Questions: 1. Did plaintiff’s case fail due to a technicality of registering with the Copyright
Office?
Essentially yes. Having documents that indicated that the companies had recorded the songs was
2. How do radio stations pay the copyright holders given the huge number of stations and
songs?
3.
ASCAP and BMI, primarily, are organizations collecting royalties from stations and all other
Add. Case: Maverick Recording v. Harper (5th Cir. 2010)—MediaSentry caught Harper
sharing hundreds of songs with others by a peer-to-peer network. Expert analysis of her
computer and transmitted files proved she had shared music. Court granted summary judgment
on copyright infringement claims and issued an injunction against further improper downloading
and sharing. She was fined $200 for each incident as an “innocent” violator. Plaintiff appealed,
asking for $750 damages per incident as allowed by statute.
Decision: The decision is correct but the damages should be $750 per incident. Harper was not
Add. Case: MGM Studios v. Grokster (S. Ct. 2005)—Grokster provided software to allow
computer users to share electronic files, peer-to-peer, of music and videos, including copyrighted
files. MGM sued for infringement, contending Grokster knowingly and intentionally distributed
software to enable infringement, even though Grokster did not do the copying itself. Lower
courts held that writing and distributing the software was not infringement. MGM appealed.
Decision: Vacated. One infringes contributorily by intentionally inducing or encouraging direct
Add. Case: Wall Data v. Los Angeles County Sheriff’s Dept. (9th Cir., 2006)–The LA County
Sheriff’s Department bought 3,663 licenses to Wall Data’s software, but installed it on 6,007
computers. While the software was on more computers than were licensed, the computers were
configured such that the number of workstations able to access the installed software did not
exceed the total number of licenses. The district court held this to be infringement. The buyer
appealed.
Decision: Affirmed. The loading of the program on to computers and copying the program was
commercial use. The program was not owned by defendant, who only obtained licenses to use a
Add. Case: NXIVM v. Ross Institute (2nd Cir., 2004)–NXIVM provides training programs for
executives Its manuals are copyrighted. The Ross Institute has a website devoted to cult
deprogramming. It posted a critical review of NXIVM’s work, quoting pages of manuals in the
review. NXIVM sued for copyright infringement. Trial court rejected the request for an injunction
against Ross. NXIVM appealed.
Decision: Affirmed. Infringement looks to the four factor test: purpose and character; nature of
the copyrighted work, amount and substantiality; and market inquiry. Some factors weigh in
Add. Case: New York Times v. Tasini (S. Ct., 2001)–Tasini and other writers, who sold
copyrighted stories to newspapers and magazines owned by Times, were paid for the stories
when written. Times later put the stories in databases where articles could be pulled up on the
Internet. The writers sued, contending copyright violation by electronic reproduction. Times
claimed that as owner of the collective copyright, the publications as a whole, it had the right to
reproduce and distribute the articles. The appeals court held for the writers. The Times
appealed.
Decision: Affirmed. Reproduction of the copyrighted articles without permission of the authors
was infringement. Copyright in each contribution to a collective work is distinct from the
Add. Case: Matthews v. Freedman (1st Cir., 1998)–Matthews designs souvenir T-shirts. One
shirt said: “Someone went to Boston and got this me this shirt because they love me very much.”
Around the writing were drawings related to Boston. Competitor Freedman began to sell a shirt
that said: “Someone who loves me went to Boston and got me this shirt.” The writing is
surrounded by items related to Boston. Matthews sued Freedman for infringement. Trial court
ruled for defendant and awarded him attorney fees. Matthews appealed.
Decision: Affirmed. No infringement occurred here as the shirts expressed similar ideas, but
there was no direct copying of the expression on the original shirt. The underlying idea, even if
Add. Disc.: Future derivative works of a copyrighted work may be impossible to imagine. The
movie “Fantasia” was released by Walt Disney in 1940. The music for film was recorded by the
Philadelphia Orchestra led by Leopold Stokowski. Over 50 years later Disney released the
videocassette of the movie which generated profits of about $120 million. The orchestra
contends it is due half the profits, per earlier agreements. Disney said that the 1938 contract did
not mention sharing profits from videocassettes or laser disks, so it does not have to pay.
Agreements about IP should be written so as to cover possible derivative works that we cannot
now envision. This can be done by using general language about future use. In a similar case,
singer Peggy Lee won $2.3 million from Disney for use of her songs in the movie “Lady and the
Tramp.”
Issue Spotter: Fair Sharing of Information?
This is not fair use. Making one copy would be fine, but making multiple copies is copyright
infringement. While the use is educational, it is part of a for-profit organization that uses the
information to improve the quality of its output. The company needs to get permission to reprint
and probably pay a fee for each copy made.
PATENTS—A statutory grant from the federal government giving the inventor of a novel,
genuine, not obvious product the exclusive right to make, use and sell an invention for 20 years
from the date of application. The 20-year standard was adopted by the Patent Office in 1995 to
conform to the WTO standards. Protection during the patent life is strong, but the patent itself is
public, so many firms prefer to use trade secrecy rather than reveal details.
CASE: Bowman v. Monstanto (Sup. Ct. 2013)—Monsanto owns patents on Rodundup Ready
soybean seeds. They are sold with a license to plant but buyers may not resell seeds or plant
seeds grown from the plants grown from patented seeds as they contain patented genetic
material. Bowman bought seeds, planted, then kept seeds for future use. Monsanto sued for
infringement. Lower courts held for Monsanto; Bowman appealed.
Decision: Affirmed. Patent law allows patent holders to prevent buyers from making copies of
Questions: 1. If Monsanto could not prevent reproduction, what incentive would it have to invest
in developing such products?
Very little as the Court explained. A purpose of patent law is to reward inventors by giving them
2. Should the court take into account the commercial success of a patented product when
considering a challenge to a patent?
In general they do not. Their job is to enforce patent law as it exists, not value individual items.
Add Case: Nystrom v. Trex Co. (Fed. Cir., 2004)—Nystrom has a patent for cutting “a board”
in a convex manner to help water run off. He sued Trex for infringement for using the cut on
planks it made from composite wood fibers and recycled plastic. Trex defended that its planks
are not “boards” which are all wood. District court dismissed the suit; Nystrom appealed.
Decision: Reversed. Board has an ordinary meaning, which would include the planks made by
Add. Case: KSR International v. Teleflex (Sup. Ct., 2007)–KSR, an auto parts maker,
produced an adjustable mechanical accelerator pedal for Ford and received a patent for it.
Later, GM hired KSR to supply pedals for certain vehicles. To make the pedal compatible for
GM, KSR added a modular sensor. Teleflex sued KSR for infringement of its patent for a sensor
attached to the pedal. KSR claimed the patent was invalid for obviousness. The trial court held
for KSR. The Federal Circuit reversed. KSR appealed.
Decision: Reversed and remanded. A patent claiming a combination of elements of prior art is
obvious if the improvement is the predictable use of prior art according to established functions.
A patent’s subject matter can be proved obvious by noting that there existed at the time of
Add. Case: eBay v. MercExchange (Sup. Ct., 2006)–MercExchange owns a patent that covers
a business method for the sale of goods on the Internet. It attempted to license its patent to eBay,
but negotiations went nowhere. MercExchange then sued for patent infringement and won a jury
finding that the patent was valid, that it had been infringed, and that damages were due. That
ruling was appealed. MercExchange requested a permanent injunction against eBay for using
the business method. The trial court refused to issue the injunction; the appeals court reversed.
eBay appealed.
Decision: Vacated and remanded. A plaintiff seeking a permanent injunction must show that: 1)
it has suffered irreparable injury; 2) remedies at law, such as money damages, are inadequate to
International Perspectives: Patent Differences
World Intellectual Property Org (WIPO) encourages IP protection globally. Many nations have
adopted the 20-year patent standard and more countries are beginning to recognize the validity of
other nation’s patents. However, differences remain. In the U.S. an inventor may disclose a
patent a year before filing, but not in Europe. In Europe, unlike the U.S., surgery and therapy
methods may not be patented. In Japan, unlike in the EU and U.S., Employees who create
patents must be compensated based on its value.
Add. Case: Richardson-Vicks v. Upjohn (Fed. Cir. 1997)–Richardson-Vicks (RVI) owned a
patent granted in 1985 for an OTC medicine combining ibuprofen and pseudoephedrine, two
common drugs. Upjohn and others requested reexamination of the patent. The Patent Office
upheld the validity. RVI then sued Upjohn and other firms for making products that had the same
formula. The jury held for RVI, finding infringement. The judge threw out the verdict as having
no basis in law because the patent fails for obviousness and prior invention. RVI appealed.
Decision: Affirmed. The drug granted the patent was obvious at the time it was issued. Other
firms had combined similar drugs about that time, so there was prior art in the industry that was
Add. Case: Robotic Vision Systems v. View Engineering (Fed. Cir., 2001)–Robotic owns a
patent that discloses a method of scanning the leads on integrated circuit devices that are
arranged in rows and columns. The patent application was filed on June 24, 1992. In 1995,
Robotic sued View, alleging that its scanning machines infringed. View defended that the patent
was invalid. The district court found the patent invalid because it was on sale prior to the
critical date of one year before the patent application was filed. The on-sale bar states that if an
invention is on sale, or is ready for patenting, more than one year prior to the filing of the patent
application, it is not eligible for a patent. Robotic appealed.
Decision: Affirmed. Robotic sold its technology to Intel in March, 1991, more than one year
prior to the filing date of the patent. The product sold at that time, while not identical in every
Add. Case: Arrythmia Research v. Corazonix (Fed. Cir., 1992)–A patented invention was
challenged in court. The invention converts the electronic impulses of a heart attack victim’s
electrocardiogram into digital information that can be analyzed by a computer program. Using
existing medical knowledge, the program alerts a physician when the patient has a high risk for
a second heart attack. The district court held that the formula for determining the risk of a
second heart attack was prior art and not patentable.
Decision: The federal circuit court of appeals reversed. “The number obtained by the program is
not a mathematical abstraction; it is a measure of microvolts of specified heart activity…. Claims
directed solely to an abstract mathematical formula or equation, including the mathematical
Add. Case: Ciba-Geigy v. Alza (D.NJ, 1994)–Ciba-Geigy acquired a patent for a nicotine
patch (Habitrol), that helps people quit smoking. Alza produced Nicoderm, a similar patch. Ciba
sued Alza for patent infringement. Alza claimed the patent was invalid.
Discussion: Alza’s motion for summary judgment is granted. The patent was anticipated by a
prior printed publication. More than a year before the patent application was filed, a letter from
Add. Disc.: The Supreme Court has held (Markham v. Westview), that the role of juries in patent
cases is limited. Judges are to determine the scope and meaning of patent terminology. The
construction of a patent, including terms of art within a patent claim, the key step in determining
most patent validity cases and infringement cases, is a matter of law for trial judges to decide.
Issues beyond that may go to a jury. The Court upheld the decision of the Federal Circuit (which
sits in Washington) that was created in 1982 and has exclusive jurisdiction over appeals from the
Patent and Trademark Office and patent infringement appeals from district courts. The result
has been more consistency in patent law than when all the appeals circuits were deciding patent
cases. The Supreme Court rarely questions decisions of the Federal Circuit on such cases.
TRADE SECRETS—Information protected by tort law that, 1) if known by a competitor
would, 2) cause the information owner to lose a competitive advantage, and 3) the owner must
take reasonable steps to protect the information. Most of the information protected by trade
secrets could be patented or copyrighted, but trade secrecy can last longer and the knowledge can
be kept from competitors. Hence, the success of the secret Coke formula for over 100 years.
Most businesses with trade secrets have employees that will know trade secrets sign statements
acknowledging that they promise not to reveal to others now or later when working for another
firm.
CASE: Bohnsack v. Varco (5th Cir. 2012)—Bohnsack invented a machine that helped in oil
drilling. Under a secrecy agreement, he discussed with Varco the possibility that it would
manufacture the machine. Talks fell apart and Varco then filed a patent application for the
machine. Bohnsack sued for trade secret violation and was awarded $600,000. Varco appealed.
Decision: Affirmed. Varco contends that it did not use the trade secret, but it exploited it in a way
likely to lead to enrichment, which constitutes use. Bohnsack tried to protect the secret by the
Questions: 1. Do you think punitive damages should be awarded in such instances?
That is largely at the discretion of the jury. Misappropriation is a tort, so punitive damages are
possible, but usually they are awarded only if the behavior is particularly odious. The jury found
2. Why would Varco steal the invention? Why not pay for it?
3.
People do things that in retrospect seem odd as the theft was clear. But the people at Varco may
have come to believe, after working with Bohnsack for some time, that they really were
Add. Case: Hicklin Engineering v. R.J. Bartell (7th Cir. 2006)—Bartell worked as an
independent contractor for Hicklin making transmission equipment. He quit and went into
competition. Hicklin sued for violation of the Wisconsin Uniform Trade Secrets Act. The trial
judge held for Bartell. Hicklin appealed.
Decision: Vacated and remanded. Just because Bartell was permitted to use trade secrets when
working for Hicklin, he had no right to use that information for personal gain. He was aware
that he had access to proprietary information and the firm took reasonable steps to protect the
Add. Case: Harvey Barnett, Inc. v. Shidler (10th Cir., 2003)–Barnett owns the Infant
Swimming Research program (ISR) that teaches babies how to survive in water. ISR instructors
are trained in the method, are told they possess trade secrets, and sign non-disclosure and
confidentiality agreements. Some former employees went into competition with Barnett; he sued
for theft of trade secrets. District court held there was no trade secret and dismissed the suit.
Barnett appealed.
Decision: Reversed. We look to the extent to which the information is known outside and inside
the business, precautions taken to guard the information, the value in having the information, the
Add. Case: Buffets, Inc. v. Klinke (9th Cir., 1996)–Buffets runs all-you-can-eat restaurants
(OCB). Scott, its founder, developed the menus and the practice of small-batch cooking to keep
food fresh. The Klinkes were impressed by OCB and asked Scott if they could buy a franchise
from him, but Scott said no. Klinke got OCB employees to give him a copy of OCB’s recipes and
employee manual. Klinke’s son also got hired at OCB, lying about his background on his
application. Soon the Klinkes opened a competitor restaurant using OCB manuals and recipes.
OCB sued for trade secret theft. Court held for Klinke; OCB appealed.
Decision: Affirmed. There was no theft of trade secrets. OCB did not treat its recipes and
employee manual as trade secrets; they were easily had by all employees in a place with many
employees and high turnover. Secrets must be kept secret and employees must be on notice about
Add. Case: Al Minor & Assoc. v. Martin (Sup. Ct., Ohio, 2008)-Martin worked for AMA, an
actuarial firm that administers retirement plans for 500 clients. The client list is confidential.
Martin was a pension analyst for five years before he quit. He did not sign an employment
contract or a non-compete agreement. When he left, he set up a competing firm and successfully
solicited 15 AMA clients based on information of who they were from his memory. AMA sued for
violation of the Ohio Trade Secrets Act. The trial court awarded AMA $25,973 in damages for
fees that it would have earned from the clients who departed. Martin appealed.
Decision: Affirmed. Information that is a trade secret does not lose its character as a trade
secret if it has been memorized. The Uniform Trade Secrets Act protects the information,
Add. Case: Baxter Intl. v. Morris (8th Cir., 1992)–Scientist Morris worked for Baxter and
signed a trade secrecy agreement and agreement not to compete by working for a competitor for
one year after leaving Baxter. Morris left Baxter to work for a competitor. Baxter sued to enforce
the trade secrecy and non-competition agreements. Trial court upheld the trade secrecy
agreement but struck down the non-competition agreement as in violation of California law.
Decision: Affirmed. Non-competition agreements are illegal in California. The trade secrecy
agreement is valid and Morris may not use any trade secrets gained at Baxter in his new work. A
Add. Case: Templeton v. Creative Loafing (Ct. App., Fla., 1989)–Templeton worked for a
publication, Music, by Creative Loafing., that was distributed to stores in the Tampa area. The
magazine was free; advertisements paid for it. Templeton quit and started a competitor
magazine, Music Pulse. He used the list of advertisers he had compiled while at Creative
Loafing, which sued, seeking an injunction and damages for use of its trade secrets. District
court held for plaintiff.
Decision: Reversed. There was no trade secrecy agreement; but, more importantly, the list of
Add. Case: PepsiCo v. Redmond (7th Cir., 1995)–Redmond was general manager of Pepsi for
California. He was privy to inside information and trade secrets and had signed a confidentiality
agreement. Quaker hired him to run Gatorade in competition with Pepsi’s PowerAde. Pepsi
sued, seeking an injunction to prevent him from working for Quaker and to prevent him from
disclosing trade secrets, such as marketing plans and cost and pricing details, which would be of
great use to him in his new position. District court ordered Redmond not to start work for six
months and then not to use any trade secrets
Decision: Affirmed. Pepsi had showed that Redmond would inevitably disclose trade secrets if he
took the job immediately, so the injunction was allowed to stand. Since the job he held and the
Add. Disc.: For a company to have a trade secret policy that will stand up in court, there are
several considerations. Access to important documents should be controlled and the documents
so stamped. Employees’ contracts should clearly state, when hired, what is trade secret
information, and employees should sign contracts not to disclose secrets or work for direct rivals
soon after leaving. If these procedures are not done carefully, the courts will not be sympathetic
in later litigation. In recent years, millions have been lost in judgments involving trade secret
computer program copying.
Add. Info,: Corporate Spying: Hilton agreed in 2010 to not create luxury hotels for two years
based on a suit filed by rival Starwood, which accused Hilton of stealing confidential documents
about such hotels. A court-appointed monitor would review Hilton’s branding and marketing
materials, plus a payment was made to Starwood.
Economic Espionage— The Economic Espionage Act holds that theft of commercial trade
secrets may be a federal offense, subject to prison and fines. It mostly is used to combat
large-scale industrial theft, especially in international competition.
CASE: U.S. v. Yang—Lee worked for Avery, an adhesives maker. When visiting Taiwan, he was
approached by the Yangs about providing information to their Taiwanese company. Lee accepted
$25,000 per year for providing confidential information. When discovered, Lee cooperated with
the FBI in a sting operation. When the Yangs visited the U.S., a meeting with Lee was filmed.
They were arrested, convicted and fined $5 million. They appealed, contending the material they
received were not trade secrets.
Decision: The Yangs conspired to steal trade secrets. That conspiracy is enough for a conviction.
Questions: 1. The appeals court held that the Yangs conspired to buy information they knew to be
trade secrets, a criminal offense. How could Avery prove the information involved were secrets?
At trial, Avery had to provide evidence that the information Lee provided to Yang were trade
2. Do you think the fine, with no prison time, is sufficient to discourage such activity?
That is a fair amount of money; it was the trial judge’s discretion about prison. In similar cases,
prison time has been imposed. From what is known, much of the economic espionage that occurs
Discussion Question
It may not get a registered trademark for Wheelbarrow’s Wheelbarrows. You cannot copyright a
generic term that is already in use, as applied to the item itself. The company can call its product
by that name, but it receives no legal protection for it. It could sell, say, perfume, and call it
Wheelbarrow’s and receive a trademark for that use, since that would be arbitrary and fanciful.
Case Questions
1. Affirmed. Information that is a trade secret does not lose its character as a trade secret if it has
been memorized. The Uniform Trade Secrets Act protects the information, regardless of the
2. Affirmed. A generic mark can never be valid under any circumstance. A descriptive mark
cannot be a valid trademark without evidence of secondary meaning. The secondary meaning in
connection with geographically descriptive marks means that the mark no longer causes the
3. (answer on Internet for students) The district court dismissed the case but the appeals court
reversed and remanded. Factors to be considered in determining whether a likelihood of
confusion exists between trademarks include: 1) similarity of marks; 2) similarity of goods or
4. Affirmed. The plastic reproduction of a wishbone by Lucky Break was independently created
as required for a valid copyright. It was not an exact copy of a natural wishbone. Artistic changes
had been made via a computer model to make the wishbone attractive to buyers. That meets the
5. (answer on Internet for students) Defendant’s motion for summary judgment granted. The
treatment of ideas for a television show is not protectable under copyright law. Copyright law
does not protect ideas, but the expression of those ideas. Elements of expression that are not
6. Nintendo was awarded $65,000 damages for copyright infringements and $62,000 for
damages under the Lanham Act for trademark infringement, which was the profits made from the
7. (answer on Internet for students) No. “…the executives at Hormel as not amused. They worry
that sales of SPAM will drop off it is linked with ‘evil in porcine form.’ Spa’am, however, is not
the boarish Beelzebub that Hormel seems to fear. … Spa’am is a comic character who ‘seems
childish rather than evil.’ … By film’s end, ‘Spa’am is shown sailing away with other Muppets as
8. (answer on Internet for students) The Supreme Court held that color alone may serve as a
trademark. Qualitex could register its green-gold color of press pads as a trademark that could
then be protected from infringement. The color has attained “secondary meaning” which means
9. No. The patent application did not reveal how the putty was made; the best mode of making
10. The court of appeals held that under Texas common law, which is the same as the
Restatement of Torts, taking aerial photographs of the building site was an “improper means” of
getting a trade secret; hence an injunction against such flying was upheld and the photographer
Ethics Question
An exception can be made for one drug or for drugs used for one disease, such as AIDS, and the
effect will not be large on the drug companies. However, if patent protection is weakened then
profits from drugs fall meaning less research and development in the future. Drug companies are
the most research intensive of all companies–sales from today’s drugs bring in the revenues to
help invent the next round of helpful medicines. To strip patent protection would benefit drug
users today but harm countless people in the future who would be denied the benefits of new
drugs not yet invented.
Essay Questions from Cases:
U.S. Search, LLC sued U.S. Search.com, Inc. claiming infringement of its trademark. U.S.
Search, LLC claimed first use of U.S. Search. It had not registered the mark, but filed a request
with the Trademark Office for registration and also sued, demanding that U.S. Search.com, Inc.
not be allowed to have continued use of its registered mark 1-800-US Search. The Trademark
Office would not register the mark and the district court held against U.S. Search, LLC, so it
appealed. Does it have a good case against U.S. Search.com and 1-800-US Search? [U.S. Search,
LCC v. U.S.Search. Com Inc., 300 F.3d 517, 4th Cir. (2002)]
Answer: U.S. Search, LLC does not win. The company, an executive recruiting services firm,
failed to show that the mark was suggestive–who knows what they were searching for? It had no
secondary meaning. There was already a registered mark. U.S. Record Search, so U.S. Search
GSI is a steel fabricator—a contractor that makes steel components for construction projects.
Scott Marshall worked for GSI as an estimator—he determined how much GSI could bid on a
project and still earn a profit. Scott asked his brother, Alan, to write a program to help him with
estimates. Alan did and was not paid for his work. Scott used the program while he worked at
GSI. When Scott left GSI, he and Alan tried to market a new version of the program to sell to
project estimators. GSI sued, contending that the key elements of the bid estimation process in
the program were stolen from GSI by Scott and were a trade secret. The trial court enjoined the
brothers from marketing the program; they appealed. Who owns the program? [Marshall v.
Gipson Steel, 806 So.2d 266, Sup. Ct., Miss. (2002)]
Answer: Reversed. The process by which bids were estimated was easy to figure out by proper
means and hence was not a trade secret. While the process has value to GSI, a person competent
Internet Assignment
U.S Patent and Trademark Office: www.uspto.gov Library of Congress: www.loc.gov
You can visit the United States Patent and Trademark Office for details of the laws relating to
patents and trademarks. The Library of Congress hosts the Copyright Office. This Office has
publications, application forms for copyright registration, links to copyright law, and an online
catalog of copyright records going back to 1978. Many resources can be found on their websites.