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Chapter 11 - Intellectual Property
11-1
Chapter 11
Intellectual Property
Learning Objectives
The objective of this chapter is to instill an appreciation for the institution of property and its
importance to the economic system and its creation of incentives for investment. The forms of
in terms of creation, maintenance and instances of violation. The international system for the
protection of intellectual property rights will also be studied. The chapter reaffirms the assertion
in Chapter 1 that property—the state’s recognition of a private individual’s right to exclude
others from legitimately acquired resources—is fundamental to the modern private market and is
conceptually intertwined with the idea of liberty.
References
Elias, Stephen, Patent, Copyright & Trademark, 3d ed. Nolo.com (1999).
Gollin, Michael A., Driving Innovation, Cambridge U. Press (2008).
Intellectual Property Stories, Ginsburg & Dreyfuss eds. Foundation Pr. (2005).
Johnston, David, et al, Cyber Law. Stoddart (1997).
McJohn, Stephen M., Intellectual Property: Examples and Explanation. 2d ed. Aspen
(2006).
Merges, Robert P., et al., Intellectual Property in the New Technological Age. 3rd ed.
Aspen (2003).
Miller, Arthur R. and Michael H. Davis, Intellectual Property in a Nutshell. Thomson West
(2007).
Poltorak, Alexander, and Paul Lerner, Essentials of Intellectual Property. Wiley (2002).
Teaching Outline
A. The Justification for Intellectual Property (LO 11-1)
Emphasize:
How an exclusive right to what an individual acquires and produces gives incentive to
create new things, new ways of doing things, and new invention generally.
That the framers of the U.S. Constitution made sure that Congress could protect
intellectual property with Article. 1, Section 8.
Chapter 11 - Intellectual Property
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See Sidebar 11.1 on the increasing importance of intellectual property.
you give them property. Deny someone the exclusion right and they do not have
property.”
Since the institution of property promotes individual prosperity and permits unequal
accumulation of resources, it is easy to see why some students may associate property
with greed and materialism. Students may not appreciate that the resources that property
protects are usually limited only at a point in time, not over time, and that the function
of the private market is to generate new resources, new wealth.
B. Intellectual Property and Competition
Emphasize:
That the basic economic system of intellectual property is grounded in the idea of
incentives.
That conversely, without intellectual property, the pace of creative research and
development (R & D) in business would slow dramatically.
That countering the benefits of intellectual property protection are certain costs.
Sidebar 11.2—“The Open Source Alternative”
Emphasize:
That the protections of property often do not apply automatically to intangible
knowledge resources all information one or one’s business creates.
That the failure to follow the rules may mean that information that could have been
captured is instead dedicated to the public domain, meaning that anyone can use it.
Chapter 11 - Intellectual Property
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Emphasize:
The definition of trade secret.
A. Establishing the Existence of a Trade Secret
Emphasize:
That to protect information as a trade secret, the information must actually be secret,
and the business must take reasonable measures to keep it so.
The various types of reasonable measures that businesses take.
The usefulness of a trade secret audit.
Case 11.1—“Al Minor & Associates, Inc. v. Martin”
B. Demonstrating Misappropriation
Emphasize:
Ask the students how the businesses they have worked for have protected trade secrets.
Many students will have worked in restaurants that must protect their recipes.
How a company should structure a program to protect trade secrets may be found in
Bloom & Chard, “Protection Programs Should Secure More Than Trade Secrets,” Nat’l
L.J., 8/30/93, p. 522.
Emphasize:
The definition of injunction.
That trade secret owners can also obtain damages against those who misappropriate
trade secrets.
11-4
© 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.
Additional Matter for Discussion:
How the Business Decision Revisited is basically the story of Jose Lopez and his move
from GM to Volkswagon. His story may be found in “GM v. Volkswagon,” Newsweek,
12/9/96, p. 48.
D. Criminal Enforcement of Trade Secrets
Emphasize:
The federal Economic Espionage Act.
That the Coca-Cola case in Sidebar 11.3 is an example of an Economic Espionage Act
criminal prosecution.
The two provisions of EEA for misappropriation.
The global dimensions of trade secret theft.
Sidebar 11.4—“Federal Government Intellectual Property Enforcement”
Additional Matter for Discussion:
Raise the issue of how easy it is to misappropriate digital trade secrets with an I Pod and
printed and other trade secrets with a cell phone camera.
II. Patent Law (LO 11-3)
A. Obtaining a Patent
Emphasize:
The existence of the Patent and Trademark Office (PTO).
Patent Type
Emphasize:
The three types of patents—design, utility and plant—and the length of time in
obtaining a patent. (See Figure 11.1)
The steps in obtaining a patent.
The role of the patent examiner.
Sidebar 11.5—“Should utility patents always be presumed valid?”
B. Patentable Subject Matter
11-5
© 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.
Case 11.2: Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct.
2107 (2013)
Additional Matters for Discussion:
A hot topic in patent law continues to involve the business subject matter patent.
Dotcoms like eBay whose chief asset may be a business method program that is easily
business plans and considering how patentable core technologies are. Patentability of
technologies and methods become important in Initial Public Offerings.
C. Novelty, Nonobviousness, and Utility
Emphasize:
That the characteristic of novelty indicates that something is new and different from the
Sidebar 11.6—“Is Software Patentable? Maybe.”
Sidebar 11.7—“The Determination of Obviousness”
Additional Matter for Discussion:
Patent registration is just that: registration. The property is not perfected, however, i.e.,
does not become legally valid, until adjudged so by a court. Although the validity of
patents is often attacked on the basis of subject matter, probably the most common basis
of attaching patent validity in court is by arguing that the invention is “obvious” to
experts in the area.
D. Patent Enforcement
Emphasize:
The constitutional limitation on patent duration.
That when a patent expires, the invention is in the public domain, and others may use it
without limitation.
Chapter 11 - Intellectual Property
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That for the duration of a patent, the owner can sue those who infringe on it. If
E. Patent Trolls and the Litigation Threat
Emphasize:
What a patent troll is.
That as a counter to the patent troll rhetoric, one might consider the fact that non-
practicing entities are exercising a legitimate right under their property grant.
The two aspects of the 2011 reforms to patent law may reduce troll behavior.
Additional Matter for Discussion:
Discuss the implications of the fact that most new drugs are discovered by U.S.
pharmaceutical companies.
III. Trademark Law (LO 11-4)
Emphasize:
That recognizability or distinctiveness is the function of trademarks and why companies
want to distinguish their products and services from their competitors’ products and
services.
A. Types of Trademarks
Emphasize:
What a trade dress is.
The case of Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992).
B. Trademark Registration
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Emphasize:
When the PTO will deny registration.
That every ten years the owner must renew the trademark registration.
How secondary meaning can allow the trademarking of a person’s name.
C. Trademark Enforcement
Emphasize:
That civil violation of a trademark (or a patent) is termed infringement.
Case 11.3: Kraft Foods Group Brands LLC. v. Cracker Barrel Old Country Store, Inc.,
735 F.3d 735 (7th Cir. 2013)
The meaning of generic and that if the trademark loses its distinctiveness, it also loses
its status as a protected trademark.
Table 11.1—“Trademarks Lost Due to Generic Use”
How defendants can win trademark infringement lawsuits.
The concept of fair use.
Criminal counterfeiting of trademarks and palm off.
Additional Matters for Discussion:
Observe that much intentional trademark violation occurs in international trade and that
international conventions (discussed in Chapter 18) are not subscribed to by all
countries. Fake “Rolex” watches and counterfeit “Levi” jeans are only the tip of the
iceberg.
Emphasize that most trademark litigation does not involve intentional infringement and
can be regarded as a way of establishing property boundaries.
Case for Discussion:
1. A federal district court judge ruled that Burger King’s use of “Kid’s Meal” did not
infringe on McDonald’s trademark “Big Kid’s Meal.” The court indicated that the term
