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Bonus Chapter A - Working within the Legal Environment
A-1
bonus ch ap ter .
Working within the
Legal Environment
what's new in this edition A.2
brief chapter outline and learning objectives A.3
lecture outline and lecture notes A.5
PowerPoint slide notes A.45
lecture enhancers A.59
lecture enhancer A-1: DOING BUSINESS WITH A PROACTIVE LEGAL STRATEGY A.59
lecture enhancer A-2: THE DIFFERENCES BETWEEN PATENTS, COPYRIGHTS, A.60
AND TRADEMARKSP1
lecture enhancer A-3: NORTEL’S PATENT AUCTION A.61
lecture enhancer A-4: LED ZEPPELIN’S STAIRWAY TO CONTROVERSY A.62
lecture enhancer A-5: PIRACY MAY KO UFC A.62
lecture enhancer A-6: NEGOTIABLE INSTRUMENT FORGERY AND THE A.63
UNIFORM COMMERCIAL CODE
lecture enhancer A-7: TAX DODGING CORPORATIONS COST THE U.S. BILLIONS A.64
lecture enhancer A-8: GOOGLE’S TAX TACTICS A.65
A
Bonus Chapter A - Working within the Legal Environment
A-2
what’s new in
this edition
additions to the 11th edition:
• Getting to Know Eve Wright Taylor of the Miami Heat
• Name That Company: The FTC
revisions to the 11th edition:
• Statistical data and examples throughout the chapter were updated to reflect current information.
deletions from the 10th edition:
• Getting to Know Kenneth C. Frazier
• Name That Company: Toyota
Bonus Chapter A - Working within the Legal Environment
A-3
brief chapter outline
and learning objectives
Bonus Chapter A
WORKING WITHIN THE LEGAL ENVIRONMENT
Getting to Know EVE WRIGHT TAYLOR, MIAMI HEAT
learning objective 1
Define business law, distinguish between statutory and common law,
and explain the role of administrative agencies.
I. THE CASE FOR LAWS
A. Statutory and Common Law
B. Administrative Agencies
learning objective 2
Define tort law and explain the role of product liability in tort law.
II. TORT LAW
A. Product Liability
learning objective 3
Identify the purposes and conditions of patents, copyrights, and
trademarks.
III. LEGALLY PROTECTING IDEAS: PATENTS, COPYRIGHTS, AND
TRADEMARKS
learning objective 4
Describe warranties and negotiable instruments as covered in the
Uniform Commercial Code.
IV. SALES LAW: THE UNIFORM COMMERCIAL CODE
A. Warranties
B. Negotiable Instruments
learning objective 5
List and describe the conditions necessary to make a legally enforce-
able contract, and describe the possible consequences if such a contract
is violated.
Bonus Chapter A - Working within the Legal Environment
A-4
V. CONTRACT LAW
A. Breach of Contract
learning objective 6
Summarize several laws that regulate competition and protect con-
sumers in the United States.
VI. PROMOTING FAIR AND COMPETITIVE BUSINESS PRACTICES
A. The History of Antitrust Legislation
VII. LAWS TO PROTECT CONSUMERS
learning objective 7
Explain the role of tax laws in generating income for the government
and as a method of discouraging or encouraging certain behaviors among
taxpayers.
VIII. TAX LAWS
learning objective 8
Distinguish among the various types of bankruptcy as outlined by the
Bankruptcy Code.
IX. BANKRUPTCY LAWS
learning objective 9
Explain the role of deregulation as a tool to encourage competition.
X. DEREGULATION VERSUS REGULATION
XI. SUMMARY
Bonus Chapter A - Working within the Legal Environment
A-5
Getting to Know EVE WRIGHT TAYLOR, MIAMI HEAT
As the vice president and associate general counsel for the Miami Heat, Eve Wright
Taylor deals with every legal issue that involves the team, including its arena..
learning objective 1
Define business law, distinguish between statutory and common law, and
explain the role of administrative agencies.
I. THE CASE FOR LAWS
A. Laws are an essential part of a civilized nation.
1. Over time, the body of law changes to reflect the
needs and changes in society.
2. The JUDICIARY is the branch of government
chosen to oversee the legal system through the
court system.
3. The COURT SYSTEM in the U.S. is organized at
the federal, state, and local levels.
a. TRIAL COURTS hear cases involving crimi-
nal and civil law.
b. CRIMINAL LAW defines crimes, establishes
punishment, and regulates prosecution.
c. CIVIL LAW involves legal proceedings that do
not involve criminal acts.
d. Both federal and state systems have APPEL-
As a key federal government agency, we have a key role in mergers and acquisitions in the
United States business community. Without our approval, mergers or acquisitions can be re-
jected. For example, we approved the merger of American Airlines with U.S. Airways, but re-
jected a merger between AT&T and T-Mobile. Name that agency.
(Students should read the chapter before guessing the company’s name: The FTC.)
Bonus Chapter A - Working within the Legal Environment
A-6
PPT A-1
Bonus Chapter Title
Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Working
within the
Legal
Environment
BONUS CHAPTER A
PPT A-2
Learning Objectives
LEARNING OBJECTIVES
A-2
1. Define business law, distinguish between statutory and
common law, and explain the role of administrative
agencies.
2. Define tort law and explain the role of product liability in
tort law.
3. Identify the purposes and conditions of patents,
copyrights, and trademarks.
4. Describe warranties and negotiable instruments as
covered in the Uniform Commercial Code.
5. List and describe the conditions necessary to make a
legally enforceable contract, and describe the possible
consequences if such a contract is violated.
PPT A-3
Learning Objectives
LEARNING OBJECTIVES
A-3
6. Summarize several laws that regulate competition
and protect consumers in the United States.
7. Explain the role of tax laws in generating income for
the government and as a method of discouraging or
encouraging certain behaviors among taxpayers.
8. Distinguish among the various types of bankruptcy
as outlined by the Bankruptcy Code.
9. Explain the role of deregulation as a tool to
encourage competition.
PPT A-4
Eve Wright Taylor
EVE WRIGHT TAYLOR
Miami Heat
A-4
• Attended law school at the
University of Indiana and
worked for the LPGA before
heading into the male-
dominated NBA.
• With the Miami Heat, Taylor
may be asked for legal advice
on issues regarding the
stadium, marketing, sales, and
player-related matters.
PPT A-5
Name That Company
NAME that COMPANY
A-5
As a federal government agency, we have a key role
in mergers and acquisitions in the United States
business community. Without our approval,
mergers or acquisitions can be rejected. For
example, we approved the merger of American
Airlines with U.S. Airways, but rejected a merger
between AT&T and T-Mobile.
Name that organization!
(See complete PowerPoint slide notes on page A.45.)
PPT A-6
The Need for Laws
The NEED for LAWS
A-6
LO A-1
• Laws are a key part of a civilized society, but must
change with the times.
• Judiciary -- The branch of government chosen to
oversee the legal system through a system of courts.
• The U.S. courts system is organized at the
federal, state, and local levels.
PPT A-7
Types of Court
TYPES of COURT
A-7
LO A-1
• Trial courts hear cases of
criminal and civil law.
• Appellate courts hear
appeals from the losing party
at the trial court level.
Bonus Chapter A - Working within the Legal Environment
A-7
LATE COURTS to hear appeals of trial court
decisions.
4. The judiciary also governs the activities and op-
erations of a business.
5. Government has stepped in to make LAWS
governing behavior because the U.S. business
community has been perceived as not imple-
menting acceptable practices fast enough.
6. BUSINESS LAW are the rules, statutes, codes,
and regulations that are established to provide a
legal framework within which business may be
conducted and that are enforceable by court ac-
tion.
B. STATUTORY AND COMMON LAW
1. STATUTORY LAW includes state and federal
constitutions, legislative enactments, treaties of
the federal government, and ordinances—in
short, written laws.
a. Laws are written in legal terminology and are
difficult to read.
b. There are more than 1.2 million lawyers in
the U.S.
2. COMMON LAW is the body of the law that
comes from decisions handed down by judges;
also referred to as unwritten law.
a. PRECEDENT involves decisions judges
have made in earlier cases that guide the
handling of new cases.
Bonus Chapter A - Working within the Legal Environment
A-8
PPT A-8
Types of Law
TYPES of LAW
A-8
LO A-1
• Criminal law defines crimes, establishes
punishments, and regulates the investigation and
prosecution of people accused of committing crimes.
• Civil law proceedings cover non-criminal acts -
divorce, personal injury lawsuits and more.
• Business Law -- Refers to the rules, statutes, codes
and regulations that provide a legal framework for the
conduct of business.
lecture enhancer A-1
DOING BUSINESS WITH A PROAC-
TIVE LEGAL STRATEGY
Many companies are simply reactive when it comes to legal
red tape. MIT’s research shows that may not be the best
course of action. (See the complete lecture enhancer on page
A.59 of this manual.)
PPT A-9
Major Areas of Law
MAJOR AREAS of LAW
A-9
LO A-1
• Statutory Law -- Includes state and federal
constitutions, legislative enactments, treaties of the
federal government and ordinances; written law.
• Common Law -- The body of law that comes from
decisions handed down by courts; unwritten law.
• Precedent -- Decisions judges have made in
previous cases to guide their handling of new cases.
Bonus Chapter A - Working within the Legal Environment
A-9
b. Lower courts must abide by the precedents
set by higher courts.
C. ADMINISTRATIVE AGENCIES
1. ADMINISTRATIVE AGENCIES are federal or
state institutions and other government organi-
zations created by Congress or state legisla-
tures with delegated power to pass rules and
regulations within their mandated area of author-
ity.
2. Administrative agencies hold quasi-legislative,
quasi-executive, and quasi-judicial powers.
a. The agency is allowed to pass regulations
within its area of authority, conduct investi-
gations, and hold hearings when rules and
regulations have been violated.
b. They issue more rulings and settle more dis-
putes than courts do.
3. Figure A.1 lists some of these administrative
agencies.
learning objective 2
Define tort law and explain the role of product liability in tort law.
II. TORT LAW
A. A TORT is a wrongful act that causes injury to an-
other person’s body, property, or reputation.
1. An INTENTIONAL TORT is a willful act pur-
posely inflicted that results in injury.
2. NEGLIGENCE, in tort law, is behavior that
causes unintentional harm or injury.
Bonus Chapter A - Working within the Legal Environment
A-10
PPT A-10
Administrative Agencies
ADMINISTRATIVE AGENCIES
A-10
LO A-1
• Administrative Agencies -- Federal or state
institutions and other government organizations with
delegated power to create rules and regulations within
their given area of authority.
• Examples of Administrative Agencies:
- The Federal Reserve Board
- The Securities and Exchange Commission
- The Equal Employment Opportunity Commission
- The Federal Trade Commission
PPT A-11
Administrative Agencies
TEXT FIGURE A.1
Examples of Federal, State, and
Local Administrative Agencies
ADMINISTRATIVE AGENCIES
A-11
LO A-1
test
prep
PPT A-12
Test Prep
TEST PREP
A-12
• What is business law?
• What is the difference between statutory and
common law?
• What is an administrative agency?
PPT A-13
What Is Tort Law?
WHAT is TORT LAW?
A-13
LO A-2
• Tort -- A wrongful act that
causes injury to another
person
’
s body, property or
reputation.
• An intentional tort is a willful
act that results in injury.
• Negligence – Behavior that
causes unintentional harm or
injury.
Bonus Chapter A - Working within the Legal Environment
A-11
3. Product liability is one of the more controversial
areas of tort law.
B. PRODUCT LIABILITY
1. PRODUCT LIABILITY is the part of tort law that
holds businesses liable for harm that results
from production, design, sale, or use of products
it markets.
2. At one time, the legal standard for liability was
KNOWINGLY placing a product on the market.
a. Today, many states have extended liability
to the level of STRICT PRODUCT LIABIL-
ITY, the legal responsibility for harm or injury
caused by a product regardless of fault.
b. The company may be held liable even if the
company did not know of the defect at the
time of sale.
3. The rule of STRICT LIABILITY has caused seri-
ous problems for manufacturers of some prod-
ucts, such as asbestos and lead-based paint.
a. Manufacturers of chemicals and drugs are
also susceptible to lawsuits.
b. Toyota recalled 8.1 million cars from 2009 to
2011; the company reached a $1.2 billion
settlement with the U.S. government.
c. Pharmaceutical giant, Merck, reached set-
tlements to end thousands of lawsuits filed
regarding its drugs.
d. The gun industry has been accused of dam-
Bonus Chapter A - Working within the Legal Environment
A-12
PPT A-14
Product Liability Laws
PRODUCT LIABILITY LAWS
A-14
LO A-2
• Product Liability -- Holds businesses liable for
harm that results from the production, design, or
inadequate warnings of products they market.
• Strict Product Liability -- Liability without regard to
fault; a company can be held liable for a defective
product even if they didn
’
t know of the defect.
PPT A-15
Major Product Liability Cases
TEXT FIGURE A.2
Major Product Liability Cases
MAJOR
PRODUCT LIABILITY CASES
A-15
LO A-2
Bonus Chapter A - Working within the Legal Environment
A-13
ages under the rules of strict product liability.
e. Fast-food companies are facing liability suits
charging that their food causes obesity and
other health concerns.
4. Businesses and insurance companies have
called for meaningful TORT REFORM from
huge losses in strict product liability suits.
5. Congress passed the CLASS ACTION FAIR-
NESS ACT, a first step in tort reform.
learning objective 3
Identify the purposes and conditions of patents, copyrights, and trade-
marks.
III. LEGALLY PROTECTING IDEAS: PATENTS,
COPYRIGHTS, AND TRADEMARKS
A. A PATENT is a document that gives inventors ex-
clusive rights to their inventions for 20 years.
1. Filing a patent with the U.S. Patent Office re-
quires a SEARCH to ensure the patent is truly
unique, followed by the FILING OF FORMS.
2. Patent owners may SELL OR LICENSE the use
of the patent to others.
3. PENALTIES for violating a patent can be se-
vere.
a. Defending of patent rights is solely the job of
the patent holder.
b. Dr. Gary Michelson received a settlement of
$1.35 billion from Medtronic Inc. to end liti-
gation and license patents.
Bonus Chapter A - Working within the Legal Environment
A-14
PPT A-16
Patents, Copyrights, and
Trademarks
• Patent -- A document that gives inventors exclusive
rights to their inventions for 20 years.
PATENTS, COPYRIGHTS, and
TRADEMARKS
A-16
LO A-3
• Copyright -- Protects a
creator
’
s rights to materials such
as books, articles, photos,
paintings, and cartoons.
• A trademark is a legally
protected name, symbol, or
design that identifies the goods
or services of a seller.
lecture enhancer A-2
THE DIFFERENCES BETWEEN
PATENTS, COPYRIGHTS, AND
TRADEMARKS
Although patents, copyrights, and trademarks are similar legal
concepts, each has a very specific definition. (See the com-
plete lecture enhancer on page A.60 of this manual.)
PPT A-17
Patent Facts
PATENT FACTS
A-17
LO A-3
• Patent applicants should
seek the advice of a lawyer.
• Foreign applicants are
eligible to file for U.S.
patents.
• Patent owners have the
right to sell or license the
use of their patent to others.
Bonus Chapter A - Working within the Legal Environment
A-15
B. The AMERICAN INVENTION PROTECTION ACT
requires patent applications to be made public after
18 months.
1. It was passed in part in response to some inven-
tors intentionally dragging out the patent applica-
tion.
2. Some inventors use a SUBMARINE PATENT,
intentionally delaying a patent application and
waiting for others to develop the technology.
3. Technology companies also defend themselves
against patent infringement suits by joining Al-
lied Security Trust, a firm that acquires intellec-
tual property of interest to its members.
C. A COPYRIGHT is a document that protects a crea-
tor’s rights to materials such as books, articles, pho-
tos, and cartoons.
1. Copyrights are filed with the LIBRARY OF
CONGRESS.
2. They involve a minimum of paperwork and last
for the lifetime of the author or artist plus 70
years.
3. The Copyright Act of 1978 gives a special term
of 75 years for publication to works published
before January 1, 1978.
4. The holder of an EXCLUSIVE COPYRIGHT
may charge a fee to anyone who wishes to use
the material.
5. If a work is created by an employee in the nor-
