ISOM 2030 –Protecting Business Innovations – Spring 2018
Final Project (two cases)
This final project is open-book, open-notes, open-internet, but written work submitted must be your own,
and any evidence of copying from any other sources will have consequences.
Both cases carry equal weight. The maximum length for your submission is six single spaced pages, which
should be submitted via canvas as a word document, or as a pdf (or rtf) format document.
Case 1
Defendant, a Delaware corporation with its principal office in New York City, publishes the Wall Street
Journal, Barrons, a weekly business magazine, and the Asian Wall Street Journal. It also maintains the Dow
Jones News Service, through which it distributes financial news to subscribers. It produces several stock
market indexes, the Dow Jones Industrial Average, Transportation Average, and Utilities Average, which
are computed on the basis of the current prices of stocks of certain companies selected by defendant's
editorial board.
Plaintiff is the oldest and largest commodities exchange market in the United States. It was organized
in 1848, and in 1859 the General Assembly granted plaintiff a special charter which incorporated it as a not-
for-pecuniary-profit organization. Over the years plaintiff has added different types of futures contracts
and now offers these contracts in a variety of fields, including agricultural products, precious metals and
financial instruments. All commodities exchanges in the United States are regulated by the Commodities
Futures Trading Commission (CFTC), and no exchange may trade a futures contract until the CFTC approves
the futures contract and designates the exchange as a contract market for that contract.
A futures contract is a contract traded on a commodities exchange which binds the parties to a
particular transaction at a specified future date. A stock index futures contract is a futures contract based
upon the value of a particular stock market index. Dr. James H. Lorie, stipulated by the parties to be an
expert, called by plaintiff, testified that these contracts have been traded since February 1982. He stated
that their "overriding" purpose is the management of risk." Unlike other futures contracts, no underlying
commodity exists to be delivered at the future date, but rather the transaction is settled by the delivery of
a certified promissory note in lieu of cash. He explained that the total risks of investing in the stock market
are divided into two parts. One part is the "nonsystematic risk," which occurs when an individual company
encounters problems such as strikes, changing consumer attitudes or other problems which would devalue
that company's stock. "Nonsystematic risk" can be controlled by an investor through the use of a diversified
portfolio. The other type of risk is "systematic risk," which is the risk associated with the broad general
movements of the stock market as a whole. Diversification of one's stock portfolio will not provide
protection against sharp declines in the stock market. He explained that there are only two ways to protect
against systematic risk. The most direct way is for an investor to sell his stocks. This method is rather costly
because of the transactional costs in selling and buying stocks, such as brokerage fees. Additionally, if
capital gains are realized, the transaction becomes even more costly. The second method of protecting
against systematic risk is to deal in stock market futures contracts. This method is more efficient, Professor
Lorie explained, since an investor holding a hypothetical $100,000 portfolio could purchase two futures
contracts in the Chicago Mercantile Exchange for one-fifteenth the cost of selling his stocks.
An investor who holds a diversified stock portfolio may "hedge" against systematic risk by entering
into a stock index futures contract predicting that the market index would decline. Dr. Lorie testified that
this was the most effective method of "hedging" of which he was aware. Plaintiff, desiring to be designated
as a contract market for stock index futures contracts, devoted more than two years to developing its own
index to be used as the basis for its stock index futures contract.
On February 26, 1982, plaintiff submitted an application to the CFTC asking that it be designated as a
contract market for Chicago Board of Trade Portfolio Futures Contracts. The application proposed the use
of three indexes, the stock market index, transport index, and the electric index portfolio contracts. It was
explained:
"Each index covers a significant portion of the overall stock market. The stock market
index covers industrial firms, the Transport Index covers air, rail, and trucking firms, and the
Gas and Electric Index covers utility companies. This division is similar to the way other major
market indices divide the stock market."
No mention of the Dow Jones name appeared in the application, but the stocks used in each of the
indexes were identical to those used in the Dow Jones averages. In a draft proposal to the CFTC for trading
"CBT indexes," the Dow Jones averages stock lists were cut out of the Wall Street Journal and pasted into
the proposals. The CFTC advised plaintiff that the CBT indexes were not just similar to, but were identical
to the Dow Jones averages and that this should be explicitly stated in its application. On May 7, 1982,
plaintiff amended its application to state that the CBT indexes were identical to Dow Jones averages and
that when Dow Jones changed a component stock or revised the divisor, plaintiff would make the same
change so that the CBT indexes would remain identical to the Dow Jones averages. Plaintiff also added a
disclaimer to the application disclaiming any association with Dow Jones. On May 13, the CFTC approved
plaintiff’s use of the stock market index portfolio contract, but did not rule concerning the use of the
transportation or utility index portfolio contracts.
Discuss the following questions:
A. How could you apply the Frisch test AND the Polaroid test to evaluate the trademark infringement
issues in this case?
B. What additional facts or information would you want either party to present if you were trying to
decide this case?
Case 2
Barney Smith seeks a copyright registration for a children’s Superman costume. Warner Brothers and
D. C. Comics own the copyrights in various works embodying the character Superman. Since the creation
of Superman in comics in 1938, Warner and D. C. have successfully exploited their rights to Superman in
various media and have licensed the character in connection with a variety of merchandising efforts.
Superman’s familiar attire consists of a skin-tight blue leotard with red briefs, boots, a cape, and a large “S”
emblazoned in red and gold upon the chest and cape.
Barney’s costume consists of a very form-fitting blue leotard, the chest of which contains a large “S”
emblazoned in red and gold. Although the leotard is not particularly comfortable to wear for long periods
of time, many children have become extremely attached to the costume and want to use the leotard as
either sleepwear or as long underwear. The costume also comes with red briefs, boots, a cape displaying
the same “S” as the leotard, and an ornate mask of Superman’s face. Children who wear the costume
outside do not need to wear regular clothes underneath the costume since the leotard is designed to cover
all the necessary parts and to keep a child sufficiently warm even on chilly October Halloween days. The
costume is rather expensive, selling for $60.00.
Barney wants to obtain copyright protection for the exterior appearance of the entire costume as an
integrated ensemble of its component parts, which results in the portrayal of Superman. The Copyright
Register, quoting its 1991 ruling on the Registrability of Costume Designs, has denied registration based on
its position that “fanciful costumes will be registered only upon a finding of separately identifiable pictorial
and / or sculptural authorship”. Warner and D. C. got wind of Barney’s application and want to sue him for
copyright infringement. Barney retains your services in dealing with Warner and D. C. and in appealing the
registration decision to the federal district court. He wants you to explain to him all of the legal issues
involved in this situation and wants your opinion as to how a court is likely to rule with respect to both the
registration application and a potential infringement lawsuit.
Discuss the following questions:
A. Under what laws or legal claims could or should Barney Smith be sued?
B. What arguments and claims could Barney Smith use in his defense?
C. What is the position of the copyright registers on issuing copyright for manufactured costumes or
clothing?