978-0132718974 Chapter 9 Solution Manual Part 1

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Intellectual Property

I. Text Materials

Introduction

Intellectual property is useful information or knowledge. It is divided into two principal branches:

artistic property and industrial property.

Artistic property encompasses artistic, literary, and musical works. These are protected, in most

countries, by copyrights and neighboring rights. Industrial property is itself divided into two

categories: inventions and trademarks. Inventions include both useful products and useful

manufacturing processes. They are mostly protected by patents, petty patents, and inventors’

certificates. Trademarks include “true” trademarks, trade names, service marks, collective marks,

and certification marks. All of these are markings that identify the ownership rights of

manufacturers, merchants, and service establishments. They are protected by trademark laws.

Intellectual property is a creature of national law. International law sets down guidelines for its

uniform definition and protection, and it sets up ways that make it easier for owners to acquire

rights in different countries. National law—and sometimes regional law—is also important in

establishing the rules for assigning and licensing intellectual property.

The Creation of Intellectual Property Rights

The realm of information that can be owned, assigned, and licensed can involve either statutory

or nonstatutory rights. The former include copyrights, patents, and trademarks. The latter include

know-how, which is also often termed “trade secrets.”

Copyrights – A copyright is title to certain pecuniary rights and certain moral rights for a

specified period of time. These rights belong to the authors of any work that can be fixed in a

tangible medium for the purpose of communication, such as literary, dramatic, musical, or artistic

works; sound recordings; films; radio and television broadcasts; and computer programs. A

contained in the copyrighted work; it only restricts the use of the work itself.

Pecuniary Rights

Economic or pecuniary rights are legislative or judicial grants of authority that entitle an author to

exploit a work for economic gain. Pecuniary rights include the right of reproduction, the right of

distribution, and the right of performance.

Right of reproduction is one of the oldest and most common of the copyright rights. The German

statute defines it as the “right to make copies of a work, irrespective of the method or number”;

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the British Copyright Act refers to “reproducing the work in any material form”; the French

that permits indirect communication to the public”; and the U.S. Copyright Act refers merely to

the making of “copies.”

In socialist countries, although a copyright does include the right of reproduction, the right can be

exercised effectively only by state agencies. As a consequence, copyright holders have to assign

their rights to an agency—commonly their employer—and hope that the agency will promote

their copyrighted work.

Distribution rights are neither consistently defined nor consistently granted by one country to

another. To understand distribution rights, one has to consider two questions: (1) What is meant

by distribution? and (2) When are distribution rights exhausted?

The German Copyright Law defines distribution as “the right to offer to the public, or to place in

circulation, the original work or copies of the work.” In most countries, once a particular copy of

a work has been sold to a public transferee, the author’s right to control any subsequent transfers

of that particular copy ends. This is known as the “first sale doctrine,” or sometimes as the

“doctrine of exhaustion.”

There are three important limitations to the doctrine of exhaustion:

The first is that the right only applies to sales. An author who transfers an original or a copy

by lending, leasing, or as part of an exhibition retains his/her distribution right as to any

subsequent transfer.

The second limitation is that the doctrine only applies to the right of distribution of that copy.

The right to reproduce the original work, as well as other rights (such as performance rights

and moral rights), is not affected.

The third limitation has to do with the author’s right to limit rentals of distributed original

works and copies. By a widely subscribed-to international agreement, authors are entitled (at

least with regard to computer programs and motion pictures) to prohibit commercial rentals

of their copyrighted works.

to the granting of this right. One is to grant a general right of performance (droit de

représentation). The right of performance is the right “to communicate the work to the public by

any means whatsoever, including public recitation, lyrical performance, public presentation,

public projection, and telecommunication.” The second approach is to create several subsidiary

rights—in particular, the right to recite a literary work, the right to perform a musical work, the

right to make a remote presentation over loudspeakers or similar devices, the right to make a

projected image, the right to communicate by visual or sound records, and the right to make radio

and television broadcasts.

Regardless of the approach, the right of performance applies only to public performances. Private

performances—that is, performances limited to a small group of people “inter-connected

personally by mutual relations or by a relationship to the organizer”—do not infringe the

and playing music in the lobby of a hotel, in a television showroom, in a record shop, over

loudspeakers to workers in a factory, and to members of a dance club denote public

performances. A private performance would be a reading of a book to one’s family or to a small

group of close friends.

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Case 9-1: Performing Right Society, Limited v. Hickey

Facts: Hickey (H) was an owner of a restaurant where he played music on a record player for the

enjoyment of his customers, especially at weekly dances. Chipumza (C), an agent of the

Performing Right Society (PRS), visited the restaurant and determined that some of the

recordings that H was playing were songs in which PRS owned the copyright. C wrote H

informing him of the copyright and demanded payment of a royalty. H, unaware that a copyright

could exist in music, thought the letters were some sort of moneymaking racket. After contacting

his lawyer, however, H stopped playing the copyrighted music. PRS nevertheless sued,

contending it had lost royalties from H’s intentional refusal and/or negligence in playing the

music. H answered that his playing of the records was done innocently, and that if PRS is entitled

to damages, the damages should be limited to the single date stated in PRS’s complaint.

Issues: (1) Is lack of knowledge of the existence of a copyright an excuse for infringing a

Holdings: (1) Yes. (2) The profits earned from the infringement.

Law: Where infringement is admitted, but the defendant “was not aware, and had no reasonable

Explanation: It is clear that the infringement was done innocently. That being so, PRS is only

Order: The parties are to meet with the judge in chambers to determine the amount of profits due

PRS.

Moral Rights

The personal rights of authors to prohibit others from tampering with their works are called moral

rights. These rights are independent of the author’s pecuniary rights, and in most states that grant

moral rights, they continue to exist in the author even after the pecuniary rights have been

transferred—that is, when someone else owns the copyright to the work.

The 1886 Belgian Copyright Law recognized what today are considered the three basic moral

rights: (1) the right to object to distortion, mutilation, or modification (droit de respect); (2) the

right to be recognized as the author (droit à la paternité); and (3) the right to control public access

to the work (droit de divulgation). France and Germany have subsequently added a fourth moral

right—the right to correct or retract a work (droit de repentir, Rückrufsrecht)—but it is not as

universally recognized as the other three.

Moral rights are not recognized in the copyright laws of the United Kingdom, the United States,

and most countries that have inherited their law from England. Member states of the Berne

Convention are obliged to protect the moral rights of authors. The United Kingdom complies with

its international obligations, at least arguably, by claiming that an author can bring an action for

libel to complain of distortion, mutilation, or modification and an action for passing off to protect

the author’s rights of paternity. It also has argued that the right to control public access is

inseparable from the economic right of reproduction and therefore is similarly protected.

American courts and legal writers have often denied the existence of moral rights in the United

States.

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement),

which is an annex to the Agreement Establishing the World Trade Organization, requires WTO

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member states to comply with provisions of the Berne Convention (whether or not they are

parties to that convention) with one significant exception: Member states are not required to grant

moral rights to authors.

Case 9-2: Amar Nath Sehgal v. Union of India

Facts: In 1959, the Indian Government commissioned sculptor Mr. Sehgal to design a mural for

the walls at Vigyan Bhawan, New Delhi. Completed in 1962 and molded from tons of solid

bronze, the mural was 40 feet high and 140 feet long. In 1979, as part of other renovations, the

mural was removed in pieces and put in storage. In May 1992, Sehgal was granted an interim

injunction restraining defendants from causing further damage to the artwork. He also claims

violation of his moral rights, including the mutilation of his work, prejudice to his artistic

reputation, and violation of his right to claim authorship by destroying his name from the work.

Issue: Does assigning the copyright and ownership in a work to the government end the artist’s

moral rights in the work?

Holding: No.

Law: Section 57 of the Indian Copyright Act (1957), based on the Berne Convention Article 6bis,

Explanation: The Delhi High Court awarded rights to the mural to Mr. Sehgal, ordered the mural

Order: Mr. Sehgal waived his damages claim against the government in exchange for the return

of the mural to him.

Works Covered

The object of copyright protection is a work, that is, an intellectual creation in the field of art,

literature, music, or science. A work must also be original; that is, an author must infuse creativity

into it. Originality, however, should not be confused with the patent law requirements of novelty

or merit. The originality must be such that the work is capable of being “fixed in any tangible

medium of expression, now known or later developed.”

What is protected is not the idea or knowledge contained in the work, but the expression of the

work. That is, copyrights do not apply to “ideas, procedures, methods of operations, or

mathematical concepts as such.” Anyone may use the information or knowledge in the work; they

are limited only in the way they may use the original or a particular copy.

Neighboring Rights

Technology, however, has a habit of producing new kinds of works that fall outside of existing

definitions. Legislatures respond to such changes in different ways. Sometimes they make

amendments to existing copyright laws to incorporate these new works. Sometimes, however,

new laws, parallel to but separate from the existing copyright statutes, are enacted. The rights

created by such laws are often called neighboring rights (from the French droits voison) because

they are neighbors to, but not part of, an author’s copyright.

Formalities

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Prior to March 1989, the United States was the only country that required authors to observe

certain formalities to obtain a copyright. In particular, all publicly distributed copies of a work

had to include a copyright notice consisting of the symbol © or the word “Copyright” or the

abbreviation “Copr.”; the year the work was first published; and the name of the copyright owner.

In addition, two copies of certain kinds of works had to be deposited with the Copyright Office of

the U.S. Library of Congress. This is no longer the case in the United States as now a copyright

exists at the moment a copyrightable work is produced in a “tangible medium of expression.”

Scope

A copyright applies only within the territory of the state granting it. A state will not prevent the

making of copies of copyrighted material outside its territory. However, most states will keep

unauthorized copies of copyrighted works from being imported into their territory.

Duration

The common rule for the duration of a copyright is that it lasts for 50 years post mortem auctoris

(i.e., for 50 years following the author’s death). Many nations, including the United States, have

extended the duration to 70 years following the author’s death.

Exceptions to Copyright Protection

Virtually every copyright law describes certain uses of works that do not constitute an

infringement of the author’s copyright. Copyrighted material can be used lawfully in at least some

countries:

in a court or administrative proceeding or by the police should the material (such as a

portrait) be needed to maintain public safety;

for instructional purposes in schools;

for purely private use (except that computer programs may not be copied, regardless of the

use involved);

in brief quotations in scholarly or literary works or in reviews; and

in extended quotations of newsworthy speeches or political commentaries.

Patents – A patent is “a statutory privilege granted by the government to inventors, and to others

deriving their rights from the inventor, for a fixed period of years, to exclude other persons from

manufacturing, using, or selling a patented product or from utilizing a patented method or

process.” The idea that patents should be granted to reward inventors for advancing the public

interest was incorporated in the U.S. Constitution of 1789.

Although a patent is commonly referred to as a monopoly, it is not truly so. The owner of a patent

may be prevented from exploiting the grant by other laws (such as national security laws or unfair

competition laws) or by contractual agreement. What a patent grants, rather, is the protection of a

monopoly.

Two reasons have been given to justify the granting of patents. Those reasons are (1) that patents

are a confirmation of the private property rights of the inventor and (2) that a patent is a grant of a

special monopoly to encourage invention and industrial development. The private-property-right

approach to patents has some theoretical shortcomings. It does not take into account the

restrictions that governments commonly impose on patents. Among these are a patent’s fixed

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duration, its inapplicability to certain kinds of inventions, and its forfeiture or compulsory

licensing when it is not worked. As a consequence, the second explanation for granting patents—

to encourage inventors and public development—seems the better explanation.

Today, both the private rights of inventors and the public’s interest in promoting development

continue to be the primary justifications given both in patent acts and by legal writers for the

granting of inventors’ privileges. In some respects, however, a patent is now viewed as a device

for reconciling these two competing interests.

Patents and Other Inventor’s Grants

The primary method of protecting and rewarding inventors is the patent. A patent is an exclusive

privilege granted to an inventor, for a fixed term, to manufacture, use, and sell a product or to

employ a method or a process. Most countries, accordingly, grant three basic kinds of patents:

Design patents – granted to protect new and original designs of an article of manufacture.

Plant patents – granted for the creation or discovery of a new and distinct variety of a plant.

Utility patents – granted for the invention of a new and useful process, machine, article of

manufacture, or composition of matter.

Several variations on these basic patents include:

Confirmation patents – issued for inventions already patented in another country.

Patents of addition – cover improvements on already patented inventions.

Precautionary patents – issued for short periods of time to an inventor who has not

completely perfected an invention so that he/she will be notified when any other inventors

apply for a patent on the same invention and so that he/she will have the opportunity to object

to their applications.

A few countries provide protection for lesser inventions, i.e., technical improvements of a minor

nature. Developed in Germany and Japan and adopted in Spain and a few other countries, this

form of protection is known as a petty patent or an inventor’s right in a utility model.

Inventions That Qualify for Patent Protection

An invention:

is new if no other inventor has obtained a patent for the same invention;

it involves an inventive step if the “subject matter” of the invention was not “obvious at the

time the invention was made to a person having ordinary skill in the art to which said subject

matter pertains”; and

it is capable of industrial application if the product or process is one that can be used in

industry or commerce.

Case 9-3: Monsanto Co. v. Coramandal Indag Products, (P) Ltd.

Facts: Monsanto (M) sued Coramandal Indag Products (CIP) for patent infringement. On

February 20, 1970, M had patented in India a weed killer that contained “Butachlor” in an

emulsifier. Butachlor is the common name for the herbicide 2-Chloro-2,

6-Diethyl-N-(Butoxy-Methyl)-Acetanilide, or CP 53619. Because CIP was marketing a weed

killer containing Butachlor, M claimed that its patent was being infringed. CIP countersued to

have M’s patent revoked on the grounds that M had not invented Butachlor, and that its formula

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was in the public domain. The facts showed that Dr. John Olin invented Butachlor in 1966 or

1967, and that it was part of the public domain. M also argued that its patent applied to the

process of emulsifying Butachlor so that it could be conveniently used as a weed killer. The

emulsifying agent, however, was a common product produced in India.

Issue: Had Monsanto invented its weed killer?

Holding: No.

Law: The Patents Act states that a patent may be revoked if the invention is obvious or does not

Explanation: The International Rice Institute had described Butachlor in its annual report for

Order: Monsanto’s patent is revoked.

Determining Qualifications

Questions about the existence or nonexistence of newness, inventive steps, and industrial

application may arise during the initial review of an application, during the appeal of a denial,

during a revocation or cancellation hearing, or in suits for infringement where the person charged

with infringement disputes the validity of the patent.

With regard to the review of an application by a patent office, procedures range from a simple

review of the application form to an extensive search of domestic and foreign materials to

determine if the product or process is both novel and inventive. In completing an application

form, an inventor is uniformly required to disclose sufficient information about the product or

process “in such full, clear, concise, and exact terms as to enable any person skilled in the art to

which it pertains, or with which it is most clearly connected, to make and use the same.”

Inventions Excluded from Patent Protection

Patents may be denied to inventions that do not meet the basic definition of patentability. They

may also be denied to inventions that violate basic social policies. The Agreement on

Trade-Related Aspects of Intellectual Property Rights allows a WTO member state to deny a

patent to an inventor in order “to protect public order or morality” so long as the state also forbids

the commercial exploitation of the invention. The TRIPS Agreement also allows WTO member

states to deny patents for certain inventions that involve:

diagnostic, therapeutic, and surgical methods for the treatment of humans and animals;

plants and animals other than microorganisms (except that member states must provide patent

protection or its equivalent for plant varieties); and

essentially biological processes for the production of plants or animals.

Duration of Patents

The World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property

Rights requires that the term of a patent be no less than 20 years.

Scope of Patents

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A patent is valid only within the territory of the state granting it; hence, states cannot prevent the

use of patented technology outside their territory. States will, however, stop the importation of

goods from countries that infringe a patent.

Trademarks – Merchants and others use five marks to identify themselves and their products:

A true trademark is “any word, name, symbol, or device or any combination thereof adopted

and used by a manufacturer or merchant to identify his goods and distinguish them from

those manufactured or sold by others.”

A trade name is the name of the manufacturer rather than the manufacturer’s products.

A service mark is a “mark used in the sale or advertising of services to identify the services of

one person and distinguish them from the services of another.”

When trademarks or service marks are used by members of an association, collective, or

cooperative organization to identify their products or services to members, they are called

collective marks.

A certification mark is a mark used exclusively by a licensee or franchisee to indicate that a

product meets certain standards.

From the perspective of an owner, a trademark is the right to put a product protected by the mark

into circulation for the first time. From the viewpoint of a consumer, a trademark serves to:

designate the origin or source of a product or service,

indicate a particular standard of quality,

represent the goodwill of the manufacturer, and

protect the consumer from confusion.

Acquiring Trademarks

Trademarks are acquired in two ways: (1) by use and (2) by registration. In a few countries,

registration is not available. In Canada and the Philippines, a trademark can be registered only if

it has already been put into use.

The fact that a trademark cannot be registered does not mean that its owner is without rights. In

countries like Panama and Taiwan, a foreign owner of a famous unregistered trademark can

oppose registration but cannot sue a local company for infringement. In other countries, only a

locally registered owner can protest either registration or infringing use.

In any of the countries that allow an unregistered foreign trademark holder to challenge either a

competing registration or an infringing use, the trademark in question must be well known. In

addition to the objections that can be raised by famous trademark holders, most countries allow a

local user of a mark to object to its registration by another individual—even if the mark is not

famous—so long as the opponent’s local use began before that of the applicant.

A few states will register a trademark to the first person to apply for it, regardless. Thus, prior

users are denied the right to challenge the application or to later seek cancellation of the

registration.

Registration

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One registers a trademark to publicly notify other potential users of one’s claim to a mark. The

registration process commonly begins with an examination done by an official in the Trademark

Office to determine a mark’s suitability for registration.

Registration Criteria

The common statutory definitional criterion that appears in all trademark laws is distinctiveness.

This means that a mark must possess a unique design that functions to distinguish the product on

which it is used from other similar products. To be registered, a trademark must (1) not infringe

on another mark and (2) be distinctive.

Case 9-4: Experience Hendrix, L.L.C. v. Hammerton

Facts: Hammerton is a domain name speculator who registered the domain name

jimihendrix.com. He advertised to sell the name for $1 million. Experience Hendrix (EH) is the

owner of all of the music, name, image, and recording rights associated with the deceased Jimi

Hendrix, including the domain name jimi-hendrix.com and several trademarks and service marks

using the name Jimi Hendrix. It seeks to have Hammerton’s registration revoked.

Issue: Should Hammerton’s registration of the domain name jimihendrix.com be revoked?

Holding: Yes.

Law: The Domain Name Registration Policy, which all registrants agree to observe, provides that

Explanation: (1) The name is identical to EH’s registered trademark and service names. (2)

Order: Registration revoked.

Refusing Registration

The statutory grounds for refusing a trademark vary from country to country. For example, a

mark or name will be denied in the United States if it:

does not function as a trademark to identify the goods or services as coming from a particular

source (for example, the matter applied for is merely ornamentation);

is immoral, deceptive, or scandalous;

may disparage or falsely suggest a connection with persons, institutions, beliefs, or national

symbols, or bring them into contempt or disrepute;

consists of or simulates the flag or coat of arms or other insignia of the United States, or a

state or municipality, or any foreign nation;

is the name, portrait, or signature of a particular living individual, unless he has given written

consent; or is the name, signature, or portrait of a deceased President of the United States

during the lifetime of his widow, unless she has given her consent;

so resembles a mark already registered in the Patent and Trademark Office as to be likely,

when applied to the goods of the applicant, to cause confusion, or to cause mistake, or to

deceive;

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is merely deceptive or deceptively misdescriptive of the goods or services;

is primarily geographically descriptive or deceptively misdescriptive of the goods or services

of the applicant; or

is primarily merely a surname.

Registration Review

Once a Trademark Office official determines that a mark is suitable for registration, the mark will

be published in the office’s official gazette. Opponents to the registration then have a period of

time—typically 30 to 90 days—in which to oppose the registration or to ask for an extension to

do so. An opposition hearing is then held before a review board of the Trademark Office. If no

opposition is filed or if the review board rules in favor of the applicant, a registration will issue.

The Term of Registered Trademarks

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires WTO

member states to protect trademarks for a term of at least seven years. Additionally, it provides

that trademarks are to be indefinitely renewable.

Usage Requirements

After a trademark is registered, many countries require the holder to present proof, upon the

renewal of registration, that the mark was actually used within the country during the prior term.

A few countries require the trademark owner to present interim proof of use before the term

expires.

In addition to requiring the user to prove use at the time of renewal, many countries allow third

parties to bring actions to cancel the trademark if it has not been used for some specified period of

time. The TRIPS Agreement now sets this period of time at no less than three years. Challenges

for nonuse are uncommon. Many trademark owners have a policy of never initiating a nonuse

action against others for fear of retaliatory actions against their own unused marks. Similarly,

challenges against new registrants attempting to file marks that are similar or identical to marks

already in use are equally uncommon.

Not all countries have a user requirement. A few, such as Canada and the United States, make it

difficult for challengers to establish nonuse by additionally requiring them to prove that the owner

intentionally abandoned the use of a trademark.

Know-How – Know-how is practical expertise acquired from study, training, and experience. It

has been defined as factual knowledge, not capable of separate description but that, when used in

an accumulated form, after being acquired as a result of trial and error, gives to the one acquiring

it an ability to produce something that he/she otherwise would not have known to produce with

the same accuracy or precision found necessary for commercial success.

Unlike other forms of intellectual property, know-how is generally not protected by specific

statutory enactments. It is protected, rather, by contract, tort, and other basic legal principles.

When specific information or know-how is kept secret, it is often called trade secrets and

protected in some countries by trade secrecy laws.

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The TRIPS Agreement requires WTO member states to protect what the agreement calls

“undisclosed information.” Natural and legal persons must be given the legal means to prevent

information from being disclosed to, acquired by, or used by others without their consent in a

manner contrary to honest commercial practice.

The owner of know-how may prevent an assignee, licensee, or employee from disclosing secret

know-how to third parties and may require these same people to pay for the training or assistance

or use of the know-how they acquire from the owner.