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©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Presentation on theme: "©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part."— Presentation transcript:

1 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. I NTELLECTUAL P ROPERTY Chapter 9 Meiners, Ringleb & Edwards The Legal Environment of Business, 12 th Edition

2 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. I NTELLECTUAL P ROPERTY 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 covered here include: Trademarks Copyrights Patents Trade secrets

3 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A commercial symbol Design, logo, phrase, distinctive mark, name or word “Brand Name” (i.e. Nike and others) Protected by the Lanham Act Classifications (See Exhibit 9.1) Arbitrary and fanciful (most favored – Reebok or Apple for computers) Suggestive (not as favored – Chicken of the Sea) Descriptive (not as favored – but Holiday Inn or Bufferin have protection due to established use) Generic – not protected (nylon, zipper lost to public domain for failure to protect) See Issue Spotter “Establishing Your Name” T RADEMARKS

4 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. R EGISTRATION Can be done online Payment of $325 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 via the Madrid Protocol Though “Madrid System” a trademark holder from most countries can file an existing trademark for international registration. (Less costly than registering in each country individually.) See Cyber Law “Who Controls Domain Names?”

5 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E XTENT OF C OVERAGE Marks can’t claim too much Some marks are still “live”; others are “dead” or “abandoned” See Trademark Office website Protection applies to wide range of creative property

6 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C YBER L AW C YBER L AW “WHO CONTROLS DOMAIN NAMES?” o International Corporation for Assigned Names and Numbers (ICANN) in charge of preserving operational stability of the Internet. o Dept. of Commerce granted control of Domain Name System (DNS) to this global organization. o ICANN coordinates top level domain (TLD) system, such as.com. Example: Refused to allow the TLD.xxx (desired by “adult” material website operations) Also coordinates IP addresses and country codes o ICANN doesn’t issue domain names – accredits firms meeting its standards, such as Network Solutions o ICANN doesn’t control spam or other problems – that is left to national law and internet servers. o If domain name owner does not keep registration current (~$40/year), site goes dormant o World Intellectual Property Organization handles half of domain name disputes – 3000 per year. o National Arbitration Forum in U.S. and other organizations handle domain problems. o Regulation of domain names is global Handled by private organizations through arbitration under the Uniform Domain-Name- Dispute-Resolution Policy. o Some disputes may end up in court.

7 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. I NFRINGEMENT, D ILUTION AND C YBERSQUATTING Infringement Confusion of origin of goods by improper use of trademark; essentially stealing another’s good name. Lanham Act allows suits for infringement. Ex: Can’t sell shoes called Rebok – would cause confusion with Reebok Dilution Rights further expanded through The Trademark Dilution Act – strengthened by Trademark Revision Dilution Act of Injunction can be issued against those blurring or tarnishing famous trademarks  Example: Can’t sell Nike Guitars 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

8 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE A UDI AG V. D’A MATO D’Amato registered domain name Sold goods and services with Audi logos. Site used various Audi trademarks – Audi & 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. (Continued)

9 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. HELD: Affirmed. D’Amato infringed. “Likelihood of confusion” must be shown to obtain equitable relief (here a permanent injunction). Disclaimer on his website of 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 of dollars 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. C ASE C ASE A UDI AG V. D’A MATO

10 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C OUNTERFEITING 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. See Issue Spotter “Knock Off the Knock-Offs?”

11 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. o Protected by Lanham Act o Concerns the “look and feel” of products and service establishments o Size, shape color, texture, graphics, etc. o Must be “inherently distinctive” i.e. Roar of lion – trade dress for MGM o Two Pesos v. Taco Cabana: One Mexican restaurant could not copy its competitor’s unique décor. o Wal-Mart v. Samara Bros.: No infringement by Wal-Mart of Samara’s design of children clothing, although its designs were similar. Protection 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. T RADE D RESS

12 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. O THER M ARKS Service Marks o Apply to services, not goods o Law is the same as for trademarks o Ex: International Silk Assn. uses the motto: “Only silk is silk” o Ex: Burger King’s “Home of the Whopper” Certification Marks o Word, symbol, device or any combination of these o Used to certify regional or other geographic origin i.e. “Made in Montana” o May also be type of material used, mode of manufacture, quality, accuracy or other characteristics i.e. “Union Made in the USA”

13 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. T RADE N AMES 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.

14 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 G OODWILL

15 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C OPYRIGHT Copyright Act of Amendment added moral rights Includes right of author to have proper attribution to authorship Prevents unauthorized changes in destruction of artist’s work Rights of literary property recognized by law Books, written works, etc. Easiest to get Works must be original Life of author’s life plus 70 years Works for hire (material written by employees of a company): Copyright is 95 years from date of publications Gives owner exclusive right to: Reproduce Publish or distribute Display in public Perform in pubic Prepare derivative works based on original

16 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. I NFRINGEMENT AND F AIR U SE 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 Damages for violations focus on economic loss to © holder. In some felony as (federal law) activity may be tied to mail or wire fraud –convictions include fines/prison People always looking for alternatives for file sharing Okay to copy TV shows for personal use See Issue Spotter “Fair Sharing of Information?”

17 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE L ATIN A MERICAN M USIC C O. V. M EDIA P OWER G ROUP Media Power Group (MPG) owns 4 radio stations, called “Radio Isla” in Puerto Rico. Has affiliated stations that rebroadcast its programming. It was notified by Latin American Music Company (LAMCO and Asosiación de Compositores y Editores de Música Latinoamericana (ACEMLA). Said Latin American Music Company was infringing on copyrights by playing songs without a license. Jury found for MPG. Said that plaintiffs failed to show it had copyrights on certain songs used by MPG (Continued)

18 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Two elements to establish copyright infringement (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original. Certificate of registration is prima facie evidence of ownership & valid copyright. Burden then shifts to the defendant to demonstrate problem with claimed copyright. Four songs were involved: LAMCO submitted certificates of recordation that assigned rights to either a specific song or all of composer’s works. Certificate of recordation is not evidence of registration. Merely indicates that the document attached was recorded in the Copyright Office on a certain date. HELD: Affirmed. Certificate does NOT prove compliance with copyright registration requirement. C ASE C ASE L ATIN A MERICAN M USIC C O. V. M EDIA P OWER G ROUP

19 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Leahy-Smith America Invents Act (2013): “First-To- File” Rule now controls who gets in case or race to file with Patent Office Before was “first-to-invent” rule 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 P ATENTS

20 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Rapid technology changes in some industries make this very important 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 “Why Many Patents Are Overturned When Challenged” See Issue Spotter “Fair Sharing of Educational Information?” See Nystrom v. Trex Company, Inc. P ATENTS

21 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE B OWMAN V. M ONSANTO Monsanto owns patents for Roundup Ready® soybean seeds. Sold with agreement that farmers will not resell the seeds or sell reproductions of the seeds. Bowman bought seeds and kept seeds from plants he grew to use in future. A violation of the contract. Monsanto sued for patent infringement. He contended he could use the product any way he liked once purchased. District and appeals court held for Monsanto. Bowman appealed. Supreme Court affirmed. Patent exhaustion does not apply. Bowman is duplicating a patented good. That infringes on the essence of a patent. A patent provides a legal monopoly over production and sale of the good for the life of the patent to the owner.

22 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. L ACK OF G LOBAL U NIFORMITY Part of complexity & cost of patens: The variation of patent laws around the world. To ensure wide protection: Firms patent in U.S., Europe & Japan. Covers those markets Rest of the world is left uncovered as the cost of registration in every country would be too high. Also enforcement is dubious is small-market countries. Some court systems have doubtful integrity. Cost of European protection is dropping. European Union agreed to create a single patent system in Italy and Spain refused to participate. Still patent holders are often forced to litigate and file in many nations.

23 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. I NTERNATIONAL P ERSPECTIVE I NTERNATIONAL P ERSPECTIVE “ PATENT DIFFERENCES” WIPO (World Intellectual Property Organization) encourages IP (Intellectual Protection) around the world. 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.

24 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. T RADE S ECRETS 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 See Issue Spotter “Protecting Valuable Information”

25 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE B OHNSACK V. V ARCO, L.P. Bohnsack invented the “Pit Bull” machine to make more efficient the process of cleaning drilling fluids used in drilling oil wells. Varco is a company that cleans drilling fluids. Secrecy agreement: Negotiated over the possibility that Varco would manufacture Pit Bull. Talks fell apart. Varco’s lawyer had filed a patent application for Pit bull, claiming Varco invented it. Bohnsack sued Varco. Jury awarded $600,000 for misappropriation of trade secrets. Elements of misappropriation of trade secrets: (1) existence of a trade secret; (2) breach of a confidential relationship or improper discovery of a trade secret; (3) use of trade secret; and (4) damages (Continued)

26 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Varco said it did not “use” trade secret. Restatement test used by the court: Any exploitation of trade secret is likely to result in injury to trade secret owner or enrichment to the defendant is a “use”. “Use” is broadly defined. Varco exploited Bohnsack’s idea for the Pit Bull – would likely to result in injury to Bohnsack. Filing a patent application by Varco would lower the market value of Bohnsack’ invention. Also making it less likely that Bohnsack would sell his invention to Varco’s competitors would enrich Varco. No precise damages are necessary – final terms of Varco-Bohnsack agreement can prove value of Pit Bull. Judgment Affirmed. Misappropriation of trade secrets by Varco. C ASE C ASE B OHNSACK V. V ARCO, L.P.

27 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E CONOMIC E SPIONAGE 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.

28 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE U NITED S TATES V. Y ANG Lee, native of Taiwan; worked in research for Avery. Lee visited Taiwan; approached by Yang & his daughter re: providing info. to their company. Lee agreed; was paid $25,000/ year for confidential information 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 were 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.”


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