Intellectual Property In California
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Intellectual Property In California

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March 2010 Presentation I gave to a Chinese Delegation

March 2010 Presentation I gave to a Chinese Delegation

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Intellectual Property In California Intellectual Property In California Presentation Transcript

  • Intellectual Property in California Emilio Varanini Deputy Attorney General California Office of the Attorney General Antitrust Section
  • The United States is a Federalist System
    • Congress has specific enumerated powers to act (albeit those powers are very broad).
    • All other powers not specifically delegated to Congress are reserved for States such as California.
    • Congress has the specific power to set up rules for granting patents and copyrights.
    • Congress has also set up a federal trademark system.
    • Does this mean the States have no role here?
  • State Law Protection for Federal Intellectual Property Rights
    • States can and do protect people’s property, including intellectual property.
    • California allows parties to bring the following actions:
      • Action for Conversion – civil action for theft – someone steals your intellectual property without paying you royalties
      • Action for Misappropriation – civil action for one party’s taking of another party’s intellectual property and passing it off as its own.
        • Example – trade secrets.
      • Action for Breach of Contract – someone does not pay royalties owed to you under a contract in exchange for the licensing of intellectual property.
  • State Intellectual Property Rights
    • Trade Secrets - information that is valuable because it is kept secret
      • Important means to protect intellectual property, e.g., software APIs, Coca-Cola’s formula for making Cola, customer lists, business plans.
      • As long as holder takes reasonable steps to protect against the loss of those secrets, law allows him to protect those secrets and treat them as if they were property.
      • Other companies cannot use bribery, theft, or espionage to get those secrets.
      • Exceptions: Reverse engineering ; Government Regulations.
    • Right to Privacy/Publicity
    • Trademarks
  • State Intellectual Property Rights (Cont’d) Covenants not to compete
    • Covenants not to compete – employer tells employee that if he wants to continue to work, he or she must agree that he cannot go to a rival company if he or she quits.
    • Not enforceable in California – California Business & Professions Code Section 16600.
    • California has a strong public policy in favor of employee mobility.
    • Exceptions:
      • Actual or threatened disclosure of trade secrets by ex-employee.
      • Inevitable disclosure of trade secrets by ex-employee enough? So far, no. Whyte v. Schlage Lock Co. , 101 Cal.App.4 th 1443 (2006).
  • The Intersection of State and Federal Intellectual Property Rights
    • Bonito Boats v. Thunder Crafts Boats , 489 U.S. 141 (1989) – United States Supreme Court decision establishing that state and federal intellectual property rights can coexist under certain circumstances.
    • Facts : Florida statute prohibited use of direct molding process to duplicate unpatented boat hull.
    • Holding : Court found that this statute was equivalent to a State’s grant of patent protection and so was not allowed. But , the court distinguished trade secrets, right of publicity/privacy, and actions for breach of contract, noting these kind of intellectual property rights did not function the same way as a patent.
  • Limitations on Federal Intellectual Property Rights Important to California
    • 1 st Limitation : State sovereign immunity
      • States can sue for violations of their federal intellectual property right but cannot in turn be sued for violations of those rights.
      • American States, like foreign countries, enjoy sovereign immunity.
      • This means States cannot be sued in federal court if they should violate someone’s patent.
      • Exception : States must allow lawsuits in state court in which a property holder can sue for fair compensation for the taking of his or her property.
  • Limitations on Federal Intellectual Property Rights Important to California (Cont’d)
    • 2 nd Limitation : State Antitrust Law
      • Walker Process : Can sue a patent holder for violations of state antitrust law if there is clear and convincing evidence that the patent was obtained by fraud.
      • Tying : Cannot use a patent to force people to buy both Product A (covered by a patent) and Product B (not covered by a patent) provided:
        • You have market power in the market for Product A.
        • The tie affects more than a trivial amount of sales in the market for Product B.
  • Limitations on Federal Intellectual Property Important to California (Cont’d)
    • 2 nd Limitation : State Antitrust Law (Cont’d)
      • Joint Activity : Joint activity involving intellectual property can take many different forms:
        • Patent-pools: Companies agree to cross-license their patents to each other so that they may produce products.
        • Standard-setting : Companies voluntarily disclose their patents in fashioning a standard for a product.
        • Joint ventures : Companies get together, form a joint venture, and license their intellectual property to each other so they can jointly produce a product.
      • Limitations : Cannot use joint activity to block competition outside of what is necessary to the joint activity itself
        • Example #1 : Patents covered by a patent-pool must be essential to the production of a product.
        • Example #2 : A joint venture cannot prevent each participant from making their own products outside of the venture.
  • Limitations on Federal Intellectual Property Important to California (Cont’d)
    • 3 rd Limitation : Essential Facilities Doctrine
      • Still good law in the U.S. no matter what commentators may say.
      • One competitor cannot deny access to a product or service that is needed by its competitors for there to be competition in the market at all.
      • The product or service must not be able to be practically duplicated by others. Courts have thought of this product or service as a bottleneck asset.
      • It must be feasible to provide access to competitors.
      • Intent can be important: if you grant access to such a bottleneck asset to your competitors and then later cut them off, that can motivate courts to apply this doctrine.
      • Courts have found that intellectual property rights can be such bottleneck assets.
  • Activity of the California Office of the Attorney General involving Intellectual Property Rights
    • Antitrust
      • Tricor
        • Company manufactured a drug to reduce cholesterol – Tricor.
        • When the patent was set to expire in 2002, the company engaged in various tactics to prevent competition, namely cheaper generic drugs.
        • Those tactics included making minor changes in the form and dosage of the drug and then obtaining a new patent to block the entry of generic drugs.
        • The company agreed to stop blocking the entry of generic drugs and to pay the States $22.5 million in reimbursement.
  • Activity of the California Office of the Attorney General involving Intellectual Property Rights (Cont’d)
    • Antitrust (cont’d) :
      • Microsoft
        • Microsoft engaged in a number of forced licensing schemes that were designed to require computer companies to install its browser (Internet Explorer) along with its operating system (Windows).
        • Its conduct was first investigated by the States, then by the federal government. The federal government and the States together sued Microsoft for violations of state and federal antitrust law.
        • One of Microsoft’s defenses was that these schemes were necessary to protect its copyright in Windows.
        • The federal courts rejected this argument as “borderline frivolous” and noted that “intellectual property rights do not confer a privilege to violate U.S. antitrust law.”
        • The relief obtained by the U.S. and the States has included interoperability requirements so that Windows would work with rival browsers and server operating systems, and would not favor Windows programs at the expense of rival programs such as desktop searches.
  • Activity of the California Office of the Attorney General Involving Intellectual Property (Cont’d)
    • Criminal Prosecutions
      • High-Tech Task Forces – funding by private enterprises of regional task forces of state and local police who engage in criminal investigations and prosecutions involving computer crimes, theft of trade secrets, trademark violations, and copyright infringement/piracy.
      • Police, not private enterprises, control which cases they will investigate.
  • Activity of the California Office of the Attorney General Involving Intellectual Property (Cont’d)
    • Other
      • DVDCCA v. Bunner
        • DVDCCA, a trade association of movie and television companies, developed an encryption program for movie DVDs so that its movies could not be copied.
        • A hacker broke the encryption and used the computer code from that program to develop a decryption program so people could copy (“pirate”) movies.
        • The defendant in this case posted that decryption program on his Internet site. DVDCCA sued, arguing that this decryption program contained their trade secrets and so must be removed under California’s trade secrets law.
        • The defendant argued that he did not have to take down this program because (1) the First Amendment allowed him to post it, (2) the code in that program was no longer a secret because it had been disseminated widely on the Internet, and (3) this code was discovered via reverse engineering – which is lawful.
  • Activity of the California Office of the Attorney General Involving Intellectual Property (Cont’d)
    • DVDCCA v. Bunner (cont’d)
        • We argued that the First Amendment did not protect the posting of this program because these were trade secrets and that this kind of reverse engineering for piracy purposes was not lawful.
        • The California Supreme Court agreed with us on the First Amendment issue, but did not address the other issues.
        • However, when the case went back down to the lower court, the lower court found that the code had been too widely publicized on the Internet to remain a trade secret.
  • Activity of the California Office of the Attorney General Involving Intellectual Property (Cont’d)
    • Process
      • Investigations are confidential
      • Civil versus criminal
      • Collaboration with local law enforcement, law enforcement in other States, and federal law enforcement
  • Closing
    • Defining and granting intellectual property rights for various ends is important. For that reason, you should think not only of patent and copyright laws, but also of trade secrets laws.
    • Allowing such rights to be enforced by local provincial authorities as well as by the center (subject to supervision by the center) is important.
    • But, allowing for free trade in publicly known, unpatented products is also important. Bonito Boats , 489 U.S. at 189.
    • Allowing for legitimate reverse engineering is also important.
    • And, preventing the abuse of intellectual property in monopolizing markets is also important.
  • Closing (cont’d)
    • Finally, need to provide a process, either through cases filed in court or through regulations, by which these rules can be developed and enforced. That process should be criminal and civil. To the extent you allow people to file civil lawsuits, you should have a process by which government entities can intervene and give their opinion.