LEGL Test 3

Scarcity (in property law)

The condition in which the need for resources outstrips the available supply, making it necessary to have a system for allocating those resources.

State-controlled / communist property system

The government controls all resources and directs how they are divided among citizens.

Property-based / capitalist property system

Laws enable citizens to acquire, possess, use, and transfer scarce resources through private ownership and free markets.

Capital formation (role of private property)

Private property enables capital formation by allowing owners to convert rights in one resource (e.g., a house as collateral) into rights in another (e.g., cash for a business loan).

Real property

Land and anything permanently attached to it — including buildings, fixtures, and surface, air, and subsurface rights. Anything requiring a real estate agent to purchase.

Personal property

Movable resources, both tangible (physical items like a car) and intangible (non-physical rights like stocks or patents).

Fixture

An item that started as personal property but became so permanently attached to real property that it is treated as real property (e.g., a built-in oven or HVAC system).

Fee simple absolute

The most complete form of ownership — unconditional and infinite. Passes to heirs or by will with no reversion. Example: 'To Michelle forever.'

Fee simple defeasible

Full ownership that can be undone if a condition is violated, at which point the property reverts to the original owner. Example: 'To Michelle so long as the land is used for…'

Life estate (present interest)

Ownership that lasts only for the grantee's lifetime. When the grantee dies, the property either reverts to the grantor or passes to a named third party. Example: 'To Michelle for life.'

Reversion interest

A future interest that returns to the original grantor after a life estate ends. Example: Kathy grants 'To Michelle for life' — Kathy holds the reversion.

Remainder interest

A future interest that passes to a named third party (not the grantor) after a life estate ends. Example: 'To Michelle for life, then to Jim' — Jim holds a remainder.

Leasehold estate

Temporary ownership of property for a fixed term, as a tenant. Example: 'To Michelle, as tenant, for 12 months.'

Tenancy in common

Concurrent ownership where each co-tenant holds a separate, divisible share that can be sold or passed to heirs independently. Default when two people receive property without survivorship language. Example: 'To Jason and Julie.'

Joint tenancy

Concurrent ownership with right of survivorship — if one owner dies, all rights pass immediately to the surviving owner. Must include explicit survivorship language. Example: 'To Jason and Julie as joint tenants with right of survivorship.'

Right of survivorship

The feature of joint tenancy that causes a deceased co-owner's share to pass automatically to the surviving co-owner, overriding any will.

Easement

A right to use someone else's land in a specific way — not ownership of the land itself. Examples: utility lines, shared driveways.

Easement by prescription

An easement earned through use rather than agreement — similar to adverse possession but grants a right to use, not own. Must be open, wrongful (without consent), and continuous for a statutory period.

Natural easement (easement by necessity)

An easement created by circumstance when there is no other practical option, such as when a landlocked parcel has no access to a public road without crossing a neighbor's land.

Rule of first possession

The first person to take control of unowned or abandoned property acquires ownership of it.

Lost property

Property the owner accidentally and unknowingly parted with. The finder has ownership rights against everyone except the true owner. The finder may need to turn it in to police or take reasonable steps to locate the owner.

Mislaid property

Property the owner intentionally placed somewhere and then forgot. The owner of the premises (not the finder) holds it, because the true owner is more likely to return to that specific location.

Adverse possession

Acquiring ownership of neglected land by occupying it in a way that is: open & notorious, actual and exclusive, continuous, wrongful/non-permissive, and for the required statutory period (years). If the owner grants permission at any point, the clock resets.

Acquisition by confusion

Acquiring ownership when fungible goods (interchangeable goods like grain or oil) are mixed together. The mixer typically owns the combined mass but must compensate the other party proportionally.

Fungible goods

Goods that are interchangeable with others of the same type (e.g., grain, oil, money). Relevant in confusion cases.

Acquisition by accession

Acquiring property by adding something new to it. If accidental: the acquirer keeps the improved item but must compensate the original owner. If stolen: the original owner gets the modified property back.

Gift (property acquisition)

Transfer of property requiring: (1) donative intent, (2) delivery to the recipient, and (3) acceptance. A promise to give a gift is unenforceable, but once all three elements are met the gift is irrevocable.

Bailment

When an owner (bailor) entrusts their property to another person (bailee) with the expectation it will be returned.

Bailor

The owner who entrusts their property to someone else in a bailment.

Bailee

The person who receives and holds someone else's property in a bailment.

Bailment for mutual benefit

A bailment that benefits both the bailor and bailee. Requires reasonable/ordinary care. Example: dry cleaning, car rental.

Bailment for sole benefit of the bailor

A bailment where only the bailor benefits. Requires only slight care from the bailee. Example: a friend stores your furniture for free.

Bailment for sole benefit of the bailee

A bailment where only the bailee benefits. Requires very high (extraordinary) care. Example: you lend your car to a friend for free.

Burden shifting in bailments

Once the bailor proves there was a bailment and the property was damaged or not returned, the burden of proof shifts to the bailee to show they exercised the required level of care.

Trade secret

Any knowledge or information held by a company that gives it competitive value. Protected as long as: (1) it holds economic value from not being generally known, and (2) the owner takes reasonable measures to keep it secret. No fixed term of protection.

Trade secret — what qualifies

Extremely broad — can be almost anything: formulas, customer lists, processes, business strategies, software. The key is that it derives value from secrecy.

Trade secret audit

A review conducted to identify a company's confidential knowledge-based resources. Includes records and data classification reviews. The first step in a trade secret protection strategy.

Reasonable measures to preserve secrecy

Steps required to maintain trade secret protection: locking up written materials, securing digital data with firewalls/encryption, regulating visitors, properly classifying documents, and requiring NDAs and non-competes from employees, customers, and partners.

Misappropriation (trade secret)

Occurs when someone improperly acquires, discloses, or uses a trade secret. Does NOT include independent creation or reverse engineering, because those methods of discovery are considered legitimate.

Independent creation (trade secret defense)

Arriving at the same secret information entirely on your own is not misappropriation. Trade secret law does not grant a monopoly — it only protects against improper acquisition.

Reverse engineering (trade secret defense)

Legally obtaining a product and working backward to figure out how it works is not misappropriation. As long as the method of discovery is legitimate, trade secret law does not prohibit it.

Civil enforcement of trade secrets

The owner can seek: (1) an injunction — a court order requiring someone to do something or stop doing something, and (2) damages. Governed by state law and the federal Defend Trade Secrets Act of 2016.

Criminal enforcement of trade secrets

Violating state trade secret laws is a crime. Federally, the Economic Espionage Act (EEA) makes stealing trade secrets a federal criminal offense.

Injunction

A court order requiring a party to do something or to refrain from doing something. A primary remedy in both trade secret and trademark infringement cases.

Utility patent

Covers new, non-obvious, and useful processes, machines, compositions of matter, or improvements thereof. Term: 20 years from the filing date.

Design patent

Covers the new, original, and ornamental (aesthetic) design of an article of manufacture — the look and feel, not how it functions. Term: 15 years from the issue date.

Prior art

Existing publicly known inventions, publications, or knowledge used to evaluate whether a patent application is truly novel and nonobvious. An inventor's own public disclosure more than 1 year before filing counts as prior art against them.

Patentable subject matter — what cannot be patented

Mere ideas (must be reduced to practice), laws of nature, natural phenomena, mathematical formulas, and general business concepts. Simply performing an unpatentable idea 'on a computer' is not enough.

Reduced to practice

An invention must be more than an idea — it must be actually built or described in sufficient detail that someone skilled in the field could build it. Required for a utility patent.

Novelty (patent requirement)

The invention must be new and different from all prior art. It cannot have been published, sold, or put into public use by the inventor more than 1 year before the filing date.

Nonobviousness (patent requirement)

The invention must produce surprising or unexpected results that would not be obvious to a person skilled in that field. Simply combining old elements that each perform their known function — even for a better result — is not enough.

Utility (patent requirement)

The invention must do something useful. Things that do not work do not qualify for a patent.

Patent rights — right to exclude

A patent gives the owner the right to exclude others from making, using, selling, or importing the invention. Note: having a patent does not automatically mean you can make it yourself — you may need licenses from others whose patents yours builds upon.

Patent licensing

A patent owner may license their invention to others (granting permission to use it, usually for payment) or buy and sell patents outright. Often necessary when inventions build on multiple existing patents.

Trademark

A word, phrase, symbol, or design (or combination) that identifies and distinguishes the source of goods of one party from those of others. Protected under the Lanham Act of 1946.

Service mark

Same as a trademark but identifies and distinguishes the source of a service rather than a tangible product.

Certification mark

Used by someone other than the owner to certify that goods or services meet certain standards. The owner licenses others to use it if they qualify. Example: USDA Organic seal.

Collective mark

A trademark or service mark used by members of a group or organization to indicate membership or common origin. Example: a union label or professional designation like CPA.

Trade dress

Visual elements — including packaging, product design, and establishment decor — that identify the source of a product. Protectable if distinctive and non-functional. Example: the Coca-Cola bottle shape, Apple Store layout.

Trademark registration (USPTO)

Registration is not required to have trademark rights, but it grants extra benefits: national protection, the right to use ®, ability to sue in federal court, and enhanced damages. Must be used in interstate commerce. Must be renewed every 10 years.

TM / SM vs. ®

™ (trademark) and ℠ (service mark) can be used before registration to signal a claim. ® can only be used after official registration with the USPTO.

Fanciful mark

A made-up word with no prior meaning — the strongest category of trademark protection. Example: Exxon, Kodak.

Arbitrary mark

A real word used in a context completely unrelated to its meaning — strong protection. Example: Apple for computers.

Suggestive mark

A mark that hints at the product or service without directly describing it. Example: Netflix, Airbus.

Descriptive mark

Directly describes the good or service. Only protectable if it has acquired secondary meaning — consumers must associate it with a specific source. Example: Bank of America, The Container Store.

Generic term

The common name of a product or service. Never protectable as a trademark. Marks can also become genericized over time and lose protection. Examples: escalator, thermos (once trademarks).

Secondary meaning

When a descriptive term has acquired distinctiveness through long use such that consumers recognize it as pointing to one specific source. Required for descriptive marks to receive trademark protection.

Trademark infringement

Unauthorized use of a mark in a way likely to cause consumer confusion about the source of goods or services. Remedies: civil damages, injunctions, and orders to destroy infringing products. Trafficking counterfeit goods is a criminal violation.

Trademark fair use defense

Use of a trademarked term for discussion, criticism, parody, or comparison advertising is not infringement. Must show there is little chance of consumer confusion.

Trademark dilution

Use of a mark same as or similar to a famous trademark that weakens its significance, reputation, or goodwill — even without consumer confusion. Prohibited under the Federal Trademark Dilution Act of 1995.

Blurring (trademark dilution)

A type of dilution where use of a similar mark weakens the distinctiveness of a famous mark. Example: 'Kodak' pianos diluting the Kodak brand.

Tarnishment (trademark dilution)

A type of dilution where use of a similar mark in an unflattering or degrading context damages the reputation of a famous mark.

Copyright

Protects original works of authorship fixed in a tangible medium. Does not protect ideas — only the specific creative expression of those ideas. Protection attaches automatically when both requirements are met.

Copyright requirements

(1) Original works of authorship — requires creative expression, not just facts or data. (2) Fixed in a tangible medium — written down, recorded, or saved. Not just spoken aloud.

Copyright registration

Not required for protection, but required before you can sue for infringement. You can and should mark with © immediately upon creation.

Work made for hire

Work created by an employee within the scope of employment belongs to the employer. For contractors, 'work made for hire' must be explicitly stated in the contract — otherwise the creator retains copyright by default.

Exclusive rights of copyright owner

The owner controls: (1) reproduction, (2) creation of derivative works, (3) distribution, (4) public performance, and (5) public display. Infringement requires violating at least one of these rights.

Copyright duration — individual author

Author's lifetime plus 70 years. Has nothing to do with the creation date.

Copyright duration — work made for hire / company

95 years from publication or 120 years from creation, whichever is shorter.

Public domain

Works whose copyright has expired. Once in the public domain, the material is free for anyone to use without permission or payment.

First sale doctrine

Once a copyright holder sells a particular copy, they lose control over the distribution of that specific copy — the buyer can resell it. Does not allow reproduction — copying is still infringement. Example: reselling a used textbook.

Copyright fair use

Certain uses of copyrighted material are not infringement: criticism, commentary, parody, news reporting, teaching, scholarship, and research. Courts weigh four factors to determine if a use qualifies.

Four fair use factors

(1) Purpose and character of the use — commercial vs. educational; is it transformative? (2) Nature of the copyrighted work. (3) Amount and substantiality of the portion used. (4) Effect on the potential market for the original. The fourth factor tends to carry the most weight.

Key considerations when choosing a business entity

Five factors: (1) time and cost of formation, (2) continuity — does the organization survive ownership changes?, (3) managerial control — how are disputes resolved?, (4) owner liability — who is liable for firm debts?, (5) taxation — how is income taxed?

Double taxation vs. pass-through taxation

Double taxation: the entity pays tax on income, then owners pay tax again on distributions (e.g., C-corps). Pass-through taxation: income flows directly to owners and is taxed only once at the individual level (e.g., LLCs, S-corps, partnerships).

Dissolution vs. business shutdown

Dissolution is the legal termination of the organizational structure — it is not the same as the business ceasing operations. A business can reorganize under a new entity while continuing to operate.