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Chapter 6
Intellectual Property
and Internet Law
INTRODUCTION
This chapter examines intellectual property, which consists of the products of intellectual, creative processes.
Laws protecting patents, trademarks, and copyrights are explicitly designed to protect and reward inventive and artistic
creativity. The study of intellectual property law is important because intellectual property is of increasing importance in
the United States and internationally. Television shows, movies, and computer programs are forms of intellectual
property. The protection of intellectual property relating to computers has posed difficulties for lawmakers because
computers were not envisioned by the legislators who drafted patent, trademark, and copyright laws. Therefore,
previous laws have had to be amended, or new laws created, to serve the needs of a computer generation.
This chapter also considers the protection of intellectual property in cyberspace. In particular, domain name
registration and cybersquatting are covered, as well as some of the issues involving patents and copyrights.
ADDITIONAL RESOURCES —
87
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part.
88 UNIT ONE: THE LAW AND OUR LEGAL SYSTEM
 VIDEO SUPPLEMENTS 

The following video supplements relate to topics discussed in this chapter—
PowerPoint Slides
To highlight some of this chapter’s key points, you might use the Lecture Review PowerPoint slides
compiled for Chapter 6.
Business Law Digital Video Library

The Business Law Digital Video Library at www.cengage.com/blaw/dvl offers a variety of videos for group
or individual review. Clips on topics covered in this chapter include the following.
• Drama of the Law

Intellectual Property: Trade Name: Rally Round the Trade Name—The name of your business is an
important intellectual property right. When the name of your business is subject to confusion with another
business, a dispute may occur.
• Legal Conflicts in Business
Choosing a Business Name and a Domain Name: Wizard for Hire dot com—A start-up software company
finds that there are others who have similar business and domain names. What options do they have for
resolving the conflict?
Intellectual Property: Permissions in Cyberspace: Deep Linking Just Good Business?—The software
company has set up a web site that uses deep links to another site. Do they need permission from the linked
site to put them into a frame?
• Ask the Instructor
Intellectual Property: Patents and Trade Secrets: What's the Difference between a Patent and a Trade
Secret?—Both patents and trade secrets are forms of intellectual property. A patent is a right, granted by the
government, to exclusive use of an invention. As a government granted right, the details of a patent are part of
the public record. Trade secrets, on the other hand, consist of valuable unique processes, formulas, or ideas
that are protected by virtue of the fact that they are kept confidential.
• LawFlix
The Jerk—Intellectual Property—The Invention.
 VIDEO QUESTIONS & ANSWERS 

LawFlix—
CHAPTER 6: INTELLECTUAL PROPERTY AND INTERNET LAW 89
The Jerk
1. In the video, Navin (Steve Martin) creates a special handle for Mr. Fox’s (Bill Macy’s) glasses. Can
Navin obtain a patent or a copyright protecting his invention? Explain your answer. Navin should obtain a
patent on his invention. Copyrights are reserved for literary or artistic productions. Patents are used for
inventions, discoveries, processes, or designs that are genuine, novel, useful and not obvious in light of current
technology.
2. Suppose that after Navin legally protects his idea, Fox steals it and decides to develop it for
himself, without Navin’s permission. Has Fox committed infringement? If so, what kind: trademark, patent, or
copyright? Fox has committed patent infringement. Patent infringement occurs when one uses or sells
another’s patented design, product, or process without the patent owner’s permission.
3. Suppose that after Navin legally protects his idea, he realizes he doesn’t have the funds to mass-
produce the special handle. Navin therefore agrees to allow Fox to manufacture the product. Has Navin
granted Fox a license? Explain. Yes, Navin has granted Fox a license because he has given Fox permission
to use his property (the patented idea) for a certain purpose (manufacturing the product).
4. Assume that Navin is able to manufacture his invention. What might Navin do to ensure that his
product is identifiable and can be distinguished from other products on the market? Navin could affix a
distinctive mark or emblem as a trademark on his invention in order to help consumers identify his product
and vouch for its origin.
LECTURE OUTLINE FOR THIS CHAPTER
I. Trademarks and Related Property
A. Trademark Protection
1. Distinctive (Strong) Trademarks
2. Secondary Meaning
B. Trademark Registration
C. Counterfeit Goods
D. Service, Certification, and Collective Marks
E. Trade Names
F. Cyber Marks
1. Infringement
2. Cybersquatting
3. Meta Tags
II. Patents
A. Patent Infringement
B. Business Process Patents
C. Protection for Foreign Firms
III. Copyrights
A. What Is Protected Expression?

B. Copyright Infringement
C. Copyrights in Digital Information

1. Electronic Copies and Sales
2. Circumvention of Encryption Software
3. Internet Service Providers’ Liability
4. File Sharing
5. Cloud Computing
IV. Trade Secrets
V. Licensing
VI. International Protection for Intellectual Property
DETAILED CHAPTER OUTLINE
I. Trademarks and Related Property

A trademark is a distinctive word, name, mark, motto, device, or emblem that a manufacturer stamps, prints, or
otherwise affixes to the goods it produces so that they may be identified on the market and their origin vouched
for. Clearly, if one uses the trademark of another, it leads consumers to believe that the other made those
goods. The law seeks to avoid this kind of confusion. The tort of trademark infringement occurs when one who
does not own a trademark copies it to a substantial degree or uses it in its entirety.
A. TRADEMARK PROTECTION
Statutory protection of trademarks and related property is provided at the federal level by the Lanham
Trademark Act of 1946 (amended by the Federal Trademark Dilution Act of 1995), which incorporates the
common law of trademarks. Many states also have trademark statutes. The dilution cause of action
protects certain marks from unauthorized use regardless of a showing of competition or a likelihood of
confusion.
ADDITIONAL BACKGROUND—
The Federal Trademark Dilution Act

Congress passed the Federal Trademark Dilution Act in 1995 as an amendment to 15 U.S.C. § 1125.
The following is the complete statute (15 U.S.C.A. § 1125), as amended, with some of the historical notes, as
the statute appears on Westlaw.
UNITED STATES CODE

TITLE 15. COMMERCE AND TRADE
CHAPTER 22—TRADEMARKS
SUBCHAPTER III—GENERAL PROVISIONS
§ 1125. False designations of origin and false descriptions forbidden
(a) Civil action

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in
commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of
origin, false or misleading description of fact, or false or misleading representation of fact, which--
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association
of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services,
or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic
origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action
by any person who believes that he or she is or is likely to be damaged by such act.
(2) As used in this subsection, the term “any person” includes any State, instrumentality of a State or employee
of a State or instrumentality of a State acting in his or her official capacity. Any State, and any such
instrumentality, officer, or employee, shall be subject to the provisions of this chapter in the same manner and
to the same extent as any nongovernmental entity.
(b) Importation
Any goods marked or labeled in contravention of the provisions of this section shall not be imported into the
United States or admitted to entry at any customhouse of the United States. The owner, importer, or consignee
of goods refused entry at any customhouse under this section may have any recourse by protest or appeal that
is given under the customs revenue laws or may have the remedy given by this chapter in cases involving
goods refused entry or seized.
(c) Remedies for dilution of famous marks
(1) The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the
court deems reasonable, to an injunction against another person’s commercial use in commerce of a mark or
trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality
of the mark, and to obtain such other relief as is provided in this subsection. In determining whether a mark is
distinctive and famous, a court may consider factors such as, but not limited to--
(A) the degree of inherent or acquired distinctiveness of the mark;
(B) the duration and extent of use of the mark in connection with the goods or services with which the mark is
used;
(C) the duration and extent of advertising and publicity of the mark;
(D) the geographical extent of the trading area in which the mark is used;
(E) the channels of trade for the goods or services with which the mark is used;
(F) the degree of recognition of the mark in the trading areas and channels of trade used by the marks’ owner
and the person against whom the injunction is sought;
(G) the nature and extent of use of the same or similar marks by third parties; and
(H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the
principal register.
(2) In an action brought under this subsection, the owner of the famous mark shall be entitled only to injunctive
relief unless the person against whom the injunction is sought willfully intended to trade on the owner’s
reputation or to cause dilution of the famous mark. If such willful intent is proven, the owner of the famous mark
shall also be entitled to the remedies set forth in sections 1117(a) and 1118 of this title, subject to the discretion
of the court and the principles of equity.
(3) The ownership by a person of a valid registration under the Act of March 3, 1881, or the Act of February 20,
1905, or on the principal register shall be a complete bar to an action against that person, with respect to that
mark, that is brought by another person under the common law or a statute of a State and that seeks to prevent
dilution of the distinctiveness of a mark, label, or form of advertisement.
(4) The following shall not be actionable under this section:
(A) Fair use of a famous mark by another person in comparative commercial advertising or promotion to identify
the competing goods or services of the owner of the famous mark.
(B) Noncommercial use of a mark.
(C) All forms of news reporting and news commentary.
(July 5, 1946, c. 540, Title VIII, s 43, 60 Stat. 441.)
(As amended Nov. 16, 1988, Pub.L. 100-667, Title I, s 132, 102 Stat. 3946; Oct. 27, 1992, Pub.L. 102-542, s
3(c), 106 Stat. 3568; Jan. 16, 1996, Pub.L. 104-98, s 3(a), 109 Stat. 985.)
HISTORICAL AND STATUTORY NOTES
Derivation. Act Mar. 19, 1920, c. 104, s 3, 41 Stat. 534.
References in Text. Acts March 3, 1881, and February 20, 1905, referred to in subsec. (c)(1)(H), (3), are acts
Mar. 3, 1881, c. 138, 21 Stat. 502 and Feb. 20, 1905, c. 592, 33 Stat. 724, which were repealed insofar as
inconsistent with this chapter by act July 5, 1946, c. 540, s 46(a), 60 Stat. 444. Act Feb. 20, 1905, was classified
to sections 81 to 109 of this title.
1996 Amendments. Subsec. (c). Pub.L. 104-98, s 3(a), added subsec. (c).
1992 Amendments. Subsec. (a). Pub.L. 102-542, s 3(c), redesignated existing provisions as par. (1) and, in
par. (1), as so redesignated, substituted “(A)” and “(B)” for “(1)” and “(2)”, respectively, and added par. (2).
1988 Amendment. Subsec. (a). Pub.L. 100-667, s 132, substituted provisions which related to liability in civil
action for any person who uses in commerce any word, term, name, symbol, or device, or any false designation
of origin, false or misleading description of fact or false or misleading representation of fact in manner likely to
cause confusion, or mistake, or deceive as to affiliation of such person with another person, for provisions which
related to false designations of origin and false descriptions.
1. Distinctive (Strong) Marks

Fanciful, suggestive, and arbitrary (common words not ordinarily associated with the product)
trademarks are generally considered to be the most distinctive.
2. Secondary Meaning
Descriptive terms, geographical terms, and personal names are not inherently distinctive and do not
receive protection until they acquire a secondary meaning (such as “London Fog” for coats with
“London Fog” labels). Whether a secondary meaning becomes attached to a term or name depends
on how extensively the product is advertised, the market for the product, the number of sales, and
other factors. Generic terms, such as bicycle or computer, cannot be trademarked, even if they
acquire secondary meanings (but they still cannot be used to deceive consumers).
B. TRADEMARK REGISTRATION
The state and federal governments provide for the registration of trademarks. Once a trademark has been
registered, a firm is entitled to its exclusive use for marketing purposes. The owner of the trademark need
not register it to obtain protection from the tort of trademark infringement, but registration does furnish
proof of the date of inception of its use. Registration is renewable between the fifth and sixth years after
the initial registration and every twenty years thereafter (ten years for marks registered after 1989), as long
as the mark remains distinctive and is used.
C. COUNTERFEIT GOODS
Counterfeit goods copy or imitate trademarked goods but are not genuine. It is a crime to intentionally
traffic in counterfeit goods or services, or use a counterfeit mark on or in connection with goods or services.
This includes counterfeit labels, stickers, packaging, and similar items, whether or not they are attached
to any goods. Penalties include fines of up to $2 million and imprisonment of up to ten years (more for
repeat offenders). Forfeiture of counterfeit products and the payment of restitution to a trademark holder
or other victim can be imposed.
D. SERVICE, CERTIFICATION, AND COLLECTIVE MARKS

A service mark is similar to a trademark, but is used to distinguish the services of one person from those
of another. A certification mark is used by one or more persons other than the owner to certify the region,
materials, mode of manufacture, quality, or accuracy of the owner’s goods or services. When used by
members of a cooperative, association, or other organization, it is referred to as a collective mark.
E. TRADE NAMES
Trademarks are not the same as trade names. A trade name is used to indicate part or all of a business’s
name. Generally, a trade name is directly related to a business and its goodwill. As with trademarks,
words must be unusual or fancifully used if they are to be protected as trade names.
F. CYBER MARKS
Cybersquatting and domain names have been contentious issues. The text covers questions concerning
cyber marks (trademarks in cyberspace) that relate to these and other issues . The text explains what a
domain name is.
1. Infringement
The unauthorized use of another’s trademark in a domain name constitutes trademark infringement
if the use would likely cause customer confusion.
2. Cybersquatting
The text reviews the Anticybersquatting Consumer Protection Act (ACPA) of 1999, which makes
cybersquatting clearly illegal. Bad faith intent is one of the elements, and the ACRA lists factors for
courts to consider. Damages may be awarded.
3. Meta Tags
Using others’ marks as meta tags without permission may constitute infringement.
II. Patents
A patent gives an inventor the exclusive right to make, use, and sell an invention for a period of twenty years
and a design for fourteen years. To qualify, an applicant must satisfy the U.S. Patent and Trademark Office
that the invention, discovery, process, or design is genuine, novel, useful, and not obvious in light of current
technology. Unlike most other countries, the United States grants a patent to the inventor rather than to the
first person to file a patent application.
A. PATENT INFRINGEMENT
A firm that makes, uses, or sells another’s patented design, product, or process without the patent owner’s
permission commits patent infringement. Because patent litigation is costly, however, a patent holder will
often license use of the patented design, product, or process rather than sue.
B. BUSINESS PROCESS PATENTS

A business process patent is, as used in the text, a patent for a process used to conduct business on the
Web. The text discusses the controversy concerning the grants for these patents.
C. PROTECTION FOR FOREIGN FIRMS

Foreign firms can obtain U.S. patent protection on items that they sell in the United States just as U.S.
firms can obtain protection in foreign nations on goods sold abroad. But no infringement occurs under U.S.
law when a product patented in the United States is made and sold by a different firm in another country.
III. Copyrights
A copyright is an intangible right granted by federal statute (the Copyright Act of 1976) to the author or originator
of certain literary or artistic productions. The right is granted automatically (registration is not required).
Protection lasts for the life of the author plus 70 years. Copyrights owned by publishing houses expire 95 years
from the date of publication or 120 years from the date of creation, whichever is first. For works by more than
one author, the copyright expires 70 years after the death of the last surviving author.
A. WHAT IS PROTECTED EXPRESSION?

Copyright law protects works that are original and fall into one of the following categories: (1) literary works;
(2) musical works; (3) dramatic works; (4) pantomimes and choreographic works; (5) pictorial, graphic, and
sculptural works; (6) films and other audiovisual works; and (7) sound recordings. The work must be “fixed
in a durable medium” from which it can be perceived, reproduced, or communicated.
Protection is not available for any “idea, procedure, process, system, method of operation, concept,
principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied.”
Ideas may be freely used by anyone—what can be copyrighted is the way in which an idea is expressed.
If an idea and its expression are inseparable, the expression cannot be copyrighted.
B. COPYRIGHT INFRINGEMENT
Copyright infringement occurs when the form or expression of an idea is copied in substantial part (a copy
does not have to mirror the original or reproduce it entirely). Penalties and remedies range from actual
damages plus the infringer’s profits or statutory damages not exceeding $100,000 imposed at the dis-
cretion of the court, to criminal proceedings for willful violations, which may result in fines or imprisonment.
The reproduction of copyrighted material is permitted without payment of royalties under the fair use
doctrine. In deciding whether a use qualifies as a fair use, courts must consider “(1) the purpose and
character of the use, including whether such use is of a commercial nature or is for nonprofit educational
purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in
relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or
value of the copyrighted work.”
ENHANCING YOUR LECTURE—
 LEGAL ISSUES FACING

BLOGGERS AND PODCASTERS

Companies increasingly are using blogs (Web logs) and podcasts (essentially an audio blog, sometimes
with video clips) internally to encourage communication among employees and externally to communicate with
customers. Blogs offer many advantages, not the least of which is that setting up a blog and keep it current
(making “posts”) costs next to nothing because so much easy-to-use free software is available. Podcasts, even
those including video, require only a little more sophistication. Nonetheless, both blogs and podcasts also carry
some legal risks for the companies that sponsor them.
BENEFITS OF BLOGS AND PODCASTS

Internal blogs used by a company’s employees can offer a number of benefits. Blogs provide an open
communications platform, potentially allowing new ways of coordinating activities among employees. For
example, a team of production workers might use a blog to move a new product idea forward: the team starts
a blog, one worker posts a proposal, and other team members quickly post comments in response. The blog
can be an excellent way to generate new ideas. Internal blogs also allow for team learning and encourage
dialogue. When workers are spread out across the country or around the world, blogging provides a cheap
means of communication that does require sophisticated project management software.
Many companies are also creating external blogs, which are available to clients and customers. External
blogs can be used to push products, obtain feedback from customers, and shape the image that the company
presents to outsider. Even some company chief executive officers (CEOs) including the CEOs of McDonald’s,
Boeing, and Hewlett-Packard have started blogs.
POTENTIAL LEGAL RISKS

Despite their many advantages, blogs and podcasts can also expose a company to a number of legal risks,
including the following.
Tort Liability Internal blogs and podcasts can lead to claims of defamation or sexual harassment if an
employee posts racist or sexually explicit comments. At the same time, if a company monitors its employees’
blogs and podcasts, it may find itself facing claims of invasion of privacy (see Chapter 24 for a discussion of
similar issues involving employees’ e-mail).
Security of Information Blogs may also be susceptible to security breaches. If an outsider obtains access
to an internal blog, a company’s trade secrets could be lost. Outsiders could also potentially gain access to
blogs containing financial information and other financial data.
Discovery Issues As explained in Chapter 3, litigation today frequently involves electronic discovery. This
can extend to blog posts and comments as well as to e-mail. Thus, a company should be aware that anything
posted on its blogs can be used as evidence during litigation. A company will therefore need to preserve and
retain blog postings related to any dispute likely to go to trial.
Compliance Issues Many corporations are regulated by one or more agencies and required to comply with
various statutes. Laws that require compliance may also apply to blog postings. For example, the Securities
and Exchange Commission (SEC) has regulations establishing the information a company must disclose to
potential investors and the public in connection with its stock. A company regulated by the SEC will find that
these rules apply to blogs. The same is true for companies regulated under the Sarbanes-Oxley Act, which will
be discussed in Chapters 8, 31, and 34.
Copyright Infringement Blogs can also expose a company to charges of copyright infringement. Suppose,
for example, that an employee posts a long passage from a magazine article on the company’s blog, either
internal or external, without the author’s permission. Similarly, photos taken from other blogs or Web sites
cannot be posted without prior permission. Note, also, that copyright infringement can occur even if the blog
was created without any pecuniary motivation. Typically, though, a blogger can claim “fair use” if she or he
posts a passage from someone else’s work with an electronic link to the complete version
External blogs carry most of the same risks as internal blogs and others as well. Not only can external blogs
lead to charges of invasion of privacy, defamation, or copyright infringement related to what the company and
its employees post, but they can also expose the company to liability for what visitors post. If a company’s blog
allows visitors to post comments and a visitor makes a defamatory statement, the company that created the
blog could be held liable for publishing it. Thus, any company considering establishing blogs and podcasts,
whether internal or external, should be aware of the risks and take steps to guard against them.
FOR CRITICAL ANALYSIS
Do individuals who create blogs face the same risks as companies that use blogs? Explain.
a. 111 F.Supp.2d 294 (S.D.N.Y. 2000).

b. Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2d Cir. 2001).
c. DVD Copy Control Association v. Bunner, 113 Cal.Rptr.2d 338 (2001). Note that in 2002, the California Supreme Court agreed to review
this case.
 COPYRIGHT LAW VERSUS FREE SPEECH


Since the ratification of the First Amendment to the U.S. Constitution in 1791, Congress has been prohibited
from making any law “abridging the freedom of speech.” Clearly, at that time the framers did not anticipate
radio, television, the movies, computers, computer programs, or the Internet. As radio, television, and the
movies became important at the beginning and middle of the twentieth century, they gave rise to free speech
issues. As the Internet moves into virtually everyone’s home and place of work in the twenty-first century, First
Amendment issues have arisen and will continue to arise.
A major contemporary legal debate today concerns free speech rights in the context of intellectual property
in digital form that is encrypted to prevent its unauthorized copying and use. More specifically, the courts are
now addressing the tension between movie studios, which are encrypting their DVDs, and “hackers” who have
posted code-cracking programs on the Internet so that DVDs can be copied numerous times.
APPLYING THE DIGITAL MILLENNIUM COPYRIGHT ACT OF 1998
Almost as soon as encryption technology was used to safeguard the contents of DVDs, the code was
cracked by a group of hackers, including nineteen-year-old Norwegian John Johansen. His decryption program,
called DeCCS, was quickly made available at various sites on the Internet including 2600.com, owned by Ed
Corly. Almost immediately after DeCCS was posted, a group of movie companies, including Disney and
Twentieth Century-Fox, filed suit.
In what was seen as a victory for the motion picture industry, a federal district court ruled, in Universal City
Studios, Inc. v. Reimerdes,a that DeCCS violated the Digital Millennium Copyright Act (DMCA) of 1998. As
noted elsewhere, among other things the DMCA prohibits the circumvention (by decryption programs, for
example) of encryption systems that are embedded in intellectual property to protect the property from piracy,
or unauthorized use. The court noted that since the posting of DeCCS, along with a separate video-
compression program known as Divx, the pirating of movies had become increasingly common on the Internet.
The defendants argued that software programs designed to break encryption schemes were a form of
constitutionally protected speech. The court, however, rejected the free speech argument. “Computer code is
not purely expressive any more than assassination of a political figure is purely a political statement . . . . The
Constitution, after all, is a framework for building a just and democratic society. It is not a suicide pact,” stated
the court. A federal appellate court affirmed the trial court’s decision. b
A DIFFERENT APPROACH
In November 2001, a California appellate court reviewed a case brought by a trade association of movie
industry businesses against Internet Web site operators who made DeCCS programs available from their Web
sites. The trade association asked the court to enjoin the defendants from copying, distributing, publishing, or
otherwise marketing the DeCCS computer program because, by doing so, the defendants were, by necessity,
disclosing or using the trade secrets contained in the encryption programs.
The California appellate court weighed in on the side of free speech and refused to grant the injunction. In
contrast to the Universal City Studios decision, the court reasoned that the DeCCS program was a form of
“pure speech.” Furthermore, stated the court, the “scope of protection of trade secrets does not override the
protection offered by the First Amendment. The California legislature is free to enact laws to protect trade
secrets, but these provisions must bow to the protections offered by the First Amendment.” The court labeled
any attempt at blocking the future use of computer programs “an impermissible prior restraint” on Web site
operators’ First Amendment rights.c
THE DEBATE CONTINUES
If you buy a book, you can read it, throw it away, give it to someone else, or sell it to a used bookstore.
Once you have bought it, you can legally do just about anything with it except make copies for resale. There is
no way that the owner of the intellectual property contained in that book can insert an encryption system to
prevent you from letting someone else read it. In contrast, any form of digitized intellectual property can contain
an encryption system.
In principle, the 1998 DMCA protects all such encryption systems from being circumvented by “code
cracking.” Understandably, the movie industry is urging the courts to interpret the DMCA’s provisions against
circumvention narrowly. Yet some argue that several passages in the act would seem to allow for a broader
interpretation—one that would allow constitutional challenges to succeed. Ultimately, the controversy may have
to be decided by the United States Supreme Court.
W HERE DO YOU STAND?
At issue in the twenty-first century is the trade-off between the necessity of writers, musicians, artists, and
movie studios to profit from their work and the free flow of ideas for the public’s benefit. Movie (and music)
industry participants claim that encryption programs are necessary to prevent piracy. Others, however,
including the defendants in cases such as those discussed above, argue that the law should at least allow
purchasers of movies, music, and books in digital form to make limited copies for fair use. Which side of this
debate do you support? Is it possible to strike an appropriate balance between the rights of both groups on this
issue?
a. 111 F.Supp.2d 294 (S.D.N.Y. 2000).

b. Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2d Cir. 2001).
c. DVD Copy Control Association v. Bunner, 113 Cal.Rptr.2d 338 (2001). Note that in 2002, the California Supreme Court agreed to review
this case.
C. COPYRIGHTS IN DIGITAL INFORMATION

Copyright law is probably the most important form of intellectual property protection on the Internet.
 A BOOK IS A BOOK IS A BOOK—

BUT IS IT AN “E-BOOK”?

One of the significant issues raised by the cyber age has to do with whether copyrights in printed materials
extend to the same materials presented in digital form over the Internet. A related issue involving licensing
agreements came before a federal district court in 2001. The case was brought by the well-known publishing
firm Random House, Inc., against Rosetta Books, LLC, with which several authors had arranged to publish
works electronically. At issue in the case was the following question: Did contracts in which the authors had
licensed Random House to “print, publish and sell” their works in “book form” include the right to publish their
works in electronic formats (as “e-books”) as well?
In evaluating the issue, the court looked to the letter of the law, as decided by other court cases, but found
little guidance. Hence, it looked to the words of the contract and to the definition of the term book given by the
Random House Webster’s Unabridged Dictionary. That dictionary defines a “book” as “a written or printed work
of fiction or nonfiction, usually on sheets of paper fastened or bound together within covers.” The court
ultimately concluded that a book is not an e-book and therefore refused to grant Random House’s motion to
enjoin (prohibit) Rosetta Books from publishing the authors’ works as e-books.a
THE BOTTOM LINE
To avoid litigation, anyone signing a licensing contract should make sure that the specific wording in the
contract makes very clear what rights are or are not being conveyed.
a. Random House, Inc. v. Rosetta Books, LLC, 150 F.Supp.2d 613 (S.D.N.Y. 2001).
1. Electronic Copies and Sales

Loading a file or program into a computer’s random access memory (RAM) violates copyright law if,
for example, the party who downloads does not have a right to do so. Periodicals buy articles written
by freelance writers. Publishers must have the writers’ permission to sell the articles to e-publishers
for online databases and other e-sources.
2. Circumvention of Encryption Software

The Digital Millennium Copyright Act (DMCA) of 1998 provides civil and criminal penalties for anyone
who circumvents encryption software. Exceptions are noted in the text.
3. Service Providers’ Liability

Under the DMCA, an Internet service provider (ISP) is not liable for any copyright infringement by its
customer if the ISP is unaware of the violation.
4. File-Sharing
MP3 file compression and music file sharing over the Internet through peer-to-peer (P2P) networking
is generally illegal.
CITATION—
REAL-WORLD CASE EXAMPLE

This feature is based on the actual case of Maverick Recording Co. v. Harper, 598 F.3d 193 (5th Cir. 2010).
In discussing this example, you might like to consider the following points:
How might a file-sharing system, or a similar service, be put to commercially significant but nonfringing
uses? One possibility is that the service could pay copyright owners before allowing the transmission of their
material via the Internet and charge its Web site’s users to download that material. The same might be done
with other types of intellectual property—movies, books, etc.
What interest does the public have in upholding copyright law and granting the sort of relief that was
awarded in this case? The public interest is the interest in upholding copyrighted protection. If there were no
protection for music and other works of intellectual and creative processes, or if the copyright laws were not
enforced, there would be less incentive to produce, package, and market such works. Our lives would be less
rich in their absence.
When rights such as those in this case become more valuable as a result of new technology, should the
law be changed to redistribute the economic benefit of those rights? Why or why not? It might be argued that
the law should be changed in such circumstances for the same reasons that the law protects the rights in their
original formats: to promote progress and development in the arts and sciences. It might be countered that the
law should not be changed for similar reasons: redistributing economic rights after their creation could inhibit
the development of new products and services.
In this and other cases involving similar issues, the courts have held that when the published
phonorecordings from which audio files were taken contained copyright notices, the innocent infringer defense
does not apply. It is irrelevant that the notice is not provided in the online file. Is this fair? Explain. Some
contend that labels placed on the physical copies of the CDs from which downloaded songs originate are not
sufficient notification to someone who accesses the songs on the Internet. Therefore, this group claims, the
courts should not rule out the innocent infringer defense as a matter of law just because the original works were
copyrighted. Rather, in situations such as Harper’s, defendants should be able to use the defense—and the
burden for defendants using the defense is not slight. According to the Copyright Act, defendants raising this
defense must prove that they were unaware—and had no reason to know—that their actions constituted
copyright infringement. Further, a defendant must hold a good faith belief in the innocence of his or her conduct
and show that holding such a belief was reasonable. Note that the innocent infringer defense is not a defense
to liability for copyright infringement. Rather, it allows a court to reduce the amount of damages to be awarded
to the plaintiff. In this case, the trial court had awarded damages of $200 per infringement because the
defendant claimed that she was an innocent infringer. The appellate court, however, after holding that the
innocent infringer defense was not available as a matter of law, upped the damages to $750 per infringement.
For Harper, this increase meant that she was liable for $27,750 in total damages, instead of the $7,400 in total
damages awarded by the trial court.
Digital Millennium Copyright Act of 1998

The following is an excerpt from the Digital Millennium Copyright Act of 1998, downloaded from
lcweb.loc.gov/copyright/penleg.html.
Sec. 1201. Circumvention of copyright protection systems
(a) VIOLATIONS REGARDING CIRCUMVENTION OF TECHNOLOGICAL MEASURES—
(1)(A) No person shall circumvent a technological measure that effectively controls access to a work protected
under this title. The prohibition contained in the preceding sentence shall take effect at the end of the 2-year
period beginning on the date of the enactment of this chapter.
(B) The prohibition contained in subparagraph (A) shall not apply to persons who are users of a copyrighted
work which is in a particular class of works, if such persons are, or are likely to be in the succeeding 3-year
period, adversely affected by virtue of such prohibition in their ability to make noninfringing uses of that particular
class of works under this title, as determined under subparagraph (C).
(C) During the 2-year period described in subparagraph (A), and during each succeeding 3-year period, the
Librarian of Congress, upon the recommendation of the Register of Copyrights, who shall consult with the
Assistant Secretary for Communications and Information of the Department of Commerce and report and
comment on his or her views in making such recommendation, shall make the determination in a rulemaking
proceeding on the record for purposes of subparagraph (B) of whether persons who are users of a copyrighted
work are, or are likely to be in the succeeding 3-year period, adversely affected by the prohibition under
subparagraph (A) in their ability to make noninfringing uses under this title of a particular class of copyrighted
works. In conducting such rulemaking, the Librarian shall examine—
(i) the availability for use of copyrighted works;
(ii) the availability for use of works for nonprofit archival, preservation, and educational purposes;
(iii) the impact that the prohibition on the circumvention of technological measures applied to copyrighted works
has on criticism, comment, news reporting, teaching, scholarship, or research;
(iv) the effect of circumvention of technological measures on the market for or value of copyrighted works; and
(v) such other factors as the Librarian considers appropriate.
(D) The Librarian shall publish any class of copyrighted works for which the Librarian has determined, pursuant
to the rulemaking conducted under subparagraph (C), that noninfringing uses by persons who are users of a
copyrighted work are, or are likely to be, adversely affected, and the prohibition contained in subparagraph (A)
shall not apply to such users with respect to such class of works for the ensuing 3-year period.
(E) Neither the exception under subparagraph (B) from the applicability of the prohibition contained in
subparagraph (A), nor any determination made in a rulemaking conducted under subparagraph (C), may be
used as a defense in any action to enforce any provision of this title other than this paragraph.
(2) No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology,
product, service, device, component, or part thereof, that—
(A) is primarily designed or produced for the purpose of circumventing a technological measure that effectively
controls access to a work protected under this title;
(B) has only limited commercially significant purpose or use other than to circumvent a technological measure
that effectively controls access to a work protected under this title; or
(C) is marketed by that person or another acting in concert with that person with that person’s knowledge for
use in circumventing a technological measure that effectively controls access to a work protected under this
title.
(3) As used in this subsection—
(A) to `circumvent a technological measure’ means to descramble a scrambled work, to decrypt an encrypted
work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the
authority of the copyright owner; and
(B) a technological measure `effectively controls access to a work’ if the measure, in the ordinary course of its
operation, requires the application of information, or a process or a treatment, with the authority of the copyright
owner, to gain access to the work.
(b) ADDITIONAL VIOLATIONS—
(1) No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology,
product, service, device, component, or part thereof, that—
(A) is primarily designed or produced for the purpose of circumventing protection afforded by a technological
measure that effectively protects a right of a copyright owner under this title in a work or a portion thereof;
(B) has only limited commercially significant purpose or use other than to circumvent protection afforded by a
technological measure that effectively protects a right of a copyright owner under this title in a work or a portion
thereof; or
(C) is marketed by that person or another acting in concert with that person with that person’s knowledge for
use in circumventing protection afforded by a technological measure that effectively protects a right of a
copyright owner under this title in a work or a portion thereof.
(2) As used in this subsection—
(A) to `circumvent protection afforded by a technological measure’ means avoiding, bypassing, removing,
deactivating, or otherwise impairing a technological measure; and
(B) a technological measure `effectively protects a right of a copyright owner under this title’ if the measure, in
the ordinary course of its operation, prevents, restricts, or otherwise limits the exercise of a right of a copyright
owner under this title.
(c) OTHER RIGHTS, ETC., NOT AFFECTED—
(1) Nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement,
including fair use, under this title.
(2) Nothing in this section shall enlarge or diminish vicarious or contributory liability for copyright infringement
in connection with any technology, product, service, device, component, or part thereof.
(3) Nothing in this section shall require that the design of, or design and selection of parts and components for,
a consumer electronics, telecommunications, or computing product provide for a response to any particular
technological measure, so long as such part or component, or the product in which such part or component is
integrated, does not otherwise fall within the prohibitions of subsection (a)(2) or (b)(1).
(4) Nothing in this section shall enlarge or diminish any rights of free speech or the press for activities using
consumer electronics, telecommunications, or computing products.
(d) EXEMPTION FOR NONPROFIT LIBRARIES, ARCHIVES, AND EDUCATIONAL INSTITUTIONS—
(1) A nonprofit library, archives, or educational institution which gains access to a commercially exploited
copyrighted work solely in order to make a good faith determination of whether to acquire a copy of that work
for the sole purpose of engaging in conduct permitted under this title shall not be in violation of subsection
(a)(1)(A). A copy of a work to which access has been gained under this paragraph—
(A) may not be retained longer than necessary to make such good faith determination; and
(B) may not be used for any other purpose.
(2) The exemption made available under paragraph (1) shall only apply with respect to a work when an identical
copy of that work is not reasonably available in another form.
(3) A nonprofit library, archives, or educational institution that willfully for the purpose of commercial advantage
or financial gain violates paragraph (1)—
(A) shall, for the first offense, be subject to the civil remedies under section 1203; and
(B) shall, for repeated or subsequent offenses, in addition to the civil remedies under section 1203, forfeit the
exemption provided under paragraph (1).
5. Cloud Computing
A newer method of file sharing via the Internet is cloud computing. Cloud computing can deliver a
single application through a browser to multiple users, or it may be a utility program to pool resources
and provide data storage and servers that can be accessed on demand.
IV. Trade Secrets

Some business processes and information that cannot be patented, copyrighted, or trademarked are protected
against appropriation by a competitor as trade secrets. Customer lists, plans, research and development,
pricing information, marketing techniques, production techniques, formulas, and generally anything that makes
an individual company unique and that would have value to a competitor constitute trade secrets. Theft of trade
secrets is a violation of the common law and a federal crime (under the Economic Espionage Act of 1996).
 HOW CAN YOU PROTECT YOUR TRADE SECRETS?


Most successful businesses have trade secrets. The law protects trade secrets indefinitely, provided that
the information is not generally known, is kept a secret, and has commercial value. Sometimes, of course, a
business needs to disclose secret information to a party in the course of conducting business. For example, a
company may need to hire a consultant to revamp a computer system, an engineer to design a manufacturing
system, or a marketing firm to implement a sales program. All of these individuals may need access to some
of the company’s trade secrets. One way to protect against the unauthorized disclosure of such information is
through confidentiality agreements.
CONFIDENTIALITY AGREEMENTS
In a confidentiality agreement, one party promises not to divulge information about the other party to anyone
else or to use the other party’s confidential information for his or her own benefit. Confidentiality agreements
are often included in licensing and employment contracts, but they can also be separate contracts. The key is
to make sure that the agreement adequately protects the trade secrets and applies to any related transactions
between the parties. For instance, if you execute a separate confidentiality agreement with a marketing firm,
you need to make sure that it refers to any other contracts you have made with that firm prior to the
confidentiality agreement. Also, subsequent contracts with the firm should either refer back to the confidentiality
agreement or include a new confidentiality provision.
DEFINING THE SCOPE OF THE AGREEMENT
Confidentiality agreements must be reasonable. Businesspersons should consider what information needs
to be protected and for how long. Make certain to define what you mean by confidential information in the
agreement. Do you want to protect just your customer list or all financial, technical, and other business
information? Think ahead, cover the bases, and be specific.
The duration of the agreement usually depends on the nature of the information. Very important secret
information should remain confidential for a longer time than less important secrets. Sometimes, as with an
advertising campaign, the time period for confidentiality may be self-evident (if the campaign ends in six months,
for example). Tailor the agreement to your needs as much as possible. If the party to whom you are disclosing
information will no longer need the information after a certain date—such as when the project is completed—
include a provision requiring the return of confidential information after that date. This will alleviate concerns
that your confidential trade secrets might later fall into the hands of a stranger.
CHECKLIST FOR THE OWNER OF TRADE SECRETS

1. Determine what your trade secrets are and who may need access to them.
2. Make sure that confidentiality agreements define, in an all-inclusive manner, what information should be
considered confidential.
3. Specify a time period that is reasonable under the circumstances.
4. Identify the agreements to which the confidentiality provisions apply.
5. Require that the confidential materials be returned to you.
6. Create a mechanism to enforce the policy.
V. Licensing
Cyberproducts include data-compression software, encryption programs, software facilitating information
linking and retrieval systems, and other network software. A patent can be protected by being licensed. Any
license can be restricted to certain specified purposes and limited to the licensee only. Because the Internet is
not bound by geography, a licensing agreement should be made only in consideration of all U.S., foreign, and
international laws.
VI. International Protection for Intellectual Property

International copyright agreements include the Berne Convention. If an American writes a book, his or her
copyright in the book must be recognized by every country that has signed the convention. Also, if a citizen of
a country that has not signed the convention first publishes a book in a country that has signed, all other
countries that have signed the convention must recognize that author’s copyright.
More significant is the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). TRIPS
was part of the agreement creating the World Trade Organization (WTO). TRIPS established standards for the
international protection of intellectual property rights, including patents, trademarks, and copyrights for movies,
computer programs, books, and music. Generally, each member country must provide broad intellectual
property rights and effective remedies (including civil and criminal penalties) for violations of those rights.
The Berne Convention

International protection of copyright is provided by international treaties, including the Berne Convention,
which the United States signed in 1989. If a work is protected by copyright law, permission must be granted by
the author or publisher before the work can be copied for commercial purposes. The following are excerpts
from the first five articles of the Berne Convention.
BERNE CONVENTION
FOR THE PROTECTION OF LITERARY AND ARTISTIC WORKS
OF SEPTEMBER 9, 1886
* * * *
(Source of Text: Paris Act of July 24, 1971, as amended on October 2, 1979, provided by the World Intellectual
Property Organization, Geneva, 1987.)
The countries of the Union, being equally animated by the desire to protect, in as effective and uniform a manner
as possible, the rights of authors in their literary and artistic works, * * * have agreed as follows:
Article 1
* * * *
The countries to which this Convention applies constitute a Union for the protection of the rights of authors in
their literary and artistic works.
Article 2
* * * *
(1) The expression ‘literary and artistic works’ shall include every production in the literary, scientific and artistic
domain, whatever may be the mode or form of its expression, such as books, pamphlets and other writings;
lectures, addresses, sermons and other works of the same nature; dramatic or dramatic-musical works;
choreographic works and entertainments in dumb show; musical compositions with or without words;
cinematographic works to which are assimilated works expressed by a process analogous to cinematography;
works of drawing, painting, architecture, sculpture, engraving and lithography; photographic works to which are
assimilated works expressed by a process analogous to photography; works of applied art; illustrations, maps,
plans, sketches and three-dimensional works relative to geography, topography, architecture or science.
* * * *
(3) Translations, adaptations, arrangements of music and other alterations of a literary or artistic work shall be
protected as original works without prejudice to the copyright in the original work.
(4) It shall be a matter for legislation in the countries of the Union to determine the protection to be granted to
official texts of a legislative, administrative and legal nature, and to official translations of such texts.
(5) Collections of literary or artistic works such as encyclopedias and anthologies which, by reason of the
selection and arrangement of their contents, constitute intellectual creations shall be protected as such, without
prejudice to the copyright in each of the works forming part of such collections.
(6) The works mentioned in this Article shall enjoy protection in all countries of the Union. This protection shall
operate for the benefit of the author and his successors in title.
(7) Subject to the provisions of Article 7(4) of this Convention, it shall be a matter for legislation in the countries
of the Union to determine the extent of the application of their laws to works of applied art and industrial designs
and models, as well as the conditions under which such works, designs and models shall be protected. Works
protected in the country of origin solely as designs and models shall be entitled in another country of the Union
only to such special protection as is granted in that country to designs and models; however, if no such special
protection is granted in that country, such works shall be protected as artistic works.
(8) The protection of this Convention shall not apply to news of the day or to miscellaneous facts having the
character of mere items of press information.
Article 2[b]
* * * *
(1) It shall be a matter for legislation in the countries of the Union to exclude, wholly or in part, from the protection
provided by the preceding Article political speeches and speeches delivered in the course of legal proceedings.
(2) It shall also be a matter for legislation in the countries of the Union to determine the conditions under which
lectures, addresses and other works of the same nature which are delivered in public may be reproduced by
the press, broadcast, communicated to the public by wire and made the subject of public communication as
envisaged in Article 11[b](1) of this Convention, when such use is justified by the informatory purpose.
(3) Nevertheless, the author shall enjoy the exclusive right of making a collection of his works mentioned in the
preceding paragraphs.
Article 3
* * * *
(1) The protection of this Convention shall apply to: (a) authors who are nationals of one of the countries of the
Union, for their works, whether published or not; (b) authors who are not nationals of one of the countries of
the Union, for their works first published in one of those countries, or simultaneously in a country outside the
Union and in a country of the Union.
(2) Authors who are not nationals of one of the countries of the Union but who have their habitual residence in
one of them shall, for the purposes of this Convention, be assimilated to nationals of that country.
(3) The expression ‘published works’ means works published with the consent of their authors, whatever may
be the means of manufacture of the copies, provided that the availability of such copies has been such as to
satisfy the reasonable requirements of the public, having regard to the nature of the work. The performance of
a dramatic, dramatico-musical, cinematographic or musical work, the public recitation of a literary work, the
communication by wire or the broadcasting of literary or artistic works, the exhibition of a work of art and the
construction of a work of architecture shall not constitute publication.
(4) A work shall be considered as having been published simultaneously in several countries if it has been
published in two or more countries within thirty days of its first publication.
Article 4
* * * *
The protection of this Convention shall apply, even if the conditions of Article 3 are not fulfilled, to: (a) authors
of cinematographic works the maker of which has his headquarters or habitual residence in one of the countries
of the Union; (b) authors of works of architecture erected in a country of the Union or of other artistic works
incorporated in a building or other structure located in a country of the Union.
Article 5
* * * *
(1) Authors shall enjoy, in respect of works for which they are protected under this Convention, in countries of
the Union other than the country of origin, the rights which their respective laws do now or may hereafter grant
to their nationals, as well as the rights specially granted by this Convention.
(2) The enjoyment and the exercise of these rights shall not be subject to any formality; such enjoyment and
such exercise shall be independent of the existence of protection in the country of origin of the work.
Consequently, apart from the provisions of this Convention, the extent of protection, as well as the means of
redress afforded to the author to protect his rights, shall be governed exclusively by the laws of the country
where protection is claimed.
(3) Protection in the country of origin is governed by domestic law. However, when the author is not a national
of the country of origin of the work for which he is protected under this Convention, he shall enjoy in that country
the same rights as national authors.
(4) The country of origin shall be considered to be: (a) in the case of works first published in a country of the
Union, that country; in the case of works published simultaneously in several countries of the Union which grant
different terms of protection, the country whose legislation grants the shortest term of protection; (b) in the case
of works published simultaneously in a country outside the Union and in a country of the Union, the latter
country; (c) in the case of unpublished works or of works first published in a country outside the Union, without
simultaneous publication in a country of the Union, the country of the Union of which the author is a national,
provided that: (i) when these are cinematographic works the maker of which has his headquarters or his
habitual residence in a country of the Union, the country
of origin shall be that country, and (ii) when these are works of architecture erected in a country of the Union
or other artistic works incorporated in a building or other structure located in a country of the Union, the country
of origin shall be that country.
 FACING A LEGAL PROBLEM 

Questions
When discussing this chapter’s Facing a Legal Problem, you might like to ask the following questions.
1. Would the answer to this Facing a Legal Problem be different if Coca-Cola were trying to make the public
believe that there was cocaine in Coke? Yes. Assuming that there was no cocaine in the beverage, in a suit
between Coca-Cola and its competitors, a court would refuse to grant relief to a party who is committing fraud.
2. If the name “Coke” were not actually registered as a trademark, would the outcome in this legal situation
be different? No. A trademark does not need to be registered to be protected, although registration provides
proof of the date of the beginning of the mark’s use.
ANSWER TO ETHICAL QUESTION

Do business process patents have a chilling effect on e-commerce? It might be argued that investors are
more inclined to invest in Internet and high-tech companies if they believe that the firms can obtain patents for
their business processes. Others assert that patents have been granted for online business processes that are
neither new nor non-obvious, and the more such patents are granted for the building blocks of e-commerce,
the more those involved in e-commerce will have to pay to use those processes.
TEACHING SUGGESTIONS
1. It could be pointed out that disputes arising in the areas covered in this chapter are among the most volatile
and most extensively—and expensively—litigated disputes in the law.
2. One of the issues raised in this chapter is whether an instructor should be allowed to photocopy (has the
common use of the brand name “Xerox” to refer to photocopying rendered the brand name generic?) all or part
of one or more copyrighted works to hand out to a class of students. Should a single student be allowed to
photocopy a chapter of a library book for later study? Would students feel differently if they owned the rights to
the work and would receive royalties if the work were purchased instead of copied? The same questions can
be raised in connection with the bootlegging of other products protected by intellectual property law, including
compact discs, cassette tapes, videocassettes, and laserdiscs. Should copying computer software be treated
any differently than copying cassettes? Why?
3. Of course, the Internet and the technology revolution are constantly in the news. This makes them easier
to discuss, at least for those students who are aware of current events. Start off a class discussion of this
chapter with whatever aspect of the topic is most recently highlighted in the media or is most likely to be on
students’ minds.
Cyberlaw Link
Questions that students might be asked include the following.
• Is linking to a Web site without authorization an infringement of the site’s copyright? Is it a violation of
trademark law? Would it make any difference if the URL included a person’s name or a trademark?
• Is framing another’s site a violation of any of the laws that protect intellectual property?
• Is caching a violation of copyright law?
• Should a company be entitled to monitor the use of its copyrighted software after it’s been sold? If so,
should it be a crime to resist this monitoring?
DISCUSSION QUESTIONS
1. What is a trademark? A trademark is a distinctive mark, motto, device, or emblem that a manufacturer stamps,
prints, or otherwise affixes to the goods it produces, so that they can be distinguished from the goods of others. Personal
names, words, or places that describe an article or its use cannot be trademarked. Words that are used as part of a
design or device, however, or words that are used in an uncommon or fanciful way may be trademarked. An applicant
can register a mark with the federal Patent and Trademark Office on the basis either of use or of the bona fide intent to
use it in commerce within six months.
2. What is trademark infringement? When a trademark is copied to a substantial degree or used in its entirety by
another, it has been infringed.
3. What are service, certification, and collective marks? A service mark distinguishes services rather than goods.
A certification mark is used by one or more persons, other than the owner, to certify the region, materials, mode of
manufacture, quality, or accuracy of the owner’s goods or services. When used by members of a cooperative,
association, or other organization, the mark is a collective mark. The same policies and restrictions that apply to
trademarks apply to service, certification, and collective marks.
4. What is a trade name? A trade name is part or all of a business’s name. Words must be unusual or fancifully
used to be protected as trade names.
5. What is a patent? A patent is a grant from the federal government securing the exclusive right to make, use,
and sell an invention for seventeen years (designs are covered for a shorter period). The invention or design must be
genuine, novel, useful, and not obvious.
6. What is patent infringement? Patent infringement is committed when a firm makes, uses, or sells another’s
patented design, product, or process without permission. An invention need not be copied entirely, but all steps of a
process must be.
7. What is a copyright? A copyright is an intangible right granted to an author or originator of certain literary or
artistic productions. The right is granted automatically; the protection lasts for the life of the author plus fifty years.
Copyrights owned by publishers last for seventy-five years from the date of publication or a hundred years from the
date of creation, whichever comes first. For works by more than one author, the copyright lasts fifty years after the
death of the last surviving author.
8. What does a copyright protect? A copyright does not protect any “idea, procedure, process, system, method
of operation, concept, principle or discovery, regardless of the form in which it is described, explained, illustrated, or
embodied.” A copyright does protect the way in which an idea is expressed. If the idea and its expression are
inseparable, no copyright will be granted. Generally, anything that is not original does not qualify; compilations of facts
do.
9. Why is copyright the most important form of intellectual property protection on the Internet? What is the
protection for copyrighted works online? Copyright law is probably the most important form of intellectual property
protection on the Internet, in part because much of the material on the Internet consists of works of authorship
(multimedia presentations, software, database information, etc.). These works are the traditional focus of copyright law.
Copyright law is also important because the nature of the Internet requires that data be “copied” to be transferred online.
Loading a file or program into a computer’s random access memory, or RAM, constitutes the making of a “copy” for
purposes of copyright law.
10. What is a trade secret and how is it protected? Trade secrets are customer lists, plans, research and
development, pricing information, marketing techniques, production techniques, formulas, and generally anything that
makes a company unique and that would have value to a competitor. They cannot be patented, copyrighted, or
trademarked, but they are protected from appropriation by the common law and in some states by the Uniform Trade
Secrets Act. The protection extends to ideas and their expression. There are no registration or filing requirements.
ACTIVITY AND RESEARCH ASSIGNMENTS

1. News reports of local, national, and international controversies involving the subjects considered in this chapter
can often be found and may be used effectively in discussing this material. Events that are frequently widely publicized
include competitors’ wrongfully attempting to obtain information and cases involving professional athletes. Have
students keep an eye out for these and discuss them in class.
2. In discussing trademarks, trade names, service marks, and collective marks, ask students to bring to class an
example of each. Discuss as a large group whether the examples are properly identified.
3. Ask students to research online how the design of a Web site can be protected. Here is one possibility: (1)
Register it with the U.S. Copyright Office. This is not necessary but it establishes (a) a public record of your design in
case a claim is filed and (b) prima facie evidence in court of the validity of the copyright. Additional damages and
attorney fees may be available in a court action if the registration occurs before a claim is filed. (2) Put a copyright mark
on the page. This is not required either, but it prevents an infringer from claiming “innocent infringement.” What is not
copyrightable? Probably features that are merely functional, that are commonly used by others, that are directed by
whatever software is used to create the site, or that are required by the Web, the Internet, or the ISP. What other
protection is needed (for instance, for software that can be downloaded from the site) and what is available? Who owns
the copyright—the owner of the site or the developer? Put it in writing.
4. Ask students to research online the following question: how does a business choose and protect a domain
name? (1) Find out if a name is taken (there are firms that run global searches). (2) Register the name. (3) Consider:
(a) the risks of not registering in countries other than the United States (for instance, do you do business abroad? do
you have foreign competitors? etc.); (b) the costs of registering elsewhere (about $250 per country, with as many as
two hundred countries in which to register); and (c) the complications of registering elsewhere (technical and regulatory
subjects to deal with in each country—requirements, fees, language translations, currency conversion, etc.). (4) Hire a
professional registration service to do everything.
LINKING THE LAW TO YOUR CAREER—
 TRADEMARKS AND SERVICE MARKS 

Bonus Question
The U.S. Patent and Trademark Office requires that a trademark or service mark that is registered must
actually be put into commercial use within three years after the application has been granted. Why do you think
the federal government put this restriction into place? In the online world, there is something called
cybersquatting. Someone registers a domain name that a large company might want to use in the future in this
situation. The owner then “squats” on this domain Internet address until he or she is offered a large enough
price to transfer it to a company that can actually make use of it.
The U.S. Patent and Trademark Office clearly is trying to prevent what we could call trademark squatting
and service mark squatting. In other words, the federal government wants to make sure that once a trademark
or service mark is created, the owner has either to “use it or lose it.” This “use it or lose it” regulation avoids
lawsuits in the future, sometimes in the distant future, when someone else creates the same or a similar
trademark or service mark. If a registered trademark or service mark is never put into commerce, it is difficult
for others to determine that it exists. They might inadvertently use a trademark or service mark that is similar
and then face a lawsuit. This would be an inefficient use of resources, particularly for our judicial system.

BEFORE THE TEST—
 ISSUE SPOTTERS 

1. Eagle Corporation began marketing software in 2000 under the mark “Eagle.” In 2009, Eagle.com, Inc., a
different company selling different products, begins to use “eagle” as part of its URL and registers it as a domain
name. Can Eagle Corporation stop this use of “eagle”? If so, what must the company show? Yes. This may be
an instance of trademark dilution. Dilution occurs when a trademark is used, without permission, in a way that
diminishes the distinctive quality of the mark. Dilution does not require proof that consumers are likely to be
confused by a connection between the unauthorized use and the mark. The products involved do not have to
be similar. Dilution does require, however, that a mark be famous when the dilution occurs.
2. Global Products develops new software for engineers and architects that it would like to publicize through
an online service on the Internet. How can Global give potential customers a look at its product while protecting
itself against patent infringement? A software developer in this situation might best protect its product by the
use of a license. In the context of a patent, a license grants permission to make, sell, or use a patented item,
but it can be limited to certain purposes and to the licensee only.)

MORE LEGAL QUESTIONS—
 GAMEPOINTS 

1. You create a new video game-playing device that you call “The Gem.” Its revolutionary twist on other game
devices is that The Gem can respond to a player’s eye movements, making a handheld joystick or similar
control almost unnecessary. At this point, is The Gem protected by trademark, patent, or copyright law? If not,
how could this protection be obtained? Different attributes of your game device are protected under different
categories of intellectual property law. The name of the product could be protected as a trademark once it is
either registered or used in commerce. It might be argued that the name is not sufficiently fanciful or distinctive,
but this argument could be countered by pointing out that “The Gem” is not a jewel. The device might obtain
patent protection if the conditions for the grant of a patent are met—that the device’s invention, discovery, or
design is genuine, novel, useful, and not obvious in light of current technology. The software that drives the
game might be protected under copyright law. Various other aspects of the production and selling of this product
could be protected against appropriation by competitors as trade secrets.
2. For The Gem, you write and develop “Rock Roles,” a game that allows players to perform in a virtual rock
band. Can “Rock Roles” be marketed with a thousand songs uploaded without the copyright owners’
permission? Would this be “fair use”? Explain. No song could be uploaded without the copyright owner’s
permission. This problem poses an instance of copyright infringement. This use of others’ works without the
permission of the copyright owners would not be “fair use” because it is not a clearly permissible purpose
(criticism, comment, news reporting, teaching, scholarship, or research) and it would not otherwise pass a
court’s scrutiny—particularly as this use would undercut the market for the copyrighted work.


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SOLUTION MANUAL FOR CENGAGE ADVANTAGE BOOKS BUSINESS LAW TEXT AND EXERCISES

7TH EDITION BY MILLER HOLLOWELL ISBN 1133625959 9781133625957

 VIDEO SUPPLEMENTS 

Business Law Digital Video Library

• Drama of the Law

 VIDEO QUESTIONS & ANSWERS 

LECTURE OUTLINE FOR THIS CHAPTER

I. Trademarks and Related Property

D. Service, Certification, and Collective Marks

B. Business Process Patents

C. Protection for Foreign Firms

A. What Is Protected Expression?

C. Copyrights in Digital Information

IV. Trade Secrets

VI. International Protection for Intellectual Property

DETAILED CHAPTER OUTLINE

I. Trademarks and Related Property

The Federal Trademark Dilution Act

UNITED STATES CODE

§ 1125. False designations of origin and false descriptions forbidden

(a) Civil action

(c) Remedies for dilution of famous marks

(A) the degree of inherent or acquired distinctiveness of the mark;

(4) The following shall not be actionable under this section:

(B) Noncommercial use of a mark.

(C) All forms of news reporting and news commentary.

(July 5, 1946, c. 540, Title VIII, s 43, 60 Stat. 441.)

HISTORICAL AND STATUTORY NOTES

Derivation. Act Mar. 19, 1920, c. 104, s 3, 41 Stat. 534.

1. Distinctive (Strong) Marks

D. SERVICE, CERTIFICATION, AND COLLECTIVE MARKS

B. BUSINESS PROCESS PATENTS

C. PROTECTION FOR FOREIGN FIRMS

A. WHAT IS PROTECTED EXPRESSION?

ENHANCING YOUR LECTURE—

 LEGAL ISSUES FACING

BENEFITS OF BLOGS AND PODCASTS

POTENTIAL LEGAL RISKS

FOR CRITICAL ANALYSIS

a. 111 F.Supp.2d 294 (S.D.N.Y. 2000).

ENHANCING YOUR LECTURE—

 COPYRIGHT LAW VERSUS FREE SPEECH

APPLYING THE DIGITAL MILLENNIUM COPYRIGHT ACT OF 1998

THE DEBATE CONTINUES

W HERE DO YOU STAND?

a. 111 F.Supp.2d 294 (S.D.N.Y. 2000).

C. COPYRIGHTS IN DIGITAL INFORMATION

ENHANCING YOUR LECTURE—

 A BOOK IS A BOOK IS A BOOK—

THE BOTTOM LINE

1. Electronic Copies and Sales

2. Circumvention of Encryption Software

3. Service Providers’ Liability

REAL-WORLD CASE EXAMPLE

Digital Millennium Copyright Act of 1998

Sec. 1201. Circumvention of copyright protection systems

(a) VIOLATIONS REGARDING CIRCUMVENTION OF TECHNOLOGICAL MEASURES—

(i) the availability for use of copyrighted works;

(v) such other factors as the Librarian considers appropriate.

(3) As used in this subsection—

(b) ADDITIONAL VIOLATIONS—

(2) As used in this subsection—

(c) OTHER RIGHTS, ETC., NOT AFFECTED—

(d) EXEMPTION FOR NONPROFIT LIBRARIES, ARCHIVES, AND EDUCATIONAL INSTITUTIONS—