For Prof.Goodman Only

Learning Objectives

After studying this chapter, you should be able to:

1. Describe the business tort of misappropriating a trade secret.

2. Describe how an invention can be patented under federal patent laws and the penalties for patent infringement.

3. List the items that can be copyrighted and describe the penalties of copyright infringement.

4. Define trademark and service mark and describe the penalties for trademark infringement.

5. Define cyber piracy and describe the penalties for engaging in cyber infringement of intellectual property rights.

Chapter Outline

1. Introduction to Intellectual Property and Cyber Piracy

2. Intellectual Property

3. Trade Secret

   1. Ethics • Coca-Cola Employee Tries to Sell Trade Secrets to Pepsi-Cola

4. Patent

   1. Case 7.1 • U.S. Supreme Court Case • Association for Molecular Pathology v. Myriad Genetics, Inc.

   2. Contemporary Environment • Leahy-Smith America Invents Act (AIA)

5. Copyright

   1. Critical Legal Thinking Case • BMG Music v. Gonzalez

   2. Case 7.2 • U.S. Supreme Court Case • Kirtsaeng v. John Wiley & Sons, Inc.

   3. Digital Law • Digital Millennium Copyright Act

6. Trademark

   1. Case 7.3 • Intel Corporation v. Intelsys Software, LLC

   2. Case 7.4 • V Secret Catalogue, Inc. and Victoria’s Secret Stores, Inc. v. Moseley

   3. Global Law • International Protection of Intellectual Property

“The Congress shall have 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.”

Article 1, Section 8, Clause 8 of the U.S. Constitution

Introduction to Intellectual Property and Cyber Piracy

The U.S. economy is based on the freedom of ownership of property. In addition to real estate and personal property, intellectual property rights have value to both businesses and individuals. This is particularly the case in the modern era of the Information Age, computers, and the Internet.

Federal law provides protections for intellectual property rights, such as patents, copyrights, and trademarks. Certain federal statutes provide for either civil damages or criminal penalties, or both, to be assessed against infringers of patents, copyrights, and trademarks. Trade secrets form the basis of many successful businesses, and they are protected from misappropriation. State law imposes civil damages and criminal penalties against persons who misappropriate trade secrets.

“And he that invents a machine augments the power of a man and the well-being of mankind.”

Henry Ward Beecher

Proverbs from Plymouth Pulpit—Business

This chapter discusses trade secrets, patents, copyrights, and trademarks and how to protect them from infringement, misappropriation, and cyber piracy.

Intellectual Property

Intellectual property is a term that describes property that is developed through an intellectual and creative process. Intellectual property falls into a category of property known as intangible rights, which are not tangible physical objects.

intellectual property

Patents, copyrights, trademarks, and trade secrets. Federal and state laws protect intellectual property rights from misappropriation and infringement.

Most persons are familiar with the fact that intellectual property includes patents, copyrights, and trademarks. It also includes trade secrets. For patents, think of Microsoft’s patents on its operating system. Microsoft has obtained more than ten thousand patents. For copyrights, think of music, movies, books, and video games. For trademarks, think of Nike’s recognizable “Just do it” and Swoosh logo and McDonald’s Big Mac and “I’m lovin’ it.” For trade secrets, think of Coca-Cola Company’s secret recipe for making Coca-Cola. Patents, trademarks, and copyrights give their owners or holders monopoly rights for specified periods of time. Trade secrets remain valuable as long as they are not easily discovered.

“Where a new invention promises to be useful, it ought to be tried.”

Thomas Jefferson

Intellectual property is of significant value to companies in the United States and globally as well. Over one-half of the value of large companies in the United States is related to their intangible property rights. Some industries are intellectual property intensive, such as the music and movie industries. Other industries that are not intellectual property intensive, such as the automobile and food industries, are still highly dependent on their intellectual property rights.

Because of their intangible nature, intellectual property rights are more subject to misappropriation than is tangible property. It is almost impossible to steal real estate, and it is often difficult to steal tangible property such as equipment, furniture, and other personal property. However, intellectual property rights are much easier to misappropriate. Think of counterfeit compact discs (CDs) and DVDs and fake designer purses. In addition, computers and cyber piracy make it easier to steal many forms of intellectual property. The misappropriation of intellectual property rights is one of the major threats to companies today.

Trade Secret

Many businesses are successful because their trade secrets set them apart from their competitors. Trade secrets may be product formulas, patterns, designs, compilations of data, customer lists, or other business secrets. Many trade secrets do not qualify to be—or simply are not—patented, copyrighted, or trademarked. Many states have adopted the Uniform Trade Secrets Act to give statutory protection to trade secrets.

trade secret

A product formula, pattern, design, compilation of data, customer list, or other business secret.

State unfair competition laws allow the owner of a trade secret to bring a lawsuit for misappropriation against anyone who steals a trade secret. For the lawsuit to be actionable, the defendant (often an employee of the owner or a competitor) must have obtained the trade secret through unlawful means, such as theft, bribery, or industrial espionage. No tort has occurred if there is no misappropriation.

The owner of a trade secret is obliged to take all reasonable precautions to prevent that secret from being discovered by others. If the owner fails to take such actions, the secret is no longer subject to protection under state unfair competition laws. Precautions to protect a trade secret may include fencing in buildings, placing locks on doors, hiring security guards, and the like.

Examples

The most famous trade secret is the formula for Coca-Cola. This secret recipe, which is referred to by the code name “Merchandise 7X,” is kept in a bank vault in Atlanta, Georgia. The formula is supposedly known by only two executives who have signed nondisclosure agreements. Another secret recipe that is protected as a trade secret is KFC’s secret recipe of eleven herbs and spices for the batter used on the Colonel’s Original Recipe Kentucky Fried Chicken.

Reverse Engineering

A competitor can lawfully discover a trade secret by performing reverse engineering (i.e., taking apart and examining a rival’s product or re-creating a secret recipe). A competitor who has reverse engineered a trade secret can use the trade secret but not the trademarked name used by the original creator of the trade secret.

Web Exercise

Go to www.usatoday.com/money/industries/food/2005-07-22-kfc-secret-recipe_x.htm and read about how KFC protects its secret recipe.

Example

An inventor invents a new formula for a perfume. The inventor decides to not get a patent for her new formula (because patent protection is good for only twenty years). Instead, the inventor chooses to try to protect it as a trade secret, which gives her protection for as long a period of time as she can successfully keep it a secret. Another party purchases the perfume, chemically analyzes the perfume, and discovers the formula. The trade secret has been reverse engineered, and the second party may begin producing a perfume using the inventor’s formula.

Civil Trade Secret Law: Misappropriation of a Trade Secret

The owner of a trade secret can bring a civil lawsuit under state law against anyone who has misappropriated a trade secret through unlawful means, such as theft, bribery, or industrial espionage. Generally, a successful plaintiff in a misappropriation of a trade secret action can (1) recover the profits made by the offender from the use of the trade secret, (2) recover for damages, and (3) obtain an injunction prohibiting the offender from divulging or using the trade secret.

Criminal Trade Secret Law: Economic Espionage Act

Congress enacted the federal Economic Espionage Act (EEA),1 which makes it a federal crime to steal another’s trade secrets. Under the EEA, it is a federal crime for any person to convert a trade secret to his or her benefit or for the benefit of others, knowing or intending that the act would cause injury to the owner of the trade secret. The definition of trade secret under the EEA is very broad and parallels the definition used under the civil laws of misappropriating a trade secret.

Economic Espionage Act

A federal statute that makes it a crime for any person to convert a trade secret for his or her own or another’s benefit, knowing or intending to cause injury to the owners of the trade secret.

One of the major reasons for the passage of the EEA was to address the ease of stealing trade secrets through computer espionage and using the Internet. Confidential information can be downloaded onto a CD or Flash drive, placed in a pocket, and taken from the legal owner. Computer hackers can crack into a company’s computers and steal customer lists, databases, formulas, and other trade secrets. The EEA is a very important weapon in addressing computer and Internet espionage and penalizing those who commit it.

The EEA provides for severe criminal penalties. The act imposes prison terms on individuals of up to fifteen years per criminal violation. An organization can be fined up to $10 million per criminal act. The criminal prison term for individuals and the criminal fine for organizations can be increased if the theft of a trade secret was made to benefit a foreign government.

The following ethics feature discusses the misappropriation of a trade secret.

 Ethics

Coca-Cola Employee Tries to Sell Trade Secrets to Pepsi-Cola

“What if you knew the markets Coca-Cola was going to move into and out of and beat them to the punch.”

—Letter to PepsiCo

PepsiCo received a letter sent to the company by an employee of Coca Cola Company that offered to sell PepsiCo trade secrets of Coca Cola. The letter stated, “What if you knew the markets Coca-Cola was going to move into and out of and beat them to the punch.” The letter proposed selling trade secrets regarding a proposed Coke product code-named Project Lancelot for $1.5 million.

PepsiCo notified Coca-Cola officials and federal authorities. The Federal Bureau of Investigation (FBI) initiated an investigation into the matter. The federal government brought criminal charges against Coca-Cola secretary Joya Williams. During trial, prosecutors produced the letter as well as a videotape of Williams putting confidential documents and samples of Coke products that were still in development into her bag.

Williams was convicted by a federal jury of conspiring to steal Coca Cola trade secrets and attempting to sell them to archrival PepsiCo. The trial court judge sentenced Williams to eight years in jail. The U.S. Court of Appeals upheld the decision. Two other co-conspirators were arrested and pled guilty. United States v. Williams, Web 2008 U.S. App. Lexis 6073 (United States Court of Appeals for the Eleventh Circuit, 2008)

Ethics Question

• Did Williams act loyally in this case? Did PepsiCo do what it was supposed to do in this case? How likely is it that PepsiCo would have paid Williams and her co-conspirators the money they demanded?

Patent

When drafting the Constitution of the United States of America, the founders of the United States provided for protection of the work of inventors and writers. Article I, Section 8 of the Constitution provides, “The Congress shall have 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.” Pursuant to the express authority granted in the U.S. Constitution, Congress enacted the Federal Patent Statute of 1952 to provide for obtaining and protecting patents.2

Federal Patent Statute

A federal statute that establishes the requirements for obtaining a patent and protects patented inventions from infringement.

A patent is a grant by the federal government upon the inventor of an invention for the exclusive right to use, sell, or license the invention for a limited amount of time.

Patent

A grant by the federal government upon the inventor of an invention for the exclusive right to use, sell, or license the invention for a limited amount of time.

Patent law is intended to provide an incentive for inventors to invent and make their inventions public and to protect patented inventions from infringement. Federal patent law is exclusive; there are no state patent laws. Applications for patents must be filed with the U.S. Patent and Trademark Office (PTO) in Washington, DC. The PTO grants approximately 250,000 patents each year.

U.S. Court of Appeals for the Federal Circuit

The U.S. Court of Appeals for the Federal Circuit in Washington, DC, was created in 1982. This is a special federal appeals court that hears appeals from the Board of Patent Appeals and Interferences of the U.S. Patent and Trademark Office and federal courts concerning patent issues. This Court was created to promote uniformity in patent law.

U.S. Court of Appeals for the Federal Circuit

A special federal appeals court that hears appeals from the Board of Patent Appeals and Interferences and federal court concerning patent issues.

Patent Application

To obtain a patent, a patent application must be filed with the PTO in Washington, DC. The PTO provides for the online submission of patent applications and supporting documents through its EFS-Web system. A patent application must contain a written description of the invention. Patent applications are complicated. Therefore, an inventor should hire a patent attorney to assist in obtaining a patent for an invention.

provisional application

An application that an inventor may file with the PTO to obtain three months to prepare a final patent application.

If a patent is granted, the invention is assigned a patent number. Patent holders usually affix the word patent or pat. and the patent number on the patented article. If a patent application is filed but a patent has not yet been issued, the applicant usually places the words patent pending on the article. Any party can challenge either the issuance of a patent or the validity of an existing patent.

Web Exercise

Go to www.uspto.gov. Go to the left column entitled “Patents.” Click on number 2 “Search.” Toward the middle of the page that appears find the term “Patent Number Search.” Click on this term. In the open line under the term “Query” type in the patent number 3741662. Click on the term “Search.” Read the information about this patent.

Exhibit 7.1 shows the abstract from the patent application for the Facebook social networking system (U.S. Patent 20070192299).

Systems and Methods for Social Mapping

Abstract

A system, method, and computer program for social mapping is provided. Data about a plurality of social network members is received. A first member of the plurality of social network members is allowed to identify a second member of the plurality of social network members with whom the first member wishes to establish a relationship. The data is then sent to the second member about the first member based on the identification. Input from the second member is received in response to the data. The relationship between the first member and the second member is confirmed based on the input in order to map the first member to the second member.

Exhibit 7.1 Patent Application for the Facebook Social Networking System

Subject Matter that Can Be Patented

Most patents are utility patents; that is, they protect the functionality of the item. The term patent is commonly used in place of the words utility patent. Only certain subject matter can be patented. Federal patent law recognizes categories of innovation that can be patented. These include:

utility patent

A patent that protects the functionality of the invention.

• Machines

• Processes

• Compositions of matter

• Improvements to existing machines, processes, or compositions of matter

• Designs for an article of manufacture

• Asexually reproduced plants

• Living material invented by a person

Abstractions and scientific principles cannot be patented unless they are part of the tangible environment.

Example

Einstein’s Theory of Relativity (E = mc2) cannot be patented.

For centuries, most patents involved tangible inventions and machines, such as the telephone and the light bulb. Next, chemical and polymer inventions were patented. Then biotechnology patents were granted. More recently, subject matter involving the computer, Internet, and e-commerce has been added to what can be patented.

Requirements for Obtaining a Patent

To be patented, an invention must be (1) novel, (2) useful, and (3) nonobvious. An invention must meet all three of these requirements. If an invention is found to not meet any one of these requirements, it cannot be patented:

1. Novel. An invention is novel if it is new and has not been invented and used in the past. If an invention has been used in “prior art,” it is not novel and cannot be patented.

requirements for obtaining a patent

To be patented, an invention must be (1) novel, (2) useful, and (3) nonobvious.

Example

College and professional football games are often shown on television. It is often difficult, however, for a viewer to tell how far the offensive team must go to get a first down and keep possession of the football. Inventors invented a system whereby a yellow line is digitally drawn across the football field at the distance that a team has to go to obtain a first down. This “yellow line” invention qualified for a patent because it was novel.

1. Useful. An invention is useful if it has some practical purpose. If an invention has only theoretical benefit and no useful purpose, it cannot be patented.

Example

A cardboard or heavy paper sleeve that can be placed over the outside of a paper coffee cup so that the cup will not be too hot to hold serves a useful purpose. Many coffee shops use these sleeves. The sleeve serves a useful purpose and therefore qualifies to be patented.

Critical Legal Thinking

Why did the founders of the United States put protections for inventors and writers in Article I of the U.S. Constitution? Have these protections become even more important in the current Digital Age?

1. Nonobvious. If an invention is nonobvious, it qualifies for a patent; if it is obvious, then it does not qualify for a patent.

Example

An invention called “Forkchops” was found to be nonobvious and was granted a patent. Forkchops consist of chopsticks with a spoon on one end of one of the chopsticks and a fork on one end of the other chopstick. Thus, when eating, a user can either use the chopstick ends or the spoon and fork ends.

“The patent system added the fuel of interest to the fire of genius.”

Abraham Lincoln

Example

An inventor filed for a patent for a “waffle fry,” which is a fried slice of potato with a waffle shape that is not as thick as a typical French fry but is thicker than a potato chip. Thus, the thickness of a waffle fry is somewhere in between the thickness of a French fry and a potato chip. The court rejected a patent for the waffle fry because it was obvious that a potato could be sliced into different sizes.

Concept Summary

Requirements for Obtaining a Patent

1. Novel. An invention is novel if it is new and has not been invented and used in the past. If an invention has been used in “prior art,” it is not novel and cannot be patented.

2. Useful. An invention is useful if it has some practical purpose. If an invention has only theoretical benefit and no useful purpose, it cannot be patented.

3. Nonobvious. If an invention is nonobvious, it qualifies for a patent; if it is obvious, then it does not qualify for a patent.

The following U.S. Supreme Court Case involves the question of what is patentable subject matter.

 Case 7.1 U.S. Supreme Court Case Patent

Association for Molecular Pathology v. Myriad Genetics, Inc.

133 S.Ct. 2107 (2013)

Supreme Court of the United States

“Laws of nature, natural phenomena, and abstract ideas are not patentable.”

—Thomas, Justice

Facts

After substantial research and expenditure of money and resources, Myriad Genetics, Inc. (Myriad) discovered the precise location and sequence of two naturally occurring segments of deoxyribonucleic acid (DNA) known as BRCA1 and BRCA2. Mutations in these genes can dramatically increase a female’s risk of developing breast and ovarian cancer. The average American woman has a 12- to 13-percent risk of developing breast cancer, but in a woman with the genetic mutations discovered by Myriad the risk can range between 50 and 80 percent for breast cancer and between 20 and 50 percent for ovarian cancer. Before Myriad’s discovery of the BRCA1 and BRCA2 genes, scientists knew that heredity played a role in establishing a woman’s risk of developing breast and ovarian cancer, but they did not know which genes were associated with those cancers. For women who are tested and found to have the dangerous mutations of BRCA1 and BRCA2 medical measures can be taken to reduce the risks of breast and ovarian cancer developing.

Myriad obtained a patent from the U.S. Patent and Trademark Office based upon its discovery. The Association for Molecular Pathology sued Myriad, seeking a declaration that Myriad’s patent was invalid. The U.S. district court held that Myriad’s claim was invalid because it covered a product of nature and was therefore unpatentable. The Federal Circuit Court of Appeals held that the isolated DNA was patent eligible. The U.S. Supreme Court granted review.

Issue

Is a naturally occurring segment of DNA patent eligible?

Language of the U.S. Supreme Court

Laws of nature, natural phenomena, and abstract ideas are not patentable. It is undisputed that Myriad did not create or alter any of the genetic information encoded in the BRCA1 and BRCA2 genes. The location and order of the nucleotides existed in nature before Myriad found them. Nor did Myriad create or alter the genetic structure of DNA. Instead, Myriad’s principal contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2 genes.

Myriad did not create anything. To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention. Groundbreaking, innovative, or even brilliant discovery does not by itself satisfy the § 101 inquiry. Myriad found the location of the BRCA1 and BRCA2 genes, but that discovery, by itself, does not render the BRCA genes new compositions of matter that are patent eligible. Extensive effort alone is insufficient to satisfy the demands of § 101.

Decision of the U.S. Supreme Court

The U.S. Supreme Court held that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated. The U.S. Supreme Court reversed the decision of the Federal Circuit Court of Appeals on this issue.

Ethics Questions

Will the Supreme Court’s decision affect the amount of research that is conducted to find naturally occurring disease-causing DNA sequences? Should Myriad be compensated by the government for its research costs?

Patent Period

Utility patents for inventions are valid for twenty years. The patent term begins to run from the date the patent application is filed.

After the patent period runs out, the invention or design enters the public domain, which means that anyone can produce and sell the invention without paying the prior patent holder.

Example

On January 12, 2016, an inventor invents a formula for a new prescription drug. On March 1, 2016, the inventor files for and is eventually granted a twenty-year patent for this invention. Twenty years after the filing of the patent application, on March 1, 2036, the patent expires. The next day the patent enters the public domain, and anyone can use the formula to produce exactly the same prescription drug.

Provisional Patent Application

Congress enacted the American Inventors Protection Act, which permits an inventor to file a provisional application with the PTO so that the inventor has time to prepare and file a final and complete patent application with the PTO. This “provisional right” gives an inventor three months to prepare a final patent application.

In addition, the act requires the PTO to issue a patent within three years from the date of filing a patent application. The act provides that non–patent holders may challenge a patent as being overly broad by requesting a contested reexamination of the patent application by the PTO. This provides that the reexamination will be within the confines of the PTO; the decision of the PTO can be appealed to the U.S. Court of Appeals for the Federal Circuit in Washington, DC.

Patent Infringement

Patent holders own exclusive rights to use and exploit their patents. Patent infringement occurs when someone makes unauthorized use of another’s patent. In a suit for patent infringement, a successful plaintiff can recover (1) money damages equal to a reasonable royalty rate on the sale of the infringed articles, (2) other damages caused by the infringement (e.g., loss of customers), (3) an order requiring the destruction of the infringing article, and (4) an injunction preventing the infringer from such action in the future. The court has the discretion to award up to treble damages if the infringement was intentional. It costs between several hundred thousand dollars to several million dollars to bring an infringement case to trial.

patent infringement

Unauthorized use of another’s patent. A patent holder may recover damages and other remedies against a patent infringer.

Design Patent

In addition to utility patents, a party can obtain a design patent. A design patent is a patent that may be obtained for the ornamental nonfunctional design of an item. A design patent is valid for fourteen years.

design patent

A patent that may be obtained for the ornamental nonfunctional design of an item.

Examples

The design of a chair, a door knob, a perfume bottle, and the outside of a computer are examples of design patents.

Statue of Liberty

The Statue of Liberty is one of the most famous design patents. It was patented in the United States by Auguste Bartholdi on February 18, 1879. Patent No. 11,023.

The following feature discusses an important amendment to patent law.

 Contemporary Environment

Leahy-Smith America Invents Act (AIA)

In 2011, Congress passed and the president signed into law the Leahy-Smith America Invents Act (AIA).3 The act represents the most significant change to U.S. patent law since 1952. Some of the major provisions of the act are:

Leahy-Smith America Invents Act (AIA)

A federal statute that significantly amended federal patent law.

• First-to-file rule. The AIA institutes a first-to-file rule in determining the priority of a patent. This means that the first party to file a patent on an invention receives the patent even though some other party was the first to invent the invention. However, the AIA does not transform U.S. patent law into a true first-to-file system because the law gives inventors a one-year grace period for filing a patent application after the public disclosure by the inventor of details of the invention. If the inventor waits longer than the one-year grace period to file a patent application, he loses the right to file for a patent on his invention.

Previously, the United States followed the first-to-invent rule whereby the party that first invented the invention was awarded the patent even if another party had previously filed for and received the patent. The new first-to-file rule means that an inventor should keep his or her invention secret as long as possible and immediately file for a patent. The first-to-file rule brings the United States more closely in alignment with most of the world’s countries that apply the first-to-file rule, although most of these countries follow a true first-to-file rule and do not provide the one-year grace period that the U.S. patent system does.

The AIA provides for derivation proceedings that will settle disputes as to whether the subject matter of an earlier filed patent application was stolen from the actual inventor.

• Prioritized examination. For the payment of $4,800, inventors can move their patent application to the front of other patent applications for review by the PTO and receive an answer within one year. The current time period for a decision on a patent application is approximately three years. The PTO can grant priority to patent applications for products, processes, or technologies that are important to the national economy or national competiveness.

• Pre-issuance challenge and post-grant review. The AIA permits third parties to file a pre-issuance challenge to a pending patent application by submitting prior art references that assert that the sought-after patent is not patentable. There is also a nine-month period after the issuance of a patent for a third party to seek post-grant review of a patent by submitting prior art references and other information that assert that the patent holder’s claim is not patentable. By permitting pre-issuance and post-grant challenges within the PTO, the new law attempts to have disputes resolved within the PTO before reaching the litigation stage.

• Patent Trial and Appeal Board (PTAB). The AIA creates the Patent Trial and Appeal Board (PTAB). The board will review adverse decisions by examiners, review reexaminations, conduct post-grant reviews, and conduct derivation proceedings. Many decisions of the PTAB are appealable to the U.S. Court of Appeals for the Federal Circuit.

• Virtual patent markings. The AIA allows a patent holder to mark an item “patented” or “pat.” and direct a party to a freely accessible Web address that identifies the product covered by the patent number. Under the AIA, the government or parties who suffer commercial injury can sue a patent holder for damages associated with false markings.

• Prior use defense. The AIA establishes a new defense to a charge of infringement called the prior use defense. The AIA provides that if an individual entity uses an invention for more than one year prior to a subsequent inventor filing for a patent on the same invention, that user may continue to use the invention as long as the user did not derive the invention from the subsequent inventor.

• Unpatentable subject matter. The AIA prohibits the issuance of a patent encompassing a human organism. The AIA also bans the ability to patent tax strategies.

Copyright

Article I, Section 8 of the Constitution of the United States of America authorizes Congress to enact statutes to protect the works of writers for limited times.

Pursuant to this authority, Congress has enacted copyright statutes that establish the requirement for obtaining a copyright. Copyright is a legal right that gives the author of qualifying subject matter, and who meets other requirements established by copyright law, the exclusive right to publish, produce, sell, license, and distribute the work.

copyright

A legal right that gives the author of qualifying subject matter, and who meets other requirements established by copyright law, the exclusive right to publish, produce, sell, license, and distribute the work.

The Copyright Revision Act of 1976 currently governs copyright law.4 The act establishes the requirements for obtaining a copyright and protects copyrighted works from infringement. Federal copyright law is exclusive; there are no state copyright laws. Federal copyright law protects the work of authors and other creative persons from the unauthorized use of their copyrighted materials and provides a financial incentive for authors to write, thereby increasing the number of creative works available in society. Copyrights can be sold or licensed to others, whose rights are then protected by copyright law.

Copyright Revision Act

A federal statute that (1) establishes the requirements for obtaining a copyright and (2) protects copyrighted works from infringement.

Tangible Writing

Only tangible writings—writings that can be physically seen—are subject to copyright registration and protection. The term writing has been broadly defined.

Examples

Books, periodicals, and newspapers; lectures, sermons, addresses, and poems; musical compositions; plays, motion pictures, and radio and television productions; maps; works of art, including paintings, drawings, jewelry, glassware, tapestry, and lithographs; architectural drawings and models; photographs, including prints, slides, and filmstrips, greeting cards, and picture postcards; photoplays, including feature films, cartoons, newsreels, travelogues, and training films; and sound recordings published in the form of tapes, cassettes, CDs, and MP3 files qualify for copyright protection.

Registration of Copyrights

To be protected under federal copyright law, a work must be the original work of the author. A copyright is automatically granted the moment a work is created and fixed in tangible form.

Example

When a student writes a term paper for his class, he owns a copyright to his work.

In 1989, the United States signed the Berne Convention, an international copyright treaty. This law eliminated the need to place the symbol © or the word copyright or copr. on a copyrighted work. However, it is still advisable to place the copyright notice © and the year of publication and the author’s name on many copyrighted works because it notifies the world that the work is protected by a copyright, identifies the owner of the copyright, and shows the year of its publication. This will help eliminate a defendant’s claim of innocent copyright.

Berne Convention

An international copyright treaty.

Example

Copyright © 2016- Henry Richard Cheeseman.

Published and unpublished works may be registered with the U.S. Copyright Office in Washington, DC. Registration of a copyright is permissive and voluntary and can be effectuated at any time during the term of the copyright. Copyright registration creates a public record of the copyrighted work. A copyright registration certificate is issued to the copyright holder. Registration permits a holder to obtain statutory damages for copyright infringement, which may be greater than actual damages, and attorney’s fees.

Copyright Period

The Copyright Term Extension Act of 1998 extended copyright protection to the following:5

“The law in respect to literature ought to remain upon the same footing as that which regards the profits of mechanical inventions and chemical discoveries.”

William Wordsworth

Letter (1838)

1. Individuals are granted copyright protection for their lifetime plus seventy years.

2. Copyrights owned by businesses are protected for the shorter of either:

   1. 120 years from the year of creation, or

   2. 95 years from the year of first publication

After the copyright period runs out, the work enters the public domain, which means that anyone can publish the work without paying the prior copyright holder.

Example

If an author publishes a novel on April 1, 2003, and lives until August 1, 2030, his heirs will own the copyright until August 1, 3000.

FBI Warning

The Federal Bureau of Investigation (FBI), a federal government agency, is authorized to investigate violations of copyright law. An FBI warning concerning copyright infringement usually appears at the beginning of a DVD and before a feature movie or television program is shown. The FBI warning was developed to deter illegal piracy and increase awareness of the criminal penalties associated with piracy.

Concept Summary

Copyright Period

Civil Copyright Law: Copyright Infringement

Copyright infringement occurs when a party copies a substantial and material part of the plaintiff’s copyrighted work without permission. The copying does not have to be either word for word or the entire work. A plaintiff can bring a civil action against the alleged infringer and, if successful, recover (1) the profit made by the defendant from the copyright infringement, (2) damages suffered by the plaintiff, (3) an order requiring the impoundment and destruction of the infringing works, and (4) an injunction preventing the defendant from infringing in the future. The court, in its discretion, can award statutory damages for willful infringement in lieu of actual damages.

copyright infringement

An infringement that occurs when a party copies a substantial and material part of a plaintiff’s copyrighted work without permission. A copyright holder may recover damages and other remedies against the infringer.

The federal government can bring criminal charges against a person who commits copyright infringement. Criminal copyright infringement, including infringement committed without monetary gain, is punishable by up to five years in federal prison.

The following critical legal thinking case discusses cyber piracy.

 Critical Legal Thinking Case Cyber Piracy

BMG Music v. Gonzalez

“Nor can she defend by observing that other persons were greater offenders . . . ”

—Easterbrook, Judge

Cecilia Gonzalez downloaded 1,370 copyrighted songs on her computer using a file-sharing network during a few weeks, and she kept them on her computer until she was caught. BMG Music sued Gonzalez for copyright infringement of 30 of these songs. Gonzalez defended, arguing that her downloading of these copyrighted songs was lawful. Gonzalez’s position was that she was just sampling music to determine what she liked enough to buy at retail. She also defended by arguing that other persons were greater offenders than she was.

The U.S. district court found Gonzalez liable for copyright infringement. The court granted summary judgment in favor of BMG Music, assessed $22,500 in damages against Gonzalez, and issued an injunction against Gonzalez, enjoining her from further copyright infringement. The U.S. court of appeals affirmed the district court’s decision. The court of appeals stated:

A copy downloaded, played, and retained on one’s hard drive for future use is a direct substitute for a purchased copy. As file sharing has increased, the sales of recorded music have dropped. The events likely are related. Music downloaded for free from the Internet is a close substitute for purchased music; many people are bound to keep the downloaded files without buying originals. That is exactly what Gonzalez did. Nor can she defend by observing that other persons were greater offenders; Gonzalez’s theme that she obtained ‘only 30’ (or ‘only 1,300’) copyrighted songs is no more relevant than a thief’s contention that he shoplifted ‘only 30’ compact discs, planning to listen to them at home and pay later for any he liked.

BMG Music v. Gonzalez, 430 F.3d 888, Web 2005 U.S. App. Lexis 26903 (United States Court of Appeals for the Seventh Circuit)

Critical Legal Thinking Questions

• Do you think that Gonzalez knew that she was violating the law? Should Gonzalez have been exonerated because others were greater offenders? Have you ever unlawfully downloaded music and not paid for the music?

Fair Use Doctrine

A copyright holder’s right in a work is not absolute. The law permits certain limited unauthorized use of copyrighted materials under the fair use doctrine. The following uses are protected under this doctrine: (1) quotation of the copyrighted work for review or criticism or in a scholarly or technical work, (2) use in a parody or satire, (3) brief quotation in a news report, (4) reproduction by a teacher or student of a small part of the work to illustrate a lesson, (5) incidental reproduction of a work in a newsreel or broadcast of an event being reported, and (6) reproduction of a work in a legislative or judicial proceeding. The copyright holder cannot recover for copyright infringement where fair use is found.

fair use doctrine

A doctrine that permits certain limited use of a copyright by someone other than the copyright holder without the permission of the copyright holder.

Examples

A student is assigned to write a paper in class about a certain subject matter. The student conducts research and writes her paper. In her paper, the student uses two paragraphs from a copyrighted book and places these paragraphs in quotation marks and properly cites the source and author in a footnote. This is fair use for academic purposes. However, if the student copies and uses three pages from the book, this would not be fair use and would constitute copyright infringement whether she footnotes the author or not.

Critical Legal Thinking

Has copyright infringement become endemic? Is illegal downloading of copyrighted DVDs and CDs “stealing”? Can copyright law and enforcement keep up with digital piracy?

Example

If a comedy television show performs parodies and satires involving famous celebrities, this is an example of parody fair use.

The following U.S. Supreme Court case involves a claim of copyright infringement.

 Case 7.2 U.S. Supreme Court Case Copyright

Kirtsaeng v. John Wiley & Sons, Inc.

133 S.Ct. 1351 (2013)

Supreme Court of the United States

“A publisher may find it more difficult to charge different prices for the same book in different geographical markets.”

—Breyer, Justice

Facts

Section 109 of the Copyright Act sets forth the “first sale” doctrine, which stipulates that a party who lawfully acquires a copyrighted work may, without the authority of the copyright holder, sell or otherwise dispose of the work. Supap Kirtsaeng, a citizen of Thailand, moved to the United States where he earned an undergraduate degree at Cornell University and a Ph.D. degree from the University of Southern California. Kirtsaeng returned to Thailand to teach. While he was in the United States, Kirtsaeng had friends and family buy foreign editions of English language textbooks in Thailand at Thai book shops, where the books were sold at low prices, and mail the books to him in the United States. Kirtsaeng sold these textbooks in the United States at higher prices, and kept the profits.

John Wiley & Sons, Inc., publishes textbooks in the United States. It assigns to its wholly owned subsidiary, John Wiley & Sons (Asia) Pte Ltd. (Wiley Asia), rights to publish and sell these same English language textbooks abroad. Each copy of Wiley Asia foreign editions contains a restriction stating that the copy is to be sold only in a particular country or geographical region outside the United States. Kirtsaeng purchased textbooks in Thailand that were published and sold by Wiley Asia and resold them in the United States, in violation of Wiley’s restriction. Wiley brought suit in U.S. district court against Kirtsaeng for copyright infringement. The jury found Kirtsaeng liable and assessed statutory damages of $600,000. The U.S. court of appeals affirmed the decision. Kirtsaeng appealed to the U.S. Supreme Court.

Issue

Does the “first sale” doctrine permit a party to purchase foreign editions of English language textbooks abroad and resell them in the United States?

Language of the U.S. Supreme Court

The upshot is that there are two essentially equivalent versions of a Wiley textbook, each version manufactured and sold with Wiley’s permission: (1) an American version printed and sold in the United States, and (2) a foreign version manufactured and sold abroad. Wiley claims that a nongeographical interpretation will make it difficult, perhaps impossible, for publishers to divide foreign and domestic markets. We concede that is so. A publisher may find it more difficult to charge different prices for the same book in different geographical markets. But we do not see how these facts help Wiley, for we can find no basic principle of copyright law that suggests that publishers are especially entitled to such rights.

Decision

The U.S. Supreme Court held that the “first sale” doctrine applied and that Kirtsaeng’s conduct did not violate copyright law. The Supreme Court reversed the decision of the U.S. court of appeals.

Ethics Questions

Was it ethical for Wiley to divide the textbook sales by geographical area? Did Kirtsaeng act ethically in this case?

Criminal Copyright Law: No Electronic Theft Act

In 1997, Congress enacted the No Electronic Theft Act (NET Act), a federal statute that criminalizes certain copyright infringement.6 The NET Act prohibits any person from willfully infringing a copyright for the purpose of either commercial advantage or financial gain, or by reproduction or distribution even without commercial advantage or financial gain, including by electronic means. Thus, the NET Act makes it a federal crime to reproduce, share, or distribute copyrighted electronic works including movies, songs, software programs, and video games.

No Electronic Theft Act (NET Act)

A federal statute that makes it a crime for a person to willfully infringe on a copyright.

Examples

Violations include distributing copyrighted works without permission of the copyright holder over the Internet, uploading such works to a website, and posting information about the availability of such uploaded electronic works.

Criminal penalties for violating the act include imprisonment for up to five years and fines of up to $250,000. Subsequent violators may be fined and imprisoned for up to ten years. The creation of the NET Act adds a new law that the federal government can use to criminally attack copyright infringement and curb digital piracy.

The NET Act also permits copyright holders to sue violators in a civil lawsuit and recover monetary damages of up to $150,000 per work infringed.

The following feature discusses a federal law designed to protect digital copyright material.

 Digital Law

Digital Millennium Copyright Act

The Internet makes it easier than ever before for people to illegally copy and distribute copyrighted works. To combat this, software and entertainment companies have developed “wrappers” and encryption technology to protect their copyrighted works from unauthorized access. Not to be outdone, software pirates have devised ways to crack these wrappers and protection devices.

Digital Millennium Copyright Act (DMCA)

A federal statute that prohibits unauthorized access to copyrighted digital works by circumventing encryption technology or the manufacture and distribution of technologies designed for the purpose of circumventing encryption protection of digital works.

Software and entertainment companies lobbied Congress to enact federal legislation to make the cracking of their wrappers and selling of technology to do so illegal. In response, Congress enacted the Digital Millennium Copyright Act (DMCA),7 a federal statute that does the following:

• Prohibits unauthorized access to copyrighted digital works by circumventing the wrapper or encryption technology that protects the intellectual property

• Prohibits the manufacture and distribution of technologies, products, or services primarily designed for the purpose of circumventing wrappers or encryption technology protecting digital works

Congress granted exceptions to DMCA liability to (1) software developers to achieve compatibility of their software with the protected work; (2) federal, state, and local law enforcement agencies conducting criminal investigations; (3) parents who are protecting children from pornography or other harmful materials available on the Internet; (4) Internet users who are identifying and disabling cookies and other identification devices that invade their personal privacy rights; and (5) nonprofit libraries, educational institutions, and archives that access a protected work to determine whether to acquire the work.

The DMCA imposes civil and criminal penalties.

Trademark

Businesses often develop company names, as well as advertising slogans, symbols, and commercial logos, to promote the sale of their goods and services. Companies such as Nike, Microsoft, Louis Vuitton, and McDonald’s spend millions of dollars annually promoting their names, slogans, symbols, and logos to gain market recognition from consumers. The U.S. Congress has enacted trademark laws to provide legal protection for these names, slogans, and logos.

A mark is any trade name, symbol, word, logo, design, or device used to identify and distinguish goods of a manufacturer or seller or services of a provider from those of other manufacturers, sellers, or providers.

mark

Any trade name, symbol, word, logo, design, or device used to identify and distinguish goods of a manufacturer or seller or services of a provider from those of other manufacturers, sellers, or providers.

In 1946, Congress enacted the Lanham (Trademark) Act,8 commonly referred to as the Lanham Act, to provide federal protection to trademarks, service marks, and other marks. This act, as amended, is intended to (1) protect the owner’s investment and goodwill in a mark and (2) prevent consumers from being confused as to the origin of goods and services.

Lanham (Trademark) Act

A federal statute that (1) establishes the requirements for obtaining a federal mark and (2) protects marks from infringement.

Registration of a Mark

Marks can be registered with the U.S. Patent and Trademark Office in Washington, DC. A registrant must file an application with the PTO wherein the registrant designates the name, symbol, slogan, or logo that he is requesting to be registered. A registrant must prove either that he has used the intended mark in commerce (e.g., actually used it in the sale of goods or services) or states that he intends to use the mark in commerce within six months from the filing of the application. In the latter case, if the proposed mark is not used in commerce within this six-month period, the applicant loses the right to register the mark. However, the applicant may file for a six-month extension to use the mark in commerce, which is often granted by the PTO.

The PTO provides for the paper filing of the application or for the electronic filing of the application through its Trademark Electronic Application System (TEAS). A party other than the registrant can submit an opposition to a proposed registration of a mark.

trademark

A distinctive mark, symbol, name, word, motto, or device that identifies the goods of a particular business.

The PTO will register a mark if it determines that the mark does not infringe any existing marks, the applicant has paid the registration fee (approximately $375), and other requirements for registering the mark have been met.

Once the PTO has issued a registration of the mark, the owner is entitled to use the registered mark symbol ® in connection with a registered trademark or service mark. The symbol ® is used to designate marks that have been registered with the PTO. The use of the symbol ® is not mandatory, although it is wise to use the ® symbol to put others on notice that the trademark or service mark is registered with the PTO. Once a mark is registered, the mark is given nationwide effect, serves as constructive notice that the mark is the registrant’s personal property, and provides that federal lawsuits may be brought to protect the mark. The original registration of a mark is valid for ten years, and it can be renewed for an unlimited number of ten-year periods.

®

A symbol that is used to designate marks that have been registered with the U.S. Patent and Trademark Office.

While the application is pending with the PTO, the registrant cannot use the symbol ®. However, during the application period, a registrant can use the symbol TM for goods or SM for services to alert the public to his or her legal claim. TM and SM may also be used by parties who claim a mark for goods or services but have not filed an application with the PTO to register the mark. In summary, TM and SM are used to designate unregistered trademarks and service marks, respectively.

TM

A symbol that designates an owner’s legal claim to an unregistered mark that is associated with a product.

SM

A symbol that designates an owner’s legal claim to an unregistered mark that is associated with a service.

A party who sells goods and services using brand names and product or service names is not required to register these names with the PTO. The party who does not register a name with the PTO still has legal rights in the name and can sue to prevent others from using the name. The lawsuit will be in state court, however. A party can use the symbols TM and SM with his goods or services, respectively, even if there is no application pending at the PTO.

A party may file for the cancelation of a previously registered mark if the party believes that the registrant did not meet the requirements for being issued the mark or if a mark has been abandoned.

Web Exercise

Go to www.coca-cola.com to see trademarks of the Coca-Cola Corporation.

Concept Summary

Meaning of Symbols Used in Association with Marks

Types of Marks

The word mark collectively refers to trademarks, service marks, certification marks, and collective membership marks:

• Trademark. A trademark is a distinctive mark, symbol, name, word, motto, or device that identifies the goods of a particular business.

Examples

Coca-Cola (The Coca-Cola Company), Big Mac (McDonald’s Corporation), Mac (Apple Computer), Intel Inside (Intel Corporation), Better Ingredients. Better Pizza. (Papa John’s Pizza), and Harley (Harley-Davidson Motor Company) are trademarks.

• Service mark. A service mark is used to distinguish the services of the holder from those of its competitors.

service mark

A mark that distinguishes the services of the holder from those of its competitors.

Examples

FedEx (FedEx Corporation), The Friendly Skies (United Airlines, Inc.), Big Brown (UPS Corporation), Weight Watchers (Weight Watchers International, Inc.), and Citi (Citigroup, Inc.) are service marks.

• Certification mark. A certification mark is a mark usually owned by a nonprofit cooperative or association. The owner of the mark establishes certain geographical location requirements, quality standards, material standards, or mode of manufacturing standards that must be met by a seller of products or services in order to use the certification mark. If a seller meets these requirements, the seller applies to the cooperative or association to use the mark on its products or in connection with the sale of services. The owner of the certification mark usually licenses sellers who meet the requirements to use the mark. A party does not have to be a member of the organization to use the mark.

certification mark

A mark that certifies that a seller of a product or service has met certain geographical location requirements, quality standards, material standards, or mode of manufacturing standards established by the owner of the mark.

Examples

A UL mark certifies that products meet safety standards set by Underwriters Laboratories, Inc. The Good Housekeeping Seal of Approval certifies that products meet certain quality specifications set by Good Housekeeping magazine (Good Housekeeping Research Institute). Other certification marks are Certified Maine Lobster, which indicates lobster or lobster products originating in the coastal waters of the state of Maine (Maine Lobster Promotion Council); 100% Napa Valley, which is associated with grape wine from the Napa Valley, California (Napa Valley Vintners Association); and Grown in Idaho, which indicates potatoes grown in the state of Idaho (State of Idaho Potato Commission).

• Collective membership mark. A collective membership mark is owned by an organization (such as an association) whose members use it to identify themselves with a level of quality or accuracy or other characteristics set by the organization. Only members of the association or organization can use the mark. A collective membership mark identifies membership in an organization but does not identify goods or services.

collective membership mark

A mark that indicates that a person has met the standards set by an organization and is a member of that organization.

Examples

CPA is used to indicate that someone is a member of the Society of Certified Public Accountants, Teamster is used to indicate that a person is a member of The International Brotherhood of Teamsters (IBT) labor union, and Realtor is used to indicate that a person is a member of the National Association of Realtors. Other collective marks are Boy Scouts of America, League of Women Voters, and National Honor Society.

Certain marks cannot be registered. They include (1) the flag or coat of arms of the United States, any state, municipality, or foreign nation; (2) marks that are immoral or scandalous; (3) geographical names standing alone (e.g., “South”); (4) surnames standing alone (note that a surname can be registered if it is accompanied by a picture or fanciful name, such as Smith Brothers cough drops); and (5) any mark that resembles a mark already registered with the federal PTO.

Concept Summary

types of Marks

1. Trademark. A distinctive mark, symbol, name, word, motto, or device that identifies the goods of a particular business.

2. Service mark. A mark used to distinguish the services of the holder from those of its competitors.

3. Certification mark. A mark that establishes certain geographical location requirements, quality standards, material standards, or mode of manufacturing standards that must be met by a seller of products or services in order to use the certification mark.

4. Collective membership mark. A mark owned by an organization whose members use it to identify themselves with a level of quality or accuracy or other characteristics set by the organization.

Distinctiveness or Secondary Meaning

To qualify for federal protection, a mark must be either (1) distinctive or (2) have acquired a secondary meaning:

secondary meaning

A brand name that has evolved from an ordinary term.

distinctive

Being unique and fabricated.

• Distinctive. A distinctive mark would be a word or design that is unique. It therefore qualifies as a mark. The words of the mark must not be ordinary words or symbols.

Examples

Words such as Xerox (Xerox Corporation), Acura (Honda Motor Corporation), Google (Google Inc.), Exxon (Exxon Mobil Corporation), and Pinkberry (Pinkberry, Inc.) are distinctive words and therefore qualify as marks.

• Secondary meaning. Ordinary words or symbols that have taken on a secondary meaning can qualify as marks. These are words or symbols that have an established meaning but have acquired a secondary meaning that is attached to a product or service.

Examples

Just Do It (Nike Corporation), I’m lovin’ it (McDonald’s Corporation), Windows (Microsoft Corporation), and Ben & Jerry’s Ice Cream (Unilever) are ordinary words that have taken on a secondary meaning when used to designate the products or services of the owners of the marks.

Words that are descriptive but have no secondary meaning cannot be trademarked.

Trademark Infringement

The owner of a mark can sue a third party for the unauthorized use of the mark. To succeed in a trademark infringement case, the owner must prove that (1) the defendant infringed the plaintiff’s mark by using it in an unauthorized manner and (2) such use is likely to cause confusion, mistake, or deception of the public as to the origin of the goods or services.

trademark infringement

Unauthorized use of another’s mark. The holder may recover damages and other remedies from the infringer.

A successful plaintiff can recover (1) the profits made by the infringer through the unauthorized use of the mark, (2) damages caused to the plaintiff’s business and reputation, (3) an order requiring the defendant to destroy all goods containing the unauthorized mark, and (4) an injunction preventing the defendant from such infringement in the future. The court has discretion to award up to treble damages where intentional infringement is found.

Web Exercise

Go to www.videojug.com/film/how-to-spot-a-fake-louis-vuitton-bag and watch the video “How to Spot a Fake Louis Vuitton Bag.”

In the following case, the court found trademark infringement.

 Case 7.3 Federal Court Case Trademark Infringement

Intel Corporation v. Intelsys Software, LLC

2009 WL 347239 Web 2009 U.S. Dist. Lexis 14761 (2009)

United States District Court for the Northern District of California

“Defendant’s conduct has, and will continue to have, an adverse effect on the value of and distinctive quality of the INTEL mark.”

—Wieking, District Judge

Facts

Intel Corporation is a large company that distributes its entire line of products and services under the registered trademark and service mark INTEL. The company also owns numerous marks that incorporate its INTEL marks as a permanent component, such as the marks INTEL INSIDE, INTEL SPEEDSTEP, INTEL XEON, and INTEL NETMERGE. Intelsys Software, LLC, which is owned by another party, develops software applications for network utilities and wireless applications. Intelsys uses the mark Intelsys Software and maintains a website at www.intelsys.com. Intel Corporation brought an action in U.S. district court against Intelsys Software, LLC, alleging that Intelsys infringed on Intel’s trademarks and service marks, in violation of the Lanham Act. Intel filed a motion for judgment and a permanent injunction against Intelsys’s use of the mark INTEL in any of its company, product, or service names.

Issue

Is there trademark infringement that warrants the issuance of a permanent injunction against Intelsys?

Language of the Court

Defendant uses the mark “Intelsys Software,” which incorporates Plaintiff’s INTEL trademark and adds the generic term “sys”—a common abbreviation for “systems”—and the generic term “software.” Defendant’s unauthorized use of the Intelsys Software name and trademark falsely indicates to consumers that Defendant’s products and services are in some manner connected with, or related to, Plaintiff. Defendant’s use of the mark allows it to benefit from the goodwill established by Plaintiff. Defendant’s conduct has, and will continue to have, an adverse effect on the value of and distinctive quality of the INTEL mark.

Decision

The U.S. district court granted judgment to Intel and issued a permanent injunction prohibiting Defendant from using the name Intelsys as a trade name or name of any products or services.

Ethics Questions

Do you think that the defendant Intelsys intended to take advantage of Intel’s strong trademarks and service marks? Have you ever engaged in trademark infringement?

Generic Names

When filing for a trademark, if a word, name, or slogan is too generic, it cannot be registered as a trademark. If a word is not generic, it can be trademarked.

Examples

The word apple cannot be trademarked because it is a generic name. However, the brand name Apple Computer is permitted to be trademarked because it is not a generic name. The word secret cannot be trademarked because it is a generic name. However, the brand name Victoria’s Secret is permitted to be trademarked because it is not a generic name.

Critical Legal Thinking

Illegal knockoffs of clothing, handbags, toys, pharmaceuticals, and other products comprises more than five percent of global trade. Can such counterfeiting be successfully curtailed?

Once a company has been granted a trademark or service mark, the company usually uses the mark as a brand name to promote its goods or services. Obviously, the owner of the mark wants to promote its brand so that consumers and users will easily recognize the brand name.

However, sometimes a company may be too successful in promoting a mark, and at some point in time, the public begins to use the brand name as a common name to denote the type of product or service being sold rather than as the trademark or service mark of the individual seller. A trademark that becomes a common term for a product line or type of service is called a generic name. Once a trademark becomes a generic name, the term loses its protection under federal trademark law.

generic name

A term for a mark that has become a common term for a product line or type of service and therefore has lost its trademark protection.

Example

Sailboards are boards that have sails mounted on them that people use to ride on water such as oceans and lakes. There were many manufacturers and sellers of sailboards. However, the most successful manufacturer of these sailboards used the trademarked brand name Windsurfer. However, the word windsurfer was used so often by the public for all brands of sailboards that the trademarked name Windsurfer was found to be a generic name, and its trademark was canceled.

Exhibit 7.2 lists names that at one time were trademarked but lost trademark protection because the trademarked names became overused and generic. Exhibit 7.3 lists trademarked names that are at some risk of becoming generic names.

Exhibit 7.2 Generic Names

The following once-trademarked names have been so overused to designate an entire class of products that they have been found to be generic and have lost their trademark status.

Exhibit 7.3 Names at Risk of Becoming Generic Names

Certain trademark and service marks are often used improperly and have some risk in the future of becoming generic names. Several of these marks are listed below, with their proper use and typical misuse also noted:

Concept Summary

Types of Intellectual Property Protected by Federal Law

Diluting, Blurring, or Tarnishing Trademarks

Many companies that own trademarks spend millions of dollars each year advertising and promoting the quality of the goods and services sold under their names. Many of these become household names that are recognized by millions of consumers, such as Coca-Cola, McDonald’s, Microsoft, and Nike.

Traditional trademark law protected these marks where an infringer used the mark and confused consumers as to the source of the goods or services. For example, if a knockoff company sold athletic shoes and apparel under the name “Nike,” there would be trademark infringement because there would be confusion as to the source of the goods.

Often, however, a party would use a name similar to, or close to but not exactly identical to, a holder’s trademark name and sell other goods or services or misuse the name. Because there was no direct competition, the trademark owner often could not win a trademark infringement case.

To address this problem, Congress enacted the Federal Trademark Dilution Act (FTDA) of 1995 to protect famous marks from dilution.9 The FTDA provides that owners of marks have a valuable property right in their marks that should not be diluted, blurred, tarnished, or eroded in any way by another.

Dilution is broadly defined as the lessening of the capacity of a famous mark to identify and distinguish its holder’s goods and services, regardless of the presence or absence of competition between the owner of the mark and the other party. The two most common forms of dilution are blurring and tarnishment:

• Blurring occurs where a party uses another party’s famous mark to designate a product or service in another market so that the unique significance of the famous mark is weakened.

Examples

Examples of blurring include Rolex skateboards or eBay toiletries.

• Tarnishment occurs where a famous mark is linked to products of inferior quality or is portrayed in an unflattering, immoral, or reprehensible context likely to evoke negative beliefs about the mark’s owner.

Example

An example of tarnishment is using the mark Microsoft on a deck of unsavory playing cards.

Congress revised the FTDA when it enacted the Trademark Dilution Revision Act of 2006.10 This act provides that a dilution plaintiff does not need to show that it has suffered actual harm to prevail in its dilution lawsuit but instead only show that there would be the likelihood of dilution. The FTDA, as amended, has three fundamental requirements that the holder of the senior mark must prove:

Trademark Dilution Revision Act

A federal statute that states that a plaintiff must only show that there is a likelihood of dilution to prevail in a dilution lawsuit against a defendant.

1. Its mark is famous.

2. The use by the other party is commercial.

3. The use by the other party causes a likelihood of dilution of the distinctive quality of the mark.

The following feature discusses international treaties that protect intellectual property rights.

 Case 7.4 Federal Court Case Dilution of a Trademark

V Secret Catalogue, Inc. and Victoria’s Secret Stores, Inc. v. Moseley

605 F.3d 382, Web 2010 U.S. App. Lexis 10150 (2010)

United States Court of Appeals for the Sixth Circuit

“The phrase ‘likely to cause dilution’ used in the new statute significantly changes the meaning of the law from ‘causes actual harm’ under the preexisting law.”

—Merritt, Circuit Judge

Facts

Victoria’s Secret is a successful worldwide retailer of women’s lingerie, clothing, and beauty products that owns the famous trademark “Victoria’s Secret.” A small store in Elizabethtown, Kentucky, owned and operated by Victor and Cathy Moseley, used the business names “Victor’s Secret” and “Victor’s Little Secret.” The store sold adult videos, novelties, sex toys, and racy lingerie. Victoria’s Secret sued the Moseleys, alleging a violation of the Federal Trademark Dilution Act of 1995. The case eventually was decided by the U.S. Supreme Court in favor of the Moseleys, when the Court found that there was no showing of actual dilution by the junior marks, as required by the statute. Congress overturned the Supreme Court’s decision by enacting the Trademark Dilution Revision Act of 2006, which requires the easier showing of a likelihood of dilution by the senior mark. On remand, the U.S. district court applied the new likelihood of confusion test, found a presumption of tarnishment of the Victoria’s Secret mark that the Moseleys failed to rebut, and held against the Moseleys. The Moseleys appealed to the U.S. court of appeals.

Issue

Is there tarnishment of the Victoria’s Secret senior mark by the Moseleys’ use of the junior marks Victor’s Secret and Victor’s Little Secret?

Language of the Court

The phrase “likely to cause dilution” used in the new statute significantly changes the meaning of the law from “causes actual harm” under the preexisting law. In the present case, the Moseleys have had two opportunities in the District Court to offer evidence that there is no real probability of tarnishment and have not done so. The defendants have given us no basis to reverse the judgment of the District Court.

Decision

The U.S. court of appeals affirmed the U.S. district court’s judgment in favor of Victoria’s Secret.

Ethics Questions

Do you think the Moseleys were trading off of Victoria’s Secret famous name? Do you think that the Moseleys had a legitimate claim to their business names because the husband’s name was Victor?

The following case involves the dilution of a famous mark.

 Global Law

International Protection of Intellectual Property

Red Square, Moscow, Russia

There are many treaties that protect intellectual property rights internationally. Signatory countries to an intellectual property treaty must abide by the provisions of the treaty. In the copyright area, two major treaties are the Berne Convention and the WIPO Copyright Treaty. In the patent area, two major treaties are the Paris Convention and the Patent Cooperation Treaty (PCT). In the trademark area, major treaties include the Paris Convention, the Madrid Agreement and Protocol, and the Nice Agreement.

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) protects patents, copyrights, trademarks, and other intellectual property rights internationally. Members of the World Trade Organization (WTO), of which there are more than 150 member nations, are subject to the provisions of TRIPS.

Key Terms and Concepts

1. American Inventors Protection Act (137)

2. Berne Convention (139)

3. Blurring (149)

4. © (139)

5. Certification mark (145)

6. Collective membership mark (145)

7. Copyright (138)

8. Copyright infringement (140)

9. Copyright registration certificate (139)

10. Copyright Revision Act (139)

11. Copyright Term Extension Act (139)

12. Derivation proceeding (138)

13. Design patent (137)

14. Digital Millennium Copyright Act (DMCA) (143)

15. Dilution (149)

16. Distinctive (146)

17. Economic Espionage Act (EEA) (133)

18. Encryption technology (143)

19. Fair use doctrine (141)

20. Federal Patent Statute (133)

21. Federal Trademark Dilution Act (FTDA) (149)

22. First-to-file rule (138)

23. First-to-invent rule (138)

24. Generic name (147)

25. Intellectual property (131)

26. Lanham (Trademark) Act (Lanham Act) (143)

27. Leahy-Smith America Invents Act (AIA) (138)

28. Madrid Agreement and Protocol (151)

29. Mark (143)

30. Micro-entity

31. Misappropriation of a trade secret (132)

32. No Electronic Theft Act (NET Act) (142)

33. Nonobvious (135)

34. Novel (135)

35. Paris Convention(151)

36. Patent (133)

37. Patent application (134)

38. Patent Cooperation Treaty (PCT) (151)

39. Patent infringement (137)

40. Patent number (134)

41. Patent pending (134)

42. Patent Trial and Appeal Board (PTAB) (138)

43. Post-grant review (138)

44. Pre-issuance challenge (138)

45. Prior-use defense (138)

46. Provisional application (137)

47. Public domain (for copyright) (140)

48. Public domain (for patent) (136)

49. ® (144)

50. Reverse engineering (132)

51. Secondary meaning (146)

52. Service mark (145)

53. SM (144)

54. Tangible writings (139)

55. Tarnishment (149)

56. TM (144)

57. Trademark (144)

58. Trademark Dilution Revision Act (149)

59. Trademark Electronic Application System (TEAS) (144)

60. Trademark infringement (146)

61. Trade secret (132)

62. Uniform Trade Secrets Act (132)

63. U.S. Copyright Office (139)

64. U.S. Court of Appeals for the Federal Circuit (134)

65. U.S. Patent and Trademark Office (PTO) (134)

66. Useful (135)

67. Utility patent (134)

68. WIPO Copyright Treaty

 Critical Legal Thinking Cases

• 7.1 Patent  Amazon.com has become one of the biggest online retailers. Amazon.com, Inc., enables customers to find and purchase books, music, videos, consumer electronics, games, toys, gifts, and other items over the Internet by using its website www.amazon.com. As an early entrant into this market, Amazon.com became a leader in e-commerce. Other e-commerce retailers began offering goods and services for sale over the Web.

One problem that Amazon.com and other e-commerce retailers faced was that more than 50 percent of potential customers who went shopping online and selected items for purchase abandoned their transactions before checkout. To address this problem, Amazon.com devised and implemented a method that enabled online customers to purchase selected items with a single click of a computer mouse button. A customer who had previously registered his or her name, address, and credit card number with Amazon.com could complete purchases by clicking an instant “buy” button. Amazon.com applied for a software patent for its one-click ordering system, and the U.S. Patent and Trademark Office (PTO) granted patent no. 5,960,411 (‘411 patent) to Amazon.com. Amazon.com designated this as the “1-click®” ordering system.

While Amazon.com’s patent application was pending, other online retailers began offering similar one-click ordering systems. One was Barnesandnoble.com, which operates a website through which it sells books, software, music, movies, and other items. Amazon.com sued Barnesandnoble.com, alleging patent infringement, and sought an injunction against Amazon.com from using its one-click ordering system. Barnesandnoble.com defended, asserting that a one-click ordering system is clearly obvious and, therefore, did not meet the required “nonobvious” test of federal patent law for an invention to qualify for a patent. Was Amazon’s 1-click ordering system nonobvious and therefore qualified for a patent? Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, Web 2001 U.S. App. Lexis 2163 (United States Circuit Court of Appeals for the Federal Circuit)

• 7.2 Copyright Fair Use James W. Newton, Jr., is an accomplished avant-garde jazz composer and flutist. Newton wrote a composition for the song “Choir,” a piece for flute and voice that incorporated elements of African American gospel music. Newton owns the copyright to the composition “Choir.” The Beastie Boys, a rap and hip-hop group, used six seconds of Newton’s “Choir” composition in their song “Pass the Mic” without obtaining a license from Newton to do so. Newton sued the Beastie Boys for copyright infringement. The Beastie Boys defended, arguing that their use of six seconds of Newton’s song was de minimis and therefore fair use. Does the incorporation of a short segment of a copyrighted musical composition into a new musical recording constitute fair use, or is it copyright infringement? Newton v. Beastie Boys, 349 F.3d 591, Web 2003 U.S. App. Lexis 22635 (United States Court of Appeals for the Ninth Circuit)

• 7.3 Copyright When Spiro Agnew resigned as vice president of the United States, President Richard M. Nixon appointed Gerald R. Ford as vice president. Amid growing controversy surrounding the Watergate scandal, President Nixon resigned, and Vice President Ford acceded to the presidency. As president, Ford pardoned Nixon for any wrongdoing regarding the Watergate affair and related matters. Ford served as president until he was defeated by Jimmy Carter in the presidential election. Ford entered into a contract with Harper & Row Publishers, Inc., to publish his memoirs in book form. The memoirs were to contain significant unpublished materials concerning the Watergate affair and Ford’s personal reflections on that time in history. The publisher instituted security measures to protect the confidentiality of the manuscript. Several weeks before the book was to be released, an unidentified person secretly brought a copy of the manuscript to Victor Navasky, editor of The Nation, a weekly political commentary magazine. Navasky, knowing that his possession of the purloined manuscript was not authorized, produced a 2,250-word piece titled “The Ford Memoirs” and published it in an issue of The Nation. Verbatim quotes of between three hundred and four hundred words from Ford’s manuscript, including some of the most important parts, appeared in the article. Harper & Row sued the publishers of The Nation for copyright infringement. Who wins? Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 105 S.Ct. 2218, 85 L.Ed.2d 588, Web 1985 U.S. Lexis 17 (Supreme Court of the United States)

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• 7.4 Trademark Clairol Incorporated manufactures and distributes hair tinting, dyeing, and coloring preparations. Clairol embarked on an extensive advertising campaign to promote the sale of its “Miss Clairol” hair-color preparations that included advertisements in national magazines, on outdoor billboards, on radio and television, in mailing pieces, and on point-of-sale display materials to be used by retailers and beauty salons. The advertisements prominently displayed the slogans “Hair Color So Natural Only Her Hairdresser Knows for Sure” and “Does She or Doesn’t She?” Clairol registered these slogans as trademarks. During the next decade, Clairol spent more than $22 million on advertising materials, resulting in more than a billion separate audio and visual impressions using the slogans. Roux Laboratories, Inc., a manufacturer of hair-coloring products and a competitor of Clairol’s, filed an opposition to Clairol’s registration of the slogans as trademarks. Do the slogans qualify for trademark protection? Roux Laboratories, Inc. v. Clairol Inc., 427 F.2d 823, Web 1970 CCPA Lexis 344 (United States Court of Customs and Patent Appeals)

• 7.5 Generic Name The Miller Brewing Company, a national brewer, produces a reduced-calorie beer called “Miller Lite.” Miller began selling beer under this name and spent millions of dollars promoting the Miller Lite brand name on television, in print, and via other forms of advertising. Falstaff Brewing Corporation had brewed and distributed a reduced-calorie beer called “Falstaff Lite.” Miller brought suit under the Lanham Act, seeking an injunction to prevent Falstaff from using the term Lite. Is the term Lite a generic name that does not qualify for trademark protection? Miller Brewing Co. v. Falstaff Brewing Corp., 655 F.2d 5, Web 1981 U.S. App. Lexis 11345 (United States Court of Appeals for the First Circuit)

 Ethics Cases

• 7.6 Ethics Case Elvis Presley, a rock-and-roll singer, became a musical icon during a career that spanned more than twenty years, until he died at the age of 42. Many companies and individuals own copyrights to Presley’s songs, lyrics, photographs, movies, and appearances on TV shows. Millions of dollars of Elvis Presley–related copyrighted materials are sold or licensed annually.

Passport Video produced a video documentary titled The Definitive Elvis, comprising sixteen one-hour episodes. The producers interviewed more than two hundred people regarding virtually all aspects of Elvis’s life. Passport sold the videos commercially for a profit. Approximately 5 to 10 percent of the videos were composed of copyrighted music and appearances of Presley on television and in movies owned by copyright holders other than Passport. Passport did not obtain permission to use those copyrighted works. Elvis Presley Enterprises, Inc., and other companies and individuals that owned copyrights to the Presley works used by Passport sued Passport for copyright infringement. Passport defended, arguing that its use of the copyrighted materials was fair use. The U.S. District Court held in favor of the plaintiff copyright holders and enjoined Passport from further distribution of its documentary videos. Passport appealed.

Did Passport act ethically in including the Elvis Presley copyrighted material in its video? Why do you think Passport Video did so? Has there been fair use in this case, or has there been copyright infringement? Elvis Presley Enterprises, Inc. v. Passport Video, 349 F.3d 622, Web 2003 U.S. App. Lexis 22775 (United States Court of Appeals for the Ninth Circuit)

• 7.7 Ethics Case Once in the past, when the city of New York teetered on the brink of bankruptcy, on the television screens of America there appeared an image of a top-hatted Broadway showgirl, backed by an advancing phalanx of dancers, chanting “I-I-I-I-I-I Love New Yo-o-o-o-o-o-o-rk.” As an ad campaign for an ailing city, it was an unparalleled success. Crucial to the campaign was a brief but exhilarating musical theme written by Steve Karmin called “I Love New York.” Elsmere Music, Inc., owned the copyright to the music. The success of the campaign did not go unnoticed. The popular weekly variety program Saturday Night Live (SNL) performed a comedy sketch over National Broadcasting Company’s network (NBC). In the sketch, the cast of SNL, portraying the mayor and members of the chamber of commerce of the biblical city of Sodom, were seen discussing Sodom’s poor public image with out-of-towners and its effect on the tourist trade. In an attempt to recast Sodom’s image in a more positive light, a new advertising campaign was revealed, with the highlight of the campaign being a song “I Love Sodom” sung a cappella by a chorus line of SNL regulars to the tune of “I Love New York.” Elsmere Music did not see the humor of the sketch and sued NBC for copyright infringement. Who wins? Did SNL act ethically in parodying the “I Love New York” campaign? Elsmere Music, Inc. v. National Broadcasting Co., Inc., 623 F.2d 252, Web 1980 U.S. App. Lexis 16820 (United States Court of Appeals for the Second Circuit)

Notes

1. 1. 18 U.S.C. Sections 1831–1839.

2. 2. 35 U.S.C. Section 10 et seq.

3. 3. Public Law 112–129.

4. 4. 17 U.S.C. Section 101 et seq.

5. 5. Public Law 105–298.

6. 6. Public Law 105–147.

7. 7. 17 U.S.C. Section 1201.

8. 8. 15 U.S.C. Section 1114 et seq.

9. 9. 15 U.S.C. Section 1125.

10. 10. Public Law No. 109–312, 15 U.S.C. Section 1125(c).