1. Contracts and Intellectual Property Law
CHAPTER 15
Contracts and Intellectual Property Law

2. 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

3. 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.

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

5. 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.

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

7. 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

8. 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

9. 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

10. 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.

11. 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

12. 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

13. Defenses to Contract Enforceability

14. 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

15. 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

16. 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

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

18. 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

19. 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.

20. 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

21. 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

22. 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.

23. 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

24. 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.

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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