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Intellectual Property
St. Johns University School of Law
Subotnik, Eva E.

INTELLECTUAL PROPERTY

SUBOTNIK

FALL 2016

I. INTRODUCTION & OVERVIEW OF IP

What is intellectual property?

Umbrella term that covers 4 different topics:

Trade Secret

How is IP different from “traditional” property?

Property law = a system of rights and duties among people with respect to tangible things, like real property or chattels
Differences between tangible property and IP:

a person who discloses an idea (IP) cannot really get it back unlike a tangible item
one person’s use of information (IP) doesn’t necessarily rival/deplete another person’s use of the same information unlike tangible property

Theoretical Foundations of IP

Non-excludability + non-rivalrousness = public goods problem

ownership doesn’t exclude others from certain uses of it
value of property is not depleted by multiple uses of it
Public Goods Problem:

Free-riding: If the owner can’t exclude people from information once it is dispersed, the owner will have trouble charging for the idea
Due to the free-riding problem, the inventor is not going to want to create if they can’t protect and monetize their creations – will limit the kinds of inventions that are out in the world for people to enjoy

Want inventors and creators – not imitators and copycats

Utilitarian/Incentive to Create

Constitution – Article I, Section 8, Clause 8

The Congress shall have the 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…”

The economic philosophy 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 (Supreme Court, 1954)

Incentives to Create:

Intellectual Property

Good Samaritan
Personal need to express oneself/to invent

Limitations: not a lot of prizes, prizes come after creation – not up front so may not be enough of an incentive

Government funding

may not be enough money to pursue endeavor, lots of stipulations, government prioritizes certain causes over others, IP is market-oriented (which inventions get funding depend on what people want)

Business Advantages (first mover, imitation costs)

Something that is difficult to make will be more difficult to imitate

Social Costs of IP:

Increased prices/Monopoly concerns à decreased access

if there are no competitors in the field, something can cost 100x the production cost

Suppression of Technology

The IP right holder might suppress the tech by threatening to sue anyone who may use it because of their fear of losing their foothold in the marketplace

Discourages improvement and cumulative innovation

Balance between:

Social costs of limiting the diffusion of knowledge
Social benefits of providing economic incentives to create

Balancing results in exceptions; defenses; and durational limitations to IP rights

Utilitarian Justification for Trademark

Lowering consumer search costs & preserving the integrity of the marketplace

Efficiency of the marketplace depends on the quality of info available to consumers

Proliferating unreliable info in the marketplace increases consumers’ costs of search and distorts the provision of goods

Trademark law counteracts the “market for lemons”

“The purchaser’s problem, of course, is to identify quality. The presence of people 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
Trademarks provide a cue as to what the product is as well what the quality of the product will be
Allows for quick decision for what product to bu

Non-Utilitarian Justifications

Natural rights/reward to labor (Locke)

“Every man has a property in his own person….the labour 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 labour with…and thereby makes it his property….This labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined

Personhood (Radin)

“One may gauge the strength or significance of someone’s relationship with 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 could be so close to the personal end of the continuum that no compensation could be “just”

Some things are just integral to our very being (like a wedding ring)
JK Rowling may feel that she has poured herself into writing Harry Potter and say if someone goes and creates a porno out of Harry Potter, she may find that deeply upsetting to her being

The Tort Structure of IP Doctrines

Requirements for the IP right ≈ Is there a duty?
Infringement of the IP owner’s rights ≈ Is there a breach of duty?
Defense ≈ Is there a justification for what ∆ has done?

II. TRADE SECRETS

Underlying Theory

Freedom of contract

Protection against unfair means of competition

Source of Law

State statute (Uniform Trade Secrets Act)

Common Law

Subject Matter

Formula, pattern, compilation, program, device, method, technique, process

Standard for Protection

Information not generally known or available

Reasonable efforts to maintain secrecy

Commercial value

Scope of Protection

Protection against mi

company, who was told the process was a secret formed a company (∆) to build a furnace incorporating the modifications that π made. Π had only divulged the modification process to 2 other companies that it had intended to do business with.
: Can one who holds a trade secret reveal a limited amount of info about the secret without losing trade secret status?
Holding:

Absolute secrecy is NOT required – relative secrecy OK
The holder of a secret doesn’t need to remain totally silent – they can reveal the info to a limited extent without destroying the trade secret status of the secret
Limited disclosure is fine as long as it is made to further the company’s economic interests

Information isn’t secret/valuable

< >REASONABLE EFFORTS TO MAINTAIN SECRECYΠs have to prove that they have taken reasonable measures to protect the secrecy of their idea – such as measures to prevent theft or use of the idea by former employeesWhat constitutes reasonable efforts to maintain secrecy?

< >Rockwell Graphic Systems v. DEV (7th Circuit, 1991) π manufactured printing presses and replacement parts based on secret piece part drawings. 2 prior employees of the π joined DEV Industries (∆), a competitor and π sued claiming that they were using stolen secret piece part drawings. Issues: Are holders of trade secrets required to take reasonable precautions to maintain secrecy?Did π engage in reasonable secrecy precautions in order to safeguard its piece part drawings?Yes, holders of trade secrets are required to take reasonable precautions to keep the secrets confidential They are allowed a limited amount of sharing (like in Metallurigical). There is no bright line test of reasonable precautions a company should take (based on facts – NO summary judgment available bc there are genuine issues of fact) π kept the drawings in a vault with restricted access for only 200 engineers who had signed an NDA. The only outsiders that could’ve had access to the drawings were vendors who were given copies and signed confidentiality agreements and return the drawings when done.

< >Electro-Craft Corp. v. Controlled Motion (Minn. 1983) à contrast with Rockwell Also involved info taken by former employees and used in starting a competing company. The court found that the info the employees took was not generally known or readily ascertainable in the industry BUT it found that the info did not constitute a trade secret because there was no reasonable secrecy effort made (lax security, gave tours of the plant) Summary judgment available here because there aren’t any genuine issues of fact as there were in Rockwell