The Legal Environment of Business

A Critical Reasoning Approach

7th Edition, Global Edition

Nancy K. Kubasek
Bartley A. Brennan
M. Neil Browne

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CHAPTER 14

Intellectual Property Rights

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 Chapter Outline
• Introduction to intellectual property
• Trademarks
• Trade secrets
• Patents
• Copyrights
• Global dimensions of intellectual property law

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 Introduction to Intellectual Property

Laws of intellectual property protect property

that is primarily the result of mental creativity
rather than physical effort

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 Trademark
• Distinctive mark, word, design, picture, or
arrangement used by the producer of a
product
– Causes consumers to identify the product with the
producer
• To be protected in interstate use, it must be
registered with the U.S. Patent Office
– Registered mark holder may recover damages and
prohibit the infringer from using the mark
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 Trademark
– Unregistered mark owner may only prohibit the
infringer from using the mark
– To register, one must:
• Submit a drawing of the mark
• Indicate when it was first used in interstate commerce
and how it is used

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 Case 14.1 - Toys “R” Us, Inc., v.
Canarsie Kiddie Shop, Inc.
• Toys “R” Us, Inc., sued Canarsie Kiddie Shop,
whose stores were called Kids “r” Us
– For trademark infringement
• Court concluded that a likelihood of confusion
did exist by considering the following factors
– Strength of the senior user’s mark
– Degree of similarity between the marks
– Proximity of the products

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 Case 14.1 - Toys “R” Us, Inc., v.
Canarsie Kiddie Shop, Inc.
– Likelihood that plaintiff will bridge the gap
– Evidence of actual confusion
– Junior user’s good faith
– Quality of the junior user’s product
– Sophistication of the purchasers
– Junior user’s goodwill

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 Trade Dress
• Overall appearance and image of a product
that has acquired secondary meaning
• Entitled to the same protection as a
trademark
• To succeed on a claim of infringement, one
must prove that the:
– Trade dress is primarily nonfunctional
– Trade dress is inherently distinctive or has
acquired a secondary meaning
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 Trade Dress
– Alleged infringement creates a likelihood of
confusion
• A trade-dress infringement claim is often
accompanied by a trademark infringement
claim

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 Trade Secret
• Process, product, method of operation, or
compilation of information used in a business
that:
– Is not known to the public
– Bestows a competitive advantage on the business
• Discovery of a trade secret through lawful
channels means there is no longer a secret to
be protected

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 Trade Secret
• Plaintiff in a trade secret infringement case
must prove that:
– A trade secret actually existed
– The defendant acquired the trade secret through
unlawful means
– The defendant used the trade secret without the
plaintiff’s permission

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 Patent
• Grants the holder the exclusive right to
produce, sell, and use a product, process,
invention, machine, or asexually reproduced
plant for 20 years
• Is licensed in exchange for the payment of
royalties
– Royalties - Sum of money paid for each use of the
patented process

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 Table 14.2 - Criteria for a Patent

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 Patent
• Patent holder must not use it for an illegal
purpose
– Tying arrangement: Seller permits a buyer to
purchase one product or service only if the buyer
agrees to purchase a second product or service
– Cross-licensing: Two patent holders license each
other to use their patented objects on condition
that neither will license anyone else to use those
objects without the other’s consent

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 Patent
• Obtaining a patent
– An attorney licensed to practice in the Patent
Office does a patent search to ensure no other
similar patent exists
– Patent application is filed with the Patent Office,
and if all the criteria are met, a patent is issued
• If an infringer proves that the Patent Office
should not have issued the patent in the first
place, patent holder loses the patent
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 Copyright
• Exclusive legal right to reproduce, publish, and
sell the fixed form of an expression of an
original creative idea
• A copyrighted work reproduced with the
appropriate notice affixed is protected for:
– The life of its creator plus 70 years
– 95 years after the date of publication or 120 years
after creation, in the case of a publisher

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 Table 14.3 - Criteria for a
Copyright

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 Copyright
• One may register a work by:
– Filing a form with the Register of Copyright
– Providing two copies of the copyrighted materials
to the Library of Congress
• Whenever a registered work is reproduced, it
should be accompanied by the appropriate
notice of copyright

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 Fair Use Doctrine
• Provides that a portion of a copyrighted work
may be reproduced for purposes of criticism,
comment, news reporting, teaching,
scholarships, and research
• Courts decide on violations by considering:
– The purpose of the use
– The amount of the work that was used
– Whether the use had any impact on the
commercial value of the copyrighted work
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 Copyrights in the Digital Age
• Once a material is downloaded into a
computer’s memory or RAM, the material is
said to have been officially copied
• Software and the Copyright Act of 1976
– Was amended by the Computer Software
Copyright Act
• Declared that computer software could be protected
with a copyright

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 Global Dimensions of Intellectual
Property Law
• International protection for intellectual
property is offered through multilateral
conventions and treaties
• Trade Related Aspects of International
Property Rights (TRIPS)
– Must be signed and adhered to by all World Trade
Organization (WTO) members
– Ensures equal protection - Through its national
treatment policy and most-favored-nation policy
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 Global Dimensions of Intellectual
Property Law
– Expands copyright protection to include computer
programs and rental rights
– Industrial designs must be protected for at least
10 years
– Patents must be protected for at least 20 years
– Allows governments to curb anticompetitive
licensing contracts under certain circumstances
– Provides standards for intellectual property laws
and punishments

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 Objectives Covered
• Introduction to intellectual property
• Trademarks
• Trade secrets
• Patents
• Copyrights
• Global dimensions of intellectual property law

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