Trends in the Intellectual Property Legal Marketplace

One of the most frequent questions that I am asked is what trends I see in the areas of intellectual property, brand protection and the marketplace for legal services.

There are a few interesting, long-term trends in the data worth mentioning, that affect everyone and not just lawyers or those who work in the brand protection and IP industry.  Perhaps the most glaring one is that:

The Cost of Doing Business Globally is Going Down, But the Cost of Protecting Intellectual Property Keeps Going Up

By 2014, the out-of-pocket costs of engaging in global commercial activity have become extremely low.  In fact, they are the lowest they have ever been.

For example, a relatively desirable Internet domain name can be leased for only a few dollars a year.  Using templates and shared hosting, virtually anyone can design and host an e-commerce website very cheaply.

This is a departure from a decade ago, when designing a website required an understanding of HTML and related computer languages, technical knowledge generally limited to IT Departments and computer consulting firms.

Similarly, marketing has become cheap.  Today, by using free e-mail accounts and social media platforms like Facebook, Pinterest, Google+ and Yahoo! for communication and marketing, and low-cost international distribution and shipping channels like eBay, Stamps.com, AliBaba and others, a well-managed small business can conceivably generate hundreds of thousands of dollars per year in only a short amount of time.

Yet the out-of-pocket cost involved in protecting a brand against Intellectual Property theft and infringement, both online and in the brick and mortar context, continues to spiral ever upward.

For example, the high-profile attorneys in the Apple v. Samsung patent wars charged their clients $1,200 per hour.  The hourly billing rates at all the large law firms have reached an all-time high, with many lawyers routinely charging well over $1,000 per hour.

And clients who choose smaller law firms and those firms that offer "flat fee" arrangements may get a better deal, but are not immune from the increased competition for high-quality intellectual property legal services.  

For example, one small law firm in Maryland posted its flat fees online, and notes that it is charging up to $12,000 for filing a provisional U.S. patent application.  An appeal if it is denied could add another $8,000.  That may be less than a large law firm's services, but just filing for a patent is still an expensive proposition.

And of course, that is just the first step in protecting Intellectual Property.  Filing for a patent or trademark is no guarantee that it will be respected by others. 

When infringers are inevitably discovered, commencing and pursuing complex litigation against them routinely costs companies many hundreds of thousands of dollars per year.

Therefore, it is clear that while many are finding it easier and easier to start and develop businesses, they are also finding it more and more expensive to effectively protect their Intellectual Property assets against thieves and infringers.

What does this trend signify?  It would appear that the marketplace is beginning to fully understand that the legal services offered by experienced Intellectual Property lawyers are at a premium, because branding and IP assets in general are as valuable -- if not more valuable -- than traditional ones.

Stock Image on ObamaCare Site Invites Scorn, Ridicule on Amateur Model

Aspiring models, be warned.

Now that the initial launch of the federal "ObamaCare" website has been declared an unmitigated logistical disaster, an odd intellectual property issue has been mentioned by bloggers and political pundits:  the rights of the models depicted in the stock photography used on the site.

When HealthCare.gov launched live on October 1, tens of millions of Americans visited the site to view an ethnically ambiguous, attractive 20-something woman smiling back, promising affordable health care.  "ObamaCare Girl" is precisely the target demographic that the administration is hoping sign up for health care.

Fox News called the smiling woman depicted in the stock photograph "mysterious," writing that "she smiles back at countless frustrated Americans as they tried to log onto the ObamaCare website."  The Washington Times dubbed her "Glitch Girl," and created a pseudo-mystery around her identity.

Since its launch, the website has crashed repeatedly, leading Congressional leaders to demand an accounting for the $300M dollars that have been spent on the website so far, given that few applicants have been satisfactorily able to sign up through the portal.

The unknown model whose face was used on the site may not be pleased with the newfound notoriety, but may have no legal recourse.

"Stock" photography is offered commercially by a wide variety of sources, such as Getty Images, Corbis, iStockPhoto.com and ShutterStock.com.  For an appropriate license fee, any user can easily download and use stock images for a variety of applications, including blogs and websites.

When objects depicted in the stock images are inanimate, the only release that is secured by the distributor is a license or assignment from the photographer.  Photographers are paid a scaled fee based on, among other things, the number of times that their images are downloaded and used.

However, when models are used in the images, the photographer typically secures a standard "release," which grants the licensees (including the distributors and end users) the right to pretty much plaster the image all over their websites and blogs.

The models essentially agree to release any claims that they might otherwise have for invasion of privacy, or appropriation of likeness under states' laws, in exchange for a nominal sum received from the photographer. In most cases, amateur models are paid very little to nothing per image, and give up all rights to control how their likenesses are used.

In the case of the anonymous woman whose face ended up appearing on a website viewed by millions of annoyed Americans, that notoriety might have been more than she bargained for.

The New York Daily News has noted that the image of ObamaCare Girl has now been removed, only to be replaced by stale graphics.

Will Bitcoins Spur Even More Online Lawlessness?

Much has already been written about the rise of a new digital currency, the Bitcoin. To some commentators, the Bitcoin is a new type of gold, representing the emergence of a borderless online world, free of annoying governmental interference and ridding the world of obsolete local currencies. To others, the Bitcoin represents just another bubble, or at worst, is the latest shift to a lawless, online "wild west."

But what is Bitcoin exactly? The Bitcoin is a digital currency based on an open source cryptographic protocol and not managed by any central governmental or financial authority. Bitcoins can be transferred through a computer or smartphone without any intermediate financial institution.

The value of a Bitcoin has fluctuated wildly, leading some to speculate that it is the conceptual equivalent of tulip bulbs in Holland in the seventeenth century, which witnessed the absurd valuation of the flowers' roots.

Apart from its sheer novelty, one part of the allure of the Bitcoin is that it can be used in transactions on the black market for all manner of contraband such as drugs and weapons. Another "benefit" to the Bitcoin is its ability to avoid governmental regulations. Consequently, it has become a hacker's dream come true.

Since each Bitcoin transaction is largely independent of any financial institution's intermediary involvement, it becomes difficult if not impossible for governments to restrict or regulate Bitcoin trade as they would traditional currency flow. 

Recently, the U.S. Financial Crimes Enforcement Network (FinCen) issued a formal statement clarifying the scope of various recordkeeping requirements in the Bank Secrecy Act to different types of Bitcoin transactions.

One relevant question raised by some Intellectual Property owners is to what extent an increase in online Bitcoin transactions will even further complicate current efforts to regulate online commerce.

The answer is uncertain. However, given the challenges already involved in ensuring international banking compliance comports with intellectual property rights, the Bitcoin promises only more headaches ahead.

Ironically, the Bitcoin itself is already reportedly being counterfeited, and hackers are stealing them from online "wallets," raising questions about how realistic expectations are that it could possibly function as an actual currency.

Pfizer to Sell Viagra Direct to Consumers Online, Blames Counterfeiting

Pfizer, Inc. is reportedly preparing to sell Viagra-brand sildenafil citrate tablets online directly to consumers, without the need for a pharmacist.

A prescription from a licensed medical doctor is still required. CVS Caremark Corp. will fill the orders made on the company's website, Pfizer said.

Pfizer attributes the unusual move to the prevalence of online counterfeiting, according to a recent story in the L.A. Times.

Online pharmacies have proliferated in recent years, selling fake versions of Viagra and other brand-name drugs at low prices and with no prescription needed.

Viagra has become one of the most popular drug products to counterfeit given its high price and the embarrassment some men experience ordering the drug from a local pharmacy.  

When announcing its move to include online sales, Pfizer cited a recent study that found as few as 3% of websites selling prescription drugs were legitimate pharmacies selling genuine goods.

Viagra is one of Pfizer's top drugs, posting $2 billion in worldwide revenue last year.

Jerk.com: Invitation to Slander or Free Speech?

While online defamation has existed since the Internet was first made accessible as a public computer network, the threat presented by such libelous content has been exacerbated by the advance of the Internet as an everyday reporting and social media tool.

The rise of websites such as Jerk.com, which openly encourage readers to post defamatory content about both public and private individuals, has raised very thorny legal and socio-political issues about defamation and bullying, and are testing the outer limits of free speech in an online world.  

Specifically, Jerk.com call itself:  "Public Service personal news." It "reports" not only on public figures engaging in public activity (e.g., WIll Smith slapping an overly affectionate reporter); it also reports on private individuals, allowing writers to call them "home wreckers," "army sluts" who "sleep around with married men," "racists," "meth-heads," "drunks," and the like.

The Legal Difficulties With Proving Online Defamation

Much of the difficulty that surrounds successfully winning an online defamation case is brought about because the plaintiff must first prove who the publisher or writer of the statement is and, secondly, that the statements were factually and objectively false and written with the intention of causing damage, and not just reflecting a subjective opinion.

Generally, the elements that must be proved to establish defamation are a publication to one other than the person defamed; a false statement of fact that is understood as being of and concerning the plaintiff; and tending to harm the reputation of plaintiff.  If the plaintiff is a public figure, he or she must also prove actual malice.

Therefore, since truth is an absolute defense to any defamation case, a plaintiff who purports to have been defamed and injured opens himself up to a wide berth of discovery into his otherwise private conduct.

Further, identifying a specific individual that has posted a defamatory comment online can prove difficult.  It is possible to geolocate a computer that was used to publish a statement or post content online through the use of geolocation.

However, with Internet access offered anonymously in Internet cafes, libraries, businesses, and other public areas, this can make it difficult to find the true source of the illegal content.

Legislative Solutions

The Communications Decency Act of 1996 (CDA) was created in a bid to combat indecent as well as defamatory content found on websites and online publications.

Section 230 of the CDA attempts to legislatively address an Internet Service Provider's liability to content that is stored on its servers.  Although it does not specifically address all possible circumstances, it does broadly provide that an ISP is not legally held responsible for the information published by their users unless and until they are informed of any specific infringement; at that point, the ISP should act to remove the content or face legal action themselves.

The Communications Decency Act of 1996 can be viewed in full at the FCC website: http://www.fcc.gov/Reports/tcom1996.txt

Some commentators have suggested that the online world has evolved dramatically since the CDA was passed in 1996, and that it is due for an overhaul.  What do you think?