978-0078023859 Chapter 11 Solution Manual Part 1

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Chapter 11 – Intellectual Property

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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.

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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.

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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.

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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

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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.

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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