Short Essay (50 Points): Please select 5 (five) questions to answer.
1.
Suppose you develop software in an industry that is dominated by one firm
with a 50 percent market share. Your software product is not doing well in
part because it is incompatible with the industry leader. Assume your
product has additional functionality. Can you legally make your product
compatible with the industry leader so that users of its product can transition
to your product? Assume that the compatibility is achieved through
decompilation of the copyrighted software of the industry leader.
2.
Assume you have developed a design that you believe has significant
customer appeal. Your product design is a federally registered trademark
and you discover a rival company has been using a product design that is
very similar to yours. Name three bases upon which the rival could defend
its imitation of your product design.
3.
In some of the major copyright cases involving software, the courts
concluded that the copyright owners were only entitled to “thin” protection.
Explain what is meant by “thin” copyright protection and why do the courts
limit some copyright owners to thin protection?
4.
If your trademark has been federally registered for 5 years, it is said to be
incontestable. What is trademark incontestability? What infringement
defenses are eliminated by incontestability and which ones remain?
5.
What is the first sale doctrine? What can a purchaser of copyrighted
material do with the copyrighted material and what is not protected under
the first sale doctrine.
6.
If you, as a small business owner, hire three programmers to develop
software to make your core technologies function properly, name the two
most significant factors that the courts will look at to determine if these
programmers are employees or independent contractors. What is the main
consequence of the determination of whether the programmers are
employees or independent contractors?
7.
What factors do the courts use in determining whether an infringer can take
advantage of the fair use defense? What is the most important factor that
seems to resolve most cases?
Long Essay (50 Points)
Jim Perkins graduated 25 years ago from North Carolina State University with
training in both engineering and management. After working for 20 years for ultracautious large corporations, Jim decided to strike out on his own and formed a company
called, Oh Cisco, named, Jim claimed, after his favorite cowboy hero, The Cisco Kid.1
Employees and others often just referred to the company as Cisco. Looking for his niche,
Jim decided that computer security would make use of both his engineering and his
management skills.
Jim was intrigued with encryption software and its possibilities. In its simplest
form, encryption, as applied to software, involves taking “plaintext” and converting it to
cyphertext, which is unreadable (or indecypherable). The sender encrypts plaintext and
the receiver decrypts the cyphertext and reconverts the cyphertext to the original
plaintext. Of course, the process can get much more complicated and huge amounts or
resources are devoted to encryption, digital signatures and digital certification because of
security concerns with Internet transmissions of data and text.
Jim hired several programmers to develop new encryption software that did not
rely exclusively on traditional methods for encrypting data. Instead of depending solely
on mathematical algorithms to encrypt plaintext, Jim directed the programmers to
develop a method of encrypting data based on a combination of mathematics and
literature. Jim’s software, which he called ScrambleText, applied standard encrypting
software to pages of copyrighted literary works that would be stored on CDs.
ScrambleText would then encrypt the plaintext of the message based on the vowel
patterns in the pages of the copyrighted stories.
The genius of Jim’s software was that since the keys for encrypting and
decrypting were based on copyrighted material that his staff produced, no one else was
legally able to reproduce the decrypting keys. Decrypting keys could be made unique to
user-companies by simply encrypting plaintext with different pages in the literary work
and then giving users the appropriate page numbers for decrypting. The literary works
used for encryption keys were written by Jim’s computer staff. The stories were utterly
devoid of literary content, but they all had some kind of plot and relied heavily on
acronyms. Jim applied for a trademark for ScrambleText with the Patent and Trademark
Office. Jim also paid $30 and registered for a copyright on ScrambleText with the Office
of Copyright. Jim also registered the “literary works” produced by his programmers.
Three of the programmers that Jim hired were named Sara, Pete and Melanie. All
three were recent graduates of NC State’s Department of Computer Science and secretly
they harbored resentment and contempt for what they called “the suits”. Jim told the
three (who he labeled The Gang of Three) that, “as long as they continued to produce
such excellent work as ScrambleText, they could work for Cisco”, but he paid them with
company checks. Oh Cisco did not provide benefits to The Gang nor did he withhold
“Oh Cisco” was the signature phrase of Poncho, Cisco’s sidekick, which he used after he and
Cisco had dispatched the “bad guys.”
1
taxes.2 Jim gave The Gang a free rein in that he did not have them report to work at
regular hours, but instead set performance goals, which were usually met on time. The
Gang of Three secretly made their own copies of ScrambleText as well as copies of an
upgrade of ScrambleText. Eventually, The Gang decided that they could no longer
tolerate working for “the suits” and left to form their own company, which they named,
NuKiDs.
Jim was doing a brisk business selling a total package of security to companies
that relied heavily on Internet transmissions. Some of his clients reported, however, that
security breaches occurred and that the software at these firms had to be updated on a
regular basis. Jim became aware of several competing firms that offered security
upgrades to the ScrambleText packages including a firm called NuKiDs, Inc., which of
course was headed by his former programmers. Jim hired a private investigator who
uncovered several companies who were clients of NuKiDs and Jim filed suit for
copyright and trademark infringements. NuKiDs, who initially thought that they could
defend themselves without attorneys, filed a counterclaim against Oh Cisco for copyright
infringements. When attorneys for the Cisco Corporation came across a court case
involving Oh Cisco, they filed suit against Oh Cisco.
Meanwhile a number of former employees of Oh Cisco took “their” stories with
them when they left the company. These ex-employees discovered that their stories had
significant market value if combined with other tools. Unrelated hackers discovered that
they could decrypt plaintext encrypted by ScrambleText by stripping the consonants from
the literary works on the CDs that Oh Cisco sold as part of its encryption installation
package. The ex-employees, of course, had copies of the CDs.
After the consonants were eliminated (from the stories in Oh Cisco’s CDs), the
hackers could apply standard encryption software to the remaining vowels and then they
only needed the page numbers to decrypt the encrypted plaintext. Since there were a
limited number of pages in the literary works, decrypting the text was accomplished by
process of elimination. One of the hackers, Red Neckerson bought one of the CDs from
an ex-employee. Red’s software, that stripped the consonants from the literary works
recorded on the Oh Cisco CDs, was called the Soundless. After breaking security at
several firms who were clients of Oh Cisco using the Soundless software, Red and his
fellow hackers would offer to repair the damage by acting as consultants for hefty fees.
When Red’s activities became known to Oh Cisco, they sued claiming copyright
infringements.
As you know any party can sue any other party in the hypothet. Please identify 5
issues, state the appropriate rules of law and let me know how you think the courts would
rule.
2
The Gang of Three and The Gang are one and the same.