PALO ALTO — They say imitation is the sincerest form of flattery. But for mobile app makers, it can pose a real threat to the bottom line.
One of Howard Hogan’s clients learned that firsthand. Outfit7, which has a development office in Palo Alto and is headquartered in London, is best known for its Talking Tom Cat and Talking Friends mobile apps. But the “Talking Tom Cat 3″ available for download in late 2012 was placed in app stores by a China-based app company. And it too featured an anthropomorphic feline.
“They weren’t subtle about it,” Hogan, a Gibson, Dunn & Crutcher partner, said. “They didn’t call it Friendly Cat—they called it Talking Tom Cat 3. It seems like the next app in that line.”
Outfit7 filed a takedown notice with Apple, Google and other app store operators, but that didn’t do the trick. “They were so brazen that they communicated to Apple and Google that they owned the rights,” Hogan said. “They left us with no alternative but to sue.”
In December, U.S. District Judge Charles Breyer of the Northern District of California entered a default judgment against the Chinese counterfeiter, NanJing oooo3d Ltd., awarding $550,000 to Outfit 7.
Clones, copies and counterfeits are on the rise in app stores, and policing for knockoffs is usually left to individual app developers rather than intermediaries such as Apple and Google. Faced with a copycat, Outfit7 had some recourse due to its trademark and copyright protections. In general, however, lawyers say mobile development companies’ interest in patents, trademarks and copyrights is maturing slowly. Infringements, on the other hand, seem to be ratcheting up rapidly.
Eric Gelwicks, an attorney at Owen, Wickersham & Erickson, recounted a recent situation involving a fashion-focused tech client. The company decided it was time to launch a mobile app, and it was an apparent success, generating both downloads and buzz. It wasn’t long before a “+” version—an app bearing the same name, but with a “+” tacked on—popped up in app stores, purporting to be an upgrade from the original. It even used the same login information.
Fortunately, Gelwicks said, his client had registered a trademark on its name. That helped persuade the app store to intervene and force the impostor to change its application’s name and post a disclaimer.
Fraudulent activity is also drawing the attention of regulators and prosecutors. Earlier this month, the U.S. government won guilty pleas from conspirators in what it called its first counterfeit apps prosecution.
In-app purchases on games is now a $12 billion industry, with remarkably low barriers to entry. It takes minimal startup capital to launch an app. But while that’s an advantage for programmers, it has also spawned a new class of pretenders, with intentions ranging from making a quick buck to mining user information.
Trademark and copyright registrations are “really handy in expediting takedowns,” said Gelwicks, who previously worked at a media entertainment startup.
Generally, the marketplaces themselves don’t have any obligation to police or curate under the Digital Millennium Copyright Act. “All they have to do is take down the allegedly offending content to avoid liability,” said Lindsey Furtado, an attorney at Owen Wickersham. At the same time, he said, app stores have an interest in ensuring there aren’t counterfeit or malicious apps to preserve the trust of the downloading public.
Apple’s App Store reviews apps for malware and performs a limited comparison to see if it’s a ripoff. However, Google Play has no restrictions besides scanning for malware.
Last year, it emerged that a free Android flashlight app was harvesting and reselling user location data. And during the first week of April, one of the most successful apps on Google Play was an app called Virus Shield. At $3.99 a pop, it garnered more than 10,000 downloads. After it came to light that the Virus Shield was a sham that provided no antivirus scanning at all, Google announced it would refund customers’ money.
“It’s the nature of human commerce that there are original artists, content originators, and then their success just gets ripped off,” said Steve Swasey, a corporate communications executive at interactive entertainment developer Kabam. “We do spend quite a bit of time protecting our intellectual property.”
Sophisticated entities such as Electronic Arts will file for trademark before launching the game, said Furtado of Owen Wickersham. But smaller companies still tend to be reactive rather than proactive.
“From our perspective, often companies get to the branding elements last,” Gelwicks said. “You form your LLC, try to take on funding, build a [minimum viable product]. You beta test, and might get a patent, but then when you finally want to launch to market, you have to scramble to put some of those branding elements together.”
Having a patent pending can also serve as a deterrent against infringement.
When McDermott Will & Emery partner Ahsan Shaikh counsels software companies on developing an intellectual property strategy, often the primary hurdle isn’t a technical challenge at all: It’s the engineers, many of whom feel the whole point of patenting runs counter to their open-source sensibilities.
“I explain to [them], ‘Look, patenting will give your company the space to give you freedom to work on what you want to work on, and help the company survive,’” Shaikh said. “You just can’t enter the software-industry ecosystem without patents. They’re key to attracting investment and defending against competitors.”
When he puts it that way, Shaikh said, they usually buy into it.
More and more, businesses of all sizes must grapple with the tension between pushing innovations forward and getting to market quickly while taking the time to secure IP protections.
“You don’t know if your game is going to go viral, which is what spawns a flood of rip­offs,” Furtado said.
It’s success itself that draws the attention of counterfeiters, said Hogan of Gibson Dunn. “Because of the ethereal nature of these infringements, it’s important to maximize the options companies have by registering appropriate copyrights and trademarks. You have to be aggressive, because if you’re perceived to be a victim, what makes your app unique could disappear overnight.”
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