091:286 Introduction to Intellectual Property Law
Spring 2012
Professor Rantanen
I. Introduction to Intellectual Property Law and Policy
A. Introduction
· Theories of IP Law
o Labor Theory—Locke
§ We first and foremost have a property right in our own bodies
§ Also have a property right in our labors
§ When we add labor to something, we have property right in object
§ Places importance on amount of effort required
§ Modern IP law doesn’t emphasize this theory
· Rights can be distributed among too many people who collaborated
· Hard to measure two things
o How much labor put in
o Total value of the resulting product
· Labor put in might not have yielded much result
o Property and Personhood—Radin
§ Should protect IP because it is an intimate expression of oneself
§ There is a spectrum of fungible to personal
§ Can gauge strength of relationship with object/idea by pain occasioned with its loss
§ If an idea is solely used for commercial gain, then it doesn’t deserve as much protection
§ Difficult to use in a consistent way to evaluate rights
· How to measure how closely something is valued?
§ Hegel’s Philosophy of Right (1820) contributed to Radin’s theory
o Utilitarianism
§ Focus of modern IP law
§ Ideas are evaluated based on the utility (often economic) to society
· Give rights to person who will make best use of discovery
§ Promotes positive laws that will promote consequences
§ IP analogy to public goods (e.g. lighthouses, national defense, fireworks displays)
· Non-rivalrous
o There is no competition for the consumption of good
o Can all use it without diminishing it for others
· Non-excludable
o Difficult to exclude others from use of that good
· Problems
o Under-produced because there is less economic incentive to create them
o IP has the same problem
o Ideas are going to be under produced if nothing is done to protect them
§ Incentivization—primary goal
· Should have rights for a period of time to make up R&D costs
§ Giving reward to inventor—secondary goal
§ Ordered Economic System
· Reduces consumer confusion/ensuring marketplace integrity
§ Constitution is basis for Utilitarian Theory
· Art. 1, Section 8, cl. 8
· Seeks to secure exclusive rights for those to create
o Usage rights
o Right to alienate/transfer
o Right to exclude others from using (particularly important for ideas)
o Right to possess
· Commerce clause (especially for TM) and state law sources (especially for trade secrets) contribute to authority of Art. 1, Section 8, cl. 8
o Optimizing Innovation
§ Greatest utility obtained when there is competition
· Result is that supply=demand and marginal cost=cost of sale
· But no profit can then be made, so little incentive to create
· If rights given to someone, they can make a profit
o Benefit=encourages production
o Downfall=less social benefit, efficiency loss, risk of monopoly
§ Means
· Direct government funding
o Grants
o Centralized—government does the work
o Tax incentives/subsidies for R&D
o Prizes
· Giving rights
o Limit length of term for rights
§ Allows innovator to make up R&D costs
§ Prevents monopoly
o Limit scope or breadth of protection
§ Allows others to build off innovations
o Problems
§ Simultaneous invention
§ Making scope clear
§ Is our system justified?
· No clear answer
· But it has been workable thus far, still much innovation
o Risks of Appropriation
§ Consultants for innovation
§ Employees
· Beneficial to have contracts in place
· Allow employees to be part owners
§ Consumers
§ Non-IP Solutions
· End use license agreements
· Requiring subscription, constant innovation
B. Overview of Intellectual Property
· Structure for each type of IP protection
o Subject Matter
o Acquisition/Validity
o Enforcement
o Defenses
o Remedies
II. Trade Secret Law
A. Introduction and Defining Trade Secrets
· Most rudimentary type of IP protection
· Indefinite time period
· Typically ex post rather than ex ante
· Important to small companies since patenting is expensive
· Litigation is very fact dependent and relatively straightforward, open-ended
o No bright line rules
o Case-by-case basis
· Why protect?
o To increase incentive for innovation
o Deterrence
§ Free-riding is a moral wrong
§ Would be inefficient to encourage investment in stealing
§ Much money would be wasted on security measures
· History
o Might protect secret (like fish in planting) by claiming a talisman needed
o Cause of action for “corrupting a servant” punishable by double damages
· Three sources of law
o UTSA
§ Arguably most important
§ Most states have adopted it in some form
o Common law
o Various Restatements
§ Torts
§ Unfair competition
§ More a summary of what all states do
· Basic elements of claim
o (1a) Trade secret
o (1b) Take reasonable precautions
o (2) Misappropriated
B. The Contours of Secrecy and Disclosure
· Trademarkable Subject Matter
o (1) Information
o (2) Valuable because it is secret
o (3) Subject to reasonable efforts to keep secret
o UTSA
§ “Trade secret” means information that satisfies (1) and (2)
§ Examples of “information”
· Formulas (recipes or chemical)
· Pattern (cutting metals, fabric, etc.)
· Compilation (information gathered in database)
· Program (software)
· Method, technique, or process
§ First Requirement
· (1) Derives independent ec
express or implied consent by a person who
§ (A) Used improper means to acquire knowledge of the trade secret; or
· E.g. DuPont aerial photography
· E.g. bribery, outright theft
§ (B) At the time of disclosure or use knew or had reason to know that his knowledge of the trade secret was
· (I) derived from or through a person who has utilized improper means to acquire it;
o E.g. the people who hired aerial photographers
· (II) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
o E.g. Ex-employees
· (III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
§ (C) Before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake
· E.g. Someone who accidentally emails a secret, realizes mistake, then sends another email telling the person not to use the information
o When is use of another’s trade secret actionable?
§ (1) Improper means
· E. I. DuPont deNemours & Co. v. Rolfe Christopher et al. (5th Cir. 1970) p. 66
o Aerial photographers hired to take pictures
o Unreasonable precautions would have to be taken to prevent this
o Not illegal trespass, but purpose was to take detailed images for the purpose of stealing
· Proper means (classified as a defense)
o Reverse engineering
§ Kadant, Inc. v. Seeley Machine, Inc. (N.D.N.Y. 2003) p. 78
· A former employee of plaintiff started making same products for defendant and claimed reverse engineering
· Court looked at the fact that the products were simple and easy to engineer, so no improper means found
· But using memorized trade secrets is actionable
o Independent discovery
o Observation of item in public display
o Obtaining secret from public literature
§ (2) Breach of confidence
· Easiest way to create confidential relationship is by contract
o Contracts are not always practical
· Smith v. Dravo Corp. (7th Cir. 1953) p. 71
o Defendant obtained secrets in lawful way because he was looking to buy shipping container business
o But instead of buying business, used lawfully obtained information in an unlawful way to copy information from patent applications, etc.