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A case Analysis: Copyright and Patent Infringement

(Napster & Research in Motion)

Manisha Thapa

Westcliff University

BUS 602: Business Law

Mr. Bhola Nath Dhungana

December 14, 2020

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An intellectual property right is the right given to individual for their creation in order

to protect their creation from being violated or from unauthorized access. In the intellectual

property right, the owner or creator get the exclusive right for certain period of a time. The

major purpose of such right is to protect the owner’s creations from being copied or misused.

There are several types of the intellectual property rights such as copyright, patents,

trademarks, trade secret (Saha & Bhattacharya, 2011).

Patent: Patent right protect the owner’s creation from being copied, sold, or being used by

any other party without permission from the authorized owners. The patent owner holds an

authority to grant the license to the third party with a mutual agreement or buy or sold of the

patent to any other party.

Trademark: a distinctive sign or symbol that helps to identify the product. The trademark

provides unique identity to the product and services.

Copyright: the right given to any tangible creation. Copyright protects the creation of artist

and authors such as music, art, paintings, books, movies and soon. This gives the creators an

exclusive right to protect their creation from any unauthorized access or copy. The purpose of

copyright is to encourage the creative work.

Trade Secret: it refers to the protection of the company’s confidential information including

strategies, formulas, operating procedure in order to prevent the unauthorized access. Trade

secrets are intellectual property rights on company’s confidential information which may be

sold or licensed.

The Intellectual property infringement means breach of intellectual property right.

The intellectual property is infringed when someone violates work protected by intellectual

property law without permission of the creator. The infringement act is carried either through

counterfeiting and piracy. While counterfeiting refers to unlawful act of duplicating or

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limiting the product whereas piracy refers to the act of copying others creation without

permission. The infringement of intellectual right is prohibited by the law that creator or

owner have the right to take the legal action against the party. Similarly, the creator or owner

hold the right to transfer the products or services to other party either through licensing or

selling (Bonaido, 2008).

Patent Infringement: the patent right is given to the creator or owner to protect their

creativity for certain period. The government enforce the patent right to protect the

innovation or creativity from being misused. To get the patent right, owner or creator must

file for patent right within a year of publicly disclosing the creation (Nambale, 2012). The

patent right is granted once government provides an approval. Patent can be categorized into

three types:

1. Utility Patent: this type of patent covers the processes, compositions, machines, and

manufactures that are new and useful. This right protects the innovation for 20 years

if the maintenance fee is paid periodically.

2. Design Patent: this protects the new and unique designs. Usually, this patent works

for 14 years.

3. Plant Patent: It is an intellectual property right that preserves the main characteristics

of a new and original plant from being reproduced, marketed or used by others.

Thus, the patent infringement happens when the unauthorized party use or sell the

creation without permission of patent holders. The patent holders have the right to filed

against the party who damage or misused the rights. The infringement cases are settled in

the court where the patentee can claim the damages cause by the unauthorized party. The

other party must pay fine or royalty including the loss the patentee has bear during the

period.
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Copyright Infringement: the act of using the preserved material of copyright holders

without permission is known as copyright infringement. As explained above copyright is

right given to some party to protect their creativity for certain party. So, if the right given

to copyright holders is breached by any other party then it is known as copyright

infringement. Music and movies are the examples of copyright infringement. The

copyright holders could grant the permission to use the works or creation to any third

party agreeing on certain mutual terms and conditions as a licensing agreement or sell to

any other party. Various factors might lead to the copyright infringement. Such as

technology is major factors that lead to copyright infringement because the technology

has made easier to copy a product or information of other party (N M& Aswath, 2016).

The development of emerging technology has surpassed the capacity of the regulatory

system to ensure that new formats are protected by copyright. Also, many companies are

generating huge amount of profit replicating or copying other products. Hence, the

growing internet facility has contributed in copyright infringement as well as created

obstacles for the copyright holders.

The copyright infringement can be classified into

Primary infringement: the act of copying the work of copyright holders. For instance,

photocopying a book and then distributing it for commercial purpose.

Secondary infringement: the act of infringement without actually copying the work of

copyright holders. This can happen through selling the infringement copies, distributing

infringing copies, importing infringing copies.

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Case -I Napster vs RIAA

Napster was started in 1999 as an online file sharing service. The Napster provide a

platform to the users which facilitates users to download music file without any charges and

also facilitate peer to peer sharing of music files. Users were able to watch the music through

internet and share it as well. Most of the users used the Napster service to upload and

download the copyright music. The Recording Industry Association of America involving the

times warner Inc, Sony Corp and other many recording companies filed against the Napster

for copyright infringement claiming that Napster operates it business sharing the music which

they don’t own and also has no the permission. While RIAA allocated that around 20 million

people shared the file via Napster that results the loss in sale of music industry costing $300

million (Ariel, 2000). Napster was fined over $40 million as a result of copyright

infringement while Napster settle the case by paying $26 million dollar and further to pay

remaining fine, Napster changed the business structure. Further, Napster filed chapter 11

bankruptcy protection however, it has to liquidate its assets (n.a, 2013).

Case II: NTP vs RIM

NTP Inc is a Virginia based Patent holding company in the field of wireless email and

RF antenna designs. NTP has licensed various other companies such as Nokia, Visto, Good

technology and RIM. The RIM licensing agreement is the result of settlement patent

infringement case. In 2006, NTP suit a file of patent infringement against the Research in

Motion seeking to shutdown the popular blackberry service of RIM. Prior to and during its

proceedings, NTP, whose primary assets are its patents, constantly sought to license them to

R.I.M. however, RIM didn’t respond to NTP which leads to lawsuit filed against RIM stating

RIM used the wireless email technique of NTP (Austen, 2006). Similarly, the court also

stated that RIM has infringed the patent and this caused the loss of $33 million to NTP. The
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case is settled when the RIM agreed to pay $612.5 million to settle a long-running patent

dispute.

1. Parties Being Sued

 In the case I, Napster was sued for contributory infringement and vicarious

infringement. The contributory infringement refers to act of not involving

directly in infringing act but authorizing others to involve in it while vicarious

infringement refers to being liable for the infringing activities done by other as

the party is not making any effort to control the infringing act even though

they have ability to control it. The recording association claims that Napster is

guilty for contributory copyright infringement. Also, Napster was aware of the

massive infringement taking place on its system which greatly contribute to

the violation rendering the complainants likely to succeed in this claim. While

court found that Napster zero effort to mitigate the infringement and also

company was benefited financially from it. Thus, Napster was sued for

vicarious infringement.

 In case 2, RIM was sued by NTP claiming RIM has used wireless email

technology of NTP to create blackberry service. Thus, claiming the patent

infringement NTP filed against RIM and eventually the court found that RIM

willfully infringe the patent. The infringement has cost $ 33 million damages

to RIM. The court judges increase the penalty fine to $ 53 million as the patent

infringement was willful. Further the court also order RIM to pay the legal fee

of the NTP costing $4.5 million as well as issue an injunction to cease and

desist the infringing patent (Austen, 2006).

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2. Parties Filing Suit

 Case 1: The American recording association filed a case against the Napster

claiming unauthorized access given to user for downloading and sharing the

videos. RIAA along with the times warner Inc, Sony Corp and other many

recording companies filed against the Napster for copyright infringement. The

Napster were involved in copying, downloading, sharing and uploading the

content without owner’s permission. Therefore, claiming the infringement of

copyright recording association filed against Napster.

 In case 2, NTP filed against Research in motion claiming the use of wireless

email technology. NTP sent the notice to RIM regarding the license of wireless

email technology however, RIM didn’t respond. NTP sued against RIM claiming

the willful infringement.

3. Financial Damages

 Case I: RIAA allocated that file shared from Napster by 20 million users has resulted

the loss in sales of $300 million. After the judgment from the court, Napster has to

pay $40 million for the copyright infringement.

 Case 2: RIM patent infringement has damaged around $33 million to NTP. The court

increases the royalty cost to $53 million stating RIM has made willful infringe

including the $4.5 million. The case is settled when the RIM agreed to pay $612.5

million to settle a long-running patent dispute.

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4. Ability of the Alleged Infringing Party to make Financial Restitution

 Case 1: This case was partially settled as Napster paid $26 million dollar and changed

the business structure to pay the remaining fine. Napster filed chapter 11 bankruptcy

in 2002 however, it was rather forced to liquidate the assets.

 Case 2: RIM and NTP first tried to settle down the case through negotiation however,

negotiation canceled due to some legal issues and the case later on was handled by the

court where both parties came into agreement and RIM paid $612.5 million to NTP.

After all the terms and infringement fine was paid by RIM, litigation against RIM was

canceled by the court.

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Contractual Issues

Contract can be defined as the agreement between two parties that is enforceable by

the court of law. Contract legally bind two parties defining the rights and obligations of both

parties. Whereas the contractual issues arise when two party fails to meet the contractual

obligations or breach the contract. If one party breach the contract another party has right to

file the case against another party claiming the damage caused.

 Case 1: Napster doesn’t have any kind of contractual relationship with any

companies.

 Case 2: RIM and NTP doesn’t have any contractual relationship. After the patent

infringement by RIM, both NTP and RIM went into negotiation and tried to settle the

$ 450 million which was later on failed due to some legal issues. However, the case

was settled at $612.5 million. During the negotiation, NTP allowed RIM to use the

mobile email patented inventions in their goods and services. NTP has licensed

various other companies such as Nokia, Visto, Good technology and RIM. The RIM

licensing agreement is the result of settlement patent infringement case. While NTP

also filed the lawsuit against other various telecommunication companies such as

sprint Nextel, Verizon and T-Mobile as similar to RIM.

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Corporate Issues

 Case 1: American recording association filed a case against the Napster claiming

business performed by Napster is not being ethically carried out as Napster were

involved in copying, downloading, sharing and uploading the content without

owner’s permission. Therefore, claiming the infringement of copyright recording

industry association of America filed against Napster as a result of unauthorized

act of distributing the copyright material. Also, RIAA allocated that file shared

from Napster by 20 million users has resulted the loss in sales of $300 million.

The case trial was long and Napster has to pay the fined costing $40 million after

the judgement from the court. When Napster paid $26 million dollars and altered

the company structure to cover the remaining fine, this case was partly settled.

However, in 2002 Napster filed chapter 11 bankruptcy, it was more compelled to

liquidate the assets.

 Case 2: before filing against the RIM, NTP has sent notice regarding the licensing

of patent of wireless email to many companies including RIM. However, RIM

didn’t respond and NTP sued against RIM claiming the willful infringement. both

NTP and RIM went into negotiation and tried to settle the $ 450 million which

was later on failed due to some legal issues. However, the case was settled at

$612.5 million.
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Legal Issues

 Case 1: Napster was sued by the Music Industry Association of America accusing

Napster for promoting an unrestrained, unauthorized online bazaar. Napster argued

that federal law protects personal copying of songs. Napster has faced copyright

infringement under copyright laws of united states. The trailer song of Metallica band

was released from their site before releasing the song officially. The court also made

the judgement that Napster is guilty for violating the copyright creations. While court

declared that Napster is involved into two infringement as per the federal law of

united states i.e., contributory infringement and vicarious infringement (Woszczynski

& Caylor, 1998).

 Case 2: NTP sued RIM claiming the use of patent wireless email technology for

producing the blackberry software. Later on, court also declare that RIM has willfully

infringe the patent product of NTP and as a fine RIM paid $612.5 million to settle the

case.

Bankruptcy issues

 Case 1: After payment of $ 26 million of fined by Napster, it filed for chapter 11

bankruptcy however it was forced to liquidate its assets. Napster had to completely

stop the business operation. After the bankruptcy of Napster, other company i.e.,

Roxio bought the name and trademark of Napster at the price of $5 million.

 Case 2: No bankruptcy was filed by RIM and NTP as both of them settle the dispute

appropriately. RIM paid $ 612.5 million as a settlement to NTP.

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Conclusion

Hence, if anyone violates work covered by intellectual property law without the

creator's permission, the intellectual property is infringed. The infringement of the patent thus

occurs when the unauthorized party uses or sells the production without the patent holders'

permission. The holders of the patent have the right to lodge a lawsuit against the party that

has violated or misused the copyright. Likewise, the growing Internet facility has therefore

led to the infringement of copyright as well as created barriers for copyright holders.

In the above case, Napster was sued by the Music Industry Association of America

accusing Napster for promoting an unrestrained, unauthorized online bazaar while NTP sued

RIM claiming the use of patent wireless email technology for producing the blackberry

software
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Reference

Ariel, B. (2000). RIAA v. Napster: A Window onto the Future of Copyright Law in the

Internet Age

Journal of Computer & Information Law, 18(4), 755-7750

Austen, I. (2006). Another Patent Case Is Filed Against Maker of BlackBerry. Retrieved from

The New York Times: https://www.nytimes.com/2006/05/02/technology/02patent.html

Bonadio, E. (2008). Remedies and Sanctions for the Infringement of IPR Under EC Law.

n.a, (2013). Case Study: A&M Records, Inc. v. Napster, Inc. Retrieved from:

https://onlinelaw.wustl.edu/blog/case-study-am-records-inc-v-napster-inc/

N M, A & Aswath, L. (2016). Understanding Copyright Laws: Infringement, Protection and

Exceptions. International Journal of Research in Library Science (2455-104X). 2.

2455-104X.

Nambale, J. (2012). Infringement of Patents in Uganda. SSRN Electronic Journal.

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Woszczynski, A & Caylor, J. (1998). Winners and Losers in the Napster Case.