Apr 15 2014

Casino Lawsuit Against Phil Ivey Reveals World of High-Stakes Gambling

Phil Ivey calls himself the Michael Jordan of Poker and is a well-known and much-admired high stakes poker player. But now two lawsuits he is involved in may hurt his reputation and may cause him to be banned from some casinos. Last week, the Borgata Casino Hotel, Atlantic City New Jersey’s most popular and successful betting palace, filed a federal lawsuit seeking to recoup approximately $9.6 Million Ivey won while playing Baccarat during four trips to the Borgata in 2012.

The lawsuit claims that Ivey took advantage of a manufacturing error in sets of cards made by card-maker Gemaco (also named in the suit). It seems the purple version of the Gemaco cards featured a slightly wider left-hand edge than right hand edge; in its contract with the Borgata Gemaco promises that all cards will be perfectly symmetrical. Somehow Ivey picked up on this defect and then used his leverage as a high-stakes player to manipulate the game of Baccarat.

baccaratBaccarat is game preferred by high rollers and casino regulars. It is also highly popular among Asian players and it is not unusual for players to have particular “superstitions” about how the cards are handled and dealt. In certain Asian casinos,for example players are allowed to hold and even tear the cards for good luck since a new deck is used every hand. The game is played with two hands of two cards being dealt: one is called the “banker’s hand” and the other is called the “player’s hand.” Ace through nine are worth their face value (Ace being one) and 10, Jack , Queen and King are all worth zero. The goal is to get as close to 9 as possible. Going over does not “bust” you. Table players bet on whether the banker or player hand will be better; you can also bet that they will tie, though that is the riskiest bet with also the greatest reward. The player hand is dealt first so if you could know the value of the first player card you will have a tremendous advantage. If the player hand is dealt a 7,8 or 9, it is much more likely this hand will have be closer to 9 than the banker hand.

To set up this advantage Ivey sent a set of strict instructions to the Borgata in beginning in the summer of 2012: The cards used had to be purple Gemacos; an automatic dealing machine (called a “shoe”) had to be employed instead of the traditional hand-dealer employed at high-end Baccarat tables; he wanted a private secluded playing pit; since he was to be accompanied by his friend Cheng Sun (also sued) the dealer had to speak fluent Mandarin; he wanted to play $25,00 per hand as a maximum bet; and he wanted to risk up to $1 million. The casino said they would be glad to comply and Ivey wired his $1 Million stake to the casino. Once there, Mr. Sun began to tell the dealer (in Mandarin) that he was superstitious and wanted him to invert the “good cards” (7,8,9) once they were shown. That meant the fat edge wold be on the right in good cards and the skinny edge on the right for all other cards. While this manipulation was going on , Ivey placed minimum bets. Once all the decks in play had been set up per Mr. Sun’s instructions, the lawsuit alleges, Ivey began playing maximum bets. The use of the shoe guaranteed that the orientation of the cards remained the same.

Using this system, according to the casino, Ivey increased his likelihood of winning by about 600%; he would bet on “player” when that hand got a “good” card and on “banker” when it did not. This little bit of extra knowledge allowed him to win $2.4 million in April; $1.6 million in May; $4.8 million in July and $825,000 in October of 2012. In July, he increased the max bet to $50,000 and his stake to $3 Million. Why the relatively low win in October? Beause in that month, he sued Crockford’s Casino in London for allegedly withholding 7.8 Million Pounds Ivey won playing Baccarat until they discovered how he had gamed the casino. Crockford’s sent out a bulletin to all casinos about the lawsuit in which IVEY detailed exactly how he did it; he argued he merely used an error to his advantage and that is not “Cheating” or “Marking the cards.” When the Borgata received the Crockford’s memo, its Executive Vice President walked down to the private Baccarat pit and confronted Ivey. Ivey said that Crockford’s had no right to withhold the money and that the allegations he was cheating were baseless. The casino let him play on -presumably due to his celebrity status. The Borgata alleges that at that point Ivey was up over $3 Million but then suddenly after being confronted he began to lose precipitously – the casino alleges he was losing intentionally.

After examining the videotapes and talking to the dealers involved and after reviewing in detail the Crockford’s lawsuit, the Borgata sued to get its $9.6 million back. But is it cheating? The court will have to determine how it defines tha tterm and how it defines “marking cards.” I say “Yes, it is cheating.” Had Ivey just caught an error and taken advantage of it at the table would be one thing, but to send a specific set of instructions to the casino in order to rig the game in your favor is cheating – and specifically orienting the cards to allow them to be identified is the very definition of “marking.” While it is true that the casino has the tremendous advantage in most cases, by not paying out what the true odds of a winning hand call for, when you sit at the table you agree to those terms. Knowledge of all the rules, odds and game idiosyncrasies is part of the contract between you and the casino.

So I think Mr. Ivey will lose his lawsuit here in the States. Whether these allegations will hurt or enhance his standing in the gambling community remains to be seen.

Apr 11 2014

US Patent Office Denies Trademark Request for “RedSkin Potatoes” As Derogatory and Confusing

Last month, an examining attorney for the United States Patent and Trademark Office (USPTO) has rejected a Washington State potato company’s application to trademark “Washington Redskin Potatoes,” in part because the name could be seen as derogatory to Native Americans. The ruling could mean trouble for the Washington Redskins football team, as the USPTO is currently considering a case challenging the trademark protection granted to the football team’s controversial name.

Funny, you don't look offensive?

Funny, you don’t look offensive?

Importantly, the potato company was not looking to use the name to trademark its particular brand of red-skinned potatoes. The USPTO has previously approved past marks for red-skinned potatoes and even red-skinned peanuts, but because the application was to market “entertainment services” and all sorts of merchandise, from clothing to trading cards, the USPTO found that in that context “red skin” is a derogatory term.

The examiner stated “Registration is refused because the applied-for mark includes matter which may disparage or bring into contempt or disrepute persons, institutions, beliefs, or national symbols. Given that ‘REDSKIN’ in the mark is a derogatory slang term that refers to, and is considered offensive by, American Indians, registration of the applied-for mark must be refused” under the Trademark Act, a 1946 law that prohibits the trademarking of offensive or derogatory terms.

The examiner listed various dictionary definitions for the term and also cited the USPTO’s prior rejection of the football team’s trademark in 1999, a result of a case brought against the name by activist Suzan Shown Harjo. That ruling found the name in violation of the 1946 law, though a federal judge overturned the decision in 2003 due to a legal technicality, allowing the team to keep its trademark protection. The examiner in the potato case also found that it may cause confusion between the potato brand and the football brand.

A new case was brought by activist Amanda Blackhorse to try and remedy the errors that caused the reversal of the first case. In the Harjo case, the court held: “There is no evidence in the record that addresses whether the use of the term “redskin(s)” in the context of a football team and related entertainment services would be viewed by a substantial composite of Native Americans, in the relevant time frame, as disparaging.” Presumably, Ms. Blackhorse has now collected sufficient statistical evidence to establish that most Native Americans find the term “redskin” offensive when use in this context. If she has corrected the reasons the Harjo case was overturned, this potato ruling would establish that the term “red skin” is offensive and derogatory when used outside the context of an actual red-skinned food product

The Blackhorse case was heard by the Trademark Trials and Appeals Board in March 2013. There is no set timetable for a ruling, though it is expected soon. If the Redskins lose, they will certainly appeal as they did when they lost the Harjo case in 1999. Owner Dan Snyder has vowed to keep the name even if he loses the right to own the trademark in it. Of course, without trademark protection, any Tom, Dick and Harry could then make and sell “Washington Redskin” merchandise. I think other NFL owners (who all share in a cut of merchandising from all the teams) would have something to say about Mr. Snyder’s insistence on using a non-trademarkeable name for his team.

Mar 24 2014

Court Rules Publisher Owns E-Book Rights Based on 1967 Contract Language

In 1971, Jean George wrote the popular children’s novel Julie of the Wolves and conveyed publishing rights to HarperCollins to publish the book in exchange for a $2,000 advance and royalty payments of between ten and fifteen percent, depending on number of copies sold.

Her literary agency Curtis Brown, negotiated the terms of the contract for her and insisted with HarperCollins on using certain language Curtis Brown had inserted in other HarperCollins’ contracts going back to 1967.

The popularity of Julie and the Wolves never waned particularly since it is always on the list of 100 most-banned books in America due to its depiction of an attempted rape of its young protagonist. Ms. George, who passed away in May 2012, published two popular sequels, one in 1994 and another in 1997.

Julie of the WolvesE-book publisher Open Road approached Curtis Brown with a proposal to publish an e-book edition of Julie of the Wolves in exchange for a 50 percent royalty to Ms. George. Preferring initially to pursue an e-book publication with her longtime publisher HarperCollins, Ms. George authorized her agent to contact HarperCollins and suggest the e-book publication, with the proviso that HarperCollins match Open Road’s 50 percent royalty offer. HarperCollins expressed interest in electronic publication; however, they counter-offered only a 25 percent royalty. Dissatisfied with that offer and expressing her belief that she — not HarperCollins — owned the e-book rights, Ms. George instead contracted in April 2011 with Open Road to publish Julie of the Wolves as an e-book. The e-book has sold about 1,600 copies to date.

HarperCollins was having none of that and brought suit to force Open Road to disgorge its profits and hand over the e-book. In addition to the standard parts of the publishing agreement, like Paragraph 1 which conveyed to HarperCollins “the exclusive right to publish [Julie of the Wolves] in book form,” the publisher was relying on Paragraph 20 of the contract which granted HarperCollins the exclusive right to “issue licenses, subject to the author’s permission, to use the work in ‘in storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means now known or hereafter invented.’”

The court found that this language was clear and covered e-books so that it did not need to delve too deeply into cases that talk about “new uses” and whether they were foreseeable or covered by old contracts. It noted that Open Road’s lawyers largely “chose to ignore” this paragraph in their brief. What else could they do? They tried to go on the angle of author’s rights and that the clause was vague and unenforceable because it did not contain a royalty rate. They also tried to rely on prior case law that said the “right to print” did not necessarily include the right to “digitize” the book. But here, the court noted, the language was broader than “print” as it gave HarperCollins the right to “publish.”

What is unusual is that this language was inserted into the contract at the request of Curtis Brown, Ms. George’s agent. HarperCollins did not have this language in its standard contract agreement with any other agency; Curtis Brown drafted the language. This was incredibly forward-thinking in 1967 when computers took up the better part of a large room and even paperbacks were considered second-class to hardcovers. But why would an agent insist on including language that gave the publisher more rights than it wanted? I can bet that this was the easiest contract negotiation HarperCollins ever handled.”You want to give us more rights for the same advance and royalty? OK you twisted our arm.” Well at the time, Curtis Brown was probably only trying to protect Ms. George by including digital media as one of the uses for which HarperCollins had to first obtain Ms. George’s approval. They did not foresee how HarperCollins could use this shield as a sword 46 years later.

Now, if Ms. George’s estate wants to continue the publication of the e-book version of Julie of the Wolves it must agree to HarperCollins’ agreed-upon royalty rate (half what Open Road was willing to give) or shelve the e-book. HarperCollins of course had all the time in the world to try and put out a digital version and before Open Road came along. Ms. George may have well accepted her trusted publisher’s lower rate if HarperCollins had come up with the idea first and approached her. Instead, HarperCollins seems content to just disgorge Open Road’s profits and pursue statutory damages for copyright infringement. I hope the court will not reward Harper with a large award here as they showed no effort in exploiting the book to its fullest.

It’s a cautionary tale about making sure you try and retain as many rights as you can when you sign a publishing deal. The case hopefully will not have too large an impact as most contracts from back-in-the-day will not have a clause foreseeing e-books. But for the George family, the battle is lost. Sometimes even when you think you are protected in the frozen tundra of the publishing world, it can be impossible to keep the wolves at bay.

Read more: http://www.newyorklawjournal.com/id=1202647703185/Harpercollins-Pub.-LLC-v.-Open-Road-Integrated-Media%2C-LLP%2C-11-Civ.-9499#ixzz2wtGs3tUl

Mar 19 2014

California Appeals Court Rules in Favor of Group Registration of Copyrights – Big Boon to Mass Photo Agencies

The 9th Circuit Court of Appeals issued a long-awaited decision in the case of Alaska Stock v. Houghton Mifflin that favors the “compilation” or “group” registration of digital images by large photo agencies. The decision, in its essence, states that provided the registrant owns the copyright in all of the images that make up the compilation registration, copyright registration also attaches to the individual images contained within the compilation or group- not just the whole group.

At issue was a conflict between the language of the Copyright Act and a memo issued to photo lobbying group by the US Copyright Office. Section 103(a) of the Copyright Act expressly provides that compilations are proper, lawful “subject matter of copyright[.]” 17 U.S.C. § 103(a). However, Section 103(b) provides that “[t]he copyright in a compilation … extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material.” But In 1995, a trade association of stock agencies, Picture Agency Council of America, Inc., met with the Register of Copyright (the head of the Copyright Office), her Chief Examiner, and other Copyright Office staff, to work out how to register large catalogs of images. The Register agreed that a stock agency could register both a catalog of images and the individual photographs in the catalog in one application if the photographers temporarily transferred their copyrights to the stock agency for the purposes of registration. The trade association confirmed this with the Copyright Office in writing, and advised its member stock agencies.

copyright logoThe trial court in Alaska Stock ruled that the language of the Act was clear and could not be changed by the Copyright Office memo. The court concluded that the registrations of the compilations of photographs did not amount to the registration of the copyrights in the individual photographs. The 9th Circuit reversed that holding, finding that it would be unfair to those that relied upon the Memo stating:

We are not performing a mere verbal, abstract task when we construe the Copyright Act. We are affecting the fortunes of people, many of whose fortunes are small. The stock agencies through their trade association worked out what they should do to register images with the Register of Copyrights, the Copyright Office established a clear procedure and the stock agencies followed it. The Copyright Office has
maintained its procedure for three decades, spanning multiple administrations. The livelihoods of photographers and stock agencies have long been founded on their compliance with the Register’s reasonable interpretation of the statute. Their
reliance upon a reasonable and longstanding administrative interpretation should be honored. Denying the fruits of reliance by citizens on a longstanding administrative practice reasonably construing a statute is unjust.

Apparently lost on the Court and not even remotely mentioned in the decision or in the oral arguments which I listened to, is how this will effect the many small businesses that could now be hit with statutory damages and even larger infringement claims based on registrations of thousands and even millions of digital images at a time. Most if not all of these stock agencies require the photographers to assign the copyrights in the image to them, making the agencies the “owners” of the works. Yet because of this compilation registration, it will be very difficult if not impossible for the targets of those claims to find out if the image complained of was part of the registration being relied upon by the stock agencies. The Copyright Office Memo only required the agencies to list three names of the individual authors an no titles of the works, so that for the vast majority of the works contained in the compilation, the only identifying mark is a random catalog number. In these claim letters (sent out in the thousands weekly) the agencies usually do not provide the actual copyright registrations or show you which image applies to which catalog number.So targets of these claims will have to “trust” that the registrations the agencies are sending them are the actual registrations that apply to the images they claim.

The 9th Circuit is the latest to rule this way. The Fourth Circuit recently confronted the question and adopted the position advocated by Alaska Stock and the government in Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., which addressed whether a real estate listing service had properly registered the individual photographs of properties contained within their listings by registering their listings as a database. The court here also relied on a case from the The Fifth Circuit, Szabo v. Errison that held that a musician who filed a single registration for his collection of his “Songs of 1991” succeeded in registering individual songs within the collection. The Alaska Stock court quoted from that case stating: “Szabo rejected the argument that because he had not listed titles for each of the songs, he had not registered the constituent songs, the same argument Houghton Mifflin makes here. Szabo applies the rule that ‘when one copyrights a collection, the copyright extends to each individual work in the collection even though the names of each work are not expressly listed in the copyright registration.’” But if I am accused of infringing a song by Szabo, I would easily find the registration for his album; I would readily be able to tell if he owned the copyright to the songs listed on the albums by seeing if he is listed as a the author of those works; and I would only have to scroll through a few names of songs from the CD to find the one I am accused of copying. But if Szabo were one of a hundred photographers who were part of the compilation but was NOT one of the three photographers listed, I would not be able to find the offending photograph or even tell if his photography was part of the compilation registered under this method.

The Court here distinguished Morris v. Bus. Concepts, Inc a Second Circuit case holding that the registration of a collective work, Allure magazine, did not register the copyright in a component work where it did not own the copyright to the component work and failed to list its author or title finding that here Alaska Stock did own all the copyright by virtue of its agreement with its photographers. The Second Circuit is the federal appeals court that covers New York. Some New York trial courts and trial courts in other States have gone the other way on this issue. See Muench Photography, Inc. v. Houghton Mifflin Harcourt Publ’g Co.,712 F. Supp. 2d 84, 92–94 (S.D.N.Y. 2010); Muench Photography, Inc. v. Pearson Educ., Inc., 2013 WL 6185200, at 10–13 (N.D. Cal. Nov. 19, 2013); Bean v. Houghton Mifflin Harcourt Publ’g Co., 2010 WL 3168624, at 3 (D. Ariz. Aug. 10, 2010). The Second Circuit has not addressed this issue directly, nor does it have any similar case on its docket to my knowledge. The 9th Circuit is not binding on NY Federal courts though it does carry more weight than most Circuits on copyright issues due to California being within its jurisdiction.

I would expect this decision to embolden photo agencies in their quest for infringement dollars. Folks who are targets of these claims should make sure to ask for proof that the stock agency OWNS and not merely LICENSES the images. They should also ask for proof that the catalog numbers on the registration matches up to the image(s) at issue.

To say I am very disappointed in the decision is an understatement. I think the 9th Circuit got it wrong in part because it failed to see how this would be applied in the infringement scenario. Also, why would anyone now pay for individual registration when it could register all of its works at one time through this method? While I understand the deference the Court gave to the practice outlined by the Copyright Office, that deference should not extend to a practice that is in direct contradiction with the words of the Copyright Act itself.

Mar 07 2014

Beware of Getty Bearing Gifs – No typo, Its a Pun

Disclaimer: For the last seven years or so I have been representing businesses large and small who have received demand letters from Getty Images over the unlicensed use of their stock photography. I have also represented many business who have recently been sued over a smattering of lawsuits Getty has filed around the country this year. In other words, try as I might to be fully objective, I may have valid reasons to look at this subject matter with less than rose-colored glasses.

Explainer:For the unknowing, GIF is an acronym for “graphics interchange format” which describes the process of combining a series of digital images into a small piece of animation. So the article title is a play on words over the age-old slogan “Beware of Greeks Bearing Gifts” due to my analogizing Getty’s offer of free images (the subject of this article) with the famous episode of the Trojan Horse, which spawned the previously mentioned age-old slogan in the first place.

History Lesson: After a fruitless 10-year siege outside the City of Troy, during the Trojan War, the Greeks -Troy’s mortal enemies- constructed a huge wooden horse, and hid a select force of men inside. The Greeks pretended to sail away, and the Trojans pulled the horse (The Symbol of Troy) into their city as a victory trophy. That night the Greek force crept out of the horse and opened the gates for the rest of the Greek army, which had sailed back under cover of night. The Greeks entered and destroyed the city of Troy, ending the war. Just about 10 years ago, Getty Images began the campaign I describe above – sending hundreds if not thousands of letters weekly to folks who are found to have unlicensed Getty Images on their websites. While the program has made Getty Images lots of money, it has been essentially fruitless in limiting the unlicensed use of Getty images by unknowing, unsuspecting, uncaring website developers. Our issue with Getty (as described repeatedly on the website extortionletterinfo.com) is not that they should allow businesses to infringe on their intellectual property, but rather the amounts they seek are exorbitant and their methods are unnecessarily heavy-handed.

Just last week, Getty Images announced that it will release 35 million images in its library of about 150 million photos, for use by bloggers and social media sites. Getty acknowledged that many such sites were already using their images without accreditation or payment of licensing fees. “Our content was everywhere already,” said Craig Peters, a business development executive at the Seattle-based company to the BBC. “If you want to get a Getty image today, you can find it without a watermark very simply…The way you do that is you go to one of our customer sites and you right-click. Or you go to Google Image search or Bing Image Search and you get it there.”

What Mr. Peters failed to mention is that if you did do that “right-click Google image” thing, it was only a matter of time until you got a cease-and-desist letter asking for $1,250 or thereabouts for your use of their thumbnail stock image and that if you ignored that you then got further inundated with letters and/or emails from collection agencies and lawyers. But I digress.

Social media and web blogs exploded with glee over the news that all these images are now available for free. Example: “This new Getty Images embed capability will open users up to a huge new creative repository in a simple, legal way,” says Raanan Bar-Cohen, senior vice president of commercial services at Automattic, the company behind WordPress.com, on the Getty blog. “We look forward to seeing all the amazing ways that our users can take advantage of this new access.”

trojan-horse-wickipedia-736005Yes, but how will Getty take advantage of this new access? Well, in order to get the free access, you have to embed a link that Getty requires which will pull folks back to the Getty catalog. These embed links also provide a window into your website so that Getty can (a) data-mine your site and its activity and sell that info to spammers and ad salesmen and (b) place ads through the link into your site. In its announcement, Getty did not mention planes for future monetization but in subsequent interviews it also did not deny that this was likely going to be used as revenue source. I expect when they decide to data-mine or sell ads (or likely both) they will make the announcement under cover of night. Is there any real chance that Getty would announce this new program without having thought out exactly what they are going to do with it down the road? I doubt it.

More likely is that Getty has already investigated and analyzed how to monetize this new idea the way they monetized copyright infringement enforcement. Two years or so ago, Getty paid $20 Million for PicScout, the software company that developed the program that Getty used to find its unlicensed images. Prior to the sale, Getty used to share its infringement revenue with PicScout; the sale allowed it to eliminate the middle man. Getty competitors continue to rely on PicScout for their infringement trolling programs so now when you misuse a digiital image Getty makes money even if you misused one of their competitors. This company is no babe in the woods and it did not get to be the industry leader by rash business decisions.

So while they announced this great new release of all these photos, worry about why they didn’t announce their other plans for he embed links. And if you decide to use on of the “free”images make sure you carefully adhere to and be aware of the limitations they place on the use: (1) The images can’t be re-sized; (2) you must embed the whole link exactly as written; (3) the image will include the Getty logo and photographer credit; (4) clicking on the image will take readers away from your blog and onto the original image in the Getty catalog; and most importantly (5) your use must be a non-commercial use. News outlets and commercial enterprises will still have to pay to use Getty’s images. I don’t know how Getty will define “commercial use” but I bet it will be a very broad definition.

What will happen if your use is not consistent with these limitations Mr. Peters says if a blog appears to be promoting a product or business with the images, it will take action:
“That’s a pretty clear delineation,” Peters said to Businessweek. “We’ll enforce the terms of this license if people start using these images to do that.”

How many people are going to read the fine print or beyond the headlines like the one The Christian Science Monitor posted: “Getty gives away 35 million images for free”? I could be wrong – Getty could be just waving the white flag and doing this all out of the goodness of their hearts. But as Laocoön famously says in Virgil’s epic Aeneid: “Equo ne credite, Teucri. Quidquid id est, timeo Danaos et dona ferentes.” (“Do not trust the horse, Trojans! Whatever it is, I fear the Greeks, even bringing gifts.”)

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