juridiko by Sean Hogle


Intentional breach of contract

Under US law, the courts as a general matter (outside of special contexts like insurance) refuse to penalize intentional breaches of contract. If the damages resulting from the breach are outweighed by the loss caused by compliance with the contract, the courts will usually not punish the breaching party merely because of that party's intention to breach. "The traditional goal of contract remedies is compensation of the promisee for the loss resulting from the breach, not compulsion of the promisor to perform his promises. Therefore, ‘willful’ breaches have not been distinguished from other breaches …." Freeman & Mills, Inc. v. Belcher Oil Co. (Cal. S. Ct. 1995). The concept of "efficient breach" under US law is based on "the understanding that people will sometimes intentionally break their contracts for no other reason than that it benefits them financially." Sierra v. Lockerby (9th Cir. 2008).

I have three questions I'd like to pose with respect to the "efficient breach" concept:

The absolute best anti-reverse engineering clause I've ever seen

Because relevant US and EU software copyright law permits reverse engineering as "fair use", blanket contractual prohibitions on reverse engineering (eg, "Licensee will not reverse engineer, decompile, decode, decrypt, disassemble, or in any way derive source code from, the Licensed Software") might not be enforced. See eg SAS Institute, Inc. v. World Programming Ltd. (ECJ 2012); Vault v. Quaid Software Ltd. (US 5th Cir. 1988). These jurisdictions countenance reverse engineering as fair use if conducted in order to achieve interoperability between the licensed software and independently created software.

Most drafters of technology license agreements representing licensors recognize this, and consequently use the following commonly found formulation: "Licensee will not reverse engineer, decompile, decode, decrypt, disassemble, or in any way derive source code from, the Licensed Software, except to the extent enforcement of the foregoing is prohibited by applicable law."

The problem with this clause, however, is that it operates in a purely binary fashion: if the licensee's activities are within the legal contours of fair use, the anti-reverse engineering clause will not be enforced. If they are not, then the clause will be enforced. This type of clause is not much of an improvement over a simple blanket prohibition. No effort is made to attempt to define in advance what the parties would consider fair use.

Compliance with the EU Cookies Directive by London's legal titans: how the top 20 firms comply

The EU Cookie Directive and national implementing legislation require that website operators that store cookies (small program files that store and send data from a user's computer or device to operators of sites that install such cookies on the user's hard drive) disclose information regarding the use and purpose of such cookies, and secure the user's consent to their use. European data protection authorities in France and elsewhere are conducting "cookie sweeps" this week to enforce the directive, so I thought now would be a good time to investigate how the top 20 (measured by revenue) London-based law firms are complying with this directive as implemented in the UK. The results of this investigation are somewhat surprising.

Design patents: be very afraid

I've long been loath to allow my technology development, user interface, graphic arts, and industrial design clients to agree to be responsible for infringements of patents caused by my clients' deliverables, especially US design patents (or the EU-equivalent, design rights/design registrations). The reason: strict liability and the "ordinary observer" test – frightening concepts for artists or engineers that design or develop per the customer's requirements. There is, however, an even more worrisome aspect of design patents: the monetary remedy of total profits attributable to the infringing product or device, regardless of the extent to which the product's value is attributable to the infringing design.

Patent applications covering fundamental tech have been pending before the US PTO for 43 years

According to the Chicago Tribune, inventor Glibert Hyatt is awaiting approval for a patent filed 43 years ago for "electronic signal control of machinery". It took 20 years for Hyatt to be awarded a patent covering "single chip integrated circuit computer architecture," effectively granting to Hyatt a royalty claim to most microprocessors in use (making Hyatt an already wealthy man).  He's also waiting for the grant of a patent application on liquid crystal displays. That application has been pending for 35 years.

Technology historian Ross Bassett is quoted in the Tribune article above as follows (emphasis added):

I respect Gilbert Hyatt's work — the process of engineering is difficult. But innovations are more than ideas. The broader context matters. If Gilbert Hyatt had never existed, I believe the microprocessor would have developed in the same way that it did.

Of course it would have.

To employers: want your employees to be covered by non-compete covenants? You're going to have to pay them for it

An appellate court in Illinois, a state that, unlike California, enforces "reasonable" employment non-compete covenants, has ruled recently that a non-compete covenant must be supported by at least two years worth of employment. Fifield v. Premier Dealer Services, Inc. (IL Ct. App. 2013). Here's a compelling summary by the legal team that successfully prosecuted the case on behalf of the employee. The Supreme Court of Illinois has declined to review the case, making Fifeld the law of the land of Lincoln (at least in large part).

Even if the employee signed the non-compete agreement at the outset of employment, the covenant will not be enforceable until the employee has worked for two consecutive years. In other words, employers cannot hire and fire within a week and expect that employee to be under an enforceable non-compete clause. The result is the same even if the employee resigns.

If more courts across the country adopt the notion that a non-compete covenant in an at-will employment relationship must be supported by more than the mere act of employment, non-competes, as they are now commonly utilized, will either be made extinct or become a compensation-driven topic. It may only be a matter of time before a non-compete covenant, at least among the skilled and professional classes, will be bargained for.

Infringement indemnification exclusion language in technology license agreements

Over the years, I've perfected infringement indemnification exclusion language for use in technology license agreements. I've posted this clause in Redline (http://redlineforlawyers.com). I'd be interested in seeing how this clause can be improved or negotiated against.

Click-accepting online terms sufficient to transfer copyright ownership

In order to transfer copyright ownership, the US Copyright Act requires that the transfer be evidenced by a signed writing. 17 USC 204 (a transfer of one or more of the exclusive rights of copyright by assignment or exclusive license “is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent."). A recent decision by the US Court of Appeals for the Fourth Circuit has now established that online terms of use purporting to assign copyright ownership of user generated content are sufficient to effectuate such a transfer. Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc. (4th Cir. July 17, 2013). 

Are the GPL's inheritance obligations enforceable in Europe after the UsedSoft decision?

On July 3 of last year, the Court of Justice of the European Union issued a decision in UsedSoft GmbH v. Oracle International Corp. that possibly calls into question the enforceability of open source licenses such as the General Public License (GPL). The CJEU held that the provision of software via internet download constituted a sale rather than a license of software, thus exhausting the software licensor's right to control subsequent use and distribution of copies of that software. In so ruling, the CJEU, perhaps inadvertently, cast doubt on the enforceability of inheritance (or so-called "copyleft") obligations of the GPL – or at least one experienced practitioner believes so, as evidenced by a recent posting.

Anti-reverse engineering clauses in technology license agreements

Because relevant US and EU software copyright law permits reverse engineering as "fair use", blanket contractual prohibitions on reverse engineering (eg, "Licensee will not reverse engineer, decompile, decode, decrypt, disassemble, or in any way derive source code from, the Licensed Software") are not likely to be enforced. These jurisdictions countenance reverse engineering as fair use if conducted in order to achieve interoperability between the licensed software and independently created software.

notices    log in

© 2006, 2014 Sean Hogle PC. All rights reserved.