Page 1
Module 09
Visit UMT online at www.umtweb.edu
Module 09
Intellectual Property
Page 2
Module 09
info
info
Visit UMT online at www.umtweb.edu
Learning Objectives
Upon successful completion, the student will be able to:
Compare major forms of intellectual property;
Identify damages that can be awarded from a lawsuit;
Explain what a trademark is;
Analyze the costs of counterfeiting;
Explain how to register names;
Analyze the extent of legal coverage;
Analyze court cases involving intellectual property in the appellate
courts.
Page 3
Module 09
info
info
Visit UMT online at www.umtweb.edu
Intellectual Property
Intellectual effort, not by physical labor
Reputation (goodwill) is one part of intellectual property
Intangible property
Lawsuits involve infringement in violation of the owner’s right
Litigation common for monetary damages and for injunctions.
Counterfeit and fraudulent use of this property costs business tens of
billions of dollars a year
Major forms include:
Trademarks
Copyrights
Patents
Trade secrets
Page 4
Module 09
info
info
Visit UMT online at www.umtweb.edu
A commercial symbol
Design, logo, phrase, distinctive mark, name or word
“Brand Name” (i.e. Nike)
Protected by common law and by the Lanham Act
Classifications
Arbitrary and fanciful (most favored – Reebok or Apple for computers)
Suggestive (not as favored – Chicken of the Sea)
Descriptive (not as favored – but Holiday Inn or Bufferin have protection due
to long use)
Generic – Not protected (nylon, zipper, thermos); lost to public domain by
failure to protect
Trademarks
Page 5
Module 09
info
info
Visit UMT online at www.umtweb.edu
Registration
Payment of $225-325 for various classes of goods claiming a mark if
done online
Submit copy of mark and description of goods using mark. Declare
that applicant has no knowledge that mark conflicts with other marks
Good for 10 years, after which must be renewed
International protection of TMs is encouraged by International
Bureau of the World Intellectual Property Organization via the
Madrid Protocol
Through “Madrid System” a TM holder from most countries can file
an existing mark for international registration. (Less costly than
registering in each country individually.)
Page 6
Module 09
info
info
Visit UMT online at www.umtweb.edu
Extent of Coverage
Marks cannot claim too much—restrict to actual use in market
Some marks are still “live”; many are “dead” or “abandoned”
See Trademark Office website www.uspto.gov
Protection applies to wide range of creative property
Page 7
Module 09
info
info
Visit UMT online at www.umtweb.edu
Infringement, Dilution and Cybersquatting
Infringement
Confusion of origin of goods by improper use of trademark by stealing
another’s good name
Lanham Act allows lawsuits for infringement.
Example: Can’t sell shoes called Rebok – causes confusion with
Reebok
Dilution
Rights further expanded through The Trademark Dilution Act.
Injunction can be issued against those blurring or tarnishing famous
trademarks
Example: Can’t claim name Nike Guitars
Page 8
Module 09
info
info
Visit UMT online at www.umtweb.edu
Infringement, Dilution and Cybersquatting (2)
Cybersquatting
Trademark is improperly used in a domain name.
Restricted by the Anticybersquatting Consumer Protection Act
Defenses
Fair use (mention of mark in comparative advertising)
Non-commercial use (parody or editorial commentary)
News reporting or educational use
Page 9
Module 09

Visit UMT online at www.umtweb.edu
Audi AG v. D’Amato
D’Amato registered domain name www.audisport.com.
Sold goods and services with Audi logos. Site used various Audi
trademarks – Audi & Audi four Ring Logo.
Claimed to have permission from an Audi dealership salesman.
(Even if he did, Audi dealers do not have rights to grant use of Audi
trademarks.)
Audi has website that sells goods with Audi name & logo on it.
its three famous trademarks.
Page 10
Module 09
info
info
Visit UMT online at www.umtweb.edu
Audi AG v. D’Amato (2)
District Court: Held for Audi. Issued a permanent injunction against
D’Amato, his website and domain name.
D’Amato appealed.
HELD: Affirmed. D’Amato infringed. “Likelihood of confusion” must
be shown to obtain equitable relief (here a permanent injunction).
Misdirecting consumers to his website and later disavowing
affiliation with Audi comes too late. He created “initial interest
confusion” – an infringement under the Lanham Act.
Page 11
Module 09
info
info
Visit UMT online at www.umtweb.edu
Audi AG v. D’Amato (3)
Stated on website that he had an agreement with Audi, which was
not true. Website with hyperlinks to goods (hats/shirts) creates a
commercial effect that damages Audi. D’Amato used the marks in
commercially related activities. The marks used were identical to
Audi’s.
Dilution law also offended – integrity and distinctiveness of mark is
infringed upon. Audi spent millions of dollars on its trademarks to be
known worldwide.
Under Anticybersquatting Consumer Protection Act (ACPA),
requirements have been met showing Amato was in bad faith to
profit from Audi’s mark.
Page 12
Module 09
info
info
Visit UMT online at www.umtweb.edu
Counterfeiting
Copying or imitating of a mark without authority to do so.
Passing off goods as if they were original.
Problems with marks of universities, the NFL and well-known
companies such as Nike, Disney, and YSL.
Even if people are told or know the goods are counterfeit (no one is
fooled), the trademark has still been violated.
Lanham Act allows private enforcement to obtain search-and-seizure
orders to grab counterfeit goods. Levi’s has seized millions of pairs of
counterfeit pants.
Private investigators look for imitations; provide U.S. Attorney with
evidence; and U.S. Attorney takes actions or approves a party’s right to
obtain a warrant from a judge.
Page 13
Module 09
info
info
Visit UMT online at www.umtweb.edu
Protected by Lanham Act
Concerns the “look and feel” of products and service establishments
Size, shape color, texture, graphics, etc. Must be “inherently distinctive”
i.e. Roar of lion – trade dress for MGM
Two Pesos v. Taco Cabana: One Mexican restaurant could not copy its
competitor’s unique décor.
Wal-Mart v. Samara Bros.: No infringement by Wal-Mart on Samara’s
design of children clothing, although designs were similar. Protection
received only if trade dress is distinctive and has secondary meaning.
Secondary Meaning is non-functional. I.e., color pink used in Owens Corning
insulation; color orange on Home Depot signage.
Trade Dress
Page 14
Module 09
info
info
Visit UMT online at www.umtweb.edu
Other Marks
Service Marks (SM)
Apply to services, not goods
Law is the same as for trademarks
Ex: International Silk Assn. uses the motto:“Only silk is silk”
Ex: Jiffy Lube
Certification Mark
Word, symbol, device or any combination of these
Used to certify regional or other geographic origin
i.e.“Made in Montana”
May also be type of material used, mode of manufacture, quality, accuracy or
other characteristics,“collective mark”
i.e.“Union Made in the USA”
Page 15
Module 09
info
info
Visit UMT online at www.umtweb.edu
Other Marks (2)
SERVICE MARKSSM:
Applies to advertising of services
Law is much like for for trademarks
Ex: The MGM roar of a lion; name of a moving company such as Bekins
Van Lines on their trucks
CERTIFICATION MARKS:
Used by members of organizations authorized to use the mark to show
standards have been met.
Ex: “UL Listed” certification on electrical products; “Champagne”
certifies from Champagne region of France.
Page 16
Module 09
info
info
Visit UMT online at www.umtweb.edu
Trade Names
Official name of company or a business
Some companies, such as Coca-Cola, have same trademark as the
trade name
Trade names not protected by Lanham Act
Most states allow company names to be registered; some do it at
the county level
Register a legal name then may register a trade name.
Ex: Ginger’s Sweet Emporium, Inc., can be registered in a state as
Ginger’s Sweet or other version (a “doing business as” (DBA) name)
that is not the full name.
Names are protected by common law
Page 17
Module 09
info
info
Visit UMT online at www.umtweb.edu
Reputation of a firm that gives value to other property
Benefit of having an established business and secured customer
base
Upon sale of business, goodwill can be evaluated. Estimated that
about 8% of asset value of existing firms in goodwill.
Tied to public knowledge of trademark or brand name.
When trademark or other intellectual property is injured, damage
estimate includes damage to goodwill of the firm.
Goodwill: An Intangible Asset
Page 18
Module 09
info
info
Visit UMT online at www.umtweb.edu
Copyright ©
Copyright Act of 1976
1990 Amendment added moral rights
Right of author to have attribution to authorship
Prevents unauthorized changes in destruction of artist’s work
Rights of literary property recognized by law. Wide coverage.
Registration not required but essential in litigation.
Easiest to get– The Copyright Office records registration—do online;
$35 and up fee.
Works must be original
Page 19
Module 09
info
info
Visit UMT online at www.umtweb.edu
Copyright © (2)
Life of author’s life plus 70 years
Works for hire (material written by employees of a company):
Copyright is 95 years from date of publications
Gives owner exclusive right to:
Reproduce
Publish or distribute
Display in public
Perform in pubic
Prepare derivative works based on original
Page 20
Module 09

Visit UMT online at www.umtweb.edu
Infringement and Fair Use in Copyright
Fair use – “for purposes such as criticism, comment, news reporting,
teaching, . . . scholarship, or research”
Four Factors of “fair use”
Purpose and character of copying
Nature of work
Extent of copying
Effect of copying on market
Damages for violations focus on economic loss to owner.
be felonies; such as large scale filing sharing of music, movies, etc.
Okay to copy TV shows for personal use
Page 21
Module 09
info
info
Visit UMT online at www.umtweb.edu
Katz v. Google
Katz owns shopping centers and part of Miami Heat. While at a
basketball practice, photographer took unflattering picture called
“ugly” and “embarrassing” by Katz
Chevaldian was unhappy tenant of a Katz shopping centers.
She found photo when doing Google search and attached photo to
blog she wrote about Katz and his business practices.
After she began blog, Katz obtained the copyright to the photo from
the photographer.
Page 22
Module 09
info
info
Visit UMT online at www.umtweb.edu
Katz v. Google (2)
He sued Google and Chevaldian for copyright infringement
(Google was dropped as a defendant).
District Court: Granted summary judgment for Chevaldian
Held the use of copyrighted photograph was protected by fair use.
Katz appealed.
Four factors of fair use
Page 23
Module 09
info
info
Visit UMT online at www.umtweb.edu
Katz v. Google (3)
Purpose and character of infringing use
Does use serve a nonprofit educational purpose opposed to commercial
purpose?
Use here was educational not commercial. Chevaldian criticized and commented
on dealing with Katz.
Blogs sought to warn and educate others of working with Katz. Made no money
from use.
Nature of copyrighted work
Whether use was transformative.
Transformative “adds something new with a further purpose or different
character, altering the first with new expression, meaning or message.”
Used Katz’s purportedly “ugly” and “compromising” appearance to ridicule and
satirize.
Page 24
Module 09
info
info
Visit UMT online at www.umtweb.edu
Katz v. Google (4)
Amount of copyrighted work used
No error by court that Factor #3 was neutral as applied to blog with
photo
Effect of use on potential market of value of copyrighted work
No error by court that use of photo would not impair Katz’s incentive to
publish the work
Katz wanted to use copyright as instrument of censorship against
criticism. The market for Katz’s photo was not affected.
Affirmed. No infringement by Chevaldian.
Page 25
Module 09
info
info
Visit UMT online at www.umtweb.edu
Leahy-Smith America Invents Act (2013): “First-To-File” Rule as in
most countries.
Exclusive right to make, use, or sell a product for 20 years
Anyone who “invents or discovers any new and useful process,
machine, manufacture, or composition of matter, or any new and
useful improvement thereof” may obtain a patent
Most are “utility patents” – something useful (although may have no
market value).
Patents
Page 26
Module 09
info
info
Visit UMT online at www.umtweb.edu
Patents (2)
“Design patents” for original and ornamental designs for products
“Plant patents” for new varieties of botanical plants.
Strong protection during life of patent. Right to monopolize.
But expensive, technical and time-consuming process
Since patent divulges all info to competitors, some prefer trade
secrets. If Coca Cola had gotten a patent instead of trade secret it
could be used by others after 1907.
Page 27
Module 09
info
info
Visit UMT online at www.umtweb.edu
Bowman v. Monsanto Co.
Monsanto invented and patented Roundup Ready soybean seeds.
Contain genes that allow survival of applications of weed killer to seeds
Seeds sold with licensing agreement that farmers may not
reproduce seeds to use in future plantings.
Bowman bought seeds, grew soybeans and saved soybean seeds
for next planting cycle. Monsanto sued for patent infringement.
Bowman defended on basis of patent exhaustion. Under that
doctrine, the buyer of patented product has the right to use/resell
item.
Lower Courts held for Monsanto. Bowman appealed.
Page 28
Module 09

Visit UMT online at www.umtweb.edu
Bowman v. Monsanto Co. (2)
Doctrine of patent exhaustion limits patentee’s right to control what others
can do with an article.
Initial sale of patented item terminates patent rights to that item.
“The purchase of the [patented] machines . . . does not acquire any right to
construct another machine either for his own use or to be vended to
another.”
Under this doctrine: Bowman can sell patented soybeans or consume
beans himself or feed to his animals.
soybeans.
If buyers reproduce the product, will destroy patent value for Monsanto.
Supreme Court affirmed judgment.
Page 29
Module 09

Visit UMT online at www.umtweb.edu
Lack Of Global Uniformity
Part of complexity & cost of patents: The variation of patent laws
around the world.
To ensure wide protection: Firms patent in U.S., Europe & Japan.
Covers those markets
Rest of the world left uncovered as the cost of registration in every
country would be too high.
Also enforcement is dubious in many small-market countries.
European Union agreed to create a single patent system.
Italy and Spain refused to participate.
Still patent holders often forced to litigate in many nations.
Page 30
Module 09

Visit UMT online at www.umtweb.edu
Trade Secrets
Coca-Cola has held secret the formula for Coke for over 100 years –
a patent would not provide such lengthy protection.
Most trade secrets are based on common law actions for theft of
secrets. Protection in other countries is difficult.
Victims of theft can request criminal charges be brought.
Information is a trade secret if:
It is not known by the competition
Owner has taken reasonable steps to protect the secret from disclosure
Page 31
Module 09

Visit UMT online at www.umtweb.edu
Bohnsack v. Varco, L.P.
Bohnsack invented the “Pit Bull” machine to make more efficient the
process of cleaning drilling fluids used in oil wells.
Varco is a company that cleans drilling fluids.
Secrecy agreement: Negotiated over the possibility that Varco would
manufacture Pit Bull.
Talks fell apart.
Varco’s lawyer then filed a patent application for Pit bull, claiming
Bohnsack sued Varco.
Jury awarded $600,000 for misappropriation of trade secrets. Varco
appealed.
Page 32
Module 09
info
info
Visit UMT online at www.umtweb.edu
Bhonsack v. Varco, L.P. (2)
Elements of misappropriation of trade secrets:
existence of a trade secret;
breach of a confidential relationship or improper discovery of a trade
secret;
use secret;
damages
Varco said it did not “use” trade secret.
Page 33
Module 09
info
info
Visit UMT online at www.umtweb.edu
Bhonsack v. Varco, L.P. (3)
Restatement test applied by the court:
Any exploitation of trade secret likely to result in injury to trade secret
owner or enrichment to the defendant is a “use.”
“Use” is broadly defined. Filing a patent application would lower the
market value of Bohnsack’s invention as it was exploited by Varco
and becomes public information.
Terms of Varco-Bohnsack agreement can prove value of Pit Bull.
Judgment Affirmed. Misappropriation of trade secrets by Varco.
Page 34
Module 09
info
info
Visit UMT online at www.umtweb.edu
Economic Espionage
Usually trade secrets based on common law and enforced by
litigation claiming misappropriation; violations of a secret; or
violations of secrecy agreement. Federal law can also apply.
Economic Espionage Act of 1996 concerns theft:
“Whoever, with intent to convert a trade secret, that is related to or
included in a product that is produced for or placed in interstate or
foreign commerce to the economic benefit of anyone other than the
owner thereof, and intending or knowing that the offense will injure any
owner of that trade secret,” is subject to prosecution.
Punishment up to 10 years in prison and fines up to $5 million.
Page 35
Module 09

Visit UMT online at www.umtweb.edu
United States v. Jin
Jin had degrees from Chinese and American universities.
Worked as software engineer for Motorola from 1998 to 2007 on
cellular communications system (iDEN) used globally.
Visited China from 2006-2007 on leave.
While there, she worked for company providing communications
technology for Chinese military.
Returned to Motorola; bought 1-way ticket to China; assembled
Page 36
Module 09
info
info
Visit UMT online at www.umtweb.edu
United States v. Jin (2)
When about to depart, Customs and FBI stopped her.
She said she needed iDEN documents to study and was going to
return to Motorola.
Trial Judge: Convicted her only of theft of trade secrets.
Imposed 48 month prison sentence.
She appealed.
HELD: Conviction affirmed.
She argued that iDEN was losing its commercial value so theft could
not harm Motorola.
Page 37
Module 09
info
info
Visit UMT online at www.umtweb.edu
United States v. Jin (3)
However, the Chinese company could duplicate the iDEN system to
compete with Motorola and iDEN would not be secure, thereby
reducing its value and Motorola would have to make costly changes.
District judge had acquitted her of some crimes of economic
espionage, but properly added 2 levels to trade secret theft under
sentencing guidelines.
Increase required “if the offence involved misappropriation of a trade
secret and the defendant knew or intended that the offence would
benefit foreign government. . . instrumentality, or foreign agent.”
Page 38
Module 09
info
info
Visit UMT online at www.umtweb.edu
THE END
© 2018 Cengage Learning, © 2021 UMT