FALL 2015–Subotnik–Intro to Intellectual Property
what unites trade secret, patent, copyright and trademark are ideas.
idea: how to build a better mousetrap.
a. Intellectual property has:
i. non-excludability: hard to exclude ppl from information once its out.
ii. non-rivalrousness: multiple ppl can use idea at the same time, property does not deplete w/ use, doesn’t interfere w/ others ability to use.
iii. =”public goods problem”
danger w/ non-excludability is that if you cant prevent others from piggybacking on the information, then ppl will not do the invention to begin with. we want inventors and creators, not just imitators and copycats.
Solve public goods problem by making ideas more like traditional property by creating exclusion regimes.
Utilitarian/”Incentive to Create”:
-US Constitution, Article I. §8:
· “the congress shall have power…
o to promote the progress of science and useful arts, by securing the limited times to authors and inventors the exclusive right to their respective writings and discoveries…”
· “the economic policy behind the clause empowering congress to grant patents and copyrights is the conviction that it is the best way to advance public welfare through the talents of authors and inventors in science and useful arts.” Mazer v. Stein
What incentivized creation? -credit/ prestige/reputation, first market mover, prizes/ awards, government funding
Upsides to IP
-encourages ppl to make things, don’t depend on govt to decide what is needed. market oriented.
Costs of IP
-can chill other ppl from using technology w/ threat of lawsuit.
-inflated costs, preventing competition on sale of works. IP right holder can raise price way above cost of production. monopoly concerns=decreased access
-suppression of technology
-discourages improvement and cumulative innovation
balance cost of limiting diffusion of knowledge w/ social benefits of proving economic incentives to create. will result in balancing results in exceptions; defenses; and durational limitations to IP rights.
Utilitarian justification for Trademark:
· lower consumer search costs/ integrity of the marketplace
o “the purchaser’s problem, of course, is to identify quality. The presence for ppl in the market who are willing to offer inferior goods tends to drive the market out of existence…Brand names not only indicate quality but also give the consumer a means of retaliation if the quality does not meet expectations… This ensures the prospective consumer of the quality of the product.” –George A. Akerlof, The Market for Lemons
· Trademark law counteracts the “market for lemons”
Non-Utilitarian Justifications for IP
1. Natural Rights/Reward to Labor:
a. “Every man has a property in his own person…The labor of his body, and the work of his hands, we may say, are properly his. whatsoever then he removes out of the state that nature hath provided…he hath mixed his labor with…and thereby makes it his property…This labor being the unquestionable property of the laborer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others” –John Locke, Two Treatises on Government §27
a. “One may gauge the strength or significance of someone’s relationship w/ an object by the kind of pain that would be occasioned by its loss…Not all object-loss is equally important. Some objects may approach the fungible end of the continuum so that the justification for protecting them as specially related to persons disappears…A few objects may be so close to the personal end of the continuum that no compensation could be just.” –Margaret Radin, Property and Personhood.
Trade Secret- creature of state law. protects companies from misappropriation of confidential business information (ex. Coca Cola formula) protects against competitors or employees who left the firm.
Patent law: gives rights of exclusively to certain inventions. Need patent application, must be novel, nonobvious and have utility.
Copyright: software, books, artistic works. Doesn’t need application. upon fixation works are copyrighted.
Trademark Law: federal statute largely, product name, logos, symbols. don’t need application, advantages to registration though.
1. Requirements for the IP right (is there a duty?)
2. infringement of the IP owner’s rights (breach of duty?)
3. defense (is there justification for what defendant had done?)
Why don’t companies just resort to self-help methods, why do we need trade secret law at all?
-want to create incentives for ppl to be innovators and make useful products.
Theories of Trade Secret Protection
· incentives to create/ innovate
· incentive to disclose share info
· commercial morality
Elements of a Trade Secret claim
1. Protectable Subject Matter—Is it a TS?
b. economically valuable?
· Uniform Trade Secrets Act §1(4): (pg 36)
o “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that…(i) derives independent value, actual or potential, from not being
he standard of morality expected in our commercial relations.”
“Our tolerance of the espionage game must cease when the protections required to prevent another’s spying cost so much that the spirit of inventiveness is dampened. Commercial privacy must be protected from espionage which could not have been reasonably anticipated or prevented.”
(2) Breach of a “confidential Relationship”: can be express or implied
Smith v Dravo Corp (p 71)
Some defenses to trade secret: information isn’t secret/valuable; No reasonable efforts to keep secrets (e.g., claimant already publicly disclosed info)
Defenses to misappropriation: “Proper Means”
· proper means
o independent development
o reverse engineering
§ Kadant v. Seeley Machine, Inc
Distinguish confidential info disclosed to employee (ex. formula for coca-cola, designs, diagrams, memorize customer lists, etc.) vs info that is part of employee’s general skill level
Common law (in absence of contract):
· “Hired to invent” –employer owns it
· use employer’s time or resources – employee owns it but employer has “shop right”
· cases of “independent invention” – employee owns
3 categories of employment agreements
· confidentiality agreements
· invention assignments (in Cali, must be employers resources and on employer’s time)
· noncompete agreements
o Minority approach:
§ Edwards v. Arthur Andersen LLP (Cal. 2008)
§ non-compete agreements are void (w/ limited exception) as against public policy
o majority approach:
§ most states employ as rules of “reasonableness” (duration, geography, line of business).
Uniform Trade Secrets Act §§ 2-4
· Injunction against actual or threatened misappropriation (to be terminated when the secret ceases to exist)
· injunction for a “reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation” – “head start injunction”
o imposition of a “reasonable royalty” in lieu of an injunction