20.1 Protecting Intellectual Property From Infringement

20.1 Protecting Intellectual Property From Infringement

Intellectual Property 20 Musical compositions, books, and new designs are all types of intangible property interests covered by the phrase intellectual property. Just like personal property, intellectual prop-erty can be protected in its use and can be sold or conveyed to another. This chapter will discuss the basic types of intellectual property and some of their unique characteristics.

The U.S. Constitution gives to Congress in Article I, Section 8, the power to “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.” Congress has secured these rights through appropri- ate legislation and the creation of the U.S. Patent and Trademark Office to regulate the issuance of patents, copyrights, and trademarks in accordance with congressional guidelines.

20.1 Protecting Intellectual Property From Infringement

Despite its protected status, intellectual property is harder to shield from theft and copyright or patent infringement than is tangible personal property; also, it is easier to prove inter-ference with tangible property rights than with intangible ones. For instance, if a carpen- ter’s creation, say a chair, is stolen, damaged, or used by another without the carpenter’s consent, the carpenter will have relatively little trouble proving the infringement. But a singer whose song or music is stolen, or inappropriately “borrowed” by another in whole or in part, will often have a harder time making his or her case. Interference with intangible property rights is often easily accomplished and difficult to trace.

Indeed, most people infringe on others’ intangible property rights on a regular basis, often unaware that they are doing so. Here are a few everyday examples that constitute unlawful interference with intangible property rights:

• Copying commercial software or a DVD from a friend; • Downloading copyrighted music or videos from the Internet or via peer-to-peer file

transfers; • Ripping MP3 or wav music files or MP4 video files of music CDs or video DVDs you own

to upload to a friend’s audio or video player; and • Incorporating the ideas of others in term papers or other writing without giving credit.

In this chapter, we will examine the basic laws that protect intellectual property rights in the United States in the form of patents, copyrights, trademarks, and service marks.

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Patents

A patent is an exclusive right granted to an inventor by the federal government to profit from the use of the invention for a period of 14 years for design patents and 20 years for utility and plant patents from the date of filing the patent application. During the 14- or 20-year period in which the inventor is given the exclusive right to exploit the invention covered by the patent, the patent itself is deemed intangible personal property. As such, it can be sold, given away, or leased to anyone the inventor chooses for whatever consider- ation is mutually agreed upon. After the patent expires, the invention becomes part of the public domain and may be used by anyone without the need to compensate the inventor.

In order to be patentable, the subject matter for which a patent is sought must be new, nonobvious, and useful, and it must not infringe on any other existing patent. Here are some examples of patentable items:

• Devices (most patents involve some type of these); • Novel chemical substances (e.g., a new drug or a better lubricant); • New compositions of matter (such as genetically engineered microorganisms or

plants with special properties); and • Novel manufacturing techniques or processes, provided they are both new and

useful (e.g., a process discovered to better extract sap from maple trees in order to make maple syrup, or a new method of extracting oil from shale rock).

Application for a patent is made to the U.S. Patent and Trademark Office (USPTO). The website for this office is located at http://www.uspto.gov. If you peruse this site, you will find not only the basics of intellectual property law but also helpful videos that describe the intellectual property protection process. In addition, the site has all of the forms neces- sary for filing, such as the patent application. In the application, the inventor must show the following:

• How the invention works; • Detailed technical drawings and other supporting evidence of how the device

can be manufactured; and • A narrative detailing the novelty and usefulness of the object that make it worthy

of patenting.

Upon the grant of a patent, the inventor is protected from any infringement during the patent’s useful life. Any unauthorized use of the patented idea by a third party will result in a valid civil suit for damages by the inventor against the infringing party, regardless of the infringer’s good faith or lack of actual knowledge of the existence of the patent. If the infringement is malicious, a court is empowered to award both actual damages (such as lost royalties) as well as punitive damages equal to three times the actual damages caused by the infringement, as well as court costs and attorney’s fees if the judge deems them appropriate. Where patent infringement is not malicious, but rather caused by negligence or ignorance of the infringer, the typical damages awarded are a reasonable royalty for use of the inventor’s patent.

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Copyrights

The Federal Copyright Act of 1976 provides protection to authors of literary, dramatic, musical, choreographic, and artistic works, including motion pictures and other audio- visual works. The act is very broad in scope and is intended to cover any original work of authorship, regardless of the medium, including computer software (both electronic programs and written program listings).

Any qualifying work can be copyrighted by registering with the USPTO in Washington, D.C., but registration is not necessary to invoke copyright protection. A work is deemed copyrighted as soon as it is expressed in some tangible form, such as by writing it down or typing it into a computer and saving it as a file. Nevertheless, it is a good idea to formally register copyrighted work because registration is a prerequisite to being able to bring an infringement action and recover damages.

For works created after January 1, 1978, copyright protection lasts throughout the author’s life and for an additional 70 years after the author’s death. Copyrights owned by publish- ers, such as works produced by authors on a work-for-hire basis, last for 95 years from the date of publication or 120 years from the date of creation, whichever comes first. During the copyright period, the author (and the author’s estate for 70 years after the author’s life) has the exclusive right to reproduce the work or to make any derivative works based on it. Authors are also entitled to royalty payments upon public use of copyrighted works, such as the broadcasting of a song or music video over the airwaves or the public perfor- mance of a play.

Limited fair use of copyrighted work can be made without it constituting copyright infringement. Fair use includes educational purposes, as well as news reporting and liter- ary criticism. To qualify as fair use, the portion of the copyrighted work must be relatively small and not unduly infringe on the work as a whole. For example, quoting from one page of a novel for purposes of literary criticism or copying one article from a newspa- per for classroom distribution is likely to be covered under fair use. But if the amount of material used is excessive, a copyright infringement occurs. In determining whether a specific instance of alleged copyright infringement is covered by the fair use doctrine, and is thus exempt from liability, the courts perform a balancing test between the author’s right to profit from his or her work and the educational or literary value of the infringement. Courts in recent years have shown decreasing tolerance for allowing a fair use exception to copyright infringement actions, even in nonprofit educational settings. Penalties for copyright infringement can include civil damages for infringement, as well as punitive damages and criminal penalties for willful infringement.

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The Digital Millennium Copyright Act of 1998 and the No Electronic Theft Act of 1997 passed by Congress significantly enhanced the protection offered by the Copyright Act of 1976 for copyrighted material in digital form. The newer legislation provides stiff penalties for copyright infringement of up to $250,000, even for private, noncommercial infringement.

Trademarks

A trademark is any symbol, pic- ture, design, or words adopted by a manufacturer to distinguish its products from other similar products in the market. In order to be capable of being registered with the USPTO, a trademark must be unique and cannot be a generic name. Product names, such as Coca-Cola- and Coke-, can be registered trademarks, as well as slogans adopted to iden- tify a product (“The real thing” relating to Coke-, for example). But the generic word cola or soda by itself cannot be a trademark, since it is not unique but rather descriptive of a type of product. Company logos and graphic designs are also capable of being registered trademarks. Thus, 7-Up- and The Uncola- are registered trademarks for the well-known soft drink, and so is the red dot used by the soft-drink maker in its advertis- ing and as part of its product’s name. Likewise, the distinctive design in product labels can be covered by a trademark.

The name Coca-Cola is a well-known example of a trademark.

Seth Perlman/Associated Press

A Closer Look: Copyright Infringement

In Bright Tunes Music v. Harrisongs Music, 420 F. Supp 177 (S.D.N.Y. 1971), George Harrison of the Beatles was accused of copyright infringement because his song My Sweet Lord sounded identical to another song, He’s So Fine. This landmark case is an excellent example of a copyright infringement case. For an excellent website explaining the case and providing access to both the songs and a com- parison of the actual musical tunes from each one, go to: http://cip.law.ucla.edu/cases/1970-1979/ Pages/brightharrisongs.aspx. After reading the opinion of the court and the analysis contained on the website, answer the following questions:

1. What was the grace note to which the court referred, and why was it significant? 2. Did the court conclude that George Harrison intentionally plagiarized or not? 3. What was the test the court used to determine whether a copyright infringement had taken

place?

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To be registered, a trademark must be used either in interstate commerce or internation- ally. When a trademark is registered, it may be contested by any company that claims an infringement of its own trademark for a period of five years. If a new trademark is not contested within that time period, it becomes incontestable. Trademarks also can be regis- tered before they are used, but they must become public within four years or they will lose their protection.

The registration is valid as long as the owner files all postregistration maintenance docu- ments in a timely manner. Once issued, a new registered trademark can be renewed after five years and is renewable every 10 years thereafter upon a showing that it is still in use and has not been abandoned. Trademarks registered before 1990 are renewable every 20 years. Application to renew a trademark must be made within three months of its expira- tion. Like all personal property, a trademark may be sold or assigned by its owner.

Service Marks and Certification Marks

Service marks, certification marks, and collective marks are closely related to trademarks and treated in exactly the same way for purposes of federal registration and renewal. A service mark is any distinctive mark used by a service industry for purposes of advertis- ing or sales. The radio and television network designations ABC, NBC, CBS, and FOX, for example, are all service marks, as are the CBS eye symbol and the NBC peacock. Likewise, the symbols used by book publishers along with their names on book spines are consid- ered service marks.

Certification marks, on the other hand, are specific words or symbols adopted by a group of companies or government agencies to denote the quality, origin, or other attribute relat- ing to their goods. Typical certification marks include USDA Choice, UL [Underwriters Laboratories] Approved, and the union labels (e.g., ILGWU) attached to goods manufac- tured in the United States by textile and other unionized workers.

Remedies for Infringing a Registered Mark

It is an infringement of a registered mark to reproduce such a mark or to imitate it without the consent of the registrant by any means for a commercial purpose if doing so would tend to confuse or deceive the public as to the genuineness of the goods involved. Not only can third parties not misappropriate the registered trademark, service mark, or cer- tification mark of another, but even using a misleading approximation of such a mark for commercial purposes is illegal if the public may be misled as to the identity of the goods. Thus, a new soft-drink maker not only can’t use the name Pepsi Cola or any registered mark associated with the nationally known soft drink, but it can’t even use a name or adopt a logo that is close enough to confuse the general public. Peppy Cola, for example, might be an allowable trade name for such a drink, but if the manufacturers adopted a lettering style or can design that approximated the Pepsi Cola- trademarks for these, it would constitute trademark infringement. The question of whether a particular trade name or trademark is sufficiently similar to the existing registered marks of a product is usually a matter for the trier of fact to determine.

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The damages allowable for infringing a registered mark vary depending on the nature of the infringement. Where an infringement is innocently made by a printer who manufac- tures literature, packaging, or any other material to be used in the sale or marketing of the product, the only remedy available against the printer is an injunction to prevent it from continuing to create such infringing material. Injunctive relief is likewise the only remedy available against a television station, newspaper, or other medium that innocently runs commercials containing infringing material.

Where the infringement is intentional, however, and made for the purpose of confusing or deceiving the public, the party who suffers an infringement of a registered mark has many legal protections. The party may be both awarded injunctive relief and recover any profits made by the infringer from the infringement, as well as any damages sustained by the holder of the infringed registered mark as a result of the infringement. In addition, treble damages (three times the actual damages of the infringer’s actual profits made from the infringement) may be awarded, as well as court costs and attorney’s fees.

Trade Secrets

Trade secrets include business plans, mechanisms, manufacturing techniques, and com- piled data that give a business an advantage over its competitors. Although some trade secrets (e.g., formulas for the manufacture of products) could be patented, they often are not, in order to extend the useful life of the formula and to keep it secret. If, for exam- ple, the formula for making Coca-Cola- were patented, its ingredients would be a part of the public record and the patent would give the company only a 20-year monopoly on its manufacture. By maintaining a formula as a trade secret, however, the company can maintain its monopoly over the manufacture of a given product indefinitely, or until its competitors can duplicate or reverse-engineer the formula themselves, whichever comes first. Likewise, customer lists and other information vital to the running of a business are considered trade secrets.

The significance of trade secrets is that they are protected in two ways:

1. Employees who have access to such information are obliged not to divulge it. They can be enjoined from doing so, as well as sued for damages if they misap- propriate or divulge trade secrets to which they had access as employees; and

2. Because trade secrets are considered the personal property of a company, any ille- gal access to, or theft of, such secret information is both a crime and a tort that can subject violators to criminal and civil liability.

If the information contained in a trade secret is discovered through lawful means, how- ever, the discoverer is free to use it. Thus, if a new company stumbles upon another’s secret manufacturing techniques or formulas by chance or by its independent research into the product, it is free to use that formula or manufacturing technique for itself unless these are covered by a patent.

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Section 20.2 International Issues of Intellectual Property CHAPTER 20

Cybersquatting

In 1999, Congress passed into law the Anticybersquatting Consumer Protection Act (ACPA), 15 U.S.C. § 1125(d). The purpose of this law was to prevent someone from reg- istering an Internet domain name that is confusingly similar to another’s. For example, suppose that someone registered the name Coke. When the real company Coca-Cola real- ized that the name was already registered, it would either not have access to the domain name, or it would have to purchase the rights to the domain name from the holder; thus, the holder would make a substantial amount of money just by “guessing” what domain names to register and then holding on to them until the real owner came along. This fed- eral law makes it a crime to “squat” on someone else’s domain name unless the squatter truly has an interest in creating a legitimate website. In the example given, the registrant would be in violation of this law.

20.2 International Issues of Intellectual Property

With the advent of the Internet and globalization of markets, concepts of intel-lectual property cannot be limited to the United States alone. Any intellectual property issues involving copyright, trademark, and trade name necessarily involve international concerns, which in turn require some familiarity with treaties. One of the most important treaties in this area is the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). This is an international treaty administered by the World Trade Organization (WTO) that outlines several important trade-related aspects of intellectual property. Specifically, it requires signatory countries to adhere to its criteria for intellectual property monopoly grants of limited duration and requires that they adhere to the Paris Convention, Berne Convention, and other WTO conventions. The WTO’s cri- teria set minimum standards for granting a monopoly over any type of intellectual prop- erty, as well as duration limits, enforcement provisions, and methods of settling disputes.

More information about international intellectual property treaties can be found at the World Trade Organization website: http://www.wto.org/english/thewto_e/whatis_e/ tif_e/agrm7_e.htm.

Key Terms

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) An international treaty dealing with intellec- tual property issues.

Anticybersquatting Consumer Protec- tion Act (ACPA) Codified at 15 U.S.C. §1125(d), the purpose of this law is to pre- vent someone from registering an Internet domain name that is confusingly similar to another’s and then to “squat” on that domain.

certification marks Specific words or sym- bols adopted by a group of companies or government agencies to denote the quality, origin, or some other attribute relating to the goods.

collective mark Any word, phrase, sym- bol, or design owned by a cooperative, association, or other group or organization that indicates the source of the goods or services.

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Key Terms CHAPTER 20

copyright An exclusive right to profit from literary, dramatic, musical, choreo- graphic, and artistic works for 70 years plus the life of the author.

Digital Millennium Copyright Act of 1998 Federal legislation criminalizing technology that circumvents measures that control access to copyrighted works.

fair use The use of copyrighted materials without paying the author in limited cir- cumstances such as literary criticism and news reporting.

Federal Copyright Act of 1976 Legal protection to authors of literary, dramatic, musical, choreographic, and artistic works, including motion pictures and other audiovisual works.

intellectual property Intangible personal property; covers ownership rights over things that do not have physical existence, e.g., music, copyrights, trademarks, and trade names.

No Electronic Theft Act of 1997 Fed- eral legislation that provides for criminal sanctions for certain types of copyright infringement.

patent The right given to an inventor by the U.S. government to profit from an invention.

patent infringement Use of someone else’s invention without his or her permis- sion (during the time period in which the patent is exclusive).

patentable Describes when the subject matter for which a patent is sought is new and does not infringe on any other existing patent.

public domain Free for anyone to use without payment to the original author or inventor.

service mark Any distinctive mark used by a service industry for purposes of advertising or sales.

trade secrets Business plans, mechanisms, manufacturing techniques, and compiled data that give a business an advantage over its competitors.

trademark Any symbol, picture, design, or words adopted by a manufacturer to distinguish its products from other similar products in the market; capable of being registered with the USPTO.

TRIPS See Agreement on Trade-Related Aspects of Intellectual Property Rights.

U.S. Patent and Trademark Office (USPTO) The federal agency responsible for granting U.S. patents and registering trademarks. Also advises the president, the secretary of commerce, and U.S. gov- ernment agencies on intellectual property policy, protection, and enforcement and promotes intellectual property protection around the world.

World Trade Organization (WTO) An organization that deals with and attempts to resolve trade issues between countries.

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Critical Thinking and Discussion Questions CHAPTER 20

Critical Thinking and Discussion Questions

1. What is a patent? What government office is in charge of granting patents? 2. Are sculptures, paintings, photographs, and choreographed dances protected by

copyright? Explain. 3. How does a work become copyrighted? How long does copyright protection

last? 4. What is a trademark? A service mark? A certification mark? 5. How long do registered trademarks last? 6. Imalia Inventor devises the proverbial better mousetrap. She promptly begins its

manufacture in her garage and starts selling the mousetraps to local businesses and private individuals through a direct marketing campaign. Sales are brisk, and she soon turns her invention into a profitable business that catches the atten- tion of other mousetrap manufacturers throughout the world. Within six months, mousetraps identical to hers flood the market at a much lower price and drive her out of business. Furious at this injustice, she wants to sue for patent infringe- ment and for interference with trade secrets. What would the result be?

7. Wanda Writer compiles a book of her poetry as well as a rough draft of a novel using her computer. She never prints the material, since she considers it a work in progress, preferring to do all her revisions on her computer. Every week, she burns a backup of the material onto a DVD. When the work is completed, she takes the DVD to work, intending to use her color laser printer there to print out the material to send to selected publishers for their consideration. On her way to work, however, she has her purse stolen by a thief in the subway. The thief takes her valuables but throws away the DVD, having no use for literature. The DVD is later found by chance by an English professor who, impressed with the work and unable to determine its rightful owner, publishes the novel in his own name and copies two of the 100 poems for distribution in his class. Wanda eventually learns of the professor’s actions and decides to sue him for copyright infringement, both for the publication of the novel in his own name and for the unauthorized use of her poetry in the classroom. What is the result on both claims? Explain fully.

8. The makers of a new toothpaste called West launch their new product on the market with a heavy ad campaign in newspapers, magazines, and television stations across the nation. The ads feature a western theme that revolves around cowboys, gunfighters, and similar characters endorsing the product. Although the commercials are unique, the packaging and lettering of the toothpaste are very similar to that of another leading dentifrice, Crest-.

Based upon these facts, answer the following questions: a. Does there seem to be a trademark infringement here? What will the makers

of Crest- need to show to succeed in a trademark infringement action? b. Assuming that the lettering and designs are found to infringe Crest’s

registered trademark, what damages should be assessed against the manufacturers of West toothpaste?

c. What damages can the makers of Crest seek against the media for running the infringing commercials?

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