Intellectual Property Intellectual effort, not by physical labor 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, Puma and others) –protected by common law & the Lanham Act –Classifications (See also Exhibit 9.1) arbitrary and fanciful (most favored) suggestive (not as favored—e.g., Chicken of the Sea is okay) descriptive not as favored--but Holiday Inn and Bufferin have protection) generic--not protected
Registration Can be done online Payment 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, after which must be renewed International protection of trademarks is encouraged by International Bureau of the World Intellectual Property Organization (WIPO) via the Madrid Protocol
Extent of Coverage Marks can’t claim too much Some marks are still “live”; others are “dead” or “abandoned” See Trademark Office website www.uspto.gov www.uspto.gov Protection applies to wide range of creative property See Who Owns What Domain Name” – regarding cybersqatting
International Perspective: “Costs of Counterfeiting” Counterfeit goods generate more than $500 billion in sales per year ($200 billion in the U.S.) EU estimates lost revenues to counterfeiters –most located in China/other countries with poor enforcement –losses are both monetary and job market losses –120,000 lost jobs in the U.S.; 100,000 lost jobs in Europe Most upscale handbag items listed on e-Bay are fakes Fakes range from sunglasses to counterfeit medical drugs –many drugs have no benefit; or harmful from unknown substances Counterfeit parts have been infiltrated even into military supplies –endangers aircraft and helicopter crews Congress toughened up by the Stop Counterfeiting in Manufactured Goods Act of 2006 European nations also cracking down Google was ordered to pay $400,000 to Louis Vuitton for allowing fake Vuitton goods to be advertised on Google. Firms have their own detectives to uncover counterfeit trade routes. They sue vendors and landlords who rent space to vendors selling knockoffs.
Cyber Law: “Who Owns and Controls Domain Names?” – International Corporation for Assigned Names and Numbers (ICANN) in charge of preserving stability of the Internet. –Dept. of Commerce granted Domain Name System (DNS) away from the U.S. to the global community. –ICANN works with governments – coordinates top level domain (TLD) system, such as. com. In 2007 refused to allow the TLD.xxx (desired by “adult” material website operations) –ICANN doesn’t issue domain names – it accredits firms that meet its standards. (ICANN site lists accredited registrars.) –If a firm violates rules, loses it ability to register names. –ICANN doesn’t control spam or other problems – that is left to national law and internet servers. –World Intellectual Property Organization handles half of domain name disputes – ~2000 per year. –National Arbitration Forum in U.S. and other organizations handle domain problems. Some disputes may end up in court.
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 of 1995 –Injunction can be issued against those blurring or tarnishing famous trademarks Cybersquatting –Trademark is improperly used in a domain name –Restricted by 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. 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 has website that sells goods with Audi name & logo on it. Audi sued D’Amato for infringement, dilution and cybersquatting of its three famous trademarks. District Court: Held for Audi. Issued a permanent 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 his website of no association with Audi does not absolve D’Amato of liability. Misdirecting consumers to his website and later disavowing affiliation with Audi comes too late. He already 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 is 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 such as 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 is being fooled), the trademark has still been 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 before a judge. Goods can be used as evidence in lawsuits.
Trade Dress –Protected by Lanham Act –Concerns the “look and feel” of products and service establishments –Size, shape color, texture, graphics, etc. –Must be “inherently distinctive” –Two Pesos v. Taco Cabana: One Tex-Mex restaurant could not copy its competitor’s décor. –Wal-Mart v. Samara Bros.: No infringement by Wal-Mart on Samara’s design of children clothing, although its designs were similar. Protection only received if trade dress is distinctive and has secondary meaning. Secondary Meaning: Primary significance of mark or trade dress is to ID the SOURCE of product rather than the product itself. Design such as children’s clothing is not inherently distinctive to earn protection, UNLESS it is identifiable by consumers TO THE SOURCE.
Other Marks Service Marks –Apply to services, not goods –Law is the same 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 i.e. “Made in Montana” –May also be type of material used, mode of manufacture, quality, accuracy or other characteristics, i.e. “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. For instance, 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
Infringement and Fair Use in Copyright Fair use - “for purposes such as criticism, comment, news reporting, teaching,…scholarship, or research” Four Factors of “fair use” –purpose and character of copying –nature of work –extent of copying –effect of copying on market File Sharing on the Internet – Napster was shut down for supporting copyright infringements People always looking for alternatives for file sharing OK to copy TV shows for personal use See Issue Spotter: “Fair Sharing of Information?”
Metro-Goldwyn-Mayer Studios v. Grokster Grokster and StreamCast provided software to allow computer users to share electronic files on peer-to-peer networks. Users could communicate directly with each other, rather than through central serves, as in the Napster case. Users shared music/video files, including those owned by MGM. MGM sued for copyright infringement, saying Grokster knowingly & intentionally distributed software to enable users to infringe. Claimed Grokster is liable for making it possible for others to violate copyright laws. District Court and Appeals Court granted summary judgment in favor of Grokster. Said that distributing the software did not make Grokster liable for infringement done by others using the software. MGM appealed.
Metro-Goldwyn-Mayer Studios v. Grokster Balance of creative pursuits through copyright protection (MGM) vs. promoting innovation in new communication technologies (Grokster) is looked at by the Supreme Court. Argument is that indirect liability created in Grokster and StreamCast through the use of their software for downloading. If it becomes impossible to enforce rights of wide infringement, court says the only practical alternative is to go against the distributor of the copying device for secondary liability. HELD: Summary judgment and appellate court decisions are vacated. On remand, trial court will reconsider MGM’s motion for summary judgment. One infringes contributorily by encouraging infringement and vicariously by profiting from direct infringement (they sold software—made $) and not trying to stop it (but rather help it). Those who distribute technology knowing it is used to infringe on a copyright is liable for acts of 3 rd parties who infringe. Defendant provided customers with technical support to induce the infringement (inducement rule). Acts here were purposeful. Evidence is present of infringement on a gigantic scale.
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 But expensive, technical and time-consuming process Since patent divulges all info to competitors, some prefer trade secrets If Coca Cola had gotten a patent instead of trade secret it could be used by others after 1907 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 … 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 sues Trex (large maker of exterior decking planks made from composites of wood fibers & recycled plastic) for infringing. Trex’s defense is that their planks are not cut from logs, and that Nystrom’s patent “board” means that made only from wood. District Court: Summary judgment in favor of Trex. Key parts of the patent invalid. Dismissed Nystrom’s claim. Nystrom appealed.
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. 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.
International Perspective Regarding Patents WIPO (World Intellectual Property Organization) encourages IP (Intellectual Property) worldwide. Encourages IP laws to become more alike and consistent. In Europe, patents cannot be obtained for surgery or therapy methods or for new plants or animal varieties. Europe has more patent restrictions on software than in U.S. In U.S. inventor may disclose invention up to one year prior to filing a patent; no such disclosure in Europe. Co-owners of patents in U.S. can exploit patent right; in Japan, all co-owners must agree on how it is exploited; in Europe this varies country to country. In Japan employees who create patentable inventions on the job must receive compensation. In one case, that was $180 million. This is unlike U.S. and Europe.
Trade Secrets Coca-Cola has held secret the formula for Coke for over 100 years - a patent would not provide such long 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 See Issue Spotter: “Protecting Valuable Information” re: company representatives who leave to work for a competitor
Hicklin Engineering v. R.J. Bartell For 7 years, Bartell worked as an independent contractor for Axi-Line Precision, a division of Hicklin. He designed & made testing equipment for vehicle transmissions. Bartell quit working for Axi-Line; formed a competing business that sells transmission testing equipment. Hicklin sued Bartell for violation of trade secret. Judge held for Bartell. Hicklin appealed.
Hicklin Engineering v. R.J. Bartell HELD: Judgment vacated and case remanded. On remand parties and trier of fact will need to separate Axi-Line’s contributions from Bartell’s contributions. Determine what data was Axi-Line trade secrets; if Bartell new information was confidential; and pin down the use of Bartell made of those 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