Chapter 24
INTELLECTUAL PROPERTY
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Suggested Additional Assignments
Research: Patents
Ask students to search the Patent and Trademark Office (PTO) database to locate two patented inventions,
one worthwhile and one frivolous. Students should prepare a brief description of each item and explain
Research: Trademarks
How Recognizable is that Trademark
Ask students to bring to class a trademark from a product they own. It could be a label from a water or
soda bottle, a tag from a piece of clothing, or a label from a box, etc. Have the student cover up the brand
name. See how many students recognize the mark without seeing the brand name.
Research: Current Events
Have students choose a current event about an intellectual property issue in the news and describe the
issue to the class. What type of intellectual property is at the heart of the issue? Why is this issue
newsworthy?
Chapter Overview
Chapter Theme
Intellectual property is a major source of economic prosperity and individual wealth. New ideas increase
both productivity and pleasure. Where would we be, as a society, without intellectual property–patented
inventions, books, movies, computer software?
Quotes of the Day
“One of the greatest pains to human nature is the pain of a new idea.” –Walter Bagehot (1826–1877),
English economist and journalist.
Introduction
Thomas Jefferson’s quote
Question: Is it true that “he who lights his taper at mine receives light without darkening mine”?
Patents
A patent is a grant by the government permitting the inventor exclusive use of an invention for 20 years
from the date of filing (or 14 years from the date of issuance in the case of design patents). During this
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period, no one may make, use, or sell the invention without permission. In return, the inventor publicly
discloses information about the invention that anyone can use upon expiration of the patent.
Types of Patents
There are three types of patents: utility patents, design patents, and plant patents. A patent is not available
solely for an idea, but only for its tangible application.
Patents on Living Organisms. In 1980, the Supreme Court ruled that living organisms could be patented.
Requirements for a Patent
Additional Case: State Street Bank & Trust Co. v. Signature Financial Group, Inc.
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After the text went to print, State Street was overruled by In re Bilski, 2008 U.S. App. LEXIS 22479.
In State Street, the court held that a so–called “Hub and Spoke” computer software program that aided in
the administration of mutual funds was patentable because it produced “a useful, concrete and tangible
result.” The Bilski court, however, explicitly overruled State Street, holding that the “useful, concrete and
tangible result” is not sufficient. To be patentable, a process must either be tied to a particular machine, or
it must transform an article. The court referred to this standard as the “machine-or-transformation test.”
In Bilski, the applicants had tried to patent a method of hedging risk in the field of commodities
transformation of any physical object or substance. In short, inventors can no longer patent a process that
simply involves thoughts.
Question: What is the likely impact of the Bilski case?
Question: What is likely to happen next?
method patents.
Ask students who completed the patent research assignment to present their results now. What types of
patents do they believe to be frivolous? Should the patent office grant patents for frivolous items? What
arguments can they make for and against such patents?
Patent Application and Issuance
To obtain a patent, the inventor must file a complex application with the PTO. If a patent examiner
determines that the application meets all legal requirements, the PTO will issue the patent.
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149 F.3d 1368, 1998 U.S. App. LEXIS 16869 United States Court of Appeals for the Federal Circuit,2 1998
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Priority Between Two Inventors
When two people invent the same product, who is entitled to a patent—the first to invent or the first to
has priority.
Prior Sale
An inventor must apply for a patent within one year of selling the product commercially any place in the
world.
Infringement
A patent holder has the exclusive right to use the invention during the term of the patent. A holder can
Patent Trolls
Due to a heavy workload, patent examiners sometimes issue patents for inventions that are not really new.
Traditionally this issue was not that important because companies with overlapping patents did not
International Patent Treaties
About half of all patent applications are filed in more than one country. Several treaties now facilitate
this process, although it is still not the one-stop (or one-click) effort that inventors desire. These treaties
were drafted by the World Intellectual Property Organization (WIPO) of the United Nations.
Copyrights
The holder of a copyright owns the particular tangible expression of an idea, but not the underlying idea
or method of operation.
Key Issue: Infringement
Anyone who uses copyrighted material without permission is violating the Copyright Act.
Example
Most Americans are familiar with the legal debate over the college students who ran a website that
permitted fellow students to share copyrighted music files.
Question: Why is this activity illegal?
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Question: Come on, what’s the harm in copying a few songs off the Internet?
Answer: In this case, it’s more than a few songs. But, no matter how many, it is still illegal. He is
Question: What’s the harm? Record companies make so much money anyway.
Answer: If record companies don’t make money and recording artists aren’t paid, there will be fewer
Case: Lapine v. Seinfeld
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Facts: Missy Chase Lapine wrote a book called The Sneaky Chef: Simple Strategies for Hiding Healthy
Foods in Kids’ Favorite Meals, which was about how to disguise vegetables so that children would eat
them. Her strategy was to add pureed vegetables to food that children like, such as macaroni and cheese.
(We are not making this up). Four months later, Jessica Seinfeld, wife of comedian Jerry Seinfeld,
published a book entitled Deceptively Delicious: Simple Secrets To Get Your Kids Eating Good Food
which featured recipes involving pureed vegetables in (guess what?) macaroni and cheese and other kid–
friendly foods.
Lapine filed suit against Seinfeld, alleging violation of her copyright in the content of the book as well as
her trademark in the name and cover design. The district court granted Seinfeld’s motion for summary
judgment and Lapine appealed.
Issue: Did Seinfeld violate Lapine’s copyright and trademark in The Sneaky Chef?
Excerpts from the Decision of the Court:
Copyright Infringement
Plaintiffs assert that the two works are substantially similar in their unique and innovative expression of
the idea of sneaking vegetables into children’s food by means of a cookbook containing comprehensive
doctrine that ideas, concepts, and processes are not protected from copying.
Further, to the extent the two works have general and abstract similarities — including their vaguely
similar titles and inclusion of illustrations of prepared dishes, health advice, personal narrative,
Our independent comparison of the two cookbooks confirms that the total concept and feel of Deceptively
Delicious is very different from that of The Sneaky Chef. Deceptively Delicious lacks the extensive
discussion of child behavior, food philosophy, and parenting that pervades The Sneaky Chef. Unlike The
Sneaky Chef, which uses primarily black, gray, and shades of brownish orange, Deceptively Delicious
Chapter 24 Intellectual Property 5
employs bright colors and more photographs. While The Sneaky Chef assumes greater familiarity with
cooking, recommends thirteen methods for hiding healthy foods, and provides recipes for multiple-
Trademark Infringement
Having considered the overall impression on a consumer and the context in which the competing marks
are displayed, we reach the same conclusion as the district court: the marks are not confusingly similar.
Question: Did the court find copyright infringement and/or trademark infringement?
Question: What were some of the courts reasons?
Answer: Recipes for vegetable puree cannot be copyrighted and the look and feel of the two
Fair Use
Parody
Parody is permitted under copyright law as long as it does not use an excessive amount of the original.
Additional Case: Campbell v. Acuff-Rose Music, Inc.,
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Facts: Acuff-Rose filed suit against the members of a rap group, 2 Live Crew and their record company,
claiming that 2 Live Crew’s song “Pretty Woman” infringed Acuff–Rose’s copyright in Roy Orbison’s
song “Oh Pretty Woman.” The District Court granted summary judgment for 2 Live Crew holding that
the song was a parody and thus a fair use of the copyrighted work. Acuff-Rose appealed and the
appellate court reversed, holding that because the 2 Live Crew song was used for a commercial purpose,
it is presumptively unfair, and because Campbell used so much of the original work in its work, the group
had taken too much of copyrighted work. The United States Supreme Court granted certiorari.
Issue: Is the parody a fair use of the original work?
Decision: Appellate decision reversed and remanded. The Copyright Act of 1976 indicates that there are
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510 U.S. 569, 114 S.Ct. 1164, 1994.
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According to the court, parody, like other comment and criticism may claim fair use. Under the first
factor, the focus is on whether the new work merely replaces the original work, or whether the new work
is a new “transformative” work, inserting new meaning and expression. The more transformative the
new work, the less important the commercial nature of the new work is considered. For parody in
The third factor asks whether the amount of the original work used is reasonable in relation to the
purpose of the copying. The court agreed that the extent of the copying depends on the purpose of the
copying. According to the Court, parody presents a difficult case because parody’s commentary stems
produced distinctive sounds, and overlaying the music with solos in different keys.
More facts
When the owners of the Pretty Woman copyright sued 2 Live Crew, the group’s first inclination was to
withdraw the parody. The Capitol Steps, however, wanted the courts to establish once and for all that
parody is a protected form of speech. To persuade the Supreme Court to grant certiorari, the Capitol
Steps prepared an audiotape history of political parody in the United States. There is some evidence that
this tape was indeed influential in persuading the Supreme Court to grant certiorari.
If a recording of the Capitol Steps singing God Bless My SUV is no longer available from their
General Questions:
• Did 2 Live Crew and the Capitol Steps make excessive use of the original recordings?
• Did they harm the market for the original?
• Should Roy Orbison be allowed (if he were alive) to prevent 2 Live Crew from using his material
to mock women? What if he finds this material offensive?
Digital Music and Movies
In 2008, 40 billion songs were downloaded illegally, which is as much as 95 percent of all downloaded
music! Government and industry are striking back. The Prioritizing Resources and Organization for
Intellectual Property Act (Pro-IP) permits law enforcement officials to confiscate any equipment used to
steal copyrighted material.
Chapter 24 Intellectual Property 7
Case: Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, LTD.
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Facts: Grokster, Ltd., and StreamCast Networks, Inc. distributed free software that allowed computer
users to share electronic files through peer-to-peer networks. The Grokster and StreamCast software
could be used for legal purposes, such as sharing non-copyrighted files. Nonetheless, nearly 90 percent of
the files available for download through Grokster or StreamCast were copyrighted. Billions of files were
shared each month. The two companies encouraged illegal use of their software.
A group of copyright holders sued Grokster and StreamCast alleging that they were violating the
Issue: Were Grokster and StreamCast violating copyright law?
Holding: Judgment for Grokster and StreamCast reversed. Anyone who distributes a device for
infringing copyrights is liable if:
• the distributor intends to promote the infringement of copyright law, and
• there is actual infringement by recipients of the device.
This file sharing software is fostering disdain for copyright laws. It is impossible to enforce rights in
copyrighted works by going against all the direct infringers (those who use the software). The only
practical option is to go after the distributor of the software.
Question: What is a peer-to-peer network?
Question: Is there any legitimate use for a peer-to–peer network?
Answer: Yes, even the briefs in this case could be downloaded from a peer-to-peer network.
Question: Then why would it be illegal to use the peer-to-peer software?
Question: Is that what Grokster and the other defendants did?
Answer: Yes. They not only failed to filter copyrighted material they even helped users find it. Of
Question: Is intent to violate the law enough to create liability?
Answer: No. There must also be evidence of actual infringement, which there was here on a gigantic
scale.
Question: Why didn’t the court just tell the plaintiffs to go after those users who were directly
infringing copyright law?
Question: What’s wrong with downloading music or movies for free? Everyone does it.
Answer: It’s illegal. Music and movies cost money to create and distribute. If no one pays for them
because someone else is subsidizing you.
Question: When you graduate from school, would you like to go to work in industry where much or
all of the product is stolen?
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125 S. Ct. 2764; 2005 U.S. LEXIS 5212 Supreme Court of the United States, 2005
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The No Electronic Theft Act
Enacted in 1997, the No Electronic Theft Act is intended to deter the downloading of copyrighted
The Family Entertainment and Copyright Act
Under the Family Entertainment and Copyright Act, it is a criminal offense to use a camcorder to film a
movie in the theater.
The Digital Millennium Copyright Act
The Digital Millennium Copyright Act (DMCA) provides that:
• It is illegal to delete copyright information, such as the name of the author or the title of the
article.
International Copyright Treaties
The Berne Convention requires member countries to provide automatic copyright protection to any works
created in another member country.
Trademarks
Types of Marks
There are four types of legally-protected marks:
Valid Trademarks
To be valid, a trademark must be distinctive—that is, the mark must clearly distinguish one product from
another. There are five basic categories of distinctive marks:
• Fanciful marks.
The following categories cannot be trademarked:
• Similar to an existing mark. .
Chapter 24 Intellectual Property 9
• Scandalous or immoral trademarks.
Infringement
You Be the Judge: Network Automation Inc. v. Advanced Systems Concepts, Inc.
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Facts: Network Automation and Advanced Systems Concepts both sold job scheduling and management
software, and both advertised on the Internet. Network sold its software under the trademarked name
Auto-Mate, while Systems used the trademark ActiveBatch. Customers paid between $995 and $10,995
to use these software programs.
page, users would see the following ad:
Job Scheduler
Windows Job Scheduling + Much More. Easy to Deploy, Scalable. D/L Trial
www.NetworkAutomation.com
Sometimes, they would also see an equivalent ad for Systems’ software – the real ActiveBatch.
Systems alleged that this use of ActiveBatch was a violation of its trademark in the word. The trial court
issued an injunction prohibiting Network’s purchase of the Google keyword. Network appealed.
You Be the Judge: Has Network violated Systems’ trademark by purchasing it as a Google keyword?
Argument for Systems: Network and Systems are direct competitors. Their two products — AutoMate
and ActiveBatch — perform the same functions and are both advertised on the Internet. Network is
Argument for Network: Today, most consumers are sophisticated about the Internet. They skip from site
to site, ready to hit the back button whenever they are not satisfied with a site’s contents. They fully
expect to find some sites that are not what they imagine based on a glance at the domain name or search
engine summary. Consumers do not form any firm expectations about the sponsorship of a website until
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2011 U.S. App. LEXIS 4488,UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT, 2011
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and will not be confused by Google ads. Also, they will probably understand the mechanics of Internet
NOTE: The court ruled for Network, holding that the sophisticated business people making this
purchase would not be confused. If you google ActiveBatch in class, you can demonstrate that Network’s
ad still appears.
Question: What did the court say that a party claiming trademark infringement must prove?
Answer: Writing for the Ninth Circuit, Judge Wardlaw explained that under § 1114, a party claiming
Question: Who benefited from this decision?
Current Focus
Companies complain that finding names for new products has become increasingly difficult, especially if
the name must work in other languages and also requires a corresponding Internet address. The classic
example is the Chevrolet Nova, which might have been fine in the United States but did not work in Latin
America, because “No va” means “Doesn’t go” in Spanish. Panasonic cancelled the campaign slogan for
Example
Suppose that you are a Warner Bros. executive. The company is about to make a movie called Eraser
that stars Arnold Schwarzenegger as an elite federal agent who “erases” the past lives of informers and
relocates them to anonymous safety.
Question: Would you be worried about trademark issues?
Answer: In the script, a villainous computer company named Cyrex Corp. tries to kill Eraser.
Question: The trademark search revealed no similar names, so Warner was safe, right?
Chapter 24 Intellectual Property 11
Answer: Wrong. Cyrix Corp., a Richardson, Texas maker of microprocessors, filed suit, alleging
began calling the company, wondering why Cyrix was cast in such an unsavory role.
Question: What can Warner Bros. do now?
Answer: It changed the name to Cyrec Corp. and ordered that 1,793 frames of the film–about two
Federal Trademark Dilution Act of 1995
A claim of trademark infringement requires proof that the defendant’s use of the mark is likely to cause
confusion among users or consumers of the plaintiff’s products. Trademark dilution is a broader concept
that prevents others from using a trademark in a way that dilutes its value, even though consumers are not
confused about the origin of the product.
Domain Names
Cybersquatting is the bad faith registration, use, and resale of a domain name, or the use of a domain
name in violation of the rights of another to that name. The Anti-Cybersquatting Consumer Protection
Act provides a remedy for trademark owners and famous people who’ve been victimized by
cybersquatting.
Trade Secrets
A trade secret is a formula, device, process, method, or compilation of information that, when used in
business, gives the owner an advantage over competitors who do not know it.
Case: Pollack v. Skinsmart Dermatology and Aesthetic Center P.C.
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Facts: Dr. Andrew Pollack owned the Philadelphia Institute of Dermatology (PID), a dermatology
practice. Drs. Toby Shawe and Samy Badawy worked for PID as independent contractors, receiving a
certain percentage of the revenues from each patient they treated. Natalie Wilson was Dr. Pollack’s
medical assistant.
Dr. Pollack tentatively agreed to sell the practice to Drs. Shawe and Badawy. Instead of buying his
out a mailing to patients and referring physicians to tell them about Skinsmart.
Dr. Pollack filed suit, alleging that the two doctors had misappropriated trade secrets.
Issue: Did Drs. Shawe and Badawy misappropriate trade secrets from PID?
Holding: Judgment for Pollack. A patient list is a trade secret, worthy of protection. Pollack spent a
great deal of time and money compiling and protecting his patient list.
Question: What did the defendants take from PID?
Question: Can a list of patients be a trade secret?
Question: What did Pollack have to do to qualify his patient list as a trade secret?
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2004 Pa. Dist. & Cnty. Dec. LEXIS 214, 68 Pa. D. & C.4th 417, Common Pleas Court of Philadelphia Country,
Pennsylvania, 2004
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Answer: Two things: Spend significant time and resources gathering the information, and take
reasonable steps to protect it.
Answer: Yes, he had taken a lot of effort to develop the list and then he kept it private – even the
other physicians in his office could not view the entire list.
Additional Example
Lest students think that stealing trade secrets is not a serious matter, consider this example. Petr
Taborsky, a former student research assistant at the University of South Florida, served seven months in
prison, including two months on a chain gang, for stealing trade secrets. Taborsky was an undergraduate
in chemistry and biology, working as a laboratory assistant at the College of Engineering when he took
part in a research project to make sewage treatment cheaper and more efficient. The research was
sponsored by Florida Progress, a utility holding company, which claimed that it had all rights to the
research.
Taborsky discovered a way to turn a clay-like compound similar to cat litter into a reusable cleanser
Additional Question Update
Students sometimes ask about the plot of the story, My Mother Is the Most Beautiful Woman in the World,
in Essay Question 3. This is the story:
A little girl is separated from her parents. Meeting a group of villagers unfamiliar to her, she
describes her mother as the most beautiful woman in the world. The village leader sends boys to
Multiple Choice Questions
1. Thomas’s English muffins wanted to protect the method by which it makes muffins with air
pockets – what it calls “nooks and crannies”. What would be the best way to achieve this goal?
(a) Patent
(b) Copyright
(c) Trademark
(d) Trade secret
(e) This method cannot be protected.
2. VitaminWater has become such a success that other companies are also now selling similar (but
not identical) flavored colored water. Some competitors bottle their drinks in a similar bell–
shaped bottle with a two-toned label that has a horizontal color band. What is the best
infringement claim for VitaminWater to make against these competitors?
(a) Patent
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“Former Student in Patent Fight Leaves Prison,” New York Times, June 14, 1996, p. A14.
Chapter 24 Intellectual Property 13
(b) Copyright
(c) Trademark
(d) Trade secret
(e) There is no good claim
3. Faber-Castell began manufacturing pencils in 1761. Although pencils and erasers had both
existed for some time, not until the 1870s, did the company began putting erasers on the end of its
pencils. The company was sued by an inventor who had previously patented this idea. The case
went to the Supreme Court. Who won the case?
(a) The patent holder because no one had ever put an eraser on a pencil before.
(b) The patent holder because the PTO had approved his patent.
(c) Faber-Castell because the pencil with an eraser was not novel.
(d) Faber-Castell because the pencil with an eraser was not useful.
4. If you buy a DVD, you have the legal right to:
(a) Watch it as many times as you want and then give it away
(b) Copy it to your computer and then give it to a friend
(c) Copy it to your computer and sell it on eBay
(d) All of the above.
(e) a and b only.
5. A couple thought up a clever name for an automobile. They wanted to protect this name so that
they could ultimately sell it to a car manufacturer. What would be the best method to obtain this
goal?
(a) Patent
(b) Copyright
(c) Trademark
(d) Trade secret
(e) This name cannot be protected.
Essay Questions
1. In the documentary movie, Expelled: No Intelligence Allowed, there was a 15-second clip of
“Imagine,” a song by John Lennon. The purpose of the scene was to criticize the song’s message. His
wife and sons, who held the copyright, sued to block this use of the song. Under what theory did the
movie makers argue that they had the right to use this music? Did they win?
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2. ETHICS After Edward Miller left his job as a salesperson at the New England Insurance Agency, Inc.,
he took some of his New England customers to his new employer. At New England, the customer
lists had been kept in file cabinets. Although the company did not restrict access to these files, it
claimed there was a “You do not peruse my files and I do not peruse yours” understanding. The lists
were not marked “confidential” or “not to be disclosed.” Did Miller steal New England’s trade
secrets? Whether or not he violated the law, was it ethical for him to use this information at his new
job? What is your Life Principle?
Answer: Answers will vary. The court held that these customer lists were not trade secrets because
3. Rebecca Reyher wrote (and copyrighted) a children’s book entitled My Mother Is the Most Beautiful
Woman in the World. The story was based on a Russian folktale told to her by her own mother. Years
later, the children’s TV show Sesame Street televised a skit entitled “The Most Beautiful Woman in
the World.” The Sesame Street version took place in a different locale and had fewer frills, but the
sequence of events in both stories was identical. Has Sesame Street infringed Reyher’s copyright?
Answer: The court held that Sesame Street had not infringed Reyher’s copyright because Reyher
4. Roger Schlafly applied for a patent for two prime numbers. (A prime number cannot be evenly
divided by any number other than itself and 1. For example: 2, 3, 5, 7, 11, 13.) Schlafly’s numbers are
a bit longer—one is 150 digits, the other is 300. His numbers, when used together, can help perform
the type of mathematical operation necessary for exchanging coded messages by computer. Should
the PTO issue this patent?
5. Frank B. McMahon wrote one of the first psychology textbooks to feature a light and easily readable
style. He also included many colloquialisms and examples that appealed to a youthful student market.
Charles G. Morris wrote a psychology textbook that copied McMahon’s style. Has Morris infringed
McMahon’s copyright?
Answer: The court held that Morris had not infringed McMahon’s copyright because a writer may not
6. Victoria’s Secret, a well-known lingerie company, found out that a man named Victor Moseley was
running a small store in Kentucky named “Victor’s Little Secret.” Moseley’s shop sold clocks,
patches, temporary tattoos, stuffed animals, coffee mugs, leather biker wallets, Zippo lighters, diet
formula, jigsaw puzzles, handcuffs, hosiery, greeting cards, incense burners, car air fresheners,
sunglasses, jewelry, candles, and adult novelties. Women’s lingerie represented about 5 percent of its
sales. Does Victoria’s Secret have a valid intellectual property claim?
Discussion Questions
Chapter 24 Intellectual Property 15
1. ETHICS Virtually any TV show, movie, or song can be downloaded for free on the Internet. Most
of this material is copyrighted and was very expensive to produce. Most of it is also available for
a fee through such legitimate sites as iTunes. What is your ethical obligation? Should you pay
$1.99 to download an episode of American Idol from iTunes or take it for free from an illegal
site? What is your Life Principle?
2. For much of history, the copyright term was limited to 28 years. Now it is as long as 120 years.
What is a fair copyright term? Some commentators argue that, because so much intellectual
property is stolen, owners need longer protection. Do you agree with this argument?
3. Do you agree with the court that the band Furious George violated the copyright of Curious
George?
4. Should Amazon be able to patent the One-Click method of ordering? What about Facebook’s
patent on a process that “dynamically provides a news feed about a user of a social network?”
Were these inventions really novel and non-obvious? What should the standard be for business
method patents?
5. Fredrik Colting wrote a book entitled 60 Years Later: Coming Through the Rye, a riff on J. D.
Salinger’s famous Catcher in the Rye. Colting’s book imagined how Salinger’s protagonist,
Holden Caulfield would view life as a 76-year old. Alice Randall wrote a novel entitled The Wind
Done Gone which retells the civil war story Gone with the Wind from the perspective of Scarlett
O’Hara’s (imagined) black half-sister. Both Colting and Randall were sued and both alleged fair
use. Will they win?
Answer: The court ruled that Colting’s book was not fair use because it was not parody or
6. The Susan G. Komen breast cancer charity trademarked the term “for the cure.” It has brought
suit against other charities that use the term, as in “run for the cure, or “kites for the cure.” It also
sues charities that use the same shade of pink that it has long used on its ribbons. Should Komen
be able to trademark “for the cure” and the color pink?
7. Should a wildflower garden be eligible for intellectual property protection?
Answer: Answers will vary. The 7th Circuit ruled that a garden is not eligible for copyright