LEGL EXAM 3

Constitution Intellectual Property

Framers of constitution carved out rights for IP that congress can protect

Article 1 Section 8

IP incentivizes art/innovation

Eventually enters public domain

Capturing

Steps needed to take to legally protect IP

trade secret

any knowledge/info that has economic value because it is secret

no time limit on protection

uniform trade secrets act

trade secrets do NOT have to be unique, they can contain known/crossover elements and still be protected (e.g. client info databases)

misappropriate secret

breaking the law so long as the trade secret was reasonably kept secret and it was obtained illegally

How to preserve trade secret

• if written, lock up

• secure computer/stored knowledge (firewalls, encryption, etc.)

• confidentiality restrictions

• regulate visitors

• sign NDA’s for employees/customers/partners

• trade secret audits

economic espionage act (EEA)

only for federal government, misappropriation benefiting foreign powers and internal business disputes (China stealing R&D)

exemptions of misappropriation (trade secrets)

independent creation and reverse engineering (if you figure out recipe from taste of food)

employee mobility and trade secrets

confidentiality K forbids employees from sharing knowledge

employers enforce k not to compete only when there is valid business purpose for K

utility patent

new non-obvious functional product (20 years of protection)

design patent

original/ornamental design for an article of manufacture (15 years of protection)

plant patent

plant that can be reproduced asexually (20 years of protection)

steps to obtaining a patent

1. file application

2. filing fee

3. explain invention

4. show difference from prior art

5. describe patentable aspects

6. evaluation from patent examiner

patent agent/lawyer

MUST have science undergrad experience

agent has not passed bar/law school, lawyer has

patents and AI

AI can NOT file patents, ONLY individuals

patent characteristics

novelty: new and different from prior art

non-obviousness: ability of an innovation to produce surprising or unexpected results

utility: must do something normal

cant be patented

natural phenomenon (new flower species)

processes (mathematical formulas)

mere abstract ideas

patent enforcement

owner can sue against infringement for injunctions/damages

inventions can cover methods/articles that can overlap

patent trolls

person/business that buys up patents just to sue other bodies for infringement

Trademarks

mark on what is produced to represent origin (brand logos)

recognizability/distinctiveness

protection against confusion

registered with PTO = powerful protection (R), but common/state law still protects unregistered (TM) symbols

Lanham Act

1946

protects Trademark, service mark, certification mark, collective mark, trade dresst

service mark

service instead of product mark (usually used in advertising since there is no product: uniform, truck, etc.)

certification mark

used by people other than the owner to show certification of certain characteristics/standard (USDA organic, fair trade)

collective mark

membership in an organization (B1G, SEC, etc.)

trade dress

look/design of a product/service (coca-cola bottle shape, alcohol bottle) or “total visual image” of a restaurant (inside of a chifa)

color/sound marks

unique situations from PTO, NOT its own category (like trade or service mark) but rather rare instances where companies can “own” colors or sounds under certain contexts (e.g., Tiffany owning their robin blue that other jewelers cant package with, Netflix ba-bum sound)

courts are persnickety about these

trademark registration

has to be interstate commerce - easy via websites

PTO Denying trademarks

• same/similar to other mark

• prohibited names or designs

• names or likeness without permission

• too descriptive of product (“salty crackers” - there are exceptions)

• generic (“Social network”)

these used to be deniable but are no longer as they have been deemed as viewpoint discrimination by gov., violating first amendment rights:

• disparaging (redskins)

• immoral, scandalous names/symbols

how to register trademark

PTO places mark in the official gazette

registered on principal register, if mark is acceptable

if its in the supplemental register for more than 5 years and acquires a secondary meaning (Disney, Ford) a name or descriptive term can acquire full TM status

trademark enforcement

law protects owners from unauthorized mark usage

infringement

civil violation of a trademark

remedies: damages/injunctions and orders to destroy infringing products

trademark criminal violation

intentionally manufacturing and trafficking counterfeit TMed products is a criminal violation (fake Rolex)

TM blurring

when usage of a mark blurs distinctiveness of famous mark

TM tarnishment

usage of mark makes negative impression about the famous company

federal TM dilution act

1995

prohibits usage of a mark same as or similar to another’s TM to dilute its signifigance, reputation, and goodwill

copyright

monopoly - copying and marketing, limited time period, original expression, artistic work, exclusive right, fixed in tangible meaning of expression

institution of copyright

NOT PTO, copyright office in congress library

timing for copyright

individual: author’s life + 70 years

company: 95 years from publication OR 120 years from creation of work, whichever expires first

public domain day

everyone can use it once it has entered public domain

on Jan 1, all IP from that year x number of years agos enter public domain regardless of when in that year it was registered

closely held

50% of stock owned by less than 5 people (typically family - most businesses in US are closely held)

publicly held

stock of company is held by many people

basic/hybrid business org types

basic: sole proprietorship, partnership, corporation

hybrid: limited partnerships, S corp, limited liability company (LLC), limited liability partnership (LLP)

disillusion

a change in the business’ leadership or legal formation, but keeping generally the same goals

Termination

completely liquidating a business, disposal of assets, abandonment of business goals

sole proprietorship

least expensive to create

needs no formal documents, can be formed “on accident'“

continuity tied solely to will of owner and cannot be transferred

sole proprietor is in complete control of business goals/operations

owner has unlimited liability for business

not taxed as an organization (personally taxed)

general partnerships

2+ people sharing goals and P/L (based off law, even if you don’t self identify as “partners”)

minimal cost

2nd easiest to register with state through secretary of state office

continuity depends on the LPA

management is split equally unless stated otherwise in the LPA

all partners have unlimited liability and have joint and severability (no matter who did the wrong, ALL pay up)

tax is still paid personally even if profit is held in business and not for personal use

equal profit for all even if it isn’t a “fair” distribution

Naming statute

if a business wants to be named something besides name of partners, the real name and general statues as partners needs to be put in the government books

Legal partnership agreement (LPA)

an legal agreement between partners to determine profit, management, bringing in new partners, how to dissolve, etc.

not REQUIRED but highly encouraged to avoid issues

corporations

artificial and intangible entity created under authority of state’s law

more complex and costly than other basic types

managerial control:

• shareholders elect a board of directors

• BoD appoint officers/set goals

• officers (CEO, CFO, etc.) manage the daily operations to reach goals

limited liability for owners (only can lose what they have INVESTED in company, not personal assets)

separate taxable entity

articles of incorporation submitted by incorporators

3 types of corporations

domestic: where the corp. was brought to life (US State)

foreign: not in that state

alien: created under laws of different country

double tax

profits are taxed at the corporation level, and then the dividend is taxed at individual level

veil piercing

when owners of corp. can be held personally liable because of certain actions:

• shareholders used the corp to defraud customers/counterparties

• shareholders commingled corp and personal assets

Delaware court of chancery

hugely important and credible court for determining internal business affairs

Georgia state-wide business courts

state-wide jurisdiction to focus on complex busn litigation that would otherwise land in county courts

governor appoints judge and approved by majority vote of senate and house

William Grady Hamrick current judge

fiduciary duties

obligation to act in best interest of other party

when special trust, confidence, or reliance on a fiduciary exercise, discretion, or expertise (publicly held)

derivative suit

minority shareholders think the majority acted in their own personal interest to detriment of company (closely held)

proxy

shareholders appoint agents for purpose of voting shares

nonprofit corporations

501c3

contributors/donors can reduce contributions from their taxes

created for public purpose, not to profit

limited partnerships

all attributes of general partnerships

limited partners: not responsible for debts of the business / can NOT get involved in running the business (usually investors)

general partners: personally liable for debts / management control over business decisions

continuity: if GP changes, disillusion, LPs can change no problem because they are structurally akin to shareholders

S corporations

shareholders of corporation unanimously elect to treat org like a partnership for income tax purposes

legal features of corp

shareholders must account on their individual income tax return for shares of P/L

must be less than 100 shareholders

limited liability company

nontaxable entity like partnership

limited liability for members (like a corporation)

more flexibility compared to S corp

articles of incorporation by organizers

members, not shareholders

dissenting powers can file derivative suits

actual agent

expressed directly to be an agent either in writing or orally

implied agent

implied by conduct, past interactions, etc.

apparent authority

a situation where a principal’s actions leads an agent to belief they have power, but in reality they do not

principal

the body that imbues power in an agent

respondent superior

principal is liable for the negligence of the agent

frolic and detour

a defense for on behalf of principal when agent negligence has occurred, e.g. if delivery drive gets into crash while going to get fast food the company can claim they weren’t doing something authorized

benefit corp vs B corp

benefit corp are allowed to make some money, but they do not maximize profit and prefer to do public good

B corp is a certification mark any body can wear so long as they meet the stringent standards

director liability

a director must make a good faith attempt to run company safely

administrative agencies

bodies that are vested power by the government over a specific area of regulatory law (FDA, SEC, etc.)

types of power within admin agencies

quasi-legislative: allowed to make rules in subject matter under their jurisdiction

quasi-judicial: allowed to hear cases, solve disputes, and make binding decisions

quasi-executive: allowed to enforce law under their jurisdiction

functions of admin agencies

rule making: general or particular industry

adjudicating: quasi-judicial, can conduct discovery, sanctions/fines/cease and desist

advising: can report to congress/attorney general, can make publications (guidelines - sparknotes of law to help corporations stay up to date but NOT the law itself)

investigating: can subpoena, examine witnesses, get info from other agencies

cease and desist

formal request from court for a person to stop an action

consenet agreement

business is not admitting guilt, but they make necessary changes as if they were at fault to preserve public image

inquiry and advisory opinion

business can send a formal inquiry to an agency, which can then return with an advising opinion (not binding law), this is a rare judicial device

organization of admin agencies

5-7 members, 1 is chairperson, no more than half can be of the same political party

senate confirmation required for appointments

appointees can’t engage in other employment while in admin

admins have different structures based on responsibilities

secretary/federal register

the secretary is responsible for publishing agency records in the federal register daily

Admin law jugdes

staff within the fiefdom, quasi-judicial, immunity, judicial findings, lawyers give evidence and judge ruling is final if not appealed within 30 days, then goes to chair people (stays in the fiefdom) - No separation of powers??

judicial review of agency decisions

standing to sue

review of rule making

• is delegation valid (does congress have power from the const., must be definite and limited)

• is authority being exceeded (agencies can only do what congress allows them to do

review of factual determinations

criticism of admin organizations

personnel

• hiring qualified people

• discharging employees

• top personnel selected for political reasons

procedures

• delay decision making

• overwhelming paperwork/meetings

• complex rules and regulations

• dictatorial

relating to substance

• rules/reg. overlap/conflict

• illegal contact end with only a consent order

• law enforcement varies over time

security

investment in a common enterprise with profits to come solely from the efforts of persons other than the investor

more than coporate stock

securities exchange commission (SEC)

administers federal securities laws

1934 creation

five commissions

quasi-legislative and judicial

same general structure as other orgs

securities act of 1933

truth in security

requires disclosure of info to potential investors “disclosure law”

only apply to INITIAL sale of security

info cannot be truth or misleading: “truth in securities” law

regulate those involved in initial sale of security: issuer, underwriter, controlling person, seller

makes it illegal to sell a security via mail without certain info first

issuer

person offering initial sale on security

underwriter

person helping issuer to sell security

controlling person

controls issuer of security

seller

contracts with purchaser/motivating influence on sale of security

registration statement

from 1933 act: detailed info about controlling individual/issuer

time periods:

• prefiling: legal for issuer to engage in preliminary negotiations with underwriter (cant sell security, but can recieve offers)

• waiting: SEC investigates (20 days, can be accelerated or reset

  • posteffective: registration effective, can now sell

prospectus

key information in a company’s registration statement

• provided to interested investor

• must conform to statutory requirement

1933 act liability

criminal and civil can be imposed

willful violation = criminal

• section 11: false/misleading registration statement (half truth = full lie, did NOT have to RELY on fact for it to fit this)

• section 12: no registration statement, false/misleading prospectus

• section 17: device, fraud, scheme, omission, deceit

defenses: false information is not material OR due diligence - “I met the reasonable standards of proof”

Securities exchange act

1934

created SEC

illegal to sell unregulated securities on national exchange

registration requires filing prescribed forms with stock exchange and SEC

section 10)b) and rule 10b-5

principal antifraud rule

private investor can bring civil action if injured from false, misleading, or undisclosed info

insider

person who owns more than 10% of a security

director or officer of issuer of securityinsid

insider trading

using info not public to invest, undermining fairness of market

tipper.tippee

person who discloses material non-public info / person receiving info

can lead to a tipper-tippee chain

private securities litigation reform act (PSLRA)

1995

SEC can pursue claims against 3rd party not directly responsible for securities violation

requires private plaintiff to allege with specificity when filing claim under rule 10b-5 / section 10(b)

• securities litigation uniform standards act (SLUSA) 1998: prevents abusive securities fraud litigation in state courts

state blue sky laws

protect investors against fraud

state statutes

applies to securities subjects AND exempt from fed laws (different than normal law with supremacy clause, feds telling states to regulate heavily)

Uniform securities act, 1956 laid groundwork for blue sky laws

Sarbanes Oxley Act (SOX)

2002

all public companies in and US and international if registered with SEC

ensure accuracy and integrity in finance/reporting in public companies

revitalization of the SEC (more power over gov issues)

congress gave SEC more power to hold companies accountable

Dodd-Frank wall street reform and consumer protection act

2010

addresses LOTS Of issues and made MANY new admin orgs

avoid future tax-payer bailouts (bailed out the biggest banks after 2008 with taxpayer dollars), predatory mortgage ending, and more

strengthened whistleblowers from SOX

• whistleblowers get a “bounty” (10-30 percent of settlement money from criminal company)

economic growth, regulatory relief, consumer protection act

did not repeal Dodd Frank (like trump claimed it would)

eased regulations on smaller banks