Tetris and Intellectual Property Rights: Trademark

This article is Part III of a series that elucidates the issues surrounding iPhone Tetromino games, Intellectual Property Law, and the Tetris Company.  The series begins with a reproduction of the Tetris Company’s Cease and Desist Letters. Next, it defines and explains patent, trademark and copyright law. Finally, it concludes with a re-examination of the Tetris Company’s claims of infringement.

What is a Trademark

A trademark is anything used in commerce to associate a product or service to its legal  entity of origin (this can be an individual, organization, or company). A trademark can apply to a word, name, symbol, device, and even a sound (USPTO). One common example of a very simple, but clearly recognizable trademark is Nike’s logo.

Trademark Rights

Trademark rights prevent outside vendors from using identical or “confusingly similar” marks on their merchandise to sell their products (USPTO).

For example, Nike Inc.’s trademark rights prevent other athletic manufacturers from designing and selling a shirt that uses the Nike logo or a confusingly similar variant thereof. Nike Inc. has invested considerably in advertisement to build its company name and to ensure a certain degree of quality for its products. Therefore, another company’s use of its logo unfairly misleads the customer and dilutes the value of Nike.

Trademark rights do not, however, “prevent others from making or selling the same goods or services under a clearly different mark.” (USPTO). This means that I can go into any athletic store, find a nike shirt that I love, manufacture an identical product (provided the design is not copyrighted and the formula for the material is not patented),  brand it with my own logo, and sell it.

Trademark rights can last indefinitely, provided the owner continues to legally enforce and protect his trademark. (This makes sense; we wouldn’t want to create a new name and logo for our company every ten years or so.) If, however, the registered trademark is in use by many other companies to the extent that it is no longer uniquely associated with the trademark owner, renewal can be contested in court.

Tetris and Trademark

The Tetris Company has obtained registered trademarks for the use of the word TETRIS and the Tetris logo in the industries of:

“games and playthings; namely action figures, bagatelle games; video games and video game cartridges; electronic game equipment for playing video games; electronic game programs; electronic toys with a clock or timepiece feature; hand held electronic toys; non-electronic hand held games; player operated electronic controllers for electronic video game machines; toy figures mountable on pencils and pens,”

“video game cartridges and software for playing video games,”

“clothing, namely shirts, hats and t-shirts,”and “hand held video games”.

(Registration 1,657,499: September 17, 1991, renewed in 2001; Registration 2,362,250 and 2,362,238: June 27, 2000).

Has the Word TETRIS Become Generically Associated with the Genre of Tetromino Falling Block Games?

Hundreds of tetromino falling block games are available on the internet that are not associated with the Tetris Company, but that call their products TETRIS (or a variant thereof). In fact, its possible for a tetromino player to go through life without buying Tetris, or even knowing about the Tetris Company.

This is because the word TETRIS has come to refer to the genre of tetromino/falling block games. As such, the question now becomes, is the Tetris Company’s registered trademark on the use of the word TETRIS valid?

This issue has never made it to court, most likely because the Tetris Company is afraid of losing a legal battle that would revoke its trademark rights.

What Makes a Name “Confusingly Similar”?

It is also unclear how dissimilar a tetromino game name must be to the word TETRIS. Some believe that the trademark covers the TETR prefix. But the term “tetromino” and the prefix “tetra” (meaning four) which predate Tetris, also contain TETR.

This issue has also never been settled in court.

How to Avoid Trademark Infringement

To safeguard against any trademark infringement claims, create your game, refer to it as a “tetromino”  or “falling block game”, and give it a completely different name (or one that you are prepared to defend).

The Tetris Company and the iPhone

This article is Part I of a series that elucidates the issues surrounding iPhone Tetromino games, Intellectual Property Law, and the Tetris Company.  The series begins with a reproduction of the Tetris Company’s Cease and Desist Letters. Next, it defines and explains patent, trademark and copyright law. Finally, it concludes with a re-examination of Tetris Company’s claims of infringement.

The Tetris Company v. Tris, Kafablo, Teto Teto, Shaker, and Touchris

Since Aplpe Inc. launched the Appstore in August, 2008, the Tetris Company has bullied five Tetromino game developers into removing their games from the Appstore. Each developer received a Cease and Desist Letter from the Tetris Company, followed shortly by a warning from Apple to remove infringing materials. Let me start by saying that these letters are absolutely bogus. You will soon understand why.

Below is a compilation of the Cease and Desist letters that a few iPhone Tetromino game developers received.

“We are the intellectual property counsel for The Tetris Company, LLC, exclusive licensee of Tetris Holding, LLC in and to the Tetris® mark and game.  Collectively, The Tetris Company, LLC and Tetris Holding, LLC are referred to as ‘The Tetris Company.’  The Tetris Company is the owner of copyright in the game throughout the world, including U.S. copyright registrations PAu 1,214,036; PAu 1,214,035; PA 412,169; and PA 412,170.

This letter is a notice of infringement pursuant to § 512(c) of the U.S. Copyright Law (section 512 is known as the Digital Millennium Copyright Act) and your Copyright Infringement Policy at www.apple.com/legal/trademarkclaimsofcopyright.html. We also write pursuant to the Lanham Act, the federal trademark statute.

The Tetris Company recently became aware of your company’s promotion and display of a ‘—’ game on Apple’s iTunes,  where the user may download and play the game. The ‘—’ game violates the copyright in the Tetris® game because it is a  copy of our client’s game and was created and is being reproduced and sold or made available for play without our client’s prior permission or authorization.

Such wrongdoing subjects your company, and any other person or entity acting in concert with it, to an injunction, liability for statutory damages, compensatory damages, punitive damages, disgorgement of profits, costs and attorneys’ fees under the U.S. Copyright Act, 17 U.S.C. §101 et seq. Accordingly, The Tetris Company demands that you immediately cease display, distribution, publication or offering of the ‘—’ game in question and any games infringing our client’s rights,  on any web site, or in any other fashion, whether via the Internet, or not.

I have a good faith belief that use of the copyrighted materials described above as allegedly infringing is not authorized by the copyright owner, its agent, or the law. I swear, under penalty of perjury, that the information in this notification is accurate and that I am authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

This letter is without prejudice to our client’s legal rights and remedies, all of which are expressly reserved, and does not purport to be an exhaustive statement of its legal position.”

Tetris and Intellectual Property Rights: Patent

This article is Part II of a series that elucidates the issues surrounding iPhone Tetromino games, Intellectual Property Law, and the Tetris Company.  The series begins with a reproduction of the Tetris Company’s Cease and Desist Letters. Next, it defines and explains patent, trademark and copyright law. Finally, it concludes with a re-examination of the Tetris Company’s claims of infringement.

What is a Patent ?

A patent is an intellectual property right that grants an inventor the “right to exclude others from making, using, offering for sale, or selling” an invention (USPTO) for a period of up to 20 years. When a patent expires, the invention pases to the public domain.

Essentially a patent authorizes a temporary monopoly on a novel idea.

What is the purpose of a patent?

The purpose of a patent is to benefit society by 1) encouraging innovation that will improve the quality of life and  2) establishing a process by which inventions pass to the public domain.

Break It Down

The first stage of patent rights rewards the inventor.

Lets say I discover a drug that treats symptoms of autism spectrum disorders, and that I successfully apply for a patent. Knowing the demand of such a product, and that I will be its sole manufacturer for the next 20 years, I set a high price.  What happens? Wealthy patients flock to their doctors to secure a prescription, and I profit greatly. Meanwhile, success stories pervade the media. Pharmaceutical companies begin to prepare for the day when they can get their hands on the formula, and autism patients gain confidence in the treatment.

The second stage of patent rights opens the market and brings the invention to the general public.

When my patent expires, the formula of my drug is made public. At this time any third party is free to step in and replicate, refine, and distribute the formula. The result? New competition, new implementations and improvements to my formula, increased supply, lower prices, and higher accessibility of the product to the general public. Now families that could not afford the original drug can buy “knock-off” brands that use the same formula to treat symptoms of autism spectrum disorders.

All in all, the inventor enjoys her day in the sun, and society benefits by being introduced to an invention that improves many people’s lives.

What is Patentable?

Novel and non-obvious inventions or discoveries are patentable.

The game concept of Tetris was once patentable. However, because it was never patented, it now lies in the public domain. Moreover, had Pajitnov patented Tetris at the time of its invention (1985),  by now (23 years later), his patent rights have expired.

What this means is that no legal framework currently protects the replication, improvement, or sale of Tetris game mechanics and rules.

What does this mean for “Knock-off”, “Home-Made” or Tetris “Clones”?

First off, lets call them “Tetromino games” so we don’t cross over into the Trademark argument. The answer is that ANYONE can freely and legally create a Tetromino game with identical game play and rules as the original Tetris, provided that he uses his own codebase, art, and music.

I will go into Trademark rights in my next post, so lets hold off on “naming” a Tetromino game for now.

Lets Get This Straight: Tetromino and Tetris

Tetromino

A Tetromino is a geometric figure composed of four, square sub-units that are connected orthogonally. There are five unique configurations of tetrominoes referred to as the L/J, S/Z, I, O, and T pieces because they resemble these characters of the Roman alphabet.

You might be familiar with the term Domino, a geometric figure comprised of two square subunits connected orthogonally. Also in existence are “pentominoes” (five) and “polyminoes”(more than one; many). Pentomino is a puzzle game that consists of arranging different configurations of pentominoes into rectangular boxes of varying sizes.

Domino Piece

Pentomino Puzzle 10×6

Tetris

In 1985 Alexey Pajitnov invented Tetris, a computer game derived from his favorite puzzle game, Pentomino. Most likely, Pazitnov used tetromineos in place of pentominoes for simplicity’s sake. In Tetris, randomly ordered tetrominoes descend from the top of a grid at a constant speed. Players must arrange these “falling” pieces on the grid through rotation and translation. Once a piece hits the “ground”, it locks into place. When a complete horizontal row of the grid is filled, the row is cleared and the player is awarded points. Players can change the acceleration of the pieces to win more points. The object of the game is to gain as many points as possible before reaching the top of the grid.
Tetris Game Concept

What I just described is the game concept of Tetris. The only intellectual property right that protects a game concept is a patent.

If Alexey had not been living in the Soviet Union at the time of his invention, he might have patented the Tetris game concept. However, he was living in a time and place where private business was outlawed and the idea of intellectual property did not exist. The BBC documentary entitled Tetris, From Russia with Love describes the atmosphere of Russia in 1985 as a place where

“individual ideas were owned by the state and were to be shared among everyone.”

So, Alexey put Tetris on a disk and shared it with his friends. Tetris spread throughout Russia, and then to Hungary, and then to the rest of the world.

Picking the Right Corporation

My first step is incorporating– creating a legal entity that will allow my team and investors to contribute to the project within a mutually understood framework. Corporation options are as follows:

• Sole Proprietorship- A sole proprietorship does not offer any liability protection for the business owner because unlike C-corps, S-corps, and in some cases LLC’s, no corporate shield exists to separate the owner from his or her company. The business owner is taxed at the individual level, and any company losses can offset other forms of income on a tax return.  This is a dangerous option for individuals with many personal assets. It is also especially risky for companies in the service industry– if your service has the potential to endanger, violate, or hurt a customer in any way, you can be held personally responsible for damages.  Finally, in a sole proprietorship, business owners must pay self-employment tax.

• Partnership- A partnership does not offer liability protection for business owners. Any income is allotted to both owners, who are then taxed on the individual level. Again, each must pay self-employment tax, and any company losses can offset other income on either of their individual tax returns. This is a little dangerous if you do not trust your partner to make sound decisions, because any mistake he or she makes can have consequences on your individual tax return. Finally, partnerships are subject to an $800 annual fee.

• Limited Liability Company- An LLC offers some liability protection for its founders and members.  Unlike a sole proprietorship or partnership, LLC tax returns are filed separately. And, unlike s-corps and c-corps, an LLC is very flexible when it comes to the allotment of income. So, if you have unique plans for income distribution, an LLC could be a good option for you. Also, LLC’s are inherently smaller businesses because the number of owners must not exceed a certain limit (something like 20). Unfortunately, larger companies (when considering a buy-out) are sometimes turned off by an LLC because they seek more structure and security in ownership and are turned off by the size limitations. There is also an annual $800 minimum tax fee for an LLC based on gross income which can reach up to about $12,000! WOAH! Not the sort of money a start-up can afford.

• S-CORP - An s-corp offers a full liability shield for its executives and investors.  It exists as an independent entity, and tax returns are filed separately. Whats great about an s-corp is that you get full corporation status without having to pay corporate taxes. Any income that is made is immediately and directly distributed to the shareholders. S-corps are also very stable and secure, and follow protocol similar to c-corporations. Therefore, if expanding or switching over to c-corporations is in your future plans, an s-corp might be right for you. Larger companies also tend to favor the framework of s-corps over LLC’s. Finally, there is an annual $800 s-corp tax fee from which second year California businesses are exempt.

• C-CORP- A c-corp offers a full liability shield for its executives and investors. Company taxes are filed separately. However, unlike all preceding options, C-coprs are subject to a corporate tax. Therefore, any income is taxed once, and then again at the individual level later. Companies that expect immediate growth begin as c-corporations. There is also an annual $800 tax fee for c-corps.

Neither a sole proprietorship nor partnership offer the liability shield I would like. I also want to keep my options open for selling the company in the future, so an LLC is not appealing to me. Furthermore, if we make as much as expected, the annual LLC tax fee could get too pricey. Finally, I do not want to form a c-corp because start-ups simply can not afford to be doubly taxed. So, my choice is an S-CORP.

Cheap and Easy Steps to Founding a Start-Up in Silicon Valley

Talk to any lawyer, accountant, or insurance agent about your plans to incorporate, and he will convince you that you absolutely need to pay his fee for incorporation services. Well, if you’re smart about it, you can avoid this. Just make an appointment with the SBDC or SCORE and talk to a counselor about your options. Here’s what I learned.

Small Business Development Center

The SBDC in Sunnyvale was not what I had expected. The office was located in a confusing, one story building in the middle of nowhere. The center itself was comprised of a series of cubicles and bodies moving about. Not many people wore professional attire. But the receptionist was friendly and my counselor was informative and very supportive. All in all, it was a comfortable introduction into the business world.

I met with a very nice woman named Sheri, who started her own business ten years ago and is now a volunteer counselor for small and developing businesses at the SBDC branch in Sunnyvale. Sheri went through the steps of starting a business on your own from beginning to end, and then answered some questions of mine about accounting. This is what she said.

Step 1: Go to the Santa Clara County Office to file for a Business License. ($30 – $100)

Step 2: Go to City Hall to file for a Fictitious Name Statement ($35). This is only necessary if the name of your company is non-descriptive and does not include your name. At City hall, you must go through a database to ensure that your name is not already in use. To check ahead of time, you can check online. After filing, you are given instructions to announce your business in the local paper within 30 days.

Step 3: Draft Articles of Incorporation. For California, go to the CA Secretary of State Business Portal and download the Organization of California Stock Corporations Template. This document contains information about the regional offices of CA, the services offered at each site, and the fees involved for each transaction.

Note: As far as ownership of the company, my intention was to award a specific amount to my seed investor. I was not willing to part with any more until after the release of our first game.  With this in mind, I asked Sheri her advice on allotment of shares.

She told me to state ownership in my articles of incorporation when naming the board of directors. She also advised me not to authorize ANY shares of stock. I later learned that this was a bad idea. (In fact, for # of authorized shares, 10 Million is a good place to start.)

Step 4: Have a lawyer look over your articles. You don’t have to pay someone to do this. SCORE has an agreement with various corporate lawyers to award first time customers a free consultation. Take advantage of this. Schedule a face to face appointment with as many lawyers as you can and have your articles ready for inspection. Once you are confident that everything is in order (the SOS is very particular about exact names and punctuation), print out 4 signed copies and drive over to the main office in Sacramento (or check to see that regional offices closer to you offer the services in which you are interested) and file your articles over the counter. There will be a $15 handling fee plus a $100 processing fee. This process will take about 1 hour. (Sheri also mentioned a $25 dollar annual fee for filing annual minutes)

Step 5: “On your way home,” call the IRS and get your Tax Identification Number. This will allow you to open up a business account and credit card.

Step 6: File for S-corp eligibility through the IRS within 45 days of incorporating. Sheri told me the form I want would be 2335 (I later learned that its actually 2553). Ask for confirmation by mail.

Step 7: Go to the bank with your 1) Articles of Incorporation, 2) Business License, and 3) TIN and open up a business account and credit card. The sooner you start building credit for your company, the better.

And….You’re in business!

I also asked Sheri about compensating my development team. My plan was to pay them through % revenue. She suggested drafting Independent Contractor Agreements (1099). I later learned that there are very specific qualifications for Independent Contracting having to do with the time, place, and method of the work being done on behalf of the company. I’ll get to that in my next article.

For the most part, it was nice to talk to Sheri because she assured me that indeed I could incorporate without a lawyer, accountant and insurance agent, and that the process would be relatively easy. A few things she told me were apparently incorrect, but, again, just be smart. Continue asking the same questions to differnt experts. When you reach consistency, you have your correct answer.