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    Social Media & Games Law Blog


    James G. Gatto

    James G. Gatto

    T: +1.703.770.7754 F: +1.703.770.7901
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    Bitcoin and Beyond: Current and Future Regulation of Virtual Currencies
    Source: The Ohio State Entrepreneurial Business Law Journal, Volume. 9.2
    Authors: Elsa S. Broeker, James G. Gatto
    FTC Issues New Guidance for Mobile App Developers that Collect Location Data
    Authors: James G. Gatto, Catherine D. Meyer, Elsa S. Broeker, Amy L. Pierce
    A mobile app that collects users’ location data while the mobile app is not in use should clearly disclose such practices and provide users with choices. Failure to do so could give rise to an FTC claim of deceptive practices.
    IRS Issues Significant Convertible Virtual Currency Ruling – Bitcoin Community Abuzz
    Author: James G. Gatto
    The IRS has issued its first major ruling on the U.S. federal tax implications of transactions in, or transactions that use, Bitcoin and other convertible virtual currencies. The ruling stresses that it relates to convertible virtual currencies.1
    June 2013
    Mobile Privacy Practices: Recent California Developments Indicate What's to Come
    Source: Computer Law Review International
    Authors: James Chang, James G. Gatto, Meighan E. O'Reardon
    This article was originally published in the June 2013 issue of Computer Law Review International (CRi).
    December 2012
    Virtual Goods, Gaming and the Trouble With Secondary Markets
    Source: World Online Gambling Law Report
    Authors: James G. Gatto
    Many creative business models enable users to acquire virtual goods or virtual currency and then use those virtual items to participate in an activity that may give them a chance to win something or acquire virtual items through some element of chance. James G. Gatto, a Partner at Pillsbury Law, discusses the legal issues presented by virtual goods and the secondary market, which by its very nature implies that virtual items are far from valueless.
    Drawing the Line Online: Employers’ Rights to Employees’ Social Media Accounts
    Authors: James G. Gatto, Julia E. Judish, Thomas N. Makris, Amy L. Pierce
    With the unprecedented popularity of social media, employees have increasingly used LinkedIn and other online forums to network for business and social purposes. When the line between personal and business use is blurred, litigation may ensue. A federal court recently ruled that an employer did not violate federal computer hacking laws by accessing and altering its recently departed CEO’s LinkedIn account, but that the former CEO could proceed to trial on her state law misappropriation claim. In addition, California, Illinois, and Massachusetts recently joined Maryland in enacting laws prohibiting the practice of requesting access to prospective employees’ password-protected social media accounts.
    August 2012
    Talking Point: Managing Social Media Risks
    Source: Worldwide
    Authors: James G. Gatto, Stephen Bonner, Jeffrey S. Bosley
    July 2, 2012
    Clone Wars: When Does Imitation Become Infringement?
    Source: Law360
    Authors: James G. Gatto, Sean F. Kane
    Video game developers have historically looked to successful games for inspiration. In a case involving the owner of renowned game Tetris, "inspiration" seemed to mirror plagiarism when Xio Interactive Inc. released it’s very similar game, Mino. In the end, a federal district court granted summary judgment to Tetris Holdings stating that the look and feel of Tetris is copyrightable as the expression of the idea distinguishable from the ideas of the game. In its opinion, the court reiterated the well-known refrain that game developers are free to use others' ideas, but not the expression of those ideas.

    Employ Me, Don’t Friend Me: Privacy in the Age of Facebook
    Authors: James G. Gatto, Julia E. Judish, Amy L. Pierce, Meighan E. O'Reardon
    With the unprecedented popularity of social media, individuals have increasingly been willing accomplices in undermining their own privacy. Few would have predicted that millions of people would voluntarily log onto the Internet and share detailed private information about themselves, their friends, family and employers. Users of social media have implemented varying privacy safeguards from unrestricted blogs to Facebook posts limited to a customized list of friends. Even those who seek privacy, however, must contend with a growing practice by employers and others of requesting access to password-protected social media accounts. Social media users have lost jobs and educational opportunities as a result of the increased scrutiny of these private postings. Maryland recently became the first state to enact a law prohibiting this practice; several other states and the U.S. Senate and House have similar legislation under review.
    Spring 2012
    Adapting to a New Reality
    Source: World Trademark Review Magazine, Issue 36
    Authors: James G. Gatto, Jenna F. Karadbil
    Not Just Fun and Games: The Legal and Privacy Implications of Virtual Currency
    Authors: James G. Gatto, Deborah S. Thoren-Peden, JiJi Park
    With the increasing popularity of social media and multi-player online games, all types of businesses are leveraging the many emerging business models associated with virtual currencies and the virtual goods that can be purchased with this currency.

    While these trends present significant business opportunities, companies need to be aware of the various legal, privacy and regulatory issues that must be considered.

    How the America Invents Act Impacts Inventions Made with Government Funds
    Authors: James G. Gatto, Patrick A. Doody, Richard P. Hadorn
    On September 16, 2011, President Obama signed into law the Leahy-Smith America Invents Act, H.R. 1249 (the "AIA"), a landmark patent-reform bill with far-reaching effects on U.S. patent law. The AIA's provisions take effect at various times, ranging from the date of enactment to 18 months thereafter. This advisory addresses three provisions of the AIA of which government contractors and others using government funds to invent should be mindful.
    Fall 2011
    Charity and Social Media: Finding What Fits
    Source: BB Wise Giving Guide
    Authors: James G. Gatto
    Intellectual Property Protection for Games
    Authors: Bradford C. Blaise, D. Benjamin Esplin, James G. Gatto
    Copying within the games industry is prevalent. Some people attribute this to the fact that this is just the way it is and has always been within the industry. This is often premised on the notion that the "idea" for a game is not protectable. But as the game market grows, so to do the losses from copying suffered by the game innovators.

    Lessons from FTC Enforcement Actions Over Online Consumer Endorsements
    Authors: James G. Gatto, Richard P. Hadorn
    In 2009, for the first time in nearly 30 years, the Federal Trade Commission revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 C.F.R. § 255.1  The Guidelines, which explain in general terms when the FTC may find endorsements or testimonials unfair or deceptive, were revised in part to address today's world of the Internet. Companies benefiting from consumer-generated media and gamification may avoid future liability if they are mindful of recent enforcement actions by the FTC and other regulatory authorities, as well as some of the Guideline's often-overlooked provisions.

    Winter 2010
    Perspectives on Real Estate
    Authors: Dana Proud Newman, Laura E. Hannusch, Scott E. Barat, James P. Bobotek, James G. Gatto, Christina Cole, Brad M. Dashoff, Brant K. Maller
    The 19th edition of Pillsbury's Newsletter: Perspectives on Real Estate features articles written by Pillsbury attorneys from practice groups across the firm including Real Estate, Tax and Social Media, Entertainment & Technology.

    DMCA Saves Google Again—Im“Perfect” Notices Not Adequate Notice of Infringement
    Authors: James G. Gatto, Richard P. Hadorn
    In Perfect 10, Inc. v. Google, Inc., Case No. CV 04-9484 (C.D. Cal. July 26, 2010), the court issued a decision consistent with a recent line of cases1 that generally favors online service providers that establish and implement effective policies under the Digital Millennium Copyright Act (“DMCA”), keeps the burden to police infringement on content owners, and strictly construes the DMCA in determining whether content owners meet the DMCA notice requirements.2 These cases make clear that it is critical for online service providers to develop and implement effective DMCA policies and for content owners to follow precisely the DMCA notice requirements. This advisory addresses key aspects of effective policies and notices based on rulings in the Perfect 10, Inc. v. Google, Inc. case.
    Not Reading or Abiding by Terms of Service Is Dangerous—But Can It Be Criminal?
    Author: James G. Gatto
    Many people routinely click the Agree button on websites without reading the terms of service. Many application developers build tools or other software to work with other online services or software without regard to the terms of services or EULAs. Doing so can be perilous for many reasons. A pending case, Facebook v. Power Ventures dba/, highlights another reason, especially for application developers: potential criminal liability.
    Supreme Court Broadens Test for Patentable Subject Matter
    Authors: Jack S. Barufka, James G. Gatto, Kathy Peng
    Today the Supreme Court issued a much anticipated decision regarding the test for patentable subject matter, broadening the test articulated by the Court of Appeals for the Federal Circuit in Bilski v. Kappos ("Bilski"). The Supreme Court held that the so-called "machine-or-transformation test"— that a process is patent-eligible if it either "transforms an article into a different state or thing" or is "tied to a machine"— is a valid test, but is not the only applicable test. However, the Supreme Court did not specifically define any other tests, thus leaving open the door to the possibility for a more flexible test to be adopted down the road. The Supreme Court, however, confirmed the long standing rule that laws of nature, abstract ideas and mental processes are not patentable.

    Court: Implementing Proper DMCA Policy Provides Website Operators 'Safe Harbor' From Copyright Infringement
    Authors: James G. Gatto, Jenna F. Karadbil
    Google has prevailed in the closely watched lawsuit against its YouTube website by Viacom, with the federal district court granting summary judgment in favor of Google. The main issue came down to who bears the responsibility for identifying or monitoring the infringing content—the copyright owner (Viacom) or the online service provider (Google). The safe harbor provisions of the Digital Millennium Copyright Act provide a significant shield from liability for online service providers. However, to qualify for this safe harbor, the service provider must have an effective policy in place.

    Copyright Registration for Virtual Goods: The Benefits of Timely Filing
    Authors: James G. Gatto, Benjamin Duranske, Jenna F. Karadbil
    Copyright registration is an important part of an overall intellectual property protection strategy for preventing infringement of virtual goods, along with patents, trademarks, trade secrets and terms of service agreements. The benefits of timely filing copyright applications for virtual goods include the ability to file suit in federal district court and collect statutory damages of up to $150,000 per infringement, the potential for recovery of legal costs and attorneys' fees and certain legal presumptions regarding ownership and validity. To get some of these benefits however, you must timely file a copyright application, typically before the infringement or misuse of your virtual goods occurs, or within three months of first publication.
    November 2009 Saber-Rattling Portends a Trend in Virtual World and Video Game Patents
    Source: Journal of Internet Law, Volume 13 Number 5
    Authors: James G. Gatto, Bradford C. Blaise, D. Benjamin Esplin
    The recent announcement of the impending enforcement of’s virtual world patents further evidences the growing trend of increased patent activities affecting virtual world and video game companies. This announcement, coupled with other recent patent infringement lawsuits, further highlights the need for an effective IP strategy, including defensive measures that can help prevent or deter patent infringement suits.
    Department of Defense Debunks Myths and Endorses Use of Open Source Software
    Authors: James G. Gatto, Daniel S. Herzfeld
    In October 2009, the Department of Defense (DoD) issued a memorandum on “Clarifying Guidance Regarding Open Source Software (OSS)” (the “Memo”). This Memo provides guidance on the use of OSS, including advantages of using OSS and common misconceptions about such use in connection with government projects. The DoD Memo endorses the use of OSS.
    Linden Lab Is Changing Its IP Protection Policies for the Second Life® Virtual World
    Authors: James G. Gatto, Benjamin Duranske
    On August 4, 2009, Linden Lab announced upcoming changes to its approach to intellectual property content management in the Second Life® virtual world. Although Linden Lab did not announce a specific timeframe for implementa­tion, these changes will impact both mainstream real-world companies and virtual world content creators who use the platform to run small businesses. The changes include a streamlined Digital Millennium Copyright Act submis­sion process, new features for content licensing, and a content seller program offering official certification of content creators who provide identity and payment information to Linden Lab. In addition, Linden Lab is advocating that creators of content-copying tools voluntarily adopt industry standards to prevent abuse.
    Virtual World Operator and Executives Sued Over Unauthorized Sale of Virtual Goods; Case Dismissed After Changes Made
    Authors: James G. Gatto, D. Benjamin Esplin, Kevin T. Kramer
    The owner of a famous brand of goods sued the corporate operator of a virtual world, including the executives who run that corporation, for trademark infringement, design patent infringement, and racketeering violations. Among other things, the brand owner noted the adult content of the website and the unauthorized use of both the name and the shape of the product as causes for concern. In what is a growing trend, the brand owner also targeted the individuals who make operative decisions for the corporate defendants. The owner subsequently dismissed the case without prejudice to re-filing in the future.
    Microsoft Launches Patent Offensive Against Linux
    Authors: James G. Gatto, Tyson Winarski
    On February 25, 2009, Microsoft sued TomTom for patent infringement in a Federal District Court and in the International Trade Commission, alleging infringement of eight Microsoft patents, including at least three that allegedly cover TomTom's implementation of the Linux kernel. These are the first patent suits by Microsoft against Linux, but the writing has been on the wall for some time. It has been widely reported that Microsoft has openly alleged that Linux violates over 200 Microsoft patents. Now more than ever, it is important to understand the patent implications of open source and the steps that your company can take to minimize liability for patent infringement.
    Blizzard Wins Virtual World Battle Against MDY—CEO Found Personally Liable
    Authors: Cydney A. Tune, James G. Gatto, Benjamin Duranske, Nathan Cardoza
    On January 28, 2009, after the close of a bench trial, a U.S. District Court in Arizona found for Blizzard Entertainment and against its long time opponent MDY Industries. As we previously reported, the same court granted summary judgment in favor of Blizzard, finding that MDY was liable for copyright infringement, not simply for breach of contract, for distributing its flagship “Glider” product. This week, the court ruled for Blizzard on all three remaining issues: (1) Blizzard’s claims under the Digital Millennium Copyright Act (“DMCA”), (2) whether MDY’s CEO is personally liable to Blizzard, and (3) whether Blizzard is entitled to injunctive relief.
    Trademark Claims Against Virtual World Strip Club Denied on 1st Amendment Grounds
    Authors: James G. Gatto, D. Benjamin Esplin, Justin A. Pan
    A court has ruled that incorporating into a video game a virtual strip club with a similar look and feel to the real thing has artistic relevance and that similarities between the real and virtual strip clubs were not explicitly misleading. Thus, the court found that the First Amendment provided a defense to the alleged trademark infringement in this case. However, it ruled that a nominative fair use defense did not apply because the game did not replicate the mark in question. Instead, the designers purposefully changed the name and look. Although it is possible that somewhat different facts may have produced a different result, the principles here are likely to apply to other virtual world and video game trademark disputes. These principles may be particularly relevant to video games and virtual worlds that include depictions of actual buildings or businesses, including "mirror worlds."
    China Taxes Real Profits from Virtual World Transactions
    Authors: James G. Gatto, D. Benjamin Esplin, Benjamin Duranske
    China has declared that it will tax profits on transactions involving virtual currency. In response to an inquiry from the Beijing Tax Bureau, China’s State Administration of Taxation issued a “Written Reply on Imposing Individual Income Tax on the Revenue Derived from Online Trade of Virtual Currency by Individuals” on September 28, 2008 (the “Written Reply”). The Written Reply imposes an individual income tax of 20% on income derived from online trade of virtual currency.
    Patent Suit Targets Virtual World, Video Game, Social Networking and Other Websites
    Authors: James G. Gatto, D. Benjamin Esplin
    In a growing trend, another patent infringement lawsuit was filed last week against nearly two dozen companies involved in virtual worlds, social networks and other websites. The plaintiff, Balthaser Online, appears to provide a web application that enables users to create Adobe Flash animations and interfaces for inclusion in websites. This and other cases evidence a growing need for companies to take proactive steps to prevent or deter patent infringement suits.
    October 2008
    Illegal Judicial Appointments?  Constitutional Attacks on Patent and Copyright Decisions
    Source: Intellectual Property & Technology Law Journal
    Authors: James G. Gatto, Hean L. Koo, Terri Cunningham
    Court Rules Copyright Owners Must Consider Fair Use Before DMCA Takedown Notice
    Author: James G. Gatto
    In Lenz v. Universal Music Corp et al. (Case 5:07-cv-03783 JF) a California District Court held that in order to issue a Digital Millennium Copyright Act (“DMCA”) takedown notice in good faith, a copyright holder must evaluate whether the use at issue qualifies as “fair use” under copyright law. In this case, the Court refused to dismiss a misrepresentation claim based on the allegation that the copyright holder (Universal) acted in bad faith by issuing a takedown notice without proper consideration of the fair use doctrine. This case highlights the need for proper legal diligence before issuing a DMCA takedown notice.
    Automated Program for Playing Virtual World Game Deemed Copyright Infringement
    Authors: James G. Gatto, D. Benjamin Esplin
    In July 2008, a U.S. District Court in Arizona found on summary judgment that the use of an automated program to play a virtual world game constituted copyright infringement. This decision turned on findings that both the End User License Agreement and the Terms of Use prohibited such use, and that these prohibitions were limitations on the scope of the copyright license and not merely contract covenants. Based on this, the Court found copyright infringement and not merely a breach of contract, thus resulting in potentially more powerful remedies, including injunctive relief. Interestingly, the copyright owner has requested that the infringer be enjoined from releasing the automated program source code as “open source” software.
    Illegal Judicial Appointments? Constitutional Attacks on Patent and Copyright Decisions
    Authors: James G. Gatto, Terri Cunningham
    Parties are contesting the validity of Board of Patent Appeals and Interferences (BPAI) decisions based on the alleged unconstitutionality of the appointment of certain Administrative Patent Judges (APJs) who participated in those decisions. The challengers argue that the director of the Patent and Trademark Office (PTO) does not have the power of appointment under Article 2 of the Constitution. If courts hold these appointments unconstitutional, the effects could be widespread, affecting potentially thousands of patents and patent applications. Specifically, this challenge creates arguments for patent applicants whose patent application rejections were affirmed by the BPAI, as well as a potential defense for patent litigants w
    Federal Circuit Affirms Invalidity of Software Patent for Inadequate Disclosure
    Source: ILO Newsletter, Information Technology-USA
    Author: James G. Gatto
    Patent Application Pitfall: Federal Circuit Affirms Invalidity of Software Patent for Inadequate Disclosure
    Author: James G. Gatto
    On March 28, 2008, the Federal Circuit affirmed the invalidity of a software patent for failing to disclose sufficient structure for a "control means" used in a slot machine that allows a player to select winning combinations of symbol positions. The Federal Circuit held that, despite disclosing a general purpose computer with "appropriate programming," the disclosure was insufficient because it failed to describe any algorithm for carrying out the claimed functions. This case highlights the need to consult with a patent attorney knowledgeable about software patents to effectively prepare and prosecute software patents.
    En Banc Federal Circuit to Revisit the Scope of Patentable Subject Matter: Will Business Method Patents Survive?
    Authors: James G. Gatto, Larry J. Hume
    From at least 1980 until recently, the trend was that the Court of Appeals for the Federal Circuit (CAFC) and the U.S. Supreme Court had been expanding the scope of patentable subject matter in the U.S. under 35 U.S.C. §101 ("Section 101") to include Living Organisms, Computer Software, and Business Methods. However, some CAFC judges may believe that the pendulum of patentable subject matter has swung too far, particularly in the burgeoning area of business method patents.
    Implied Patent Licensing and the Supreme Court's Ongoing Review of Quanta Computer, Inc. v. LG Electronics, Inc.
    Authors: George M. Sirilla, James G. Gatto, Fred T. Grasso
    Having heard oral arguments in Quanta Computer, Inc. v. LG Electronics, Inc., the Supreme Court is in step to further develop the jurisprudence of patent exhaustion and the first sale doctrine. Beyond this, however, the case will also serve as a reminder of the need to remain vigilant towards, and be aware of the potential for, patent licenses implied in agreements and through the sale of goods.
    New Rules Change Open-Source Landscape
    Author: James G. Gatto
    James Gatto, head of Pillsbury Winthrop Shaw Pittman's Intellectual Property practice and co-head of the firm's Open Source team, authored this article, which originally appeared in Washington Technology, October 15, 2007.
    February 2007
    Doubts Wane Over GPL Enforceability
    Source: Managing Intellectual Property
    Author: James G. Gatto
    January 2007
    Doing IP Right - What Start-Ups Need To Know
    Source: The Entrepreneur Center @ NVTC
    Author: James G. Gatto
    GPL3 - Round 2
    Author: James G. Gatto
    July 2006
    GPL Version 3 - More Clear or More Issues?
    Source: e-Commerce Law Report
    Author: James G. Gatto
    Patent Appeals Court Ruling Highlights Potential Pitfalls of Over Reliance on Provisional Patent Applications
    Author: James G. Gatto
    A case decided by the Court of Appeals for the Federal Circuit (CAFC) highlights some potential pitfalls of the widespread over-reliance on filing provisional applications.

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