INTELLECTUAL PROPERTY Text – Chapter 8 Learning Objectives • Infringement of intellectual property rights • Misappropriation of trade secrets • Unfair competition - intentional torts • Unfair competition – the Lanham Act 8-2 Types of Intellectual Property • PATENT: – Engine design, business methods • TRADEMARK – Logo, trade name • COPYRIGHT – Sales 8-3 materials, Copyright • Intangible right granted by statute to the author or creator of certain tangible literary or artistic productions – Can’t copyright an “idea” • Applicable law: Copyright Protection Act and the Copyright Term Extension Act • http://www.copyright.gov/ 8-4 Copyright • Protection automatic; registration not required, though recommended • Works created after 1/78 are given protection for life of author + 70 years • Protection for a work-for-hire (corporation owns copyright) is 95 years from first publication or 120 years from creation, which ever 8-5 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. • Facts & Procedural History: 8-6 – Defendants Grokster and StreamCast Networks, Inc. distributed free software that allowed computer users to share electronic files through peer-to-peer networks – Many copyright owners (collectively referred to as MGM) filed separate lawsuits against defendants and the cases were consolidated – MGM sought damages and injunction alleging that defendants knowingly and intentionally distributed software to enable users to Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. • Issue and Legal Reasoning: 8-7 – Issue is under what circumstances the distributor of a product capable of both lawful and unlawful use is liable for acts of copyright infringement by third parties using the product – One infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it – Substantial evidence shows defendants acted Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. • Holding: 8-8 – One who distributes a device with the object of promoting its use to infringe copyright, as shown by affirmative steps taken to foster infringement, is liable for the Patent • Grant from federal government to an inventor in which inventor obtains exclusive right to make, use, and sell his invention for a period of 20 years (14 years for designs) • U.S. Patent Act requires registration 8-9 – http://www.uspto.gov/ Patent • A patent will not be issued if more than one year before the patent application the invention was patented elsewhere, described in a printed publication, or in public use or on sale in the United States • Example: Pfaff v. Wells Electronics, Inc. 8 - 10 – Inventor sold patented item on April 8, 1981 Patent • Protection for: a process, a machine, a manufacture or product, a composition of matter (such as a new chemical compound), an improvement of any of the above, an ornamental design for a product, a plant produced by asexual reproduction, certain business methods • Even though an invention fits one 8 - 11 of the categories, it is not Trademark • Distinctive mark, motto, device, or emblem that a manufacturer or service provider stamps, prints, or affixes to products it produces or services it performs to distinguish products or services from those of competitors • Applicable law: Lanham Act • Registration with state or fed. government recommended, but not 8 - 12required Trademark • “Trademark” applicable to: – trade name (e.g., McDonald’s, Nike) – trade image (e.g., Ronald McDonald) – trade logo (golden arches, swoosh) – trade dress (red & white awnings of KFC) • Trademark dilution is the diminishment of the capacity of plaintiff's marks to identify and distinguish plaintiff's 8 - 13goods or services E-Commerce Infringement • Trademark dilution on the internet is prohibited by the Anticybersquatting Consumer Protection Act • Creates civil cause of action against a person who, with bad faith intent to profit from a trademark, registers, traffics in, or uses a domain name identical or “confusing similar” to distinctive mark – Example: Volkswagen sued Virtual World for their registration of VW.com 8 - 14 Work-for-Hire • A work-for-hire exists when – (1) an employee, in the course of her regular employment duties, prepares a copyrightable work; or – (2) an individual or corporation and an independent contractor (i.e., nonemployee) enter into a written “hire” agreement under which the nonemployee prepares a copyrightable work for the individual or corporation 8 - 15 Infringement • Violation of intellectual property right: when someone uses, makes, or sells another’s trademarked, patented, or copyrighted intellectual property without owner’s permission, license, franchise • Penalties -- actual or statutory damages in civil proceedings or 8 - 16 criminal penalties for willful violations Proof of Infringement • Generally, infringement requires proof that: – (1) defendant had access to copyrighted work; – (2) defendant engaged in enough copying (deliberately or subconsciously) that resemblance between allegedly infringing work and protected work could not be coincidental; and 8 - 17 – (3) substantial similarity exists between the The “Fair Use” Defense • For copyright and trademark infringement, a “fair use” defense or exception exists when the copyrighted work or trademark is used without the property holder’s permission – “for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research” Section 107 of the 8 - 18 Copyright Act The “Fair Use” Defense • A court weighs factors in a fair use determination: – (1) the purpose and character of the use, – (2) the nature of the copyrighted work, – (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and – (4) the effect of the use on the potential markets for the copyrighted work or on its value 8 - 19 Exceptions/Defenses • “Fair Use” may include parody – Example: In Campbell v. Acuff-Rose Music, Inc., the Supreme Court held that 2 Live Crew’s version of Roy Orbison’s “Pretty Woman” was a parody and could be a fair use if the use was not excessive and did not harm the market for the original 8 - 20 • Case remanded to determine whether use was “excessive” or “harmed the market,” but the two sides eventually settled with 2 Live Crew paying Mattel, Inc. v. Walking Mountain Productions • Facts & Procedural History: 8 - 21 – Plaintiff artist produces works with social and political overtones, including a 78-photograph series titled “Food Chain Barbie” – Forsythe describes the artworks as an attempt to “critique the objectification of women associated with [Barbie], and [to] lambaste the conventional beauty myth and the societal acceptance of women as objects.” – Mattel sued Forsythe alleging that the series violated Mattel’s copyright and trademark Mattel, Inc. v. Walking Mountain Productions • Issue: – Did defendant’s use of Mattel’s intellectual property infringe on Mattel’s rights? • Law Applied to Facts: 8 - 22 – Because Forsythe reproduced photographs of the Barbie figure, Mattel established a prima facie case of copyright infringement – However, the Copyright Act recognizes certain statutory exceptions to protections on copyrights Mattel, Inc. v. Walking Mountain Productions • Legal Reasoning and Holding: – “Purpose and character of use” factor in a fair use inquiry asks “to what extent the new work is transformative” and does not “supplant” original • Parodic works comment and criticize, thus often sufficiently transformative to fit under fair use exception 8 - 23 – Given extremely transformative nature and parodic quality of Forsythe’s work, the first fair use factor weighs heavily in favor of Forsythe International Law • International intellectual property law is governed by multilateral agreements – Paris Convention – Madrid Agreement Concerning the International Registration of Trademarks – Madrid Protocol – World Trade Organization’s Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS) • World Intellectual Property Organization 8 - 24 (WIPO) resolves international intellectual Test Your Knowledge • True=A, False = B 8 - 25 – You may copyright an idea – Copyright protection requires registration with the U.S. Copyright Office – The U.S. Patent Act requires registration of a patent to obtain protection for the intellectual property – The Lanham Act protects trademarks Test Your Knowledge • True=A, False = B 8 - 26 – Trademark dilution refers to the overuse of a trademark on products or services – An employee who creates a new software program has made a workfor-hire – The “fair use” defense is an absolute defense to an infringement claim Test Your Knowledge • Multiple Choice – A trademark refers to: • • • • • (a) (b) (c) (d) (e) trade name trade image trade logo trade dress all of the above – Trademark dilution on the internet is prohibited by: 8 - 27 • (a) Anticybersquatting Consumer Protection Act • (b) Patent & Trademark Act Trade Secrets • Trade secret: any secret formula, pattern, process, program, device, method, technique, or database used in the owner’s business that gives the owner competitive advantage • A firm must take reasonable measures to maintain secrecy 8 - 28 Misappropriation • Misappropriation of a trade secret occurs when a person discloses or uses after acquiring the secret: 8 - 29 – By improper means (theft, trespass, etc.) – Through another party who is known or should have been known to have obtained the secret by improper means, – By breaching a duty of confidentiality North Atlantic Instr. v. Haber • Facts: 8 - 30 – North Atlantic manufactured electronic equipment – The firm acquired TMI in which Haber was a 1/3 owner and president; Haber had substantial client base – Acquisition of TMI conditioned on Haber’s continued employment since the client contacts were a valuable intangible asset – Haber’s employment contract, with a confidentiality clause, ended in 1997, when he joined Apex, a firm with a similar target market North Atlantic Instr. v. Haber • Appellate Court Reasoning and Ruling: – Based on a magistrate’s findings, the trial court enjoined Haber and Apex from using the client contacts; Haber and Apex appealed – The appellate court examined and agreed with the magistrate’s findings that the identity of North Atlantic’s client contacts was a protectable trade secret and agreed that Haber had breached his duty of confidentiality 8 - 31 Commercial Torts • Commercial torts are intentional torts that involve business or commercial competition and include: – Injurious falsehood (product disparagement) involves the publication of false statements that disparage another’s business, property, or title to property, and thus harm economic interests 8 - 32 • Example: Jefferson County School District v. Moody’s Investor’s Services, Inc. Commercial Torts • Commercial torts (cont.) 8 - 33 – Intentional interference with contractual relations occurs when one party to a contract claims that the defendant’s interference with the other party’s performance of the contract wrongly caused the plaintiff to lose the benefit of that performance – Intentional interference with prospective advantage parallels the elements for Commercial Torts • Commercial torts (cont.) – Section 43(a) of the Lanham Act creates civil liability for unfair competition, including misleading, confusing, or deceptive representations made in connection with goods or services • Example: American Italian Pasta Co. v. New World Pasta Co., in which the pasta companies battled over whether the defendant could claim its brand was 8 - 34 Thought Question & Participation Assignment for Chapter 8: • Music is intellectual property. What do you think about people who download music illegally? Have they committed 8 - 35 theft?