intellectual propertynovaonline.nvcc.edu/eli/bus241_242/powerpoint9th/liuzzo... · 2017. 1. 13. ·...

Chapter 28

Intellectual

Property

Copyright © 2016 McGraw-Hill Education. All rights reserved.


Definition of Intellectual

Property

• Individuals and businesses own both real and personal property.

• Most people think of property as including only tangible items, such as land and buildings (real property); and automobiles, clothing, and cash (personal property).

• Another form of personal property includes knowledge, ways of doing things, and expressions of ideas.

• This property is commonly referred to as intellectual property (or intellectual capital).

• The expressions of such intellectual property are stored in computers and on Web pages.

• Intellectual property is protected through the use of trade secrets, trademarks, copyrights, and patents.

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Trade Secrets

• Trade secret: A specialized knowledge associated with a particular business.

• It includes information gained during employment about such matters as manufacturing processes, practices, devices, customer lists, and other confidential information that, in the hands of a competitor, would place the firm at a serious disadvantage.

• When trade secrets are made public, the firm loses the advantage it had while the secrets were undisclosed.

• Accordingly, most firms take precautions to make certain that their trade secrets remain confidential.

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Economic Espionage Act of

1996

• The Economic Espionage Act of 1996 was

passed to protect firms from the theft of trade

secrets.

• This statute makes the misappropriation or

outright theft of trade secrets a federal crime.

• Under the law, if the owner of the trade secret

took reasonable precautions to protect it from

theft, he or she can recover any resulting

damages.

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Protecting Trade Secrets

• To protect its business and its trade secrets, an employer may, within reasonable bounds, impose restrictions of secrecy on the employee or forbid the employee to work in the same line of business or for a competing firm if he or she leaves the company.

• Companies require employees to sign an employment contract, which governs the relationship between the employer and the employee. • This contract is a clause, or paragraph, called a

restrictive covenant.

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Restrictive Covenants

• Restrictive covenant: An agreement in which the employee agrees not to work in similar employment.

• Nearly all restrictive covenants are enforceable; the most important factor is whether the covenant is reasonable. • It would be reasonable for a firm with a highly secret process to

require its key people or scientists to agree not to work for a competitor for, say, three years.

• If the same company were to require all employees to sign such an agreement, it would be unreasonable.

• It would also be unreasonable to require even key employees to avoid employment with a competitor for 20 years and avoid work anywhere in the world.

• Restrictive covenants could even prevent the employee from working for a competitor even if the employee is terminated, with or without cause.

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Agreements Not to Compete

• When an established business is sold, included in the sale are trade secrets that the business owns.

• The contract for sale usually includes an agreement not to compete, similar to the restrictive covenant placed in an employment contract. • Agreement not to compete: The seller agrees not to begin or

operate a similar business within a certain geographic area, or within a specified period of time, and such agreements are generally held valid provided the restrictions are reasonable.

• Agreements such as these are highly recommended and legally enforceable because the sale of a business includes more than just a firm’s physical property; the sale also includes the firm’s goodwill.• Goodwill is the name and good reputation of the firm.

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Example: Agreement Not

to Compete

• Facts:• Heather contracted to sell her bakery to Grant.

• The agreement included a provision that Heather would not open another bakery for three years within the same neighborhood.

• One year later, Heather opened a new bakery within two blocks.

• After a year of business, Grant realized that Heather’s new bakery was siphoning his customer base.

• He initiated legal action by referring to the agreement not to compete, acknowledged by Heather in the original contract.

• While Heather might argue that the condition in the agreement not to compete was unreasonable, she is incorrect.

Heather’s act violated the terms of agreement because the restriction imposed by Grant is reasonable, and the agreement is generally held valid.

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Application of Trade Secret Law

to Computer Software

• Developers of commercial software have

attempted to protect against pirated copying by

claiming that the program is a trade secret.

• Since most software is prepared for wide distribution,

it is difficult to protect a computer program from being

copied by making this argument.

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Trademarks

• Trademark: Any word, name, symbol, or device or combination thereof adopted and used by a manufacturer or merchant to identify goods and distinguish them from goods manufactured or sold by others.

• Ownership may be designated in advertising or on a label, package, or letterhead by the use of the word “Registered,” the symbol ®, or the symbol™.

• Trademark registrations are issued at the federal level by the U.S. Patent and Trademark Office of the Dept. of Commerce. • Trademark registrations are issued for a renewable period

of 10 years.

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Trademarks (cont.)

• The person in whose name a trademark is registered or to whom it has been assigned may prevent others from:

• Using the trademark in connection with competing goods.

• Using it in the same kind of business.

• Using marks or names similar to those registered that might confuse reasonable people.

• Some famous trademarks, such as “Google,” that are directly associated with a specific product or service are afforded a higher level of protection• In addition, they are often shielded from unrelated, non-

competing uses.

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Trade Dress

• Trade dress: A distinctive, nonfunctional feature, which distinguishes a merchant’s or manufacturer’s goods or services from those of another.

• The trade dress of a product relates to its total image and can include the color of the packaging or the configuration of goods.

• Examples:

• Packaging of Wonder Bread.

• Packaging of Healthy Choice frozen dinners.

• Color scheme of Subway sandwich shops.

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Losing Trademarks

• Most firms that have registered trademarks spend considerable amounts of money to research, design, register, and advertise their trademarks.

• Still, many trademarks have been lost because they were so successful or often misused, that they entered the language as ordinary words.

• To the general public, the trademark came to mean the same as the product, no matter who had manufactured it. These are called Generic

• Examples: Escalator, aspirin, spearmint, and frisbee.

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Protecting a Trademark

• Under federal law, the owner of a trademark loses rights to it “when any course of conduct of the registrant, including acts of omission or commission, causes the mark to lose its significance as an indication of origin.”

• It is important that all executives, employees, and the firm’s advertising agency try to protect the firm’s trademark by following a few basic rules:

• Never use the trademark without the generic name of the product.

• Never use the trademark in the possessive form.

• Never use the trademark in the plural.

• Always identify trademarks.

• Continuously monitor the way others use your trademarks .

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Application of Trademark Law

to Cyberspace

• Domain Name• A unique identifier that serves as an address for a Web page. It

can be characters and numerals, followed by a suffix such as .com, .org, .gov, .edu., etc.

• Cybersquatting: Registering or using another person’s or company’s domain name in bad faith for the purpose of earning a profit.

• To win a lawsuit against cybersquatting, a firm would need to demonstrate:

• There was bad faith on the part of the cybersquatter.

• The company owns the trademark.

• The trademark is distinctive.

• The domain name being used by the cybersquatter is identical to (or close to) the trademarked name owned by the complaining party.

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Copyrights

• A valid, government-granted protection given to creators of literary, creative, or artistic work.• Examples: books, magazines, music, dramatic works,

maps, works of art, motion pictures, computer programs, computer games, and videos.

• To receive copyright protection, such works must be (1) original, (2) creative, and (3) expressed in a tangible form.

• Works produced and copyrighted in one country are protected under the laws of most other countries.

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Copyrights (cont.)

• A copyright cannot prevent the copying of an idea, but only the way it is expressed.

• Under the current copyright law, a created work is protected for the lifetime of the creator plus 70 years. • If the work is produced as a result of the creator’s

employment, the term is 95 years from first publication, or 120 years after the creation of the work, whichever is shorter.

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Example: Infringement of

Copyright

• Facts:

• Ross, a popular music composer, entrusted Trevor, his assistant, to record and deliver the final versions of his albums to the record label company.

• After one of these recordings, Trevor stole a copy of the record and sold it as his own to a different record label company.

• When Ross discovered that his creative work had been stolen and sold under a different identity, he initiated legal action against Trevor for infringing the copyright.

In this case, Trevor infringed the copyright of music composed by Ross, and sold it for gain.

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Fair Use

• Fair use: The law does allow limited copying if

such copying falls under the doctrine of fair use.

• Fair use applies when the copyrighted material is

copied without authorization for use in connection with

criticism, news reporting, research, education, or

parody.

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Application of Copyright Law

to Software & Cyberspace

• A computer program is a “set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain act.”• Pursuant to this law, however, it is not an infringement

if the owner of a computer program makes a single copy.

• Indeed, sellers of computer programs at times encourage the user to make a “working copy” and to safeguard the original.

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Application of Copyright Law

to Software & Cyberspace (cont.)

• Courts use the substantial similarity test where there is the need to determine whether a person or business has violated the copyright of another.• The test is used to determine whether an ordinary reasonable

observer comparing two works would have to conclude that the work being questioned was copied from the other.

• It should be noted that the substantial similarity test used to determine infringement in computer software cases is nearly identical to that used to judge the claim of a songwriter who alleges that his or her music or lyrics have been wrongfully copied.

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Patents

• Patent: A valid, government-granted protection awarded to inventors that gives the patent holder the exclusive right to manufacture, use, and sell the invention for 20 years. • A patent cannot be renewed.

• The purpose of patents is to encourage inventors to develop new products and new ideas.

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Patents (cont.)

• Patents, like trademarks, are issued by the U.S. Patent and Trademark Office in Washington, D.C. Patents are issued for devices that are useful, novel, and nonobvious creations. • Anyone who manufactures or sells, without

permission, a product that has been patented by another can be charged with infringement.

• Patents have been granted for inventions such as machines, processes, or chemical compounds.

• Patents also have been issued for scientifically engineered bacteria and genetically engineered life forms.

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Computer Hardware and

Software

• There are several requirements for a computer

hardware and software patent to be issued:

• The invention must be a device.

• The invention must be useful.

• The invention must be new and original.

• The invention must be nonobvious.

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Design Patents

• Combining some of the characteristics of both patents and copyrights, a design patent is awarded to individuals or business firms to protect distinctive patterns, figures, and shapes and to prevent unauthorized copying.

• Design patents have been issued for soft-drink bottles, wine decanters, silverware patterns, and other unique designs.

• Design patents, however, are granted for periods of less than 20 years.

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intellectual propertynovaonline.nvcc.edu/eli/bus241_242/powerpoint9th/liuzzo... · 2017. 1. 13. ·...

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