Introduction to Intellectual Property – Kesan – Fall 2015
Introduction
Basics of IP
patents and copyrights are the sole domain of federal law
Copyrights: Title 17
Patents: Title 35
trademarks: concurrent jurisdiction [Lanham Act]
trade secrets: state law [UTSA]
Economics and Philosophy
Production and dissemination balance: private reward :: public consumption
Stronger IP protection -> more incentive to produce
Lower IP protection -> higher consumption/maximum production of goods in general
Market Reward: IP confers ability to price supracompetitively because it grants exclusive control of supply
can attract investors/financiers
attract potential licensees
IP goods differ from other goods
e.g. software (duplication thing)
Other reasons to favor IP
offers downside risk protection
even failed company can have valuable IP to dispose of
technology standards
people or entities with complementary IP associate to engage in productive activity to maximize value of product to consumer by offering most features
Economic life of the patent
period during which you can charge supracompetitively; may be less than statutory life of the patent as noninfringing similar products emerge
Schumpeterian Hypothesis
undersupply of desirable goods incentivizes innovation
Lockeian Notions of Property
entitled to the fruits of your labors, provided there is enough left and good for others
Economic Concerns of Real Property vs. Intellectual Property
IP has all the same attributes of personal property
consumption of IP is very different, because it is in a sense inexhaustible
ergo, consumption of IP is not competitive
w/o strong IP laws, would be hard to charge for consumption
Trade Secrets
I. What is a Trade Secret?
Unregistered, unfiled, STATE LAW ONLY IP regime
Information has no statutory limitation; valid as long as it remains secret
independent invention
reverse engineering
Arrow Paradox
in order to determine the value of a trade secret, you have to disclose the secret, thus destroying the value of it.
Particularly valuable where reverse eng./independent invention is less likely to occur
Ruckleshaus v. Monsanto
RULE: TS are property for the purposes of the Takings Clause because they share characteristics with tangible forms of property
exemplified the struggle over property issues related to TS
II Civil Protection of Trade Secrets
A. Uniform Trade Secrets Act (adopted by ~47 states)
imposes civil liability
Elements of TS
information, including formulae, pattern, compilations, devices, methods, techniques, or processes that
derive independent value, actual or potential, from not being generally known or readily ascertainable by others . . . AND
is the subject of reasonable efforts to maintain secrecy
2. Application of the UTSA
Learning Curve v. Playwood Toys (2003 7th Cir)
Common defenses to a misappropriation claim
You have no trade secret.
If you have a trade secret, defendant didn't take it.
If you have a trade secret, and defendant took it, in fact, defendant already had it.
If you had a trade secret, and defendant took it, and defendant didn't already have it, then that secret is worthless.
ITSA definition closely mirrors that of the UTSA:
1) sufficiently secret to derive economic value, actual OR potential, from not being generally known…
2) subject of efforts reasonable under the cirumstances to maintain its secrecy
Restatement of Torts (sec. 757)
1 ) extent to which info is known outside plaintiff’s business
2 ) extent to which info is known to employees and others in the business
3 ) extent of measures taken by plaintiff to guard secrecy of info
4 ) value of info to plaintiff’s business and competitors
5 ) amount of time, effort, money expended in development
6 ) ease or difficulty with which could be acquired or duplicated
UTSA replaced this, but some courts (learning curve, e.g.) use these as informative inquiries
Mangren Research and Development v. National Chemical Co. (1996)
FACTS: Mold release agent using PTFE
valuable: was being sold, had list of customers
efforts to maintain secrecy: confidential
fendant COULD have obtained the knowledge legally is not a defense where defendant IN FACT obtained it ILLEGALLY.
that is, reverse engineering was possible, but defendant just took the blueprints
blueprints/design was provided ONLY so defendant could decide whether to purchase; to use them as basis for constructing his own containers was improper, even without explicit promise of such trust
C. Defenses to Misappropriation
Big Questions
1) What is a trade secret?
2) what is misappropriation thereof?
Courts struggle with these questions because a TS is information, but the real claim arises out of a contract (nondisclosure, etc.) or tor
1. Honest Discoverer – Independent Invention
actual evidence by your own efforts
2. Reverse engineering
must be done by lawful means, after product itself is obtained lawfully
Chicago Lock v. Fanberg (1982)
Fanberg complied book of lock codes that had been found by locksmiths over the years.
Chain: lock owner purchases lock legitimately. owner hires locksmith, legitimately. No point at which chain of legitimacy is damaged.
Held: No misappropriation.
Innocent Wrongful User
third party who unknowingly obtains a trade secret from another party who got it illegitimately
that third party is not liable; TS owner can still go after the party that obtained it illegitimately and can put third party receivers on notice of their liability
Restatement: one who learns another's TS without notice that it is a TS from a third party . . . is liable to the owner for disclosure or use of the TS after notice, unless prior he has in good faith paid value for the TS and has so changed position that liability would be inequitable.
