Controversy over first dibs on a gimmicky iPhone application could be brewing into a full blown hangover for Canadian beer maker Molson Coors Brewing Co.
Steve Sheraton, a Swiss-born, Los Angeles-based, a comedian, magician and developer has filed a U.S$12.5 million law suit before the L.A. District Court for against Molson and its ad agency Beattie McGuinnes Bungay Ltd. for allegedly copying his iBeer.
At least one Canadian technology analyst says the scenario could well be a precursor to other mobile app copyright battles as mobile marketing gain traction in the industry. The iBeer, currently one of the top five downloads in Apple’s App Store, costs $2.99 a pop. Basically, the application makes a user’s iPhone look like a glass of beer. Tip the phone back, and the beer disappears as if you were drinking it.
Sheraton, a certified magician and physical comedian whose Website identifies him as a “general nutcase speaking seven languages,” made a YouTube video of the application in August 2007.
A few months later Beattie McGuinnes Bungay asked Sheraton whether the company could use iBeer to promote Coors. When he refused, the company created iPint, said Sheraton. When iPint appeared on the Internet for free, it quickly eclipsed iBeer in popularity.
In his submission to the court, Sheraton said iPint “dilutes the market” causing Sheraton’s company Hottrix to “suffer irreparable damages and lost profits.”
The ad company received a “cease and desists” letter from Hottrix and iPint was removed from the App store in the U.S. The iBeer then quickly became No. 5 in the App Store’s top download list. iPint, however, is still available in international markets and Sheraton is now suing for loss of profits amounting to about $12.5 million.
Molson Coors did not comment in detail for this article. A company spokesperson e-mailed IT World Canada stating: “We are confident that we’ve handled this matter appropriately, and will vigorously defend the action.”
Carmi Levy, technology research analyst and senior vice-president of AR Communications Inc. in Toronto says the applications themselves may well be useless but the “stakes are high”. “The apps don’t really do anything beyond being a funny party trick,” Levy said. “But the situation underscores how high the stakes are in terms of application development for mobile devices.”
He said the lawsuit could be the first of a string of legal battles over mobile app copyright just as companies spent millions of dollars in litigation over desktop applications in the 1990s.
“Back then the Apple vs. Microsoft GUI battle made headlines. With the emergence of mobile marketing, we might see the same for mobile apps,” he said. In the case of iBeer – iPint contest, Sheraton and Molson are targeting the same audience and appear to be using the same technology for divergent ends, Levy said.
“Clearly, Sheraton aims to monetize the application because he’s charging a fee for its use. Molson on the other hand is using it as a marketing tool.” At this point, Levy said, Molson could either opt to pay the plaintiff a certain amount without admitting any guilt or further liability, drop the use of iPint completely, or battle it out in court.
The case also illustrates the intricacies of dealing with copyright and intellectual property issues flavoured by IT realities such as widespread Internet access, say Marek Nitoslawski, Montreal-based head of the intellectual property practice group at Canadian law firm Fasken Martineau.
“There’s a bit of a gray area here,” Nitoslawski said.
For example, the beer brewer had effectively ceased American distribution of iPint over the App store. But because online downloads can be made across continents and applicantions can be easily passed around over the Web, virtually nothing can stop the iPint from showing up in U.S. iPhones.
“One out in the Web, things take on a life of their own. How can you even tell if Molson controls or is responsible for the distribution?” asks Nitoslawski.
While the episode may have brought the relatively obscure Sheraton some measure of public notice, the situation has the potential of painting Molson in a less flattering light, according to the analyst.
“A very public legal battle could make Molson look like Goliath trampling David, ” said Levy.