24 - Intellectual Property

• Intellectual property protection has been essential to U.S. law since the Constitution's ratification.
• Article I, Section 8 of the U.S. Constitution empowers Congress to protect intellectual property.
• Intellectual property now accounts for about 70% of an average firm's value.
• Intellectual property protections help businesses create and capture value.

Trade Secrets and Business Information

• Trade secrets include secret processes, formulas, methods, procedures, and lists.
• Trade secrets give firms a competitive edge.
• Trade secret law can protect customer lists, designs, instructional methods, manufacturing processes, product formulas, recipes, and document-tracking processes.
• Trade secrets, business information, and business methods might not be protectable by patent or copyright laws.
• Most patent applicants use trade secret law to protect their inventions while patent applications are pending.
• Trade secret law comes from common law, where courts consider several factors to classify material/info as a trade secret.
• The extent to which the information is known outside the claimant's business matters.
• Measures taken to guard the information's confidentiality are considered.
• The value of the information to competitors is relevant.
• The amount invested in developing the information impacts classification.
• Efforts to maintain trade secret confidentiality among employees, investors, and vendors are key.
• Uniform Trade Secrets Act (UTSA) defines trade secrets as valuable secret information/articles.
• A trade secret derives independent value from not being generally known or easily ascertainable.
• Reasonable efforts must be made under the circumstances to maintain the secrecy of trade secrets.
• Misappropriation from the UTSA means acquiring a trade secret knowing it was obtained improperly.
• Disclosure/use of a trade secret without consent also constitutes misappropriation.
• Misappropriation can result from industrial espionage or when employees use former employer's secrets for a new venture.

Criminal Sanctions

• The UTSA does not include criminal penalties.
• The Economic Espionage Act, a federal statute, provides criminal penalties for domestic/foreign theft of U.S. trade secrets.
• Some states have statutes for criminalizing certain trade secret misappropriation forms.
• Trade secret protection offers exclusive rights for an unlimited duration.
• No formal registration is required for this protection.
• Protection is lost if the owner fails to take reasonable steps to keep the information secret.

Trademarks, Service Marks, and Trade Dress

• Trademarks are a daily part of consumer life.
• Businesses want to extend trademark protection beyond words/symbols to product shape/packaging color.
• These beyond-the-mark features are called trade dress.
• Courts traditionally allow trade dress protection for product design features and packaging for businesses like restaurants.
• The U.S. Patent and Trademark Office (USPTO) grants trade dress protection if it provides an exclusive link to the product source in the consumer's mind.
• Examples include Christian Louboutin's red-bottomed shoes and UPS's Pullman brown color.

Trademarks as a Business Asset

Marks are also known as brands.

• Trademark protection prevents others from fooling consumers into buying a product they believe is from the mark holder.
• Businesses invest significantly in trademarks to build brand loyalty.
• The Lanham Act prevents competitors from getting a free ride on a famous brand.
• Courts classify marks based on their level of distinctiveness.
• The more distinctive the mark, the stronger the protection under the Lanham Act.

Arbitrary or Fanciful Marks

• Marks do not have a direct connection to the product.
• An arbitrary mark is a real word used unrelated to its literal meaning (e.g., Apple, Amazon).
• A fanciful mark is a made-up word for use as a distinctive term (e.g., Spotify).

Suggestive Marks

• Marks imply a product/service without literally describing it.
• Understanding the product requires imagination (e.g., Under Armour).
• Suggestive marks are highly distinctive and receive high protection.

Descriptive Marks

• Marks refer to features/qualities of a product/service and are not inherently distinctive.
• Examples include "After Tan" and "Car Freshener."
• They are not protected under the Lanham Act without acquiring a secondary meaning.
• Holders must prove the public connects the mark with their product, not its ordinary meaning.

Standards for Secondary Meaning

A secondary meaning is created when the public primarily associates a mark with a product rather than any alternate meaning.

• The U.S. Patent and Trademark Office (USPTO) denied trademark protection of terms such as "smartphone” or “e-mail."

Key Point

• Courts determine mark protection eligibility based on its classification.
• A generic mark cannot be registered as a trademark.
• A mark that is more distinctive has higher chances of protection by the Lanham Act.
• A distinct mark can become generic, losing its trademark protection.
• Bayer lost the right to protect "aspirin" in 1921.

Legal Implications in Cyberspace

• Individuals register domain names associated with famous trademarks.
• Cybersquatters offer the domain name at inflated rates to the trademark owner.
• Congress enacted the Anticybersquatting Consumer Protection Act (ACPA) to curb unscrupulous cybersquatters.
• Bad faith means a dishonesty of belief or purpose.
• Bad faith is satisfied when the registrant has no reason for using the domain name.

Enforcing the Mark

• If a mark is distinctive, the holder prevents unauthorized use.
• A holder must acquire rights, police, and maintain the mark.
• If rights are attached, third-party use can be prevented, and damages can be collected.

Acquiring Rights

• Rights are acquired through commerce use or registration with the U.S. Patent and Trademark Office (USPTO).
• Use in commerce carries a risk of limited nationwide rights.
• Most holders register for full realization.
• A mark holder typically uses the symbolt™ (orsm) to indicate that the mark is not yet registered with the USPTO.
• Indicate that mark is distinctive enough to be protected and, in some cases, that the application for registration is pending.
• Once the mark has been approved by the USPTO, it is considered registered, and the mark holder now uses the symbol®️.
• The Patent Act also allows the USPTO to reject a mark if it is “immoral, deceptive, or scandalous matter” or if it may be disparaging to people, institutions, beliefs, or national symbols.
• In 2017, the Supreme Court held that Section 2a was unconstitutional.

Policing the Mark

• Mark holders protect their rights by policing their mark.
• A primary threat is the use of the mark by competitors/third parties.
• Of particular concern to business owners/managers should be the use of the mark as a noun/verb.
• Xerox Corporation has used advertising campaigns to caution writers about using Xerox's mark.
• Xerox's mark to only identify their products/services as Xerox copiers.
• It can not be a verb ‘to Xerox' or a noun ‘Xeroxes.”

Trademark Infringement

• It occurs then a party uses a protected mark without the mark holder's consent.
• The holder of a mark must prove use of the mark by another to cause confusion of the source of the goods.
• Courts the use eight-factor Polaroid test to assess likelihood of confusion.

Trademark Dilution

• In addition to bringing an infringement claim under the Lanham Act, holders of famous marks may also enforce their rights via the Federal Trademark Dilution Act of 1995.
• In a dilution claim, consumer confusion is not necessary.
• Dilution occurs through blurring or tarnishment.
• Blurring dilutes the mark's quality through its identification with goods that are not alike.

Copyright Law: Protections of Original Expressions

• A copyright protects the rights of creators of original works for a defined period of time during which the holder has the exclusive rights to copy, distribute, display, or perform the work.

Originality and Creativity Requirements

• The courts have ruled that an original work of authorship is a work that is original to the author, which means that the author must use her own creative capabilities to create the work or medium.
• In fact, the work must be fixed in a tangible form, such as writing, digital, video, and so forth.

Copy Right Infringement

• When a copyright holder sues a party that it believes has infringed on its copyright, the copyright owner will generally pursue one of three theories of infringement.
• These theories have been developed by the federal courts to analyze copyright infringement cases.
• These theories are direct infringement, indirect infringement (also known as contributory infringement), and vicarious infringement.

Defenses To Infringement Claims

A work that is in the public domain is not protectable under copyright laws. -Works fall into the public domain either because the copyright has expired or because federal or state governments publish the work. By way of example, reproductions of classical works in literature such as Homer's The Odyssey or Tolstoy's War and Peace do not require permissions because those works are now part of the public domain. Similarly, court cases, government agency correspondence, and statutes are all in the public domain and do not require permission for use.

Fair Use

• The most common and powerful defense in copyright infringement cases is fair use The term fair use has now been codified in the Copyright Act with four general factors or guideposts: (1) the purpose and nature of the use, (2) the nature of the work itself, (3) the amount and substantiality of the material used, and (4) the effect of the use on the market.

Legal Implications in Cyberspace

Technology has created new challenges for legislatures and courts struggling with applying copyright law in the digital age. In order to settle uncertainty in the computer science field about the ability to copyright computer software, Congress amended the Copyright Act with the Computer Software Copyright Act.

Evolution of Copyright Law and Technology

• The revolutionary technological gains and the increasing popularity of the Internet have led to significant threats to such copyright holders as record labels and movie studios.
• Congress enacted the Digital Millennium Copyright Act (DMCA) in 1998 in an attempt to modernize copyright law to deal with the new challenges that had emerged in the digital age.