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Chapter 08 – Intellectual Property and Unfair Competition

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CHAPTER 08

INTELLECTUAL PROPERTY AND UNFAIR COMPETITION

I. OBJECTIVES

This chapter is designed to acquaint students with the law of intellectual property, certain

“commercial” or “competitive” torts, and the law of unfair competition as represented by § 43(a) of

the Lanham Act. See the Learning Objectives that appear near the beginning of the chapter. The

material on competitive torts can be treated separately, along with the other intentional torts

discussed in Chapter 6. Competitive torts are addressed in this chapter because they reflect the

general theme of unfair competition, as do the other doctrines and rules discussed in the chapter.

II. ANSWERS TO INTRODUCTORY PROBLEM:

III. SUGGESTIONS FOR LECTURE PREPARATION

A. Introduction

discussed in the chapter:

creativity and innovation such competition induces; and

The introductions to most of the major sections in the chapter should suggest which policy

B. Patents

1. Describe the meaning of patent protection in general terms and state the policy rationale

underlying such protection.

effect.

b. Who is entitled to a patent? Is it the first to invent, or is it the first to file? Note that

historically, the U.S. adhered to a first-to-invent rule in determining who is entitled to

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

a patent. This approach ran contrary to what many other nations do. They instead

have tended to go with a first-to-file approach. With the AIA (see the above

paragraph), the U.S. moved from a first-to-invent system to a first-to-file system in

March 2013. Note the implications and likely effects of this change.

2. Briefly note the types of patents that may be awarded (see p. 266), but emphasize that the

text focuses on utility patents. With regard to the “what is patentable?” question:

a. You might distinguish a process (a means devised for the production of a given

result) from a machine (a distinctive means—basically an apparatus—for

b. Stress that laws of nature and natural phenomena are not patentable, even if they

were previously unknown and were only recently discovered. The law-of–nature

disqualification from patentability has received considerable attention from the

the law-of-nature prohibition on patentability, consider Association for Molecular

Pathology v. Myriad Genetics, Inc., the text case discussed immediately below.

Association for Molecular Pathology v. Myriad Genetics, Inc. (p.267): The

Supreme Court holds the Patent & Trademark Office (PTO) should not have

granted patents arising from the discovery of the precise location and sequence of

human genes that would substantially increase a patient’s risk of breast or ovarian

Points for Discussion: Walk the students through basic facts here, without digging

too deeply into the science (unless, of course, you have a fairly extensive

background regarding the latter). Ask why Association for Molecular Pathology

patents shouldn’t have been granted in the first place.) Note that the plaintiffs are

isolated by Myriad. (They received what amounts to a green light to do so.)

Aren’t patents supposed to provide incentives to create and innovate? Didn’t

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Myriad make a great discovery? (Yes, to both questions.) So why is there the law

of nature prohibition? (Do we really want those who discover previously

unknown facts to have dibs on what they discovered for 20 years? Would that be

good policy? Note, importantly, that particular applications of the law of nature

that Myriad discovered could be patent-eligible, whether the applications are

developed by Myriad or by someone else.

c. The Supreme Court has held that practical applications of mathematical principles

may merit patent protection. This ruling helped paved the way for an eventual

abstract ideas, however, are not patentable.

d. Regarding the patentability of certain business methods, note the controversy that

has resulted from a 1998 decision in which the U.S. Court of Appeals for the

Federal Circuit held that business methods could qualify for patent protection.

For example, Amazon obtained a patent on its “one–click” online shopping

patentable and disappointed some observers who hoped that the Court would

interpret the Patent Act as not permitting patents on business methods. Discussion

of Bilski appears below. It is followed by discussion of a text case, Alice Corp. v.

CLS Bank Int’l, in which the Supreme Court applied Bilski.

1990s. (See the above background.) Note what the business method in the case

involved, and what was contemplated by the “machine or transformation” test that

the Federal Circuit held to be the exclusive test for patentability of business

methods. Why do the students think the Federal Circuit regarded that test as the

that business methods simply are unpatentable. Instead, the court issued a more

limited ruling, though one suggesting that business method patents shouldn’t be

routinely granted even though they may be granted. What does the Supreme

Court say about the “machine or transformation” test? (That it may be useful to

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an approach that should be fair game for all to use.)

the reason why those prohibitions appear in the Patent Act. Bilski (see above) was

among the decisions the Court cited and discussed. The reasoning and result in

Bilski led logically to the Court’s conclusion that the Alice patents at issue also

amounted to abstract ideas and thus were unpatentable. Although the Court

the Court indicate that business method patents are likely to receive fairly careful

scrutiny when the validity is questioned? (It would appear so.) Note, too, that

those who are concerned about so-called patent trolls (see the text’s later

discussion at p. 276) probably enjoyed the fact that Alice’s patents were ruled

disqualify the applicant from obtaining a patent. See p. 271. But be sure to note the

one-year window exception explained at p. 271. Walk the students through this

exception and stress its most common application: to the situation in which the

inventor begins public sale of the invention before filing the patent application. The

commenced.

f. Discuss the nonobviousness requirement and what it contemplates. KSR v. Teleflex

(a former text case that is now Problem #1) is an excellent vehicle for doing so.

KSR International Co. v. Teleflex, Inc.: The Supreme Court reversed the Federal

Circuit’s judgment that a claim in Teleflex’s patent over placement of an electronic

patent was invalid.

Points for Discussion: When does an invention become obvious—and therefore

unpatentable—in light of the prior art? In rejecting the “teaching, suggestion,

motivation” test applied by the Federal Circuit, the Supreme Court seemed to want to

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

reorient the obviousness test in a more pragmatic direction. Fixating on the fact that

the prior art had not specifically “taught” Teleflex’s inventor where to place the sensor

distracted from the real point of an obviousness analysis: namely, whether Teleflex’s

solution to the problem would have been apparent to persons of ordinary skill in the

field. Has the Supreme Court’s decision in this case made the nonobviousness

is to change the time frame of the nonobviousness inquiry. Until March 2013,

3. The rights held by a patent owner are sweeping in nature, as the discussion in the text

have a different duration, however. See p. 272 of the text.

4. Explain patent law’s exhaustion doctrine (also called the first sale doctrine), which

provides that the sale of an item embodying a patented invention exhausts the patent

Bowman v. Monsanto Co. ( p.272): The Supreme Court holds that the exhaustion

doctrine did not protect Bowman, a farmer, against patent infringement liability to

Monsanto.

almost certainly were still Roundup-Ready to a considerable extent, and they were much

cheaper than buying more Roundup-ready seeds from a Monsanto licensee.) Of course, the

doctrine only ends a patent owner’s rights regarding the particular copies or items at

issue—here, the previously sold soybeans. It does not entitle a person in Bowman’s

case. That flavor probably helped generate much of the media attention given to the case.

The Supreme Court, however, appeared to regard this case as an easy one to decide.

5. Note that the shop-right doctrine discussed in the text (see p. 274) refers only to the

employer’s license to use the patent, not to patent ownership. The other two rules

discussed at this point deal with patent ownership.

6. Note the doctrine of equivalents and its key role in many patent infringement cases of a

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

the patented invention. Note also that there may be liability in appropriate cases for

inducing patent infringement or for contributory infringement.

7. Briefly note the remedies available to successful plaintiffs in patent infringement cases.

Mention that even though injunctions remain a standard and frequently imposed remedy in

such cases, they are not a mandatory remedy.

8. With regard to defenses, emphasize the two obvious ways to defend against a patent

granted.

9. A new section added for the 16th edition (see p. 266) summarizes other major changes

a. Note that originality is not the same thing as uniqueness or the novelty required for a

such matters as where to stand when taking the picture, how to position the persons or

things shown in the picture, and what type of film (color or black and white) to use.

of the Lanham Act.

practical benefit of “scaring off” would-be infringers.

October 1998 effective date of the CTEA received an extra 20 years of protection. Of

course, the longer duration contemplated by the CTEA also attaches to works created after

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would apply, and those under which the work-for-hire rule would apply.

28-year term plus a renewal term (if the proper procedures for renewal were followed).

The renewal term, originally 28 years and later extended to 47 by Congress, is now 67

years with the enactment of the CTEA. The “old” rules concerning duration will therefore

to discuss the public policy implications of this state of affairs. Critics of the CTEA have

d. In 2003, the Supreme Court decided Eldred v. Ashcroft, 537 U.S. 186, the case referred to

duration extensions enacted by Congress had been applied to already existing works.

Although the Court upheld the CTEA, it made comments that raised questions about the

wisdom of the enactment. Justices Breyer and Stevens wrote vigorous dissents.

these rights can be licensed or transferred. Be sure that students understand the difference

278.

American Broadcasting Cos. v. Aereo, Inc. (p. 278): The Supreme Court holds that

complex facts than this one. Have the students trace the basic elements of Aereo’s plan,

without getting into too many technical details. Suffice it to say that Aereo devised what it

regarded as a way around having to pay the licensing fees that cable networks have to pay

in order to make programming available to their paying subscribers. Of course, then,

Aereo could keep its prices low for its subscribers. Note, but probably only in a general

the Court’s decision have a substance-over-form feel to it? (I.e., Aereo’s form differs

from that of CATV providers (the forerunners of today’s cable networks), but its

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

substance is the same in terms of the access to copyrighted programs that consumers get).

Does the Court seem to be saying that Aereo’s method achieves the same results cable

companies achieve, that Congress clearly wanted CATV’s (and therefore cable

(largely the same doctrine seen in patent law). Start this discussion with basic examples

similar to the textbook example noted at p. 281 of the text. For instance, one who buys a

novel owns that copy of it and can sell or give it to someone else without implicating the

make and distribute copies. After such an introduction to the first sale doctrine, discuss

Kirtsaeng, a text case the students are likely to find interesting

Kirtsaeng v. John Wiley & Sons, Inc. (p. 282): The Supreme Court holds that the first sale

Points for Discussion: Ask the students to summarize Kirtsaeng’s profit-making plan. (He

textbooks that Wiley produced outside the U.S. and intended for distribution outside the

Kirtsaeng could sell the overseas editions in the U.S. at lower prices than would be

charged for the functionally equivalent U.S. versions.) So, what was the possible hitch in

Kirtsaeng’s plan, which might otherwise seem to be a legally permissible way to take

outside the U.S.) Why did Wiley’s argument fail? (Because the importation provision

sales practices of Wiley (practices that have been common in the publishing industry).

6. In discussing infringement, explain the elements of access, copying (either deliberate or

subconscious), and substantial similarity. Note the extent to which the copying and

substantial similarity elements tend to overlap.

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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

a. A famous case dealing with subconscious copying is the one in which former Beatle

George Harrison was held liable for infringing the copyright on the song “He’s So

Fine.” Portions of Harrison’s song “My Sweet Lord” reflected substantial similarity to,

and apparent copying from, portions of “He’s So Fine.” The fact that any copying by

Harrison was not deliberate (i.e., that it was subconscious) did not protect him against

claim.

b. You might also note a recent example that students probably heard about because it

work’s expression may be enough to constitute infringement—especially if the

borrowed portion was qualitatively significant (e.g., an important, particularly

Action box on p. 285, deals with a variety of infringement issues. We include

discussion notes on Grokster in case you wish to devote meaningful class time to it.

MGM Studies, Inc. v. Grokster, Ltd.: The U.S. Supreme Court recognizes the

Napster, the Ninth Circuit Court of Appeals had placed contributory and vicarious

infringement liability on Napster. In Grokster, however, the Ninth Circuit had said

Grokster was not liable. Distinguishing Napster, the Ninth Circuit held that Grokster’s

in favor of Grokster was erroneous because the Ninth Circuit failed to recognize that

the inducement theory of liability would apply to Grokster.

Ask the students what underlying actions the contributory infringement, vicarious

infringement, and inducement theories all depend on. (Answer: direct infringement

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need not be named in the lawsuit, but proof of such infringing actions must be

demonstrated in order for contributory or vicarious infringement liability or

acknowledge that Grokster wouldn’t be liable under either of these theories, but

strongly indicates that application of the inducement theory would lead to a different

outcome. Ask what area of the law the Supreme Court “borrows” from in recognizing

advocated the use of Grokster‘s software to engage in uses of an infringing nature.)

Note that the Supreme Court remands without actually holding Grokster liable, but the

message to the lower courts on remand is clear. The Supreme Court regarded

Grokster‘s unlawful objective as “unmistakable” and considered the evidence

conduct amounting to inducement. In addition, the evidence in Grokster showed that

an overwhelmingly large percentage of the uses of Grokster’s software were infringing

in nature, and that noninfringing uses were very few and very far between.). Finally,

ask about the Grokster-related ethical issues raised in the Ethics in Action box at p.

293.

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

antitrafficking provisions. Note the court’s rejection of the fair use and First Amendment