1. Legal Environment of Business (Mgmt 518) Professor Charles H. Smith Real Property, Intellectual Property and Computer Law Fall 2005

2. Introduction to Real Property “Real property” – formal term for real estate, whether developed or undeveloped. Can be commercial or residential – vacant lot, office building, house, condominium, or apartment building. Can include land surface, airspace and subsurface rights, and items attached permanently to land surface. Can even include fixtures – personal property closely associated with real property – such as dock attached to land, landscaping (e.g., fruit trees), fence, cabinets, plumbing and windows.

3. Rights and Title to Real Property Tenancy in common – two or more owners with undivided interest in real property; each owner can transfer ownership interest by sale, gift or will. Joint tenancy – two or more owners with undivided interest in real property; each owner can transfer ownership interest by sale or gift, but deceased owner’s interest transfers to other owner(s) (no transfer by will). Community property – husband and wife each have undivided one-half interest in real property by reason of their marital status. Air and subsurface – rights to use all or portion of airspace above and dirt/minerals/etc. below surface of real property; subject to reasonable use by others (e.g., airplanes), but owner of rights entitled to damages if unreasonable interference. Fee simple absolute – grant of rights to real property without limitation or condition; as a practical matter, there may be limits to permit access by public utilities. Life estate – grant of rights to real property limited in duration to life of grantee. Lease – any grant which establishes landlord-tenant relationship re real property.

4. Transfer of Real Property Rights Conveyance by deed (sale, trade or gift) – typical instruments are grant deed or quitclaim deed; grantor can transfer all or portion of rights to real property. Inheritance – by will or living trust; all or portion of rights to real property can be left to heir(s). Eminent domain – gov’t has right to take privately-owned real property for public use upon payment of “just compensation” (fair market value); “taking” can be acquisition of title/possession or – in California only – damage to real property; see U.S. Constitution, 5 th Amendment (“nor shall private property be taken for public use, without just compensation”) and Kelo v. City of New London, 125 S.Ct. 2655 (2005) (private land subject to taking for sale to other private owner(s) if part of redevelopment plan). Adverse possession (C.C.P. § 321 et seq.) – acquisition of title to real property after continuous actual possession of at least five years; possession must be adverse (without owner’s permission) and exclusive (cannot be shared).

5. Types of Pollution Air pollution – mobile and stationary sources expel pollutants into the air, making breathing, sight and even life difficult; e.g., motor vehicles, factories. Water pollution – industrial, governmental and agricultural sources; e.g., organic waste, soil runoff, heated water, nutrients such as detergents, fertilizers and human/animal waste, toxic and other hazardous materials. Noise pollution – loud and otherwise annoying noise; e.g., late-night party music, barking dog, construction. Soil pollution/contamination – e.g., toxic and other hazardous materials such as petroleum products. Pollution traditionally regulated by common law but now more commonly regulated by federal, state and local statutes, which can lead to “anti-business” accusations.

6. Nuisance and Trespass Nuisance occurs when landowner uses land in manner that unreasonably interferes with another’s right to use or enjoy his/her/its own land; common law theory but now often based on violation of statute. Private nuisance – when one party suffers distinct harm separate from that affecting the general public. Public nuisance – when multiple victims suffer same or similar harm due to nuisance. Legal and equitable remedies available – damages for harm caused in the past; injunction (TRO/preliminary/permanent) to prevent further harm in the future; plaintiff might seek either or both in same case. Balancing test – court may balance plaintiff’s harm caused by defendant’s interference with plaintiff’s property rights against harm to defendant and community if defendant required to stop activity causing the nuisance. Trespass is a related theory – requires defendant’s physical invasion of plaintiff’s property; nuisance and trespass often indistinguishable as a practical matter (i.e., the trespass causes the nuisance).

7. Nuisance and Trespass Case Study ABC Factory, Inc. (“ABC”) in Podunk, Arkansas disposes of toxic waste in violation of statute; as a result, nearby residents get serious rashes. –Which nuisance theory(ies) apply to this situation? –What remedies are available to nearby residents? –Should the remedies be different if ABC’s illegal disposal was (1) intentional or (2) an accident? –If ABC employs 50% of the residents of Podunk how should the court balance the harm to the nearby residents against the harm that could be caused by penalizing ABC Factory and the community? What if ABC employs 5% of the residents of Podunk? –What would have to happen for the nearby residents to make claims of trespass in addition to nuisance against ABC?

8. Zoning Laws Government has ability (“police power”) to designate/restrict use of land by enacting laws designating/restricting certain uses for land in certain areas or “zones.” Zoning designations include commercial, industrial and residential as well as sub- designations (e.g., single-family or multiple-unit for residential). Zoning designation can support presumption that certain use of land is (or is not) a nuisance.

9. Basics of Intellectual Property “Intellectual property” is the result of intellectual/creative processes; e.g., your textbook, a movie like Star Wars (theater or DVD), the formula for making Coca-Cola, etc. Desire to protect intellectual property is not new; see U.S. Constitution, Article I, Section 8, where Congress is authorized “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

10. Types of Intellectual Property Trademarks Patents Copyrights Trade secrets First three governed by federal law, while trade secrets protected by state law.

11. Trademarks Definition – “The term ‘trademark’ includes any word, name, symbol, or device, or any combination thereof— [¶] (1) used by a person, or [¶] (2) which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this Act, [¶] to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown.” (15 U.S.C. Section 1127.) Examples – band name like Metallica, phrase like “zoom-zoom” (Mazda), trade dress (appearance/colors) such as McDonald’s “Golden Arches.”

12. Patents “Whoever 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 therefor.” (35 U.S.C. § 101.) As a practical matter, a patent is usually an invention. A patent is a grant from the federal gov’t that provides an exclusive right to make, use and sell anything described in § 101.

13. Copyrights Definition – “Copyright protection subsists... in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device[, including]: ”(1) literary works; ”(2) musical works, including any accompanying words; ”(3) dramatic works, including any accompanying music; ”(4) pantomimes and choreographic works; ”(5) pictorial, graphic, and sculptural works; ”(6) motion pictures and other audiovisual works; ”(7) sound recordings; and ”(8) architectural works. “(b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” (17 U.S.C. Section 102(a).)

14. Introduction to Trade Secrets Definition – “‘Trade secret’ means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (California Civil Code Section 3426.1(d).) Trade secrets can include customer lists, formulas, production techniques, results of market surveys (anything unique and confidential developed or maintained by a business). Trade secrets violation often alleged when employee leaves company to work for a competitor.

15. Trade Secrets Litigation Injunction (TRO, preliminary, permanent) for actual or threatened misappropriation (C.C. § 3426.2). Damages based on actual loss, unjust enrichment, reasonable royalties (if actual loss or unjust enrichment provable), punitive damages not more than 2X actual loss damages or reasonable royalties (C.C. § 3426.3). Attorney’s fees if claim or defense in bad faith (C.C. § 3426.4). “[C]ourt shall preserve the secrecy of an alleged trade secret by reasonable means” such as protective orders, in-camera hearings, sealing case files, nondisclosure orders (C.C. § 3426.5).

16. Selected Computer Law Issues Cybersquatting –Person registers domain name that is the same or quite similar to another’s trademark (e.g., cases involving juliaroberts.com or panavision.com) –Prohibited by Anticybersquatting Consumer Protection Act of 1996 (prevailing plaintiff can get order transferring domain name, damages, and attorney’s fees). Trespass to chattels – see Intel Corp. v. Hamidi, 30 Cal.4 th 1342 (2003) –Defendant sent about 200,000 e-mails negative about plaintiff to 8,000-35,000 employees on six occasions over 21-month period. –Cal. Supreme Ct. ruled in defendant’s favor because e- mails did not damage or impair functioning of plaintiff’s computer system.

17. Additional Case Studies Vallerie v. Town of Stonington (pp. 482-83) – fixture part of real property for property tax assessment purposes. Times Mirror Magazines, Inc. v. Las Vegas Sports News, L.L.C. (pp. 496-98) – trademark infringement. RIAA v. Verizon Internet Services, Inc. (pp. 504- 05) – limits on subpena served on ISP. Questions and Case Problems (pp. 508-09) –#16-2 – Leases –#16-4 – Adverse possession –#16-7 – Common ownership of real property