" protected under the copyright act, Granick said.

Eolas Technologies, a company that ground through a years-long patent infringement lawsuit against Microsoft, now has sued a large swath of corporate powers for infringement of that same patent and another related patent concerning interactive programs on Web sites.

The list of defendants includes many high-profile companies inside and outside the tech world: Adobe Systems, Amazon, Apple, Blockbuster, Citigroup, eBay, Frito-Lay, Go Daddy, Google, J.C. Penney, JPMorgan Chase, Office Depot, Perot Systems, Playboy Enterprises, Staples, Sun Microsystems, Texas Instruments, Yahoo, and YouTube.

Eolas' suit is not to be taken lightly. Although the earlier Microsoft case took many years to resolve, and Eolas by no means won a complete victory, the patent involved did overall withstand heavy legal challenges despite many on the Web rallying to Microsoft's aid. Microsoft and Eolas won't describe terms of their 2007 settlement of the patent case, but Eolas did say it expected to pay its shareholders a 2007 dividend afterward.

"What distinguishes this case from most patent suits is that so many established companies named as defendants are infringing a patent that has been ruled valid by the Patent Office on three occasions," said Mike McKool, head of the national law firm McKool Smith and Eolas' lead attorney.

This diagram shows one example of the newly granted Eolas patent 7,599,985 in use.

(Credit: Eolas)

The U.S. District Court suit, filed in the eastern district of Texas, seeks preliminary and permanent injunctions prohibiting the plaintiffs from using the patented technology; payment for damages from infringement, including treble damages because the alleged infringement was willful; attorney's fees; and a jury trial.

Eolas conducts research and development but also has a separate licensing department. "Eolas seeks to return value to its shareholders by commercializing these technologies through strategic alliances, licensing and spin-offs," the company says of itself.

The earlier Microsoft case involved U.S. patent 5,838,906, "Distributed hypermedia method for automatically invoking external application providing interaction and display of embedded objects within a hypermedia document," which involved browsers launching a helper application such as Adobe Flash.

In the new case, that patent is joined by a newer one granted Tuesday, No., 7,599,985, with a very similar title: "Distributed hypermedia method and system for automatically invoking external application providing interaction and display of embedded objects within a hypermedia document."

"The '985 Patent is a continuation of the '906 patent, and allows Web sites to add fully-interactive embedded applications to their online offerings through the use of plug-in and Ajax (asynchronous JavaScript and XML) Web development techniques," Eolas said in a statement about the lawsuit.

Ajax caught on midway through the decade as a way to endow Web pages with interactive features based in part on the JavaScript programming language. Ajax is used in many Web sites including Google Maps and Yahoo Mail.

The '985 patent, originally filed Aug. 9, 2002, involves a program embedded in a Web page--or "hypermedia document," as the patent language calls it more generally. Here's an excerpt from the patent abstract's description of the technology:

A system allowing user of a browser program on a computer connected to an open distributed hypermedia to access and execute an embedded programming object. The program object is embedded into a hypermedia document much like data objects.

The user may select the program object from the screen. Once selected the program executes on the user's (client's) computer or may execute on a remote server or additional remote computers in a distributed processing arrangement.

After launching the program object, the user is able to interact with the object as the invention provides for ongoing interprocess communication between the application object (program) and the browser program.

And later, in a bit more detail:

The present invention allows a user at a client computer connected to a network to locate, retrieve, and manipulate objects in an interactive way. The invention not only allows the user to use a hypermedia format to locate and retrieve program objects, but also allows the user to interact with an application program located at a remote computer.

Interprocess communication between the hypermedia browser and the embedded application program is ongoing after the program object has been launched. The use is able to use a vast amount of computing power beyond that which is contained in the user's client computer.

Apple, Google, Yahoo, Texas Instruments, and Office Depot each declined to comment on the suit. Staples, Playboy, Sun, Blockbuster, Citigroup, eBay, Frito-Lay, J.C. Penney, JPMorgan Chase, Adobe, and Perot Systems didn't immediately respond to requests for comment.

Elizabeth Driscoll, vice president of public relations for Go Daddy, said in a statement, "We have not seen the lawsuit and, therefore, cannot comment on it. However, we are unaware of the basis for any such claims and we will defend the case vigorously."

Updated 1:26 p.m., 2:09 p.m., 2:35 p.m., and 4:08 p.m. PDT with comment from companies.

An adviser to the European Union has sided with Google in the company's battle with Louis Vuitton and others over alleged trademark infringement.

The search giant is fighting a lawsuit in the European courts against several companies that claim Google is infringing on their trademarks by allowing advertisers to buy keywords that match those trademarks.

Led by LVMH's Louis Vuitton, the companies are upset that makers of imitation items can buy those keywords through Google's AdWords, allowing their products to pop up in searches alongside the genuine article.

But in a statement released by the European Court of Justice on Tuesday, adviser and Advocate General Poiares Maduro said that "Google has not committed a trademark infringement by allowing advertisers to select, in AdWords, keywords corresponding to trademarks."

Maduro's opinion is that the use of trademarks is limited to the selection of keywords internal to AdWords and as such only concerns Google and its advertisers. When selecting keywords, no product or service is being sold to the public, therefore, neither Google nor its advertisers are infringing on any trademarks, said Maduro.

In response to the concern that makers of imitation products can grab certain keywords, the Advocate General put the responsibility firmly in the hands of consumers.

"The mere display of relevant sites in response to keywords is not enough to establish a risk of confusion on the part of consumers as to the origin of goods or services," said Maduro in the statement. "Internet users are aware that not only the site of the trademark owner will appear as a result of a search in Google's search engine... These users will only make an assessment as to the origin of the goods or services advertised on the basis of the content of the ad and by visiting the advertised sites."

Maduro's opinion doesn't leave Google totally in the clear. Maduro said the company might be liable if found to feature content in AdWords that infringes on a trademark. But even in this case, the trademark owner would have to cite specific instances of damage to their trademarks in order to hold Google accountable.

Trademark issues over AdWords have plagued Google for years, both in the U.S. and especially in Europe where Louis Vuitton and others have taken the company in and out of court. French justice has generally found in favor of the trademark owners, usually ordering Google to pay a fine. But the issue has never been definitively settled.

In response to the latest round of legal squabbles, the French court has asked the European Court of Justice to now settle the issue.

The Advocate General's statement is not binding on the court, but the opinion is strongly considered. The court is now reviewing the case and will render its judgment at a later date.

Mike Volpi's battle with his former employer Joost is now headed to court.

Joost announced on Friday that it has filed a lawsuit against Volpi, alleging that the former CEO used trade secrets and other confidential information in a bid to acquire a majority share in Skype from eBay.

Credit: CNET TV

Mike Volpi

The lawsuit comes just days after Joost relieved Volpi of his duties as chairman and a member of the board, saying that it was investigating his actions while he was chairman.

The fracas has its roots in the complicated relationship between online video provider Joost and VoIP provider Skype.

Joost was launched in 2006 by Janus Friis and Niklas Zennstrom, who also co-founded Skype. Volpi met and befriended the pair after serving on Skype's board of directors.

Once considered a contender for CEO at his former company Cisco, Volpi was tapped by Friis and Zennstrom to become CEO of Joost in June of 2007.

After a two-year stint, Volpi left Joost this past July to take a position as a partner at the venture capital firm Index Ventures. This same firm was part of a group that made a deal to buy a 65 percent share of Skype from eBay.

The question of Skype ownership between eBay and Friis and Zennstrom has been a dicey one. Though they sold Skype to eBay in 2006, Friis and Zennstrom kept certain rights via a company they formed called Joltid, and claim they still own the core technology and source code behind Skype. A licensing issue between the two companies triggered a suit that's set to hit a U.K. courtroom next summer. And a separate copyright suit was filed by Joltid this week in Northern California alleging Joltid's technology is being infringed on by Skype users "in the United States at least 100,000 times each day."

Joost's lawsuit filed against both Volpi and Index Ventures alleges that Volpi accessed and used confidential information while at Joost to help his group's bid for Skype. It alleges breach of fiduciary duty against Volpi and Index Ventures, aiding and abetting breach of fiduciary duty against Index, interference with prospective business advantage, misappropriation of trade secrets, breach of contract against Index, breach of confidence, and civil conspiracy.

Joost is looking for an injunction requiring Volpi and Index Ventures to return all confidential documents and files that were allegedly taken from Joost. The suit also is seeking to prevent both defendants from using the alleged misappropriated trade secrets.

Among the specific claims in the suit:

"This action arises out of the acts of a faithless fiduciary, who has taken advantage of the trust and confidence placed in him to steal confidential, highly proprietary information relating to an extremely popular Internet-based technology...Using that misappropriated information and in utter disregard for his fiduciary obligations, Volpi, acting in concert with other participants, put together a successful bid for Skype that has shocked the investment community."

"Numerous sophisticated strategic bidders (including, among others, Google and Microsoft) who initially expressed an interest in Skype could not get comfortable proceeding with formal bids. The reluctance of these sophisticated parties is hardly surprising given that intellectual property that is essential to Skype's business currently hangs under a cloud of litigation. Yet somehow the successful bidder, led by Volpi, was able to get comfortable with the enormous risks of proceeding with a Skype transaction. That comfort level could have been obtained only with knowledge of and an intent to use confidential information that had been misappropriated by Volpi..."

A phone call placed to Index Ventures for comment was not immediately returned.

Joost was launched more than two years as another portal for online videos but has struggled to gain a foothold in the market against competitors such as YouTube and Hulu.

Note: CBS, which owns CNET News, is investor in Joost.

iStockphoto, a Getty Images subsidiary that licenses photos and other content for relatively low cost, is hoping to benefit by reassuring customers concerned about violating others' intellectual property rights.

iStockphoto's Kelly Thompson

(Credit: Stephen Shankland/CNET)

Adding photographs can improve advertisements, brochures, and other content, but getting sued for inappropriately using another company's trademark or violating an individual's privacy is buzzkill. As a result, iStockphoto has now begun promoting a legal guarantee under which the company will cover up to $10,000 in legal expenses in cases involving trademark, copyright or other intellectual property rights, and privacy rights.

It's included with any file purchased from the company. For those who want more, iStockphoto will increase the coverage to $250,000 at a cost of 100 of the credits ordinarily used to purchase photos, videos, audio clips, and graphics. Presently, credits cost between 95 cents and $1.50, with lower per-credit prices when purchased in bulk.

The company essentially is trying to capitalize on the risks involved when using content that's freely downloaded from the Web or produced on one's own, eagerly pointing out that even stitching patterns on jeans can be trademarked.

"There are certainly millions of images available on the Web, but most are not cleared for commercial usage. Creative Commons images can be perfect for some projects, but there are little to no formal inspections on those files, so iStock offers a much safer and suitable alternative when using multimedia," iStockphoto Chief Operating Officer Kelly Thompson said in a statement.

A federal appeals court on Friday affirmed a lower court ruling that Microsoft infringed on a patent owned by Alcatel-Lucent, but said the jury award of $358 million in damages was excessive.

The U.S. Court of Appeals for the Federal Circuit in Washington, D.C., upheld a ruling that the patent at issue was valid and had been infringed on, but said there was not sufficient evidence to support the calculation of damages. The question of damages was sent back to the district court.

The patent, whose application was originally filed by engineers at AT&T, covers a method of entering information into fields on a computer screen without using a keyboard. Lucent initially sued computer maker Gateway for the patent infringement in 2002 and Microsoft subsequently intervened. Dell is listed as a third defendant in the case.

The trial court found that the "date-picker" calendar tool in Microsoft Outlook, and similar features in Microsoft Money and Windows Mobile, infringe on what the court refers to as the "Day patent." However, for damages purposes, the court said there was no evidence of widespread use of the infringing tool by customers and questioned the calculation of damages.

Alcatel-Lucent argued that it was owed damages representing 8 percent of the revenue of Microsoft's sales. The jury apparently arrived at its sum based on that percentage of Microsoft's sales or the entire market value of the software products that contain the feature, the opinion said. Microsoft, meanwhile, had suggested a sum of $6.5 million. The appeals court did not suggest a method for calculating the damages, but said the amount chosen by the jury was out of proportion to the potential for infringing use.

The infringing feature is a tiny piece of a large software program, and thus "the portion of the profit that can be credited to the infringing use of the date-picker tool is exceedingly small," the ruling said.

"In short, Outlook is an enormously complex software program comprising hundreds, if not thousands or even more, features. We find it inconceivable to conclude, based on the present record, that the use of one small feature, the date-picker, constitutes a substantial portion of the value of Outlook," the court said.

Representatives from both Microsoft and Alcatel-Lucent said they were pleased with the ruling.

"We are pleased that the court vacated the damages award, and we look forward to taking the next step in the judicial process," Microsoft spokesman Kevin Kutz said in a statement.

"We are very pleased with this decision by the U.S. Court of Appeals for the Federal Circuit affirming the jury's decision that Microsoft infringed the Alcatel-Lucent Day patent and that the Day patent is a valid patent," Alcatel-Lucent spokeswoman Mary Ward said in a statement.

"While we are disappointed that the court did not affirm the jury's decision on damages, we look forward to an upcoming proceeding to determine the compensation to which Alcatel-Lucent is entitled based on the court's finding that Microsoft did use our patented invention, which Microsoft included in each of the infringing products, presumably because they recognized that it added real value for their customers," she said.

The case is just one of a number of patent infringement cases the two companies have filed against each other over the years including cases involving the MP3 format, as well as communications technology, and digital speech compression.

Google offered an olive branch to rivals of its digital book efforts at a congressional hearing Thursday, but Amazon was having none of it.

David Drummond, Google's chief legal officer, testifies before Congress.

(Credit: Screenshot by Stephen Shankland/CNET)

The move involves a major point of contention in Google's project to bring books to the Internet and in a proposed settlement of class-action suits that author and publisher groups brought against the project. Specifically, Google announced a reseller program that would let competitors get some measure of the rights--and revenue--that Google itself could get through the settlement.

"Any bookseller--Amazon, Barnes & Noble, Microsoft--would be able to sell the books covered by the settlement," said David C. Drummond, Google's chief legal officer. Under the proposed settlement, Google would get 37 percent of revenue from e-books sold through its service, and through the reseller program, the reseller would get "the significant majority" of that 37 percent, Drummond said.

He announced the offer during a House Judiciary Committee hearing on digital books issues raised by Google Books project. If the settlement is approved, Google would get the right to sell not just books for which it had explicit agreements with rights holders, but also for out-of-print books that still are in copyright for which Google doesn't have explicit permission.

That blanket permission has worried some, notably Amazon, which has scanned 3 million books with permission and opposes the settlement. Drummond explicitly said Amazon would be allowed to participate the revenue-sharing program.

Amazon: No thanks
But Amazon indicated it's not interested after Judiciary Committee Chairman John Conyers, a Democrat from Michigan, asked the company's reaction to this "thrilling new piece of information" from Google.

Paul Misener, Amazon's vice president of global policy

(Credit: Screenshot by Stephen Shankland/CNET)

"The Internet has never been about intermediation," said Paul Misener, Amazon's vice president of global policy. "We're happy to work with rights holders without anybody else's help."

The hearing revealed some representatives, including the chairman, to be allies of Google. Also generally speaking in favor of Google's work were Zoe Lofgren and Brad Sherman, both Democrats from California.

"It is a good thing to provide millions of Americans access to published works that otherwise wouldn't be available to them," Conyers said. "A library available to every household with an Internet connection--this could be the greatest innovation in book publishing since the Gutenberg press."

But a high-profile opponent emerged in Marybeth Peters, the register of copyrights at the U.S. Copyright Office.

"By permitting Google to engage in an array of new uses, the settlement would alter the landscape of copyright law," in effect subjecting authors to "compulsory licenses" for their works, Peters said.

"Compulsory licenses are the domain of Congress, not the courts," she said, adding that the settlement could cause diplomatic stress for the United States because foreign authors' books are in U.S. library collections that Google is scanning.

Opting in or out
Google wants to be able to sell electronic books online and has scanned 10 million books since 2004 as part of the program. About 2 million are out of copyright, meaning Google and anyone else may do as they like with them; about 2 million are in copyright and in print, with Google establishing permission from rights holders; and about 6 million are in copyright and out of print. It's this last category that's so contentious--particularly in the case of "orphaned" books, whose rights holders can't be located.

Misener specifically objected to the way in which the class-action suit would give Google the right to sell access to the in-copyright, out-of-print books without obtaining permission first.

Google is the only entity in the world that could approach copyright as an opt-out mechanism," Misener said, meaning that authors and publishers are included in the Google project by default. "Everybody else faces the current legal regime, which is opt-in."

Marybeth Peters, the register of copyrights at the U.S. Copyright Office

(Credit: Screenshot by Stephen Shankland/CNET)

Sharing Misener's concerns was Rep. Hank Johnson, a Democrat from Georgia. "I'm troubled by the exclusive access Google will have to orphaned works. Why should Google be the only entity permitted to sell orphaned works?" he asked. And he believes the case in the courts could edge in on the job of his own branch of government.

Orphaned works rights-holders aren't completely ignored in the proposed settlement, though. It would create a nonprofit organization called the Books Rights Registry that would collect sales revenue--minus Google's cut--and use that money to locate missing rights holders of and compensate them and other rights holders.

Google argues its program will let millions of out-of-print books generate revenue once again, including orphaned works. Reinforcing Google's point, Sherman criticized Amazon for focusing on digitizing bestsellers but not bothering to bring other books to the electronic realm.

Misener stood by Amazon's position, though. "We are not scanning books for which rights holders cannot be found in advance. That's the way the law requires," he said.

Sherman countered by likening the orphan-works situation to that of unclaimed property. "We want unused property and unclaimed property to be made use of, and we want the ultimate owner to be compensated when found," he said. "To say all that knowledge should be locked up and unavailable to humankind doesn't seem to be in the interest of knowledge."

Congress or the courts?
Conyers indicated he doesn't see the orphaned-works issue as an issue that can't be resolved.

House Judiciary Committee Chairman John Conyers

(Credit: Screenshot by Stephen Shankland/CNET)

"My primary concern is because Google reached this settlement, they now have exclusive access to orphaned works," Conyer said. "This can be remedied by legislation."

Such legislation hasn't been easy to come by, though. The House and Senate have worked on it in recent years but have yet to pass any new law. Google's proposed settlement raises the issue that for one company at least, the orphan-works issue could be settled in the judicial branch of government rather than the legislative branch.

"The best protection of the prerogatives of the legislative branch is for us to legislate. Since we have haven't done very effectively the legislation on the orphaned works, it's hard for me to condemn the courts to have a case before it that determines what can be done and can't be done with orphaned works," said Rep. Mel Watt, a Democrat from North Carolina.

Johnson disagreed. "The settlement is coming very close to whittling away the powers of the U.S. Congress. The treatment of orphaned rights holders is a matter that should be determined by Congress," he said.

Things get even more complicated, too: the executive branch, in the form of the Justice Department, is investigating the proposed Google Books settlement.

For its part, Google has no objection to legislation--even if it grants competitors rights to the same books the proposed settlement would give it access to. "We support Congress going in and legislating around that," Drummond said.

Updated at 11:15 a.m. PDT with further detail from the hearing.