Introduction to Intellectual Property Outline

INTRODUCTION TO INTELLECTUAL PROPERTY
VAN HOUWELING
FALL 2012
 
JUSTIFICATIONS FOR IP RIGHTS
1.        Utilitarian/Economic: Priority is to enrich the public by incentivizing inventors with exclusivity, author reward is secondary
a.        Balance benefits of providing economic incentives for inventors with increased costs of limiting the diffusion of knowledge
2.        Natural Rights/Labor Desert: Labor put into product protects a man’s property
a.        Complications in IP: Difficult to allocate property rights to reflect labor input, Hard to leave “as much and as good” left for public, Difficult to figure out how much input (flash of creative genius situations)
3.        Personhood: Property is an extension of the person, necessary for flourishing
a.        Complications in IP: Infringers also have personhood, Involves a lot of people which increases transaction costs, Difficult to prove
b.        Utilized in Europe
Overlapping Regimes
·          Baker (copyright/patent; ledger sheets not copyrightable subject matter, good example of merger doctrine where expressive and functional /factual elements merge),
·          TrafFix (trademark/patent; dual-spring feature of sign not eligible for trade dress protection b/c serves functional purpose
·          Trademark / Copyright overlap?
 
TRADE SECRETS
·          State law, Uniform Trade Secrets Act § 1 (model law, adopted by 46 states)
·          Justifications: (1) Utilitarian – Encourage investment in trade secret development; Law recognizes that TSs cannot be utilized if kept entirely private; Share info to make valuable (2) Tort – Deter wrongful acts and punish (3) Labor Theory – discouraging wrongful behavior and granting inventor fruits of labor
 
> Requirement #1: Subject matter must be qualifying type of knowledge/information, ie: (a) Valuable information about almost anything that derives actual/potential economic value AND (b) Relatively secret – not generally known/readily available (UTSA §1(4))
·          (a) Factors to consider (RST Torts): Use expert testimony to determine –
o    Extent to which the information is known outside of P’s business
o    Extent to which information is known internally
o    Measures taken to preserve secrecy
o    Value of information to P
o    Cost of production
o    Ease of duplicating information – is the secret readily ascertainable?
·          (b) Limited disclosures are OK in certain circumstances where they are NOT public announcements and are made to further economic interests (Metallurgical) PP don’t want to hinder holder’s ability to profit from TS by requiring absolute confidentiality; Cts allow companies to profit from their secrets
o    Generally public disclosure of TS destroys the secret and ends protection forever
§   Ex: publication // sale of product from which secret is apparent
o    TS protection ends when information becomes generally known /readily ascertainable by PROPER MEANS
·          Ways to Disclose
o    Publish Secret – journal or patent application
o    Sell commercial product that embodies secret – Q: whether secret is apparent from product itself
§   Ex: Clean Bottle – Screw-off bottom is too obvious after sales for protection; use patent instead
o    Disclosed by someone other than TS owner (such as other person independently discovers)
o    Disclosed inadvertently
§   Under UTSA it’s misappropriation to disclose a secret they have reason to know was acquired by accident/mistake
o    Government agencies sometimes require disclosure of TS
·          Metallurgic Industries v. Fourtek (pg. 39/6): P designed furnace modification, which was not known to the industry, added value, had a high cost of development. M told others about it but disclosures were made to further economic interests (important)
o    R: TS holder may divulge his info to a limited extent w/o destroy its status as a TS
o    H: Qualifying subject matter for TS because (1) valuable information generally unknown in industry^ and (2) P’s efforts to keep it a secret suggest it is in fact a secret
·          Data General Corp (p. 6) – D bought one of P’s computers from a 3rd party and it came with design/logic drawings and documents. P provided these documents to customers under NDAs to aid in maintenance of the computers
o    R: Even though an unpatented article, device or machine has been sold to the public, and is therefore subject to examination and copying by anyone, the manner of making the article, device, or machine may yet constitute a trade secret until such a copy has in fact been made.
o    If evidence shows misappropriate à injunction for # of man hours to reverse engineer
 
> Requirement #2: Plaintiff-Innovator took reasonable efforts under the circumstances to maintain secrecy of the TS (UTSA §1(4))
·          Rationale: Don’t waste the court’s time if you can’t be bothered to protect the secret yourself; the law will only help if you made reasonable efforts.  W/o requirement P would be unjustly enriched w/ windfall from remedy.
o    Posner: Take initiative to protect the secret yourself to prove it is important / valuable, cannot only rely on the law to protect you
·          Threshold Q: whether additional benefit of security would have exceeded cost (Rockwell GFX)
o    Reasonable effort may serve as a circumstantial indicator that secret was misappropriated / the secret is valuable.
o    Hypothetical cost/benefits analysis to determine reasonableness
o    Standard ≠ perfect, airtight methods of maintaining secrecy
·          Rockwell Graphic Systems v. DEV Industries (pg. 49/7) – P gave printing press plans to customers/outsourced vendors, D obtained them (ex employees)
o    Holding: Court dismissed D’s motion for SJ on grounds that P’s efforts could have been reasonable enough because P took some precautions (vault)
o    “Perfect security ≠ optimal security”
·          Mixology Example—bar tender creates new drink; shares only w/ staff that mixes it behind closed doors.
o    Valuable info? Yes. Reasonable efforts? Probably—mixed drinks behind bar. Protectable? No. Drink readily ascertainable once released to public.
> Requirement #3: Misappropriation àD (1) acquired information by improper means; OR (2) disclosed/used information by someone who knew / should have know that the secret was acquired (a) by improper means, (b) by mistake or accident, or (c) through a confidential relationship (UTSA § 1(2))
·          (1) Improper means (USTA § 1(1)) = Theft, bribery, misrepresentation, breach or inducement of duty to maintain secrecy; espionage through electronic or other means
o    Includes means that fall below the generally accepted standards of commercial morality and reasonable conduct
o    Under UTSA: if information is NOT secret; doesn’t matter if you get it through improper means
o    Rstmt takes different approach; if D could have gotten through proper means but didn’t then misappropriation (Rohm & Haas)
o    E.I. DuPont de Nemours (66/8): Photographer who deliberately took aerial pictures of plant developing methanol production utilized an improper means to obtain a trade secret
§   Illegality or trespass is not required
§   Broader definition of “improper means” than USTA
§   PP: deterring wrongful behavior // prevent economic waste spending on precautions b/c of rampant espionage within an industry
·          (2) Confidential relationships are generated through (USTA § 41):
o    (a) Express: Promises of confidentiality
o    (b) Non-express: Circumstances where the secret was disclosed in a way where D knew/had reason to know that the disclosure was made in confidence AND P was reasonable in inferring that D consented to confidentiality obligation
o    Smith v. Dravo Corp. (71/8): In negotiations for P’s shipping containers, P disclosed confidential information to D for limited purpose to sell a business.  D utilized information to create the shipping containers.
§   Holding: D was in a position of trust/confidence at the time of the disclosure
§   Circumstance such that D knew or should have known that the disclosure was made in confidence
§   Counter arg: No secret b/c container design was obvious; if no secret then breach of confidential relationship is irrelevant.
·          PROPER means of acquiring information à DEFENSE to TS misappropriation claim; doesn’t negate TS’s existence; just negates misappropriation (§1 comment)
1.        Independent invention
2.        Reverse engineering: Working backwards from publicly available products to figure out secret (without help via confidential relationship)
§   Kadant v. Seeley (78/13): P’s ex-employee started producing similar products to those on the market 1.7 years after leaving P
·          Holding: 1.7 years is insufficient proof that D did not simply reverse engineer the product; P had to prove that reverse engineering would have been impossible in that time period
§   Varying views of whether reverse engineerability =
·          Easy to reverse engineer = readily ascertainable and thus, unprotectable secret
·          Difficult / time consuming to RE then can still be a TS
3.        Observing competitor’s product in public use or on display
4.        Published literature – obtain trade secret from this source
 
·          Trade Secret REMEDIES
o    Injunction // Affirmative acts to protect secret // Reasonable royalty  // Damages // Unjust Enrichment // Punitive Damages // Attorney’s Fees // State and Federal CRIMINAL law also provide remedies (ex: Economic Espionage Act)
·          Relationship Between Patent and Trade Secret
o    NO concurrent TS / Patent Protection
§   Patent requires disclosure // TS operates based on non-disclosure
o    Drawbacks to Trade Secret law à danger of reverse engineering // expensive to keep secret (NDAs, security, etc.)
o    Patent law created in effort to overcome these drawbacks and in exchange applicant must provide more proof that patentable matter is valuable.
 
PATENTS
·          Patent & Trademark Office Procedural Requirements // Fed. Cir. For Patent Appeals
·          Protection lasts for 20 years from filing date
·          Themes
o    Incentivize innovation / dissemination of information through quid pro quo // clarity and notice (doctrine of equivalents makes murky) // expansion and contraction of subject matter (Chak and Bilski)
·          Patent Rationales
o    Utilitarian/Economic rationale: Incentivize innovation and public disclosure at costs of monopoly and potential decrease in second generation monopoly
o    Labor Theory – entitled to fruits of your labors through the monopoly right to exclude
·          Rationales to Limit Patent Protection
o    Other incentives/funding sources—don’t need incentive to innovate for certain inventions (e.g. exercising cat w/ laser pointer); there are costs involved in administering patent system, and we should limit the kinds of eligible subject matter.
o    Access to Innovations—in general we don’t think monopolies are a good idea, but in the realm of IP we create monopolies on purpose; consumers better off when there’s competition on price/quality—if we need these patents, don’t want them for too long (e.g. medicine)
o    Broad patent protection à inadvertent infringement becomes more prevalent by commoners
o    Tragedy of the Anticommons—breakdown where the existence of numerous rights holders frustrates achieving a socially desirable outcome. The concept provides a unifying framework for a range of coordination failures including patent thickets.
§   Courts want to avoid granting patents on “building blocks”; too many upstream patents (“patent thickets”) would inhibit downstream research
o    Second-Generation Innovation—some things not patentable b/c they’re building blocks for future discovery and should be available for everyone to use (products of nature).
o    Enforcement difficulties.
o    Metabolite– too much protection can discourage research b/c it impedes the free exchange of information by forcing researchers to avoid the use of potentially patented ideas, by leading them to conduct costly and time-consuming searches of existing/pending patents, complex licensing arrangements, and by raising the costs of using the patented information, sometimes prohibitively so.
o    Should limitation on patents be placed during the §101 patentable subject matter test or through other doctrines (utility, non-obviousness)?
·          POLICY Balance length of patent term, appropriate standard of invention, and the nature of rights granted to patentees
·          Right to Exclude: Patents confer NEGATIVE rights—not affirmative right to sell; patents that are more/less broad can BLOCK each other
·          Patent Characteristics
o    Theoretically hard to get (in contrast to ©)
§   Application process required
§   Nonobviousness and other requirements
o    Scope defined ex ante by claims
§   Doctrine of equivalents creates some wiggle room
o    Protection relatively strong
§   Independent innovation is no excuse
§   Defenses (e.g. experimental use) are narrow
·          Overlap w/ other regimes
o    Patent is more appropriate protection option in some circumstances
o    Baker v. Seldon (copyright; accounting ledgers)
o    TrafFix (trademark; two spring device on road sign)
 
> Requirement #1/5 (35 USC § 101): Patentable subject matter
[[ Patentable subject matter include inventions or improvement there of:
·          (1) Processes: Process, art, method
o    No per se rule against patenting business methods BUT can’t be abstract idea (Bilski)
·          (2) Products:
o    (a) Machine: Mechanical device/combination of mechanical powers and devices to perform some function and produce a certain effect
o    (b) Manufacture: Gives new form, qualities, properties to raw/prepared materials by manual or machine labor
o    (c)