Establishes patent criteria: must be (1) novel, (2) nonobvious and (3) useful

    Novel: patent goes to the "first inventor" (elsewhere in the world the rule is first to file)
    Non-obvious: someone skilled in the art could not work it out for himself, on the basis of publicly available information
    Useful: the invention should not be frivolous or injurious to the well-being, good policy, or sound morals of society

    Sets a higher bar for "usefulness"
    Denies patent protection for inventions with no known use
    Risks discouraging basic research in favor of applied research

    Sears, Roebuck (d, appellant) & Co v. Stiffel Co. (p) 376 U.S. 225 (1964)

    (4) "fair use" (nonprofit and education versus commercial); the nature of the work; the amount copied; and the effect on the revenue of the copyright holder. (F130)
    Fair use situations:
    (i) high transaction costs: ex: small excerpts.
    Denial for performance of full pieces: American Society for Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) gets nonexclusive performance rights and licenses to users for an annual fee for full access. Fair use for performance would undermine this, and "performance distributions from ASCAP are an important part of composers' incomes" (LEA214)
    (ii) book reviews--a credible form of free advertising (LEA214)
    Fair use allows book reviewer to quote without permission. "[M]ost reviews are favorable, because most people are more interested in being told what they should read than what they should not read." (P42)
    favorable reviews are complements of the book, but video recorder and public performance are both complements and substitutes. (P43)
    (iii) parody (LEA215)
    "moral right" in continental Eur and gaining headway in US gives artists right to prevent alteration even after sale. Gaining headway because of Berne convention commitments. (P65)

    Past: protection without copyright
    1900--US had no copyright protection treaty with Britain, but first-mover advantage allowed Britain to get some royalties anyway. (F142)

    Present: copyright without protection. [unethical to use office Word at home] (F143)
    Ex: Sony v. Universal Studios (1984). the Betamax case: copying OK for "time-shifting: purposes but not necessarily for "archiving." (CU132)
    VCRs enlarge audience so can raise advertising revenues (but many can screen out ads now) (P42)
    Vault Corp. v. Quaid Software Limited 655 F. Supp. 750 (1987) -- an important case on copy protection of disks. Vault provided the software with which companies produced copy protected disks; Quaid produced the software with which people copied them. Vault failed in its attempt to legally suppress Quaid's activities. (F143)

    There are revenue options without copyright protection:
    "selling support, getting revenue from tie-in sales of products that cannot be easily copied, relying on the honesty of its customers, or getting most of its revenue from firms too large to risk being caught with pirated software." (F143)

c. Trademark

    Also called servicemarks.

   "The common law and statutes protected trademarks from as early as thirteenth century in England. Modern trademark law in the United States stems from the Federal Trademark Act of 1946, commonly called the Lanham Act."  (CU134)

    trademarks:
    "fanciful" marks = invented words (Ex: Kodak);
    "descriptive" mark = indentifying phrase (Ex: Holiday Inn allowed only if it has acquired a "secondary meaning.") (P43)

    no tracing costs, so time period = forever unless
(i) abandoned (CU134)
(ii) becomes generic (P43)

    Ex: Sterling Drug Company, 1921, lost "Aspirin" trademark for acetyl salicylic acid." Bayer has kept it in Canada and Mexico.  (CU135)

    Assessment:

    Benefits:
    Lower consumer search cost (P43)
    Higher product quality.
    Competition by brand

    Cost:
    Trademark protection efforts
    Coca-Cola: spends $2 million annually for a team of 25 investigators. "Since 1945, Coca-Cola has sued approximately 40-60 retailers per year." ("Mixing with Coke over trademarks is always a fizzle. Coco-Cola adds a little lif in court to those failing to serve the real thing." Wall Street Journal, March 9, 1978: p.1, col. 4.) (CU136)

    Potential monopoly
    Ex: Retailers complain it is costly to tell each consumers that they aren't using Coke in "Rum and Coke" so the real cost is to ensure a Coke monopoly

d. Trade Secrets

    Trade secret: "'Trade secret' means information, including a formula, pattern, compilation, program, device, method, technique or process, that (i) derives independent economic value, actual or potential from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." (Uniform Trade Secrets Act) (F139, The law)

    Establishes
    (i) rights against wrongful acquisition--breach of contract, employee disloyalty; trespass.

    Ex:  breach of contract: "An employee or contractor with a Silicon Valley company is routinely required to sign a non-disclosure agreement (NDA)." (CU121)

    Ex: trespass: E.I du Pont deNemours & Co. v. Christopher 431 F.2d 1012 (1970) -- a competitor obtained information by hiring a pilot to fly over a chemical plant under construction and photograph it. The court held that this was a violation of du Pont's rights, even though the flight itself was lawful. (F139)

    (ii) limited rights against recipients of pirated secrets
    If you find out that what you have is a stolen trade secret before you do anything with it, you are not allowed to use it, but ...
    If you have already built the factory to employ the trade secret, so that not being able to use it would leave you worse off than you were before, you can run the factory.
   Damages usually; not usually an injunction against an innocent 3rd party beneficiary. (F139)

    If the info leaks, it can be freely used. "Recent survey research concludes that trade secrets protection is not very effective in Silicon Valley." (CU122)
    Ex: Church of Scientology cases -- they have won their copyright claims but lost their trade secret claims--not because the material is not in principle protectable, but because once one person has posted it on the net it is no longer a trade secret, and a second poster is therefore not liable. And things can be (and were) posted anonymously.

    Trade secret law does not establish a property right--someone who gets possession of the trade secret without doing anything wrong has a legal right to use it.
    Ex: reverse engineering is legal: "clean room" reverse engineering of IBM PC read only memory (ROMs): The software built into the PC's read only memory is copyrighted. But the software in clones has to function exactly the same way, in order that programs for the IBM will run on it.
    The solution is "clean room" reverse engineering. Team A looks at the IBM ROMs and writes out a detailed functional specification of exactly what they do. Team B is never allowed to look at the ROMs. Instead, they read team A's specifications, and write code that does exactly what team A says the original ROMs did. (F130)