In 1883, 25-year-old Harold Preston arrived in Seattle by train from Iowa. He quickly established a solo law practice, before laying the foundation for what would become one of the Northwest’s largest legal firms, from one office and 13 lawyers at the end of the 1960s, to 350 lawyers practicing in six U.S. offices and Hong Kong by 2000. In the Internet and E-commerce realm, the firm’s local client list includes Microsoft, VoiceStream Wireless, Aventail, Corbis, Pacific Edge Software, Virtual AdVentures and WRQ among others.
The firm’s municipal finance practice is one of the oldest and largest in the Pacific Northwest. Its strong litigation department has represented clients in a number of prominent cases, including the State of Alaska in the 1989 Exxon Valdez oil-spill litigation, which resulted in settlements totaling nearly $1 billion.
The firm also has a long standing relationship with Microsoft (including a family connection; the Gates is Bill Gates Sr.), dating back to the famous IBM-Microsoft MS-DOS licensing agreement, which propelled the personal computing era.
To get better acquainted, we sat down with partner Marty Smith, chairman of the firm’s Intellectual Property and Technology department, to talk about some of the issues now weighing on Internet businesses.–LS
Seattle24x7: How many full-time attorneys do Internet-oriented work at Preston Gates & Ellis?
Smith: We have around 30 to 35 people working on technology and IP-related issues, focused solely on licensing and commecial transactions (as opposed to corporate finance or litigation). Out of these lawyers, we have a core group of five or six focused primarily on E-commerce work. We also have a couple people in our trademark group focused on domain names and trademark registrations issues involving the Internet.
Seattle24x7: A hot topic right now concerns the new domain names about to come on the scene. One issue is whether the dot-com top level domains can exert their rights to acquire the new .biz or .pro top-level domains. Does a company have to rush out now and buy up all the new domains to safeguard its Internet address?
Smith: There are a couple of related issues here. Remember that you can always register a trademark. If you have trademarked the name “Amazon,” and you have a very broad business as Amazon does, if somebody goes out and tries to run a website that’s Amazon.biz, they’re going to have a problem from a trademark perspective. This is very similar to the people who tried to register and then run Coca-Cola.com websites.
It’s traditional trademark law that has overlaid most of the the dot-com naming issues. If you go back to a lot of the early cases, the court either found that the people who had the website address were infringing the trademark because they were in a similar line of business, or even if they weren’t, there was the potential to dilute the value of a famous mark.
Seattle24x7: As technology becomes more sophisticated and mobilized, via cell phones, PDAs, etc., users will become far easier to to track. What do you see happening in the area of privacy?
Smith: This is very, very close to being dealt with legislatively. The various state attorney generals have said that unless the federal government steps in and acts, each of them will propose their own state’s specific privacy legislation.
Clearly, privacy is something that calls out for a federal solution. Having 50 different state laws on rights of privacy won’t work. This year, I think you will see some form of federal legislation get introduced.
Seattle24x7: Another hot topic now is the copying of material, be it MP3s via Napster or applications software. Can you give us some legal insights into that situation?
Smith: Unlike software, which you have the right to make backup copies of for archival purposes, a music file does not have those rights. The question is: If I purchase a copy of a work, should I have the right to easily migrate that copy to the Internet? I’m not going to share the copy with friends or make additional copies. But can I have a copy in a place that lets me access it in my car, my home or wherever I am? In my mind, the question then becomes: can you put in place effective digital rights-management software that protects the copyright owner?
Section 117 of the Copyright Act, “Making of an Additional Copy by Owner of a Copy,” says, in essence, that when you boot up a copy of a computer program, you’re making a copy in the RAM. This essential copy step does not amount to a copyright infringement. Similarly, an owners’ making of a copy of a computer program for archival or backup purposes does not amount to a copyright infringement.
Seattle24x7: When we speak about the Internet as a global entity, there are literally hundreds of nations involved. What should website owners understand about the issue of jurisdiction?
Smith: The short answer is you are potentially subject to every law of every country in which a user accesses your website. So the most difficult part from a legal perspective is to sort through what the proper approach should be when creating a website that will be accessed in various legal jurisdictions.
For instance, some European countries do not permit comparative advertising. Others have a “distance-contracting” directive, a statute geared toward remote contact, including by telephone, but also via a website. So if you’re offering goods, services or content for sale in Europe via a website, you’re subject to this particular European directive.
It’s very difficult for many smaller companies to make their website comply with all the various laws. Also, U.S. lawyers are not admitted to practice in Europe or in Asia, so they need to work with corresponding foreign law firms to come up with appropriate answers.
Seattle24x7: It begs the question whether the Internet really does facilitate global e-commerce. Take encryption standards and digital signatures, for example. Are the standards going to be the same on each end of the deal?
Smith: The U.S. government regulates what strength of encryption can be exported. It cannot regulate what takes place within the boundaries of the U.S. So, for example, most companies employ 128-bit encryption within the U.S. The current standard for export is 56-bit, I believe.
Seattle24x7: Another fundamental issue is that a database of information is only protected in the way that it’s expressed or presented, and that the data itself could be subject to misappropriation. Do publishers of large databases proceed at their own peril?
Smith: Multi-level analysis is needed on that issue, because the database can be copyrighted or not copyrighted. For example, if you’re putting on the Web information that you have originated (for instance the Time magazine website containing back issues of Time), that’s a copyrightable database. If somebody were to go in there and try to lift it and use that information in a way that wasn’t authorized, according to the terms and conditions of the website, that would clearly constitute a copyright infringement, and someone could clearly be sued for taking that material inappropriately.
Seattle24x7: What about things like Multiple Listing real-estate databases?
Smith: Now you’re starting to move down the gradation. Once you get out of copyrightable subject matter, and into facts, you have unprotected copyrightable expression. There are a couple ways to protect these kinds of databases.
First, you can attempt to protect the database through a contract provision, which is quite common. There’s the infamous ProCD case in Wisconsin about four or five ears ago, where somebody had put on CD-ROM business directories, and then licensed the data. Somebody else had taken that CD-ROM, lifted all the information and posted it on a website. They were sued, and it was not for breach of the copyright (since there was nothing there that was necessarily copyrightable). Instead, they were sued for breach of the license agreement that said: I’m only letting you use this data for the following purposes.
The other way you can protect databases is through technology — make it very difficult to go in and easily access and download the entire database. Readers may be able to view a slice, and see a few things, but they’re not going to be able to go in and say: show me all listings for Seattle.
Also, heavily under discussion for the last couple of years, is that there should be a new form of legal protection for databases. Europe has been giving a lot of thought to this, and it’s now an issue in the United States. There may be some new sui generis form of protection for databases that would be a legislative type proposal at a federal level.
Seattle24x7: Thank you, Marty. We rest our case.
701 Fifth Avenue, Suite 5000
Seattle, Washington 98104-7078
Tel: (206) 623-7580
Fax: (206) 623-7022
Managing Partner: B. Gerald Johnson
Puget Sound Area Lawyers: 185
Total Personnel: 545
Clients include: Microsoft, VoiceStream Wireless, Seattle Post-Intelligencer, Business Software Alliance, Bill & Melinda Gates Foundation, Optiva