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Intellectua Intellectua l Property l Property Chapter 9 Chapter 9

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Page 1: Intellectual Property Intellectual Property Chapter 9

Intellectual Intellectual PropertyProperty

Chapter 9Chapter 9

Page 2: Intellectual Property Intellectual Property Chapter 9

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

• Counterfeit and fraudulent use of this property costs business tens of billions of dollars a year

• Major forms include:– Trademarks– Copyrights– Patents– Trade secrets

Page 3: Intellectual Property Intellectual Property Chapter 9

Trademark• A commercial symbol

– design, logo, phrase, distinctive mark, name or word

– “brand name” (i.e. Nike and others)– protected by the Lanham Act– Classifications:

• arbitrary and fanciful (most favored – Clorox)

• suggestive (not as favored – Dairy Queen)• descriptive not as favored – but Holiday Inn

and Yellow Pages have protection• Generic – no protection (nylon, zipper)

Page 4: Intellectual Property Intellectual Property Chapter 9

Registration• Online: Pay of $335 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, then renew• International protection of marks encouraged by

International Bureau of the World Intellectual Property Organization (WIPO) via the Madrid Protocol

• Through “Madrid System” a trademark holder from most countries can file an existing trademark for international registration. Less costly than registering in each country individually.

Page 5: Intellectual Property Intellectual Property Chapter 9

Infringement, Dilution and Cybersquatting

• Infringement– Confusion of origin of goods by improper use of trademark– Essentially stealing another’s good name– Lanham Act allows lawsuits for infringement

• Dilution– Rights further expanded through The Trademark Dilution Act– Injunction against those blurring or tarnishing famous trademarks

• 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

Page 6: Intellectual Property Intellectual Property Chapter 9

Audi AG v. D’Amato

• D’Amato registered domain name www.audisport.com.• Sold goods and services with Audi logos.• Site used various Audi trademarks – Audi, Quattro &

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 sued D’Amato for infringement, dilution and cybersquatting of its three famous trademarks.

• District Court: Held for Audi. Issued injunction against D’Amato, his website and domain name.

• D’Amato appealed.

Page 7: Intellectual Property Intellectual Property Chapter 9

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 website of association with Audi does not absolve

D’Amato of liability.• Directing consumers to his website and later disavowing affiliation

with Audi is too late. He 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 also offended – integrity and distinctiveness of mark is infringed upon.

• Audi spent millions 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.

Page 8: Intellectual Property Intellectual Property Chapter 9

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: 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

fooled), the trademark 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 to seize goods.

• Goods can be used as evidence in lawsuits.

Page 9: Intellectual Property Intellectual Property Chapter 9

Trade Dress– Protected by Lanham Act– Concerns the “look and feel” of products and service– Size, shape color, texture, graphics, etc.– Must be “inherently distinctive”

• i.e. Roar of lion – trade dress for MGM

– Two Pesos v. Taco Cabana: One Tex-Mex restaurant could not copy its competitor’s unique décor.

– Wal-Mart v. Samara Bros.: No infringement by Wal-Mart on Samara’s design of children clothing, although designs were similar. Protection received if trade dress is distinctive and has secondary meaning.

• Secondary Meaning: Primary significance of mark or trade dress is recognition of the source of product rather than the product itself.

Page 10: Intellectual Property Intellectual Property Chapter 9

Other Marks

• Service Marks– Apply to services, not

goods– Law is similar as for

trademarks– Ex: International Silk

Assn. uses the motto: “Only silk is silk”

– Ex: Burger King’s “Home of the Whopper”

• Certification Mark– Word, symbol, device or

any combination of these

– Used to certify regional or other geographic origin

>“Made in Montana”

– May also be type of material used, mode of manufacture, quality, accuracy or other characteristics,

>“Union Made in the USA”

Page 11: Intellectual Property Intellectual Property Chapter 9

Trade Names

• 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. E.g., cannot open Coca-Cola Motel.

Page 12: Intellectual Property Intellectual Property Chapter 9

Goodwill• 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

Page 13: Intellectual Property Intellectual Property Chapter 9

Copyright © • Copyright Act of 1976• Rights of literary property

recognized by law• Books, written works, etc.• Easy to get; registration process• Works must be original• Life of author plus 70 years or 95

years for business copyrights• Gives owner exclusive right to:

– reproduce– publish or distribute– display in public– perform in pubic– prepare derivative works based on

original

Page 14: Intellectual Property Intellectual Property Chapter 9

Infringement and Fair Use in Copyright

• 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 areas (federal law) activity may be tied to mail or wire fraud – felony convictions include fines/prison

• People always looking for alternatives for file sharing

Page 15: Intellectual Property Intellectual Property Chapter 9

Maverick Recording Co. v. Harper

• Media Sentry looks for infringements of media via Internet.• Discovered Harper using file-sharing program.• Shared files (songs) by peer-to-peer network (LimeWire).• MediaSentry downloaded files, capturing and sharing

metadata for each file.• After suit was filed by copyright owners, plaintiffs were

allowed to examine Harper’s computer.• Forensic experts ID’ed all file sharing, even those “erased”.• Plaintiffs moved for summary judgment on copyright claims

for 37 audio files.• Court granted judgment & injunction for further action.• Harper said infringements were “innocent” under copyright

law; trial court agreed with that lesser level of violation.• It set damages at $200/violation.• Plaintiffs appealed, saying she’s not “innocent” violator and

damages should be statute minimum of $750/violation.

Page 16: Intellectual Property Intellectual Property Chapter 9

Maverick Recording Co. v. Harper

• HELD: Harper is not an innocent infringer.• Affirmed district court’s copyright liability.• Reversed its finding of “innocent” infringer.• Remanded for further proceedings.• No doubt that Harper downloaded copyrighted material.• Harper contended that she was too young and naïve to

understand copyrights on music. • Her arguments are insufficient.• Her knowledge is irrelevant under the Copyright Act.• Plaintiffs are entitled to statutory damages.• Must be awarded $750/infringement minimum.

Page 17: Intellectual Property Intellectual Property Chapter 9

Patents

• 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

• Rapid technology changes may limit usefulness.

• But expensive, technical and time-consuming process

• Since patent divulges all info to competitors, some prefer trade secrets

See Nystrom v. Trex Company, Inc.

Page 18: Intellectual Property Intellectual Property Chapter 9

Nystrom v. Trex Company

• Nystrom owns a two-truck, two-man lumber yard. Received patent for “A board for use in constructing a flooring surface for exterior use [such as a deck] . . . manufactured to have a . . . convex top surface which sheds water and at the same time is comfortable to walk on. . . .”

• Nystrom sued Trex (large mfgr. of exterior decking planks made from composites of wood fibers & recycled plastic) for infringing.

• Trex’s defense: their planks are not cut from logs, and that Nystrom’s patent “board” means that made only from wood.

• District Court: Summary judgment for Trex. • Key parts of the patent invalid. Dismissed Nystrom’s claim.

Nystrom appealed. Continued

Page 19: Intellectual Property Intellectual Property Chapter 9

Nystrom v. Trex Company

• U.S. Ct. of Appeals: Summary judgment for non-infringement is reversed.

• Opinion centered on the meaning of the word “board”. Nystrom says that “board” is not limited to “wood cut from log” and in his patent he did not disclaim boards made from materials other than logs, such as products made from plastic.

• Nystrom called his invention “a decking board.”• “Board” can encompass materials made from wood

and other rigid materials as well.• Trex infringed in making the “board” in a convex top

surface that is shaped by manufacturing.

Page 20: Intellectual Property Intellectual Property Chapter 9

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:

– 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

Page 21: Intellectual Property Intellectual Property Chapter 9

Hicklin Engineering, L.C. v. R.J. Bartell

• Bartell worked as an independent contractor for Axi-Line, a division of Hicklin.

• He designed & made testing equipment for vehicle transmissions.• Bartell formed a competing business that sells transmission testing

equipment.• Hicklin sued Bartell for violation of trade secret.• Judge held for Bartell. Hicklin appealed.• HELD: Judgment vacated and case remanded.• On remand parties and trier of fact will need to separate Hicklin’s

contributions from Bartell’s contributions.• Determine what data was Hicklin trade secrets; if Bartell knew information

was confidential; and pin down the use of Bartell made of trade secrets. • District court can then select an appropriate remedy.

Page 22: Intellectual Property Intellectual Property Chapter 9

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 + damages

Page 23: Intellectual Property Intellectual Property Chapter 9

United States v. Yang• Lee, native of Taiwan; worked in research for Avery (adhesive mfgr.)• Lee visited Taiwan; approached by Yang & his daughter about providing info. to their

Taiwanese adhesives company.• Lee agreed; was paid $25,000/ year for confidential info 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 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.”