CHAPTER 11 Intellectual Property. 2 INTRODUCTION Intellectual property is any product or result of a mental process that is given legal protection against

CHAPTER 11 CHAPTER 11

Intellectual Property

2

INTRODUCTIONINTRODUCTION Intellectual property is any product or result of a

mental process that is given legal protection against unauthorized use. Intellectual property is now a strategic, revenue-generating asset for many firms comprising up to 70% of the company’s value. Different types of intellectual property are protected in different ways. This chapter examines patents, copyrights, trademarks, trade secrets and technology licensing.

3

PATENTS PATENTS Utility Patent - protects any novel, useful, and non-obvious

process, machine, manufacture, or composition of matter, or any novel, useful, and non-obvious improvement thereof for the patent owner’s exclusive right to sell, use, make, or import for use the invention for a nonrenewable period of 20 years. Biotechnology Computer Software Business Method Patents View from Cyberspace: E-Commerce Patents.

Amazon.com’s “One Click” business method patent. Priceline.com’s internet version of the name-your-price auction.

4

Case 11.1 Synopsis. State Street v. Signature Financial (1998).Signature was the assignee of U.S. Patent No. 5,193,056, entitled “Data Processing System for Hub-and-Spoke Financial Services Configuration” (the hub-and-spoke patent). The system was designed for use in Signature’s business as administrator and accounting agent for “fund of funds” mutual funds. Through this system, mutual funds (the spokes) pool their assets into an investment portfolio (the hub), which is organized as a partnership. Signature then can enjoy economics of scale in managing the investments, along with the tax benefits of partnership status. CONTINUED

PATENTS PATENTS

5

Case 11.1 Synopsis. (Cont’d)State Street sought to license the hub-and-spoke patent from Signature, but negotiations broke down. State Street then sought a summary judgment ruling that the patent was invalid. The district court granted summary judgment for State Street, and the case was appealed. ISSUE: Is a computerized data processing system patentable? HELD: REVERSED. The patent was upheld and the summary judgment ruling was reversed.

PATENTS PATENTS

6

Design Patent - protects any novel, original, and ornamental design for an article of manufacture for 14 years.

Plant Patents - protects any distinct and new variety of plant that is asexually produced.

PATENTS PATENTS

7

FILING FOR PATENT PROTECTION WITH PTO

FILING FOR PATENT PROTECTION WITH PTO

Specifications (Best Mode)

Claims

Drawings

Declaration by the Inventor

Judgment by Patent Examiner at PTO

8

PATENT INFRINGEMENT

PATENT INFRINGEMENT

Direct Patent Infringement – the making, use, or sale of any patented invention within the United States during the term of the patent.

Indirect Patent Infringement - active inducement of a 3rd party to infringe a patent.

Contributory Patent Infringement - when a party knowingly sells a product that will results in infringement.

9

DEFENSES TO INFRINGEMENT

CLAIMS

DEFENSES TO INFRINGEMENT

CLAIMS Non-Infringement - alleged infringing matter is not within the claims of the issued patent.

Invalidity: Invention was not novel, useful, or non-obvious at the time patent

was issued; The patent covers non-statutory subject matter, such as abstract

idea; There was a statutory bar created by publication or sale of the

invention more than one year prior to the filing of the patent application; or

Any other requirement of the patent law was not met. Patent Misuse - although patent infringed, patent holder has abused

his patent rights and lost the ability to enforce the patent.

10

REMEDIES FOR PATENT

INFRINGEMENT

REMEDIES FOR PATENT

INFRINGEMENT Preliminary and Permanent Injunctive Relief –

once the courts have determined a valid patent has actually been infringed, the patent holder is entitled to permanent injunctive relief.

Damages - royalties and court costs, plus treble damages for intentional infringement.

- Court Costs

- Attorney’s Fees

11

INTERNATIONAL PATENT

PROTECTION

INTERNATIONAL PATENT

PROTECTION Multi-National Treaties

– International Convention for the Protection of Industrial Property Rights (the Paris Convention).

– Patent Cooperation Treaty.

World Intellectual Property Organization

12

COPYRIGHTS COPYRIGHTS

Under the U.S. Copyright Act of 1976 requires works to be original and fixed in a tangible medium. Protection is automatic but registration is helpful to defend against infringement claims.

13

Term - author’s life plus 70 years. Originality and Compilations - facts are not copyrightable. Expressions versus Idea Useful Articles Doctrine - copyright does not extend to useful

application of an idea. Copyright Ownership - owned by Author. A “Work Made for Hire”: Employer is Author, Created by

Employee within scope of employment; or Created by Independent Contractor specifically agreed to in writing as a “work made for hire.”


14

Fair Use Doctrine – a person may infringe the copyright owner’s exclusive rights without liability in the course of such activities as literary criticism, social comment, news reporting, education, scholarship, or research.

Query: Is “reverse engineering” a fair use? First Sale Doctrine - once a copyright owner places

a copyrighted item in the stream of commerce by selling it, the owner has exhausted his or her exclusive statutory right to control its distribution.


15

IS “REVERSE ENGINEERING”

A FAIR USE?


A FAIR USE? Case 11.2 Synopsis. Sony Computer Inc. v. Connectix (9th Cir. 2000).

Sony produces and markets the Sony PlayStation console. The console contains hardware components and software. Sony owns the copyright on the basic input-output system (BIOS), which is the software that operates the PlayStation. Connectix makes and sells a software program called “Virtual Game Station that allows PlayStation game disks to be used on a regular computer. Connectix created the Virtual Game Station by “reverse engineering” Sony’s BIOS to find out how Sony PlayStation worked. During this process, Connectix made several copies of the BIOS. The BIOS was also copied and otherwise used during the debugging phase. Sony sued Connectix for copyright infringement. The district court concluded that Connectix’s “intermediate copying” was not “fair use” protected under copyright laws and enjoined Connectix from selling the Virtual Game Station. Connectix appealed. Continued

16

Case 11.2 Synopsis. (Cont’d)

ISSUE: Were the intermediate copies made by Connectix during the course of its reverse engineering of the Sony BIOS protected by the fair use doctrine? HELD: REVERSED for Connectix, injunction is dissolved. Sony BIOS deserved only a limited level of protection because it contained unprotected elements that could be accessed only through copying. Moreover, the court determined that the methods used by Connectix to reverse engineer the Sony BIOS were necessary to gain access to the unprotected elements. Accordingly, Connectix’s intermediate copying of the Sony BIOS constituted a fair use within the meaning of the Copyright Act.


A FAIR USE?


A FAIR USE?

17

COPYRIGHTS (CONT’D)COPYRIGHTS (CONT’D)

Preemption of State Law. The “Hot News” exception applies in cases where:

- Plaintiff generates information at his cost; - Information is time sensitive. - Defendant is riding on Plaintiff’s efforts. - Defendant and Plaintiff are direct

competitors. International Copyright Protections. - Berne Convention.

- Universal Copyright Convention.

18

DIGITAL MILLENNIUM COPYRIGHT ACT OF 1998

DIGITAL MILLENNIUM COPYRIGHT ACT OF 1998 DMCA implemented World Intellectual Property

Organization Copyright Treaty Provides copyright protection for products

distributed digitally on the internet and protects internet provides with safe harbors from copyright infringement if certain statutory conditions are met.

International Considerations- European Commission- Directive on Copyright

19

COPYRIGHT FORMALITIES

COPYRIGHT FORMALITIES

Copyright Notice - not required for works published after March 1, 1989, but it is still advisable to give notice with “©,” or “Copyright.”

Registration - with the U.S. Copyright Office is a prerequisite to suit for copyright infringement.

20

COPYRIGHT INFRINGEMENT


The copying, display, performance or distribution of a work without permission of the owner.

Electronic Piracy is now a global issue.- Security measures of encryption and watermarking.- Web “robots” that search web looking for infringement.- Napster in the “Inside Story” below.

21

• Remedies for Electronic Infringement– Civil—actual damages, defendant’s profits, and attorney’s fees.– Criminal penalties under the “No Electronic Theft Act” of 1998.

• Types of Infringement– Direct Copyright Infringement.– Contributory Copyright Infringement.

• Religious Technology Center v. Netcom Online (1995).• Napster’s “time shifting” defense rejected (see “Inside Story”

below). “Time Shifting” defense was used in Sony Corp. v. Universal City Studios (1984).

– Vicarious Infringement.



22

REGISTERED MASK WORK

REGISTERED MASK WORK

Created in the Semiconductor Chip Protection Act of 1984. Semiconductor masks are transparencies that represent the topological layout of semiconductor chips.

23

TRADEMARKS TRADEMARKS Statutory Definition (Lanham Act and 1988 Trademark Law

Revision Act) - “Any word, name, symbol, or device or any combination thereof adopted and used by a manufacturer or merchant to identify and distinguish his goods, including a unique product, from those manufactured or sold by others, and to indicate the source to the goods, even if that source is unknown.”

Other Marks– Service Marks used in connection with a service.– Trade Names identify companies, partnerships or

businesses.– Certification Marks (“Good Housekeeping” seal).

24

CHOOSING A TRADEMARK CHOOSING A TRADEMARK

Inherently Distinctive - strong marks because they are immediately protectable.– Fanciful Marks - made up, such as “Kodak”

and “Exxon.”– Arbitrary Marks - real words that have nothing

to do with the product such as “Camel” cigarettes.

– Suggestive Marks - consumer uses imagination, such as “Chicken of the Sea.”

25

Not Inherently Distinctive Descriptive Marks. Geographic Terms. Personal Names.

Secondary Meaning Generic - no protection for generic terms such as

“software,” “escalator.” Once a company allows the public to use the trademark name for a generic product the trademark may loose its protection.

CHOOSING A TRADEMARK CHOOSING A TRADEMARK

26

CREATING RIGHTS IN A TRADEMARK


Use - trademark used in commerce if it is physically attached to the goods which are then sold or distributed. Rule of “first use.” Federal Registration - United States Patent

and Trademark Office. State Registration - cannot preempt or

narrow federal regulations. Trademark Searches Online searches at www.utpto.gov.

http://www.utpto.gov/




27

Federal Registration Benefits: prima facie evidence of ownership “incontestable right” to use the mark, and right to prevent importation of product bearing mark

State Registration - not as much protection as federal. International Protection

The Paris Convention The Madrid Agreement The PanAm Convention



28

LOSS OF TRADEMARK RIGHTS

LOSS OF TRADEMARK RIGHTS

Actual Abandonment - discontinued use of the mark with the intent not to resume use.

Constructive Abandonment - active or passive actions that causes the mark to lose its distinctiveness.

29

TRADEMARK INFRINGEMENT


To establish infringement, an owner must prove: the validity of the mark priority of the usage of the mark a likelihood of confusion in the purchaser’s

mind of the products in question. First Sale Doctrine - protection extends only to the

first sale of the item. Remedies - include injunctive relief, an accounting,

and damages.

30

Domain Names and Cybersquatting - involves the domain name registration of a famous trademark, then an offer to sell the domain name to the trademark holder.

Internet Corporation for Assigned Names and Numbers ( ICANN) – regulatory body in charge of overseeing the Internet’s address system.– New Top-Level Domain Names.– Uniform Name Dispute Resolution Policy managed by WIPO.– 1999 Lanham Act amended to include Anticybersquatting

Consumer Protection Act (ACPA) which creates a federal remedy for cybersquatting.



31

DOMAIN NAMES AND CYBERSQUATTING


Case 11.3 Synopsis. Sporty’s v. Sportsman’s (2d Cir. 2000)

Sportsman’s is a mail-order catalogue company that is well-known to pilots who purchase its products. In the 1960s, Sportsman’s began using the logo “Sporty” to identify its products and catalogues; in 1985, Sportsman’s registered it as a trademark with the USPTO. Sportsman’s spends approximately $10 million per year advertising the Sporty logo. Sporty’s Farm, a subsidiary of Omega, registered the domain name “sportys.com” in 1995, and began selling Christmas trees from the webpage. In March 1996, Sportsman’s learned that Omega had registered sportys.com as a domain name. Sporty’s Farm filed a declaratory action seeking the right to continue its use of sportys.com. Sportsman claimed that Omega had committed trademark infringement and dilution pursuant to the FTDA. CONTINUED

32


ISSUE: Whether Sporty’s Farm acted with a “bad faith intent to profit” from the mark sporty’s when it registered the domain name sportys.com. HELD: For Sportsman’s, holding there was more than enough evidence in the record to show “bad faith intent to profit” on the part of Sporty’s Farm because: (1)neither Sporty’s Farm nor Omega had any intellectual property rights in sportys.com at the time Omega registered the domain name (2) The domain name does not consist of the legal name of the party that registered it, Omega. (3) The prior use of the domain name in connection with the bona fide offering of any goods or services, also cuts against Sporty’s Farm since it did not use the site until after this litigation began, undermining its claim that the offering of Christmas trees on the site was in good faith and (4) Omega planned to enter into direct competition with Sportsman’s in the pilot and aviation consumer market.



33

TRADE DRESS TRADE DRESS Case 11.4 Synopsis. Wal-Mart v. Samara Brothers, Inc. (US 2000).

Samara Brothers, Inc. designs and manufactures children’s clothing. Its main product is a line of one-piece seersucker outfits decorated with hearts, flowers, and fruits. A number of retail stores, including JCPenney, sold this line of clothing. Wal-Mart, one of the nation’s largest retailers, contracted with one of its suppliers, Judy-Philippine, Inc., to manufacture a line of clothes similar to Samara’s line. Wal-Mart sent photographs of Samara’s line to Judy-Philippine, which then copied sixteen of Samara’s garments with only minor modifications. Samara sued Wal-Mart, Judy-Philippine, and others on several grounds, including infringement of unregistered trade dress. Samara won a jury trial and Wal-Mart moved for a judgment that there was insufficient evidence to establish infringement of unregistered trade dress under the Lanham Act. The Second Circuit affirmed the district court’s denial of Wal-Mart’s motion and an appeal to the Supreme Court followed. CONTINUED

34


ISSUE: Is product design protectable in an action for infringement of unregistered trade dress? HELD: REVERSED. For Wal-mart. The U.S. Supreme Court held that unregistered trade dress is not entitled to protection unless it is distinctive or has acquired secondary meaning.

TRADE DRESS TRADE DRESS

35

TRADE SECRETS TRADE SECRETS • Common Law - Restatement (Second) of Torts

definition.• The Uniform Trade Secrets Act of 1979.• Economic Espionage Act of 1996.• Comparison with Other Forms of Protection

1. Trade secrets are immediately protectable. 2. Uniqueness is not important, only competitive advantage. 3. Patent/copyright protection requires disclosure of confidential information.

36

TRADE SECRETS (CONT’D

TRADE SECRETS (CONT’D

Protecting a Trade Secret Issue: Did the Owner take reasonable precautions?

1. Notification - imperative the program be written and all key employees know. A Non-Disclosure Agreement can serve as the basis for recovery if there is a violation.2. Identification3. Security4. Exit Interviews

International Protection: NAFTA and TRIPS require protection of trade secrets.

37

MISAPPROPRIATION OF

TRADE SECRETS

MISAPPROPRIATION OF

TRADE SECRETS Use of a trade secret of another or learning of a trade secret by improper means.

Inevitable Disclosure Doctrine - pre-emptive strike against former employee who may rely on trade secrets in their new position. Pepsico v. Redmond (1995).

Remedies1. Injunction2. Damages - Tort theory - Contract theory3. Punitive Damages

38

TECHNOLOGY LICENSING

TECHNOLOGY LICENSING

Advantages to the Licensor - corporate revenue, a market presence, and an inexpensive source of supply.

Advantages to the Licensee - access to technology, market penetration, and a long-term relationship.

Disadvantages to the Licensor - licensee may become a future competitor.

Disadvantages to the Licensee - transfer problems. License may be used as an Intellectual Property

Dispute Settlement.

39

INSIDE STORY - NAPSTER ORDERED

TO FACE THE MUSIC

INSIDE STORY - NAPSTER ORDERED

TO FACE THE MUSIC Direct Infringement by Napster itself. Napster’s “space shifting” is not fair use. Secondarily Liable for Direct Infringement by

its users. Injunction Modified.

40

REVIEWREVIEW1. Should an inventor be allowed to patent the process for

making human clones? 2. Should living organisms be patentable? 3. Is a parody a fair use? 4. What problems could arise in international licensing? 5. Is the Human Genome project copyrightable?

Documents

CHAPTER 11 Intellectual Property. 2 INTRODUCTION Intellectual property is any product or result of a mental process that is given legal protection against