Intellectual property protection, Patent, Trademark, Copyright, Trade secret

1. INTELLECTUAL PROPERTY
AND
UNFAIR COMPETITION
Stephen Ong, BSc(Hons) Econs (LSE),
MBA International Business(Bradford)
Visiting Fellow, Birmingham City University
Visiting Professor, Shenzhen University
MBA1034 GOVERNANCE, LAW & ETHICS

2. • Discussion: CEO Pay1
• Intellectual Property &
Unfair Competition2
• Case Discussion : Patent
Games - Plavix3
Today’s Overview

3. 1. Open Discussion
• Gabaix, Xavier, Landier, Augustin and
Sauvagnat, Julien (2013) CEO pay and firm
size: an update after the crisis,NBER working
paper 19078, May 2013

4. 2.1 INTELLECTUAL
PROPERTY

5. Overview
• Introduction to Intellectual
property
• Intellectual property protection
• Trade secret
• Patent
• Copyright
• Trademarks

6. The Importance of Intellectual Property
• Intellectual Property
– Is any product of human intellect that is intangible but
has value in the marketplace.
– It is called “intellectual” property because it is the
product of human imagination, creativity, and
inventiveness.
• Importance
– Traditionally, businesses have thought of their physical
assets, such as land, buildings, and equipment as the
most important.
– Increasingly, however, a company’s intellectual assets
are the most important.

7. SPOT the DIFFERENCE

8. 8
Patent Litigation
Source: bbc.co.uk 30th August 2005
Creative wins MP3 player patent
One of Apple's main rivals, Creative Technology, has
been awarded a patent in the US for the interface
used on many digital music players.
"The first portable media player based upon the user interface covered in our Zen
Patent was our Nomad Jukebox MP3 player," said Creative CEO Sim Wong Hoo.
"The Apple iPod was only announced in October 2001, 13 months after we had
been shipping the Nomad Jukebox based upon the user interface covered by our
Zen Patent."
In its press release, Creative said Apple had filed for a patent for a user interface
in a multimedia player in late 2002, but its application had been recently rejected.
On 24 August 2006, Apple and Creative announced a broad settlement to end
their legal disputes. Apple will pay Creative US$100 million for a paid-up license,
to use Creative's awarded patent in all Apple products. As part of the agreement,
Apple will recoup part of its payment, if Creative is successful in licensing the
patent.

9. 9
Automatic hierarchical categorization of music by
metadata
Patent number: 6928433
Filing date: Jan 5, 2001
Issue date: Aug 9, 2005
Application number: 9/755,723
A method, performed by software executing on the processor of a portable
music playback device, that automatically files tracks according to hierarchical
structure of categories to organize tracks in a logical order. A user interface is
utilized to change the hierarchy, view track names, and...
Inventors: Ron Goodman, Howard N. Egan
Assignee: Creative Technology LTD
Apple pays US$100m for use of Patent
Source: bbc.co.uk 30th August 2005

10. SPOT the DIFFERENCE
NASDAQ AAPL
Market Cap :
US$308.8 B
PINK CREAF
Market Cap :
US$0.150 B

11. CREATIVE vs APPLE

12. The Four Key Forms of Intellectual Property
12-12
Patents
Copyrights
Trademarks
Trade Secrets

13. FIGURE 2.4 Patent Applications and Patents Issued

14. 2 - 14FIGURE 2.6 Trademark Applications and Trademarks and Renewals Issued

15. Protecting Your Ideas
• Patent – a grant from the Patent
and Trademark Office to the
inventor of product, giving the
exclusive right to make, use, or sell
the invention for 20 years from the
date of filing the patent
application.

16. Patents
• Patents
– A patent is a grant from the federal government
conferring the rights to exclude others from making,
selling, or using an invention for the term of the patent.
(See the next slide for a full explanation.)
• Increasing Interest in Patents
– There is increasing interest in patents.
• Since Patent #1 was granted in 1790, the U.S. Patent &
Trademark Office has granted over six million patents.
• The patent office is strained. It now takes an average of 35.3
months from the date of first filing to receive a U.S. patent.

17. Proper Understanding for What
a Patent Means (1)
• A patent does not give its owner the right to
make, use, or sell an invention; rather, the
right granted is only to exclude others from
doing so.
• As a result, if an inventor obtains a patent for
a new kind of computer chip, and the chip
would infringe on a prior patent owned by
Intel, the inventor has no right to make, use,
or sell the chip.
12-17

18. Proper Understanding for What
a Patent Means (2)
• To do so, the inventor would need to obtain
permission from Intel. Intel may refuse
permission, or ask that a licensing fee be paid for
the rights to infringe on its patent.
• While this system may seem odd, it is really the
only way the system could work. Many inventions
are improvements on existing inventions, and the
system allows the improvements to be (patented)
and sold, but only with the permission of the
original inventors, who usually benefit by
obtaining licensing income in exchange for their
consent. 12-18

19. Growth in Patent Applications in
the United States

20. Three Basic Requirements for
Obtaining a Patent
12-20

21. Types of Patents
Type Type of Invention Covered Duration
Utility
Design
Plant
20 years from
the date of the
original
application.
20 years from
the date of the
original
application.
14 years from
the date of the
original
application.
New or useful process, machine,
manufacturer, or composition of material
or any new and useful improvement
thereof.
Invention of new, original,
and ornamental design for
manufactured products.
Any new varieties of plants
that can be reproduced
asexually.

22. Business Method Patents
(Special Utility Patent)
• Business Method Patent
–A business method patent is a patent that protects
an invention that is or facilitates a method of
doing business.
–The most notable business method patents that
have been awarded:
• Amazon.com’s one-click ordering system.
• Priceline.com’s “name-your-price” business model.
• Netflix’s method for allowing customers to set up a
rental list of movies to be mailed to them.12-22

23. Patent Infringement
• Patent Infringement
–Takes place when one party engages in the
unauthorized use of another party’s patent.
–The tough part (particularly from a small
entrepreneurial firm’s point of view) is
that patent infringement cases are costly to
litigate.
• A typical patent infringement case costs
each side at least $500,000 to litigate.

24. Protecting Your Ideas
• Trademark – any distinctive word, symbol,
design, name, logo, slogan, or trade dress a
company uses to identify the origin of a
product or to distinguish it from other goods
on the market.
• Servicemark – the same as a trademark
except that it identifies the source of a
service rather than a product.

25. Trademarks
• Trademark
–A trademark is any word, name, symbol, or
device used to identify the source or origin of
products or services and to distinguish those
product or services from others.
–Trademarks also provide consumers with useful
information.
• For example, consumers know what to expect when
they see a Macy’s store.
• Think how confusing it would be if any retail store
could use the name Macy’s.

26. Types of Trademarks
1 of 2
12-26
Type Types of Marks Covered
Trademark
Duration
Renewable
every 10 years,
as long as the
mark remains
in use.
Service
mark
Renewable
every 10
years, as long
as the mark
remains in
use.
Any word, name, symbol, or
device used to identify and
distinguish one company’s
goods from another. Eg. Apple,
d.light, Dry Soda, ModCloth,
and Zeo.
Similar to trademarks; are used
to identify the services or
intangible activities of a business,
rather than a business’s physical
products. Eg. 1-800-FLOWERS,
Amazon.com, Mint.com, and
Zipcar.

27. Types of Trademarks
2 of 2
12-27
Type Types of Marks Covered
Collective
mark
Duration
Renewable
every 10 years,
as long as the
mark remains
in use.
Certifica
tion
mark
Renewable
every 10
years, as long
as the mark
remains in
use.
Trademarks or service marks
used by the members of a
cooperative, association, or other
collective group. Eg. Rotary
International and International
Franchise Association
Marks, words, names, symbols,
or devices used by a person
other than the owner to certify a
particular quality about a good
or service. Eg. 100% Napa Valley
and Underwriters Laboratories

28. What is Protected Under Trademark Law
1 of 2
12-28
Item Example(s)
Words
Numbers
and letters
Designs
and logos
Sounds
YouTern, PledgeMusic, GiftZip
3M, MSNBA, 1-800-FLOWERS
Nike swoosh logo
MGM’s lion’s roar

29. What is Protected Under Trademark Law
2 of 2
12-29
Item Example
Fragrances
Shapes
Colours
Trade
dress
Stationery treated with a special fragrance
Unique shape of the Apple iPhone
Nexium—the “purple pill”
The layout and décor of a
restaurant

30. Exclusions From Trademark
Protection
Item Example
Immoral or
scandalous matter
Deceptive
matter
Descriptive
marks
Surnames
Profane words
Labeling oranges “Fresh Florida
Oranges” that aren’t grown in Florida
Phrases like “golf ball” and “fried
chicken” are descriptive and can’t
be trademarked
Common surnames like
“Anderson” or “Smith” can’t be
trademarked

31. Protecting Your Ideas
• Copyright – an exclusive right that
protects the creators of original
works of authorship such as literary,
dramatic, musical, and artistic
works.
• Copyrighted material is denoted by
the symbol ©.

32. Copyrights
• Copyrights
–A copyright is a form of intellectual property
protection that grants to the owner of a work of
authorship the legal right to determine how the
work is used and to obtain the economic
benefits from the work.
–A work does not have to have artistic merit to
be eligible for copyright protection.
• As a result, things such as operating manuals and
sales brochures are eligible for copyright
protection.

33. What is Protected By a Copyright?
Literary works Musical compositions
Computer software Dramatic works
Pantomimes
and
choreographic
works
Pictorial, graphic,
and
sculptural works

34. Exclusions From Copyright
Protection
• The Idea-Expression Dichotomy
– The main exclusion is that copyright laws cannot
protect ideas.
• For example, an entrepreneur may have the idea to open a
soccer-themed restaurant. The idea itself is not eligible for
copyright protection. However, if the entrepreneur writes
down specifically what his or her soccer-themed restaurant
will look like and how it will operate, that description is
copyrightable.
• The legal principle describing this concept is called the
idea-expression dichotomy.
• An idea is not copyrightable, but the specific expression of
an idea is.

35. • How to Obtain a Copyright
– Copyright law protects any work of authorship the
moment it assumes a tangible form.
– Technically, it is not necessary to provide a copyright
notice or register work with the U.S. Copyright
Office.
– The following steps can be taken, however, to
enhance copyright protection.
• Copyright protection can be enhanced by attaching the
copyright notice, or “copyright bug” to something.
• Further protection can be obtained by registering the work
with the U.S. Copyright Office.
Obtaining a Copyright

36. Copyright Infringement
1 of 2
• Copyright Infringement
–Copyright infringement occurs when one
work derives from another or is an exact
copy or shows substantial similarity to the
original work.
–To prove infringement, a copyright owner is
required to show that the alleged infringer
had prior access to the copyrighted work and
that the work is substantially similar to the
owner’s.

37. Copyright Infringement
2 of 2
12-37
The illegal downloading
of music is an example of
copyright infringement.
Copyright infringement
costs the owners of
copyrighted material an
estimated $20 billion per
year in the U.S. alone.

38. Trade Secrets
• Trade Secrets
– A trade secret is any formula, pattern, physical
device, idea, process, or other information that
provides the owner of the information with a
competitive advantage in the marketplace.
– Trade secrets include marketing plans, product
formulas, financial forecasts, employee rosters,
logs of sales calls, and similar types of
proprietary information.
– The Federal Economic Espionage Act, passed in
1996, criminalizes the theft of trade secrets.

39. What Qualifies for Trade Secret
Protection? 1 of 2
• Trade Secret Protection
–Not all information qualifies for trade
secret protection.
–In general, information that is know to
the public or that competitors can
discover through legal means doesn’t
qualify for trade secret protection.
–Companies protect trade secrets through
physical measures and written
documents.

40. What Qualifies for Trade Secret
Protection? 2 of 2
The strongest case for trade secret protection is
information that is characterized by the following.
• Is not known outside the company.
• Is known only inside the company on a “need-to-know” basis.
• Is safeguarded by stringent efforts to keep the information
confidential.
• Is valuable and provides the company a competitive advantage
• Was developed at great cost, time, and effort.
• Cannot be easily duplicated, reverse engineered, or discovered.

41. Protecting Your Ideas
Type of
Protection
What It
Covers
Time
Required Cost
Copyright Works of
original
authorship
About 2 weeks About $35
Trademark Logos, names,
phrases
6 – 12 months $900 - $1,500
Design patent Look of an
original product
Up to 2 years $5,000 - $20,000
Utility patent How an original
product works
2 – 5 years $5,000 - $20,000
Business
method patent
A business
process
2 – 5 years $5,000 - $20,000
2 - 41Source: Anne Field, “How to Knock Out Knock Offs,” Business Week, March 14, 2005.

42. 2.2 INTELLECTUAL
PROPERTY
PROTECTION

43. Intellectual Property Protection
• The basic trade-off in the protection of
intellectual property is between:
– Benefits to society from the use of ideas and
inventions and the incentives for their creation

44. Information and Incentives

45. Intellectual Property
• The appropriability of the returns
from a discovery depends on two
principal factors:
–How easy it is for others to replicate
the discovery
–Strength of the public protection for
the discovery

46. Appropriability of Returns

47. Example : Appropriability of Returns
and Peer-to-Peer Systems

48. Intellectual Property Protection
• Patents
• Copyright
• Trademarks and trade secrets

49. 2.3
INTELLECTUAL
PROPERTY LAWS

50. Introduction to Intellectual Property
• U.S. Federal law provides
protections for intellectual property
rights by means of:
– Patents
– Copyrights
–Trademarks
7-2

51. Trade Secret
• Trade secrets
–Product formula
–Pattern
–Design
–Compilation of data
–Customer list or other business secret
• Uniform Trade Secrets Act: Gives
statutory protection to trade secrets 7-3

52. Trade Secret
• Lawsuits for misappropriation – brought
against anyone who steals a trade secret
–Defendant must have obtained the trade
secret through unlawful means
–Discovery of trade secret by reverse
engineering is lawful
–A trade secret unprotected by the owner
is not subject to legal protection
7-4

53. Trade Secret
• Civil Trade Secret Law:
Misappropriation of a trade secret
–A successful civil plaintiff can:
• Recover profits made by offender
• Recover damages
• Obtain injunction prohibiting offender
from divulging trade secret

54. Trade Secret
• Economic Espionage Act
–Makes it a federal crime for any person:
• To convert a trade secret to his or her benefit or
for the benefit of others
• Performing the above knowing or intending that
the act would cause injury to the owner of the
trade secret
–Includes computer espionage
–Severe criminal penalties
7-6

55. Patent
• A grant by the federal government upon
the inventor of an invention for the
exclusive right to use, sell, or license the
invention for a limited amount of time
–Intended to provide incentive for inventors
to make their inventions public
–Protects patented inventions from
infringement
–Federal patent law is exclusive; no state
patent laws 7-7

56. Patent
• Federal Patent Statute: Establishes the
requirements for obtaining a patent and
protects patented inventions from
infringement
• Patent: A grant by the federal
government upon the inventor of an
invention for the exclusive right to use,
sell, or license the invention for a
limited amount of time

57. Patent
• U.S. Court of Appeals for the
Federal Circuit: A special federal
appeals court that hears appeals
from the Board of Patent Appeals
and Interferences and federal court
concerning patent issues
• Utility patent: Protects the
functionality of an invention

58. Patent
• Subject matter that can be patented
– Machines
– Processes
– Compositions of matter
– Improvements to existing machines, processes, or
compositions of matter
– Designs for an article of manufacture
– Asexually reproduced plants
– Living material invented by a person
7-8

59. Patent
• Requirements for obtaining a patent
–An invention must be:
•Novel
•Useful
•Nonobvious
–Abstractions and scientific principles
cannot be patented unless they are part
of the tangible environment 7-9

60. Case 1: U.S. Supreme Court Patent
• Case
– Bilski v. Kappos, Director, Patent and Trademark
Office
– 130 S.Ct. 3218, 177 L.Ed.2d 792, Web 2010 U.S.
Lexis 5521 (2010)
– Supreme Court of the United States
• Issue
– Is the petitioners’ claimed invention patentable?
7-10

61. Patent
• Patent period
–Utility patents – 20 years
–Design patents – 14 years
–Patent term begins to run from the date
the patent application is filed
–The U.S. follows “first-to-invent” rule
–The invention or design enters the
public domain after patent period
expires
7-11

62. Patent
• One-year “on sale” doctrine
–Public use doctrine
–Patents will not be granted if an
invention was in the public
domain for one year prior to
application filing
7-12

63. Patent
• Provisional patent application
–Filed by the inventor to obtain
three months to prepare a final
patent application
–American Inventors Protection Act
provides provisional patent
application
7-13

64. Patent
• Patent infringement
–Occurs when someone makes
unauthorized use of a patent
–Plaintiff may recover:
• Money damages equal to royalty rate
• Other damages caused by the infringement
• Order for destruction of infringing items
• Injunction against infringer
• Treble damages for intentional infringement
7-14

65. Copyright
• Copyright Revision Act of 1976
–Establishes the requirements for obtaining a
copyright
–Protects copyrighted works from infringement
• Only tangible writings are subject to copyright
registration and protection
• Federal copyright law is exclusive
• Copyright can be sold or licensed to others 7-15

66. Copyright
• Registration of copyrights
–Must be an original work
–Registered with U.S. Copyright Office
–Registration
• Permissive
• Voluntary
• Done at any time during term of copyright
–Registration permits a holder to obtain
statutory damages for copyright infringement
–Not required to use © or word “copyright”
7-16

67. Copyright
• Copyright period
–Sonny Bono Copyright Term
Extension Act
• Individuals are granted copyright protection for
their lifetime plus seventy years
• Copyrights owned by businesses are protected
for the shorter of either:
–120 years from the year of creation
–95 years from the year of first publication7-17

68. Copyright
• Copyright infringement
–Occurs when a party copies a substantial
and material part of the plaintiff’s
copyrighted work without permission
–Successful plaintiff may recover:
• Profit made by the defendant from the
infringement
• Damages suffered by the plaintiff
• Order requiring impoundment and destruction
• Injunction preventing future infringement 7-18

69. Copyright
• Fair use doctrine
–Permits certain limited unauthorized
use of copyrighted materials
• No electronic theft act
–Makes it a crime for a person to
willfully infringe on a copyright
• Digital Millennium Copyright Act
–Makes it a crime to circumvent
encryption technology 7-19

70. Copyright
• Fair Use Doctrine: Permits certain
limited use of a copyright by someone
other than the copyright holder without
the permission of the copyright holder
• Examples of fair use include:
–Quote for review
–Parody or satire
–Academic
–Brief quote in news report

71. Copyright
• No electronic theft act: A federal statute that
makes it a crime for a person to willfully infringe
on a copyright
• Digital Millennium Copyright Act: A federal
statute that prohibits unauthorized access to
copyrighted digital works by circumventing
encryption technology or the manufacture and
distribution of technologies designed for the
purpose of circumventing encryption protection
of digital works

72. • Used to identify and distinguish goods
of a manufacturer or seller or services
of a provider from others
–Trade name
–Symbol
–Word
–Logo
–Design
–Device
Trademark
7-20

73. Trademark
• Lanham (Trademark) Act
–Protects the owner’s investment
and goodwill in a mark
–Prevents consumers from being
confused as to the origin of
goods and services

74. Meaning of Symbols Used in
Association With Marks

75. Trademark
• Registration of a mark
• Mark may be registered if it has been
used in commerce
– Can be registered six months
prior to use
• Mark is lost if not used within six months
• Mark may be opposed by third parties
• The use of the symbol ® is not
mandatory
7-22

76. Trademark
• Types of marks
–Trademark
–Service Mark
–Certification mark
–Collective membership mark
7-23

77. Trademark
• Marks that cannot be registered
–Flag or coat of arms of the United States,
any state, municipality, or foreign nation
–Marks that are immoral or scandalous
–Geographical names standing alone
–Surnames standing alone
–Any mark that resembles a mark already
registered with the U.S. PTO 7-24

78. Trademark
• Distinctiveness or secondary
meaning
–A mark must be distinctive
• A unique word or design
–Have acquired a secondary
meaning
• An ordinary term becomes a brand name
7-25

79. Trademark
• Trademark infringement: Unauthorized
use of a trademark
• Owner must prove that:
–Defendant infringed the plaintiff’s mark
by using it in an unauthorized manner
–Use is likely to cause confusion, mistake,
or deception
7-26

80. Case 2: Trademark Infringement
• Case
– Intel Corporation v.
Intelsys Software, LLC
– Web 2009 U.S. Dist.
Lexis 14761 (2009)
– United States District
Court for the Northern
District of California
• Issue
– Is there trademark
infringement that
warrants the issuance of
a permanent injunction
against Intelsys?
7-27

81. Trademark
• Generic names
–Term for a mark that has become a
common term for a product line or
type of service and therefore has
lost its trademark protection
–Name becomes descriptive rather
than distinctive
7-28

82. Trademark
• Diluting, blurring, or tarnishing
trademarks
–Federal Dilution Act of 1995
• Protects famous marks from dilution
• Use by other party is actionable if:
–It is commercial
–It causes dilution of distinctive quality of mark
–Types of dilution
–Blurring
–Tarnishment 7-29

83. Trademark
• Trademark Dilution Revision
Act
–A dilution plaintiff does not need
to show that it has suffered actual
harm
–It only needs to show that there
would be the likelihood of dilution
7-30

84. Case 3 : Dilution of a Trademark
• Case
–V Secret Catalogue, Inc. and Victoria’s
Secret Stores, Inc. v. Moseley
–605 F.3d 382, Web 2010 U.S. App.
Lexis 10150 (2010)
–United States Court of Appeals for the
Sixth Circuit
7-31

85. Case 3: Dilution of a Trademark
• Issue
–Is there tarnishment of the
Victoria’s Secret senior mark
by the Moseleys’ use of the
junior marks Victor’s Secret
and Victor’s Little Secret?
7-32

86. CASE DISCUSSION :
PATENT GAMES -
PLAVIX

87. Case - Patent Games: Plavix
• In 2002 Sanofi-Aventis filed a patent infringement
lawsuit in federal court, claiming that the patent
provided it with exclusive rights to produce and
market Plavix
• The approval by FDA allowed Apotex to market the
Plavix at its own risk
• Surprised by Apotex’s flooding the market, Sanofi-
Aventis responded by filing a lawsuit in federal
court seeking an injunction to halt the sales
• At the hearing on the lawsuit seeking an injunction,
attorneys for Bristol-Myers Squibb claimed that
failure to issue an injunction would “kill future
clinical efforts.”

88. Core Readings
• Baron, David P.(2013) Business and its environment,
7th Edition, Pearson, Ch.14
• Cheeseman, Henry R.(2013) Business law, 8th Edition,
Prentice Hall. Ch.8.
• Barringer, Bruce R. & Ireland, R. Duane, 2011
Entrepreneurship – Successfully launching new
ventures 4th edition, Pearson.

89. Next Week’s Ideas for Discussion
• Rocco R. Vanasco, (1996),"Auditor
independence: an international
perspective", Managerial Auditing
Journal, Vol. 11 No.: 9 pp. 4
• - 48

90. QUESTIONS?