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Chapter 8
Intellectual Property Rights
INTRODUCTION
Laws protecting patents, trademarks, and copyrights are designed to protect and reward inventive and artistic
creativity. These laws limit the economic freedom of some individuals, but they protect the freedom of others to enjoy
the fruits of their labors—in the form of profits.
The study of intellectual property law is important because intellectual property is of increasing importance in
CHAPTER OUTLINE
I. Trademarks and Related Property
A trademark is a distinctive mark, motto, device, or implement that a manufacturer stamps, prints, or
otherwise affixes to the goods it produces so that they may be identified on the market and their origin
vouched for.
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CASE SYNOPSIS—
Case 8.1: The Coca-Cola Co. v. The Koke Co. of America
The Coca-Cola Co. sought to enjoin The Koke Co. of America and other beverage companies from,
among other things, using the word Koke for their products. Koke contended that the Coca-Cola trademark
was a fraudulent representation and that Coca-Cola was thus not entitled to an injunction. Koke alleged that
Coca-Cola, by its use of the Coca-Cola name, represented that the beverage contained cocaine (from coca
leaves). The court granted the injunction against Koke, but an appellate court reversed. Coca-Cola appealed
to the United States Supreme Court.
public would not find cocaine in Coca-Cola. “[I]t would be going too far to deny the plaintiff relief against a pal–
The United States Supreme Court upheld the trial court’s decision. The Supreme Court acknowledged
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Notes and Questions
Until 1903, the amount of active cocaine in each bottle of Coke was equivalent to one “line” of cocaine,
and, “many years before this suit was brought,” as the Supreme Court put it, Coca-Cola was advertised as an
“ideal nerve tonic and stimulant.” In the first part of this century, the word Dope was understood to mean
Coke. If a customer asked for a “Dope,” he or she was given a Coke. Koke attempted to associate the word
with its product, and Coca-Cola also sought to stop this, arguing that people would be confused if they
ordered a Dope, expecting a Coke, and got something else. The Supreme Court refused relief, concluding
that Dope was not a sufficiently descriptive term. The Court found that the word had no clear connection to
Coke.
The name “Coke” was not registered as a trademark until 1945.
lost sales for Coca-Cola. Confusion could also damage the reputation and goodwill associated with the Coca-
Cola Company.
What, if any, harm could the Coca-Cola Company have suffered as a result of the Koke Company’s
use of the Name “Koke” to market its products? The use of the name “Koke” may have created confusion
Suppose that the trial court had found that 25 percent of all adult Coca-Cola drinkers believed that
Coca-Cola contained cocaine, despite the fact that cocaine was not listed among the soft drink’s
ingredients. In that situation, should the court deny Coca-Cola’s request for an injunction against
CHAPTER 8: INTELLECTUAL PROPERTY RIGHTS 3
ADDITIONAL CASES ADDRESSING THIS ISSUE —
Consumer Confusion
Recent cases involving a sufficient likelihood of confusion to support an injunction against a non-
owner’s use or alteration of a trademark include the following.
• Zino Davidoff SA v. CVS Corp., 571 F.3d 238 (2d Cir. 2009): The owner of the trademark “cool water” for
fragrances would suffer irreparable harm in the absence of a preliminary injunction against a retail drugstore
chain’s sales of its product with the unique production code (UPC) removed, which increased the risk that
consumers would unwittingly buy a counterfeit or defective product.
• TGI Friday’s Inc. v. Great Northwest Restaurants, Inc., __ F.Supp.2d __ (N.D. Tex. 2009): Restaurant
agreement, even if franchisees continued to meet standards that franchisor required, because it is inevitable
that customers will be confused into believing that they are dining at such restaurants.
• Productive People LLC v. Ives Design, __ F.Supp.2d __ (D. Ariz. 2009): A preliminary injunction is
• Red Head Inc. v. Fresno Rock Taco LLC, __ F.Supp.2d __ (N.D. Cal. 2009): A corporation was entitled to
a preliminary injunction barring a restaurant from further use of the corporation’s trademarks, trade dress, and
the name and likeness of musician Sammy Hagar after the restaurant breached their license agreement by,
among other things, failing to pay royalties.
A. STATUTORY PROTECTION OF TRADEMARKS
1. Trademark Dilution
• Statutory protection of trademarks and related property is provided at the federal level by the
Lanham Trademark Act of 1946 (amended by the Federal Trademark Dilution Act of 1995 and
the Trademark Dilution Revision Act of 2006), which incorporates the common law of
trademarks.
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The association is likely to impair the distinctiveness of the famous mark or to harm its
reputation.
2. Marks Need Not Be Identical
A famous mark may be diluted by the unauthorized use of an identical or a similar mark.
ADDITIONAL BACKGROUND—
The Federal Trademark Dilution Act
Congress passed the Federal Trademark Dilution Act in 1995 as an amendment to 15 U.S.C. § 1125.
The following is the complete statute (15 U.S.C.A. § 1125), as amended, with some of the historical notes, as
the statute appears on Westlaw.
UNITED STATES CODE
TITLE 15. COMMERCE AND TRADE
CHAPTER 22—TRADEMARKS
SUBCHAPTER III—GENERAL PROVISIONS
§ 1125. False designations of origin and false descriptions forbidden
(a) Civil action
(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or as–
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic
(2) As used in this subsection, the term “any person” includes any State, instrumentality of a State or
(b) Importation
Any goods marked or labeled in contravention of the provisions of this section shall not be imported into the
CHAPTER 8: INTELLECTUAL PROPERTY RIGHTS 5
(c) Remedies for dilution of famous marks
(1) The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as
the court deems reasonable, to an injunction against another person’s commercial use in commerce of a
(A) the degree of inherent or acquired distinctiveness of the mark;
(B) the duration and extent of use of the mark in connection with the goods or services with which the mark is
used;
(C) the duration and extent of advertising and publicity of the mark;
(D) the geographical extent of the trading area in which the mark is used;
(E) the channels of trade for the goods or services with which the mark is used;
(F) the degree of recognition of the mark in the trading areas and channels of trade used by the marks’ owner
and the person against whom the injunction is sought;
(G) the nature and extent of use of the same or similar marks by third parties; and
(H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on
the principal register.
famous mark shall also be entitled to the remedies set forth in sections 1117(a) and 1118 of this title, subject
to the discretion of the court and the principles of equity.
(2) In an action brought under this subsection, the owner of the famous mark shall be entitled only to
injunctive relief unless the person against whom the injunction is sought willfully intended to trade on the
prevent dilution of the distinctiveness of a mark, label, or form of advertisement.
(3) The ownership by a person of a valid registration under the Act of March 3, 1881, or the Act of February
(4) The following shall not be actionable under this section:
(A) Fair use of a famous mark by another person in comparative commercial advertising or promotion to
identify the competing goods or services of the owner of the famous mark.
(B) Noncommercial use of a mark.
(C) All forms of news reporting and news commentary.
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(July 5, 1946, c. 540, Title VIII, s 43, 60 Stat. 441.)
HISTORICAL AND STATUTORY NOTES
Derivation. Act Mar. 19, 1920, c. 104, s 3, 41 Stat. 534.
References in Text. Acts March 3, 1881, and February 20, 1905, referred to in subsec. (c)(1)(H), (3), are acts
Mar. 3, 1881, c. 138, 21 Stat. 502 and Feb. 20, 1905, c. 592, 33 Stat. 724, which were repealed insofar as
inconsistent with this chapter by act July 5, 1946, c. 540, s 46(a), 60 Stat. 444. Act Feb. 20, 1905, was
classified to sections 81 to 109 of this title.
1996 Amendments. Subsec. (c). Pub.L. 104-98, s 3(a), added subsec. (c).
1992 Amendments. Subsec. (a). Pub.L. 102-542, s 3(c), redesignated existing provisions as par. (1) and, in
par. (1), as so redesignated, substituted “(A)” and “(B)” for “(1)” and “(2)”, respectively, and added par. (2).
B. TRADEMARK REGISTRATION
To register for federal protection, an application must be filed with the U.S. Patent and Trademark Office
in Washington, D.C. A mark can be registered if—
• It is currently in commerce.
• The applicant intends to put the mark into commerce within six months. (Under some
circumstances, the six-month period can be extended to three years.)
Registration is renewable between the fifth and sixth years after the initial registration and every ten
years thereafter (twenty years for marks registered before 1990).
C. TRADEMARK INFRINGEMENT
• When a trademark is copied to a substantial degree or used in its entirety by another, it has been
infringed. To obtain a remedy—an injunction, damages, the infringer’s profits, the destruction of the
infringing goods, attorney’s fees—its owner must show that the use created a likelihood of
confusion about the origin of the infringing goods or services.
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Case 8.2: LFP IP, LLC v. Hustler Cincinnati, Inc.
Jimmy and Larry Flynt owned “The Hustler Club,” a bar and nightclub. Larry opened Hustler clubs, and
within a few years, began publishing Hustler, a magazine. Larry formed LFP IP, Inc. and other corporations to
conduct his enterprises. Many of these used “HUSTLER” or “LARRY FLYNT” as trademarks, which LFP
owned. Jimmy opened his own store, Hustler Cincinnati, and paid LFP licensing fees to use the “HUSTLER”
mark. When the store stopped paying the fees. LFP filed a suit in a federal district court, alleging trademark
infringement. The court issued an injunction prohibiting Jimmy from using the “HUSTLER” mark. Later, he
opened a store called “FLYNT Sexy Gifts.” LFP claimed that this name was likely to cause confusion with the
“LARRY FLYNT” mark. The court modified the injunction to limit Jimmy’s use of the “Flynt” name without
“Jimmy.” Jimmy appealed
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Notes and Questions
D. DISTINCTIVENESS OF THE MARK
Only trademarks deemed sufficiently distinctive from competing trademarks are protected.
1. Strong Marks
These marks are generally protected without proof of secondary meaning.
a. Fanciful and Arbitrary Marks
Fanciful and arbitrary marks are considered the most distinctive trademarks.
b. Suggestive Trademarks
Suggestive trademarks bring to mind something about a product without describing the
product directly.
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2. Secondary Meaning
Descriptive terms, geographical terms, and personal names are not inherently distinctive and do
3. Generic Terms
Generic terms, such as bicycle or computer, cannot be trademarked, even if they acquire
E. SERVICE, CERTIFICATION, AND COLLECTIVE MARKS
• Service mark—Distinguishes the services of one person or company from those of another (such
F. TRADE DRESS
The image and overall appearance of a product is subject to the same protection as trademarks. As in
common-law trademark infringement cases, a major consideration is whether consumers are likely to be
confused by the allegedly infringing use.
G. COUNTERFEIT GOODS
Counterfeit goods copy or imitate trademarked goods but are not genuine. U.S. laws do not apply to
foreign counterfeiters, but U.S. officials can obtain a court order to shut down a Web site that sells
counterfeit goods, regardless of the site owner’s citizenship.
1. The Stop Counterfeiting in Manufactured Goods Act
This act makes it a crime to intentionally traffic in counterfeit goods or services, or use a counterfeit
2. Penalties for Counterfeiting
These include fines of up to $2 million and imprisonment of up to ten years (more for repeat
3. Combating Online Sales of Counterfeit Goods
H. TRADE NAMES
A trade name indicates part or all of a business’s name. A trade name may be protected at common law
(if it is unusual or fanciful), but it is not protected under federal statutes and cannot be registered with the
CHAPTER 8: INTELLECTUAL PROPERTY RIGHTS 9
federal government—unless it is of course the same as the business’s trademarked product (such as
Coca-Cola).
I. LICENSING
Licensing (permitting the use of a mark for certain limited purposes) is one way around many intellectual
ENHANCING YOUR LECTURE—
A BOOK IS A BOOK IS A BOOK—
BUT IS IT AN “E-BOOK”?
One of the significant issues raised by the cyber age has to do with whether copyrights in printed
materials extend to the same materials presented in digital form over the Internet. A related issue involving
licensing agreements came before a federal district court in 2001. The case was brought by the well-known
publishing firm Random House, Inc., against Rosetta Books, LLC, with which several authors had arranged to
publish works electronically. At issue in the case was the following question: Did contracts in which the
authors had licensed Random House to “print, publish and sell” their works in “book form” include the right to
publish their works in electronic formats (as “e–books”) as well?
In evaluating the issue, the court looked to the letter of the law, as decided by other court cases, but
THE BOTTOM LINE
To avoid litigation, anyone signing a licensing contract should make sure that the specific wording in the
contract makes very clear what rights are or are not being conveyed.
II. Patents
A patent gives an inventor the exclusive right to make, use, and sell an invention for a period of twenty years
and a design for fourteen years. Like most other countries, the United States grants a patent for an invention
to the first person to file a patent application.
A. SEARCHABLE PATENT DATABASES
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The USPTO provides searchable databases covering U.S. patents granted since 1976. The European
Patent Office provides online access to 50 million patent documents in over 70 nations.
B. WHAT IS PATENTABLE?
Federal law requires that to be patentable an invention, discovery, process, or design must be—
• Genuine.
• Not obvious in light of current technology
Almost anything is patentable, including artistic methods, certain works of art, the structure of storylines,
and genetically engineered plants and animals. Exceptions include—
• The laws of nature.
C. PATENT INFRINGEMENT
A firm that makes, uses, or sells another’s patented design, product, or process without the patent
owner’s permission commits patent infringement. But no patent infringement occurs when a product is
made and sold in another country.
1. Patent Infringement Suits and High-Tech Companies
2. Patent Infringement and Foreign Sales
No infringement occurs under U.S. law when a product patented in the United States is made and
sold by a different firm in another country.
D. REMEDIES FOR PATENT INFRINGEMENT
If a patent is infringed, the owner can obtain an injunction against the infringer and damages for royalties
III. Copyrights
A copyright is an intangible right granted by federal statute (the Copyright Act of 1976) to the author or
originator of certain literary or artistic productions.
• The right is granted automatically (registration is not required).
A. REGISTRATION
By registering a work, a copyright owner is protected against—
• Reproduction of the work.
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B. WHAT IS PROTECTED EXPRESSION?
To be copyrighted, a work must be “fixed in a durable medium” from which it can be perceived, re–
produced, or communicated. Copyright law protects works that are original and fall into one of the
following categories:
• Literary works.
1. Section 102 Exclusions
• Protection is not available for any “idea, procedure, process, system, method of operation,
concept, principle, or discovery, regardless of the form in which it is described, explained, il-
2. Compilations of Facts
Compilations of facts are copyrightable. A compilation is “a work formed by the collection and
C. COPYRIGHT INFRINGEMENT
Copyright infringement occurs when the form or expression of an idea is copied in substantial part (a
copy does not have to mirror the original or reproduce it entirely).
CASE SYNOPSIS—
Case 8.3: Winstead v. Jackson
Shadrach Winstead, the author of The Preacher’s Son—But the Streets Turned Me into a Gangster, filed
a suit in a federal district court against Curtis Jackson, who wrote and performed the songs on the CD Before
I Self–Destruct and wrote, starred in, and directed the companion film of the same name. Winstead alleged
that Jackson’s CD and film infringed the copyright of Winstead’s book. The court dismissed the complaint.
Winstead appealed.
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CD and film did not support a claim of copyright infringement. “A lay observer would not believe that
Jackson’s album/CD and film copied protectable aspects of Winstead’s book. * * * Winstead’s book and
Jackson’s works share similar themes and setting,” but “the story of an angry and wronged protagonist who
turns to a life of violence and crime has long been a part of the public domain. * * * In addition, Winstead’s
book and Jackson’s works are different with respect to character, plot, mood, and sequence of events.”
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Notes and Questions
Does it seem likely that most creative works are in the public domain—and available for anyone to
use without charge? If not, should they be? Most creative works are in the public domain—and available
for anyone to use without charge. In other words, the availability of works in the public domain is the rule, and
1. Remedies for Copyright Infringement
Penalties and remedies range from actual damages, plus the infringer’s profits, or statutory
2. The “Fair Use” Exception
The reproduction of copyrighted material is permitted without payment of royalties under the
Copyright Act’s fair use doctrine. To determine whether a use is fair, courts consider—
• The purpose of the use.
3. What Is Fair Use?
D. THE FIRST SALE DOCTRINE
The owner of an authorized copy of a copyrighted work can sell, or otherwise dispose of it however he or
she sees fit.
E. COPYRIGHT PROTECTION FOR SOFTWARE
• The Computer Software Copyright Act of 1980 extended Copyright Act protection to computer pro-
grams. A program’s source code (the part of a program readable by humans) was clearly included.