Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 08 - Intellectual Property and Unfair Competition
6. Note that when the plaintiff elects the statutory damages option alluded to at p. 286
(instead of choosing the basic remedy of actual damages plus infringer's attributable
profits), the court sets the amount of recovery within certain ranges set by Congress.
Proof of the existence or extent of harm to the copyright owner is not a prerequisite to the
recovery of statutory damages. Currently, statutory damages may range from a minimum
of $750 to a maximum of $30,000. However, if the evidence shows that the
infringement was willful in nature, the statutory damages ceiling is raised to $150,000.
7. Discuss the issues addressed in the Cyberlaw in Action box at p. 292 (the Digital
Millennium Copyright Act’s “safe harbor” provisions and its anticircumvention and
antitrafficking provisions. Note the court’s rejection of the fair use and First Amendment
arguments made by the defendant in the Corley case.
8. Emphasize that many cases hinge on the fair use defense, which involves consideration
of factors whose application and weight vary from case to case. Explain the purposes and
effect of the fair use defense. Note the types of uses singled out by Congress as good
candidates for fair use protection. Introduce the factors courts must apply in deciding
whether a defendant’s use was fair use. Emphasize that fair use cases are highly fact-
specific. Bouchat (a text case discussed later) is a very good example. So is Perfect 10, a
former text case that is now Problem #10. Discussion notes on Perfect 10 are included
later. Campbell v. Acuff-Rose Music, Inc. (a former text case that is discussed and applied
in Bouchat and Perfect 10) remains a leading case and serves as an excellent discussion
vehicle. Although Campbell is no longer included in Chapter 8, we include extensive
comments on it immediately below. Those who plan to use Campbell may wish to
provide students a copy of the decision.
Campbell v. Acuff-Rose Music, Inc.: The U.S. Supreme Court holds that parody of a
copyrighted work is a candidate for the protection of the fair use defense, even when the
parody has a commercial character. The Court, however, stops short of a categorical rule
that parody is always to be considered fair use. (As mentioned earlier, you may want to
provide the class a copy of the Campbell opinion.)
Points for Discussion: Note that each side advanced an extreme position, neither of
which the Court was inclined to adopt. Acuff-Rose, the copyright owner, sought a ruling
that the commercial character of a defendant's use automatically prevents the defendant
from being able to rely on the fair use defense. The alleged infringer, 2 Live Crew,
sought a ruling that parody is fair use in all instances. Rejecting both of these extreme
positions, the Court steered a middle course by holding that parody may sometimes
constitute fair use, and that the commercial character of a use does not in and of itself
deprive the user of the fair use defense. The Court stressed that parody must work its
way through the four factors that are applied in any case in which fair use protection is
asserted as a defense. After application of the factors, the parody at issue may--or may
not--be classified as fair use. The inquiry is highly-fact-specific.
This case illustrates that whether a use amounts to fair use does not depend upon
whether the copyright owner thinks a license is necessary. Here, Acuff-Rose refused to
grant 2 Live Crew permission to record its parodic version of "Oh, Pretty Woman." 2
Live Crew recorded the parody anyway. Even though the group proceeded against the
copyright owner's wishes, the group may still be entitled to the protection of the fair use
defense.
Note the Court's discussion of the importance, to the fair use analysis, of
"transformative" uses (see the early portions of the decision). Ask the students how 2
Live Crew's version of "Oh, Pretty Woman" might be regarded as transformative in
8-1
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
nature. Also note the emphasis placed by the Court on the Copyright Act's language that
lists criticism or comment as examples of the types of uses that are candidates for fair use
treatment. Parody, of course, often employs humor as a way of conveying criticism or
commentary. The Court emphasized, however, that in order for a parody to have
potential entitlement to fair use protection, it must contain criticism of, or commentary
on, the substance or style of the copyrighted work--as opposed to reflecting nothing more
than borrowing from the copyrighted work as a means of gaining attention or "avoid[ing]
the drudgery in working up something fresh." Although the Court considered the call a
close one, it concluded that 2 Live Crew's parodic version of "Oh, Pretty Woman" did
contain comment on the original version's substance or style.
Ask the students about the Court's analysis of the fair use factors. Factor #1 is the
purpose and character of the use, including whether it was for commercial purposes or
for nonprofit educational purposes. The Court stated that even though commercial
character tends to cut against fair use, the court of appeals erred when it made
commercial character a conclusive bar to fair use entitlement. A defendant's commercial
purpose will often cause factor #1 to be viewed in favor of the copyright owner, but the
other factors must still be examined. Depending on the relevant facts, a commercial use
may still obtain the protection of the fair use doctrine.
Note, also, the Court's comments that the significance of the commercial character of
the defendant's use will vary from case to case, and that the use of a parody to help sell
another product might not be viewed as favorably in the fair use analysis as the sale of
the parody itself (the situation in Campbell). Although the Court did not explain these
comments, it appeared to be signaling that the use of a parody in a TV commercial for a
product may not be as good a candidate for the fair use label as the use present in
Campbell, in which the parody itself--2 Live Crew's version of "Oh, Pretty Woman"--was
the thing being sold. The Court also made it clear that a defendant's parodic purpose is a
relevant consideration under factor #1. To the extent that the parody is designed to
constitute criticism of the copyrighted work, the parody would have a purpose consistent
with the objectives underlying the fair use defense.
Factor #2 is the nature of the copyrighted work. This factor plays a much more
important role when there has been a borrowing from an unpublished copyrighted work.
In that event, factor #2 tends to cut rather strongly against fair use. Where, as here, the
borrowing was from a published work, factor #2 tends not to have much significance
either way. Moreover, as the Court points out, familiar published works are logical,
typical targets of parodists. Factor #2 is effectively neutral in this case.
Factor #3 considers the amount and substantiality of the portion of the work used, in
relation to the work as a whole. The Court adopts a pro-parody approach to this factor,
stressing that in order make a parody effective, the parodist must be able to borrow
enough from the copyrighted original to be able to "conjure up" the original in the minds
of readers, viewers, or listeners. If the parody's audience cannot identify what is being
parodied, the humor and point of the parody are likely to be lost. The Court's approach to
factor #3 means that the parodist is likely to be able to get away with more borrowing
that is the nonparodist borrower. For example, parodists such as the members of 2 Live
Crew, if they succeed with the fair use defense, would not be liable even though they
deliberately borrowed from "Oh, Pretty Woman" what probably was more than what
nonparodist George Harrison subconsciously borrowed from "He's So Fine." (See the
earlier discussion of the infringement case in which Harrison was held liable.)
Factor #4 considers the effect of the use on the potential market for, or value of, the
copyrighted work. As a general rule, a parody is not likely to have an adverse effect on
the market for the original, because the parody will not be viewed by the public as a
8-2
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
substitute for the original. To take an example from an actual case, one who wants to
purchase the sheet music for the copyrighted song "When Sunny Gets Blue" is not likely
to be satisfied with a copy of the parodic version titled "When Sonny Sniffs Glue."
Parodists thus would generally seem to be in good shape under factor #4. Indeed, in
Campbell, an expert witness for Acuff-Rose conceded on cross-examination that 2 Live
Crew's version of "Oh, Pretty Woman" would not adversely affect sales of the
copyrighted original. The Supreme Court pointed out something else of importance,
however, about factor #4. Under that factor, courts must also consider the prospect of
harm to markets for derivative uses of the copyrighted work. In Campbell, a relevant
question was whether 2 Live Crew's parodic version of "Oh, Pretty Woman," done in the
group's rap style, would adversely affect potential markets for rap versions of the
copyrighted original. Because the lower courts had not considered this question, the
Supreme Court remanded the case.
Bouchat v. Baltimore Ravens Limited Partnership (p. 287): The Fourth Circuit holds that
the fair use defense protects the NFL against infringement liability for producing videos
that contained game-action shots in which a version of Bouchat’s copyrighted logo was
visible. (The Baltimore Ravens for a time had used the logo.) The Fourth Circuit also
holds that the fair use doctrine protects the Ravens against infringement liability for
displaying images that showed their former logo (which resembled Bouchat’s logo) in the
context of historical exhibits at the team’s stadium. Adopters should be aware that this
case is a different Bouchat case from the one that appeared in the 15th edition. As noted
in the facts summary that appears in the text, the case included in the 16th edition is the
latest in a lengthy series of cases brought by Bouchat against the Ravens and sometimes,
as here, against the NFL.
Points for Discussion: Ask a student to summarize the general history of Bouchat’s
ongoing disputes with the Ravens, as well as the basic facts. Note that as with many
copyright infringement cases, this case hinges on whether the defendants’ uses
constituted fair use. Note the nature of the fair use defense and the fact that there isn’t a
magic list of uses that are fair or, as the case may be, unfair. Rather, each case in which
fair use is argued must involve application, weighing, and balancing of the four fair use
factors. The cases therefore become highly fact-specific.
Separate out the two uses at issue in this case (the use in the NFL videos and the use
in the historical exhibits at the stadium.) Identify the four fair use factors and work
through each one in regard to each of the uses. Ask students what the court concluded
with regard to each factor. What were the major reasons why the court determined that
the use in the NFL videos was fair use? Do the students’ agree with the court’s
conclusions? What was the major reason why the court determined that the use in the
historical exhibits at the stadium was fair use? Do the students agree? Work in
discussion of Campbell and of how the Fourth Circuit applied Campbell’s emphasis on
whether a use is transformative (a matter relevant to the first fair use factor). On what
else does the Fourth Circuit place importance in applying the first and fourth fair use
factors to each of the uses at issue in the case? Do you suppose the court has become a
bit frustrated with Bouchat and his repeated lawsuits over uses of the logo? Might that
have been an unstated factor here?
Perfect 10, Inc, v. Amazon.com, Inc. (formerly a text case; now Problem #10): The 9th
Circuit vacated the lower court's preliminary injunction against Google's posting
thumbnailed images from Perfect10.com's "members only" section on Google Image
8-3
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
Search. The court held that Perfect 10 had made out a prima facie case that Google had
violated its display right by using the thumbnails, but that Google did not violate Perfect
10’s rights by linking to other sites where full-size images of Perfect 10’s photos could be
seen. The court also held that Google would have a valid fair use defense to Perfect 10’s
prima facie showing of a violation of Perfect 10’s display right.
Points for Discussion: The court characterizes Google’s use of the thumbnails as
“transformative” because the thumbnails on Google’s service serve a different “purpose”
than the ones on Perfect 10’s website—namely, to aid users in their Internet searches.
The purpose of Perfect 10’s images, of course, was “artistic expression.” Is that a helpful
distinction? The court also holds Google’s service has no market effect, even though it
no doubt directs millions of users to unauthorized full-size Perfect 10 images they could
never have found otherwise. Finally, though Google used the entire image, albeit scaled
down, the court regarded the substantiality factor as a wash. It seems pretty likely the
court recognized the larger stakes, and just declined to slow down the Google
phenomenon. Was the court concerned about the implications for the public interest if
search engines such as Google were held liable in cases such as this one.
Further fair use examples: Problems #2, #3, and #13.
D. Trademarks
1. Discuss the reasons why the law protects trademarks. After noting the various kinds of
marks protected by the Lanham Act, mention that the chapter mainly concerns itself
with trademarks and service marks.
a. Also note that the chapter focuses on protection of marks under the federal
Lanham Act (the most desirable and most expansive trademark protection
available), though the common law and state statutes also provide legal
protection for trademarks.
2. Discuss the requirement that to merit protection, a mark must be distinctive. Discuss the
hierarchy of types of marks in terms of distinctiveness (or nondistinctiveness). Also
suggest why some kinds of marks merit more protection than others. Descriptive and
generic marks, for example, are not apt to remain in the consumer's mind and become
associated with a particular product. Also, how effectively can a competitor of the
trademark owner carry on business if such marks are protected? How, that is, can he
describe his products without risking liability? In this connection, be sure to discuss the
concept of secondary meaning and why it affords protection to descriptive marks,
deceptively misdescriptive marks, geographically descriptive marks, and marks that are
primarily a surname. Note that some terms are said to be so inherently generic that they
can never acquire secondary meaning. "Cereal" is an example.
3. Discuss the requirements for registration of a mark on the federal Principal Register.
Note that those requirements relate closely to the categories of distinctiveness just
discussed. Also note the situations when secondary meaning is and is not required as a
prerequisite to registration on the Principal Register.
a. Emphasize that registration is not required in order for one to use a trademark.
Neither is registration required in order for some legal rights over the trademark to be
triggered (e.g., rights under the common law). Only if registration on the Principal
Register is obtained, however, will the trademark owner have the more expansive
protection associated with a federally registered mark.
b. For consideration of whether color may quality for registration as a trademark, see
Problem #4.
4. Emphasize how and why the transfer of trademark rights is relatively difficult. Contrast
8-4
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
this with the transfer of copyrights and patents.
a. The Global Business Environment box at pp. 296-97 outlines some basic concepts
regarding the acquisition and protection of trademark, patent, trade secret, and
copyright rights in foreign nations. Walk the students through those basics. Note,
too, the piracy problem addressed in the Global Business Environment box at p. 294.
5. The registration duration rule mentioned in the text (10 years, plus successive 10-year
renewals) applies to marks first registered on November 16, 1989 or thereafter.
Registrations first granted prior to that date carried--and still carry--a 20-year duration,
with renewals of those registrations continuing to be for successive 20-year periods. As
was the case with the "old" rule governing copyright duration, we will be dealing with the
"old" rule on trademark duration for many years to come.
6. Discuss the various ways that trademark protection may be lost before the duration of the
registration expires. Emphasize, in particular, the problem of a mark's becoming generic.
If a mark is held by the Patent & Trademark Office (PTO) or a court to be generic, the
mark's registered status and the mark owner's exclusive rights are lost. Other examples of
this (besides the ones in the text) include Shredded Wheat, Toll House (for cookies), and
Gold Card.
a. Ask your students for examples of current trademarks that could be in danger of a
ruling that they have become generic (if a proper proceeding were initiated in the
PTO or a court). Possible examples include Kleenex, Jell-O, Band-Aid, and Xerox.
Neither a court nor the PTO has been presented with a cancellation request regarding
Kleenex, Jell-O, Band-Aid, or Xerox, however.
b. Note, also, that a trademark registration can be cancelled in an appropriate legal
proceeding if it is determined to be disparaging to individuals or groups. The text
discusses a current example: the PTO’s cancellation of the registration for the
Redskins name (used for several decades by the Washington Redskins football team).
Note what this cancellation means and does not mean. See pp. 294-95.
7. When discussing trademark infringement, note that there are two required elements of
infringement: (1) sameness or substantial similarity; and (2) likelihood of confusion in
one or more of the senses mentioned in the text. The first element is fairly easy to satisfy
if the infringement claim is at all plausible. The second element is often much more
difficult to satisfy. In fact, the vast majority of trademark infringement cases hinge on the
likelihood of confusion question. For discussion of the factors courts take into account in
deciding whether there was likelihood of confusion, see Louis Vuitton (a former text case)
and Starbucks (a text case). Both cases present trademark infringement issues and
trademark dilution issues. Discussion of the two cases appears after the discussion of
dilution (see below). In addition, see Problem #5.
8. Trademark dilution is both a relatively new and an old doctrine in trademark law. It is
relatively new as a matter of federal law, by virtue of the Federal Trademark Dilution Act
of 1996 (FTDA) and the Trademark Dilution Revision Act of 2006 (TDRA), a set of
amendments to the FTDA. (The TDRA receives extensive discussion at pp. 295-96 of the
text.) Dilution is an old doctrine in the sense that for many years, states have had dilution
statutes (though they were seldom invoked by trademark owners until relatively recent
years). Roughly half of the states have such statutes. Until the enactment of the FTDA,
Congress had resisted trademark owners' pleas for federal recognition of the dilution
doctrine.
a. A dilution claim is attractive to trademark owners because it does not require proof of
likelihood of confusion. Note the alternative ways in which dilution may be
established under state statutes or the FTDA (as amended by the TDRA): (1) through
8-5
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
proof of a likely blurring of (or a "whittling away" at) the distinctiveness of the
plaintiff's trademark; or (2) through proof of likely tarnishment of the plaintiff’s
trademark. Under the FTDA and the TDRA amendments, the plaintiff's trademark
must be "famous" and the defendant's use must have been commercial in nature.
State statutes do not necessarily contain the requirements mentioned in the previous
sentence.
1. A good example of the “blurring” or "whittling away" type of dilution may be
found in a case that involved Polaroid and arose under the Illinois dilution
statute. The Polaroid trademark had long been used in connection with cameras
by the company of the same name. Another (and much smaller) firm began using
the name "Polaroid" for its heating and air conditioning business. The court
agreed with Polaroid that if the heating and air conditioning firm continued to use
the Polaroid name for its business, consumers who had been exposed to uses of
Polaroid and Polaroid would then think, whenever they saw the Polaroid mark,
not only of the camera company but also of the heating and air conditioning firm.
Even if consumers were not likely to think that Polaroid had gone into the
heating and air conditioning business (i.e., even if consumers were not likely to
be confused), there would be dilution of the distinctive quality of Polaroid's
trademark. This would be so because the mark that once conjured up thoughts of
one source (the camera company) would instead conjure up thoughts of two
different sources (the camera company and the heating and air conditioning
firm). The court therefore enjoined the heating and air conditioning firm's use of
Polaroid.
2. Dilution of the mark's distinctive quality should not be an automatic conclusion
every time two marks are quite similar, however. For example, after winning a
short-lived victory in the district court, Mead Data Central, which owned the
"Lexis" trademark and used it in connection with its computerized legal research
database, lost a dilution claim against Toyota, which had chosen the name
"Lexus" for its luxury car and luxury car division. The federal court of appeals
was not convinced that the distinctive quality of Lexis would be diluted. (The
case was decided under a state dilution statute.)
3. In explaining the alternative dilution theory of tarnishment, stress the
unwholesome context requirement courts generally impose. Absent illicit sexual
or drug-use connotations, an unwholesome context normally does not exist. In
other words, the context of the defendant's use is not rendered unwholesome by
the mere fact that the trademark owner does not like the defendant's use. You
may also wish to note that some courts allow tarnishment claims to be made out
through proof of the defendant's use of a substantially similar version of the
plaintiff's trademark in connection with goods that are less prestigious or of lower
quality than the goods as to which the trademark owner uses the mark.
b. As the text suggests, the FTDA and the TDRA amendments contain various
provisions whose meanings are less than clear. This has led to a considerable amount
of litigation in very recent years, as parties have disagreed over the meaning and
applicability of the statute's terms. A cynic might be inclined to assert that the FTDA
should have been subtitled "The Trademark Lawyers' Full Employment Act of 1996."
c. Louis Vuitton Malletier, SA v. Haute Diggity Dog, LLC (formerly a text case; now
Problem #8): Haute Diggity Dog manufactured dog chew toys designed to look
comically like Louis Vuitton bags. Louis Vuitton alleged the toys diluted and
infringed its trademarks and infringed its copyrights. The 4th Circuit affirmed a grant
8-6
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
of summary judgment for the defendant.
Points for Discussion: Note that the basis for the parody “defense”—namely, that
Haute Diggity literally throws Vuitton’s mark to the dogs—is exactly what inspires
Vuitton’s lawsuit. In other words, what made Vuitton mad enough to sue serves as a
big reason why Vuitton loses the case. Given the obvious parody, consumers simply
aren’t likely to be confused here. The court applies the likelihood of confusion factors
in a way that reflects the clear influence of the parody context on what consumers
probably would or would not think. Turning to the dilution claim, ask students why
neither dilution by blurring nor dilution by tarnishment is present here. Note, too,
that even though the court interprets the parodist-protection language added by the
TDRA amendments as not strictly applicable to Haute Diggity’s actions, the court
effectively gives Haute Diggity’s parody the same degree of indulgence contemplated
by the supposedly inapplicable TDRA language.
d. Starbucks Corp. v. Wolfe’s Borough Coffee, Inc. (p. 297): The Second Circuit affirms
the trial court’s decision in favor of the defendant (referred to here as Black Bear) on
Starbucks’ trademark infringement and dilution by tarnishment claims, but vacates
the decision in favor of Black Bear on Starbucks’ dilution by blurring claim. The
Second Circuit therefore remands for reconsideration of the dilution by blurring
claim.
Points for Discussion: This case provides a nice vehicle for examining the factors
courts take into account in determining whether there was likelihood of confusion
(the critical element in trademark infringement cases. After asking a student to
summarize the basic facts, work through the likelihood of confusion factors and ask
students how the court applied each factor. Which factors in the weighing and
balancing process seemed most significant to the court’s determination that Black
Bear did not commit infringement? Ask students why the Second Circuit vacated the
trial court’s ruling against Starbucks on the dilution by blurring claim. (The trial
court concluded that substantial similarity was required for such a claim, but the
Second Circuit said that similarity—regardless of whether it was substantial in
nature--was enough under the Trademark Dilution Revision Act. That error by the
trial court may have affected its application of other factors relevant to a dilution by
blurring claim, so reconsideration of that claim was necessary.) As for the dilution by
tarnishment claim, why was there neither tarnishment nor likelihood thereof?
10. Note the 1999 enactment of the Anticybersquatting Consumer Protection Act
(ACPA), in which Congress sought to pay special attention to a problem that simply
did not exist two decades ago. Stress the importance of the "bad faith intent to profit"
element discussed in the text. Some cases of cybersquatting may also raise
infringement or dilution issues. The ACPA, however, attempts to meet the
cybersquatting concern head-on and with appropriately targeted remedies. The
ACPA is discussed in the Cyberlaw in Action box that appears at p.302.
E. Trade Secrets
1. Emphasize what a trade secret is and discuss the purposes of trade secrets law.
2. Be sure to mention that trade secrets law sometimes provides an alternative to the other
means of protection (mainly patent law) available to those desirous of protecting valuable
inventions.
3. Note from the section’s introduction that the main justification for providing a remedy for
the misappropriation of trade secrets is to uphold certain standards of commercial ethics,
and not to stimulate innovation. The main reason is the apparent view that the innovation
8-7
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
stimulated by protecting trade secrets does not outweigh the disadvantages--mainly, the
harm to competition and the inability of others to further develop the secret--resulting
from secrecy.
4. Stress the text's statement that in order to receive protection, owners need not adopt
extreme measures to block every ingenious form of espionage.
5. Go through the three major forms of misappropriation discussed in the text. See the
Coleman case (discussed below) and Problem #6.
6. Cover the basics regarding noncompetition agreements (see p. 303), though it should be
noted that such agreements sometimes go beyond being attempts to protect trade secrets.
Note the competing interests at stake in connection with noncompetition agreements.
Stress what courts tend to focus on when determining whether a noncompetition
agreement is enforceable or, instead, too broad to be enforceable.
7. Coleman v. Retina Consultants, P.C. (p. 303): The Georgia Supreme Court holds that a
noncompetition clause in a contract was unenforceable insofar as it went beyond the
former’s employer’s interest in protecting its trade secrets, where the noncompetition
provision contained no duration and purported to limit the former employee’s ability to
use even material that he had developed and that was not his former employer’s trade
secret.
Points for Discussion: Ask a student to summarize the basic facts. By virtue of its
decision here, is the court effectively granting Coleman permission to use his former
employer’s trade secrets? (No.) After this decision, what can Coleman lawfully do?
What can’t he lawfully do? Ask students questions that get at the problems with this
noncompetition agreement. What’s wrong with it, according to the court? Did the former
employer get anything out of this agreement over and above what it would have had
under the law even without this agreement? (No. Even without a noncompetition
agreement, Coleman would have had a common law duty not to use his former
employer’s trade secrets.)
F. Injurious Falsehood
1. A successful claim of injurious falsehood involves proof of the following: a) the
defendant's communication, to a third party, of a false statement, b) that disparages
another's business or property broadly conceived and thus causes harm to another's
economic interests, c) with this harm taking the form of "special damages" (some fairly
tangible and provable form of economic loss), and d) some kind of fault or culpability on
the part of the defendant (see below).
2. The most common types of harm to the economic interests of another are comprehended
by the traditional torts of trade libel and slander of title discussed in the text. Other harm-
causing statements that do not involve attacks on the plaintiff's property usually qualify
as well, however. Example: D falsely tells T that P has died, causing T to buy goods from
someone other than P. Or, suppose that D falsely tells T that P does not deal in certain
goods, thus deflecting a possible sale.
3. Note that the special damages discussed in the text are part of the cause of action for
injurious falsehood. For this reason, a plaintiff who cannot prove special damages also
cannot recover nominal damages, punitive damages, or injunctive relief.
4. It seems generally agreed among the states that some form of fault on the part of the
defendant is a necessary element of an injurious falsehood cause of action. In addition, it
seems generally agreed that negligence is not enough. Beyond these points, however,
there is variation from one state to another. The Restatement test stated in the text
(knowledge of falsity or recklessness in that regard) is probably your best alternative for
8-8
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
class use, because it appears to represent a trend among the states. (This is the actual
malice concept--borrowed from defamation law. See Chapter 6.) Some states, however,
require proof of common law malice (ill will, spite motives, etc.). Other states require
proof of specific intent to cause economic harm.
5. Note the possible--and partial--overlap with defamation discussed in the text.
6. Note that all or almost all of defamation law's absolute or conditional privileges apply in
injurious falsehood cases. On these privileges, see Chapter 6.
G. Interference with Contractual Relations
1. Probably the best way to break down the material in this section is to discuss: a) the
"threshold requirements" for liability, and b) the variety of factors relevant to
determinations of impropriety or privilege.
2. With respect to these threshold requirements:
a. Note that some hindrance to an existing contractual relation is needed. Most often,
this means that the third party breaches his contract with the plaintiff. However, the
tort almost certainly applies to any kind of interference that reduces the value of the
third party's performance as well.
b. Note the wide variety of types of behavior that constitute interference. Refusals to
deal, however, are a problem area. (E.g., D says to T: "I won't deal with you so long
as you continue your dealings with P.") In view of the law's general tendency to
respect a party's freedom to deal, or not to deal, with whomever he chooses, courts
hesitate to make refusals to deal automatically unlawful. Such cases, however, fall
close to the line. Their outcomes depend upon the particular facts and circumstances
at issue. See Lewis-Gale, a text case discussed below.
c. Note the different types of existing contracts whose frustration will result in liability.
This probably includes oral contracts subject to the statute of frauds, contracts for
which a condition precedent has not been fulfilled, and unconscionable contracts.
Note also the types of "contracts" that can safely be interfered with. One example is a
"yellow dog" contract (which is forbidden by federal labor law). Finally, although
liability may result from interference with a terminable-at-will contract, liability is
less likely in such situations. See Lewis-Gale, a text case discussed below.
d. Finally, note that the interference with the contract must be intentional. There is no
liability for negligent interference with a contract.
3. The text's discussion of "privilege" situations probably provides enough examples for
classroom use. The Carey Station Village case (a former text case now serving as
Problem #9) deals with this subject.
Lewis-Gale Medical Center, LLC v. Alldredge (p. 307): The Supreme Court of Virginia
overturns a jury verdict in favor of the plaintiff (Dr. Alldredge) in an interference with
contractual relations case. The court holds that the defendant (Lewis-Gale Medical
Center) did not employ improper methods and, in any event, the employment contract
allegedly interfered with was terminable at will.
Points for Discussion: Have a student summarize the basic facts. Note the terminable-at-
will nature of the employment contract between Alldredge and SWEP (the contract with
which Lewis-Gale allegedly interfered). Didn’t Lewis-Gale use some harsh tactics here?
Wasn’t calling Alldredge an “organizational terrrorist” pretty extreme? Why wasn’t that
improper? (Court says it wasn’t independently tortious, which is probably true.) Would
such a statement give rise to a good defamation claim? (Probably not. Given the
opinion-oriented, hyperbolic nature of the statement, it probably wouldn’t be seen as a
false statement of supposed fact.) But what good is an interference with contractual
8-9
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
relations claim if the plaintiff effectively has to establish the defendant’s commission of
some other tort? How far should we let parties such as Lewis-Gale go in what the court
calls a “rough-and-tumble’ world? How big a factor in the court’s decision was the fact
that the contract between Alldredge and SWEP was terminable at will? (It was
significant. Although it did not expressly say so, the court suggested that less latitude
might have been extended to Lewis-Gale if the contract had not been terminable at will.)
One other consideration is worth noting here: the court’s indication that in using
aggressive tactics here, Lewis-Gale was looking out for its own legitimate interests.
H. Interference with Prospective Advantage
1. Emphasize how this tort differs from interference with contractual relations. Here, we are
concerned with hoped-for or likely business relations, not existing contractual relations.
Possible examples of interference with prospective advantage include: interferences with
the prospect of hiring employees; interferences with the prospect of obtaining
employment; interferences with the prospect of buying or selling products, land, or
intangibles; and even interferences with a business relation that does not involve an
actual contract.
2. Also emphasize that most of the "privilege" factors discussed previously apply in this
context as well. The exception is that interferences undertaken by competitors are much
less likely to produce liability where prospective advantages are involved. Recall that
such conduct often results in liability for intentional interference with contractual
relations if the defendant disrupts an existing contract.
I. Lanham Act § 43(a)
1. Section 43(a) appears at 15 U.S.C. § 1125(a).
2. Go through the text's five applications of § 43(a)'s broad language. Example of a false
advertising claim that involves an omission and an ad that is not clearly false on its face:
a seller of artificial fur coats calls one of its brands "Normink" and does not disclose the
coat's true nature. Problem # 11 deals with the type of statement that may violate § 43(a).
Time Warner Cable v. DIRECTV, Inc. (p. 310):
On a false advertising claim, the Second Circuit upheld the lower court's preliminary
injunction against DIRECTV ads implying, falsely, that high-definition picture quality
could not be had on "basic cable." It vacated a preliminary injunction against Internet ads
that depicted unrealistically poor "other tv" picture quality; this was puffery.
Points for Discussion: Should there be a puffery defense? Why is a nonspecific
misrepresentation worse than a specific one? The idea is that a competent, media-literate
consumer won't fall for it. Is this an appropriate setting for another appearance by the
"reasonable person?" It is easy to see the sense in applying the reasonable person
standard to an allegedly negligent defendant. Such standards also serve to keep
"ultrasensitive" litigants from holding up the normal flow of adult society. But what
value is there in an ad that is designed to fool the gullible through puffery? Probably
none. But not all puffery is actually designed to fool somebody. In this case, it probably
would have been difficult to advertise the distinction between 720p and 1080i resolution
through anything less than puffery. The difference is subtle unless it is viewed on an
enormous screen. Ask the class how to market high-definition television effectively
without puffery. Is it even possible? How would you distinguish the name-brand paper
towel from the leading brand without puffery?
3. Note that when false advertising is present, it will be enjoined. A corrective advertising
order is also among the court's arsenal of remedies for false advertising. If the party
alleging false advertising wants money damages, however, that party must adduce proof
of resulting economic harm. A commonly awarded item of damages is the plaintiff's
8-10
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Intellectual Property and Unfair Competition
increased costs in countering the defendant's false ads.
IV. RECOMMENDED REFERENCES
A. J.T. MCCARTHY, MCCARTHY'S DESK ENCYCLOPEDIA OF INTELLECTUAL PROPERTY.
B. A. MILLER & M. DAVIS, INTELLECTUAL PROPERTY: PATENTS, TRADEMARKS, AND
COPYRIGHTS IN A NUTSHELL.
C. M. EPSTEIN, EPSTEIN ON INTELLECTUAL PROPERTY.
D. R. BROWN & R. DENICOLA, COPYRIGHT.
E. S. FISHMAN, THE COPYRIGHT HANDBOOK: HOW TO PROTECT AND USE WRITTEN WORKS.
F. S. KANE, TRADEMARK LAW.
G. K. MCGRATH & S. ELIAS, TRADEMARK: LEGAL CARE FOR YOUR BUSINESS & PRODUCT
NAME.
H. K. STUCKEY, INTERNET AND ONLINE LAW.
I. K. NORWICK AND J. CHASEN, THE RIGHTS OF AUTHORS, ARTISTS, AND OTHER CREATIVE
PEOPLE.
J. D. DOBBS, THE LAW OF TORTS.
K. Arlen W. Langvardt, Section 43(a), Commercial Falsehood, and the First Amendment: A
Proposed Framework, 78 MINNESOTA LAW REVIEW 309 (1993).
L. Arlen W. Langvardt and Kyle T. Langvardt, Unwise or Unconstitutional? The Copyright
Term Extension Act, the Eldred Decision, and the Freezing of the Public Domain for Private
Benefit, 5 MINNESOTA INTELLECTUAL PROPERTY REVIEW 193 (2004).
M. Arlen W. Langvardt and Tara E. Langvardt, Caught in the Copyright Rye: Freeing First
Amendment Interests from the Constraints of the Traditional View, 2 HARVARD JOURNAL OF
SPORTS & ENTERTAINMENT LAW 99 (2011).
8-11
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
