Contracts and Intellectual Property Law CHAPTER 15 Contracts and Intellectual Property Law

Introduction The law governs virtually every transaction or activity that individuals engage in across the nation Paralegals routinely help attorneys deal with disputes involving contract and sales law Paralegals need a thorough understanding of the basic principles Another area of law that has become increasingly important involves intellectual property, such as patents, trademarks, and copyrights

Requirements to Form a Valid Contract Bilateral and Unilateral Contracts Bilateral Exchange a promise for a promise Most contracts are bilateral Unilateral Exchange a promise for an act Both types of contracts are valid May be referred to by different names Learning Objective: The requirements for forming a valid contract and the circumstances under which contracts are not enforceable.

Requirements to Form a Valid Contract Contract Validity Determine whether valid contract was formed Four basic requirements Agreement Consideration Contractual capacity Legality

Requirements to Form a Valid Contract Agreement Offer Offerer Terms must be reasonably certain, or definite Offeree Advertisements Not offers but invitations to make an offer Termination of the offer Counteroffer Other bases for termination Cont.

Requirements to Form a Valid Contract Agreement Acceptance Mirror image rule Proper communication Mailbox rule Reasonableness standard Click-on agreements

Requirements to Form a Valid Contract Consideration Elements of consideration Contract change requires new consideration Legal sufficiency of consideration Adequacy of consideration Promissory estoppel Clear and definite promise Promisee must justifiably rely on the promise Reliance normally of a substantial and definite character Justice will be better served by enforcement of promise

Requirements to Form a Valid Contract Contractual Capacity Legal ability or competence to enter into contractual relationship Minors Usually are not legally bound by contracts Contract voidable at option of minor Intoxication and mental capacity Contract voidable at option of intoxicated person Contract by a mentally incompetent person is void

Requirements to Form a Valid Contract Legality If contract is prohibited by statutory law Void from the outset Unenforceable Any contract to commit an illegal act is unenforceable Contract with an unlicensed individual May still be enforceable Depends on nature of licensing statute Some contracts not enforced because court deems them contrary to public policy

Defenses to Contract Enforceability Genuineness of Assent Defense to the contract’s enforceability Mistakes Mistakes of fact versus mistakes of value or quality Mistake of fact Mutual mistake Fraudulent misrepresentation Undue influence Duress Learning Objective: The remedies available when a contract is breached, or broken.

Defenses to Contract Enforceability Unconscionable Contracts or Clauses Court normally does not look at fairness or equity of contract Persons are assumed to be reasonably intelligent Unconscionable contract (or clause) If a bargain is so oppressive to one of the parties, court may refuse to enforce the contract Adhesion contract Dominant party presents a “take it or leave it” contract

Defenses to Contract Enforceability The Statute of Frauds Specifies what types of contracts must be in writing Involving interests in land or anything attached to land Cannot be performed within one year (possible) Collateral, or secondary, contracts Promises made in consideration of marriage Sale of goods priced at $500 or more

Defenses to Contract Enforceability

Sales Contracts and Warranties The Scope of UCC Article 2 Deals with sale of goods, not real estate, services, or intangibles Rules vary depending on whether buyer or seller is a merchant If subject is goods, UCC will likely govern UCC comes into play only when dispute arises over ambiguous or missing terms UCC does not replace the common law of contracts

Sales Contracts and Warranties Warranties under the UCC Express warranty Oral or written promise made by a seller concerning nature of goods being sold Implied warranties Goods must be reasonably fit for ordinary purposes of use Disclaimers Express and implied warranties may be disclaimers Must be made at time sales contract is formed

Contract Performance and Remedies Conditions must be fully satisfied for performance to take place Substantial performance Not perfect; other party entitled to damages Impossibility of performance “It can’t be done”—not “I can’t do it” Commercial impracticability Performance becomes more difficult or expensive

Contract Performance and Remedies Contract Remedies Damages Compensatory damages Consequential damages Liquidated damages Punitive damages Rescission, restitution, and reformation Specific performance

Contract Performance and Remedies Remedies for Breach of Sales Contracts Designed to put aggrieved party in as good a position as if other party had fully performed Remedies include: Right to reject nonconforming goods Right to cover Right to recover damages Right to obtain specific performance of the sales contract

Electronic Contracting and Electronic Signatures Online Offers and Acceptances Online offer should be as comprehensive as paper document Easily readable and clear Click-On Agreements Buyer indicates assent to be bound by terms of offer by clicking on button that says “I agree” or “I accept” Shrink-Wrap Agreements Terms expressed inside the box in which goods are packaged Learning Objective: The nature and legal validity of an electronic signature.

Online Contracting and Electronic Signatures State Laws Governing E-Signatures Uniform Electronic Transactions Act (1999) Adopted in part by forty-seven states Attempt at uniformity among laws E-signature is broadly defined Does not apply to UCC provisions Does not apply to wills and trusts

Online Contracting and Electronic Signatures Federal Law on E-Signatures and E-Documents E-SIGN Act (2000) Electronic signature is valid Electronic document is as enforceable as paper Both parties must agree to e-signatures Significantly expanded contracting possibilities

Intellectual Property Law Intellectual property consists of products that result from intellectual, creative processes The need to protect creative works was voiced in the U.S. Constitution in Article I, Section 8 Growing Value of Intellectual Property Value of world’s intellectual property exceeds value of physical property Specialized area of law in great demand Learning Objective: The nature and forms of intellectual property.

Intellectual Property Law Strategies for Protecting Intellectual Property: The Intellectual Property Audit The need for intellectual property audits Strategies for conducting an intellectual property audit Designating the team Preparing the audit questionnaire Conducting the audit Writing the audit report Postaudit activity

Intellectual Property Law Patents Grant from the government Gives inventor exclusive right to make, use, and sell an invention for twenty years Patents for designs granted for fourteen years U.S. Patent and Trademark Office Law gives patent protection to first to file for patent, even if another may have been first to invent Patent infringement is a tort Learning Objective: What conduct gives rise to a violation of intellectual property.

Intellectual Property Law Copyrights Exclusive right of an author or other creator to publish, print, or sell an intellectual production for a statutory period of time Granted by Copyright Act of 1976 What can be copyrighted? Not possible to copyright an idea Expression cannot be copyrighted Key requirement to obtain protection is originality Copyright infringement Exception: “fair use” doctrine

Intellectual Property Law Trademarks and Related Property Distinctive mark, motto, device, or emblem that manufacturer affixes to its goods so that goods can be distinguished from those of other manufacturers Trade names Trademark infringement Trademark dilution

Intellectual Property Law Trade Secrets Information or processes that give a business an advantage over competitors who do not know the information or processes What is protected? Ideas and their expression Secret formulas and methods Misappropriation of trade secrets Uniform Trade Secrets Act (UTSA): adopted in forty-three states Economic Espionage Act: federal statute

Summary A contract is any agreement (based on a promise or an exchange of promises) that can be enforced in court To form a contract, four basic requirements must be met: agreement, consideration, contractual capacity, and legality Defenses to contract enforceability include genuineness of consent, unconscionable contracts or clauses, and the Statute of Frauds

Summary States have statutes to replace common law contracts in certain areas of commerce The most common way to terminate contractual duties under a common law contract or UCC-based contract is by the performance of those duties Failure to perform contractual duties as promised results in a breach of the contract

Summary Many contracts are formed over the Internet, and how the courts apply the traditional rules of contract law to such contracts is an increasingly important issue The four basic types of intellectual property rights are: patents, copyrights, trademarks and related property, and trade secrets