1. Business And Its Legal Environment (Mgmt 246) Professor Charles H. Smith Intellectual Property And Internet Law (Chapter 12) Spring 2006

2. Basics of Intellectual Property  “Intellectual property” is the result of intellectual/creative processes; e.g., your textbook, the new Blackeyed Peas CD, a movie like Fantastic 4, etc.  Need to protect intellectual property is not a new idea – recognized in U.S. Constitution, Article I, Section 8 (1787) – Congress authorized “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

3. Forms of Intellectual Property  Trademarks  Patents  Copyrights  Trade secrets  First three covered by federal law (same law throughout the USA); trade secrets covered by state law (can be different laws in different states)

4. Trademarks  Definition – “The term ‘trademark’ includes any word, name, symbol, or device, or any combination thereof—[¶] (1) used by a person, or [¶] (2) which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this Act, [¶] to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown.” (15 U.S.C. Section 1127.)  Examples Your favorite band’s logo – words such as “Fall Out Boy” or symbol such as The Rolling Stones’ mouth and tongue. Design/color scheme of restaurant – McDonald’s “Golden Arches” (usually called “trade dress”). Brand name of product – “Honda Civic” or “Air Jordan.” Business slogan – “We never stop working for you” (Verizon Wireless) or “Click ‘n Save” (Southwest Airlines).

5. Patents  “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor.” (35 U.S.C. § 101.)  Patent is a grant from the federal gov’t that provides an exclusive right to make, use and sell anything described in § 101.  Examples – recipe for food or drink, machine or any part of it (such as flat-screen monitor or mouse as part of PC), design for product (such as piece of paper or DVD).

6. Copyrights  Definition – “Copyright protection subsists... in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device” including creations such as literary works; musical works, including any accompanying words; pictorial, graphic, and sculptural works; and sound recordings. (17 U.S.C. Section 101.)  Copyright protection does not “extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery.” (17 U.S.C. Section 102.)  Examples – song such as “Master of Puppets” (music and/or words), movie such as “Anchorman: The Legend of Ron Burgundy” (theatre or DVD), “The DaVinci Code” (book or movie).

7. Copyright law applied to peer-to-peer file-sharing – MGM v. Grokster, Ltd., 125 S.Ct. 2764 (2005)  Copyright holders re songs sued Grokster and others for providing free software that permitted peer-to-peer file- sharing.  U.S. Supreme Court’s holding – “[O]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of [direct] infringement by third parties.”  Software providers’ intent to promote copyright infringement was shown by three factors, which were (1) “aiming to satisfy a known source of demand for copyright infringement, the market comprising former Napster users,” (2) no “attempt[] to develop filtering tools or other mechanisms to diminish the infringing activity using their software” and (3) “directing ads to the screens of computers employing their software.”  Prior Sony case distinguished – VCR’s potential for copyright infringement since VCR had principally had fair use of “taping program for later viewing at a more convenient time” and “no evidence that Sony had expressed an object of bringing about taping in violation of copyright or had taken active steps to increase its profits from unlawful taping.”

8. Multiple Intellectual Property Issues in Same Product  Product – “Little House on the Prairie” books Trademark on “Little House on the Prairie” title. Patent on fonts used on cover and text (not unique to Little House books). Copyright on text and cover artwork.  Product – “Seinfeld” DVD sets Trademark on “Seinfeld” title. Patent on DVD design and manufacturing process (not unique to Seinfeld DVD sets). Copyright on video, audio and artwork on box.

9. Introduction to Trade Secrets  Definition – “‘Trade secret’ means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (California Civil Code Section 3426.1(d).)  Can be something that is patentable but company chooses not to register with federal government.  Trade secrets violation often alleged when employee leaves company to work for a competitor; e.g., ex-employer make accusation of theft of customer list or secret formula.  Examples – customer lists, formulas, production techniques, results of market surveys (anything unique and confidential developed or maintained by a business).

10. Trade Secrets Litigation  Injunction (TRO, preliminary, permanent) for actual or threatened misappropriation (C.C. § 3426.2).  Damages based on actual loss, unjust enrichment, reasonable royalties (if actual loss or unjust enrichment provable), punitive damages not more than 2X actual loss damages or reasonable royalties (C.C. § 3426.3).  Attorney’s fees if claim or defense in bad faith (C.C. § 3426.4).  “[C]ourt shall preserve the secrecy of an alleged trade secret by reasonable means” such as protective orders, in-camera hearings, sealing case files, nondisclosure orders (C.C. § 3426.5).

11. Selected IP and Internet Issues  Cybersquatting Person registers domain name that is the same or quite similar to another’s trademark (e.g., cases involving juliaroberts.com or panavision.com) Prohibited by Anticybersquatting Consumer Protection Act of 1996 (prevailing plaintiff can get order transferring domain name, damages, and attorney’s fees).  Trespass to chattels (interference with plaintiff’s right to use and enjoy of personal property) – see Intel Corp. v. Hamidi, 30 Cal.4 th 1342 (2003) Defendant sent about 200,000 e-mails negative about plaintiff to 8,000-35,000 employees on six occasions over 21-month period. Cal. Supreme Ct. ruled in defendant’s favor because e- mails did not damage or impair functioning of plaintiff’s computer system. Also, plaintiff had no property right to employees’ time; could this lawsuit have succeeded on another theory (e.g., interference with prospective economic advantage)?

12. Selected IP and Internet Issues cont.  Parody as “fair use” (exception to copyright infringement) – relies on the “criticism and comment” language in copyright statute Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994) – 2 Live Crew’s song called “Pretty Woman” was not copyright infringement (parody of Roy Orbison’s “Oh, Pretty Woman”). SunTrust Bank v. Houghton-Mifflin Co., 268 F.3d 1257 (11 th Cir. 2001) – no injunction against publication of “The Wind Done Gone” (parody of “Gone With The Wind”).  State’s restrictions on ability of its employees to access sexually explicit material on state-owned or –leased computers Urofsky v. Gilmore, 167 F.3d 191 (4 th Cir. 1999) – upholding Virginia statute prohibiting such access unless permission granted by supervisor.