The Sources and Limits of Intellectual Property Law;
· US Const. Art. I, Sec. 8, Cl. 3
o Commerce Clause – Gives Congress right to regulate commerce
· US Const. Art. I, Sec. 8, Cl. 8
o Balanced Sentence Clause – Gives Congress the right to protect the Sciences and Arts
· Eldred v. Ashcroft
o Facts: Congress extended copyright protection by 20 years. Was this Constitutional? Yes.
o Congress (not the SC) has the power to set laws that protect original art/ideas.
o Extending a term is diff’t from creating an unlimited term.
The Nature and Functions of Intellectual Property Law
o Jefferson: ideas should be free for all to use, there are no natural rights to ideas
o Goldstein: Goal is to ensure the best for consumers (best intellectual goods at lowest price). Protecting new ideas creates the incentive to develop more.
o Appropriability v. indivisibility: balance b/w incentive v. access to ideas
o Considerations in making IP laws:
§ What to protect?
§ How to protect it and for how long?
§ Protection for whom?
§ Limitations? (fair use, etc….)
Trade Secrets & State Law Intellectual Property Laws
Trade Secrets I: Theory of Protection
· Trade Secret Intro
o Trade secrets are included in the Unfair Competition Statutes
§ Encourage investment in creation & maintain standards comm’l ethics
o Trade secrets fall under State Law
§ Is there a trade secret? (see factors below)
§ Was the secret misappropriated?
· Metallurgical Industries v. Fourtek, Inc.
o Facts: M.I. developed a process for producing carbide, Fourtek used it w/o permission and sold to Smith.
o Is There a Trade Secret Test? (from the UTSA)
§ Is there a Secret?
· Absolute secrecy is not an obligation. Limited disclosure is allowed. Factors to consider:
o Were disclosures public announcements or limited divulging? Were the disclosures made to further economic interests?
· “negative know how” may be protected as a trade secret. Depends on the jurisdiction and what the “negative know how” is.
§ Is there Economic Value?
· Factors to Consider: does it give you an advantage over competitors? Is it worthy of protection?
§ Was there a Cost? (time counts as a cost)
§ Were there efforts to maintain Secrecy?
· Types of Security Measures: non-disclosure agreements, confidentiality agreements, signs posted, partitioning the secret amongst workers, etc…
o Was There Wrongdoing?
§ Wrongdoing doesn’t necessarily have to be illegal or fraudulent. Can be:
· Breach of a confidential relationship
o Stealing an idea is not enough to be actionable.
o Confidential relationship can be implied in fact, via contract, implied in law
· Other improper means
o UTSA: theft, bribery, misrepresentation, breach inducement of a breach of duty to maintain secrecy, espionage, etc…
o Restatement: anything that falls below generally accepted standards of comm’l morality and reasonable conduct
o Policy: trade secret holder are protected from improper means b/c businesses shouldn’t have to go to unreasonable extremes in order to protect their secrets.
· Must have use or disclosure (per most states, though the UTSA includes acquisition) in order to have wrongdoing
o When the trade secret itself is sold, that is automatically ‘use’
o When something utilizing the trade secret is sold, like in Metallurgical, it must be used for commercial gain to constitute ‘use’
§ 3rd Party Recipient
· Must be on notice of a trade secret (they must have known or should have known).
o No affirmative duty to research trade secrets, but if you see/suspect something shady is going on you must inquire
o Standard is that of reasonable person
§ Confidential Relationships make a case stronger but are not a necessity in showing liability
o Remedies (§1114)
· An injunction will last for as long as the trade secret remains a secret, or
· A court can set an injunction for a set period of time, based on how long it would take to reverse engineer the secret (i.e. how long the advantage would last) (the minority rule), or
· A court may issue a perpetual (permanent) injunction for egregious conduct. This is a punitive ruling. (Rarely used)
· Factors to Consider: forseeable changes in the parties’ competitive posture, previous prices paid, total value, nature and extent of the use, and unique factors (including availability of alternatives)
· EI Dupont v. Christopher
o Facts: Competitors hired D to fly over Dupont’s new construction site to take pictures of alleged trade secrets.
o Proper Means of Discovering a Trade Secret
§ Reverse Engineering, or
§ Independent Research
§ Policy: To obtain knowledge of a process without spending the time and money to discover it independently is improper unless the holder voluntarily discloses it or fails to take reasonable precautions to ensure its secrecy.
· UTSA: Commercial Morality. This is higher than standard business practice, a pretty high standard. Doesn’t have to be fraudulent or illegal.
· Restatement: generally accepted comm’l morality
· Expert Witness’ can be used to make a determination on the standard and whether its breached
· Wexler v. Greenberg
o Covenants Not to Compete
§ Rule: When deciding on the enforceability of a covenant not to compete, the rights of the individual are favored. If trade secrets are involved (even if there is no covenant), the courts will lean a little more towards the side of the employer.
§ Consider: “The reasonableness of the covenant in the light of the need of the employer for protection and the hardship of the restriction upon the employee.”
§ Policy: This is because they do not want to waste the individuals contribution to the market, or limit the individuals bargaining power, also want to promote the spread of innovation.
· PepsiCo v. Redmond
o Facts: Dude left Pepsi to take high-level role w/ Quaker to market Gatorade. He had access to Pepsi trade secrets. Holding: Dude was given injunction from working for 6 months and a permanent injunction from ever using the Pepsi trade secrets.
o Inevitable Disclosure Doctrine
§ The trade secret was not misused, but it is inevitable that it will be.
§ Teradyne / AMP standard:
· There must be a high degree of probability of immediate and inevitable disclosure or use of a trade secret
· This requires showing more than just that the employee took a similar position at another company. In PepsiCo, the dude’s bad faith dealings (credibility questions) w/ Pepsi were considered.
o A court abuses its discretion where the scope of injunctive relief exceeds the extent of the plaintiff’s protectable rights.
· Reed, Roberts Associates v. Strauman
o Facts: D left RR to start his own firm. He had signed a restrictive covenant not to compete for 3 yrs and not to recruit any RR customers. Holding: Ruling for D, customer info was publicly available.
o Policy: Preventing D from starting his own business solely b/c he had this knowledge would infringe on his rights. Do not want to rid the individual of his right/ability to realize his potential professionally and financially. This is especially true when the knowledge is not a trade secret and there’s no improper means.
§ Negative covenants restricting competition are enforceable only to the extent that they are reasonable. Reasonableness varies with context and type of restriction.
§ Restrictive covenants will be enforceable to the extent necessary to prevent the disclosure or use of trade secrets or confidential customer information. Injunctive relief may also be available where an employee’s services are unique or extraordinary and the covenant is reasonable (common in the learned professions).
§ Standard: Reasonableness. Where it pertains to an employee/employer relationship, the standard will be stricter.
§ Factors to consider for reasonableness: time/area, protections of legitimate employer interests, harm to the general public, burden to employee.
§ Non-competes are invalid in CA
o Customer Lists
§ Are regarded as trade secrets unless they are discoverable through public sources
§ Restatement of Agency: agent cannot take a customer list w/ him, but he can rely on memory.
o Shop Rights
§ In general, ab
aka palming off)
o Saying your product is someone else’s (ex: serving pepsi when someone orders coke)
o Symbols/names used do not need to be identical. However, the closer in similarity b/w the two, the greater the probability that a court will infer deception.
§ Consumer’s Interest: ensure they get the product that they think they’re buying
§ Businesses Interest: ensure that innovators are compensated for their goods
· William Warner v. Eli Lilly
o Facts: Coco-Quinine. Chocolate flavored drug, was copied and passed off to/by pharmacists.
o This is a descriptive mark so there is no trademark infringement. There is passing off (unfair competition).
o Remedy: in this case, the passer offers were required to put a label on their products
· Tests for Unfair Competition
o Descriptive mark w/ no secondary meaning
§ Passing off,
§ Intent to confuse,
§ Actual confusion
o Descriptive mark w/ secondary meaning
§ Only need to show that consumers are likely to be confused
§ Intent to deceive, and
§ Actual confusion
§ Both are presumed
Requirements I – Use and Use in Commerce
· Jurisdiction: §1388 gives federal courts jurisdiction over trademark issues
· Lanham Act (15 U.S.C.)
o Trademarks include any word, name, symbol, device, or any combination thereof that is
§ Used by a person, or
§ Which a person has a bona fide intention to use in commerce…to identify and distinguish goods…and to indicate the source of the goods, even if that source is unknown
· (consumers don’t know who the producer is, ex: coke makes minutemaid, even if consumers don’t know that minutemaid gets trademark protection)
· Test for Trademark Protection
§ Can it be expanded into other products (i.e. can it be diluted)?
§ Can it be expanded into other areas (geography, zone of expansion)?
§ Where in the spectrum of five types of marks does it fall?
o Proper Subject Matter
§ No profanity
· Two ways to register a mark (Lanham Act §1051 (a)&(b)):
o Use-Based Registration
§ If one has satisfied the use-in-commerce requirement than they can file w/ the PTO and receive Constructive Use Protection.
o Intent-to-Use (ITU) Registration
§ If one can demonstrate a bona fide intent to use the mark in trade then they can file w/ the PTO and receive temporary protection. They will have up to three years to reach the necessary use-in-commerce requirements to reach full protection. Over this three year period they will still receive Constructive Use Protection.
§ §1051(d): ITU Provisions – 6 mos initial registration, up to 30 more mos.
· The bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. i.e. non-token use
· Mark must be affixed to goods and consumers must have the ability to identify the mark w/ the good and it must be offered for sale.
§ Bona Fide Use Considerations:
· Quantity and continuity of sales**, consumer purchases**, business of mark owner, quality control, distinguishing mark, intent, profit or loss, advertising, test marketing
o Advertising alone typically works, as does any
o Blue Bell v. Farah Mfg
§ Constructive Use (Lanham Act §1057(c))
· Is received post-registration. Gives the registrant priority use of the mark nationwide against everyone but…