INTELLECTUAL PROPERTY
Chapter 9
Meiners, Ringleb & Edwards
The Legal Environment of Business, 12th Edition
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INTELLECTUAL PROPERTY

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
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Counterfeit and fraudulent use of this property costs business tens
of billions of dollars a year

Major forms covered here include:

Trademarks
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Copyrights
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Patents

Trade secrets
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TRADEMARKS

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)
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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”
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REGISTRATION
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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?”
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EXTENT OF COVERAGE

Marks can’t claim too much

Some marks are still “live”; others are “dead” or
“abandoned”
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See Trademark Office website www.uspto.gov
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Protection applies to wide range of creative property
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CYBER LAW
“WHO CONTROLS DOMAIN NAMES?”
o
o
o
International Corporation for Assigned
Names and Numbers (ICANN) in charge of
preserving operational stability of the
Internet.
Dept. of Commerce granted control of
Domain Name System (DNS) to this global
organization.
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
•
o
Handled by private organizations through
arbitration under the Uniform Domain-NameDispute-Resolution Policy.
Some disputes may end up in court.
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INFRINGEMENT, DILUTION AND
CYBERSQUATTING
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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 2006.

Injunction can be issued against those blurring or tarnishing famous
trademarks

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Example: Can’t sell Nike Guitars
Cybersquatting

Trademark is improperly used in a domain name

Restricted by the Anticybersquatting Consumer Protection Act
Defenses
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Fair use (mention of mark in comparative advertising)
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Non-commercial use (parody or editorial commentary)

News reporting or educational use
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CASE
AUDI AG V. D’AMATO
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D’Amato registered domain name www.audisport.com.

Sold goods and services with Audi logos.
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Site used various Audi trademarks – Audi & Audi Four Ring Logo.
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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.)
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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)
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CASE
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 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.
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Dilution law is also offended – integrity and distinctiveness of mark is infringed
upon.
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Audi spent millions of dollars on its trademarks to be known worldwide.
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D’Amato used the marks in commercially related activities.
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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.
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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.
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See Issue Spotter “Knock Off the Knock-Offs?”
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TRADE DRESS
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.
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OTHER MARKS
Certification Marks
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”
o
Word, symbol, device or any
combination of these
o
Used to certify regional or
other geographic origin
•
o
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”
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TRADE NAMES

Name of company or a business

Some products, such as Coca-Cola, have same
trademark as the trade name of producer
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Cannot be registered under the Lanham Act
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Protected by common law
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Protection applies to areas in which name has
meaning
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National protection cannot be claimed unless there might be
confusion
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Ex: Because Coca-Cola is known worldwide, no one may
use trade name in any business.

For instance, cannot open Coca-Cola Motel.
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GOODWILL

Reputation of a firm that gives value to trademarks
and other forms of intellectual property
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Prized asset of many firms
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Gain trust of many customers = Goodwill!!

Benefit of advantage of having an established
business and secured customers
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Upon sale of business, goodwill can be evaluated.

Often closely tied to trademark or brand name
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COPYRIGHT
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Copyright Act of 1976
1990 Amendment added
moral rights
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Includes right of author to
have proper attribution to
authorship
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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
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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
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INFRINGEMENT AND FAIR USE
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Fair use - “for purposes such as criticism, comment, news
reporting, teaching, . . . scholarship, or research”
Four Factors of “fair use”
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Purpose and character of copying
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Nature of work
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Extent of copying
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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?”
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CASE
LATIN AMERICAN MUSIC CO. V. MEDIA POWER GROUP

Media Power Group (MPG) owns 4 radio stations, called
“Radio Isla” in Puerto Rico.
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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)
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CASE
LATIN AMERICAN MUSIC CO. V. MEDIA POWER GROUP
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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.
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PATENTS

Leahy-Smith America Invents Act (2013): “First-ToFile” Rule now controls who gets in case or race to file
with Patent Office

Before was “first-to-invent” rule
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Exclusive right to make, use, or sell a product for 20
years
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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
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PATENTS
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Rapid technology changes in some industries make this
very important
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But expensive, technical and time-consuming process

Since patent divulges all info to competitors, some
prefer trade secrets
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If Coca Cola had gotten a patent instead of trade secret
it could be used by others after 1907
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See “Why Many Patents Are Overturned When Challenged”

See Issue Spotter “Fair Sharing of Educational Information?”

See Nystrom v. Trex Company, Inc.
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CASE
BOWMAN V. MONSANTO
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.

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LACK OF GLOBAL UNIFORMITY
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Part of complexity & cost of patens: The variation of patent laws
around the world.
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To ensure wide protection: Firms patent in U.S., Europe & Japan.
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Covers those markets
Rest of the world is left uncovered as the cost of registration in
every country would be too high.
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Also enforcement is dubious is small-market countries.
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Some court systems have doubtful integrity.
Cost of European protection is dropping .

European Union agreed to create a single patent system in 2014.

Italy and Spain refused to participate.
Still patent holders are often forced to litigate and file in many
nations.
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INTERNATIONAL PERSPECTIVE
“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 coowners 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.
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TRADE SECRETS

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:
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
It is not known by the competition
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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”
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CASE
BOHNSACK V. VARCO, L.P.
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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)
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CASE
BOHNSACK V. VARCO, L.P.
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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.
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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.
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CASE
UNITED STATES V. YANG

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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