Intellectual Property Intellectual effort, not by physical labor Reputation (goodwill) is one part of intellectual property Intangible property Lawsuits involve infringement in violation of the owner’s right Damages include monetary and injunction Counterfeit and fraudulent use of this property costs business tens of billions of dollars a year Major forms include: –Trademarks –Copyrights –Patents –Trade secrets
Trademark A commercial symbol –design, logo, phrase, distinctive mark, name or word –“brand name” (i.e. Nike and others) –protected by the Lanham Act –Classifications: arbitrary and fanciful (most favored – Clorox) suggestive (not as favored – Dairy Queen) descriptive not as favored – but Holiday Inn and Yellow Pages have protection Generic – no protection (nylon, zipper)
Registration Online: Pay of $335 for each class of goods using a mark Submission of copy of mark (a specimen) Description of the goods that will use the mark Declaration that applicant has no knowledge that mark will conflict with other marks Good for 10 years, then renew International protection of marks encouraged by International Bureau of the World Intellectual Property Organization (WIPO) via the Madrid Protocol Through “Madrid System” a trademark holder from most countries can file an existing trademark for international registration. Less costly than registering in each country individually.
Infringement, Dilution and Cybersquatting Infringement –Confusion of origin of goods by improper use of trademark –Essentially stealing another’s good name –Lanham Act allows lawsuits for infringement Dilution –Rights further expanded through The Trademark Dilution Act –Injunction against those blurring or tarnishing famous trademarks Cybersquatting –Trademark is improperly used in a domain name –Restricted by the Anticybersquatting Consumer Protection Act Defenses –Fair use (mention of mark in comparative advertising) –Non-commercial use (parody or editorial commentary) –News reporting or educational use
Audi AG v. D’Amato D’Amato registered domain name www.audisport.com. Sold goods and services with Audi logos. Site used various Audi trademarks – Audi, Quattro & Audi Four Ring Logo. Claimed to have permission from an Audi dealership salesman. (Even if he did, Audi dealerships don’t have rights to grant use of Audi trademarks.) Audi sued D’Amato for infringement, dilution and cybersquatting of its three famous trademarks. District Court: Held for Audi. Issued injunction against D’Amato, his website and domain name. D’Amato appealed.
Audi AG v. D’Amato HELD: Affirmed. D’Amato infringed. “Likelihood of confusion” must be shown to obtain equitable relief (here a permanent injunction). Disclaimer on website of association with Audi does not absolve D’Amato of liability. Directing consumers to his website and later disavowing affiliation with Audi is too late. He created “initial interest confusion” – an infringement under the Lanham Act. He stated on the website that he had a signed agreement with Audi, which was not true. Website merely having hyperlinks to goods (hats/shirts) creates a commercial effect that damages Audi. Dilution law also offended – integrity and distinctiveness of mark is infringed upon. Audi spent millions on its trademarks to be known worldwide. D’Amato used the marks in commercially related activities. The marks used were identical to Audi’s. Under Anticybersquatting Consumer Protection Act (ACPA), requirements have been met showing Amato was in bad faith to profit from Audi’s mark.
Counterfeiting Copying or imitating of a mark without authority to do so. Passing off goods as if they were original. Problems with universities, Major League Baseball and well-known companies: Nike and Disney. Levi’s has seized millions of pairs of counterfeit pants all over the world. Even if people are told that the counterfeit goods are counterfeit (no one fooled), the trademark counterfeited. Lanham Act allows private parties to obtain search-and- seizure orders to grab counterfeit goods. Private investigators look for imitations; provide U.S. Attorney with evidence; and U.S. Attorney either takes actions or approves a party’s right to obtain a warrant to seize goods. Goods can be used as evidence in lawsuits.
Trade Dress –Protected by Lanham Act –Concerns the “look and feel” of products and service –Size, shape color, texture, graphics, etc. –Must be “inherently distinctive” i.e. Roar of lion – trade dress for MGM –Two Pesos v. Taco Cabana: One Tex-Mex restaurant could not copy its competitor’s unique décor. –Wal-Mart v. Samara Bros.: No infringement by Wal-Mart on Samara’s design of children clothing, although designs were similar. Protection received if trade dress is distinctive and has secondary meaning. Secondary Meaning: Primary significance of mark or trade dress is recognition of the source of product rather than the product itself.
Other Marks Service Marks –Apply to services, not goods –Law is similar as for trademarks –Ex: International Silk Assn. uses the motto: “Only silk is silk” –Ex: Burger King’s “Home of the Whopper” Certification Mark –Word, symbol, device or any combination of these –Used to certify regional or other geographic origin >“Made in Montana” –May also be type of material used, mode of manufacture, quality, accuracy or other characteristics, >“Union Made in the USA”
Trade Names Name of company or a business Some products, such as Coca-Cola, have same trademark as the trade name of producer Cannot be registered under the Lanham Act Protected by common law Protection applies to areas in which name has meaning –National protection cannot be claimed unless there might be confusion –Ex: because Coca-Cola is known worldwide, no one may use trade name in any business. E.g., cannot open Coca-Cola Motel.
Goodwill Reputation of a firm that gives value to trademarks and other forms of intellectual property Prized asset of many firms Gain trust of many customers = Goodwill Benefit of advantage of having an established business and secured customers Upon sale of business, goodwill can be evaluated. Often closely tied to trademark or brand name
Maverick Recording Co. v. Harper Media Sentry looks for infringements of media via Internet. Discovered Harper using file-sharing program. Shared files (songs) by peer-to-peer network (LimeWire). MediaSentry downloaded files, capturing and sharing metadata for each file. After suit was filed by copyright owners, plaintiffs were allowed to examine Harper’s computer. Forensic experts ID’ed all file sharing, even those “erased”. Plaintiffs moved for summary judgment on copyright claims for 37 audio files. Court granted judgment & injunction for further action. Harper said infringements were “innocent” under copyright law; trial court agreed with that lesser level of violation. It set damages at $200/violation. Plaintiffs appealed, saying she’s not “innocent” violator and damages should be statute minimum of $750/violation.
Maverick Recording Co. v. Harper HELD: Harper is not an innocent infringer. Affirmed district court’s copyright liability. Reversed its finding of “innocent” infringer. Remanded for further proceedings. No doubt that Harper downloaded copyrighted material. Harper contended that she was too young and naïve to understand copyrights on music. Her arguments are insufficient. Her knowledge is irrelevant under the Copyright Act. Plaintiffs are entitled to statutory damages. Must be awarded $750/infringement minimum.
Patents Exclusive right to make, use, or sell a product for 20 years Anyone who “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent” Strong protection during life of patent Rapid technology changes may limit usefulness. But expensive, technical and time- consuming process Since patent divulges all info to competitors, some prefer trade secrets See Nystrom v. Trex Company, Inc.
Nystrom v. Trex Company Nystrom owns a two-truck, two-man lumber yard. Received patent for “A board for use in constructing a flooring surface for exterior use [such as a deck]... manufactured to have a... convex top surface which sheds water and at the same time is comfortable to walk on....” Nystrom sued Trex (large mfgr. of exterior decking planks made from composites of wood fibers & recycled plastic) for infringing. Trex’s defense: their planks are not cut from logs, and that Nystrom’s patent “board” means that made only from wood. District Court: Summary judgment for Trex. Key parts of the patent invalid. Dismissed Nystrom’s claim. Nystrom appealed. Continued
Nystrom v. Trex Company U.S. Ct. of Appeals: Summary judgment for non- infringement is reversed. Opinion centered on the meaning of the word “board”. Nystrom says that “board” is not limited to “wood cut from log” and in his patent he did not disclaim boards made from materials other than logs, such as products made from plastic. Nystrom called his invention “a decking board.” “Board” can encompass materials made from wood and other rigid materials as well. Trex infringed in making the “board” in a convex top surface that is shaped by manufacturing.
Trade Secrets Coca-Cola has held secret the formula for Coke for over 100 years – a patent would not provide such lengthy protection Most trade secret lawsuits are common law actions of stealing & using secrets Prosecutors can also press criminal charges Protection in other countries is difficult Information is a trade secret if: –it is not known by the competition –business would lose advantage if competition were to obtain it –owner has taken reasonable steps to protect the secret from disclosure
Hicklin Engineering, L.C. v. R.J. Bartell Bartell worked as an independent contractor for Axi-Line, a division of Hicklin. He designed & made testing equipment for vehicle transmissions. Bartell formed a competing business that sells transmission testing equipment. Hicklin sued Bartell for violation of trade secret. Judge held for Bartell. Hicklin appealed. HELD: Judgment vacated and case remanded. On remand parties and trier of fact will need to separate Hicklin’s contributions from Bartell’s contributions. Determine what data was Hicklin trade secrets; if Bartell knew information was confidential; and pin down the use of Bartell made of trade secrets. District court can then select an appropriate remedy.
Economic Espionage Usually trade secrets based on common law and enforced by litigation claiming misappropriation; violations of a secret; or violations of secrecy agreement Economic Espionage Act of 1996 concerns theft of commercial trade secret: –“Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will injure any owner of that trade secret,” is subject to prosecution Punishment for a person can be up to 10 years in prison Firms may face fine up to $5 million + damages
United States v. Yang Lee, native of Taiwan; worked in research for Avery (adhesive mfgr.) Lee visited Taiwan; approached by Yang & his daughter about providing info. to their Taiwanese adhesives company. Lee agreed; was paid $25,000/ year for confidential info about new Avery products. FBI uncovered arrangement; confronted Lee who agreed to participate in sting operation to help arrest Yang. Yangs visited U.S.; Lee met with them; discussed confidential info.; meeting was filmed. Yangs arrested; convicted; fined $5 million. They appealed, saying materials used in sting operation were not actual trade secrets, so they could not have violated the law. HELD: Convictions affirmed. Under the Model Penal Code, defendant’s guilt turns on the “circumstances as he believes them to be.” Court held government was not required to prove what the defendant sought to steal was in fact a trade secret; only that defendant believed it to be one. This was a “mutual understanding to try to accomplish a common and unlawful plan.”