Expert answer:weekly discussion week2
Answer & Explanation:Chapter 24.docx Discuss the, “Legal Issues in Cyberspace” excerpt in Section 24-5 of Ch. 24, and Section 24-6, “Copyright Infringement,” of the text. Discuss the topics you are comfortable with, the topics you struggled with, and how these issues relate to application in your field.Write a 350- to 700-word paper detailing the findings of your discussion.Must be APA format with 3 reference in alphabetical order, introduction and conclusion paragraph. All work will be checked for plagiarism.
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Intellectual Property
Learning Outcomes Checklist
After studying this chapter, students who have mastered the material will be able to:
Define a trade secret and other protectable business information and articulate the various legal
implications for misappropriation of that information.
Classify trademarks marks based on their level of distinctiveness and give examples of
trademarks, trade dress, and service marks.
Express how federal laws aimed at regulating trademarks in cyberspace apply to domain names.
Identify and understand the impact of trademark infringement and dilution.
Articulate the fundamental requirements for copyright protection, the legal ramifications of
copyright infringement, and the impact of technology on copyright law.
Apply the fair use defense and give examples from case law.
Explain the process for obtaining and maintaining a patent and articulate the basic requirements
for an invention to have patent protection.
Identify and understand the remedies for acts of patent infringement.
The formal protection of intellectual property has been a foundation of U.S. law since the
ratification of the Constitution. In Article I, Section 8 of the U.S. Constitution, Congress is
specifically authorized to protect intellectual property “by securing for limited Times to Authors
and Inventors the exclusive Right to their respective Writings and Discoveries.” A study
published in the Harvard Business Review found that intellectual property represents
approximately 70 percent of an average firm’s value, and that number has nearly doubled in one
decade.1 This chapter discusses the increasingly important legal concepts of intellectual property
protection that will help business owners and managers to make informed decisions on how best
to protect their own intellectual property and prevent infringing upon the intellectual property
rights of others. In this chapter, students will learn:
K. Rivet and D. Kline, “Discovering New Value in Intellectual Property,” Harvard Business
Review, January 2000, p. 58.
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Legal protections for trade secrets and other business information.
Statutory and common law requirements for protection of trademarks, service marks, and
trade dress.
Requirements for protection under federal copyright laws, consequences of infringement,
and application of the fair use test.
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Overview of protections for inventors through patent law and statutory requirements for
obtaining a patent.
International treaties and risks concerning intellectual property protection.
Trade Secrets and Protection of Business Information
LO24-1
One of the most valuable assets of any firm is their secret processes, formulas, methods,
procedures, and lists that allow them a competitive advantage in their trade. It is important to
understand that many of these types of trade secrets, business information, and business methods
may not be protectable by patent or copyright laws. In fact, patent applicants generally rely on
trade secret law to protect their inventions while patent applications are in progress. Businesses
from across the spectrum of sectors turn to trade secret protection laws to protect some or all of
their valuable creative ideas. Examples of technical and business information material that can be
protected by trade secret law include customer lists, designs, instructional methods,
manufacturing processes and product formulas, and document-tracking processes.
Courts use several factors under the common law of the majority of states to determine whether
certain material constitutes a trade secret:
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The extent to which the information is known outside the claimant’s (i.e., the firm
claiming the information to be a trade secret) business.
Measures taken by the claimant to guard the confidentiality of the information.
The value of the information to competitors.
The amount invested (in terms of time and money) in developing the information.
The efforts to maintain trade secret confidentiality among the claimant’s employees and
third-party vendors (such as auditing firms).
Trade Secret Protections
Trade secret protections are provided by state statutes and/or state common law. The Uniform
Trade Secrets Act (UTSA)2 defines trade secrets as information or articles that are to be kept
secret because of its particular value. More formally, a trade secret is described as formula,
pattern, compilation, program, device, method, technique, or process that meets the following
criteria:
2
The UTSA is a model law drafted by the American Law Institute for use by state legislatures.
For more information on the ALI and Model Laws, see Chapter 1, “Legal Foundations.”
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Derives independent economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by other persons who can obtain
economic value from its disclosure or use.
Is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy. Economic value must be identified by the owner and secrecy must be kept.
Misappropriation
While the definition of misappropriation may cover a wide spectrum of illegal acts, most states
use the fundamental definitions contained in the UTSA: acquisition of a trade secret of another
by a person who knows or has reason to know that the trade secret was acquired by improper
means, or any disclosure or use of a trade secret of another without express or implied consent.
Criminal Sanctions
While the UTSA does not contain any criminal sanctions, many states have added a separate set
of statutes that make certain trade secret misappropriation a criminal offense. For example, in
1997, a district attorney in California prosecuted several executives and employees of Avant!
Corporation, a firm that designed software related to semiconductor chips. The prosecutor was
alerted to the case after a competitor of Avant! sued them in an action brought under California’s
Trade Secret Act, alleging that Avant! employees stole computer code from one of Avant!’s
primary competitors.3 Ultimately, Avant! accepted a plea bargain from the prosecutor that forced
the company and seven individuals to pay $35 million in fines and resulted in incarceration for
five of the defendants. The Economic Espionage Act is a federal statute passed in 1996 providing
criminal penalties for domestic and foreign theft of trade secrets.
3
Cadence Design Systems, Inc. v. Avant!, 253 F.3d 1147 (9th Cir. 2002). The parties settled the
civil suit for $265 million.
Exclusive Rights for Unlimited Duration
Perhaps the most significant advantage of trade secret protection over other forms of intellectual
property (such as patents) is protection for trade secrets does not expire after a fixed period of
time. A trade secret owner has the right to keep others from misappropriating and using the trade
secret for the duration of the firm’s existence. Although sometimes the misappropriation is a
result of industrial espionage, most trade secret cases involve people who have taken their former
employer’s trade secrets for use in a new start-up business or for a new employer.
Trade secret protection endures so long as the requirements for protection continue to be met.
The protection is lost if the owner fails to take reasonable steps to keep the information secret.
For example, Sam discovers a new method for manipulating images in multimedia works. He
demonstrates his new method to a number of other developers at a multimedia conference. Sam
may have lost his trade secret protection for the image manipulation method because he failed to
take appropriate steps to keep his method secret.
Trade secret owners have recourse only against misappropriation. Discovery of protected
information through independent research or reverse engineering (taking a product apart to see
how it works) is not misappropriation.
Self-Check: Trade Secrets
Which of the following may be protectable as a trade secret?
1.
A list of customers compiled by a firm that included buying patterns, purchaser contact
information, and preferred products of each customer.
2.
A system used by a medical practice for scheduling patients for doctor’s office visits.
3.
The formula for a new brand of fruit drink for a beverage supply company.
4.
The process used by an accounting firm to draft financial statements in accordance with
Generally Accepted Accounting Procedures (GAAP).
5.
New software that helps a manufacturer speed up the design process for new products.
Answers to this Self-Check are provided at the end of the chapter.
Trademarks, Service Marks, and Trade Dress
LO24-2
A trademark is a word, symbol, or phrase used to identify a particular seller’s products and
distinguish them from other products. For example, the word Nike and the Nike “swoosh”
symbol identify shoes made by Nike and distinguish them from shoes made by another company.
Similarly, the Coca-Cola name and logo design distinguishes the brown-colored soda of one
particular company from competing brown-colored sodas made by other companies. When such
marks are used to identify services rather than products, they are known as service marks. Visa,
for example, is a service mark related to the credit card services offered by Visa International
Services Associated.
Trade Dress
Trademark protection also extends beyond words, symbols, and phrases to include other aspects
of the product such as shape or the color scheme of its packaging. These features are known as
trade dress. Increasingly, the U.S. Patent and Trademark Office (USPTO) and courts have
granted trademark protection for such trade dress-related characteristics as product shapes,
colors, and scents so long as a company can prove an exclusive link to the source product in the
consumer’s mind. For example, beginning in 2005, after having secured trademark registration
for the two-dimensional iPod symbol and the cobranded “Made for iPod” symbol, Apple applied
for trademark protection of the actual three-dimensional shape of their product. Apple provided
the USPTO with evidence that (1) they had spent hundreds of millions of dollars in advertising
targeted to building an association between iPod’s shape and Apple, (2) there was a widespread
consumer familiarity with the iPod’s design, and (3) many consumers automatically linked the
iPod’s shape with Apple. In 2008, the USPTO granted Apple’s application for trademark
registration. Figure 24.1 shows the sketches submitted by Apple to the USPTO.
Figure 24.1 Apple iPod Trademark Registration
Trademarks as a Business Asset
Business owners often invest significant resources into their trademark design, advertisement,
and protection because it is a valuable asset. Trademarks make it easier for consumers to quickly
identify the sources of a given good. Trademark owners design and advertise their trademarks in
hopes of helping to build brand loyalty, knowing that instead of reading the fine print on a
product, consumers have instant recognition of their mark. Rather than having to ask a store
clerk where to find a particular brand of sneaker, consumers are more likely to recognize a
unique pattern of stripes or a “swoosh” symbol. Trademark protections are designed to ensure
that competitors cannot have a free ride on a popular brand name. If a low-quality clothing
manufacturer could freely use the name Aéropostale or the widely known trade dress associated
with that mark, consumers might assume that they are buying authentic Aéropostale clothing.
Sales and reputation may suffer as consumers now began to infer that the Aéropostale company
had reduced its quality assurance standards.
Trademarks also serve as an incentive for business owners to invest in the quality of their goods
or services. If a consumer tries a brand of laundry detergent and finds the quality to be lacking, it
will be easy for a consumer to avoid that brand in the future. Trademark law provides consumer
protection by regulating the use of trademarks and prohibiting the use of a mark where consumer
confusion may result.
Source of Law
Trademark protections are a patchwork of federal and state law, but the major provisions and
protections are found in a federal statute known as the Lanham Act. The statute prohibits the use
in commerce, without the mark holder’s consent, of any protected trademark in a way likely to
cause consumer confusion. The act also prohibits the use of an unregistered common law
trademark.4
4
15 U.S.C. § 1114(1)(a).
Classifications of Trademarks
To qualify for protection as a trademark, the mark must be distinctive. That is, it must be capable
of identifying the source of a particular good. In determining whether a mark is distinctive,
marks can be grouped into three categories that are based on the mark’s relationship to the
underlying product. Because marks vary with respect to their distinctiveness, the requirements
for, and degree of, legal protection afforded a particular trademark will depend upon which
category it falls within.
Arbitrary or Fanciful
A mark categorized as arbitrary or fanciful bears no logical relationship to the underlying
product. For example, “Amazon.com” or “Kodak” bears no inherent relationship to their
underlying products or services. Similarly, the Google name and symbol has no obvious
connection to an Internet search engine. Arbitrary/fanciful marks are highly distinctive and are
thus afforded a relatively high level of protection.
Suggestive
A trademark is classified as suggestive if the mark itself evokes images of characteristics of the
underlying product. Some exercise of imagination or knowledge of a particular field may be
necessary to make this connection, but the mark itself suggests the underlying product. For
example, Under Armour Clothing suggests some type of product to be used “under” something,
but one needs a leap of imagination to understand the tied product. Suggestive marks are similar
to arbitrary marks in that they tend to be highly distinctive and are given a high level of
protection.
Google is one of the strongest and most distinctive trademarks in the world.
© AP Photo/Paul Sakuma
Case 24.1. Custom Vehicles v. Forest River, 476 F.3d 481 (7th Cir. 2007)
Fact Summary
Custom Vehicles registered the trademark “Work-N-Play” for one of their products. Work-NPlay vehicles were vans designed to be both a mobile office and, upon conversion that took the
owner approximately one hour, a camper. Later, Forest River manufactured a van with a ramp
door from the rear cargo section that had space fitted for a snowmobile, motorcycle, or ATV.
They named the van Work and Play (without registering it as a trademark). Custom filed suit for
trademark infringement, but the district court held that no infringement had taken place.
Synopsis of Decision and Opinion
The Seventh Circuit Court of Appeals affirmed the trial court’s decision in favor of Forest, ruling
that Custom’s mark was descriptive but had not acquired a secondary meaning. Sales of
Custom’s product were relatively small, and there was no evidence that the mark would have any
brand recognition. Thus, the mark was not sufficiently “famous” so as to be afforded trademark
protection.
Words of the Court: Secondary Meaning
“A trademark, like a patent, carries a presumption of validity. However, in the case of a
registered descriptive mark, the presumption is that it has acquired secondary meaning. But the
act of registration merely begins the process that leads to the presumption. Bare registration is
not enough. Trademarks cannot be ‘banked’ or ‘ware-housed’—that is, an individual or entity
cannot register thousands of names, unrelated to any product or service that it sells, in the hope
of extracting a license fee from sellers of products or services for which one of the names might
be apt. The register of a name must certify that the product is in use in commerce—defined as
the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a
right in a mark—within six months after the trademark is registered. Within those six months,
the use of the trademark in one commercial sale is not enough to place the trademark in the
ordinary course of trade, unless the sale is large enough to seize the attention of the relevant
market.”
Case Questions
1.
Should Custom have waited until they sold more of this product before they registered
Work-N-Play as a trademark?
2.
Why must a descriptive mark acquire a secondary meaning in order to have protection?
Descriptive
A descriptive trademark is one in which the mark directly describes, rather than suggests, a
characteristic of the underlying product or service in terms of color, function, and so forth. For
example, “Pizza Hut” tells us something about the product they sell. Marks that indicate
geographic ties, such as Vermont Maple Syrup, or marks that use a proper surname, such Ford
Motor Company, are considered descriptive. However, unlike arbitrary marks, descriptive marks
are not inherently distinct and may only gain trademark protection if they have acquired a
secondary meaning. Descriptive marks must clear this additional hurdle precisely because these
are frequently common terms that are connected to the product, but may also have alternate
meanings in a different context.
Standards for Secondary Meaning
A secondary meaning is created when the consuming public primarily associates a mark with a
particular product rather than any alternate meaning. For example, Microsoft attempted to
protect the term Windows as a mark for its revolutionary operating system for many years. In
order to attain that right, Microsoft was required to show that much of the consuming public
more often associated that term with their operating system rather than panes of glass.
In Case 24.1, a federal court of appeals analyzes the requirements for a secondary meaning.
Legal Implications in Cyberspace: Domain Names, Trademarks, and Cybersquatting
LO24-3
The explosive growth of consumer Internet use caused concern among trademark holders on a
number of fronts. Chief among them was the practice of individuals who legally registered
domain names that were also words associated with a famous trademark. Once the domain name
was secured, the individual would offer the domain name at an extraordinarily inflated rate to the
trademark owner. This practice became known as cybersquatting and was the subject of
considerable media attention in the 1990s and early 2000s. Congress responded to this practice
by passing a federal statute designed to curb some of the more unscrupulous cybersquatters. That
law, the Anticybersquatting Consumer Protection Act (ACPA), gave specific statutory remedies
to trademark owners to recover trademark-related domain names from users that acted in bad
faith. Bad faith is a dishonesty of belief or purpose. In this context, the bad faith requirement
may be met in a number of ways, but is typically satisfied when the registrant has no legitimate
reason for the use of a domain name or the registrant is using the domain name to profit or
confuse consumers. In Case 24.2, a federal court outlines nine examples of bad faith under the
ACPA.
Business Ethics perspective: Name for a King’s Ransom
1. Do you think that registering a domain name with the sole intent to sell the domain name
is ethical? Isn’t this just the market economy at work?
2. If one individual buys a domain name from another, with the intent to resell to another
party, is that a different ethical decision than in question one?
3. Are there any circumstances in which a party could ethically obtain the domain name of a
famous trademark?
Acquiring Rights for Trademark Protection
Assuming that a trademark qualifies for protection, rights to a trademark can be acquired in one
of two ways: (1) by being the fi …
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