Intellectual Property and Cyberlaw Guide

Business Law, Sixth Edition
© 2019 BVT Publishing. All rights reserved.
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Chapter 12:
Intellectual Property and Cyberlaw

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Learning Objectives
• Describe intellectual property.
• Recognize requirements of a patent.
• Distinguish between types of patents.
• Understand how patents are obtained.
• Understand trademark law.
• Recognize categories of trademark
distinctiveness.
• Understand copyright law.
• Explain trade secret law.
• Discuss cyber law.

S-3
12.0 In the News
Supreme Court Gives Samsung a Reprieve in
Apple Patent Case
http://bvtlab.com/M8j8g
Apple’s patents covered specific design elements
of the iPhone, including its black rectangular front
face with rounded corners and its colorful grid of
16 icons. In 2012, a jury found that Samsung had
infringed those patents.
• Is there a patent infringement in this case? Explain.
• Discuss what is meant by “article of manufacture”.

S-4
12.1a What Is Intellectual Property?
Intellectual property refers to intangible
personal property produced by one’s mind.
• Legal rights are protected under the laws of a
country.
• Four types of property:
– Patents
– Copyrights
– Trademarks
– Trade secrets
Basic Facts: Trademarks, Patents, and Copyrights
(8:25) http://bvtlab.com/eVAeB

S-5
12.1b Why Is the Protection of
Intellectual Property Important?
• Intellectual property has a value of its own
apart from the physical assets of
business.
• The value of intellectual property depends
upon the owner’s ability to protect the
property from use by others.
• The Internet and the global business
environment challenge intellectual
property rights today.

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12.2a Nature of a Patent
Patent: a set of rights granted by the federal
government for time-limited monopoly to
make, use, and sell an invention.
• Patents are provided for in Article I, Section 8
of the Constitution.
• Provides patent holder the legal means to
exclude others from making, using, or selling
the invention
• Provides inventor time to be rewarded
financially for creation.

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12.2b Basic Requirements of a Patent
Must be novel
• Not previously invented
• Not trivial improvement
• Not previously patented in the U.S. or any
other country; not known or used within
U.S.
• Not “prior art”; different from what has
occurred in relevant field
Must be nonobvious:
• Determined by an expert in the field

S-8
12.2b Critical Thinking (Slide 1 of 2)
Case: Association for Molecular Pathology
v. Myriad Genetics
Myriad Genetics was the first to locate, isolate
and manipulate the BRAC 1 and BRAC 2
genes for breast and ovarian cancer. Several
patents held by the company were based on
these isolated, naturally-occurring genes.

S-9
12.2b Critical Thinking (Slide 2 of 2)
• Why was the discovery of specific
sequencing of DNA not subject to a patent,
but the synthetically created cDNA was a
proper subject for patenting?
• Do you think the decision in the case will
have the effect of encouraging or
discouraging investment in biotechnology?
Why?
• Will cancer research be encouraged or
discouraged as a result of the decision?
Why?

S-10
12.2c Types of Patents
Utility patents: the most common type
of patent, granted for a useful innovative
item or process or method.
Design patents: protect the appearance
of a product.
Plant patents: granted for the asexual
production of a new variety of plant.

S-11
12.2d How Patents Are Obtained
(Slide 1 of 2)
Granted by the United States Patent and
Trademark Office (USPTO)
• Filing an application
– Specifications that describe the invention
– Claims that present the aspects of the
invention that should be protected
– Drawings accurately depicting the invention
– Declarations offering proof that the
invention is novel

S-12
12.2d How Are Patents Obtained
(Slide 2 of 2)
• A patent examiner evaluates the
application for completeness and
for similarity with prior inventions.
• Patent deed is issued if there are
no objections.

S-13
12.2e Patent Infringement (Slide 1 of 2)
Direct infringement: making, using,
selling or offering to sell a patented
invention in the U.S. without authorization.
• Law of exactness
• Law of addition
Indirect infringement: the infringing
device is the functional equivalent of the
patented device.
• Doctrine of equivalents

S-14
Defenses
• Statutory bar for disclosure of the
invention prior to filing the application
• “First to file” rule
• Noninfringement
• Patent misuse
• Innocent infringement
12.2e Patent Infringement (Slide 2 of 2)

S-15
12.2f Remedies
• Exclusively federal jurisdiction
• Remedies may be equitable and legal.
– Injunctive relief
– Appropriate damage awards
oMonetary awards
oPunitive awards

S-16
12.2g Strategic Aspects
• Blocks competition from using
intellectual property
• Transferability is easier with a
patented device than a trade secret.
• Investors are attracted to companies
with new patents.
• Procuring and litigation is an
expensive undertaking for time-limited
protection.

S-17
12.3a Essence of a Trademark
• Must be a “word, name, symbol, or device,
or any combination” of those items
• Must identify and distinguish a product or
service
• Must be used by a person in commerce and
registered with the USPTO
Intellectual Property: Trademarks (6:28)
http://bvtlab.com/gpT9D

S-18
12.3b Categories of Distinctiveness
Arbitrary or fanciful marks (greatest level)
• Lotus software, Google, or Xerox
Suggestive marks (high degree)
• Netscape, Under Armour
Descriptive marks (possible)
• Must acquire secondary meaning
Generic terms (no protection)
• aspirin, email, zipper

S-19
12.3c Creating and Keeping Legal
Rights in a Trademark
• Creation
– Common law method: use of the mark in
commerce
– Registration of a mark with the PTO
• Policing the Trademark
• Losing Rights in a Trademark
– Actual abandonment
– Constructive abandonment

S-20
12.3d Enforcing a Trademark
Trademark Infringement
• Owner of the mark must show:
- Validity of the mark
- Priority use of the mark
- Likelihood of confusion in the minds of
purchasers
Trademark Dilution
• Uniqueness of the mark is lessened
through the actions of others.
• Legal remedy for famous trademark

S-21
12.3d Critical Thinking (Slide 1 of 2)
Case: Louis Vuitton Malletier
v. Haute Diggity Dog
Plaintiff filed a trademark infringement suit
claiming the Chewy Viton (CV) trademark
used by defendant infringed upon Plaintiff’s
LV trademark. Defendant used the mark on
chew toys for dogs, a product not made by
the Plaintiff.

S-22
12.3d Critical Thinking (Slide 2 of 2)
• In weighing the factors, was this a close
case? Was it clear there was no
trademark infringement? Why?
• How important was the fact that the
court found the presence of a parody?
In which of the factors did the presence
of a parody matter?

S-23
12.3e Strategic Aspects
• Connotes a measure of quality
• Very closely associated with the
goodwill of a business
• Important element of any marketing
strategy

S-24
12.4a Nature of a Copyright
• Exclusive right granted to the author of
an original work
• Covers published and unpublished works
• Covers tangible form of expression
• Holder of a copyright has the power to:
– Reproduce the work
– Distribute the work
– Prepare derivative works of original work
– Display and perform the work

S-25
12.4a Critical Thinking (Slide 1 of 2)
Case: Star Athletica, L.L.C. v. Varsity
Brands, Inc.
Citing Copyright Act, U.S. Supreme Court held
that surface designs on cheerleading uniforms
were eligible for copyright protection because:
(1) they qualified as two-dimensional works of
art separate from the uniforms, and (2) if applied
in another tangible medium, were separable
from the uniforms.
Star Athletica: One Year Later (5:32)
http://bvtlab.com/38eJ7

S-26
• Is the design on the uniform a “pictorial,
graphic, or sculptural” work as required under
copyright law? Why?
• Can the design be separated from the
utilitarian aspects of the useful article? How
so?
• The court held the two-dimensional surface
decorations are protectable, but not the
shape, cut, or physical dimensions of the
uniforms. Does this make sense? Why?

S-27
12.4b Copyright Basics
• Created when original work first occurs in
tangible form
• Registration not required, but has substantial
benefits
• Duration: life of the author plus seventy
years
• Work for hire
• International aspects
How Does Copyright Law Work? (3:08)
http://bvtlab.com/uA875

S-28
12.4c Infringement, Defenses,
and Remedies (Slide 1 of 2)
Infringement - substantial similarity
Defenses
• First sale: once on sale
• Fair use
- Purpose and character of the use by defendant
- Nature of the copyrighted work
- Amount of work used by defendant
- Impact of use on markets for copyrighted work

S-29
Remedies
• Equitable relief
• Statutory damages
• Criminal charges
12.4c Infringement, Defenses,
and Remedies (Slide 2 of 2)

S-30
12.5a Essence of a Trade Secret
Valuable information used in a commercial
enterprise not known to the public
• Each state has its own trade secret law.
• Unauthorized disclosure may be governed
by USTA (1976).
• Three dimensions to definition:
– Wide array of information relating to business
– Separate economic value
– Reasonably treat the information as a secret
• DTSA (2016): trade secret owner can sue in
federal court for misappropriation

S-31
Case: DuPont v. Christopher
Defendants took photographs of a plant under
construction by Plaintiff, incorporating trade
secrets involving a new method of methanol
production. Plaintiff sued alleging unfair trade
practices. Defendants moved to dismiss for
failure to state a claim for which relief can be
granted and for summary judgment.

S-32
• Did DuPont provide reasonable means to
protect its trade secret in this case? What
measures did they adopt?
• Do you believe the Christophers’ decision to
not disclose the entity that hired them to take
the photographs was an important factor used
by the court to reach its conclusion? Would the
court have reached the same conclusion if the
name of the client had been disclosed?

S-33
12.5b Misappropriation of a
Trade Secret (Slide 1 of 2)
• Acquisition of a trade secret of another
by a person who knows or has reason
to know that the trade secret was
acquired by improper means
• Disclosure or use of a trade secret of
another without express or implied
consent by a person

S-34
12.5b Misappropriation of a
Trade Secret (Slide 2 of 2)
Four methods for obtaining a trade secret are
illegal.
– Acquiring the knowledge of a trade secret by
improper means (theft, bribery, or espionage)
– Acquiring the information from someone who used
improper means to secure the knowledge
– Acquiring the trade secret through a breach of
confidentiality
– Acquiring the information from someone who
breached a duty of confidentiality

S-35
12.5c Remedies for Misappropriation
• Injunction to prevent disclosure
• Statutory damages under USTA

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12.5d Strategic Aspects (Slide 1 of 2)
• Inexpensive and easy to create
• No requirement that a trade secret be
registered with a governmental entity
• No need to show the uniqueness of a
trade secret
• No mandate that policing occur to
ensure the information retains its
“secret” status

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• Trade secret rights encompass both
the idea and its expression.
• Trade secrets can be licensed;
typically requiring a nondisclosure
agreement.
• Trade secret law has the least amount
of protection available outside the
U.S.
12.5d Strategic Aspects (Slide 2 of 2)

S-38
12.6a Introduction to Cyberlaw
• Importance of the Internet
• Heightened importance of intellectual
property
• Information technology law
– Legal issues businesses face when using
the Internet
– Legal aspects of computers and software

S-39
12.6b Civil Law Aspects
Patent: Business methods are patentable
subject matter.
Trademark: may be liberally used by
operators of websites
Copyright: Most information on the
Internet is copyrighted.
– Digital Millennium Copyright Act (DMCA)
Trade secret: governed by Uniform Trade
Secret Act and Defend Trade Secret Act

S-40
12.6c Criminal Law Aspects
• Traditional forms of crime occur in
cyberspace.
• States have enacted criminal statutes.
• Federal cybercrime statutes
- Federal statutes outlaw “hacking” and
otherwise obtaining unauthorized
information from a computer.

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Editor's Notes