Chapter 8 -


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  • The hyperlink is to the U.S. Patent & Trademark Office.
  • The hyperlink is to the case information and opinion on the Cornell University Law School website. In Pfaff v. Wells Electronics, Inc., Pfaff began development work on a new computer chip socket in November 1980. He prepared detailed engineering drawings that described the design and dimensions of the socket and the materials to be used in making it, then sent the drawings to a manufacturer in February or March 1981. Prior to March 17, 1981, he showed a sketch of his concept to representatives of Texas Instruments. On April 8, 1981, the Texas Instruments representatives provided Pfaff a written confirmation of a previously placed oral purchase order for 30,100 of the new sockets. The total purchase price was $91,155. Pfaff did not make and test a prototype of the socket before offering to sell it. The first actual sockets were not produced until the summer of 1981. Pfaff filled the Texas Instruments order in July 1981. Other orders followed, as the socket became a commercial success. On April 19, 1982, Pfaff applied for a patent on the socket. A patent was issued to him in January 1985. Pfaff later filed an infringement action against Wells Electronics, Inc., which produced a competing socket. Wells Electronics argued that Pfaff’s patent was invalid under section 102(b) of the Patent Act of 1952, which states that a patent cannot be obtained for an invention if it has been “on sale” for more than a year before the filing of the patent application. The federal district court rejected Wells Electronics’ section 102(b) defense because Pfaff had filed the patent application less than a year after reducing the invention to practice (i.e., less than a year after the first actual sockets were produced and available for sale). The district court held Wells Electronics liable for infringement but the U.S. Court of Appeals for the Federal Circuit reversed. The Court of Appeals held that Pfaff’s patent was invalid because the socket had been offered for sale on a commercial basis more than a year before the filing of the patent application. The U.S. Supreme Court stated: “…April 19, 1981 constitutes the critical date for purposes of the on-sale bar of section 102(b); if the one-year period began to run before that date, Pfaff lost his right to patent his invention. …Pfaff ’s patent is invalid because the invention had been on sale for more than one year in this country before he filed his patent application.” Note that Pfaff missed having a valid patent by 11 days.
  • The hyperlink is to the Supreme Court opinion in pdf format. The Supreme Court affirmed that Bilski’s risk-management method was not the type of innovation that may be patented. However, rather than using the Federal Circuit's "machine-or-transformation test", the court relied on precedent to find the claimed method unpatentably abstract. All nine justices agreed that Bilski's method of hedging risk was not patentable because it is an abstract idea "just like the algorithms at issue in Benson and Flook .“ Section 101 does not categorically exclude business methods from patentability. Section 101 patent eligibility is "only a threshold test." To be patentable, the invention must also "be novel, see §102, nonobvious, see §103, and fully and particularly described, see §112.“ (quotation from Justice Kennedy’s opinion)
  • The hyperlink is to the Supreme Court opinion in pdf format. To be patentable, an invention must be non-obvious. In other words, a person having ordinary skill in the art would not use the same mechanism to solve the problem that the invention resolves. Since almost all inventions are combinations of known elements, the U.S. Court of Appeals for the Federal Circuit applied the teaching-suggestion-motivation (TSM) test, which requires a showing that some suggestion or motivation exists to combine known elements to form a claimed invention. The Supreme Court declared that the TSM test was inadequate and the true test of non-obviousness required an application of the Graham factors (from Graham et al. v. John Deere Co. of Kansas City et al. , 383 U.S. 1 (1966) ). In KSR , the Supreme Court decided that obviousness should be determined by looking at: the scope and content of the prior art; the level of ordinary skill in the art; the differences between the claimed invention and the prior art; and objective evidence of nonobviousness. Objective evidence of nonobviousness is evidenced by: commercial success; long-felt but unsolved needs; and failure of others
  • Hyperlink is to the Supreme Court opinion.
  • The hyperlink is to the U.S. Copyright Office.
  • Pre-1978 works were good for a term of 28 years from first publication plus a renewal term of 47 years. However, a pre-1978 work that was still under valid copyright protection as of 1998 (when the Copyright Term Extension Act took effect), now has a total protection period of 95 years from first publication (28 year initial term plus renewal term lengthened to 67 years).
  • Patent infringement may be established under principles of literal infringement or under a judicially developed approach known as the doctrine of equivalents. Infringement is literal in nature when the subject matter made, used, or sold by the defendant clearly falls within the stated terms of the claims of invention set forth in the patentee’s application. Under the doctrine of equivalents, a defendant may be held liable for infringement if the alleged infringer’s subject matter performs substantially the same function as the protected invention in substantially the same way, in order to obtain the same result.
  • The hyperlink is to the case information and opinion on the Cornell University Law School website.
  • Hyperlink is to the opinion. In Campbell v. Acuff-Rose Music, Inc., Supreme Court held that 2 Live Crew’s version of Roy Orbison’s “Pretty Woman” was a parody and could be a fair use if use not excessive and did not harm market for the original. Case remanded to determine whether use was excessive or harmed the market, but parties settled.
  • The hyperlink is to the opinion. You may wonder why Amazon is in the title of the case. Google and Amazon entered into an agreement pursuant to which Amazon was permitted to display Google search results in response to its users’ search queries. Amazon displayed such search results via “in-line links” that made the results appear on pages containing Amazon’s branding. These links made it appear to the user that Amazon that was supplying the results, when in fact they were actually coming from Google. As a result of this arrangement, presented its users with the same image search results that Google did – both smaller thumbnails of the infringing images from Google’s servers, and the actual infringing images themselves, found on the third party websites on which they appear on the Internet. As it had against Google, Perfect 10 asserted that by these acts, was guilty of infringing its copyrights. Applying the server test, the Ninth Circuit held Perfect 10 unlikely to prevail on its claims of direct infringement, because only delivered html instructions – to wit in-line links – to its users, and not the actual images themselves, which were supplied either by Google or third parties. The Ninth Circuit also held Perfect 10 unlikely to prevail on its claims of vicarious infringement, because it had not adequately shown that garnered sufficient direct financial benefit from the activities in question to sustain such a claim.
  • Hyperlink is to the U.S. Patent and Trademark Office document entitled U.S. Trademark Law, Rules of Practice and Federal Statutes. Registration with state or federal government recommended, but not required for protection
  • The hyperlink is to the Fourth Circuit opinion in pdf format.
  • The lower court granted defendant HDD’s motion for summary judgment. LVM appealed to the U.S. Court of Appeals for the Fourth Circuit.
  • Fourth Circuit noted that a successful parody conveys two messages: an original item that reminds consumers of a famous mark but is clearly not the parodied famous mark, and the parody conveys "some articulable element of satire, ridicule, joking or amusement".” Specifically, the court stated: “First, the pet chew toy is obviously an irreverent, and indeed intentional, representation of an LVM handbag, albeit much smaller and coarser. The dog toy is shaped roughly like a handbag; its name "Chewy Vuiton" sounds like and rhymes with LOUIS VUITTON; its monogram CV mimics LVM's LV mark; the repetitious design clearly imitates the design on the LVM handbag; and the coloring is similar. In short, the dog toy is a small, plush imitation of an LVM handbag carried by women, which invokes the marks and design of the handbag, albeit irreverently and incompletely. No one can doubt that LVM handbags are the target of the imitation by Haute Diggity Dog's ‘Chewy Vuiton’ dog toys.” In discussing the dilution issue, the court stated, “In this case, precisely because LOUIS VUITTON is so strong a mark and so well recognized as a luxury handbag brand from LVM, consumers readily recognize that when they see a ‘Chewy Vuiton’ pet toy, they see a parody. Thus, the strength of LVM's marks in this case does not help LVM establish a likelihood of confusion…. Indeed, by making the famous mark an object of the parody, a successful parody might actually enhance the famous mark's distinctiveness by making it an icon.”
  • Hyperlink is to the Starbucks opinion. In a trademark infringement action by Starbucks Corp. regarding a competitor's use of the name "Charbucks," judgment for defendant is affirmed in part where: 1) the district court did not clearly err in finding that the Charbucks Marks were minimally similar to the Starbucks Marks; 2) the Charbucks line of coffee was marketed as a product of very high quality -- as Starbucks also purported its coffee to be -- which was inconsistent with the concept of tarnishment. However, the judgment is vacated in part where the district court needed to conduct further proceedings on the issue of whether Starbucks demonstrated a likelihood of dilution by "blurring" under federal trademark law. The Second Circuit U.S. Court of Appeals held that the Trademark Dilution Revision Act of 2005 (“TDRA”) does not require proof of “substantial similarity” between the marks in question for a trademark owner to establish dilution by blurring. In Starbucks Corp. v. Wolfe’s Borough Coffee, Inc ., 588 F.3d 97 (2nd Cir. 2009), the Second Circuit vacated a district court ruling, finding that the District Court improperly applied and weighed the six factors that determine a dilution by blurring claim. In particular, the Second Circuit held that the TDRA does not require that the infringing mark be “substantially similar” to the famous mark, nor does it require that the infringer acted in “bad faith” in using his mark.
  • The hyperlink is to the opinion on the website. Coleman v. Retina Consultants, P.C. : Georgia Supreme Court reversed trial court’s decision to enjoin a former employee based on his non-compete provision. However, court upheld the injunction to extent that it prevented employee from using former employer’s trade secrets. The case concerned a situation in which an employee and employer disputed ownership of software developed over the course of employment.
  • The hyperlink is to the opinion on the website. Lewis–Gale Medical Center, LLC (“Lewis–Gale”) appealed from a jury verdict awarding Dr. Karen J. Alldredge $900,000 for tortious interference with her contract of employment with Southwest Emergency Physicians, Inc. (“SWEP”). The dispositive issue was whether Dr. Alldredge presented sufficient evidence to permit the jury to find that Lewis–Gale employed improper methods to induce SWEP to terminate her employment. Regardless of any expectancy that Dr. Alldredge may have had with regard to her continued employment by SWEP, because her contract provided for termination by SWEP after giving 90 days notice, Dr. Alldredge's contract was for employment at-will. Accordingly, Dr. Alldredge was required to prove not only that Lewis–Gale intentionally interfered with her contract relationship with SWEP, but also that in doing so Lewis–Gale employed “improper methods.” “ Lewis–Gale's actions in this case involving at-will contracts did not rise as a matter of law to the level of the “improper methods” required for Dr. Alldredge to prove that Lewis–Gale's purposeful interference in her contract relationship with SWEP was tortious. Accordingly, we hold that the circuit court erred in not striking Dr. Alldredge's evidence and in not granting summary judgment to Lewis–Gale.”
  • The hyperlink is to the case opinion on the website. Time Warner Cable, Inc. (TWC), and DIRECTV, Inc., are major players in the multichannel video service industry. In 2006, DIRECTV launched a multimedia advertising campaign based on the “Source Matters” theme. Shortly after DIRECTV began running the above-described television commercials and Internet ads, TWC sued DIRECTV in the U.S. District Court for the Southern District of New York. TWC, which claimed that DIRECTV had engaged in false advertising in violation of § 43 (a) of the Lanham Act, moved for a preliminary injunction against the commercials and ads. When the federal district court granted the preliminary injunction, DIRECTV appealed to the U.S. Court of Appeals for the Second Circuit. Second Circuit: Two different theories of recovery are available to a plaintiff who brings a false advertising action under § 43(a). First, the plaintiff can demonstrate that the challenged advertisement is literally false, i.e., false on its face. When an advertisement is shown to be literally or facially false, consumer deception is presumed and “the court may grant relief without reference to the advertisement’s [actual] impact on the buying public.” [Case citation omitted.] Alternatively, a plaintiff can show that the advertisement, while not literally false, is nevertheless likely to mislead or confuse consumers. Therefore, whereas “plaintiffs seeking to establish a literal falsehood must generally show the substance of what is conveyed, . . . a district court must rely on extrinsic evidence [of consumer deception or confusion] to support a finding of an implicitly false message.” Here, TWC chose to pursue only the first path of literal falsity, and the District Court granted the preliminary injunction. Second Circuit reviewed the statements and concluded that DIRECTV’s television commercials were literally false, therefore TWC had a basis for claiming irreparable harm and obtaining the injunction. However, the internet advertising was so unrealistic that confusion could not occur, thus mere sales puffery.
  • False. You cannot copyright an “idea,” though once the idea has been made into a tangible work of artistic or literary expression, that work is automatically protected under U.S. Copyright law. False. Copyright protection is automatic, though registration certainly is recommended. True. True.
  • False. Trademark dilution is the diminishment of the capacity of plaintiff's marks to identify and distinguish plaintiff's goods or services. True. False. The fair use may not be excessive or harm the market for the original work. A court weighs factors in a fair use determination: (1) the purpose and character of the use, (2) the nature of the copyrighted work, (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and (4) the effect of the use on the potential markets for the copyrighted work or on its value
  • The correct answer is (e)
  • The correct answer is (a). Trademark dilution on the internet is prohibited by the Anticybersquatting Consumer Protection Act.
  • Refer back to the MGM v. Grokster decision.
  • Chapter 8 -

    1. 1. C H A P T E R 08Intellectual Property and Unfair Competition I dream for a living. Steven Spielberg quoted in Time magazine July 1985 8-1
    2. 2. Learning Objectives• Differentiate the various intellectual property rights: patent, copyright, and trademark• Describe infringement and defenses• Explain misappropriation theory and the importance of trade secrets• Identify the elements a plaintiff must prove in unfair competition claims 8-2
    3. 3. Types of Intellectual Property• PATENT: – Engine design, business methods• TRADEMARK – Logo, trade name• COPYRIGHT Marketing materials for Case Construction Equipment – Sales materials, artwork 8-3
    4. 4. Patent• Grant from federal government to an inventor in which inventor obtains exclusive right to make, use, and sell his invention for a period of 20 years (14 years for designs)• U.S. Patent Act requires registration – 8-4
    5. 5. Patent• A patent will not be issued if more than one year before patent application the invention was patented elsewhere, described in a printed publication, or in public use or on sale in the United States – Example: Pfaff v. Wells Electronics, Inc. • Inventor sold patented item on April 8, 1981 • Inventor applied for patent on April 19, 1982 • More than one year passed, thus the patent was invalid 8-5
    6. 6. Patent• Protection for: a process, a machine, a product or manufacture, a composition of matter (such as a new chemical compound), an improvement of any of the above, an ornamental design for a product, a plant produced by asexual reproduction, certain business methods• Even though an invention fits one of the categories, it is not patentable if it lacks novelty, is obvious, or has no utility 8-6
    7. 7. Bilski v. Kappos• Bilski and Warsaw applied for a patent on methods for hedging risks for commodities trading, but the Patent Office rejected the application as covering an abstract idea not eligible for patent protection under § 101 of the Patent Act; appellate court affirmed.• Supreme Court: the invention, in this case (a risk-management method), may not be patented; nevertheless, business methods can be patented, even if the method does not pass the "machine or transformation" test 8-7
    8. 8. KSR International Co. v. Teleflex, Inc.• Teleflex sued KSR claiming one of KSR’s products infringed on a Teleflex patent• Issue was whether disputed patent claim was obvious• Supreme Court – obviousness determined by – Scope and content of the prior art; – Level of ordinary skill in the art; – Differences between claimed invention and prior art; – Objective evidence of nonobviousness (commercial success, long-felt but unsolved needs, and failure of others) 8-8
    9. 9. Patent Infringement• Infringement occurs when defendant makes, uses, or sells patented invention without patentee’s authorization• Remedy: monetary damages – Global-Tech Appliances, Inc. v. SEB S.A.• Infringement established by literal infringement or doctrine of equivalents – Whether alleged infringer’s subject matter performs substantially same function as protected invention in substantially same way for same result 8-9
    10. 10. Copyright• Intangible right granted by statute to the author or creator of certain tangible literary or artistic productions – Can’t copyright an “idea”• Applicable law: Copyright Protection Act and Copyright Term Extension ActVisit the U.S. Copyright Office 8-10
    11. 11. Copyright• Protection automatic; registration not required, though recommended• Works created after 1/78 are given protection for life of author + 70 years• Protection for a work-for-hire (corporation owns copyright) is 95 years from first publication or 120 years from creation, whichever comes first 8-11
    12. 12. Work-for-Hire• A work-for-hire exists when – an employee, in the course of her regular employment duties, creates a copyrightable work; or – an individual or corporation and an independent contractor (nonemployee) enter into a written “hire” agreement under which the non-employee creates a copyrightable work for the individual or corporation 8-12
    13. 13. Infringement• Violation of intellectual property right: when someone uses, makes, or sells another’s trademarked, patented, or copyrighted intellectual property without owner’s permission, license, franchise• Penalties -- actual or statutory damages in civil proceedings or criminal penalties for willful violations 8-13
    14. 14. Proof of Infringement• Infringement generally requires proof that: – defendant had access to protected work; – defendant engaged in enough copying (deliberately or subconsciously) that resemblance between allegedly infringing work and protected work could not be coincidental; and – substantial similarity exists between the works 8-14
    15. 15. Metro-Goldwyn-Mayer Studios, Inc• Facts & Procedural History: – Defendants Grokster and StreamCast Networks, Inc. distributed free software that allowed computer users to share electronic files through peer-to-peer networks – Many copyright owners (collectively referred to as MGM) filed separate lawsuits against defendants and the cases were consolidated 8-15
    16. 16. Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.• Facts & Procedural History: – MGM sought damages and injunction alleging defendants knowingly and intentionally distributed software to enable users to reproduce and distribute copyrighted works in violation of the Copyright Act• Issue: – Under what circumstances is distributor of a product capable of both lawful and unlawful use liable for acts of copyright infringement by third parties using the product? 8-16
    17. 17. Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.• Legal Reasoning: – One infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it – Substantial evidence shows defendants acted with a purpose to cause copyright violations by use of software suitable for illegal use 8-17
    18. 18. Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.• Holding: – One who distributes a device with the object of promoting its use to infringe copyright, as shown by affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties 8-18
    19. 19. The “Fair Use” Defense• A fair use defense or exception exists when a copyrighted work or trademark is used without the property holder’s permission, but the use was: – “For purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research” Section 107 of the Copyright Act 8-19
    20. 20. The “Fair Use” Defense• A court weighs several factors in a fair use determination: – purpose and character of the use, – nature of the copyrighted work, – amount and substantiality of portion used in relation to copyrighted work as a whole, – effect of use on the potential markets for the copyrighted work or on its value 8-20
    21. 21. Compare Cases: Bouchat• Concerned copyrighted Shield logo that Ravens football team used and for which the team was held liable for infringement• Use of Flying B logo in season highlight film is not fair use because use was significant and for commercial (not transformative) purpose• Use of Flying B logo in Ravens lobby is fair use because use was transformative and noncommercial 8-21
    22. 22. Compare Cases: Perfect 10• Perfect 10 markets copyrighted images of nude models which were republished without permission and became thumbnails in Google’s search engine• In appeal of infringement case, Ninth Circuit relied largely on the transformative nature of thumbnails Google created, which facilitated public’s ability to search web for images and serve a different purpose than original images (designed to entertain); such use is fair use 8-22
    23. 23. Trademark• Distinctive mark, motto, device, or emblem that a manufacturer or service provider stamps, prints, or affixes to products it produces or services it performs to distinguish products or services from those of competitors• Applicable law: Lanham Act• Registration with government recommended, but not required 8-23
    24. 24. Trademark• “Trademark” applicable to: – Trade name (e.g., McDonald’s, Nike) – Trade image (e.g., Ronald McDonald) – Trade logo (golden arches, swoosh) – Trade dress (orange & red of McDonald’s)• Trademark dilution is the diminishment of the capacity of plaintiffs marks to identify and distinguish plaintiffs goods or services 8-24
    25. 25. Louis Vuitton Malletier, SA v. Haute• Procedural History & Facts: – Louis Vuitton Malletier ("LVM"), well- known maker of luxury goods, sued a Las Vegas company for infringement of its marks and design copyright – Defendant Haute Diggity Dog ("HDD"), manufactures and sells chewable dog toys intended to mimic and parody famous luxury products 8-25
    26. 26. Louis Vuitton Malletier, SA v. Haute Diggity Dog, LLC• Procedural History: – Defendant moved for summary judgment to dismiss and the trial court granted the motion• Issue on Appeal: – Did defendant’s use of LVM’s intellectual property infringe on or dilute LVM’s rights? 8-26
    27. 27. Louis Vuitton Malletier, SA v. Haute Diggity Dog, LLC• Legal Reasoning: – LVM established prima facie infringement case – Copyright Act and Lanham Act recognize certain statutory exceptions to protections – “Purpose and character of use” factor in fair use inquiry and asks what extent new work is transformative and does not supplant original • Parodic works comment and criticize, thus often sufficiently transformative for fair use exception 8-27
    28. 28. Louis Vuitton Malletier, SA v. Haute Diggity Dog, LLC• Holding: – Clear parody and dilution claim fails since successful parody might strengthen a mark’s distinctiveness• In the Starbucks case, the Second Circuit held that Charbucks did not dilute Starbucks mark, but further proceedings were required to determine whether there was dilution by blurring 8-28
    29. 29. E-Commerce Infringement• Trademark dilution on the internet is prohibited by the Anticybersquatting Consumer Protection Act• Creates civil cause of action against a person who, with bad faith intent to profit from a trademark, registers, traffics in, or uses a domain name identical or “confusing similar” to distinctive mark – Example: Volkswagen sued Virtual World for their registration of and won 8-29
    30. 30. Trade Secrets• Trade secret: any secret formula, pattern, process, program, device, method, technique, or database used in the owner’s business that offers competitive advantage• A firm must take reasonable measures to maintain secrecy 8-30
    31. 31. Misappropriation• Misappropriation of a trade secret occurs when a person discloses or uses after acquiring the secret: – By improper means (theft, trespass, etc.) – Through another party who is known or should have been known to have obtained the secret by improper means, – By breaching a duty of confidentiality• See Coleman v. Retina Consultants, P.C. 8-31
    32. 32. Commercial Torts• Commercial torts are intentional torts that involve business or commercial competition• Injurious falsehood (product disparagement) involves publishing false statements that disparage another’s business, property, or title to property, harming economic interests 8-32
    33. 33. Commercial Torts• Intentional interference with contractual relations occurs when one party to a contract claims that the defendant’s interference with the other party’s performance of the contract wrongly caused the plaintiff to lose the benefit of that performance See the Lewis-Gale Medical Center case 8-33
    34. 34. Commercial Torts• Intentional interference with prospective advantage parallels elements for interference with contractual relations, but prospective relations are focus (not existing contracts)• Section 43(a) of the Lanham Act creates civil liability for unfair competition, including misleading, confusing, or deceptive representations made in connection with goods or services 8-34
    35. 35. Time Warner Cable, Inc. v. DIRECTV, I• Lanham Act tort in which multichannel video service companies battled over whether defendant had engaged in false advertising on television and the internet• Issue was whether statements were sales puffery or literally false statements• Television statements by TWC’s competitor were literally false (not mere sales puffery)• TWC demonstrated irreparable harm, thus preliminary injunction affirmed 8-35
    36. 36. Test Your Knowledge• True=A, False = B – You may copyright an idea – Copyright protection requires registration with the U.S. Copyright Office – The U.S. Patent Act requires registration of a patent to obtain protection for the intellectual property – The Lanham Act protects trademarks 8-36
    37. 37. Test Your Knowledge• True=A, False = B – Trademark dilution refers to the overuse of a trademark on products or services – An employee who creates a new software program has made a work-for- hire – The fair use defense is an absolute defense to an infringement claim 8-37
    38. 38. Test Your Knowledge• Multiple Choice – A trademark refers to: a) trade name b) trade image c) trade logo d) trade dress e) all of the above 8-38
    39. 39. Test Your Knowledge• Multiple Choice – Trademark dilution on the internet is prohibited by: a) Anticybersquatting Consumer Protection Act b) Patent & Trademark Act c) Dotcom Protection Act 8-39
    40. 40. Thought Questions• Music is intellectual property. What do you think about people who download music illegally? Have they committed theft?• If you create a new product at your workplace, is it yours? 8-40