(BN) Microsoft, Theranos, Amazon, EMI: Intellectual Property

(Bloomberg ) A former Microsoft Corp. (MSFT) employee was charged with stealing the software maker's trade secrets, including code for a program to protect against copyright infringement, and leaking them to a blogger in France.

Alex Kibkalo, a Russian national, was arrested March 19 and ordered held without bail, according to federal court filings in Seattle. He admitted to Microsoft's investigators that he provided the confidential information to the blogger, according to the criminal complaint filed by U.S. prosecutors.

Russell Leonard, a federal public defender representing Kibkalo, didn't immediately respond to a phone message after regular business hours seeking comment on the case.

The case is U.S. v. Kibkalo, 14-mj-00114, U.S. District Court, Western District of Washington (Seattle.)

Patents

Theranos Settles Dispute Over Medical-Testing Patent

Theranos Inc. settled a dispute with a former McDermott Will & Emery lawyer over a patent the medical-device company claimed was based on information stolen from the firm after it was hired to pursue a patent on Theranos's behalf.

According to court filings, the parties agreed that all claims of the disputed patent -- 7,824,612 -- are to be found invalid and each party is to pay its litigation costs. The McDermott firm wasn't a party to the suit.

The case is Theranos Inc. v. Fuisz Pharma LLC, 11-cv-05236, U.S. District Court, Northern District of California (San Francisco).

Trademark

Amazon China Unit Closes Vendor After Report of Fake Cosmetics

The China unit of Amazon.com Inc. (AMZN), the world's largest e-commerce company, closed a third-party online store after state media reported that fake cosmetics were being sold.

The shutdown came in response to customer complaints and the company will immediately close any stores selling fakes, Amazon's China unit said in a posting on its verified microblog.

Amazon and rival Alibaba Group Holding Ltd. have adopted tougher management of fake products on their websites in China as the government pledges to crack down on breaches of intellectual property rights.

The world's most populous nation accounts for more than half of international trade in counterfeit goods, according to Organization for Economic Cooperation and Development estimates.

Copyright

MP3tunes Found Liable by Jury for Infringement in EMI Case

EMI Group Ltd. won most of its claims in a copyright trial against the music storage site MP3tunes LLC and Michael Robertson, its founder and chief executive officer.

A jury in Manhattan found MP3tunes and Robertson liable for infringing EMI's copyrights in music and album cover art.

EMI sued in 2007, claiming that MP3Tunes set up its service so that copyrighted songs stored in a user's online "personal music locker" could be copied and sent to other computers, "enabling multiple unauthorized copies to be made and distributed."

The case is Capitol Records v. MP3tunes LLC, 07-cv-09931, U.S. District Court, Southern District of New York (Manhattan).

Copyright Office Asks Public for Comment on Music Licensing

The U.S. Copyright Office is seeking public comment on the effectiveness of current copyright law with respect to the licensing of music.

According to a notice posted on the copyright office's website, the office is asking for input on the licensing of music delivered through new methods such as downloading and streaming.

Comments are to be submitted by May 16, according to the notice.

(BN) Comcast Deal With Netflix Shows Cable Rules in Streaming

(Bloomberg ) Those "House of Cards" binges may soon be going down easier, at least when it comes to how quickly they arrive over the Web. Just don't ask how much that's costing Netflix Inc. (NFLX) -- or how much it might one day cost consumers.

After months of talks, Netflix finally agreed to pay Comcast Corp. (CMCSA) an undisclosed amount for more dependable delivery of shows and movies. As the world's largest subscription video-streaming service, Netflix concluded that using intermediaries to transmit its content just wasn't cutting it anymore. And it couldn't persuade Comcast to let it connect directly to the cable company's servers for free.

What Netflix stands to gain out of the deal is simple: fewer complaints about video that's slow to load or interrupted midstream. Comcast wins by securing its hold over content companies, which need the Web to deliver their wares to televisions, tablets and computers.

"In the long term, the agreement is definitely better for the Internet providers," said Ken Doctor, an analyst with Outsell Inc.

Netflix rivals including Amazon.com Inc. (AMZN) and Hulu LLC already have similar commercial relationships with Comcast and others, according to people with knowledge of the matter. Netflix's joining them cements a shift in the economics of how entertainment is delivered. In the past, the major streaming services relied on third parties such as Akamai Inc. to convey their videos and webpages. Now the traffic has shifted to favor broadband providers.

Access Payments

It's unclear whether Netflix subscribers will have to pay more down the line. The rates the Los Gatos, California-based company agreed to give Comcast total only several million dollars annually, according to a person familiar with the matter. Because Netflix already pays third parties to access the Internet -- much as consumers pay broadband operators to get on to the Web -- what Netflix charges its customers might not be affected, at least not right away. It's simply shifted its traffic costs in favor of Comcast.

The equation is different in the relationships cable companies have with programmers like HBO or ESPN, which charge fees that have gone up over the years and have spurred rises in people's cable bills.

HBO, owned by Time Warner Inc., (TWX) gets about $7.77 per subscriber per month, while ESPN, part of Walt Disney Co. (DIS), gets about $5.54. Those are the two highest average rates in the industry, according to research firm SNL Kagan.

Transit Fees

Comcast has said that one of the benefits of its proposed $45.2 billion acquisition of Time Warner Cable Inc. (TWC) is that a combined company could negotiate better rates with the television programmers.

In the meantime, Netflix and the other streaming providers are essentially helping subsidize the costs of broadband.

Not long ago, most online video companies sent their content to customers via secondary providers and paid them transit fees. For Netflix -- which streamed more than 2 billion hours of programming in January -- the main deliverer has been Cogent Communications Group Inc. (CCOI), which routes content across the backbone of the Internet to the phone and cable companies with wires into people's homes. Cogent could be a loser, as Netflix will be diverting some of its transit fees to Comcast.

The agreement between the two outlines a private business relationship known as an "interconnect" agreement and so doesn't run afoul of net neutrality, according to a person with knowledge of the arrangement.

No Preferential Treatment

Net neutrality holds that providers like Comcast shouldn't discriminate between the different types of content that flow through its network. In a statement announcing their agreement, the two companies said Netflix "receives no preferential network treatment" under the terms of the contract.

The contention is that Netflix has essentially entered an already established marketplace, following other content companies like Google Inc. that have commercial relationships with broadband providers.

The payments Comcast receives from Netflix and other content companies aren't large enough to define a new business, said Richard Greenfield, an analyst with BTIG LLC. "These are tiny numbers in the scheme of things."

The accord with Netflix could be helpful to Comcast's bid for Time Warner Cable, removing the potential obstacle of Neflix's arguing to regulators that Comcast was impeding its service, said Outsell's Doctor. Netflix accounts for about 32 percent of all peak Internet traffic in North America, according to estimates from Sandvine Inc.

The deal is also good for subscribers, Greenfield said.

"It's hard to see this as being anything other than a win-win for consumers," he said. "They get better Netflix at the same price for both their Netflix and their broadband."

That's the case for now. In the future, Comcast and others could end up demanding more if bandwidth capacity is reached or because there are no alternatives for the video companies.

(BN) Apple, InterDigital, Samsung: Intellectual Property

(Bloomberg ) Apple Inc. (AAPL) and Samsung Electronics Co. (005930), which have sued each other around the globe over patents, joined together to tell the European Union to cut down on the ability of companies that license patents to win court rulings limiting product sales.

Apple and Samsung are among 19 companies and associations that told the EU in a letter that a new court should limit the ability of companies that license technology to win injunctions when the validity of the underlying patent is in dispute.

Manufacturers are turning to lawmakers and courts in Europe and America in battles with patent trolls, a derogatory term for intellectual property owners that don't manufacturer products and instead rely on license fees. A similar group of companies are asking the U.S. Supreme Court to make it easier for them to collect legal fees in patent disputes.

InterDigital's EU Case Shut as Huawei Pulls Antitrust Complaint

InterDigital Inc. (IDCC) no longer faces a European Union antitrust investigation after Huawei Technologies Co. withdrew a complaint about its use of patents.

Huawei contacted the EU last month to withdraw a complaint it filed in 2012 that sought a probe into InterDigital's alleged refusal to license wireless patents that are part of an industry standard, InterDigital said in a regulatory filing yesterday. Huawei's move followed a confidential settlement with InterDigital agreed on in December.

Trademark

Samsung Applies to Register 'Finger Scanner' as U.S. Trademark

Samsung Electronics Co., the South Korean maker of smartphones, applied to register "finger scanner" as a trademark, according to the database of the U.S. Patent and Trademark Office.

The application, filed Feb. 19, specifies that the mark would be used with a range of electronic products, including 3D eyeglasses, mobile telephones, wireless headsets for mobile phones, printers for computers and semiconductors.

Nasty Gal Sues Mr. Nasty Time Entertainment Over Trademark

Nasty Gal Inc., a Los Angeles based Internet clothing retailer, sued a New York entertainment company for trademark infringement.

Jason Jarvis and his Mr. Nasty Time Entertainment infringed Nasty Gal's trademarks, according to the complaint filed Feb. 24 in federal court in Manhattan. The clothing company said it made repeated attempts to contact Jarvis and "resolve this dispute amicably," to no avail.

Nasty Gal asked the court to order Jarvis and his company to quit using the "Da Nasty Boys" name, and for awards of money damages, attorney fees and litigation costs. The clothing company also seeks a court order for the destruction of all infringing products and promotional materials and for extra damages intended to punish the defendants for their actions.

The case is Nasty Gal Inc. v. Jarvis, 14-cv-01135, U.S. District Court, Southern District of New York (Manhattan).

Copyright

'Simpsons' Actor Azaria Bests Craig Bierko's Copyright Claims

Hank Azaria, an actor on Fox television's "The Simpsons," defeated a 2012 copyright challenge by fellow actor Craig Bierko over the rights to the voice of a fictional baseball announcer in an Internet comedy program.

A Los Angeles court said Feb. 21 that Azaria's character, named Jim Brockmire, didn't infringe Bierko's rights to his "baseball announcer character," which the court found not entitled to copyright protection.

The case is Azaria v. Bierko, 12-cv-09732, U.S. District Court, Central District of California (Los Angeles).

For more copyright news, click here.

CREATE.Org Releases Report on Economics of Trade Secret Theft

The Center for Responsible Enterprise & Trade, a Washington-based advocacy organization headed by former Microsoft Corp. (MSFT) Deputy General Counsel Pamela Passman and known as CREATE.org, released a study on the economic effects of trade-secret theft.

The study was conducted in collaboration with PricewaterhouseCoopers LLP. It identifies five categories of potential misappropriators of trade secrets: nation states, malicious insiders, competitors, transnational organized crime and what it calls "hactavists."

Four factors that will probably affect trade secret theft in the future are the balance of cyber power, the openness of the Internet, the pace of innovation and regulation focused on trade-secret protection, according to the report.