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  • ISBN-10 ‏ : ‎ 013400406X
  • ISBN-13 ‏ : ‎ 978-0134004068

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Chapter 8

Intellectual Property and Cyberpiracy

VI. Answers to Critical Legal Thinking Cases

8.1 Patent
No, the claimed invention is not patentable. In order to be patentable, the claimed invention must be novel and nonobvious. Laws of nature, physical phenomena, and abstract ideas do not meet these criteria and are therefore not patentable. The concepts covered by laws of nature and abstract ideas are part of the storehouse of knowledge of all men free to all men and reserved exclusively to none. Claims 1 and 4 of the patent application explain the basic concept of hedging, or protecting against risk. The U.S. Supreme Court stated, “Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.” The U.S. Supreme Court held that the concept of hedging is an abstract idea that cannot be patented. Bilski v. Kappos, Director, Patent and Trademark Office, 561 U.S. 593, 130 S.Ct. 3218, 2010 U.S. Lexis 5521 (Supreme Court of the United States, 2010)

8.2 Trademark
Yes, Zura Kazhiloti is liable for trademark infringement. The store owners testified that they had purchased the counterfeit jewelry from Kazhiloti that contained the trademarks of Cartier International A.G and Van Cleef & Arpels and produced invoices showing the purchase of such jewelry. They also testified that Kazhiloti gave them certificates of authenticity that the jewelry came from Cartier and Van Cleefs & Arpels. The jewelry sold by Kazhiloti to the jewelry stores, which were then sold to unsuspecting customers, and the pieces seized from the jewelry stores, were high-quality counterfeits that contained plaintiffs’ trademarks. The court found that Kazhiloti’s counterfeiting was intentional. The court stated, “Mr. Kazhiloti has simply plead the Fifth Amendment throughout the course of this litigation and has not so much as denied that he sold the counterfeit jewelry in question.” The court issued a permanent injunction against further infringement of the plaintiffs’ trademarks and awarded the plaintiffs a total of $43 million in total damages. The court also awarded the plaintiffs their attorneys’ fees, costs, and prejudgment interest. Cartier International A.G. and Van Cleef & Arpels S.A. v. Kazhiloti, 2013 U.S. Dist. Lexis 145278 (United States District Court for the District of New Jersey, 2013)

8.3 Copyright
The U.S. Court of Appeals held that the incorporation by the Beastie Boys of a short segment of a copyrighted musical composition of “Choir” into their new musical recording constituted fair use and not copyright infringement. The dispute between Newton and the Beastie Boys centered around the copyright implications of the practice of “sampling” a practice now common to many types of popular music. Sampling entails the incorporation of short segments of prior sound recordings into new recordings. For an unauthorized use of a copyrighted work to be actionable, there must be substantial similarity between the plaintiff’s and defendant’s works. This means that even where the fact of copying is conceded, no legal consequences will follow from that fact unless the copying is substantial. The focus on the sample’s relation to the plaintiff’s work as a whole embodied the fundamental question in any infringement action: whether so much is taken that the value of the original is sensibly diminished. The court held that when viewed in relation to Newton’s composition as a whole, the sampled portion was neither quantitatively nor qualitatively significant. Quantitatively, the three-note sequence appeared only once in Newton’s composition. When played, the segment lasted six seconds and was roughly two percent of the four-and-a-half-minute “Choir.” Beastie Boys’ use of the “Choir” composition was de minimis. The U.S. Court of Appeals held that the Beastie Boys’s de minimis sampling of Newton’s “Choir” composition constituted fair use and not copyright infringement. Newton v. Beastie Boys, 349 F.3d 591, 2003 U.S. App. Lexis 22635 (United States Court of Appeals for the Ninth Circuit, 2003)

8.4 Trademark
Yes, Cracker Barrel Old Country Store, Inc. (CBOCS) use of the “Cracker Barrel” name on the food products it proposes to sell in grocery stores infringes on the Kraft Foods Group Brands LLC (Kraft) Cracker Barrel trademark. The words “Cracker Barrel” on both labels might lead the shopper to think them both Kraft products. The U.S. court of appeals stated “Even savvy consumers might be fooled. A trademark’s value is the saving in search costs made possible by the information that the trademark conveys about the quality of the trademark owner’s brand.” The particular danger for Kraft of CBOCS’s being allowed to sell food products through the same outlets under a trade name confusingly similar to Kraft’s “Cracker Barrel” trade name is that if CBOCS’s products are inferior in any respect to what the consumer expects — if a consumer has a bad experience with a CBOCS product and blames Kraft, thinking it the producer — Kraft’s sales of Cracker Barrel cheeses are likely to decline. The U.S. court of appeals affirmed the injunction issued by the U.S. district court that prevents CBOLS from selling food products in grocery stores using Kraft’s trademark name Cracker Barrel. Kraft Foods Group Brands LLC v. Cracker Barrel Old Country Store, Inc., 735 F.3d 735, 2013 U.S. App. Lexis 23124 (United States Court of Appeals for the Seventh Circuit, 2013)

8.5 Copyright
Yes, Dodger Productions, Inc.’s use of the seven-second clip from The Ed Sullivan Show in the Jersey Boys musical production is fair use of a copyrighted work and is not copyright infringement. By using The Ed Sullivan Show clip for its biographical significance of introducing the rock ‘n roll band the Four Seasons in the play Jersey Boys, Dodger imbued it with new meaning and did so without usurping whatever demand there is for the original clip. The U.S. court of appeals held that the Jersey Boys is not a substitute for The Ed Sullivan Show. The court stated, “The clip is seven seconds long and only appears once in the play. Dodger’s use of the clip advances its own original creation without any reasonable threat to SOFA Entertainment’s business model. In the end, we are left with the following conclusion: Dodger’s use of the clip did not harm SOFA’s copyright in The Ed Sullivan Show. This case is a good example of why the ‘fair use’ doctrine exists.” The U.S. court of appeals held that Dodger’s use of the seven-second clip from The Ed Sullivan Show in its Jersey Boys musical production was fair use of SOFA’s copyrighted work. SOFA Entertainment, Inc. v. Dodger Productions, Inc., 709 F.3d 1273, 2013 U.S. App. Lexis 4830 (United States Court of Appeals for the Ninth Circuit, 2013)

8.6 Copyright
Yes, Cecilia Gonzalez is liable for copyright infringement. The U.S. court of appeals stated, “A copy downloaded, played, and retained on one’s hard drive for future use is a direct substitute for a purchased copy. As file sharing has increased, the sales of recorded music have dropped. The events likely are related. Music downloaded for free from the Internet is a close substitute for purchased music; many people are bound to keep the downloaded files without buying originals. That is exactly what Gonzalez did. Nor can she defend by observing that other persons were greater offenders; Gonzalez’s theme that she obtained ‘only 30’ (or ‘only 1,300’) copyrighted songs is no more relevant than a thief’s contention that he shoplifted ‘only 30’ compact discs, planning to listen to them at home and pay later for any he liked.” The U.S. district court granted summary judgment in favor of BMG Music, assessed $22,500 in damages against Gonzalez, and issued an injunction against Gonzalez, enjoining her from further copyright infringement. The U.S. court of appeals upheld the decision. BMG Music v. Gonzalez, 430 F.3d 888, 2005 U.S. App. Lexis 26903 (United States Court of Appeals for the Seventh Circuit, 2005)


VII. Answers to Ethics Cases

8.7 Ethics Case
Yes, there was infringement of Intel Corporations trademarks that warranted the issuance of a permanent injunction against Intelsys. Intel Corporation distributes its entire line of products and services under the registered trademark and service mark INTEL and well as under other trademarks that incorporate its INTEL mark, such as the marks INTEL INSIDE, INTEL SPEEDSTEP, INTEL XEON, and INTEL NETMERGE. The defendant uses the mark “Intelsys Software,” which incorporates the plaintiff’s INTEL trademark and adds the generic term “sys”—a common abbreviation for “systems”—and the generic term “software.” The defendant’s unauthorized use of the Intelsys Software name and trademark falsely indicates to consumers that the defendant’s products and services are in some manner connected with, or related to, plaintiff Intel. The defendant’s use of the mark allows it to benefit from the goodwill established by Intel and will continue to have an adverse effect on the value of and distinctive quality of the INTEL mark. The U.S. district court granted judgment to Intel Corporation on its trademark infringement claims against Intelsys and issued a permanent injunction prohibiting the defendant from using the name Intelsys as a trade name or name of any products or services.
From the facts of the case it is easy to draw the conclusion that the defendant choose the name Intelsys to play off of the name recognition of the “INTEL” trademark of Intel Corporation. The Intel Corporation used its trademark name Intel and added additional names to that word to create other recognizable trademarks. The defendant took the INTEL trademark and did the same by adding the abbreviated term sys to the mark INTEL. This was an obvious and unethical means of stealing the recognition and goodwill established by Intel Corporation’s INTEL trademark. Intel Corporation v. Intelsys Software, LLC, 2009 U.S. Dist. Lexis 14761 (United States District Court for the Northern District of California, 2009)

8.8 Ethics Case
The U.S. Court of Appeals held that Passport’s use of the copyrighted Elvis Presley materials was not fair use but instead constituted copyright infringement. The Court of Appeals stated, “The King is dead. His legacy and those who wish to profit from it, remain very much alive.” The Court of Appeals held that Passport’s use of others’ copyrighted materials was for commercial use rather than for a nonprofit purpose. The Court rejected Passport’s claim that the videos consisted of scholarly research that would be protected as fair use. Also, the use of other copyright holders’ materials that made up 5 to 10 percent of the Passport video is not de minimis, but is significant. The court found that Passport’s use of the copyrighted material caused market harm to the copyright holders because it would act as a substitute for the original copyrights and thus deny the copyright holders of the value of their copyrights. The Court of Appeals denied Passport’s claim of fair use and affirmed the District Court’s judgment that enjoined Passport from distributing its videos containing these copyrighted materials.
Concerning the ethics of Passport Video, it is obvious that Passport knew it was attempting to use copyrighted material for free. The amount of copyrighted material made up a significant portion of its Elvis Presley video. Passport itself would assert copyright protection for its video and would not want someone to copy 5 to 10 percent of the video. The question is whether Passport video could have realistically thought that its use of other parties’ copyrighted material was fair use. Although possible, it is highly unlikely that this would have been the case. Elvis Presley Enterprises, Inc. v. Passport Video, 349 F.3d 622, 2003 U.S. App. Lexis 22775 (United States Court of Appeals for the Ninth Circuit, 2003)



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