Intellectual Property Law

February 16, 2015

Third Member of International Computer Hacking Ring Pleads Guilty to Hacking and Conspiracy to Steal Intellectual Property; Charges Against Indiana Defendant Pending

Delaware – A third member of an international computer hacking ring has pleaded guilty to conspiring to break into computer networks of prominent technology companies to steal more than $100 million in intellectual property and other proprietary data.

Nathan Leroux, 20, of Bowie, Maryland, pleaded guilty to conspiracy to commit computer intrusions and criminal copyright infringement based on his role in the cyber theft of software and data related to the Xbox One gaming console and Xbox Live online gaming system, and popular games such as the “FIFA” online soccer series; “Call of Duty: Modern Warfare 3;” and “Gears of War 3.” Leroux has been in custody since attempting to flee into Canada from Buffalo, New York, on June 16, 2014. A sentencing hearing is set before U.S. District Judge Gregory M. Sleet of the District of Delaware on May 14, 2015.

Sanadodeh Nesheiwat, 28, of Washington, New Jersey, and David Pokora, 22, of Mississauga, Ontario, Canada, previously pleaded guilty to the same conspiracy charge on Sept. 30, 2014. They remain in custody pending their sentencing hearings, which are scheduled for April 2015. Pokora’s guilty plea is believed to have been the first conviction of a foreign-based individual for hacking into U.S. businesses to steal trade secret information. Charges against a fourth defendant, Austin Alcala, 19, of McCordsville, Indiana, remain pending.

According to Leroux’s admissions in connection with his guilty plea, he was part of the hacking conspiracy between January 2011 and September 2012. During that period, hacking group members located in the United States and abroad gained unauthorized access to computer networks of various companies, including Microsoft Corporation, Epic Games Inc., Valve Corporation and Zombie Studios. The conspirators accessed and stole unreleased software, software source code, trade secrets, copyrighted and pre-release works, and other confidential and proprietary information. Members of the conspiracy also allegedly stole financial and other sensitive information relating to the companies – but not their customers – and certain employees of such companies.

Specifically, the data theft targeted software development networks containing source code, technical specifications and related information for Microsoft’s then-unreleased Xbox One gaming console, as well as intellectual property and proprietary data related to Xbox Live and games developed for that online gaming system.

Leroux admitted in court that he and others used the stolen intellectual property to build, and attempt to sell, counterfeit versions of the Xbox One console before its public release in November 2013. In July 2013, the FBI intercepted a counterfeit console built by Leroux, which was destined for the Republic of Seychelles.

Leroux also admitted that he developed a software exploit that allowed him and others to generate millions of “coins” for the FIFA soccer games playable on the Xbox Live platform. These coins are the virtual, in-game currency used to build a “FIFA Ultimate Team” in the games. Without the authorization of Electronic Arts, the intellectual property rights holder to the FIFA games, Leroux and others sold bulk quantities of the “FIFA coins” via online black markets.

The value of the intellectual property and other data stolen by the hacking ring, as well as the costs associated with the victims’ responses to the conduct, is estimated to range between $100 million and $200 million. To date, the United States has seized over $620,000 in cash and other proceeds related to the charged conduct.

This case was investigated by the FBI, with assistance from the Criminal Division’s Office of International Affairs, the U.S. Department of Homeland Security’s Homeland Security Investigations and Customs and Border Patrol, and the U.S. Postal Inspection Service. The investigation also has been coordinated with the Western Australia Police and the Peel Regional Police of Ontario, Canada.

The case is being prosecuted by Trial Attorney James Silver of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Edward J. McAndrew of the District of Delaware.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Charles M. Oberly III of the District of Delaware and Special Agent in Charge Stephen E. Vogt of the FBI’s Baltimore Field Office made the announcement.

October 13, 2014

Indiana Teen Indicted for Theft of Intellectual Property Valued More Than $100 Million

By Overhauser Law Offices, LLC

District of Delaware – Four members of an international computer hacking ring were

indicted for stealing gaming technology and Apache helicopter training software. Two have already pled guilty.

Four members of an international computer hacking ring have been charged with breaking into computer networks of prominent technology companies and the U.S. Army and stealing more than $100 million in intellectual property and other proprietary data. Two of the charged members have already pleaded guilty. The alleged cyber theft included software and data related to the Xbox One gaming console and the Xbox Live online gaming system; popular games such as “Call of Duty: Modern Warfare 3” and “Gears of War 3”; and proprietary software used to train military helicopter pilots.

October 3, 2014

If You Have Been Sued for Patent Infringement

By Overhauser Law Offices, LLC

How does a patent infringement lawsuit begin?

A patent lawsuit begins with the filing of a complaint alleging patent infringement by the patent

holder. If a lawsuit is filed against you, the patent owner must serve two documents on you: (1) a document called a “complaint,” which explains the accusations made against you; and (2) a document called a “summons.” The patent owner may first send a “demand” letter that states that you are potentially infringing the claims of a patent and requests that you pay for a license to use the patented invention, or it may go straight to court.

September 29, 2014

What To Do If You Get a Demand Letter

By Overhauser Law Offices, LLC

What is a demand letter? Am I legally

obligated to respond?

A demand letter is correspondence that states that you are potentially infringing the claims of a patent and requesting that you pay for a license to use the patented invention. You are not legally required to respond to a demand letter, but in some situations that may be the right course of action. Before deciding, consider your options, described below.

September 8, 2014

Apple Entitled to $400M in Samsung Profits, Indiana University Maurer School of Law Professors Say in Amicus Brief

By Overhauser Law Offices, LLC

Bloomington, Indiana – In a highly publicized intellectual property case involving the design features of smartphones and tablets, the Federal Circuit will decide whether to force Samsung to pay Apple nearly $400 million – Samsung’s total profits on products that infringed Apple’s design patents. Though several high-profile academics have lined up in support of Samsung, Apple’s position on the total profits rule should prevail, according to Indiana University Maurer School of Law experts who have filed an amicus curiae brief in the case.

Apple and Samsung have been battling in dozens of complex intellectual property infringement cases in several countries. At trial in one of the U.S. cases, a jury found that several Samsung devices infringed Apple’s design patents, and awarded Apple all of Samsung’s profits on those devices. On appeal, Samsung is arguing that it should only be required to give up the portion of its profits that can be linked directly to the infringing design features of the products, a theory called “apportionment.”

“Congress debated this same question over a century ago and rejected apportionment,” said Mark D. Janis, the Robert A. Lucas Chair of Law and director of the Center for Intellectual Property Research at the IU Maurer School of Law. He explained that in the mid-1880s, the Supreme Court decided two cases involving carpet designs in which the infringers made thousands of dollars in profits, but the design patent holder was awarded only 6 cents because it failed to prove how much of the profit was attributable to the carpets’ appearance.

July 28, 2014

Copyright Office Requests Comments on Music Licensing

By Overhauser Law Offices, LLC

Washington, D.C. – The U.S. Copyright Office has undertaken a study to evaluate the effectiveness of current methods for licensing musical works and sound recordings. It seeks additional comments on whether and how existing music licensing methods serve the music marketplace, including new and emerging digital distribution platforms.

An initial round of written comments and roundtable sessions were held, during which a number of significant issues were discussed. The Copyright Office believes these issues merit additional consideration.

First, the two federal district courts overseeing the antitrust consent decrees governing the largest performance rights organizations (”PROs”), American Society of Composers, Authors and Publishers (”ASCAP”) and Broadcast Music, Inc. (”BMI”), held in separate opinions that under those decrees, music publishers could not withdraw selected rights – such as ”new media” rights – to be directly licensed outside of the PROs; rather, a particular publisher’s song catalog must either be ”all in” or ”all out.” Following these rulings, both in public statements and at the recent roundtables, certain major music publishers have indicated that, if the consent decrees remain in place without modification, they intend to withdraw their entire catalogs from the two PROs and directly license public performances. Such a move would affect not only online services, but more traditional areas of public performance such as radio, television, restaurants, and bars.

July 25, 2014

Indiana Passes New Statute Criminalizing Offenses Against Intellectual Property

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Indiana Code § 35-43-1-7 has been made effective as of July 1, 2014.

This new criminal statute, enacted by P.L.158-2013, SEC. 458, covers certain computer-related offenses against intellectual property. It takes the place of 35‐43‐1‐4, which was repealed.

Indiana Code § 35-43-1-7 reads, in full:

June 27, 2014

Terry Unveils Draft Legislation to Address Abusive Patent Demand Letters

By Overhauser Law Offices, LLC

WASHINGTON, D.C. – Commerce, Manufacturing, and Trade Subcommittee Chairman Lee Terry (R-NE) (pictured) recently proposed draft text of legislation to address illegitimate patent demand letters. The legislation is designed to protect businesses from abusive patent assertion entities, also known as PAEs or patent trolls, while preserving the ability of legitimate companies to prosecute their patents.

The draft legislation seeks to increase transparency and accountability to help expose and prevent fraudulent infringement claims. It would require patent demand letters to include certain basic information to help companies determine whether a letter is legitimate. It would also enhance Federal Trade Commission (FTC) authority to levy fines on fraudulent patent demand practices, and provide state Attorney General enforcement of the federal standard.

Terry stated, “Patent trolls cost American companies tens of billions of dollars each year, and are threatening job creation and innovation. We heard from countless small businesses about the destructive consequences of these scams, and after listening to these concerns, it became clear Congress needs to act to stop this growing abuse. But we must also be careful not to reach too broadly and limit legitimate business practices.”

June 19, 2014

USPTO Cancels Redskins Trademark as “Disparaging” to Native Americans

By Overhauser Law Offices, LLC

Washington, D.C. – The opinion in Blackhorse v. Pro Football, Inc., TTAB Cancellation No. 92046185, resolved the petition of five Native Americans who filed for the cancellation of six “Redskins” trademarks with the U.S. Patent and Trademark Office (“USPTO”).

Yesterday, in a 177-page opinion, the Trademark Trial and Appeal Board (“TTAB” or “Board”) canceled six trademark registrations belonging to The Washington Redskins. All of the trademark registrations included the term “Redskins.”

Trademark attorneys for the petitioners argued that the term “Redskins” was disparaging of Native Americans. Under 15 U.S.C. § 1052, registration of a mark may be denied if that mark “Consists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.”

May 29, 2014

IU McKinney Welcomes Internationally Renowned IP Scholar to Law Faculty

By Overhauser Law Offices, LLC

Professor Xuan-Thao Nguyen, a professor at the Southern Methodist University Dedman School of Law, will join the faculty and lead the Center for Intellectual Property Law and Innovation at the IU Robert H. McKinney School of Law. She will join Indiana University in August 2014.

Professor Nguyen is internationally recognized for her teaching and scholarship in the areas of intellectual property, secured transactions, bankruptcy, licensing, and taxation in her teaching and scholarship. She has co-authored several treatises and casebooks and around 30 law review articles in the areas of intellectual property, secured financing, bankruptcy, and taxation.

“It is an honor and privilege to be the Gerald L. Bepko Chair in Law and Director of the Center for Intellectual Property and Innovation at the Indiana University Robert H. McKinney School of Law,” Professor Nguyen said. “I look forward to working with my colleagues, students, alumni and friends in building a vibrant Center for all and a special home for training future leaders around the world in IP and related fields.”