Chapter 8 -

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Intellectual Property and Unfair Competition

PA ET RHC 08

I dream for a living.

Steven Spielbergquoted in

Time magazineJuly 1985

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Learning Objectives

• Differentiate the various intellectual property rights: patent, copyright, and trademark

• Describe infringement and defenses• Explain misappropriation theory and

the importance of trade secrets• Identify the elements a plaintiff must

prove in unfair competition claims

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• PATENT:– Engine design,

business methods

• TRADEMARK– Logo, trade

name

• COPYRIGHT– Sales materials,

artwork

Types of Intellectual Property

Marketing materials for Case Construction Equipment

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• 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– http://www.uspto.gov/

Patent

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• A patent will not be issued if more than one year before 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.

• Inventor sold patented item on April 8, 1981• Inventor applied for patent on April 19, 1982• More than one year passed, thus the patent

was invalid

Patent

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• Protection for: a process, a machine, a product or manufacture, 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 of the categories, it is not patentable if it lacks novelty, is obvious, or has no utility

Patent

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Bilski v. Kappos

• Bilski and Warsaw applied for a patent on methods for hedging risks for commodities trading, but the Patent Office rejected the application as covering an abstract idea not eligible for patent protection under § 101 of the Patent Act; appellate court affirmed.

• Supreme Court: the invention, in this case (a risk-management method), may not be patented; nevertheless, business methods can be patented, even if the method does not pass the "machine or transformation" test

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KSR International Co. v. Teleflex, Inc.• Teleflex sued KSR claiming one of KSR’s

products infringed on a Teleflex patent• Issue was whether disputed patent claim was

obvious• Supreme Court – obviousness determined by

– Scope and content of the prior art; – Level of ordinary skill in the art; – Differences between claimed invention and prior art; – Objective evidence of nonobviousness (commercial

success, long-felt but unsolved needs, and failure of others)

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• Infringement occurs when defendant makes, uses, or sells patented invention without patentee’s authorization

• Remedy: monetary damages – Global-Tech Appliances, Inc. v. SEB S.A.

• Infringement established by literal infringement or doctrine of equivalents– Whether alleged infringer’s subject matter

performs substantially same function as protected invention in substantially same way for same result

Patent Infringement

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• 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 Copyright Term Extension Act

Copyright

Visit the U.S. Copyright Office

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• 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, whichever comes first

Copyright

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Work-for-Hire

• A work-for-hire exists when – an employee, in the course of her

regular employment duties, creates a copyrightable work; or

– an individual or corporation and an independent contractor (nonemployee) enter into a written “hire” agreement under which the non-employee creates a copyrightable work for the individual or corporation

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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 criminal penalties for willful violations

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Proof of Infringement

• Infringement generally requires proof that: – defendant had access to protected work;– defendant engaged in enough copying

(deliberately or subconsciously) that resemblance between allegedly infringing work and protected work could not be coincidental; and

– substantial similarity exists between the works

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• Facts & Procedural History: – 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

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster,

Ltd.

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• Facts & Procedural History: – MGM sought damages and injunction

alleging defendants knowingly and intentionally distributed software to enable users to reproduce and distribute copyrighted works in violation of the Copyright Act

• Issue: – Under what circumstances is distributor of a

product capable of both lawful and unlawful use liable for acts of copyright infringement by third parties using the product?


Ltd.

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• Legal Reasoning: – 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 with a purpose to cause copyright violations by use of software suitable for illegal use


Ltd.

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• Holding: – 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 resulting acts of infringement by third parties


Ltd.

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The “Fair Use” Defense

• A fair use defense or exception exists when a copyrighted work or trademark is used without the property holder’s permission, but the use was:– “For purposes such as criticism, comment,

news reporting, teaching (including multiple copies for classroom use), scholarship, or research” Section 107 of the Copyright Act

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• A court weighs several factors in a fair use determination: – purpose and character of the use, – nature of the copyrighted work, – amount and substantiality of portion

used in relation to copyrighted work as a whole,

– effect of use on the potential markets for the copyrighted work or on its value

The “Fair Use” Defense

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• Concerned copyrighted Shield logo that Ravens football team used and for which the team was held liable for infringement

• Use of Flying B logo in season highlight film is not fair use because use was significant and for commercial (not transformative) purpose

• Use of Flying B logo in Ravens lobby is fair use because use was transformative and noncommercial

Compare Cases: Bouchat

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• Perfect 10 markets copyrighted images of nude models which were republished without permission and became thumbnails in Google’s search engine

• In appeal of infringement case, Ninth Circuit relied largely on the transformative nature of thumbnails Google created, which facilitated public’s ability to search web for images and serve a different purpose than original images (designed to entertain); such use is fair use

Compare Cases: Perfect 10

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• 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 government

recommended, but not required

Trademark

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• “Trademark” applicable to: – Trade name (e.g., McDonald’s, Nike)– Trade image (e.g., Ronald McDonald)– Trade logo (golden arches, swoosh)– Trade dress (orange & red of McDonald’s)

• Trademark dilution is the diminishment of the capacity of plaintiff's marks to identify and distinguish plaintiff's goods or services

Trademark

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Louis Vuitton Malletier, SA v. Haute Diggity Dog, LLC

• Procedural History & Facts: – Louis Vuitton Malletier ("LVM"), well-

known maker of luxury goods, sued a Las Vegas company for infringement of its marks and design copyright

– Defendant Haute Diggity Dog ("HDD"), manufactures and sells chewable dog toys intended to mimic and parody famous luxury products

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• Procedural History:– Defendant moved for

summary judgment to dismiss and the trial court granted the motion

• Issue on Appeal: – Did defendant’s use of

LVM’s intellectual property infringe on or dilute LVM’s rights?


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• Legal Reasoning:– LVM established prima facie infringement

case– Copyright Act and Lanham Act recognize

certain statutory exceptions to protections– “Purpose and character of use” factor in fair

use inquiry and asks what extent new work is transformative and does not supplant original

• Parodic works comment and criticize, thus often sufficiently transformative for fair use exception


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• Holding:– Clear parody and dilution claim fails

since successful parody might strengthen a mark’s distinctiveness

• In the Starbucks case, the Second Circuit held that Charbucks did not dilute Starbucks mark, but further proceedings were required to determine whether there was dilution by blurring


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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 and won

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• Trade secret: any secret formula, pattern, process, program, device, method, technique, or database used in the owner’s business that offers competitive advantage

• A firm must take reasonable measures to maintain secrecy

Trade Secrets

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• Misappropriation of a trade secret occurs when a person discloses or uses after acquiring the secret:– 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• See Coleman v. Retina Consultants, P.C.

Misappropriation

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• Commercial torts are intentional torts that involve business or commercial competition

• Injurious falsehood (product disparagement) involves publishing false statements that disparage another’s business, property, or title to property, harming economic interests

Commercial Torts

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• 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

Commercial Torts

See the Lewis-Gale Medical Center case

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• Intentional interference with prospective advantage parallels elements for interference with contractual relations, but prospective relations are focus (not existing contracts)

• 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

Commercial Torts

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• Lanham Act tort in which multichannel video service companies battled over whether defendant had engaged in false advertising on television and the internet

• Issue was whether statements were sales puffery or literally false statements

• Television statements by TWC’s competitor were literally false (not mere sales puffery)

• TWC demonstrated irreparable harm, thus preliminary injunction affirmed

Time Warner Cable, Inc. v. DIRECTV, Inc.

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Test Your Knowledge

• True=A, False = B– 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

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• True=A, False = B– Trademark dilution refers to the

overuse of a trademark on products or services

– An employee who creates a new software program has made a work-for-hire

– The fair use defense is an absolute defense to an infringement claim

Test Your Knowledge

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• Multiple Choice– A trademark refers to:

a) trade nameb) trade imagec) trade logod) trade dresse) all of the above

Test Your Knowledge

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• Multiple Choice– Trademark dilution on the internet

is prohibited by: a) Anticybersquatting Consumer

Protection Act b) Patent & Trademark Actc) Dotcom Protection Act

Test Your Knowledge

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Thought Questions

• Music is intellectual property. What do you think about people who download music illegally? Have they committed theft?

• If you create a new product at your workplace, is it yours?

Documents

Chapter 8 -