ISMT 520 Lecture #5: TradeMark, Brand & Identity and E-Commerce Law Issues Dr. Theodore H. K. Clark Associate Professor and Academic Director of MSc Programs in IS Management and E-Commerce Management Department of Information & Systems Management Hong Kong University of Science & Technology and Visiting Associate Professor of Operations & Information Management (Information Economics and Strategy Group) The Wharton School of the University of Pennsylvania

HKUST Business School 2 Group Project: Due SOON!!! Group project deadline coming up soon, and with final exams also coming up, start soon! Individual assignment helped prepare you for group project, as questions overlap some Bonus incentive: Turn in DRAFT of Group project before December 9, and free review No possible way it could hurt your grade Definitely might help your grade

HKUST Business School 3 E-commerce and Contract Law Offer, acceptance, and consideration Does website make an offer, or invitation for offers? Advertisement, or commitment? When we have a contract? Is electronic acceptance valid? (It depends …) Meeting of minds requirement of acceptance? Confirmation of receipt of order not acceptance Void and voidable contracts – big difference You could be locked in but partner not! Look to contract terms and details

HKUST Business School 4 Contract created by Offer, Acceptance, and Consideration? Offer – when is an offer not legally an offer? Advertisements? Website? B2B E-Commerce and EDI? Revocation of offers? Unilateral offers and contracts Bilateral offers Acceptance What is required for acceptance? What if acceptance is partial? Can acceptance be by actions instead? Can acceptance be revoked?

HKUST Business School 5 E-Commerce and Jurisdiction Where is the contract enforceable? Contract is only a right to sue for legal enforcement in civil action Police will not make sure the contract is honored Threat of legal action encourages compliance Contract also is a way to clarify agreement Honor and relationship may be all that is needed EDI and contracts – no cases ever get to court. Why? Relationship and the basis for long-term contracts Dispute resolution outside court under contracts

HKUST Business School 6 Battle of the Forms Purchase order states some terms E.g., warrantee for 5 years against all defects Confirmation of order states other terms E.g., sold as-is, where-is, with no warrantee Goods shipped by producer and accepted What terms are in the contract? Is there a contract at all? (Meeting of minds?) Payment made on invoice and accepted Invoice reiterates no warrantee condition Payment reiterates requirement for warrantee

HKUST Business School 7 License Agreements and Related Contract Law Rights and Issues Many things can be included in a license agreement, including many restrictions Not the same as sale, so some fair use exceptions or FIRST SALE DOCTRINE rights need not apply Right to modify code is First Sale Doctrine right, so may not be included in rights of licensee, but always available with sale Some terms MIGHT be excluded and the contract “reformed” by the court as matter of public policy Contracts may not include terms which are illegal, impossible, unconscionable, or against public policy Unless reformed, license contract sets the terms

HKUST Business School 8 Computer Crimes Most computer crimes involve insiders Hacking happens, but generally with inside help Increasing computer crime and associated costs More than 30% and possibly more than 50% of major firms experience computer crime Why are reported statistics much lower? Computer crime analogy to sexual assault Cost of prevention versus cost of recovery

HKUST Business School 9 Hackers, Crackers, and Phrackers Hackers are intentional criminals Breaking in systems with intent to steal or harm Crackers are motivated by fun & challenge Beating the system to prove it can be done However, harm often results unintentionally Regardless of intent, unauthorized intrusion is criminal in most jurisdiction, but penalties vary Phraker is hacker or cracker of phone networks, often for free calling access

HKUST Business School 10 Protecting Brands and Identity “Indentity”, including Product Brand Identities, is protected by TRADEMARK LAW TRADEMARK LAW is VERY LOCATION SPECIFIC There is no international agreement regarding trademarks, like there is with copyrights. Requirements to establish a trade market differ by country. TRADEMARKS MUST BE REGISTERED to be valid There is NO AUTOMATIC TRADEMARK registration It is a detailed and very specific registration process required Similar in some ways to the process of setting up a new company TRADEMARKS do not give absolute protection to owners Registration priority for names exist, but not absolute Like Copyright or Patent, Trademark gives you the right to sue

HKUST Business School 11 Trademark Law Protects brands, corporate names or slogans “It’s the real thing: Coke” Significant source of litigation in Cyberspace Same name of firm in different states, who has right to use the name in Cyberspace? Domain name squaters? Legalized blackmail? New cyberspace domains created – confusion? Can not be generic or functional (Xerox) Strongest defense for fabricated names

HKUST Business School 12 Trademarks: Jurisdiction & Industry Company can even use its own name in another country if some other firm has that Trademark. Standard Brands Merck Standard Oil Trademarks can be issued for same name but for different products Consider degree of overlap in names, products, and markets Consider degree to which name is unique versus common Park N Shop and Wellcome are relatively common as names Xerox is very unique name, so well protected, but might not be protected if used as the name of a drycleaner or hotel chain

HKUST Business School 13 Confusion in E-Commerce Names Same name registered in different states, which is okay as long as markets do not overlap Then, one firm goes online, and takes other firm’s customers E-Commerce is global in reach – so who has jurisdiction? National registration of Trademarks in USA Interstate commerce regulation clause of the consitution Might not overrule states rights for “local” brand issues Domain names and Trademark issues Cyber Squatting and Cyberspace Blackmail Increasing importants of National Trademark registration, and potentially even international issues, although limited to USA in disputes over Domain name registrations for.com names

HKUST Business School 14 Purpose, Duration, and other issues Why do we need Trademark Law anyway? Purpose? Benefits? Costs? How long does or should a Trademark last? Why is Trademark duration different from Copyright? Requirement of Registration and Continuous Use Why can’t we protect a Brand that is no longer used? How can we protect a product Brand that is coming out within a few years, but which is not yet in the market? What is a Token use, and why is this not permitted?

HKUST Business School 15 Trademark, Service Mark, etc Trademark is BOTH a generic and broad term, and A precise description of a mark which identifies goods Service mark is used in connection with services Is a service mark also a trademark? Certification mark is signal about something E.g., ISO 9000, CFA, Chartered Accountant, QC Collective mark is used by members of an association E.g., part of the Dairy Farm group E.g., Lasik Eye Care center (franchise operations)

HKUST Business School 16 Common Law Trademarks Before 1988, there was no national USA trademark formal “registration” process Trademarks were only issued based on actual usage Many other developed countries preceded USA in requiring registration or followed soon thereafter Hong Kong has relatively Strong protections for Brand names associated with domain name usage Formal registration of name required to get domain name However, this only applies to names ending in *.hk

HKUST Business School 17 Trademark Issues Usage versus intent and token usage The details and application of US trademark law is not global in the way this has been adopted in other countries Distinctive, Arbitrary, Descriptive, Suggestive, Generic Nature of the words used determines strength of Trademark Foreign words – translation issues, and mistakes Functionality Secondary meaning Evidentiary issues Disclaimers

HKUST Business School 18 Coach Bag Trademark Case What are the issues, laws, and facts in this case? Principle problem – Judge asks you to write memo Identify the “law” in this area of dispute Apply to facts of case and fit with law Advise on how to rule on this case Good case materials to help prepare your answers This case, like your Individual Assignment can help: As good preparation for the Group project assignment As useful in preparing for the Final Examination Final Exam will be VERY similar in nature to this (76-117)

HKUST Business School 19 Conducting Your Own Legal Research The Internet can be a very useful tool for many kinds of research, including legal research Interpreting what you find may be challenging Does not replace, but may augment, legal counsel Similar in some ways to searching for medical information Link on Course Website to legal information sites You may wish to save this set of links somewhere for later Use FINDLAW for searching for information that may be useful for your Group Project and Final Exam.

HKUST Business School 20 Using Findlaw ( Register to use the site (it is free) Only RECENT CASES are available for free Why? Provides easy to use links to Westlaw Why? Easy to use TEXT search Westlaw, in contrast, provides easy to use CASE REFERENCE searching Most general users of free service prefer simple text search