Intellectual Property: A Delicate Balance · 2015-06-18 · Colgate toothpaste was being...

Intellectual Property: A Delicate Balance © 2015

Jeff Bragalone

Bragalone Conroy PC

2200 Ross Ave., Suite 4500W

Dallas, Texas 75201

[email protected]

The views and opinions expressed in this presentation are solely

those of the presenter and should not be attributed to the presenter’s

firm, its other professionals, any of the presenter’s clients, or any of

the contributors to this presentation.

Intellectual Property: A Delicate Balance

Trademarks and Service Marks

Patents

Copyrights

Trade Secrets

Intellectual Property Types and Characteristics

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Intellectual Property is:

That which results from the intellectual, creative processes of the mind.

Intangible creative work—not necessarily the physical form on which it is stored or delivered.

Given legal protection in the form of trademark, patent, copyright, and trade secret laws.

Importance:

Traditionally, businesses have thought of their physical assets, such as land, buildings, and equipment as the most important. Increasingly, a company’s intellectual assets are the most important.

Trademarks Identifying and Protecting Source of Origination

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A trademark is any word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those products or services from others. Federal (commercial use of mark in interstate commerce) The Lanham Act: 15 USC 1051, et seq. Term: 10 years with possibility of indefinite 10-year renewals States (commercial use of mark in intrastate commerce) State laws: Common law and various state trademark registries Term: varies by State

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Registering Trademarks Technically, a trademark does not need to be registered to receive protection. Once it is used, it is protected.

There are many advantages, however, to registering a trademark with the U.S. Patent and Trademark Office.


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Collective mark

Certification

mark

Trademarks or service marks used by the members of a

cooperative, association, or other collective group.

Examples: Rotary International, Cotton Industry Inc.

Marks, words, names, symbols, or devices used by a

person other than its owner to certify a particular quality

about a good or service.

Examples: Energy Star, Underwriters Laboratories

Trademark

Service mark

Any word, name, symbol, or device used to identify and

distinguish one company’s goods from another.

Examples: Dell, Apple, Samsung

Similar to trademarks; are used to identify the services

or intangible activities of a business, rather than a

business’s physical products.

Examples: Amazon.com, eBay


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Fanciful – coined or made-up words highest protection

• Valium® for prescription tranquilizers

• Verizon® for telecommunication services

Arbitrary – common words used out of context high protection

• Apple® for computers

• Grey Goose® for vodka

Suggestive – suggests a quality of the product strong protection

• Chicken of The Sea® for tuna fish

• Jaguar® for fast sports car


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Descriptive – describes the actual goods or services least protection; difficult to secure trademark registration

• Park ‘N Fly® for airport parking services

• Vision Center® for optics store

Generic – the term is the name of the goods or services themselves no protection; not eligible for trademark registration

• “Tatoo” for a tattoo parlor

• “Eats” for a restaurant

• “Nails” for a nail salon


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Name

Word/Slogan

Colors

Design

Sounds

Trade dress

Packaging

Symbol

http://www.ecommerce-awards.co.uk/images/cisco.jpg

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Name is

trademarked

Symbol is trademarked

Slogan is trademarked


http://www.ecommerce-awards.co.uk/images/cisco.jpg

Trademarks Any of These Look Familiar?

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Trademarks Illustrative Cases

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Coca-Cola Co. v. Koke Co. of America, 254 U.S. 143 (1920)

Koke alleged that since Coca-Cola no longer contained cocaine, the trademark was fraudulent, and not entitled to protection. (Koke wanted to use the name “Koke” for its product.) On appeal, the U.S. Supreme Court held that since few, if any, would now be led to believe Coca-Cola contained cocaine, there was no fraud and the trademark was valid.

Trademarks Loss of A Mark Through Generification

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Genericide: nylon thermos zipper

kerosene formica linoleum

escalator aspirin cellophane

One foot in the “generification” grave:

Kleenex Baggies Xerox Plexiglas Rollerblade

Trademarks Infringement

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Trademark Infringement Trademark infringement occurs when one uses the protected trademark, service mark, or trade name of another without permission when marketing goods or services.

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Coca-Cola Co. v. Busch 44 F. Supp. 405 (E.D. Penn. 1942)

The word "koke (coke)" is simply an abbreviation which the public

has made of the trademark "Coca-Cola“ … it is therefore quite

natural, that the purchasing public rather than use the full

trademark, "Coca-Cola,” make resort to the more abbreviated

form "koke (coke).”

[W]hile the name of the defendant's product is "Koke-Up" it is not

to be doubted from the evidence in the case that "Koke" is the

dominant word which is attempted to be impressed upon the

public, since the word "Koke" on the label of the bottle of the

product is much larger in size than the other lettering.

Trademarks Illustrative Case on Infringement


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Trademarks Familiar But Dangerous

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The Dangers of Counterfeits

Sophisticated and large-scale

factories fake popular Western

prescription drugs. Although the

bottle, labels, and physical

attributes of the pills looks right,

the drugs may be placebos. For

patients who depend on their

drugs for critical health conditions,

non-working placebos place them

in grave danger. Some prior

Chinese counterfeit drugs include

“Plavix, a blood thinner, and

Casodex, a hormone treatment for

prostate cancer.

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Trademarks Familiar But Dangerous

The Dangers of Counterfeits

In 2007, it was discovered that

Colgate toothpaste was being

counterfeited. These fakes

contained diethylene glycol -- a

chemical toxic to humans that’s

used in antifreeze -- instead of

fluoride. These toothpaste tubes,

labeled “Manufactured in South

Africa,” were sold in discount

stores in New York, New Jersey,

Pennsylvania, and Maryland

before they were recalled.

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1787: U.S. Constitution

Article 1, Section 8, Clause 8

“The Congress shall have power . . . to promote the progress

of science and useful arts, by securing for limited times to

authors and inventors the exclusive right to their respective

writings and discoveries. . .”

Patents Constitutional Authority

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Patents are available for any invention whether it’s a product or a process, provided the invention is:

• New, i.e., “novel”

• Involves an inventive step (not obvious to someone with expert knowledge of the subject matter)

• Not an “abstract idea” or product of nature - Alice Corp. v.

CLS Bank, 134 S. Ct. (2014)

Patents General Overview

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United States Patent & Trademark Office

Exclusive jurisdiction over Patents (no State patent laws)

Charges fees for PTO services

Only registered patent attorneys and patent agents deal with PTO

Only inventor or representative may file

Over 500,000 patent applications each year

Less than two out of three applications are granted

Full disclosure at 18 months, at issuance, and throughout prosecution of the patent

Over two-year wait for examination after filing due to back log


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The United States is No Longer the Top Patent-Filing Country


• China’s Patent Law took effect

in 1985. Since then, China has

become the top patent filing

country in the world, obtaining

526,412 invention patent

applications; U.S. is second

with 503,582 utility patent

applications.

• China, along with the U.S.,

Japan, Europe (EPO), and

South Korea account for over

75% of all patents worldwide. Source: Thomson Reuters World IP Today

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True or False:

A patent gives the owner an exclusive right to make their invention.

False. A patent does not give its owner the right to make, use, or sell an

invention: rather, the patentee is granted only the right to exclude others

from making, using, or selling an invention.

If an inventor obtains a patent for a new kind of computer chip, and the chip

would infringe on a prior patent owned by Intel, the inventor has no right to

make, use, or sell the chip.

True. Absent a license from Intel, the inventor has no right to use Intel’s prior

patented technology. Intel may refuse permission, or ask that a licensing fee

be paid for the rights to use its patented technology.

Many inventions are improvements on existing inventions, and the system

allows the improvements to be (patented) and sold, but only with a license

from the original inventors.


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Utility Patent New & useful process, machine,

article of manufacture, etc., or improvement thereof.

• Novel

• Useful

• Fall within one or more statutory classes

“Better mousetrap”

Duration: 20 years from date of filing (or 17 from date of invention if filing prior to March 2013

First-to-file: Became effective in March of 2013

Patents Types of Patents

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Design Patents New, original, and ornamental

design for an article of manufacture

Aesthetic aspects of an article only; no functional aspects

Duration: 14 years

Scope: Very specific and limited

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Design Patents Unlike Apple’s Design Patent

D558756, Design Patent D593087 claimed the bezel separately from the back.

Jury Instruction on the distinction: “The broken lines in the D’087 Patent constitute unclaimed subject matter. Thus, the D’087 Patent claims the front face, a bezel encircling the front face of the patented design that extends from the front of the phone to its sides, and a flat contour of the front face.” See

Final Jury Instructions: Apple vs. Samsung, Case5:11-cv-01846-LHK Document 1901, 8/21/12.

The jury found that the Galaxy S4G (and 2 other models)

infringed the patent. Total damages: $163,018,625.

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Inter-Partes Review of Patents •On September 16, 2012, the America Invents Act (“AIA”) eliminated inter partes reexamination of patents, but added two new post-grant challenge procedures, including a revised inter partes review (IPR) process, all heard by the Patent Trial and Appeal Board (“PTAB”).

•Presumption of validity does not apply in IPRs. The PTAB uses a preponderance of the evidence standard rather than the higher “clear and convincing evidence” standard applied in district court actions.

•The PTAB has been much less likely to defer to examiner conclusions, and has routinely invalidated the majority of patent claims as obvious.

Patents Available Challenges to Patents

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Inter-Partes Review of Patents

Timing

A petition for IPR may be filed after the later of either: (1) The date that is nine months after the grant of a patent or issuance of a reissue of a patent; or (2) if a post-grant review is instituted, the date of the termination of that post-grant review. See 35 U.S.C. 311(c).

Petition must be filed within one year after the date on which the petitioner, real party-in-interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.


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•Basis: Sections 102 and 103 (anticipation and/or obviousness); based on patents or printed publications •Standard: “Reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged” •Decision: If an IPR is instituted and not dismissed, the PTAB will issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner (and any new claim added by the patent owner). •Estoppel: Bars reliance on prior art that the challenger “raised or reasonably could have raised.” IPR estoppel attaches upon PTAB’s final written decision.


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Business Method Patent A business method patent is a patent that protects an invention that is or facilitates a method of doing business. The most notable business method patents that have been awarded:

Amazon.com’s one-click ordering system. Priceline.com’s “name-your-price” business model.

AIA Covered Business Method Review So-called “business method patents” are now subject to review proceedings under the AIA.


• The Near Extinction of Injunctive Remedies

• The Uncompensated Taking of Intellectual Property

• The Ongoing Restrictions on Damages Awards

Patent Damages: A Delicate Balance

The Near Extinction of Injunctive Remedies eBay Inc. v. MercExchange

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• Our troubles all began in 2006 with the Supreme Court’s decision in eBay Inc. v. MercExchange.

• Prior to the eBay decision, there was a long-standing presumption that a patent holder was entitled to permanent injunctive relief after a finding of infringement.

• In eBay, the Supreme Court held that there is no "general rule" requiring injunctive relief in patent infringement cases. In his concurring opinion, Justice Kennedy addressed the issue of "patent trolls," suggesting that monetary damages, rather than injunctive relief, may be sufficient to compensate NPEs (non-practicing entities).

• Since the eBay decision, district courts have routinely denied permanent injunctions after a finding of patent infringement—something that was virtually unheard of prior to eBay.

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• Without the threat of permanent injunctive relief, patent holders lost a significant weapon to address infringement.

• Although the Supreme Court's decision in eBay provides district courts with the power to require patentees to enter into compulsory licenses, the unavailability of permanent injunctions decreased the value of the patents for most (and arguably all) patentees.

• Following the Supreme Court's eBay decision, the successful patent holder was required to rely on a damages assessment to dissuade infringers.

• As patentees relied on expansive damages theories to restore the in terrorem effect of patent assertions, the courts sought to curtail the availability of large damages awards.

The Near Extinction of Injunctive Remedies eBay Inc. v. MercExchange





The Ongoing Campaign to Restrict Damages Awards Cornell University v. Hewlett Packard Co.

Cornell University v. Hewlett Packard Co. (N.D.N.Y. 2009)

• Judge Rader, sitting by designation, adjourned the trial to conduct an impromptu Daubert hearing. After hearing testimony that the Plaintiff’s damages theory (for infringement of a patent relating to the “Instruction Recorder Buffer”) was based on the entire market value of the HP servers that included the buffer, Judge Rader struck the Plaintiff’s damages theory due to:

• No “demand curve” offered to demonstrate consumer demand

• No evidence that invention drove demand for entire CPU brick

• No “real world” support for royalty base claim

• Plaintiff revised its theory to allege a .8% royalty on the “CPU brick” component of the server, because the smallest saleable unit of the server, the processor, was not sold “a la carte” by HP.

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The Ongoing Campaign to Restrict Damages Awards Cornell University v. Hewlett Packard Co.

Cornell University v. Hewlett Packard Co. (N.D.N.Y. 2009) cont’d

• The jury returned a verdict of $184 million based on the revised damages base. On motion for JMOL, Judge Rader again restricted the application of the EMV rule.

• Judge Rader held that EMV could be appropriate if applied to a smaller component of the HP servers, such as the processor

• Recalculated damages based on the lower “market value” of the processors

• $53 million in damages was allowed based upon a lower $8 billion processor base

• Judge Rader introduced an even more rigorous evidentiary standard (e.g., calling for demand curves) than he ultimately applied

• Since Judge Rader stopped the trial to conduct a Daubert hearing and strike the Plaintiff’s damages theory based on the EMV of the HP server, why didn’t the Judge stop the trial to restrict the damages base to the processors (rather than the “CPU brick”)?

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Uniloc v. Microsoft Corp. (Fed Cir. 2011)

• The Federal Circuit noted that the EMV rule is derived from Supreme Court precedent requiring that "the patentee . . . must in every case give evidence tending to separate or apportion the defendant's profits and the patentee's damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative," or show that "the entire value of the whole machine as a marketable article, is properly and legally attributable to the patented feature.”

• Use of $19 billion EMV figure was irrelevant and “tainted” the jury award

• “This court now holds as a matter of Federal Circuit law that the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation. Evidence relying on the 25 percent rule of thumb is thus inadmissible under Daubert and the Federal Rules of Evidence, because it fails to tie a reasonable royalty base to the facts of the case at issue.”

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The Ongoing Campaign to Restrict Damages Awards Uniloc USA v. Microsoft Corp.

Uniloc v. Microsoft Corp. (Fed Cir. 2011) cont’d

• The Uniloc panel opinion conflicts directly with Lucent’s suggestion that EMV could be applied “simply by asserting a low enough royalty rate”

• The Uniloc Court noted that:

Just before this statement, however, this court held that one of the flaws in the use of the entire

market value in that case was “the lack of evidence demonstrating the patented method of the

Day patent as the basis—or even a substantial basis—of the consumer demand for Outlook....

[t]he only reasonable conclusion supported by the evidence is that the infringing use of the

date-picker tool in Outlook is but a very small component of a much larger software program.”

Id. at 1338. Thus, in context, the passage relied on by Uniloc does not support its position. The

Supreme Court and this court's precedents do not allow consideration of the entire market

value of accused products for minor patent improvements simply by asserting a low enough

royalty rate.

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The Ongoing Campaign to Restrict Damages Awards Uniloc USA v. Microsoft Corp.

The Ongoing Campaign to Restrict Damages Awards Inventio A.G. v. Otis Elevator Company

Inventio A.G. v. Otis Elevator Company (S.D.N.Y. 2011)

• Claimed invention related to a destination dispatching system that recognizes a user and then

dispatches an elevator to bring the user to the destination floor based on user-specific data

• Defendants brought a motion in limine regarding EMV Rule

• Court held that Patentee must show that the infringing item was not just a substantial basis for customer demand, but that it was the basis for customer demand of the product

• Court required the Patentee to “proffer some credible evidence that customer demand for an entire elevator system was based on one aspect of that system...rather than on other factors including the vendor's history, reliability, price or ability to get the job done in a timely fashion.”

• Court also held that “destination dispatching was indeed a desirable feature and that Otis would have placed itself at a competitive disadvantage if it did not incorporate a destination dispatching feature into its elevator products.”

• Court used a VERY HIGH (mis) application of the EMV rule. Court viewed that unless the demand for the entire elevator was driven by the patented feature, you couldn't employ the EMV Rule

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The Uncompensated Taking of Intellectual Property IP Innovation LLC v. Red Hat, Inc.

IP Innovation LLC v. Red Hat, Inc. (E.D. Tex. 2010)

Chief Judge Rader sitting by designation

• IP Innovation claimed a reasonable royalty on 100% of defendants’ revenues from sales of subscriptions to the accused operating systems

• Judge Rader found that:

• The claimed invention was one of thousands of components in the operating system

• The record suggested that users do not buy the accused operating systems for their

workspace switching feature and the plaintiff’s damages expert did not account for the fact that most users don’t use the feature at all

• The Plaintiff’s expert arbitrarily picked a royalty rate much higher than existing rates for

licenses to the patents in-suit

Accordingly, the district court (Judge Rader) excluded plaintiff’s damages expert on the grounds that he “improperly inflate[d] both the royalty base and the royalty rate by relying on irrelevant or unreliable evidence and by failing to account for the economic realities of the claimed component as part of a larger system”

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The Uncompensated Taking of Intellectual Property Fractus S.A. v. Samsung Electronics Co.

Fractus S.A. v. Samsung Electronics Co. (E.D. Tex. 2011)

• Court excluded patentee's survey evidence from damages calculation.

• Technology related to internal antennas used in cell phones.

• Excluded surveys sought customer preference regarding a general feature of an internal cell phone antenna instead of the specific antenna claimed in the patent. The claimed invention was an improvement on the general feature.

• Court noted that surveys failed to “tie proof of damages to the claimed invention’s footprint in the marketplace:

• Must test the demand for the improvement, not just the feature that is improved.

• BUT, what about the fact that there was improvement in a feature that drives consumer demand? Shouldn’t a jury be allowed to give some weight to that fact?

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The Uncompensated Taking of Intellectual Property Open Questions that Lead to Disturbing Conclusions

• What can be done regarding “apportionment” when there is either no consumer demand for the patented feature or no evidence of consumer demand? If there is no evidence of demand (but clear infringement), does that mean that the patented invention is worthless?

• Are litigants now forced to commission “surveys” to try to create evidence of demand? Surveys may be available when a product has millions of customers, but what if the accused product does not have a statistically sound customer base for a survey?

• What should be done if the value of the case doesn’t warrant the expense of a consumer demand survey?

• How do you measure consumer demand on new products, or products that have very specific markets, such as military or medical products?

• There is an increasing number of successful Daubert challenges over whether the expert was properly calculating damages if the EMV is used.

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• 17 U.S.C. section 102 (a) -- An original work of authorship fixed in any tangible medium of expression.

• Notice

• © 2015 Mark Smith

• (symbol) + (first year of publication/creation) + (author)

• No longer a legal requirement for protection

• Term

• Life of the author + 70 years

• “Work for hire” = the shorter of:

• 95 years from date of first publication

• 120 years from year of creation

Copyrights Protecting Creative Works

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Pre-Bono: Life of the author + 50 years or 75 years for a work for hire

Post Bono: Life of the author + 70 years or 120 years for a work for hire.

Works made for hire from 1923 to 1998 (such as Mickey Mouse) do not enter the public domain until

2019 (instead of 1999).

Copyrights Duration of Protection Has Increased Over Time

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What it protects:

literary works

musical works, including any accompanying words

dramatic works, including any accompanying music

pantomimes and choreographic works

pictorial, graphic, and sculptural works

motion pictures and other audiovisual works

sound recordings

architectural works

What it does not protect:

ideas

procedures, systems

methods of operation

concepts, principles

discoveries

titles, names

short phrases, slogans

listing of ingredients, contents

works not fixed in a tangible medium of expression

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WHAT GOOD IS A COPYRIGHT? Grants the holder an exclusive bundle of five rights: 1. To reproduce the work in copies or sound recordings

2. To distribute copies of the work to the public (by sale or

other transfer of ownership, or by rental, lease, or lending)

3. To prepare derivative works or create adaptations based upon the work

4. To perform the work publicly

5. To display the work publicly

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UNIFORM COPYRIGHT LAWS

One of the main problems for the international online community is that copyright protection varies among jurisdictions. The U.S. does not recognize moral rights, but other countries, like France, enforce these rights. In Great Britain, authors have paternity rights to their copyrighted works.

Although the WIPO Copyright Treaty and the DMCA of 1998 have been implemented, there are still many cyberspace copyright issues unsolved.

Should there be a different copyright law solely for cyberspace?

If so, what rights should it include?

Copyrights Identifying and Protecting Source of Origination

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Copyrights Identifying and Protecting Source of Origination

Unauthorized Copying of Music Improved technology allows for easy, fast, cheap, and

ubiquitous copying of music on the Web.

Companies create businesses to facilitate storing and sharing

of music files. Many individuals set up free sites for music

sharing, too.

In the past, lawsuits have delayed, restricted, or banned the

release of new technologies, including:

• CD-recording devices.

• Digital Audio Tape (DAT) systems.

• DVD recorders.

• DVD players.

• MP3 players.

The Recording Industry Association of America (RIAA)

continues to fight unauthorized copying of music.

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Grandma endures wrongful ISP piracy

suspension

Qwest had suspended the service of 73-year-old accused by Hollywood of

illegal file sharing. The problem was she didn't do it.

To Paradiso, the customer-service representative from Qwest Communications on the phone with her could

have been speaking Slovenian for all the sense it made. Her Internet service was suspended... Hollywood

studios accused her of copyright violations... she illegally downloaded 18 films and TV

shows..."Zombieland," "Harry Potter," "South Park..."

Cathi Paradiso, a Pueblo, Colo. grandmother, was wrongly accused of pirating movies, and a watchdog

group says safeguards need to be put in place to protect against mistakes.

South Park? What would a 73-year-old grandmother want with "South Park" she thought to herself? But this

much about what the Qwest rep said sank in: if Paradiso was accused of copyright infringement once more,

her Internet service provider would have no choice but to terminate her account. Paradiso said she was also

told that she would have a hard time acquiring new service as the other ISPs in the area would know her

name and what she did.

"Take me off your hit list," Paradiso wrote in a January 15 e-mail plea to some of the studios who had

accused her. "I have never downloaded a movie. Period... You'll need to admit you made a mistake and

move on to the correct perpetrator... I am saying this once more: My computer is not a toy. My livelihood

depends on my ISP's reliability. Look for the perpetrator and leave my service alone."

Paradiso, would eventually be cleared. Last week, Qwest had a technician investigate--after CNET began

making inquiries--and he discovered that her network had been compromised, according to Monica

Martinez, a Qwest spokeswoman. (mock article)

Copyrights Protecting Against DMCA Abuses

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Copyrights Protecting Against DMCA Abuses

"The concern of this Court is that in these lawsuits,

potentially meritorious legal and factual defenses are

not being litigated, and instead, the federal judiciary is

being used as a hammer by a small group of plaintiffs

to pound settlements out of unrepresented defendants."

-Hon. S. James Otero, Dist. Judge, Central Dist.

California, March 2, 2007, Elektra v. O'Brien, 2007

ILRWeb (P&F) 1555

"[C]ounsel representing the record companies have an

ethical obligation to fully understand that they are

fighting people without lawyers... that the formalities of

this are basically bankrupting people, and it's terribly

critical that you stop it...." -Hon. Nancy Gertner, Dist.

Judge, Dist. Massachusetts, June 17, 2008, London-

Sire v. Does 1-4

"'Statutory damages must still bear some relation to

actual damages." Hon. Michael J. Davis, Dist. Judge,

U.S.District Court, Dist. Minnesota, January 22,

2010, Capitol Records v. Thomas-Rasset

http://recordingindustryvspeople.blogspot.com/2008/01/thoughtful-decision-in-2007-california.html

http://recordingindustryvspeople.blogspot.com/2008/10/transcript-of-june-17th-conference-in.html





http://recordingindustryvspeople.blogspot.com/



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Copyright infringement occurs whenever the form or expression of an idea is copied without the permission of the copyright holder. An exception applies if the copying is deemed a “fair use.” Fair use includes:

Criticism, comment, news reporting teaching, scholarship, or research

Fair use allows uses of copyrighted material that contribute to the creation of new work and do not significantly affect sales of the material, thus depriving copyright holders of their income.

Copyright Act gives four factors to consider in determining whether a

work is fair use:

1. The purpose and character of the use

2. The nature of the copyrighted work

3. The amount and substantiality of the portion used

4. The effect of the use upon the potential market

Copyrights The “Fair Use” Exception

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Fair-Use Cases

• Sony v. Universal City Studios

• 1984: U.S. Supreme Court ruled that non-commercial copying (recording) of a movie for viewing at a later time was fair use.

• Court ruled that copying devices (in this case, Betamax VCR) should not be banned if they have significant legal uses.

• Sega Enterprises, Ltd. v. Accolade, Inc.

• 1992: Reverse engineering a complete program in order to produce new, creative work was ruled fair use.

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Terri Welles was featured as “Playboy Playmate of the Year” in June 1981. She maintained a website titled “Terri Welles— Playmate of the Year 1981.” As meta tags, Welles uses the terms “Playboy” and “Playmate,” among others. Playboy Enterprises, Inc. maintains websites to promote Playboy magazine and PIayboy models. PIayboy filed a suit against her asking the court to order her to stop using those terms as meta tags. The court held that Welles was entitled to the “fair use” of the “Playboy” and “Playmate” marks as tags.


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Circulation of the Famous Rabbit Mark

™

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ROYALTIES

Book Royalties: Simple

Music Royalties: Amazingly Complicated

Copyrights The Complexities of Copyright Royalties

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“In consideration of the author’s performance… the publisher will pay to the author the following royalties based on the publisher’s net cash receipts: On copies of the work sold in the United States … 15%. However, if in any year, sales exceed 4500 copies, then … 18%” (Econometric Analysis/Prentice Hall)


ROYALTIES

Book Royalties: Simple

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ROYALTIES

Music Royalties: Amazingly Complicated

Writers/Composers

• Sales of music in fixed form (CDs)

• Public performances

Recording Artists

• NONE from public performance (radio, TV, bars, etc.)

• Digital arena if not interactive and the listener is a subscriber.


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The Digital Performance Rights in Sound Recordings Act (DPRSRA) created a right in sound recordings to perform the copyrighted work publicly by means of a digital audio transmission, as well as established a compulsory licensing scheme.

(Compulsory license = the owner cannot deny the request. Disagreements on terms must be litigated.)


ROYALTIES

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Record Label

$10.80

Retailer

$6.20

.75 1.40 2.15 .86 1.08 1.29 .70 1.94 .59 1.36 1.36 2.55 .97

Operating Profit Sunk Costs

Consumer

Fixed Costs Royalties


ROYALTIES $17

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• American sisters Patty and Mildred Hill wrote the lyrics in 1893. It is now among the top three most popular songs in the English language (along with Auld Lang Syne and For He's A Jolly Good Fellow).

• The lyrics were copyrighted in 1935, 11 years before Patty's death, and the ownership has swapped hands in multi-million dollar deals ever since.

• The song generates royalties of about $2 million per year for the current owners AOL/Time-Warner, who bought the rights to the simple tune for $28 million in 1989

• By the time its copyright runs out in 2030, Happy Birthday should have made nearly $100 million.


Valuing Happy Birthday

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Definition: Any formula, pattern, device, or compilation of information that give a business an advantage over competitors who do not know the information or processes.

Duration of Protection: Indefinitely, as long as the party adequately protects his or her trade secrets from disclosures.

Trade Secrets Protecting Valuable Business Data

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Trade Secret Protection

Pros: No government registration fees

No government registration disclosure

Effective immediately

Indefinite in duration

Used to protect software

Both federally and state protected

Cons: Protection lost upon disclosure

Law does not punish “fair discovery”

Law only punishes improper acquisition

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Elements:

• Formula, process, practice, etc.

• Not generally known

• Gives the owner a competitive advantage

• Reasonable efforts are taken to maintain its secrecy Examples: customer lists, survey methods, marketing strategies, computer algorithms, manufacturing techniques

It is illegal: • to acquire another’s trade secret by improper means (bribery, misrepresentation,

theft, etc.) or • to disclose or use another’s trade secret without consent by a person used improper

means to acquire it


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• Not all information qualifies for trade secret protection.

• In general, information that is known to the public or that competitors can discover through legal means does NOT qualify for trade secret protection.

• The strongest case for trade secret protection is information that is characterized by the following:

• Is not known outside the company.

• Is known inside the company on a “need-to-know” basis only.

• Is safeguarded by stringent efforts to keep the information secret.

• Is valuable and provides the company a competitive edge.

• Was developed at great cost, time, and effort.


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Physical Measures For Protecting Trade Secrets

• Restricting access to confidential material.

• Labeling documents “proprietary,” “restrictive,” or “secret.”

• Password protecting confidential computer files.

• Maintaining log books for visitors.

• Maintaining log books for access to sensitive material.

• Maintaining adequate overall security measures.

• Can patented material be a trade secret?


Credits and Acknowledgements

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The presenter gratefully acknowledges the research, scholarship, and writing contributions from the following distinguished attorneys: Daniel Olejko Bragalone Conroy PC (214) 785-6770 [email protected]

These contributors assisted or authored

synopses of several of the cases digested

herein. But the opinions and views

expressed in this presentation are solely

those of the presenter and should not be

attributed to the presenter’s firm, its other

professionals, any of the presenter’s

clients, or any of the credited individuals

who provided portions of the written

scholarship and research reflected in this

presentation.

mailto:[email protected]



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