IP Survey. Franklyn.

Fall 2010

COPYRIGHT ATTACK PLAN I. Validity: Is the work protected by copyright 1. work of authorship: which of the 8 categories is it in i. Ideas, methods, systems are excluded ii. Useful article doctrine iii. Merger doctrine 2. Fixed: Is the work fixed in a tangible medium of expression (unfixed works are not eligible for federal copyright + creation must also be fixed under the authority of the author). 3. i) original and ii) creative? (this does not equal novelty) two different people can both have copyright on the same exact picture if it was a coincidence, as long as they made it themselves and there was a minimum requirement of creativity. This is not like patent where one right holder excludes another from the same right. 4. Period of protection/ When was it created? To determine whether the 1909 or 1976 Act applies and whether it is still in copyright as of today II. Who owns the copyright? 1. who was/were the initial owner(s) of the copyright i. who had creative control (when joint situation) ii. is there possibility of joint copyright iii. was it a work made for hire that gave copyright to someone else rather than the creator 2. was ownership transferred ever i. any assignment/ exclusive license (exclusive licensee has standing to sue as if he or she was the owner) ii. there has to be writing for transfer III. Was the copyright infringed by the acts in question 1. Rights i. right of reproduction ii. adaptation/ derivate works iii. right of distribution iv. public performance v. public display 2. Infringement i. Copying (qualitative) a material (quantitative) amount OR ii. Improper appropriation IV. Defenses 1. Affirmative defenses i. Fair use s107 (4 part balancing test) 1. purpose of Ds work or use 2. nature of the Ps work 3. amount/significance of work taken 4. potential adverse economic impact on the market for P ii. statutory exemptions iii. compulsory licenses (pay and allowed to copy)

IP Survey. Franklyn. Fall 2010 first sale doctrine no copying by proving independent creation not an improper appropriation de minimis copying no longer in copyright domain Never copyrighted or that it is not eligible to be copyrighted (i.e. not original enough) the use does not fall into one of the categories of infringement
iv.

2. 3. 4. 5. 6. V.

Remedies injunctive relief / monetary destruction of all infringing copies damages i. actual out of pocket damages caused by the copying/infringement ii. lost licensing fees (what the P could have gotten had he licensed the work) iii. unjust enrichment or disgorgement 4. statutory damages i. Judge has discretion to award punitive damages of up to $150,000 per occurrence of infringement. There are some rules of limitation ii. Recoup attorney fees iii. However, if the case is brought wrongfully or frivolously, defendant has right to recoup attorney fees
1. 2. 3.

INTRODUCTION A. The Law i. Threshold is set forth in 102(a) of the Copyright Act: Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of machine or device. ii. This creates 2 fundamental requirements originality and fixation. iii. By comparison, 102(b) denies copyright protection to any ideas, procedure, process, system, method of operation, concept, principle, or discovery
B. Theory of Copyright Utilitarian/economic incentive theory: Predominant justification in US; w/o protection, commerce would grind to a halt. People wouldnt do anything creative w/o the incentive of a monopoly. Labor theory: Sweat of the brow; author entitled to reap the benefits of her labor; primary justification in Europe Neo-classical economic theory: Benefits society economically to keep things in private ownership for a long period ensure maximum exploitation by society. Justifies eternal copyright.

IP Survey. Franklyn. Fall 2010 Best way to ensure that the world has derivative works is to make sure the author has the rights to it. Author (rational self-maximizer) can control the market to ensure balance between saturation and underexposure

Personhood theory: Reflection of the personality of the individual; moral rights (rather than just commercial purposes). Keep others from mutilating your work, even if they own it. Rhetoric of the public domain: public interest against long/strong

Threshold: COPYRIGHTABLE SUBJECT MATTER A. List (7 in 102+ 1 in 103) of copyrightable subject matter i. Literary works including computer programs, structure, sequence organization words and short phrases are not protected (e.g. names, title, slogans) ii. Musical works (including any accompanying words) iii. Dramatic works and Pantomime and choreographic including any accompanying music, such as plays iv. Pictorial graphic and sculptural works (potentially broad enough to cover conventional sculptures and other 3D work, i.e. a podium or piece of furniture) Useful article doctrine is a significant limitation Not judged based on artistic merit v. Motion pictures Sound tracks treated as integral part of motion pictures vi. Sound recording (separate from musicals). vii. Architectural works Covers not only the blueprints and the plans, but also the building itself. Not analyzed under the useful article doctrine 2 limitations a) pictorial representations permitted (pictures, paintings etc) and b) alterations to and destruction of buildings (building owner does not require copyright owner consent) viii. Derivative Works and Compilations of copyrightable subject matters Compilations and derivative works are specifically recognized by 103 as copyrightable subject matter as long as it constitutes an original work of authorship and falls within one or more of the seven protected categories listed in 102. Derivative work = requires a process of recasting based upon one or more preexisting work, such as translation, musical arrangement, dramatization etc. Compilation = results from a process of selecting, organizing, and arranging previously existing material of all kinds, regardless of whether the individual items have been subject to copyright.
B.

Not Copyrightable: Idea Expression Dichotomy i. 102(b) denies copyright protection to any ideas, procedure, process, system, method of operation, concept, principle, or discovery

IP Survey. Franklyn. Fall 2010

ii. For a P to prove infringement of expression, the owner must show that the alleged

infringer took not just an abstract idea from his work, but copied the expression of that idea. iii. The nature of functional works: Because functional works often closely integrate idea and expression, they often conflict with copyright laws protection of original expression. This basic principle is embodied in 102(b) When encountering functional work, courts will limit protection to avoid conferring a de facto monopoly over the unprotectable aspects of the work. Baker: cannot obtain a copyright excluding others from practicing what was taught in the book; Forms must necessarily be used as incident to the teaching of the systems. F: P wrote a book about bookkeeping, feature method that located all info onto 1 page. P sued D for infringement b/c D used accounting forms similar to those featured in Ps book. S Ct ruled in favor of D saying that the system could not be copyrighted, even if copyright of book is obtained, cannot prevent others from practicing what was taught in the book (P did not have patent protection). Also, the forms must necessarily be used as incident to the teaching of the system. Thus, according to the court, the ledger was actually a utilitarian object rather than an expressive work. Unless copyright was denied in this instance, a monopoly could in effect be granted over the underlying idea of the system. Merger doctrine: When there is only one way or very few ways to express an idea or method in a visual form, then BOTH the expression and the idea are not copyrightable.
C.

The Merger Doctrine (Defense) i. Definition: Courts will not protect a copyrighted work from infringement if the idea underlying the work can be expressed only in one or a few different ways, for fear that there may be a monopoly for the underlying idea. ii. The key is how broadly you define the idea, its level of abstraction The more broad an idea -> more variety of available expression The more narrow an idea -> only a few ways to achieve that objective iii. Morrissey v. Procter & Gamble, 1st Cit. p460 F: P is copyright owner of a set of game rules for sweepstakes contest which asks applicants to print name, address, and social security number etc including instructions for if applicant has no SSN, may use the name and number of any member of an immediate family member etc. P sues D for using the same set of instructions for its sweepstake. R: Though there are more than one way of expressing this simple substance, Court holds for D. When the uncopyrightable subject matter is very narrow, so that the topic necessarily requires if not only one form

IP Survey. Franklyn. Fall 2010 of expression, at best only a limited number, to permit copyright could exhaust all possibilities of future use of the substance. A: The Rule was so straightforward and simple that we find this limiting principle to be applicable. H: In this case, copyright does not extend to the subject matter at all, and P cannot complain even if his particular expression was deliberately copied.

ELEMENTS A. Original Work of Authorship i. 102(a) states Copyright subsists in original works of authorship. ii. originality requires 1. independent creation and 2. modicum of creativity (de minimis) iii. NOT copyrightable includes short phrases, such as names, titles, slogans; familiar symbols or designs; mere variations of typographic ornamentation; lettering/coloring; mere listing of ingredients 1. fragmentary statements (clich) hang in there 2. words dictated by functional considerations shake well before using 3. translation from one medium to another a. painting into print iv. while facts are not copyrightable, compilation of facts may be if they feature original selection or arrangement 1. protection would extend to only those original components 2. there is no copyright protection for the facts and ideas, but possibly the selection and arrangement of facts and ideas v. Feist Publication (p422) F: Feist had copied information from Rural's telephone listings to include in its own, after Rural had refused to license the information. Rural had sued for copyright infringement. S Ct held that Yellow page telephone numbers are not eligible for copyright because the data itself is not creative, and the ordering of names is dictated by the worlds use of phone numbers. Compiling telephone books is not creative. no one may claim originality to facts because facts do not owe their origin to an act of authorship. Court recognized factual compilations though, and said that they may possess the requisite originality, including choosing how to arrange the collected data so that they may be used effectively. These choices as to selection and arrangement entail a minimal degree of creativity that is sufficient. Thus, even though a directory contains absolutely no protectable written expression, it may meet the minimal requirement if it features an original selection or arrangement. However, copyright in factual compilation is thin. A subsequent compiler remains free to use the facts contained in anothers publication to aid in preparing a competing work, so long as the competing work does not feature to same selection and arrangement.
B.

Fixation in Tangible Medium or Expression

IP Survey. Franklyn. Fall 2010 A work is fixed when it is placed in a relatively stable and permanent embodiment to permit the work to be perceived, reproduced or otherwise communicated. In effect, it must be written or recorded in some manner. Thus, a mere performance of a work does not create copyright. ii. Live broadcasts/transmissions are protected if recorded, even if recorded simultaneously w/ transmission iii. Unfixed work of authorship (e.g. improvisation) subject to State common law or statutory protection, but it is not eligible for Fed protection
i. C.

Formalities
i.

ii.

iii.

iv.

Notice of copyright 1. 1909 Act: failure to give notice typically resulted in forfeiture of protection. 2. 1976 Act (Pre-Berne): copyright protection begins upon creation, not publication. Failure to give notice will not result in forfeiture as long as it was inadvertent and holder registered the work w/I 5 years after publication and made r/s efforts to give notice after omission discovered. 3. Post-Berne (since 3/1/89): eliminated notice requirement. Publication of the work 1. 1909 Act: protection triggered by publication, unpublished works protected by state common law, or constructively published by registration 2. 1976 Act (Pre-Berne): protection triggered by creation of work fixed in tangible medium of expression. Publication determined when notice required. 3. Post-Berne (since 3/1/89): w/ elimination of mandatory notice, publication no longer a factor in determining validity of works created after 3/1/89; but still relevant for # of things (list on pg. 392). Registration of the work w/ the Copyright Office 1. Has always been voluntary, but required before bringing infringement suit 2. 1909 Act: registration required to renew copyright and pre-requisite to bringing infringement action. 3. 1976 Act (Pre-Berne): successful registration is prima facie evidence of the validity of the . Must register prior to infringement suit. Copyright holder can only obtain statutory damages and atty. fees for infringements that occurred after registration. 4. Post-Berne (since 3/1/89): still have to register prior to suit for domestic works. Deposit of a copy of the work w/ the Library of Congress 1. 407 requires deposit of 2 copies of ea. work published in the US for which is claimed w/I 3 mo. after publication. 2. Does not affect the validity of a or the authors right to bring suit. Failure to comply only results in a fine. 3. Separate deposit w/ Copyright Office is required for registration under 408 (can be satisfied by compliance w/ 407 deposit).

IP Survey. Franklyn. Fall 2010 OWNERSHIP A. Works made for hire i. 1909 Act: Works made for hire included any employee created works within the scope of employment and anything that was commissioned by independent contractor created works of the instance and expense of employer. This clearly favors right of ERs (the commissioning party). ii. 1976 Act: 101 Work to hire occurs under 2 circumstances: 1. a work prepared by an EE w/n the scope of his or her employment; or 2. a works specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. iii. Subdivision (1) applies to EEs Read in connection with 201(b), which provides that ER or other person for whom the work was prepared for is considered the author unless parties expressly agreed by written instrument. In other words, when a work is created by an EE w/n scope of employment, it is presumed to be made for hire unless the parties agree otherwise through K. iv. Subdivision (2) applies to independent contractors Two limitations: must fall into one of the 9 categories AND the parties must expressly agree in k that the work shall be considered work for hire. B/c the express agreement must indicate unambiguously that the parties agree to a work made for hire, thus, a check endorsement legend that mentions only an assignment is insufficient to create work made for hire. Unclear whether the K must necessarily say work made for hire, however, if the intent of the parties was clear, a work made for hire could nonetheless be created absent the magic words.
v. Distinguishing b/w EEs and Independent Contractors

When analyzing employment relationship under 101 (1) (whether the person is EE or NOT), consider The hiring partys right to control the manner and means by which the product is accomplished, Other factors: skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship; whether the hiring party has the right to assign hours; the hired partys role in hiring and paying assistants; whether the work is part of regular business etc. None of these factors are determinative CCNV v. Reid (S Ct. p489) Held: True that CCNV members directed enough of Reids work to ensure that he produced a sculpture that met their specifications, but the extent of control weigh heavily against finding EE relationship. A: Reid is a sculptor, a skilled occupation. He supplied his own tools. He worked in his own studio in Baltimore, daily supervisions from others were impossible. Reid was retained for less than two months, a relatively short period of time. During and after this time, CCNV had no right to assign him more projects. Reid had absolute freedom to decide when and how long to work. CCNV paid him dependent on completion on the specific job, a method by which independent contractors are

IP Survey. Franklyn. Fall 2010 often compensated. Creating sculptures was hardly regular business for CCNV. CCNV did not pay any EE benefits or tax etc. B. Joint works i. Rule 101 defines joint work as work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of the unitary whole. This means that there must be 1) a copyrightable work, 2) two or more authors and 3) the authors must intend their contributions be merged into inseparable or interdependent parts of a unitary whole. 9th circuit also requires that each author to make an independently copyrightable contribution to the disputed work.
ii. Aalmuhammed v. Lee p497 Facts: Warner Bros contracted

with Lee to make the movie Malcom X, who co-wrote the screenplay and directed and co produced the movie, starring Denzel Washington as Malcom X. Washington hired Aal to prepare him for his role since Aal was an Islam expert. Aal later contends that he was a co-author and thus can obtain copyright of the movie because of his extensive involvement with respect to making the movie more authentic Analysis: Copyrightable contribution i. Speaking Arabic to persons in charge of the mosque does not result in copyrightable contribution. But Aal submitted evidence that he rewrote some of the script, this evidence must be accepted as true on SJ, these items are independently copyrightable therefore Al presented a genuine issue of fact. Author i. Al concedes that he contributed substantially but was not one of the authors. Authorship is not the same as making a valuable and copyrightable contribution. ii. As the word is traditionally used, author is the person who causes something to come into being. iii. In Burrow Giles v. Sarony author of a photograph was the person who has superintended the arrangements, who has actually formed the picture by putting the persons in position, and arranging the place where ppl are to be the man who is the effective cause of that; author involves originating, making, producing, as the inventive or mastermind, the thing which is to be protected. The man who really represents, creates, or gives effect to the idea, fancy or imagination. iv. AL did not at any time have superintendence of the work. Warner and Bros and Lee controlled it. AL was not the person who actually formed the picture by putting people in

IP Survey. Franklyn. Fall 2010 place or did arrangements. Al could make extremely helpful recommendations but Lee was not bound to accept any of them. Al lacked control over the work, and absence of control is strong evidence of the absence of coauthorship. v. Al offered no evidence that he was the inventive or mastermind of the movie Authors intent i. Best objective manifestation of shared intent is k, but this does not always occur ii. Al, nor Lee, nor WB made any objective manifestation of an intent to be co-authors. iii. WB required Lee to sign a work for hire agreement, so that even Lee was not a co-author. It would be illogical to conclude that WB while not wanting Lee to own the copyright, intended to share ownership with Al. RIGHT TO PREPARE DERIVATIVE WORKS A. Introduction i. The 1976 Act provides the copyright owner the exclusive right to prepare derivate works based upon the copyrighted work s106(2). ii. The Act defines a derivative work as a work based on one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed, or adapted. It also includes a work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship B. Anderson v. Stallone i. Facts: Stallone wrote and played the role of Rocky Balboa in movies Rocky I, II and II, which were extremely successful motion pictures. P, Anderson, wrote a thirty one page treatment using Rockys characters in hopes that it would be used by Stallone in Rocky IV. He sent the treatment to MGM and met with MGMs board of directors. He also signed a release that purported to relieve MGM from liability stemming from use of the treatment. Afterwards, Andersons attorney wrote MGM requesting compensation for the alleged use of his treatment in the forthcoming Rocky IV. (Anderson writes the script based on Stallones press conference where he announced the plot/idea). Anderson alleges that Stallone stole Andersons script. ii. Analysis: Andersons work is derivative work of Rocky I, II and II. Derivative works itself is a violation of copyright. He did not just take the unprotected idea that was announced in the press conference, he took things that were still under Stallones copyright, such as the characters, their identities, their relationship. Characters can have copyright in itself it they are detailed and intricate enough to the point where they would be recognized. Copyright infringement and making derivative work can occur totally privately, the act that violates the law is the making of the script. Not the

IP Survey. Franklyn. Fall 2010 act of selling. Thou shall not make derivative work and thou shall not copy. It is the act of copying/making derivative work itself that violates copyright. iii. Holding: D is entitled to SJ because infringing work is not entitle to copyright protection. The infringer cannot sue someone who copies the infringing work, even though the person that copied may have copied something that may be original and creative of the infringer. Exception: If the infringing work (i.e. Andersons work) can be subdivided cleanly, so that you can distinguish those parts that are infringing versus parts that are Andersons own work, and infringer can show that he who copied also copied the infringers own work, then the infringer may sue for copyright violation. In this case, the work is intertwined and cannot be separated. DURATION, DIVISION, TRANSFER, RECLAIM A. Duration i. Basic terms of protection 1909 Act measured by date of publication for 28 yrs, followed by a renewal term of 28 yrs, for a total of 56 years. 1978 Act measured by life of author + 70 yrs Date of Protection Length of Term Works created on or after 1/1/78 Works created but not published before 1/1/78 Works published between 1964 and 1977 (inclusive) Works published between 1923 and 1963 Works published before 1923

When work was fixed in a tangible medium Federal protection began on 1/1/78 When work was published with notice When work was published with notice n/a

Life + 70 yrs Life + 70 years at least through 12/31/2002 if the work remained unpublished as of that date OR until 12/31/2047 if the work was published before 1/12/2003 Total 95 years protection. (1st term of 28 years, automatic renewal, 2nd term of 67 yrs) 1st term of 28 years, renewal for 67 years, but only if renewal was properly obtained (not auto) Work is now in public domain

B.

Transfer i. 1909 Act Precluded the formal divisibility of the rights comprising a copyright. A copyright owner could assign the entire copyright to another, but a transfer of any lesser interest was considered a license

IP Survey. Franklyn. Fall 2010 One consequence of the doctrine of indivisibility was that only the proprietors had standing to bring suit to enforce the copyright. Thus a licensee would have to join the proprietor in order to protect his or her rights. ii. 1976 Act The Act eliminated restrictions on the formal divisibility of copyright interests. Section 201 provides that ownership of copyright may be transferred in whole or in part. Any of the exclusive rights comprised in a copyright, including any subdivision of any of the rights may be transferred and owned separately. The owner of any particular exclusive right is entitled, to all of the protection and remedies accorded.
C.

Reclaiming Copyright i. 1909 act authors could reclaim copyright interests that they had licensed at the time of renewal. ii. 1976 eliminated the renewal regime, allow authors and their survivors to reclaim copyright interests by having right to terminate transfers of copyright b/w 30th-40th year from execution of the transfer of rights for works created after 1977. iii. With respect to works in their second renewal term prior to 1978, s304(c) allows authors and their families to terminate transfers b/w the 56th 61st year of copyright protection for such works so as to allow them to profit from the 19 year of protection for such works added by the 1976 act. iv. Sonny Bono Copyright Term Extension Act of 1998 may reclaim the 20 years added to their copyrights. Termination of transfer rights may not be assigned in advance. v. Works made for hire doctrine, the only way for a transferee to prevent a termination of transfer is by establishing that the work is made for hire and therefore owned by the employer or commissioning party from the outset vi. With regards to commissioned works (works prepared by independent contractors), Congress limited this exception to the termination of transfer provision in two ways; by allowing only certain enumerated categories of works to be treated as works made for hire and by requiring that the parties specifically agree in writing that the work shall be treated as a work made for hire.

COPYING AND INFRINGEMENT A. P must prove by per ponderous of the evidence (before filing complaint) that i. P has a protectable copyrightable work ii. That work is still in copyright iii. The plaintiff is the rightful current owner of copyright in that work iv. The work is now registered with the US copyright office v. The work copyright was infringed with regard to _______ which particular right (specify which right) Assume the right is reproduction right (see f(i) and g(i)) vi. Defendant copied protectable elements of creative expression from Ps work Copyright law protects accidental similarity

IP Survey. Franklyn. Fall 2010 Copying need not be conscious, there is such a thing as unconscious copying P does not have to prove intent or bad intent P merely has to prove copying Forms of copying 1. literal complete copying 2. literal partial copying 3. non literal pattern copying 4. non literal complete copying of ideas, facts, systems, methods. Proving copying: Direct evidence and circumstantial evidence 1. direct - eye witness, camera, admission 2. circumstantial two part test a. plaintiff must prove that D had access to Ps work (that D was in a position to see or hear Ps work, P does not have to prove that D actually saw or heard it, that they could have, and probably did) b. P must also prove substantial similarity c. Doctrine Striking similarity in small number of cases, P does not have to prove access. This is NOT common and NOT liberally applied. In vast majority of cases, where copying is not admitted, there must be ACCESS + SUBSTANTIAL SIMILARITY. Majority Rule: This doctrine applies when Ps work is detailed not simple. vii. That copying rises to the level of a improper appropriation Not all copying are considered illegal. De minimis copying that would not be obvious to a layperson will not be considered infringing. Test: Would an ordinary observer comparing the works recognize Ps protected creative expression in defendants work viii. P has been damaged by the copying infringement and seeks the following remedies (i.e. discouragement of profits, injunction from future copying, destruction of infringing articles)
B.

CL for proving copying: Arnstein a. Facts: Arnstein sued Porter for infringement of copyrights in various of Ps musical compositions. Some of the songs were published and some were not. P averred that a copy of the unpublished song was stolen from his room. P suggested that D gained access to his songs either through publishers or a movie producer or that D was connected with burglaries of his home, P testified that he did not know, but only saying that P could have. D testified that he had never seen nor heard the Ps compositions and that he did not have any connections with the alleged theft of such works. District Ct granted SJ for D. b. Analysis: Copying find some similarities, but hold that unquestionably, standing alone, they do not compel the conclusion, or permit the inference, that D copied. The similarities, however, are sufficient so that, if there is enough evidence of access to permit the case to go to the jury, the jury may properly infer that such result is not coincidence. The circuit judge here

IP Survey. Franklyn. Fall 2010 held that there was no possibility of access, however, P is entitled to a trial where the jury decides whether his story is probable or not. Illicit copying (misappropriation) question is whether D took from Ps work so much of what is pleasing to the ears of lay listeners, who comprise the audience for whom such popular music is composed, that defendant wrongfully appropriated something which belongs to the P. This question should also go to the jury. c. Holding: SJ proper
C.

Improper Appropriation a. P must show D copied a sufficient amount of the protectable elements of Ps copyrighted work as to render the two works substantially similar b. Copyright violator can produce substantially similar work in two ways: verbatim copying and overall pattern and arrangement. These two are not mutually exclusive. c. Nicholas Facts: P, author of Abies Irish Roe, sues D, author of another movie for copying. Meticulously comparing the plots, the Ct concluded that the only matter common to the two is a quarrel b/w a Jewish and an Irish father, the marriage of their children, the birth of grandchildren and reconciliation. Ct held no copying based on the fact that as to both incident and character, D took no more (assuming that it took anything at all) than the law allowed. Even assuming that Ps play was original and assuming that novelty is not essential to a copyright, there is no monopoly in such a background. Though the P discovered the vein, she could not keep it to herself. The theme was too generalized an abstraction from what she wrote. It was only a part of her ideas. Nor does she fare better as to her characters. The D has not taken from her more than their prototypes have contained for many decades. P presents resulting parallelism as proof of infringement, but the adjectives employed are so general as to be quite useless.

DEFENSE- FAIR USE A. Introduction i. The doctrine is codified in 107 of the 1976 Act. ii. Consider these 4 factors to determine if there is a valid fair use (no one factor necessarily more important than another) 1. The purpose and character of Ds use: a. Commercial or noncommercial (nonprofit) i. Commercial = earns profit. ii. Fair use doctrine is not a license for corporate theft b. Criticism, comment, news reporting, teaching i. Non profit educational use is more likely to be fair use b/c it is less inclined to harm the market for the copyrighted work than would a commercial use

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c.

i. ii. iii. 2. a.

b. c. i.

3. a. b. c. i. 1. ii. d.

4. a. b. c. i. d. e.

**Transformative (continuum between exact duplication and complete modification) Central purpose: a work that is transformed adds value by creating new information, new aesthetics, new insights and understandings. Artistic / creative / modifications Selection/Arrangement (transformative organization) Reformatting (the info into a different kind of creative product) The nature of the copyrighted work b/c the ultimate goal of copyright is to increase our fund of info, the fair use privilege is more extensive for works of information such as scientific, biographical, or historical works, as opposed to works of entertainment. Similarly, if a work is unavailable or out of print, the need for public access and dissemination is greater Privilege diminishes for unpublished works i.e. Harper & Row the Nation magazine obtained, through an undisclosed source, a stolen, as yet, unpublished manuscript of former President Fords autobio. The article scooped Time mags planned excerpt from the book and Time cancelled its k as a result. S Ct rejected Nations fair use defense, despite the newsworthiness and Nations use of only 300 words verbatim from a 200,000 word manuscript, Ct concluded that the unpublished nature of a work is a key, though not necessarily determinative, factor tending to negate fair use defense. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and Whether the D had taken more than is necessary to satisfy the specific fair use purpose Focusing on relationship b/w s relation to s work What % of the s work did the copy, and how important was it? Qualitative; and How important are the words? Did the D take the heart of the work? Quantitative (percentage) i.e. Harper & Row even small takings can exceed fair use when the essence of the work is taken. In this case, the verbatim copying of only 300 words out of 200,000 words of Ps book was considered excessive b/c these words constituted the heart of the work. The effect of the use upon the potential market for or value of the copyrighted work If the market for the copyright owners work is harmed, the incentives for creativity will no longer exist. A use that supplants any part of the normal market would ordinarily be considered an infringement (Harper & Row). Potential market Whether the took from the the opportunity to enter into a collateral market (market for derivative works) the reasonably could have and would have If intended use if for commercial gain, that likelihood [of economic impact] may be presumed (except parody) But if for noncommercial use, the likelihood must be demonstrated. (Sony v. Univ. Std.).

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Commercial but Parody Campbell v. Acuff Rose i. Facts: 2 Live Crew made a parody of the song oh pretty woman and used a substantial portion of it. It first asked for the copyright holders consent, but he refused. They published the parody anyhow and sold a quarter of million copies of the song. Copyright holder sues for infringement. Conceded that but for fair use, 2 Lives Crew Song would be a copyright infringement. ii. Rule & analysis a. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes the more transformative the new work, the less will be the significance of the other three factors. The court found that, in any event, a work's commercial nature is only one element of the first factor enquiry into its purpose and character though parody is not necessarily not fair use, however, parodys are rarely considered not fair use, perhaps only at times when they took more than necessary. Court favors fair use if the work is a parody b. the nature of the copyrighted work it has little merit in resolving this and other parody cases, since the artistic value of parodies is often found in their ability to invariably copy popular works of the past. c. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and finding that the Court of Appeals erred in holding that, as a matter of law, 2 Live Crew copied excessively from the Orbison original. Souter reasoned that the "amount and substantiality" of the portion used by 2 Live Crew was reasonable in relation to the band's purpose in creating a parody of "Oh, Pretty Woman". The majority reasoned "even if 2 Live Crew's copying of the original's first line of lyrics and characteristic opening bass riff may be said to go to the original's 'heart,' that heart is what most readily conjures up the song for parody, and it is the heart at which parody takes aim." The Supreme Court then looked to the new work as a whole, finding that 2 Live Crew thereafter departed markedly from the Orbison lyrics, producing otherwise distinctive music. d. the effect of the use upon the potential market for or value of the copyrighted work. Found that the Court of Appeals erred in finding a presumption or inference of market harm. Parodies in general, the Court said, will rarely substitute for the original work, since the two works serve different market functions. While Acuff-Rose found evidence of a potential "derivative" rap market in the very fact that 2 Live Crew recorded a rap parody of "Oh, Pretty Woman" and another rap group sought a license to record a rap derivative, the Court found no evidence that a potential rap market was harmed in any way by 2 Live Crew's parodic rap version. In fact, the Court found that it was unlikely that any artist would find parody a lucrative derivative market, noting that artists "ask for criticism, but only want praise." iii. Held: Reversed the court of appeals and remanded the case for specific considerations because court of appeals erred in holding that i) commercial in nature cannot be fair use,
B.

IP Survey. Franklyn. Fall 2010

C.

Non commercial use Sony v. Universal Studios a. Facts i. Copyright owners used the makers of VCRs, alleging that they were liable for contributory copyright infringement b/c consumers bought VCRs and used them to take movies and other programs on TV. Record shows that most consumers used the product for time shifting recording shows for later viewing; relatively few consumers engaged in archiving- recording and storing programs in a library b. RULE i. to determine whether Ds product is capable of commercially significant noninfringing use, need not explore all different potential use, but rather, only need to consider on the basis, as found by Dist Ct here, that a significant number of the uses would be non infringing =substantially non infringing use doctrine. c. Analysis i. Purpose and character of use: Sony demonstrated a significant likelihood that substantial numbers of copyright holders who license their works for broadcast on free tv would not object to having their broadcasts time shifted by private viewers (time shifting). Court thinks this is legitimate, personal consumptive use. ii. Nature of copyrighted work: news and entertainment, everything. iii. How much copying? The whole program iv. Market impact: respondent failed to demonstrate that time shifting would cause any likelihood of non minimal harm to the potential market for, or the value of, their copyrighted works d. Held: i. Ruled that the making of individual copies of complete television shows for purposes of time-shifting does not constitute copyright infringement, but is fair use. The Court also ruled that the manufacturers of home video recording devices, such as Betamax or other VCRs (referred to as VTRs in the case), cannot be liable for infringement. The case was a boon to the home video market as it created a legal safe haven for the technology, which also significantly benefited the entertainment industry through the sale of pre-recorded movies.

PATENT

OVERVIEW
Requirements In order to be eligible for a patent, the Patent and Trademark Office reviews each patent application for five requirements: i) Patentable subject matter, ii) utility, iii) describing and enabling the invention, iv) novelty (and statutory bars) and v) non obviousness. B. Rights i. Scope of protection:
A.

IP Survey. Franklyn. Fall 2010 Claims give the right to sue Exclusionary right (negative right) a. Patent confers right to exclude others from making, using, selling, offering for sale, or importing the claimed invention for term of yrs. b. Patent does not grant an affirmative right to do anything c. Patented invention may itself be covered by a preexisting patent Blocking Patents: holder of an improvement patent has right to exclude everyone from her improvement, incl. holder of broad patent, while at same time being barred from use of the improvement herself unless holder of broad patent authorizes such use ii. Period of protection: 20 years from date of filing 1. Patent is in force for 20 yrs. minus amt. of time spent in the application/ prosecution process
1. 2. C.

Theories Inventions are public goods that are costly to make and that are difficult to control once they are released into the world. As a result, absent patent protection inventors will not have sufficient incentive to invest in creating, developing, and marketing new products. Patent law provides a market driven incentive to invest in innovation, by allowing the inventor to appropriate the full economic rewards of her invention.

UTILITY PATENT ELIGIBILITY

A.

Patentable subject matter i. Overall rule: Patent Act 101 provides that whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent thereof, subject to the conditions and requirements of this title. ii. The breadth of patentable process and products reflects congressional intent to make patentable anything under the sun that is made by man. However, there are limits: laws of nature, physical phenomena, and abstract ideas are not patentable. However, the court has held certain applications of principles as patentable subject matters. iii. 4 categories: Patentable subject matter (of utility patent) can be separated into either process patents or product patents (machine, manufacture, composition of matter). iv. Process Basic principles Process is synonymous with method or a series of steps for accomplishing some result. A process claim does not include the end product of the process. Even if the end product is not eligible for patent, such as insulin, a well known protein, a process that obtains this protein through DNA cloning, which is much more efficient than the conventional method of extracting it from the pancreas of

IP Survey. Franklyn. Fall 2010 hogs, the process of extraction will be patentable for the inventor created a new and nonobvious way to make the existing product. Process vs. Principles (natural laws/ ideas) Test a. Whether Applicants claim recites a fundamental principle, and if so, whether it would preempt substantially all uses of that fundamental principle if allowed. Bilksi. CL where ct held principle (unpatentable) Bilski patent applicant challenged the denial of a process patent application for method of hedging risk in field of commodities trading in the energy market based on lack of patent-eligible subject matter. The court, using Benson, Flook and Diehr as precedents, held that petitioners application not patentable because its an attempt to patent abstract ideas. The reasoning is that claims 1-4 explains basic concepts of hedging and reduces that concept to mathematical formula, which is an unpatentable abstract idea, just like the algorithms in Benson and Flook. The remaining claims were broad examples of how hedging can be used in commodities and energy markets, this is attempt to patent the use of the abstract hedging idea, and instruct the use of well known analysis techniques to help establish some of the inputs into the equation. Court found this to add even less to the underlying abstract principle than the invention held patent ineligible in Flook. Benson The Court considered whether a patent application for an algorithm to convert binary-coded decimal numerals into pure binary code was a process under 101. The Court first explained that [a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right. The Court then held the application at issue was not a process, but an unpatentable abstract idea. It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting ... numerals to pure binary numerals were patented in this case. If the claim was allowed, the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself. Flook Involved a claim using a particular mathematical formula to calculate an alarm limit a value that

IP Survey. Franklyn. Fall 2010 would indicate an abnormal condition during an unspecified chemical reaction. The Ct rejected the claim as drawn to the formula itself b/c the claim did not include any limitation specifying an actual process, steps, factors or variables, the mechanism for monitoring the variables etc.

CL where ct held process (patentable) a. Diehr Involved a patent application seeking to claim a process for producing cured synthetic rubber products. The claimed process took temperature readings during cure and used a mathematical algorithm to calculate the time when curing would be complete. Noting that a mathematical algorithm is unpatentable b/c they are laws of nature, the Ct nevertheless held that the claimed process was patent eligible subject matter. The Ct reasoned that the inventors do not seek to patent a mathematical formula, instead, they seek to patent protection for a process of curing synthetic rubber. Their process admittedly employs mathematical equations, but they do not seek to preempt the use of that equation. Rather, they seek only to foreclose from others the use of that equation in conjunction with all of the other steps in their claimed process. Rule: The ct here thus drew a distinction b/w claims that seek to preempt the use of a fundamental principle versus those seek only to foreclose others from using a particular application of that fundamental principle. Thus, whether a claim will be considered a claim of the principle or claim of a process depends on the scope of that exclusion, i.e. whether the effect of allowing the claim would be to allow the patentee to preempt substantially all uses of that fundamental principle. If so, the claim is not drawn to patent eligible subject matter.

v.

Products Basic principles Includes machines, composition of matters and manufactures Composition of matter vs. natural matter Definition (from Chakrabarty): all compositions of two or more substances and all composite articles, whether they be the results of chemical union, or of mechanical mixture, or whether they be gases, fluids, powders or solids Diamond v. Chakrabarty

IP Survey. Franklyn. Fall 2010 The Court upheld a patent application for a genetically engineered bacterium that could be used to consume oil because the patentee has produced a new bacterium with markedly different characteristics from any found in nature. His discovery is not natures handiwork, but his own. This was distinguished from Funk Bros v. Kalo, where the patentee had discovered that there existed in nature certain species of bacteria which did not exert a mutually inhibitive effect on each other. He used that discovery to produce a mixed culture capable of inoculating the seeds of plants. Concluding that the patentee had discovered only some of the handiwork of nature the court held the product unpatentable. Parke Davis Patentee discovered how to isolate a purified substance of significant medical use from the suprarenal glands of animals, and called the product Adrenalin. The patentee originally claimed the active principle itself, but the examiner rejected b/c no product that is merely separated from its surrounding materials and remains unchanged is subject of patent. However, after patentee amended his claims so that they were not limited to the active principle, the court upheld his claims, recognizing that there is a thin line between different substances and degrees of the same substance. In this case, the court found that even though the product may be a result of purification, the invention became for every practical purpose a new thing commercially and therapeutically, and that the change here resulted in ample practical differences sufficient as grounds for a patent.

B.

Utility Rule: 101 mandates the patents issue only to useful inventions. In reality, however, the utility requirement is rarely an obstacle to patentability. A finding of utility has long been held to require only a minimal showing that the invention is capable of practical application. The specifically claimed utility must also be reduced to practice, a requirement intended to ensure that a patent does not block of whole areas of scientific development by asserting a too general claim ii. The Supreme Court View: Brenner v. Manson The patent application, Manson, claimed a new process for making a known steroid. Manson asserted his process had utility because the steroid product itself was being tested for tumor inhibiting effects on mice, and the next adjacent most similar chemical compound of the steroid had already been shown to work for that purpose. S Ct held that the claimed process did not satisfy the utility requirement of 101. It viewed Mansons research in steroid chemistry, which it deemed an unpredictable art, as being at too preliminary a stage to merit patent
i.

IP Survey. Franklyn. Fall 2010 protection, noting that a patent is not a hunting license and not a reward for the search, but compensation for its successful conclusion. Rather the Ct explained the requirement is substantial utility. This substantial utility standard could not be achieved, the Ct held, until the process was defined and developed to the point that specific benefit exists in currently available form The USPTO in 2001 issued examination guidelines that interpret the Manson decision as requiring utility that is specific, substantial credible. iii. In Re Fisher A federal circuit case in 2005 reexamined the definition of substantial utility where the claimed invention related to five purified nucleic acid sequences, commonly referred to as expressed sequence tags (ESTs), that encoded proteins and protein fragments in maize plants. The Board of Appeals affirmed examiners rejection of the application, who found that none of the recited uses for the ESTs satisfied the substantial utility standard. Rule: Fisher majority held that in order to show a specific utility, an asserted use mustshow that the claimed invention can be used to provide a well defined and particular benefit to the public, and that in order to demonstrate a substantial utility, an asserted use must show that the claimed invention has a significant and presently available benefit to the public. A: In the majoritys view, Fishers claimed EST failed to satisfy either one of these criterias. Each claimed EST corresponded to the single gene from which it was transcribed; yet as of the applications filing date, no function was transcribed of these underlying genes. The claimed ESTs were thus no more than research intermediates that were unable to provide any information about the overall structure let alone the function of the underlying gene. Such research tool was not substantial use in majoritys opinion, since the claimed ESTs disclosed nothing more from any EST derived from any organism. H: Granting Fisher a patent on the claimed ESTs would amount to no more than a hunting license, b/c Fisher could not identify the function for the underlying protein encoding genes. Absent such identification, the claimed ESTs have not been researched and understood to the point of providing an immediate, well defined, real world benefit to the public meriting the grant of a patent
C.

Novelty and Statutory Bars i. Introduction In practice, novelty is established by applying a set of technical rules to determine if a patent applicant was really the first to make the invention she is claiming. Under novelty, a patent can be unpatentable if it was made before, sold more than a year before patent application, or otherwise disqualified by prior use or knowledge ii. novelty

IP Survey. Franklyn. Fall 2010 Means new compared to the prior art. Under 102, (Novelty), patent will not be issued to invention that was known or used (requires prior knowledge to be public OR non secret use) by others in this country, OR patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent. Grace period Note that patent applicants enjoy a grace period of one year between the critical date and his application filing date. During this one year grace period, a invention may be described in a printed application, in public use, or on sale, without triggering a 102(b) loss of right. So long as the patent application is filed within one year of the first instance of the invention being released into public domain or commercial exploited etc, the right to a US patent will not be lost. Rosaire v. National Lead (5th circuit) The court examined what level of use justifies prior use in a case where the patent claims a method of prospecting for oil by studying rock samples formation of hydrocarbons. Plaintiff claims that in 1936 he and Horvitz invented this new method and patents in suit were issued thereon. Appellee argues that work carried on by one Teplitz for the Gulf Oil Corp. invalidated both patents by reason of provision 35 U.S.C.A s 102(a) which states that an invention is not patentable if it was known or used by others in this country. Appellant himself admits that Teplitz conceived of the same method but argue that Gulf did not apply for patent until 1939, did not publicize Teplitz ideas, only experimented, and did not otherwise give the public the benefit of the experimental work. Trial Cts finding that the Teplitz work was a successful and adequate field trial of the prospecting method involved and a reduction to practice of that method was affirmed. Ct noted that the work was performed in the field under ordinary conditions without deliberate attempt at concealment or effort to exclude the public and without any instructions of secrecy to the employees performing the work. Thus appellees claim of the prospecting method is barred from the fact that there is prior use. Appellee also argued that Teplitz work lacked publication. 5th circuit finds that public knowledge is not a requirement and lack of does not invalidate a subsequent patent. public means not secret. iii. statutory bars Under 102 (Statutory Bars), a patent will not be issued to an invention that was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States. Publications, In Re Hall

IP Survey. Franklyn. Fall 2010 Rule: The court restated the principle of publication bar as being grounded on the principle that once an invention is in the public domain, it is no longer patentable by anyone. And this interpretation gives effect to ongoing advances in the technologies of data storage, retrieval and dissemination. B/c there are many ways that information may be disseminated, public accessibility has been called the touchstone in determining whether a reference constitutes a printed publication. BOP: proponent of the publication bar must show that prior to the critical date the reference was sufficiently accessible, at least to the public interested in the art, so that such a one by examining the reference could make the claimed invention w/o further research or experimentation. In this case, the federal circuit determined that appellants claim is bared from printed publication bar because the claim had previously been published by another in Germany in the form of a dissertation, and that dissertation was printed publication b/c it was made available to the public by being cataloged and placed in main collection and accessible for anyone interested in the art. Public Use, Egbert v. Lippman Barnes invented improved corset-springs, gave them to close friend to wear in her corset, under her clothing, for several yrs. US Supreme Ct held that inventors act amounted to a public use that invalidated the corset patent, noting that the inventors friend might have exhibited the corset to any person, or made other corsets of the same kind and used or sold them without violating any restrictions imposed on her by the inventor. The Ct concluded that whether the use of an invention is public or private does not necessary depend on the number of persons to whom its use is kwnon. If an inventor having made his device, gives or sells it to another, to be used by the donee or vendee, without limitation or restriction, or injunction of secrecy, and it is so used, such use is public, even though the use and knowledge of the use may be confined to one person. Decision based on 3 factors Rule: 1. Does not require complete public use: To constitute public use of an invention, it is not necessary that more than one of the patented articles should be publicly used. The use of a great number may tend to strengthen the proof, but one well defined case of such use is just as effectual to annul the patent as many. Allowing one to use without restrictions or limitations is just as public as if he had sold and allowed the use of a great number. 2. Number of persons does not matter: whether the use of an invention is public or private does not necessarily depend upon the number of persons to whom its uses is known. If the inventor gives or sells to another, to be used by the donee or vendee, w/o limitation or restriction, or injunction of secrecy, and it is used, such use is public, even though the use and knowledge of the use may be confined to one person. 3. Some inventions are by their very character only capable of being used where they cannot be seen or observed by the public eye. Nevertheless, if its

IP Survey. Franklyn. Fall 2010 inventor sells a machine of which his invention forms a part, and allows it to be used w/o restrictions of any kind, the use is a public one. On the other hand, if a use is necessarily open to public view, if made in good faith solely to test the qualities of the invention, and for the purpose of this experiment, it is not a public use within the meaning of the statute iv. Experimental Use Exception This doctrine negates or excuses what would otherwise appear to e statutory bar triggering activity prior to the 102(b) critical date The use of an invention by the inventor himself, or of any other person under his direction, by way of experiment, and in order to bring the invention to perfection, has never been regarded as [public use within the meaning of the statute]. (Nicholson Pavement) Nicholson Pavement The inventor (patentee) Nicholson developed a method of paving streets using wooden blocks in a checker board arrangement, which he tested by paving a well traveled section of public carriage road in Boston. Despite the fact that Nicholson did not file a patent application claiming his right for six years after commencing the testing, however, the experimental use doctrine preserved his right to file a patent. Rule: So long as he does not voluntarily allow others to make it and use it, and so long as it is not on sale for general use, he keeps the invention under his own control, and does not lose his title to a patent Ct held that the nature of the invention required the experiment to be in public, most importantly, Nicholsons intent to test his invention was bona fide, and the record shows that the invention was under his control at all times. On these facts, Nicholsons experimental use of his pavement, though in public place, did not amount to statutory definition of public use.
D.

Non-obviousness i. The 1952 Patent Act 103. A patent may not be obtainedif the difference b/w the subject matter sought to be patented and prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art ii. Graham v. John Deere Co. Graham Factors...while the ultimate question of patent validity is one of law103 lends itself to several basic factual inquires The scope and content of the prior art The differences between the prior art and the claims at issue The level of ordinary skill in the pertinent art Secondary considerations (i.e. commercial success) F: Graham was concerned with the construction of a plow that would not break upon striking soil obstructions, such as rocks. He obtained the 811 patent for this. Three years later, Graham obtained a second patent,

IP Survey. Franklyn. Fall 2010 798, for an improvement of 811. The two inventions differed in that 1) the 798 invention featured a stirrup and bolted connection of the shank to the hinge plate and 2) the 798 invention placed the shank below the hinge plate. This distinction shifted the point of wear from the bottom of the upper plate to the top of the stirrup of the hinge plate. The patentee also added that this modification allowed the shank to flex away when the plow encounters obstruction, and thus minimizing excessive strain on the shank. S Ct held 798 invalid on the basis that 798 would have been obvious to the inventor at the time of invention due to teachings of two references: Grahams own 811 patent and a device marketed by Clencoe Manuf. The Ct said certainly a person having ordinary skill in the prior art, given the fact that the flex in the shank could be utilized more effectively if allowed to run the entire length of the shank, would immediately see that the thing to do was what Graham did. Thus conclude that the mere shifting of the wear point presents no operative mechanical distinction, much less nonobvious differences iii. Combining References of Prior Art, KSR International In a case where Teleflex sued KSR Intl for infringing Teleflexs patent for an adjustable pedal assembly for car engines controlled by electronic throttle control, the S Ct examined what constitutes as adequate teaching, suggestion, or motivation (TSM) which would render a claimed invention obvious to the patentee. Rule: if a technique has been used to improve one device, and a person of ordinary skill in the art would recognize that it would improve similar devices in the same way, using the technique is obvious unless its actual application is beyond his or her skill. When doing this analysis, the ct need not seek out precise teachings directed to a specific subject matter of the challenged claim, but merely take into account of the inferences and creative steps that a person of ordinary skill in the art would employ. The Ct held that because Redding (prior inventor) provided an example of adjustable pedal and Smith (another prior inventor) explained how to mount a sensor on a pedals support structure, they saw little difference between these teachings and the claimed patent and concluded that a personal having ordinary skill in the art could have done the same and seen the benefits of doing so thus patentees claim is obvious and not a valid patent. E. Enablement (description) i. 35 U.S.C 112 provides The specification shall contain a written description of the invention, and the manner and process of making and using it, in such full, clear, concise and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.

PATENT PROSECUTION
A.

Literal Infringement

IP Survey. Franklyn. Fall 2010 35 U.S.C 271 gives the patentee an infringement cause of action against anyone who makes, uses, sells, offers for sale, or imports the invention described in the claims of the patent ii. Literal infringement is found where the accused subject matter falls precisely within the express boundaries of the claim iii. Larami v. Amron In a case determining whether SUPER SOAKERS infringed on 129 patent for a similar water gun, the United States Dist Ct for Eastern District of Pennsylvania held that there was no literal infringement because the two guns had different means for containing the liquid (129 requires an elongated housing having a chamber therein for a liquid while SUPER SOAKER has an external water reservoir chamber that is detachable from the gun and housing). Rule: the absence of even one element of a patents claim form the accused product means there can be no finding of literal infringement.
i. B.

Doctrine of Equivalents (DoE) i. Warner Jenksinson v. Hilton provides the rule for DoE DoE is found when the accused product or process contains elements identical or equivalent to each claimed element of the patented invention An analysis of the role played by each element in the context of the specific patent claim will thus inform the inquiry as to whether a substitute element matches the function, way and result of the claimed element, or whether the substitute element plays a role substantially different from the claimed element ii. All limitations rule: Hughes VII decision clarified the Warner Jenkinson rule Each element contained in a patent claim is deemed material in defining the scope of the patented invention, and thus the DoE must be applied to individual elements of the claim, not to the invention as a whole. It is important to ensure that the application of the doctrine, even as to an individual element, is not allowed such broad play as to effectively eliminate that element in its entirety. Analysis of the role played by each element of the claim will thus inform the inquiry as to whether a substitute element matches the function, way, and result of the claimed element, or whether the substitute element plays a role substantially different from the claimed element. Legal Limitations of DoE Prosecution History Estoppel i. Definition If a patent applicant surrendered certain subject matter in the USPTO in order to obtain its patent (e.g. by narrowing the scope of a claim through amendment in order to distinguish subject matter disclosed in a cited prior art reference) it cannot thereafter rely on the doctrine of equivalents to obtain exclusionary rights over that same subject matter. ii. Justifications

C.

IP Survey. Franklyn. Fall 2010 This doctrine is justified by the theory that a rejection indicates that the patent examiner did not believe that the original claim could be patented. The patentees decision to forgo an appeal by submitting an amendment is taken as a concession that the invention as patented does not reach as far as the original claim. Estoppel precludes a patentee from re-gaining, through litigation, coverage of subject matter relinquished during prosecution of the application for the patent. Where the original application once embraced the purported equivalent but the patentee narrowed his claims to obtain the patent or to protect its validity, the patentee cannot assert that he lacked the words to describe the subject mater in question. Doctrine of equivalents is premised on languages inability to capture the essence of the invention, but in the instance of estoppel, the inventor knew the words for both the broader and narrower claim, but affirmatively chose the latter iii. Festo F: Festo corp alleges AMC infringed their patent rights, however, the alleged infringed claims were previously amended to meet patentability requirements, and thus, rights to the broader claim are foregone. Defendant uses this and argues prosecution history estoppel. Petitioner contends that the amendments should not estop the prosecution because the amendments were only to clarify the ambiguity and this purely cosmetic, and did not narrow the patents scope sufficient to raise estoppel. Rule 1: The kind of amendments that may give rise to estoppel: Narrowed claim: estoppel arises only where claims have been amended for a limited set of reasons, such as to avoid the prior art, or otherwise to address a specific concern- such as obviousness- that arguably would have rendered the claimed subject matter unpatentable. If a 112 amendment is truly cosmetic, then it would not narrow the patents scope or raise an estoppel. However, if an s112 amendment is necessary and narrows the patents scope- even if only for the purpose of better description, estoppel may apply. Amendment narrowing claim creates presumption of prosecution history estoppel unless plaintiff can forward either 1 of these 3 reasons: a. the equivalent might not have been foreseeable at the time the invention was made. (at the time of prosecution) OR b. amendments might have been peripheral or tangential to the nature of the equivalent element (reasonably foreseeable) OR c. an open ended, some other reason. Rule 2: Estoppel bar is flexible The perfect balance is by placing the burden on the patentee to show that an amendment was not for purposes of patentability. However, when no explanation is provided, estoppel would bar the application of the doctrine of equivalents. These words do not mandate a complete bar; they are limited to the circumstances where no

IP Survey. Franklyn. Fall 2010 explanation is established. They do provide, however, that when the court is unable to determine a purpose, the court should presume that the patentee surrendered all subject matter between the broader and the narrower language. TRADEMARK INTRODUCTION A. Theory of trademark law i. trade marks, i.e. marks which permit the goods of different makers to be distinguished from each other ii. preventing consumer confusion and the injury to a trademark owners good will WHAT CAN BE PROTECTED AS A TRADEMARK A. trademarks, trade names, service marks section 45 of the Lanham Act defines a trademark as: any word, name, symbol, or device, or any combination thereofused by a person, or which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this chapter, to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown spectrum of distinctiveness for WORD marks (to determine level of protection and eligibility for immediate registration) Inherently distinctive and do not require showing of secondary meaning to acquire trademark protection Fanciful: word is entirely made up (entirely or in pieces), i.e. Exxon, Xerox strength strongest (along with arbitrary) b/c any value they possess in terms of name recognition comes from the corporation use of the name (not natural) to associate in peoples minds b/w name and product Arbitrary: word exists in English language, but its use is arbitrary and bears no relationship whatsoever to the product. However, this depends on the fact that it is mismatched to a particular product/ service. i.e. Apple would be arbitrary for computers, but would be generic for apples, the food. strength strongest with fanciful. Suggestive: only indirectly conveys an impression of the goods or services to which it is attached, thus, a term is suggestive if it requires imagination, thought and perception to reach a conclusion as to the nature of the goods, i.e. Greyhound bus suggests speed
B.

i. 1. a. b. 2.

i. 1. a.

2.

a. 3.

Not inherently distinctive (requires acquiring secondary meaning to register) 1. Descriptive: describes quality, function, characteristic, or ingredient of the product/service, i.e. after tan for post tanning lotion 2. Test for descriptive (From Zatarain) a. Ordinary significance (dictionary definition)
ii.

IP Survey. Franklyn. Fall 2010

b. i.

c. i. d. i.

ii. 1. a. b. c.

Imagine test If a term requires imagination, thought and perception to reach a conclusion as to the nature of goods, it is considered suggestive term. Alternatively, it is considered descriptive term if standing alone, it conveys information as to the characteristic of the product. Plain descriptive whether the term is so descriptive of the product that competitors would be likely to need the term to describe their products The extent to which a term actually has been used by others in the market with similar service or product when companies A to Z select the same term to describe their similar products, the term in question is most likely a descriptive one NO protection Generic: one that would commonly be used as the name or description of a kind of goods (rmb to analyze in context) Word can start out as generic or become generic over time (i.e. escalator, Ziplock) You can use it but cannot TM it Can combine two generic words to make non generic phrase
C.

Spectrum of distinctiveness for NON words, i.e. trade dress, sounds, smell, graphics etc (3 categories) i. Inherently distinctive: intrinsic nature serves to ID a particular source ii. Not inherently distinctive: requires proof of secondary meaning iii. Functional: applies traditionally to product design/ shape 1. No protection (like generic words) 2. Functionality doctrine: prevents TM law from inhibiting legitimate competition by allowing a producer to control a useful product feature. Cant claim TM in product feature if it is either essential to the use or purpose of the article or if it materially affects cost/quality 3. Aesthetic functionality whether the feature is such that giving TM in it would put other competitors at a significant non reputation related advantage D. color, sounds, scent i. while color, sound or scent, alone cannot be inherently distinctive, it can serve as a trademark if it is nonfunctional and acquires a secondary meaning E. trade- dress i. Refers to the distinctive features of a products packaging or the distinctive features of the product configuration itself; it is the total image of a product. Thus trade dress must be considered as a whole, and may be protectable even if the individual elements used may be functional or non- distinct ii. possible for registration if it is capable of distinguishing in the minds of the public, the source of goods/services iii. must be 1) non functional and 2) distinctive HOW ARE TRADEMARKS RIGHTS OBTAINED

IP Survey. Franklyn. Fall 2010 General i. The mark must be used to indicate origin rather than merely to identify an individual person, character, or literary/ drama work
A.

Distinctiveness (or non distinct + secondary meaning) i. Rule: Marks that are inherently distinct only need priority use to get TM rights, however, if marks are not inherently distinct, they must first acquire secondary meaning to get TM protection. (Proof that the mark has acquired a secondary meaning as a source identifier elevates it to a trademark status. ) ii. Secondary meaning exists when buyers associate a descriptive term w/ a single source of products, and not necessarily need to know the identity of the source. iii. BOP P must show that the primary significance of the term in the minds of the consuming public is not the product, but the producer, iv. Factors relevant to proof of secondary meaning 1. circumstantial evidence a. amount and manner of advertising (effectiveness and extent) b. volume of sales c. length and manner of use 2. direct evidence a. surveys v. Zatarains, Inc v. Oak Grove Smokehouse 1. Facts: Appellant, owners of Fish Fri and Chick Fri trademarks, used TM to sold frying batter, sues Appellee Oak Grove for trademark infringing for selling products with name fish fry and chicken fry. 2. Analysis: a. Descriptive mark: Ct applied the 4 factor test for descriptive mark and found that appellants Fish Fri and chick fri were descriptive, and not suggestive. B/c descriptive marks are not protectable TM absent showing of secondary meaning. b. Secondary meaning: (Dist Ct holding will not be disturbed unless clearly erroneous) Since 1950, Z and its predecessor have continuously used the term Fish Fri to identify this particular batter mix. Through the expenditure of over $400,000 for advertising during 1976 through 1981, Z has promoted its name and its product to the buying public. Sales of Fish Fri increased from 37,265 cases in 1969 to 59,439 cases in 1979. Dist ct found this evidence weigh heavily in Zs favor. Z also introduced survey results that out of 100 women questioned in the South, 23% specified Fish Fri as the product they would buy. Cannot say that Dist Cts finding that Fish Fri obtained secondary meaning was clearly erroneous, thus affirm. c. Fair use defense: Although Fish Fri has acquired secondary meaning, it is still a descriptive term. Therefore, Z has no legal claim to an exclusive right in the original, descriptive sense of the term. D is still free to use the words fish fry in their ordinary, descriptive sense, so long as such use will not tend to confuse customers as to the source of the goods.
B. C. i.

Registration Lanham Act 45 provides two types used in commerce and bona fide intent to (Actual) Use

use
ii.

IP Survey. Franklyn. Fall 2010 Registration w/o use fails to become TM, use w/o registration does not necessarily fail. Ownership is determined based on who was 1st to used in commerce 2. Priority defined as first to use the mark in connection with the goods or services in question, whether or not the use involved interstate commerce iii. intent to use 1. The applicants priority date will be either the filing date of the intent to use app, or the date on which that applicant commenced use of the mark in connection with goods and services, whichever is earlier. iv. Zazu Designs v. LOreal, What constitutes use and how much use is enough? 1. Facts: P, Zazu Designs (ZHD), a hair salon, sued LOreal after it put out a line of hair dye called Zazu. P doesnt sell hair dye, but has sold a small number of bottles of shampoo. Ps argument: risk of confusion. 2. Timeline: a. Loreal has made small amount of interstate shipment of Zazu products and obtained federal registration of TM on June 12, 1986. By August, Loreal has sold its products nationally. b. Zazu Designs (ZHD) sold a few bottles of shampoo to customers in plain bottles between Nov 1985 and Feb 1986. Shipped two bottles to a friend in Texas who paid $13. Also made shipments to a hair stylist friend in Florida- 40 bottles for $78.58. Late in 1985, ZHD ordered labels, and in Sept 1986, ZHD began to sell small quantities of shampoo in bottles w/ label. 3. Rule: a. Under common law, one must win the race to the marketplace to establish exclusive right to TM b. Now, registration system allows slight sales + registration to substitute for substantial sales w/o notice c. Used in commerce at least means sales to the public of a product with the mark attached 4. Analysis ZHDs sales of its products are insufficient use to establish priority over Loreal. A few bottles over the counter and a few more mailed to a friend, neither links the ZAZU mark with the ZHD products in the mind of consumers nor put other producers on notice. ZHD applied for registration after Loreal not only had registered the mark but also put its product on sale nationwide. Efforts to register came too late. Intent to use a mark, like a naked registration, establishes no rights at all. Held for D. 5. Franklyn agrees with Dissent, a. Loreals knowledge of ZHDs use should defeat Loreals claim of priority. Loreal did not even act in good faith. b. A service mark can be infringed by its use on a closely related product Hair salons service mark is obviously infringed by Loreal selling hair products under the same name. c. Since federal law did not apply here, TM right should be judged by copyright, which is based on first to marketplace.
1.

HOW ARE TRADEMARK RIGHTS INFRINGED A. Test

IP Survey. Franklyn. Fall 2010 Whether P can show an appreciable number of relevant consumers are likely to mistakenly think that Ds goods come from the same company as Ps goods, or that the goods come from affiliated companies, or that Ps company is sponsoring the Ds production of these goods. ii. Factor Test from (AMF v. Sleekcraft Boats) 1. Strength of the mark If mark is weak and entitled to restricted range of protection, only if the marks are quite similar and goods be related will infringement be found 2. Proximity of the goods - The more likely the public is to make such an association, the less similarity in the marks is requisite to a finding of likelihood of confusion 3. Similarity of the marks do the marks i) sound like? ii) look alike and iii) similar meanings? 4. Evidence of actual confusion based on complaints and not surveys, can be rebutted, i.e. things have changed 5. Marketing channels used- Convergent marketing channels increase the likelihood of confusion, include considering sales methods and price ranges 6. Types of goods and the degree of care likely to be exercised by the purchaser- Standard is typical buyer exercising ordinary caution, the standard includes the ignorant and the credulous. Consider when the goods are expensive, the buyer can be expected to exercise greater care in his purchases. Also, whether the trademark is important to the average consumer 7. Ds intent in selecting the mark although P does not have to prove D acted w/ bad intent, however, bad intent can be probative evidence of confusion that D was trying to confuse the public and Ct assumes likelihood of succeed when confusion is intentionally attempted. Bad intent also goes into equitable considerations. 8. Likelihood of expansion of the product lines - A strong possibility that either party may expand his business to compete with the other will weigh in favor of finding that the present use in infringing B. AMF v. Sleekcraft Boat i. Facts: Plaintiff (AMF) owns trademark slickcraft, while D uses mark sleekcraft, D also uses a logo different from P. Both companies designs and manufactures boats. ii. Rule & analysis 1. strength of the mark Slickcraft is a suggestive mark and therefore a weak mark entitled to a restricted range of protection. Thus, only if the marks are quite similar and the goods closely related will infringement be found 2. proximity of the goods Although these product lines are non competing, they are extremely close in use and function, in fact, the use overlaps. Their functional features, are for the most part, also similar. They are so closely related that a diminished standard of similarity must be applied when comparing the two marks
i.

IP Survey. Franklyn. Fall 2010

3.

4.

5.

6.

7. 8.

similarity of the marks Sound and meaning is really similar, almost virtually synonyms, though distinctive logo may make the mark look more different. evidence of actual confusion This evidence is persuasive proof but hard to come by. In this case, evidence of actual confusion is negligible. marketing channels used each sells through authorized dealers, same sales methods are employed, price ranges are almost identical. Each line is advertised extensively through different national magazines, and participate in similar boat shows etc. Although diff submarkets are involved, the general class of boat purchasers exposed to the products overlap. type of goods and the degree of care likely be exercised by purchaser Dist Ct found that the TM was unimportant to the average boat buyer. Common sense and evidence indicate that this is not the type of purchase made only on general impressions. High quality of Ds boat is also relevant in a way, b/c TMs owner interest of protecting its reputation is not harmed in this case where infringers goods are of equal quality Ds intent in selecting the marks D was unaware of Ps mark. likelihood of expansion of the product lines there is a strong possibility that either party may expand his business to compete with the other, they are both diversifying their model lines. The potential of one entering the sub- market of another is strong.

DEFENSE A. Classic fair use defense i. when the allegedly infringing term is used fairly and in good faith only to describe to users the goods or services of a party, or their geographic origin ii. the defense is available only in actions involving descriptive term and only when the term is used in its descriptive sense rather than its trademark sense iii. in essence, the fair use defense prevents a TM registrant from appropriating a descriptive term for its own use to the exclusion of others, who may be prevented thereby from accurately describing their own goods. iv. Holder of a protectable descriptive mark has no legal claim to an exclusive right in the primary, descriptive meaning of the term, consequently, anyone is free to use the term in its primary, descriptive sense so long as such use does not lead to consumer confusion as to the source of the goods/services. Nominative (Non trademark) Fair use, parody and the First Amendment A Parody depends on a lack of confusion to make its point. A parody must convey two simultaneous and contradictory messages: that it is the original, but also that it is not the original and is instead a parody. ii. Mattel, Inc v. MCA Records
B. i.

IP Survey. Franklyn. Fall 2010

1. 2.

3.

4.

ii. 1.

2. a.

b.

c.

Facts: owner of Barbie, Mattel, sues Aqua the band, who made a song called Barbie girl for confusion of Barbie, the TM, as used in the songs title. Rule for parodies: where Ds artistic work targets the original and does not merely borrow the originals fame to get attention, First Amendment interest weights more heavily in favor of D to find that it is parodic commentary. But a claimed parodic use that makes no comment on the mark is not a permitted trademark parody use. Rule for Titles: Literary titles do not violate TM unless the title has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source or the content of the work. Analysis: Use of Barbie is not an infringement of Mattels trademark. The use of Barbie in the song title clearly is relevant to the underlying work, namely, the song itself. However, the song title does not explicitly mislead as to the source of the work; it does not explicitly or otherwise, suggests that it was produced or sponsored by Mattel. Held: use of Barbie was nominative fair use. In advertising Rule: A use of anothers TM to identify not the Ds goods/services, but the Ps goods or services, is not an infringement as long as there is no likelihood of confusion as to source, i.e. comparative ads 9th circuits 3 part test. Fair use of anothers TM is ok when: Product or service in question must be one not readily identifiable w/o the use of the others TM (i.e. Pepsi wanting to contrast itself to Coke, thus necessary to use the term coke in its ad) Only so much of the mark or marks may be used as it reasonably necessary to ID the others product/ service (can use the term coke once, but not all over the background of ad to draw attention based on the coke brand) The user of the mark, D, does nothing to suggest sponsorship or endorsement by the owner of the mark
C.

Doctrine of Laches i. Equitable doctrine to protect junior user ii. A defendant raising laches as a defense must show 1. P knew of the infringing use 2. Ps delay in filing suit was unreasonable. To determine whether its th unreasonable, 9 circuit looks at a. Strength and value of the TM right asserted b. Ps diligence in enforcing mark c. Harm to senior user if relief is denied d. Good faith ignorance by junior user e. Competition b/w senior and junior users f. Extent of harm suffered by the junior user b/c of senior users delay 3. D would suffer prejudice caused by the delay if the suit were to continue. TRADEMARK

IP Survey. Franklyn. Fall 2010

INTRODUCTION
Analysis i. Whether the Ps information qualifies as a trade secret, and ii. Whether the Ds acquisition, use, or disclosure of the information is misappropriation B. Protection i. Protection does not depend on registration/application, trade secret protection arises automatically by virtue of certain circumstances which makes the information worthy of protection, which can be protected against unauthorized disclosure or retrieval
A.

DEFINING TRADE SECRETS

Restatement (First) of Torts 757 Any information i) used in ones business that gives its owner ii) an opportunity to obtain an advantage over competitors who do not know or use it, so long as the information was in fact a iii) secret. ii. Comments explain that a trade secret is not simply information pertaining to single or short lived events, but rather something that is continuously used in business. Additionally, the secret must actually be a secret and not matter of public knowledge. iii. Six factors for determining whether something is a trade secret: a. The degree that the secret is known to others; b. The degree that the secret is known to those involved in Ps business; c. The measures taken to guard the secret; d. The secrets value; e. The time, effort, and money invested to develop the secret; and f. How difficult it is for others to legitimately develop the information comprising the secret
A. i. B.

Uniform Trade Secrets Act (UTSA) i. Information, including a formula, pattern, compilation, program, device, method, technique, or process, that: a. Value: derives independent economic value, actual or potential b. Not generally known: from not being generally known to, and c. Improper means: not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and d. Reasonable effort to maintain secrecy: is the subject of efforts that are reasonable under the circumstances to maintain its secrecy ii. The UTSA thus departs from the Restatement (First) of Torts definition in that it does not limit a trade secret to a process or device for continuous use in the operation of the business. This is intended to protect trade secrets that are not yet put to use. iii. This version also protects valuable information concerning what does not work, as discovering that a process or technique is not effective can be of great value as well Restatement (Third) of Unfair Competition 39 i. A trade secret is any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.

C.

IP Survey. Franklyn. Fall 2010

CHARACTERISTICS OF TRADE SECRET

A.

Secret = not matter of general knowledge and is not readily ascertainable i. Common knowledge and readily ascertainable information cannot qualify as trade secrets. Further, if information is an industry custom or is known by even one competitor, trade secret protection is lost. On the other hand, a trade secret need not be exclusive; thus multiple independent developers may have rights in the same trade secret if they develop the secret independently and each developer maintains secrecy. ii. Whether information is readily ascertainable is also significant. Under UTSA, a trade secret must not be readily ascertainable by proper means. Proper means include discovery by independent invention, reverse engineering, discovery under a license from the TS owner, observation of the item in public, and obtaining the TS from published literature. Value i. Defined as commercially valuable or gives the proprietor an economic advantage b/c of its secrecy ii. Information must be at least minimally commercial valuable to qualify as a trade secret. Actual or potential economic advantage is sufficient. Reasonable means to maintain secrecy i. Information will not be protected unless its holder uses reasonable means to protect the informations secrecy. Proprietors must actively protect their trade secrets. Absolute secrecy, however, is not required. Rather, secrecy is a relative term. ii. The holder of a secret need not remain totally silent: He may, without losing his protection, communicate it to ees involved in its use. He may likewise communicate it others pledged to secrecy Nevertheless, a substantial element of secrecy must exist, so that except by the use of improper means, there would be difficulty in acquiring the information. Metallurgical. iii. Restatement (Third), Comment g: does not require P take reasonable precautions to protect their secrets. Though precautions are relevant, however, if the value and secrecy of the information are clear, evidence of specific precautions taken by the trade secret owner may be unnecessary iv. UTSA over half the states (including California, Chicago) follow this, requires reasonable protection of secrecy v. Rockwell Graphic Systems, Inc v. Dev F: Rockwell has piece part drawing that are essential in showing how printing tools are manufactured. Rockwell alleges that one of his exemployees, who is also now the president of DEV, has illegitimately gained possession to some of its piece part drawings. Upon investigation, 100 out of 600 piece part drawings in DEVs possession belonged to Rockwell. Defendant wins on motion for SJ on the basis that Rockwell had inadequate protection of its information and thus does not constitute as trade secret. Rockwell does allow vendors to access the drawings, but in a limited, for profit reason.

B.

C.

IP Survey. Franklyn. Fall 2010

I: Whether Rockwells failure to do more was so plain a breach of the obligation of a trade secret owner to make reasonable efforts to maintain secrecy as to justify the entry of SJ for Ds A: Sharing a secret with "a limited number of outsiders for a particular purpose" is not definitive evidence that reasonable efforts to maintain secrecy were not made. But only in an extreme case can what is reasonable precaution be determined on a motion for SJ, the answer depends on a balancing of cost and benefits. H: Contested factual issues here, SJ reversed, case remanded. Note: Theoretical Analysis (rational of why require reasonable precaution) a. P has to show the secret matters. The law is not going to protect secrets that dont actually have value or matter. P has to show that it is entitled to protection by having invested in protecting its own secrets. b. More precautions are in place, indirectly proves possibility of misappropriation because if there were such high security, then it creates a reasonable or strong inference that if information was obtained it must be unlawfully because that would be the only way to do it. c. Demonstrates the value of the information, helps establish that it is secret

D.

Disclosure of Trade Secrets Disclosure can make the information generally known, and hence not a trade secret. Disclosure can show that the owner failed to take reasonable security measures, even if the disclosure did not make the information publicly known. Disclosure or use in breach of a duty of confidentiality is misappropriation; receiving voluntary disclosure is receipt by proper means; and disclosure after misappropriation can destroy the TS Disclosure of trade secrets can occur in number of ways 1. TS owner may publish, ie. in academic journal or forum, in this case the secret is lost 2. TS published in patent application 3. TS owner may in some cases disclose the secret by selling a commercial product that embodies the secret. If a so-called trade secret is fully disclosed by the products produced by use of the secret, then the right to protection is lost. The question is whether the secret is apparent from the product itself. 4. TS may be publicly disclosed by someone else other than the trade secret owner who has subsequently invented the same secret. Majority states holds that once the subsequent owner publishes this, it not only effects her rights, but also defeats the prior inventors rights too. 5. Publishing on the internet = publication to the world

IP Survey. Franklyn. Fall 2010 Inadvertently disclosure i.e. left on a train for public view. It seems reasonable to argue that a truly accidental disclosure should not defeat trade secret protection if reasonable precautions have been taken. 7. Govt agencies sometimes require disclosure to serve some social purpose, ie. food labels or file documents. Data General Corp v. Digital Computer F: P has developed and marketed successfully small general purpose computers known as the Nova. P makes available at no extra cost to those customers who wish to do their own maintenance a copy of the design or logic drawings. Such purchasers are required to sign a non disclosure clause and the information bears a legend to the effect that they contain proprietary information. D bought Nova from one of its customers, including the design drawings, and used such to manufacture a competing machine. I: Whether putting a product on the market with certain safety precautions renders it sufficient A: Ps attempts to maintain secrecy merely consisted of 1) not giving copies of designs to customers who did not need them for maintenance, 2) obtaining non disclosure agreements from customers who were given copies of the drawings, and 3) printing a legend on the drawings which contained the allegedly confidential information. H: Reasonable minds can differ on whether such precautions are adequate, thus Ds motion for SJ must be denied.
6.

a. b.

Example of Trade Secret found i. Metallurgical Industries Inc. v. Fourtek, Inc. F: Metallurgical Industries contracted with Bielefeldt, employee of Therm-O-Vac to construct a furnace for carbide reclamation. After first furnace was delivered, MI was dissatisfied with the performance of the furnace and made several modifications in Bielefeldts presence. Second furnace delivered, some modifications also made. Therm O Vac then went bankrupted, and Bielefeldt and three other Therm O employees formed Fourtek, Incorporated. Fourtek soon after agreed to build a carbide reclamation furnace for Smith Intl, Incorporated. MI sues defendants with misappropriating its trade secrets. I: Whether the modifications of the furnace was a trade secret and whether by disclosing it to two business partners, it was no longer a protectable secret R: UTSA (5th Circuit adopted), defined a Trade Secret as that which derives independent economic value, actual or potential, from not being generally known to, and c. not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and d. is the subject of efforts that are reasonable under the circumstances to maintain its secrecy A: 1) Value: The carbide product from this furnace was clearly superior to others, and thus the secret process provides advantage over competitors. 2) Not generally known: though the basic zinc recovery process has been publicized in the trade, however, Metallurgicals particular modifications
E.

IP Survey. Franklyn. Fall 2010 efforts were unknown to the industry. The general process reveals nothing about the benefits of unitary heating elements and vacuum pump filters. That the scientific principles involved are generally known does not necessarily refute Metallurgicals claim of trade secrets. 3) Improper means: information was kept secret, though debatable whether they had a duty to maintain that secrecy, no k signed. 4) Reasonable efforts: Court held secrecy does not have to be absolute, no non-disclosure agreement signed with one business does not matter because it was limited, there was implied expectation of continued secrecy, it was for legitimate business purposes. Protecting against disclosure of the furnace design by hiding it from public view, placing it in restrictive access area and requiring EEs to sign non-disclosure forms were sufficient. H: There is no standard formula, but Mettallurgical met is burden by showing value of the modifications, the advantages over its competitors, cost of developing the secret device etc. It seems only fair that one should be able to keep and enjoy the fruits of his labor. If a businessman has worked hard, he should be able to profit from his efforts. Simple fairness plays a large role.

MISAPPROPRIATION OF A TRADE SECRET

A.

Definition of improper means Definitions 1. Restatement of Torts 757 One who discloses or uses anothers trade secret, without a privilege to do so, is liable to the other if: a. He discovered the secret by improper means, or b. If his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him 2. Restatement of Torts 757: proper means include a. Discovery by independent invention b. Discovery by reverse engineering c. Observation of the item in public use or on public display d. Obtaining the trade secret from published literature
3.

UTSA 1(2) a. acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or b. disclosure or use of a trade secret of another w/o express or implied consent by a person who i. used improper means to acquire knowledge of the trade secret; or ii. At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was 1. derived from or through a person who had utilized improper means to acquire it; 2. acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

IP Survey. Franklyn. Fall 2010 derived from or thorugh a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or iii. before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake what is improper means E.I. DuPont deNemours & Co v. Rolfe Christopher F: hired by unknown 3d party to take aerial photos of s new TX facility (plant designed to produce methanol by highly secret process). noticed the plane and began an investigation, refused to name 3d party. sued for misappropriation of trade secrets by wrongfully obtaining photos and delivering them to 3d party. I: Whether aerial photography of plant construction is an improper means of obtaining anothers trade secret R: Under Restatement of TortsImproper means A: Christophers argue that since the conduct in itself is not illegal, they did not satisfy improper means element. Ct says: underlying theory is that one may use his competitors secret if he discovers it independently, if he discovers by reverse engineering, but one may not avoid these labors by taking the process from the discoverer without his permission without himself spending the time and money to discover. **The S Ct. of that state has declared that the undoubted tendency of the law has been to recognize and enforce higher standards of commercial morality in the business world. Also, Economical rational unreasonable cost will be placed on regular citizens if businesses were required to spend additional money on safeguarding secrets. H: In this case, the Christophers deliberately flew over DPs plant to take pictures of the process. The third party has a right to use this process only if he obtains this knowledge through his own research efforts. Since he did not, DP has a valid cause of action against Cs and this third party Notes: Improper means includes physical force of taking the secret or breaking into someones office to steal, but other means may also be improper without causing any other harm, such as fraudulent misrepresentations to induce disclosure, tapping telephone wires, or eavesdropping Hypo- if there was no fence, instead of no roof, the outcome might be different, since it is reasonable that people will walk outside of the plant and see it from ground view. However, back in the days, it is not expected that people may spy aerially. Modern days social conditions may produce different results. B. Breach of confidence
3.

IP Survey. Franklyn. Fall 2010 Secrets that have been properly obtained may still be misappropriated if improperly used or disclosed most often this occurs when used/disclosed in violation of confidential relationship. Confidential relationships can be express (by k) or implied. ii. Rules Restatement (Third) of Unfair Competition 41 holds that confidential relationship is established in the following circumstances: 1. a) the person made an express promise to confidentiality prior to the disclosure of the trade secret; or 2. b) the trade secret was disclosed to the person under circumstances in which the relationship between the parties to the disclosure or the other facts surrounding the disclosure justifying the conclusion that, at the time of the disclosure a. the person knew or had reason to know that the disclosure intended to be in confidence, and b. the other party to the disclosure was reasonable in inferring that the person consented to an obligation of confidentiality th 11 circuit almost creates a standard of actual knowledge on the part of the recipient of confidential information that the discloser of such information intended the disclosure to be confidential 5th circuit found implied confidential relat. in the course of negotiations, despite the fact that the disclosing party never even requested that the info remain confidential iii. Smith v. Dravo F: D proposed to purchase Ps company, plaintiff sent detailed into to defendant concerning the business, including patent applications, blue prints, list of prospective buyers etc. After several failed negotiations of D rejecting the offer, D announced that it would produce a container that can be used both in highway and rail carriers. Such container was extremely similar to that which plaintiff had shown D. D also subsequently sold its containers to many of the prospective buyers on Ps list. P complaint is that defendant obtained, through a confidential relationship, knowledge of plaintiffs secret designs, plans and prospective customers, and then wrongfully breached that confidence by using the information to its own advantage and plaintiffs detriment I: Was D in a position of Trust and Confidence at the Time of the Disclosure? R: Pressed Steel Car Co. where P furnishes blue prints to customers in order that they may acquaint themselves more thoroughly with the railroad cars they were purchasing, held that customers held the plans as a result of a confidence reposed in them by P, and thus it is a breach of confidence when they delivery such blue prints to defendant. It is clear that the purpose for which they were delivered by the P was understood by all parties A: P disclosed their design for one purpose, to enable D to appraise the purchasing of the business. There can be no question that D knew and understood this limited purpose. Defendant shall not fraudulently abuse this
i.

IP Survey. Franklyn. Fall 2010 trust. But for those very transactions, D would not have learned, from plaintiff, the container design. H: Ds own evidence discloses that they did not begin designs until seeing Ps plans. Ds engineers also admitted that they referred to Ps patent applications to avoid infringement. The striking similarity between the two products is enough to convict D of the improper use of the structural information obtained from P.
C.

Reverse engineer i. Reverse engineering is a defense: starting w/ known product and working backwards; acquisition of product must also be by fair and honest means ii. Kadant P is a company that manufactures and sells products that cleans and conditions papermaking machines and filter water used in the paper making process. D was a EE and had access to a computer assisted drawing machine, which contained the recipes for the AES products and generated drawings and bills of material. He also had access to the entire computer system, including prospective customers. After being terminated D began working for another company which developed and marketed a new line of products exactly same as Ps. According to D, the products were reverse-engineered from existing products. P contends that D could not have developed and put out for sale this new line in such short period of time, and accuses D of theft of the AES trade secrets. P seeks preliminary injunctive relief I: Whether P products could be reverse engineered in the time span b/w Corlews hiring at Seeley and Ds marketing and putting out their products for sale Rule : To establish misappropriation of trade secret, a P must prove 1) that it possessed a trade secret; and 2) that defendants are using that trade secret in breach of an agreement, confidence, or duty, or as a result of discovery by improper means A: P has no evidence that D used improper or dishonest means to obtain the alleged trade secrets. There is no evidence that Corlew actually stole the design specifications H: b/c P has failed to make a clear showing that Ds improperly obtained and reverse engineered its products, preliminary injunction is improper

CONTRACTS TO KEEP SECRET

A.

Employee trade secrets 1. Most companies require employees to sign some sort of employment agreement, either when hired or at some point during tenure 2. 3 categories of agreements: a. Confidentiality agreements (employee will undertake to keep confidential info secret and not use it for anyone else) b. Invention assignments (give employer right to IP created by employee in course of employment)

IP Survey. Franklyn. Fall 2010 Non-competition agreements (limit the circs in which former employees can compete for customers w/ their former employers)
c. B.

BOP
i.

Employer has burden of showing a. Legally protectable trade secret and b. Legal basis, either a covenant or a confidential relationship, upon which to predicate relief

Confidentiality agreements i. Employees fall into one of 3 categories 1. Hired to invent ER owns invention 2. EE who invent on the ERs time or using its resources, which results in a limited, non exclusive shop right on part of the ER to practice the invention 3. An EEs independent invention which the EE owns ii. Who owns a TS in an employment relationship if no assignment caveat? a. Majority View: EE inventions within the scope of their employment are the property of the ER i. Not Included: The aptitude, skill, dexterity, ability and general knowledge acquired by the employee while inventing for the employer is not the property of the employer. ii. Can imply duty of confidentiality, invention belongs to co., hes liable for disclosure. In Winston v. 3m (9th circuit): The court disagrees with Wexler, and holds that an agreement not to disclose might be implied from 3ms elaborate efforts to maintain the secrecy of its development program, and the ees knowledge of those efforts and participation in them. In any event, 3m and its ees entered into express written agreements binding the latter not to disclose confidential info, and these agreements did not exclude info which the ee himself contributed. b. Minority view: No implied duty of confidentiality if it is the EEs own invention (seemingly no TS when purely the product of EEs skill and of no great concern) In Wexler (Pennsylvania), Penn S Ct. conclude that a departing EE was entitled to take formulas he had himself developed at his prior ER to work for a competitor. Despite the fact that the EE, Greenberg, was the chief chemist at the P, the court concluded that he was not in fact hired to invent and therefore, owned the inventions he made. Generally, however anything that an EE does that is within the scope of her work and uses resources of the company, that information she develops belong to the company. Wexler is not often followed.
C. D.

1. 2.

Non competition agreements i. Majority Rule: Most court allow non-competition agreements that are reasonable (both in duration and geography) ii. Minority Rule (CA): Any K which restrains one from engaging in a lawful profession to that extent void Prohibits non-competition agreements: Trade secret exception: But nondisclosure of TS agreements survives

IP Survey. Franklyn. Fall 2010

3.

Edwards v. Arthur Anderson: (CA) Edwards was an accountant for Anderson that had to sign a non compete agreement. After leaving, P was refused a job at HSBC because of this agreement, court held that noncompetition agreements between an employer and employee that even just "partially" or "narrowly" restrict an employee's ability to practice the employee's trade or profession are void unless they fall into the applicable stautotry exceptions of section 16601 or 16602. iii. California v. Majority States California's statute flatly prohibits noncompetition covenants, with narrow exceptions, including one for protecting trade secrets. In contrast, Geogia's statute, as construed by its courts, prohibits only unreasonable covenants not to compete and considers a legitimate need to protect trade secrets as one factor tending to show that a noncompetition covenant is reasonable. In this respect Georgia reflects the approach of the vast majority of states. The difference is subtle but practically important. In California, the noncompetition covenant is unenforceable except to the extent necessary to protect trade secrets. The covenant itself therefore adds little to the plaintiff's case, except to the extent that it may provide additional remedies, such as attorneys' fees. In contrast, in Georgia and most other states, the trade-secret claim is a separate and independent cause of action, success in which helps to support enforcement of the covenant not to compete. As a result, in states like Georgia the trade-secret claim can bolster a completely separate claim to enforce the covenant, which can provide much broader relief, i.e., a prohibition upon competition beyond that necessary to protect trade secrets. Another important difference between California's approach and the majority approach is that, in Georgia and the majority of states, no tradesecret claim is required to support a covenant not to compete. A legitimate need to protect trade secrets may help to validate a noncompetition convenant but is not required. Without regard to trade secrets, a covenant not to compete is valid in "rule-of-reason" states if it is reasonable in time, territory, and scope of operation.
E.

EEs Inevitable disclosures Pepsi Co v. Redmond F: Pepsi asserts that Redmond cannot help but rely on PCNAs trade secrets in certain situation, and help Quaker achieve substantial advantage by knowing exactly how PCNA will price, distribute, and market its sports drinks, Quaker will be able to respond strategically. I: Will Redmonds new job result in inevitable breaches of these k A: Pepsi provided substantial evidence that Redmond possessed extensive and intimate knowledge about PCNAs strategic goals,

IP Survey. Franklyn. Fall 2010 unless Redmond possessed an uncanny ability to compartmentalize information, he would necessarily be making decisions about Gatorade and Snapple by relying on his knowledge of PCNA trade secrets. H: affirmed the district court order enjoining Redmond from assuming his position at Quaker and preventing him forever from disclosing PepsiCo trade secrets and confidential information. Injunction not to work for competitor upheld for 6 months.

Virginia has established a three part test for assessing the reasonableness of restrictive employment covenants: 1. Is the restraint, from the standpoint of the ER, reasonable in the sense that it is no greater than is necessary to protect the ER in some legitimate business interest? Factors: limited in time, limited in geographical scope, limited in competitive scope, limited in subject matter to competitors, and if the ee was in charge of things such as technology, trade secrets, on going customer relationships Also ask if the restriction is the least restrictive mean possible to protect the legitimate business interest

From the standpoint of the EE, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legitimate efforts to earn a livelihood? 2. Is the restraint reasonable from the standpoint of a sound public policy?
1. F.

Non Solicitation of Clients Would be enforceable in majority of States, in California, it would depend on whether client list is considered trade secret that belongs to the ER In Diodes (California) Ct held that there is no actionable wrong committed by a competitor who solicits his competitors ees or who hires away ees who are not under k, so long as the inducement to leave is not accompanied by unlawful action. Note that Interest of EEs mobility is paramount Licensing agreements i. Overall rule Trade secrets, unlike patents, can be licensed forever. The licensee can be obligated to continue paying royalties for the trade secrets license even if the information (subject to the trade secret license) has entered the public domain. 41 of Restatement (Third) of Unfair Competition takes the position that nondisclosure agreements which purport to protect information in the

G.

IP Survey. Franklyn. Fall 2010 public domain may be unenforceable as an unreasonable restraint on trade. On the other hand, the Federal Circuit has seemingly endorsed the Warner Lambert approach, holding that the issuance of a patent did not extinguish the confidentiality obligation imposed by a nondisclosure agreement, even though the issuance of the patent destroyed the trade secret that was the basis for the agreement. Celeritas Technologies. ii. Warner Lambert v. Reynolds (Listerine Case) P sues to declare a judgment that it is no longer obligated to make periodic payments to defendants based on its manufacture and sale of Listerine to D, who are the successors in interest to Dr. Lawrence, the inventor of Listerine. The license agreement signed expressly states that Lambert is to pay Dr. L and his heirs royalties for each Listerine sold. P contends, however, the secret was no longer a secret b/c the formula has been published and many other manufacturers were producing it too. The court held, however, that even if the formula was no longer a trade secret that is no bar to a contract requiring license fee for a trade secret. The court reasoned that Trade secrets are different from patents and copyright law, which are required to be published after its statutory period. There is no same public policy concern here. Instead, the parties are free to contract with respect to a secret formula or trade secret in any manner which they determine for their own best interests. A secret formula or trade secret may remain secret indefinitely. It may be discovered by someone else almost immediately after the agreement is entered into. Whoever discovers it for himself by legitimate means is entitled to its use. But that does not mean that one who acquires a secret formula or a trade secret through a valid and binding contract is then enabled to escape from an obligation to which he bound himself simply because the secret is discovered by a third party or by the general public. To allow P prevail would be to rewrite the contract for the parties without any indication that they intended such a result Moreover, possession of trade secret information, under a license, provides the licensee with a "head start" advantage in the marketplace: At the very least plaintiff's predecessors, through the acquisition of the Lawrence formula under this contract, obtained a head start in the field of liquid antiseptics which as proved of incalculable value through the years. The Listerine case illustrates the benefits of trade secret licensing. Even if a trade secret subsequently enters the public domain, royalty payments under trade secret licensing agreements can continue indefinitely. One explanation for this holding is the economic value of freedom of contract, however, the Warner-Lambert result is controversial.

REMEDIES
A.

Civil remedies Include damages, injunctions, accountings, and award of profits, as well as destruction of objects embodying or incorporating the trade secret law Injunctions

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Are generally issued only if the trade secret remains a secret (Reversed Engineering injunction = for as long as the time it requires for reverse engineering. Problem does not deter bad behavior, since the injunction that is limited to the reverse engineering time is the same time as it would take for the other party to discover the technology on its own. So it might as well just steal the secret injunction usually lasts only as long as necessary to eliminate the commercial advantage or lead time obtained through misappropriation (lead time = the value obtained for being the first person who brought the product to the market) may be issued to prevent threatened use or disclosure of a trade secret Under the inevitable disclosure doctrine, an injunction may be available to prevent former EEs from performing the same job for a competitor of their former ER Damages Include both compensation for actual loss and recovery for unjust enrichment If the product has been brought to the market, then unjust enrichment may be calculated However, if the product has yet been brought onto the market, then damages are speculative Alternatively, the court may order an accounting and award royalties lost b/c of unauthorized use or disclosure of trade secret information.
B.

Criminal penalties States that impose criminal penalties for misappropriation generally do so either by expressly criminalizing misappropriation of trade secrets or by incorporating trade secrets within the coverage of larceny or robbery statutes Congress has also enacted federal legislation criminalizing the misappropriation of trade secrets (The Economic Espionage Act of 1996) Regardless of whether the information was actually secret, under the Economic Espionage Act the prosecution must prove only that the defendant sought to acquire information which he or she believed to be a trade secret, regardless of whether the information actually qualified as such. Example Case- Winston Research Corp v. 3M Corp. Rule: injunction = approximate time it would require a legitimate competitor to develop the same thing after public disclosure of the secret information Justification = denied the EEs any advantage from their faithlessness, placed trade secret holder in the position it would have occupied had the breach not occurred prior to public disclosure, and imposed the minimum restraint consistent with the realization of these objectives upon the utilization of the EEs skills

C.