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PHIL 215
Lecture #8
Today: 1. Midterms Returned Next Week 2. Chill out! 3. Finish Pinto + Product Safety 4. Intellectual Property

Ford Pinto Continued:

The Classic Case of Business Ethics 1. Failure as Business Calculation (See cost comparison from last lectures notes) 2. Moral Failure 3. Legal Failure -> FORD guilty of NEGLIGENCE: a) Failure to act as a reasonable person would b) This violates a duty of care c) Resulting in harm to others (exploding cards: death, injury)

1. Ruthless, Selfish Cost-Benefit Analysis:

Ford did not do consequential calculus for everyone - only did it for its own profit (putting the cost on others: their own customers!). Not only that, Ford failed in its own Marketing Analysis because it did not consider Confirmation Advertising - Existing Customers Crucial

2. Cost-Benefit Standard vs. Rights-Respecting Standard:

Cost-benefit: aggregating pleasure vs. pains across a population. Rights-based: respecting all individuals in a population

2A: Problem: Quantifies things that cant be quantified: life / death, injuries - McDonalds hot coffee example 2B: Problem: Ignores distribution of these costs & benefits within a population 2c: Problem: Ignores the existence of Rights not to be harmed, Right to be informed of risk

Negligence has 3 elements:

1. Failure to act as a reasonable person would.
LAW: rules / standards for behaviour, which makes society better. Cant set standards too high because: - People arent perfect, nor saints - Widespread disobedience Cant set standards too low because: - People will do terrible things! - Anarchy! Goldilocks Standard: Standard of the reasonable average person. In Ford Pintos case, Ford could have done any of these things: 1. Fix It: $21 million in recall costs 2. Fix It: Share the cost with customers, or pass it all onto them ($11 per car) 3. R.C.C would have fully informed the consumer of risk & let them take it themselves. Bad Ethics -> Bad Business.

Product Safety:
1. Negligence (Pinto) 2. Breach of Warranty: (Warranty: promise that a product will adhere to a certain standard) Explicit: Written on a piece of paper Implicit: Intrinsic to purchase of good: This good will do what its designed to do for at least 1 month (To prevent fraud) 3. Strict Liability: Even if youve done nothing wrong, you might still be held liable for your products: If damage ordinarily comes about from the use of your goods (e.g.: firecracker, knifes, guns, gym equipment, lawn mowers) The notion is: the damage is done, who should pay for the damage? We decided as a public policy that the company should pay at least a portion of the damage - otherwise switch business. The reason that big ticket items that you think would be sueable by strict liability, like alcohol, tobacco, pharmaceuticals, cars are not is because these companies have really large sums of money and because of this reason theyre exempt from Strict Liability. Minimal Liability: 1. Rigorous product testing

2. Huge warning labels + clear instruction guides 3. Adhere any social safety codes I.S.O 9000/12000 etc 4. *Keep up with the industry state of the art Aside: Judge Learned Hand: - 1900-1907 - Ship smashing into the harbour of a big city, destroying the harbour - City sues the ship company for damages - Ship Company states that they followed all safety standards (flag-signal method), not negligent, but still crashed. - But Learned Hand asserted that use of radio is reasonable, thus precedent-setting to find a whole industry negligent. Aside: Viagra / Cialis takes advantage of fineprint product safety requirement to advertise its products.

Intellectual Property:
1. Definitions + Importance:
Definitions:
Property: right to own things - things follow rights. Intellectual: As opposed to physical; ideas, especially creative ideas: entertainment, architecture, software design, internet content, processes for building things, drugs + medication.

Importance:
Manufacturing is moving away from 1st world economies to developing / 3rd word economies. What can 1st world countries own? Canadian Labour division: 70% services, 25% industry, 5% primary sector: agriculture + resources.

Who should own & benefit from new knowledge?

I.Ps answer: the inventor (in first instance) Why? PRO: Personal Reasons Dessert: (its theirs, wouldnt CON: 1. Dessert, or capitalization

exist without them) Social Reasons

on prior social base?

Incentives: (more new 2. Shouldnt new knowledge inventions we all benefit from) best be shared by all? (e.g. Pharmaceutical-Meds) 3. Perverse Consequences - Perverse: unintended + harmful. (e.g. renewable energy - solar, wind - patents are owned by oil + gas company).

5 Kinds of I.P. Protection:

1. Copyright
- Right to copy; sell for profit - ? inheres in anything original: register if want cheap, C.I.P.O; I.P.O - Cant copy a general idea, only exact expression of idea. - Easy to prove violation - CDA: 80 years after death of author. 70 years for USA, EU; cant be renewed, generally but this under pressure. - Public domain, after expiry. - How do they get paid? Authors / Musicians / Actors: Advance: one-time lump-sum, up front Royalties: % of profit after the fact of sale. - Nike example: Nike paid a graphic designer $35 in 1975 to design the Nike logo. - Lucasfilm example: George Lucas traded in a $250,000 advance on Star Wars for Future I.P., in particularly Star Wars toy / kid product. 20th century Fox gladly agreed. As a result, George Lucas profited $1 Billion dollars.

2. Trade-Mark (tm)
- Originality required - Have to register - Cost between copyright + patent - It lasts for as long as you use it; if you stop, others can claim your TradeMark. Aside: Fashion Designer name-change example: trademarks are public information - Orend raided files of Ralph Lauren - found Roberto Battani. - Can trademark: logos, phrases, colours, shapes, jingles. (e.g. Coke Cola trademarked the color for its beverage containers) - Creating a unified look / feel for your good. (e.g. Orend trademarking purple color #43 for the Cadbury Corporation) Aside: example for celinedion.com: someone got the domain name and tried to sell it to SONY for $50K; SONY sued.

3. Patent (p)
- Originality requirement - New, useful & innovative - Materially different from the state of the art* - Extremely expensive (Patent lawyers are well-paid, but require technical background) - Given 20-year monopoly in sale of the good. But: once granted, all of your patent becomes public. - Ruthless practice, companies would raid public patent files and try to reverse engineer to get substitute products - High risk (expensive to get, possibility of being reverse-engineered) - High reward (20 years of monopoly -> $$$) - Cannot patent something naturally occurring.

4. Trade Secret
- Examples: Recipe for Coke-Cola; Ziljian Drums: metal-folding technique kept secret for 300 years; KFC recipe - Little legal protection if secret is exposed - How to keep things a secret? 1. Segment production process 2. Badged environment 3. Only a handful know (a certain profile: last job + compensation based on stock) 4. NDAs: non-disclosure agreement. (less impact on younger workers) 5. Anti-competition clauses: (swear not to go to work for a competitor for a certain amount of time: e.g. 2 years) (less impact on younger workers)

5. Industrial Design
- New, emerging trend - Registered, lasts for 10 years: cant be renewed. - Aesthetic appearance

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