Protect Your Business from a Rogue Employee

Days before Christmas, a New York glass installer who admitted he uploaded an unfinished copy of X-Men Origins: Wolverine to the Internet, received a one-year sentence in federal prison from a U.S. District Court judge who termed his actions "extremely serious."

It's a sad story for Gilbert Sanchez, the glass installer, but what, you ask, does this have to do with my company or start-up? Let's suppose for a moment that instead of installing glass, Sanchez worked for you and, rather than uploading the movie from his home, he did so using his work computer and your company's Internet connection. This circumstance may carry implications for businesses.

Recently, a raft of lawsuits have appeared accusing thousands of individuals of illegally uploading and downloading materials in violation of U.S. copyright laws. Attorneys for film companies -- including one Los Angeles plaintiff that sued more than 5,800 individuals for downloading one particular adult film -- file many of these suits.

OK, so you probably won't see many of these films at the Academy Awards celebration in February, but the plaintiffs in these lawsuits are hell-bent on collecting settlements from a large number of individual defendants. They're in the process of issuing subpoenas to Internet service providers to obtain the name and address of individual subscribers -- including businesses -- to pursue mass settlements.

The question is, what do you do if your company is subpoenaed as a result of a mass filing? TheElectronic Frontier Foundation, a nonprofit founded in 1990 to defend digital rights, says that because these cases are unique you should immediately contact an attorney in either the state where the lawsuit was filed or in the state where your business is incorporated.

Stewart Kellar of the San Francisco-based E-ttorney at Law agrees, but says business owners slapped with a mass file-sharing lawsuit also need to have an Internet Usage/Copyright Infringement policy in place to avoid such legal actions in the first place. He says that policy "should state in no uncertain terms that the Internet is to be used for business and (maybe) personal email use only and for no other purpose."

Kellar suggests that if your business does receive a subpoena from its ISP, it should first be determined if the infringement occurred on a work computer by an employee. If so, the company can offer up the employee to the plaintiff, pay the settlement fee and seek reimbursement from the employee. Or a company can just ignore the demand letter and see if the plaintiff will proceed and make good on its threats.

"A business that provides an Internet connection to its employees or the public is itself an ISP," says Keller. "Unless it knew about the infringing activity and then induced or facilitated that infringement, contributory liability is very unlikely."

What Your Business Can Learn From Apple's Battle with Samsung?

If you haven't been paying attention to the ongoing court battle between Apple and Samsung, you're missing an epic conflict over patents and trademarks, both of which are often overlooked by entrepreneurs when attempting to launch a new product or service.

The dispute centers on Apple's claims that Samsung's products infringe upon its design patents. Per the latest in the conflict, a U.S. District judge ruled last Friday that Apple failed to meet its burden of showing a likelihood of irreparable harm in the injunction it sought against Samsung. As a result, Samsung, the world's largest consumer electronics company, now has the go ahead to continue selling its Galaxy S 4G, Infuse 4G, and Droid Charge phones and Galaxy Tab 10.1 tablet in the U.S.

It's an early Christmas gift for Samsung, but winning a battle does not the war win, according toChristopher V. Carani, a partner in the intellectual property law firm of McAndrews, Held & Malloy and chair of the American Bar Association's Design Rights Committee. Here's what Carani has to say about this seven-month-old court fight and why business owners should pay attention to future skirmishes:

Preliminary injunctions are hard to win but do have impact. Apple had an uphill battle in persuading a judge to pull Samsung's targeted products off the shelves prior to the fact-finding discovery process and full trial based on the merits of Apple's claims. In this case, even though Samsung prevailed on the preliminary injunction, the motion created delay and uncertainty in Samsung's U.S. launch.

Apple's design patents strategy proved effective. Apple's strategy of applying for multiple design patents for the iPhone enabled it to protect itself and was effective in ensnaring Samsung's tablet and smartphone products.

Prior art searches to invalidate patents are critical. When someone claims your product violates their patent, you conduct a search for "prior art" -- that is, anything proving that a product or service existed prior to a given date. Samsung's saving grace in this latest round was that its litigation team located prior art references that undermined the validity of one of Apple's iPad design patents. What Samsung discovered was a 1994 Knight-Ridder video depicting a tablet newspaper of the future, which looks very similar to the iPad and Galaxy Tab 10.1 tablet.

While Samsung doesn't have to take its products off store shelves, the judge found in Apple's favor with respect to one of Apple's iPhone design patents. As a result, Apple has an excellent chance of obtaining a large damages award for that patent infringement as well as for lost profits from Samsung's sales of the Galaxy S 4G and Infuse 4.