LEGL 2700 - Exam 3

What role does property (property rights and resources) play in our economy?

• Capitalism versus Communism

• Ability to leverage resources for additional capital

State Controlled/Communism

Government controls all resources and directs how they are divided up between citizens

Property-Based/Capitalism (private/free markets)

Enact laws that enable citizens to acquire, possess, use, and transfer scarce resources 

How does private property establish necessary conditions for capital formation?

• Loan for business: put up house as collateral for example 

• Can convert rights in one resource (house) into rights in different resource (cash) for purpose of starting a business 

Real Property

Applies to ownership to land and interests in land and buildings (surface, air, subsurface, fixtures) 

• Ex: Land, fixtures, apartment leases, easements

Personal Property

Movable resources

• Tangible: applies to physical things (computers, cars, carrots)

• Intangible: applies to nonphysical things, particularly various types of valuable information (intellectual property - patents, copyrights, trademarks, trade secrets)

Types of Ownership for Real Property

1. Fee Simple - own it without restrictions

   1. Absolute - own it outright without restrictions

   2. Defeasible - own it with conditions

2. Life Estate - present and future interests

   1. Present interest - life estate

   2. Reversion interest - land reverts to the original grantor

   3. Remainder interest - land goes to someone other than the grantor upon the person’s death

   4. Future interest - what reversion and remainder interests are also called

3. Leasehold Estate - “rent” with a lot of restrictions

4. Concurrent Ownership - more than one person/party owning the real property at the same time

   1. Tenant in Common - undivided but not necessarily equal between two or more owners

   2. Joint Tenants with Right of Survivorship - undivided and equal between two or more owners

“To Michelle forever”

Fee Simple Absolute to Michelle

“To Michelle so long as the land is used for…”

Fee Simple Defeasible for Michelle

“To Michelle for life”

• Present Interest (life estate) to Michelle

• Future interest (reversion interest) to Kathy

“To Michelle for life, then to Jim”

• Present Interest (life estate) to Michelle

• Future Interest (remainder interest) to Jim

“To Michelle, as tenant, for 12 months”

Leasehold Estate to Michelle

“To Jason and Julie”

Tenancy in Common

“To Jason and Julie as joint tenants with right of surviorship”

Joint Tenancy

Easements

A right to use the land of another in a certain way - many variations including paying for the right to use the land, public utilities

• Easement by prescription

• Natural easement

Easement by Prescription

Similar to adverse possession but it is about the “right to use” and not ownership

• Openly (not in secret)

• Wrongfully (against owner’s interest and without consent)

• Continuously for period of time (many years)

Natural Easement

One of necessity

Ways of Acquiring Property

1. Exchange

2. Possession

3. Confusion

4. Accession

5. Gift

Exchange

Most common - buying things providing services - contracts

Possession 

• Un-owned (includes abandoned) - Rule of First Possession 

• Lost – own it except rightful owner can come back for it (may need to provide to police, take reasonable measures to locate owner, etc.) 

• Mislaid – owner of premises and owner can come back for it (state dependent as well) 

• Neglected land – Adverse Possession

  • Open and Notorious – not secretive 

  • Actual and Exclusive – physical presence on land 

  • Continuous – uninterrupted 

  • Wrongful / Non-Permissive – without owner's permission 

  • Period of time – years! 

Confusion

Most common with fungible goods mixed together

Accession

Adding something new

• If accidentally acquired, then acquirer gets it but must compensate original owner

• If stolen, then original owner get modified property

Gift

• Remember what we learned about the promise of gift, but  

• Intent and Transfer means you can't take it back 

Escheatment

Turning over assets to the state when a company cannot locate the rightful owner (unclaimed property)

Bailments

Arises when you entrust someone with your property to be returned in the future 

• The owner (bailor) entrusts their property to someone else (bailee) 

• Burden Shifting in bailment cases

Categories of Bailments

• For the mutual benefit of both parties – reasonable care 

• For the sole benefit of the bailor - slight duty of care 

• For the sole benefit of the bailee – very high duty of care 

Intellectual Property

Can find the authority in the Constitution - incentives for innovation

4 Types of Intellectual Property

• Trade secrets

• Patent

• Trademarks (Trade symbols)

• Copyright

Trade Secrets

• Economic Value and reasonable measures taken to protect secrecy

• Last for forever

• Misappropriation

• Civil and criminal remedies

Misappropriation

Occurs when one improperly acquires, discloses, or uses a trade secret 

• Not Misappropriation 

  • Independent creation 

  • Reverse engineering 

 

Enforcement of Trade Secrets

• Civil

  • Trade secret owners can get an injunction

  • Owners can obtain damages from people who misappropriate trade secrets

    • State law and the Defend Trade Secrets Act of 2016

• Criminal

  • State Laws 

  • Federal: Economic Espionage Act (EEA) 

    • Considers stealing trade secrets a crime 

    • Punishment 

      • Individuals – Fines and up to 10 years' imprisonment 

      • Organizations – Up to $5 million in fines 

    • Provisions 

      • Makes one liable for standard trade secret misappropriation 

      • Address misappropriation to benefit a foreign government

Injunction

Order by a judge either to do something or to refrain from doing something

Patents

Exclusive right to invention

• Utility and Design

• First to file system

• New Invention --> Legal monopoly 

• After patent expires, it enters the "public domain”

• Overlapping IP Rights - goes to the monopoly patent owner receives

Utility Patent

New, non-obvious, useful processes, machines, compositions of matter or improvements thereof 

• Term: 20 years from filing date 

Design Patent

New, original, and ornamental design of a useful product for an article of manufacture 

• Term: 15 years from issue date

Methods of Utility Patents

• Novelty

• Nonobviousness

• Utility

Novelty

• Something new and different from the prior art 

• Cannot have been published, sold or put in public use by inventor > 1 year before 

Nonobviousness

Ability of an invention to produce surprising or unexpected results 

Utility

• Must do something useful 

• Things that don't work don't count 

Patent Rights

• Exploiting a patent: 

  • Right is to exclude others from making, using, selling, importing 

  • Depending on circumstances may be able to make it yourself (see overlapping rights) 

  • May want to license your invention to other(s) (or may need to get licenses from others) 

  • May want to buy/sell patents 

 

Trade Symbols

Purpose is to identify goods/services with their origin and prevent confusion

Marks Protected by the Lanham Act of 1946 

• Trademark 

• Service mark 

• Certification mark 

• Collective mark 

• Trade dress 

Trademark Registration

• Use of the mark conveys some rights 

• Registration not required but gets you extra rights (e.g., national protection, extra damages) requires registration with PTO – must be used in interstate commerce 

• TM or SM prior to registration, after granted the right to use ® 

• Registered on the Principal Register if the mark is acceptable 

  • Must be renewed every 10 years 

Strength of Marks

• Fanciful

• Arbitrary Marks 

• Suggestive Marks 

• Descriptive Marks 

• Generic Terms 

Fanciful

Made-up words (Exxon) 

Arbitrary Marks

Normal words but used in a different way (Apple for computers) 

Suggestive Marks 

Hints at what it is (Netflix, Airbus) 

Descriptive Marks  

Describes the good or service (Bank of America, The Container Store) - can develop "secondary meaning"

Generic Terms

Common name of product or service (Clock) 

Copyrights

• Original works of authorship fixed in tangible medium - new and creative

• Protection attaches as soon as two elements are met 

• Registration is not required, however, it is required to sue for infringement 

  • Can, and should, immediately mark with words and/or © 

  • "Work made for hire" language in outsourced deals 

Copyrights Term (how long does it last?)

• Author’s lifetime plus 70 years

• 95 years from publication or 120 years from creation for a “work made for hire” or by a company, whichever comes first

• After expiration, the material goes into the “Public Domain”

Trademark Enforcement

• Law protects the owner from unauthorized use of the mark 

  • Establishes civil and criminal violation

• Trademark Infringement

• Defenses

  1. Mark is not distinctive

     1. Rather, it is descriptive or generic (may have become "genericized" and lost its protection) 

  2. Fair use

     1. Discussion, criticism, parody, comparison advertising (need to show study information) 

  3. Little chances of confusion

Trademark Infringement

• Remedies include civil damages and injunctions and orders to destroy infringing products 

• Manufacturing and trafficking counterfeit trademarked products is a criminal violation 

Federal Trademark Dilution Act

Prohibits the usage of a mark same as or similar to another's famous trademark to dilute its significance, reputation, and goodwill 

• Types: Blurring and Tarnishment

Blurring

When usage of a mark blurs distinctiveness of a famous mark 

Tarnishment

When usage of a mark creates a negative impression about the famous company 

Copyrights - what do you get?

• The owner has to establish that the defendant violated his or her exclusive rights of:

  • Reproduction

  • Creation of derivative works

  • Distribution

  • Performance

  • Display

First Sale Doctrine

Copyright holder loses all rights over a particular physical (or digital) copy once sold 

Copyright Fair Use

• Specifies that fair use of copyrighted materials is not an infringement of the owner's property 

  • Fair use includes copying for criticism, comment, parody, news reporting, teaching, scholarship, or research 

• Factors considered by courts 

  • Purpose and character of the use 

  • Nature of work 

  • Amount and substantially of the portion used 

  • Effect of the use upon the potential market 

Basic v Hybrid forms of business organizations

Accentuate the good and fix some of the bad

When a business entity no longer exists, we call that _______; it is not the same as terminating the operations of the business

Dissolves

Corporations face _____ taxation; what does that mean?

Double Taxation are where profits are taxed at corporate level and dividends taxed at an individual level

Sole Proprietorship

Quick, easy, everything tied to the individual (continuity, management, liability, taxes) 

Partnership

Agreement between two or more persons, operating a business, sharing in profits/losses, no need for contract but really should have one, dissolves easily, personal liability (joint and several), personal taxation

Corporation

Filing requirements (domestic, foreign, and alien status), high continuity, control in shareholders/BOD/Officers/Employees, "no" personal liability, double taxation 

Piercing the corporate veil

Disregarding limited liability of a business entity and getting to the owners of the business by courts when finding out that the corporation is being misused

Alter-ego theory

Used to impose personal liability upon corporate officers, directors, and stockholders 

• Blending of assets 

• Not following formalities of the corporation (bylaws, meetings, etc.) 

• Entity was inadequately capitalized 

• Control concentrated in one person 

• Fraudulent behavior 

Fiduciary Duty

The BOD and officers must act in the best interest of the company and shareholders

Business Judgment Rule

BOD and officers won’t get in trouble if they are doing things that they think are the right things to do

Derivative suits

A minority shareholder brings an action against an officer or director on behalf of the company