This Document Contains Chapters 6 to 10 Chapter 6—Administrative Agencies TRUE/FALSE 1. An administrative agency is a governmental body charged with administering and implementing legislation. Answer: True 2. Administrative agencies may make the rules, police the community to see the rules are obeyed, and sit in judgment to determine violations of their rules. Answer: True 3. Because administrative agencies have broad powers, they are subject to strict procedural rules as well as disclosure requirements. Answer: True 4. The modern administrative agency typically possesses legislative, executive, and judicial powers. Answer: True 5. The Freedom of Information Act provides access to any information upon request. Answer: False 6. The public has access to the activity of administrative agencies in three ways: (1) open records, (2) open meetings, and (3) public announcement of agency guidelines. Answer: True 7. The Administrative Procedure Act is a federal law that establishes the operating rules for administrative agencies. Answer: True 8. The Sunshine Act requires most meetings of major administrative agencies to be open to the public. Answer: True 9. In an emergency, an administrative agency can act beyond the scope of the statute that created it. Answer: False 10. Until proven valid, a rule adopted by an administrative agency is considered invalid by the courts. Answer: False 11. The authority of an agency is limited to the technology in existence at the time the agency was created. Answer: False 12. Modern administrators cannot make laws, but they can argue persuasively before Congress for the passage of needed legislation. Answer: False 13. Administrative agencies never allow members of the industry that is to be regulated to participate in rule-making deliberations. Answer: False 14. A federal agency planning to adopt a new regulation must give public notice of such intent and then hold a hearing at which members of the public may express their views and make suggestions. Answer: True 15. Regulations properly adopted by agencies are important, but they do not have the full force of law as do statutes. Answer: False 16. The Federal Register lists all administrative regulations, presidential proclamations, and executive orders on a semi-annual basis. Answer: False 17. An administrative agency has the power to investigate, to require persons to appear as witnesses, to require witnesses to produce relevant papers and records, and to bring proceedings against those who violate the law. Answer: True 18. Agency investigations of possible violations of agency rules are handled through independent enforcement agencies. Answer: False 19. Administrative agencies are not subject to the constitutional protections afforded individuals and businesses. Answer: False 20. An administrative agency is barred from examining the records of a business enterprise by the constitutional guarantee against unreasonable searches and seizures. Answer: False 21. Within the area in which the administrative agency is authorized to make decisions, the agency can be regarded as a specialized court or court of limited jurisdiction. Answer: True 22. An administrative agency cannot hold a hearing without a jury. Answer: False 23. In an administrative hearing, an administrative law judge hears the complaint and has the authority to swear witnesses, take testimony, make evidentiary rulings, and make a decision to recommend to the administrative agency heads for action. Answer: True 24. An agency hearing is generally not subject to the rules of evidence. Answer: True 25. A consent decree is an informal settlement of an enforcement action brought by an administrative agency. Answer: True 26. Before an appeal can be taken to a court concerning a determination of an agency, all administrative remedies must be exhausted. Answer: True 27. A court will not reverse an agency’s decision merely because the court would have made a different decision based on the same facts. Answer: True 28. Decisions made by agencies are more likely to be reversed than to be accepted by the court on appeal. Answer: False 29. As Courts now tend to accept an agency’s reasonable interpretation of a statute involving a technical matter, even though it was not the only interpretation that could have been made. Answer: True 30. An administrative agency whose erroneous decision causes a regulated person or enterprise substantial loss is liable for such loss regardless of whether the agency acted in good faith. Answer: False MULTIPLE CHOICE 1. The most recent addition to the American governmental structure is the: A. executive branch. B. administrative agency. C. judicial branch. D. legislative branch. Answer: B 2. An administrative agency can be created to perform: A. only one of the three functions of government (executive, legislative, or judicial). B. any two of the three functions of government. C. all three of the functions of government. D. none of the three functions of government. Answer: C 3. Members of administrative agencies are ordinarily A. pre-selected. B. elected. C. assigned. D. appointed. Answer: D 4. Generally, which power(s) does (do) an administrative agency possess? A. all powers necessary to effectively perform the duties entrusted to it B. legislative only C. judicial only D. executive only Answer: A 5. The Freedom of Information Act: A. is to be strictly construed to prevent unauthorized disclosures. B. has too many exemptions to be useful. C. is intended to subject agency action to public scrutiny. D. puts the burden of proof upon the person requesting the information. Answer: C 6. Meetings are to be open to the public under: A. the Administrative Protection Act. B. the Sunshine Act. C. the Freedom of Information Act. D. none of the above. Answer: B 7. An administrative regulation: A. is a guideline that may be voluntarily followed. B. has the force of law. C. is a suggestion of what will protect the environment. D. is a standard used to guide an industry at the industry’s discretion. Answer: B 8. When it comes to administrative agencies, courts: A. regard agencies as able to perform their duties effectively. B. accept rules that have been established by agencies using a rational basis. C. do not substitute their own judgment in agency decisions. D. all of the above. Answer: D 9. Before an agency can begin rulemaking proceedings it must be given jurisdiction: A. by congressional enactment in the form of a statute. B. granted by an executive order of the President of the United States. C. from the United States Supreme Court. D. none of the above. Answer: A 10. The “public comment” period for proposed administrative agency rules must be at least __________ days. A. 30 B. 60 C. 90 D. 120 Answer: A 11. Proposed administrative regulations must be: A. printed in the Federal Register. B. published in the trade journals of those trades that will be affected by the proposed rules. C. both a. and b. D. none of the above. Answer: C 12. Which of the following is part of an administrative agency’s power to investigate? A. an investigation to determine whether additional administrative rules need to be adopted B. an investigation to ascertain facts with respect to a particular suspected or alleged violation C. an investigation to determine whether the defendant in a proceeding before the agency is complying with its final order D. all of the above Answer: D 13. Concerning administrative investigations: A. agencies are severely limited by the constitutional protection against unreasonable searches and seizures. B. a search warrant is always required to search premises. C. papers and records generally may be subpoenaed by an agency. D. a person does not have constitutional protection against unreasonable searches and seizures. Answer: C 14. The United States constitution places the most significant limitations on administrative investigation in the area of: A. search and seizure of the person. B. aerial inspection. C. search and seizure of papers and records. D. guarantee against self-incrimination. Answer: A 15. A subpoena to testify or to produce records: A. is prohibited by the constitutional guarantee against unreasonable searches and seizures. B. is an illegal attempt to gain information by compulsion. C. cannot be opposed on the grounds that such a request constitutes an unreasonable search and seizure. D. must be approved by corporate officers to be effective. Answer: C 16. An administrative agency: A. is not empowered to act as a court with regard to its own regulations. B. acts as a specialized court of limited jurisdiction. C. can hear complaints only in the presence of a jury. D. cannot impose penalties for violation of its regulations. Answer: B 17. Which statement is true concerning administrative hearings? A. The findings are turned over to a court of law for the final decision. B. Denial of a jury trial is a denial of due process. C. It is generally necessary to give notice of an administrative hearing and to allow affected persons to be present. D. Traditional courtroom rules of evidence must be applied. Answer: C 18. Which of the following is beyond the enforcement power of an agency? A. requiring proof of compliance with agency regulations B. issuing a cease-and-desist order C. convicting of criminal violations D. imposing civil penalties Answer: C 19. A significant difference between an administrative agency hearing and a court hearing is that: A. a binding decision can only be made by an agency. B. there is no right of trial by jury before an agency. C. a court hearing allows no public intervention. D. a court can enforce its decision. Answer: B 20. A(n) __________ is a negotiated disposition of a matter before an administrative agency, generally without public sanctions. A. formal settlement B. informal settlement C. judicial verdict D. quasi-judicial verdict Answer: B 21. The term "exhaustion of administrative remedies" means that: A. parties to an agency action must be diligent in pursuing their case. B. parties to an administrative action must take their appeal to a court of law. C. parties to an administrative action can appeal only after the agency has made a final decision. D. administrative agencies tend to work very hard. Answer: C 22. Which of the following is true about judicial review of agency action? A. Judges tend to substitute their own judgment for that of the agency. B. Courts will reverse agency decisions merely because the court would have made a different decision based on the same facts. C. Courts will reverse a decision if they disagree with the legal interpretation. D. All of the above Answer: C 23. Under modern law, when the issue that an agency decides is a question of law based on a technical statute: A. the court on appeal will reverse the agency’s decision if the court disagrees with the decision. B. the court will not accept the agency's decision unless the agency's interpretation is the only one that could have been made. C. the court will tend to accept the agency's interpretation of the law as long as it is reasonable. D. the court will not reverse the agency's decision. Answer: C 24. In reviewing agency action, courts generally apply the: A. “beyond a reasonable doubt” standard. B. “preponderance of the evidence” standard. C. “arbitrary and capricious” standard. D. “rational relationship” standard. Answer: C 25. If an agency causes a substantial loss to a business by enforcement of its laws, that business: A. always can hold the agency liable for damages. B. never can hold the agency liable for damages. C. may seek damages if the agency acted in bad faith. D. may seek damages if the agency complied with its own guidelines. Answer: C CASE 1. The Federal Trade Commission suspects Billy Williams of unlawful trade activities and has obtained evidence, claimed to be proof of unlawful activity, by way of aerial photography. The FTC is also currently seeking the submission of various documents, within Williams' place of business, for additional evidence. Williams refuses to submit to the demands to produce the documents and claims that this demand and the aerial photos are direct violations of his constitutional rights. Williams also demands a jury trial to clear him of charges levied. Comment on Williams' claims. Answer: An agency has the power to execute the law and to bring proceedings against violators. This may be accomplished with no significant constitutional limitations on how the agency is to conduct its investigation of infractions. A search warrant is never required for subject matter observed from a public place; therefore, aerial photography of Williams' place of business can be used by the FTC as proof of wrongdoing. The FTC may also demand the production of relevant papers and documents by Williams, since the constitutional guarantee against unreasonable searches and seizures does not afford much protection with regard to papers and records being investigated by an agency. Lastly, Williams has no right to a jury trial in an administrative hearing. 2. Arthur sustained an injury to his back. Arthur claimed the injury was suffered at work and filed a claim for workers' compensation benefits. The employer opposed this claim, saying the injury, if real, was the result of a congenital condition. In accordance with the statute, a hearing was held before the Workers' Compensation Board, which ruled against Arthur. Arthur became disgusted with the hearing officer and the proceedings because Arthur felt that the hearing officer did not like him. Arthur has consulted an attorney seeking to sue for workers' compensation benefits. An appeal is available within the agency, but Arthur wants to go directly to court because he feels that the agency appeal would be useless. Discuss the merits of this strategy. Answer: Arthur cannot bring a lawsuit to overturn the findings of the Worker’s Compensation Board, since Arthur has failed to exhaust his available administrative remedies. The lawsuit would be unsuccessful and would not be heard by the courts. 3. Wilma was an employee of the Electric Storage Battery Company. She was fired. She claimed that she was fired because she was a member of a labor union. The employer asserted that she was fired because she was a poor worker. Wilma filed an unfair labor practice complaint with the National Labor Relations Board. Its examiner held a hearing at which evidence was presented showing that Wilma was a poor worker. Other evidence presented showed that the employer was opposed to labor unions. The Board decided to believe Wilma's witnesses and concluded that she had been fired because she belonged to the union. Can the employer appeal this decision? Answer: Yes. The employer has the right to appeal the decision. This right is conferred by statute. On the facts as stated, however, the employer will lose the appeal because the decision turns upon the decision of which witnesses to believe. If the witnesses on behalf of the employee are believed, there was an unfair labor practice. When the administrative agency selects one set of witnesses to believe, a court hearing an appeal will not reverse the conclusion of the agency. The court will only examine the case to see if there was a substantial basis for the agency’s findings of fact. There was evidence on both sides which, if believed, would be sufficient to justify a conclusion in favor of each side. The court will not go further to see if it would have agreed with what the agency believed. That is, the court will not substitute its own opinion when a case turns upon the credibility of witnesses who testified before the agency. Chapter 7—The Legal Environment of International Trade TRUE/FALSE 1. When an international sale is made, the parties often set forth in their contract which country's law will govern a dispute. Answer: True 2. Parties to international ventures often agree to arbitrate their disputes in neutral countries. Answer: True 3. Law is the result of the desire of the lawmaker to achieve certain goals. Answer: True 4. A letter of credit agrees to provide the seller with needed currency exchanges when transactions with foreign buyers occur. Answer: False 5. The U.S. dollar is considered the international currency. Answer: False 6. Since 1947 and the end of the World War II era, the goal of the General Agreement on Tariffs and Trade (GATT) has been to restrict world trade. Answer: False 7. Under the General Agreement on Tariffs and Trade (GATT), the principle of trade without discrimination is embodied in the most favored nation clause. Answer: True 8. The World Trade Organization (WTO) provides a Dispute Settlement Body (DSB) to enable member countries to resolve trade disputes rather than engage in unilateral trade sanctions or a trade war. Answer: True 9. The United Nations Conventions on Contracts for the International Sale of Goods (CISG) sets forth uniform rules to govern international sales contracts. Answer: True 10. The interests of the less-developed nations of the world are represented by the United Nations Conference on Trade and Development (UNCTAD). Answer: True 11. The goal of the North American Free Trade Agreement (NAFTA) is to eliminate all tariffs between the United States and Europe. Answer: False 12. A country can borrow money from other International Monetary Fund (IMF) members or from the IMF by means of special drawing rights (SDRs) sufficient to permit that country to maintain the stability of its currency’s relationship to other world currencies. Answer: True 13. The International Monetary Fund (IMF) was formed to shorten the duration and lessen the disequilibrium in the international balance of payments of its members. Answer: True 14. The Export-Import Bank (EX-IM Bank) is an international agency. Answer: False 15. One of the main goals of the Organization of Petroleum Exporting Countries (OPEC) was to reduce taxes from crude oil production. Answer: False 16. A direct sale by an American firm to a customer abroad, with terms of payment commonly based on an irrevocable letter of credit, is an import sale. Answer: False 17. The use of agency arrangements allows a U.S. firm to avoid taxation on sales made in its agent's country. Answer: False 18. Franchising is a form of licensing that now is very common in international business. Answer: True 19. Licensing involves the transfer of title of goods to a distributor who bears the financial and commercial risks for the subsequent sale of the goods. Answer: False 20. A societé anonyme is the European counterpart of a U.S. corporation. Answer: True 21. United States antitrust laws can protect United States exports. Answer: True 22. The jurisdictional rule of reason addresses the problems that arise when a foreign country has a significant interest in regulating conduct taking place within the United States. Answer: False 23. Under the act-of-state doctrine, the courts of one country will not sit in judgment of the acts of the government of another country conducted within its own territory. Answer: True 24. Blocking laws prohibit the disclosure, copying, inspection, or removal of documents located in the enacting country in compliance with orders from foreign authorities. Answer: True 25. The Securities and Exchange Commission (SEC) is not limited to litigation when a securities law enforcement investigation runs into secrecy or blocking laws. Answer: True 26. A common barrier to the free movement of goods across borders is the tariff barrier. Answer: True 27. The use of import quotas represents the most common form of tariff barrier. Answer: False 28. The term dumping refers to the sale of damaged goods in a foreign market to cut the losses that would otherwise be caused by the damage. Answer: False 29. The Overseas Private Investment Corporation (OPIC) offers asset protection insurance against risk of loss to plant and equipment, as well as loss of deposits in overseas bank accounts, to companies that qualify on the basis of the involvement of a “substantial U.S. interest.” Answer: True 30. The Foreign Corrupt Practices Act prohibits improper payments to influence foreign officials. Answer: True MULTIPLE CHOICE 1. Which is a correct statement about arbitration of contractual disputes regarding international trade? A. It is done in court. B. There is extensive judicial review of the decision. C. Parties frequently arbitrate in neutral countries. D. It is not available in disputes of more than $1 million. Answer: C 2. The General Agreement on Tariffs and Trade (GATT): A. is a multilateral treaty B. is subscribed to by the United States C. has as its goal the liberalization of world trade D. all of the above Answer: D 3. Which of the following statements is true regarding the World Trade Organization (WTO)? A. The WTO has been in place since 1947. B. The WTO coordinates its activities with GATT. C. It provides a dispute settlement body to promote the resolution of trade disputes. D. It has the ability to impose criminal penalties. Answer: C 4. The provisions of the United Nations Convention on Contracts for the International Sale of Goods (CISG) have been strongly influenced by: A. the GATT's most-favored nation clause. B. the European Economic Community's Treaty of Rome. C. the Uniform Commercial Code. D. the success of the Organization of Petroleum Exporting Companies. Answer: C 5. The United Nations Conference on Trade and Development (UNCTAD): A. represents the interests of less developed countries. B. arbitrates trade disputes between countries. C. furnishes letters of credit to expedite trade. D. all of the above. Answer: A 6. Which of the following does not describe the European Union (EU)? A. It was formerly known as the European Economic Community. B. It had ten members sign on in 2004. C. It eliminated internal barriers to the free movement of goods, persons, services, and capital between member countries. D. It is administered solely by the heads of state of the member countries. Answer: D 7. NAFTA seeks to eliminate tariffs among which countries? A. all members of the United Nations B. United States, Canada, and Mexico C. United States and Japan D. members of the common market Answer: B 8. The main purpose of the International Monetary Fund (IMF) is to: A. provide easy access to money for multinational corporations. B. facilitate the expansion and balanced growth of international trade. C. create a model simplified lending system. D. facilitate currency exchanges. Answer: B 9. The Ex-IM Bank: A. helps U.S. manufacturers export goods by provides loan guarantees. B. receives funding from the U.S. Treasury to help sustain its operations. C. has a financing cap of $100 billion. D. all of the above. Answer: A 10. A direct sale to customers in a foreign country is a(n): A. foreign distributorship. B. agency arrangement. C. licensed sale. D. export sale. Answer: D 11. One reason the U.S. controls the export of goods and technology is: A. for national security reason. B. foreign policy. C. short supply of domestic goods. D. All of the above are reasons the U.S. controls the export of goods and techonolgy. Answer: D 12. The transfer of technology rights in a product to allow another firm in a foreign country to produce a product in return for royalties or other specified payments is called: A. exporting. B. licensing. C. agency representation. D. subsidiary sales. Answer: B 13. Which of the following allows a domestic firm to maintain the greatest control over its foreign operations? A. wholly-owned subsidiaries B. licensing C. foreign distributorships D. agency arrangements Answer: A 14. When a U.S. trademark holder licenses a foreign business use of its trademark overseas and a third party imports these goods into the United States to compete against the U.S. manufacturer's goods, the foreign-made goods are called __________ goods. A. “gray market” B. counterfeit. C. specially-licensed. D. dumped goods. Answer: A 15. U.S. courts will assume jurisdiction and apply antitrust laws to conduct business outside the United States if the activities of the business firms outside the United States have a direct, substantial, and foreseeable impact on U.S. commerce. This is based on what principal? A. the “jurisdictional rule of reason” B. the “act–of–state doctrine C. the “effects” doctrine D. comity Answer: C 16. Three defenses are commonly raised to the extraterritorial application of U.S. antitrust laws. They are: A. act–of-state, sovereign compliance, and sovereign immunity doctrines. B. jurisdictional rule of reason, effects doctrine, and comity. C. foreign legislation, sovereign compliance, and comity. D. foreign antitrust laws, sovereign immunity doctrine, and International Monetary Fund applications. Answer: A 17. The Alexo Corporation has been charged in a United States court with violation of American antitrust laws in its foreign dealings. The firm has raised the defense that its actions were compelled by the government of its host country. Alexo based its defense on the __________ doctrine. A. act-of-state B. sovereign compliance C. sovereign immunity D. Treaty of Rome Answer: B 18. Under which of the following doctrines is it held that a foreign sovereign cannot be sued unless it engages in illegal commercial conduct? A. act-of-state B. sovereign compliance C. Timberlane D. sovereign immunity Answer: D 19. Which of the following is NOT a nontariff barrier? A. government subsidies B. import quotas C. complex custom procedures D. an import or export duty or tax placed on goods as they move in or out of a country Answer: D 20. In antidumping cases: A. The International Trade Administration determines whether foreign goods are being sold in the United States at less than fair value (LTFV). B. The International Trade Commission determines if there is an injury to a U.S. industry as a result of such sales. C. Remedial action will be taken only if findings of both LTFV sales and injury are present. D. All of the above Answer: D 21. Companies with concerns over the possibility of expropriation could lessen the harm or the likelihood of this occurring by: A. fully investigating a host government's stability. B. establishing treaty commitments. C. obtaining insurance. D. all of the above. Answer: D 22. When a foreign government takes over an American business that is being conducted in the foreign country, this is called: A. expropriation. B. dollar credits. C. suspension agreement. D. antidumping. Answer: A 23. Legal restrictions of U.S. firms doing business abroad in regard to payments made to foreign officials for obtaining business are set forth in the: A. International Corruption Prohibition Act. B. Global Anti-bribery Control Act. C. Foreign Corrupt Practices Act. D. International Graft Prohibition Act. Answer: C 24. Which of the following actions is not prohibited by The Foreign Corrupt Practices Act? A. offers of payments to government officials to influence a decision on behalf of the firm making the payment B. payments to government officials to influence a decision on behalf of the firm making the payment C. payments to low-level officials for expediting the performance of routine government services D. all of the above actions are prohibited by The Foreign Corrupt Practices Act Answer: C CASE 1. You plan to enter the export market with a new product that you have just developed. You feel that the product has great promise, but you are confused over whether you are required to obtain an export license. Further, your brother-in-law says that he knows someone in the Japanese government who could greatly assist you in your endeavors for a very modest fee. Discuss this situation. Answer: International trade is well-regulated in the United States. The majority of the appropriate regulations come from the Export Administration Regulations. Current Export Administration Regulations simplify the export process, seeking thereby to enhance export trade by U.S. citizens. For example, no license is required unless the regulations affirmatively require a license. However, when no license is required, the exporter must fill out a Shipper’s Export Declaration and attach it to the bill of lading from shipment with the goods being exported. Your brother-in-law may be leading you directly into a violation of the Foreign Corrupt Practices Act, as the prospective payment to the Japanese official would be primarily designed to influence a business transaction decision, rather than to expedite routine governmental services. If you need assistance, a better option is to consider using a licensed foreign freight forwarder. They are in the business of handling the exporting of goods to foreign destinations and can attend to all of the essential arrangements required. 2. Oswaldo Enterprises began to do business in a small East African nation. The representatives of Oswaldo bid on government contracts. Although Oswaldo was by far the lowest bidder and offered a superior product, the company was not awarded a contract. Oswaldo officials learned after inquiring that the company would have to give substantial sums of money to high-level government officials in order to receive a contract. Oswaldo officials are considering this as a necessary cost of doing business, but they are concerned about violating U.S. law. Discuss the implications of this under the Foreign Corrupt Practices Act. Answer: Unfortunately, these payments would appear to violate the Foreign Corrupt Practices Act, which prohibits payments to officials to influence business decisions. 3. The SEC has accused the Acme Company of fraud in connection with the sale of its securities to American citizens. Although the firm is American-owned, it is located in Switzerland. All of the accounts and business records of the firm are in several Swiss banks. The SEC has been actively pursuing the case, although it has not been able to provide a great deal of hope for those victimized by the fraud. What factors are probably hindering the SEC, and how might this be handled? Answer: Secrecy laws (which prohibit the disclosure of business records or the identity of bank customers) and blocking laws (which prohibit the disclosure, copying, inspection, or removal of documents located in the territory of the enacting country in compliance with orders from foreign authorities) probably are to blame. The SEC may take action under the 1977 Treaty of Mutual Assistance in Criminal Matters if the conduct involved constitutes a criminal offense under the laws of both the United States and Switzerland. Chapter 8—Crimes TRUE/FALSE 1. Crimes and criminal punishment guidelines are specified in detailed criminal codes and statutes. Answer: True 2. The criminal law of all states is the same because all states have adopted a uniform criminal code. Answer: False 3. Generally, misdemeanors are more serious than felonies. Answer: False 4. An act that is a felony in one state be a felony in all states. Answer: False 5. A crime consists of three elements: the mental state, the intent, and the act. Answer: False 6. It is not necessary that some person be harmed for an act to be considered a crime. Answer: True 7. "Mental state" does not require an awareness of guilt. Answer: True 8. A person may be held criminally liable for acts committed by another. Answer: True 9. For business crimes, managers cannot be held criminally responsible for the conduct of their employees. Answer: False 10. Because a corporation is not a human being, it cannot be convicted of a crime. Answer: False 11. Executives can be convicted on the basis that something went wrong at their company. Answer: False 12. Some types of instruments of crime are automatically forfeited. Answer: True 13. Criminal penalties for corporations are based on a percentage of sales. Answer: False 14. Corporate Integrity Agreements are the equivalent of putting a corporation on probation. Answer: True 15. Corporate managers found guilty of masterminding any criminal activity must be sentenced to prison time. Answer: True 16. The Sarbanes-Oxley Act (SOX) made minor adjustments to penalties and prison sentences for executives of companies. Answer: False 17. White-collar crimes generally involve violence. Answer: False 18. The Racketeer Influenced and Corrupt Organizations (RICO) Act authorizes both criminal and civil actions. Answer: True 19. The Racketeer Influenced and Corrupt Organizations (RICO) Act was designed primarily to prevent individuals involved in organized crime from investing money obtained through racketeering in legitimate businesses. Answer: True 20. Bribery requires the use of violence. Answer: False 21. Extortion and blackmail are exactly the same. Answer: False 22. The Foreign Corrupt Practices Act applies to businesses with their principal offices located in the United States. Answer: True 23. Forgery includes signing another person's name to a check with the intent to defraud. Answer: True 24. The issuing or delivery of a forged instrument to another person constitutes the crime of counterfeiting a forged instrument. Answer: False 25. Embezzlement involves fraud. Answer: True 26. Larceny is best defined as the taking of personal property from the presence of the victim by the use of force or fear. Answer: False 27. A computer crime generally can only be committed by a person having some knowledge of the operation of a computer. Answer: True 28. Destroying information stored on a computer may be a crime. Answer: True 29. The Fourth Amendment warrant requirement does not apply to businesses. Answer: False 30. Corporations are entitled to Fifth Amendment protection. Answer: False 31. Due process includes the right to be heard, question witnesses, and present evidence. Answer: True MULTIPLE CHOICE 1. Crimes are generally defined and their punishments specified by: A. trial court judges. B. appellate judges. C. codes and statutes. D. the United States Constitution. Answer: C 2. Which of the following statements is true? A. Felonies are punishable by a minimum of six months in prison. B. Felonies involve white-collar crimes only. C. Felonies are more serious than misdemeanors. D. All of the above. Answer: C 3. A crime generally consists of: A. an act or omission. B. a mental state. C. a mental state and an act or omission. D. a mental state, an act or omission, and harm. Answer: C 4. A person who did not necessarily commit the crime can still be held criminally responsible for acts committed by others __________. A. only for non-business crimes B. only for business crimes C. both a. and b. D. neither a. nor b. Answer: B 5. When a defendant is convicted of a crime, the court may also declare that the defendant’s rights in any property used or gained from the crime be confiscated. This is known as __________. A. forfeiture B. reversion C. subversion D. divestiture Answer: A 6. Penalties for crimes are: A. always paid to the government. B. always paid to the victim(s). C. shared equally between the government and the victim(s). D. subject to forfeiture. Answer: A 7. White-collar crimes: A. always involve the threat or use of force or violence. B. generally involve the threat or use of force or violence. C. sometimes involve the threat or use of force or violence. D. do not involve the threat or use of force or violence. Answer: D 8. Conspiracy means ______ committing a criminal act. A. thinking about B. an agreement aimed at C. thinking with others about D. all of the above Answer: B 9. Money __________ involves the knowing and willful participation in a financial transaction involving unlawful proceeds when the transaction is designed to conceal or disguise the source of the funds. A. ironing B. vacuuming C. laundering D. cooking Answer: C 10. The Racketeer Influenced and Corrupt Organizations (RICO) Act is a product of: A. Congress. B. international trade agreements. C. state law. D. none of the above. Answer: A 11. Racketeering is defined as: A. using money to influence public officials. B. using money to influence employees of competitors. C. using money derived from illegal activities to invest in legitimate businesses. D. using money to influence foreign officials. Answer: C 12. Bribery is defined as: A. giving money, property, or any benefit to a person to influence that person's judgment. B. using one’s position as a public official to make an illegal demand. C. using one’s position as a nonpublic official to make an illegal demand. D. exerting improper political influence. Answer: A 13. Blackmail is defined as: A. giving money to a person to influence that person's judgment. B. an illegal demand made by a public official. C. an illegal demand made by a nonpublic official. D. providing improper political influence. Answer: C 14. Which of the following statements regarding the Foreign Corrupt Practices Act is true? A. It applies only to foreign officials in this country. B. It applies only to foreign officials outside this country. C. It applies only to "grease" payments. D. None of the above statements is true. Answer: D 15. Counterfeiting is: A. a federal crime only. B. a state crime only. C. both a federal and state crime. D. none of the above. Answer: C 16. Perjury occurs: A. only in federal court. B. only in written form. C. only in state courts. D. none of the above. Answer: D 17. Knowingly making false statements in a loan application to a federally insured bank: A. is a form of embezzlement B. is a federal crime. C. is a crime in the state the bank operates in. D. all of the above. Answer: B 18. Under the Sarbanes-Oxley (SOX) obstruction of justice provision, auditors must retain working papers related to a client’s audit for at least: A. 3 years. B. 5 years. C. 10 years. D. 20 years. Answer: C 19. Sarbanes-Oxley (SOX): A. created a new form of mail and wire fraud. B. requires corporate officers to certify their financial statements. C. provides for both fines and jail time for corporate fraud D. all of the above. Answer: D 20. Which of the following is NOT a common law crime? A. Larceny B. Robbery C. Blackmail D. Arson Answer: C 21. A computer crime generally requires that: A. the criminal possess a computer. B. the victim possess a computer. C. the criminal have some knowledge of computers. D. the victim have some knowledge of computers. Answer: C 22. Computer crimes include: A. theft of hardware. B. theft of software. C. intentional damage to information stored on a computer. D. all of the above. Answer: D 23. The unauthorized use of a computer belonging to someone else is: A. a crime in all states. B. a crime in some states. C. not a crime in any state. D. a crime under federal law only. Answer: B 24. The Economic-Espionage Act (EEA): A. makes it a crime to use a fraudulently obtained device to obtain money through a electronic fund transfer system. B. makes it a crime to send unsolicited bulk emails. C. makes it a crime to transfer proprietary files, documents and information from a computer to an unauthorized person. D. all of the above. Answer: C 25. The Fourth Amendment to the United States Constitution’s protection against unreasonable searches applies to: A. personal homes only. B. businesses only. C. both homes and businesses. D. none of the above. Answer: C 26. The Fifth Amendment to the United States Constitution’s protection against self-incrimination applies to: A. individuals only. B. corporations only. C. both individuals and corporations. D. individuals, but only in their official capacity within a business. Answer: A 27. Due process rights apply to: A. individuals only. B. corporations only. C. both individuals and corporations. D. individuals, but only in their official capacity within a business. Answer: C CASE 1. James Smith, a health inspector for the state of Missouri, inspected a restaurant owned by Salley Slick. Smith found numerous health violations in the restaurant and fined Slick accordingly. When Smith notified Slick of the infractions, Smith strongly suggested that $5,000 "would sure prove handy in the Spring" when he planned to purchase a new fishing boat. Slick understood Smith's obvious hint and offered Smith $5,000 if he would lose the paperwork concerning the failure of the restaurant to meet proper inspection guidelines. Smith accepted the $5,000 and lost the paperwork. One month later, Smith returned to the restaurant and told Slick that he would reappear every month and find violations unless Slick produced $1,000 each month to go toward the purchase of a fleet for Smith. Slick agreed to make the $1,000 payments. What crimes have been committed by Smith and Slick? Answer: Bribery occurs when a person's judgment is influenced through the giving of something of value, such as money, to benefit the giver. Smith is guilty of soliciting a bribe and of bribery itself. Smith sought to obtain a bribe and this constituted the crime of bribery solicitation. When the money came forth and was accepted, the crime of receiving a bribe occurred. When additional sums of money were requested, based solely on the request and no actual violations, the crime of extortion (blackmail) was committed. Acting on his authority as a health inspector, Smith is threatening action not based on violations, but rather by greed. Slick is guilty of bribery of a public official to escape the payment of fines and damage to reputation that are the results of health code violations. 2. Sally operates a large manufacturing firm near a federal land preserve known for its waterfowl and fauna. The federal government has just filed suit against Sally and her corporation, charging them with criminal violations of various environmental protection statutes. What rights do Sally and her corporation have that are guaranteed under the United States Constitution? Answer: The Fourth Amendment requirement that a search warrant be issued before any search is conducted applies both to Sally's property and to that of the corporation. The Fifth Amendment right against self-incrimination applies to Sally, but not the corporation. Further, both Sally and the business organization are entitled to due process. Chapter 9—Torts TRUE/FALSE 1. A victim of a tort may sue and recover money damages. Answer: True 2. “Tort” comes from the Latin term “tortus,” which means “crooked, dubious, or twisted.” Answer: True 3. If a crime does not hurt an identifiable person, it is not a tort. Answer: True 4. A tort is a wrong arising from a violation of a public duty. Answer: False 5. Strict liability is one type of tort. Answer: True 6. Careless actions that result in injuries to others usually are not deemed to be torts. Answer: False 7. For tort liability to be imposed, the perpetrator of the tort must have acted with the intent to do wrong. Answer: False 8. The concept of strict liability is applied without regard to whether the defendant was at fault. Answer: True 9. Assault is the intentional, wrongful touching of another person without that person’s consent. Answer: False 10. The tort of false imprisonment requires the detention of a person without his or her consent. Answer: True 11. Under the tort of false imprisonment, shopkeepers are prevented from detaining anyone whom they believe has shoplifted. Answer: False 12. The tort of intentional infliction of emotional distress requires proof of outrageous conduct and resulting emotional distress in the victim. Answer: True 13. The tort of invasion of privacy always requires the misappropriation of another's name or likeness. Answer: False 14. Commercial exploitation is a form of invasion of privacy. Answer: True 15. Offensive or derogatory language used by one person to describe another constitutes the tort of slander. Answer: False 16. In terms of defamation liability, members of the United States Congress enjoy an absolute privilege when they are speaking on the floor of the Senate or the House of Representatives. Answer: True 17. Libel is the printed equivalent of the spoken form of defamation known as slander. Answer: True 18. The media enjoy a qualified privilege for stories that turn out to be false. Answer: True 19. Truth is not a defense to defamation. Answer: False 20. Product disparagement is a form of defamation. Answer: True 21. Malice is always a required element of defamation. Answer: False 22. A trespass to personal property is any unpermitted entry below, on, across, or above the land of another. Answer: False 23. The use of someone’s car without that person’s permission is a trespass to personal property. Answer: True 24. Today, the widest range of tort liability arises in the field of negligence. Answer: True 25. To determine whether the defendant is liable for negligence, a reasonable person standard is employed. Answer: True 26. Professionals have a duty to perform their functions at the same level as would a reasonable person. Answer: False 27. Plaintiffs are typically awarded punitive damages in negligence cases. Answer: False 28. When contributory negligence is proven, damages awarded as reduced based on the plaintiff’s degree of fault. Answer: False 29. The assumption of risk defense has been abolished in several states. Answer: True 30. Governments are generally immune from tort liability. Answer: True MULTIPLE CHOICE 1. A wrong that arises from a violation of a private duty is called a: A. criminal action. B. tort. C. crime. D. de mala. Answer: B 2. Concerning torts and crimes, choose the correct statement: A. Every tort is a crime. B. Every crime is a tort. C. No crime is a tort. D. A crime may also be a tort. Answer: D 3. Torts arise from a violation of a _______ duty. A. public B. private C. contractual D. criminal Answer: B 4. Torts are classified as: A. intentional only. B. negligence only. C. strict liability only. D. intentional, negligence, and strict liability. Answer: D 5. Without meaning to, Alice carelessly strikes Mary. Mary may be able to sue Alice for: A. an intentional tort. B. negligence. C. strict liability D. absolute liability. Answer: B 6. In order to establish the tort of false imprisonment, a person must show imprisonment for: A. any amount of time. B. at least one minute. C. at least ten minutes D. at least one hour. Answer: A 7. A shopkeeper may lose the shopkeeper’s privilege if: A. the customer is kept an unreasonable amount of time. B. the shopkeeper acted with reasonable suspicion. C. the shopkeeper acted with necessary force. D. all of the above. Answer: A 8. John owed Barney money. Barney called John's home several times per day for five weeks asking for repayment, with some of the calls coming after midnight. Barney might be liable for: A. defamation. B. wrongful interference with a contract. C. intentional infliction of emotional distress. D. trespass. Answer: C 9. The tort of invasion of privacy includes: A. intrusion into private affairs. B. public disclosure of private facts. C. misappropriation of another's name. D. all of the above. Answer: D 10. Defamation of a public figure requires what additional element? A. Intent B. Malice C. Causation D. none of the above Answer: B 11. Which of the following is a defense to defamation? A. Slander B. Libel C. Truth D. All of the above. Answer: C 12. Oral or spoken defamation is: A. slander. B. libel. C. privilege. D. perjury. Answer: A 13. An absolute privilege is available as a defense to slander liability when: A. the statement is made to only a few people. B. libel exists. C. a witness testifies in a court proceeding. D. no intent to harm is present. Answer: C 14. Slander of title and trade libel are collectively known as product __________. A. Divestiture B. Disparagement C. Dilution D. Diversion Answer: B 15. Maria intentionally attempts to have Patty break a contract with Alfred. Maria will be liable under which theory of tort? A. Libel B. product disparagement C. contract interference D. intentional infliction of emotional distress Answer: C 16. Trespass applies to: A. personal property only. B. land only. C. both personal property and land. D. only government-owned property. Answer: C 17. Trespass to personal property requires: A. the personal property to be connected to real property. B. destroying the personal property. C. the invasion of personal property regardless of whether the owner grants permission. D. the invasion of personal property without the permission of the owner. Answer: D 18. The widest range of tort liability arises in the area of: A. negligence. B. absolute liability. C. violation of statute. D. assumption of risk. Answer: A 19. The degree of care required of a person is: A. that degree of care the person exercised in the situation at hand. B. that degree of care an extraordinary person would exercise under similar circumstances. C. that degree of care an ordinarily prudent person would exercise under similar circumstances. D. none of the above. Answer: C 20. Professionals have a duty to perform their jobs at the level of: A. a reasonable person. B. a reasonable professional in the same business. C. an extraordinarily careful person. D. none of the above. Answer: B 21. Comparative negligence: A. has been rejected by most of the states. B. allows a comparison of negligence between plaintiff and defendant. C. only applies when the plaintiff has signed a release. D. is a bar to recovery under common law. Answer: B 22. If the plaintiff has either engaged in or refrained from actions that are at least partially to blame for the injuries received, what negligence has occurred? A. criminal B. contributory C. personal D. prejudicial Answer: B 23. What type of damages is recoverable when the defendant’s tortious conduct is accompanied by fraud, malice, or willful or wanton conduct? A. compensatory B. consequential C. nominal D. punitive Answer: D 24. The concept of immunity from liability means that: A. one who harms another can be held liable only for voluntary acts. B. certain persons are not subject to tort liability. C. one who harms another without intending to do so is not subject to tort liability. D. one who harms a child can never be sued by the parents of the injured child. Answer: B 25. What form of tort liability was developed to provide guaranteed protection for those who are injured by conduct the law deems both serious and inexcusable? A. strict liability B. negligence C. both a. and b. D. neither a. nor b. Answer: A CASE 1. Philip Laws leased an apartment from Candice Sutton. Laws had notified Sutton on more than one occasion that the wooden steps to his apartment were decaying and in need of repair. Laws claimed that he had to leave the outside light on to avoid portions of the steps that no longer would bear his weight when he came in at night. Sutton promised to repair the steps while Laws was away on a business trip. Accordingly, Laws did not leave lights on during his absence. When he returned three nights later, Laws was injured when one of the steps broke under his weight as he was entering his apartment. Laws sued Sutton. Sutton replied that she should not bear liability for Laws' injury because Laws knew of the condition of the steps and had not taken the customary precaution of lighting the area. Based on what you have learned in this chapter, decide the case. Answer: Questions of contributory negligence, comparative negligence and assumption of the risk are primarily questions for the jury to resolve based on the unique facts and circumstances of the case presented. If the state in which this case is tried is a contributory negligence jurisdiction, the jury has the right to conclude, based on the evidence, that Laws was contributorily negligent in not leaving the outside light on, knowing that certain areas of the steps would not support his weight, and that such areas would be difficult (if not impossible) to identify in the dark. Should the jury conclude that Laws was contributorily negligent, Laws recovers nothing from Sutton. If the case is tried in a comparative negligence jurisdiction, the jury might choose to apportion fault between Sutton (the defendant) and Laws (the plaintiff), and reduce the damage award by the percentage that Laws was responsible for his injuries due to his own negligence. In either a contributory or comparative negligence jurisdiction, Sutton could raise the “assumption of the risk” argument against Laws, arguing that the plaintiff “actively, voluntarily and willingly” proceeded in the face of danger knowing the risk, and that such assumption of the risk should serve to bar completely the plaintiff’s recovery. Again, the resolution of this case depends on whether the case is tried in a contributory or comparative negligence jurisdiction, and the jury’s analysis of the factual evidence presented at trial. 2. A local newspaper devotes its New Year's Day issue to people who have performed heroically during the past year. One of the people included in the article was Janet, a local actress. Eight months earlier, a fire started in the theater while she was in the middle of a performance. Rather than running out, she stayed to help frightened members of the audience get out of the theater. The New Year's article stated that Janet had been unable to find work as an actress because of burns to her hands and feet and that, as a result, she owes a great deal of money. Janet sued the newspaper for invasion of privacy. Based on what you have learned in this chapter, how should the case be decided? Answer: Janet might be able to recover. The right of privacy protects against giving unnecessary publicity to personal and private matters of the plaintiff's life, including financial status. However, there is no invasion of privacy when there is a legitimate business interest in making the information known. In this case, it appears that the private information included in the article concerning Janet's financial status and inability to continue in her profession is not necessary to the article. 3. John was driving his car in a careless way, failing to drive as a reasonably prudent person would under the driving conditions. Ramona was crossing the street in a careless way, failing to cross as a reasonably prudent person would. John struck and injured Ramona with the car John was driving. At trial, it was determined that John was 80 percent at fault and that Ramona was 20 percent at fault. The injuries sustained amounted to $100,000. Explain how much, if any, recovery Ramona would receive in a state that applies the contributory negligence rule. Do the same thing for a state that applies the comparative negligence rule. Answer: In a contributory negligence jurisdiction, Ramona would recover nothing, since the doctrine of contributory negligence holds that in order for a plaintiff to recover, the plaintiff must be entirely free from any negligence that contributed to the injury. Under comparative negligence, Ramona would recover 80 percent of $100,000, or $80,000; although Ramona's negligence would reduce the amount of her recovery, it would not preclude her recovery. In other words, whatever amount of the injury is held to be caused by Ramona will be deducted from the total amount of the damage award. Chapter 10—Intellectual Property Rights TRUE/FALSE 1. A trademark is any word, name, symbol, device, or combination of these used to identify a product. Answer: True 2. Trademarks may be used to protect the exclusive right to identify either products or services. Answer: False 3. Once a mark is registered in accordance with federal law, the holder of the mark has the exclusive right to use the mark in perpetuity. Answer: False 4. Trademarks and service marks are recorded with the Register of Copyrights. Answer: False 5. Descriptive terms such as locations and colors are never subject to trademark protections. Answer: False 6. Generic terms that refer to a type or class of goods are never subject to trademark protection. Answer: True 7. Trade dress refers to the packaging look and overall image of a product. Answer: True 8. Protection for trade dress is available under the Lanham Act. Answer: True 9. To prevail in an action for trade dress infringement, a plaintiff must prove that its trade dress is distinctive and nonfunctional and the defendant’s trade dress is confusingly similar to the plaintiff’s. Answer: True 10. Cybersquatters are individuals who register and set up domain names on the Internet that are identical or confusingly similar to existing trademarks in the hopes they can sell the name to the trademark owner. Answer: True 11. A copyright prevents the copying of an idea. Answer: False 12. A copyright is the exclusive right given by federal statutes to the creator of a literary or an artistic work to use, reproduce, and display the work. Answer: True 13. The typical U.S. copyright now runs for 28 years, with a right of renewal for an additional 28 years. Answer: False 14. Copyright of a "work made for hire" runs for the life of the creator of the work plus 50 years. Answer: False 15. Under the Berne Convention Implementation Act of 1988, it is no longer mandatory that works published after March 1, 1989 contain a notice of copyright. Answer: True 16. In order for a work to be copyrightable, it must possess a significant amount of creativity. Answer: False 17. An owner of a copyright may license some of his or her rights to another in exchange for royalty payments. Answer: True 18. A copyright owner may prohibit even limited use of copyrighted material if it is used for parody or criticism. Answer: False 19. All types of patents available under U.S. law are entitled to the same quality and duration of protection once initial filing is perfected with the Patent and Trademark Office in Washington, D.C. Answer: False 20. Although processes and machines are eligible for patent protection, manufactures and compositions of matter are not. Answer: False 21. Under the United States Supreme Court’s “doctrine of equivalents,” infringers may not avoid liability for patent infringement by substituting insubstantial differences for some of the elements of the patented product or process. Answer: True 22. To be patentable, an invention must be new and not obvious to a person of ordinary knowledge and skill in the art or technology to which the invention is related. Answer: True 23. A showing that an invention as a whole would have been obvious to a person of ordinary skill in the art when the invention was patented is called subsequent art. Answer: False 24. In limited circumstances customer lists are protected under trade secret laws. Answer: True 25. When secret information is shared or communicated for a special purpose and the person receiving the information knows it is not to be made known, it loses the protection it had while secret. Answer: False 26. Stealing trade secrets can result in fines, but not imprisonment. Answer: False 27. Written computer programs are not given the same protection as other copyrighted material. Answer: False 28. Computer software licensing agreements include restrictions on the use of software and give the licensor greater protection than that provided by copyright law. Answer: True 29. The Semiconductor Chip Protection Act of 1984 created a new form of industrial intellectual property by protecting mask works and the semiconductor chip products in which they are embodied against chip piracy. Answer: True 30. Under the Semiconductor Chip Protection Act reverse engineering exemption, competitors may study mask works but may not use the results of that study to design their own semiconductor chip. Answer: False MULTIPLE CHOICE 1. The Lanham Act grants protection for: A. marks. B. patents. C. copyrights. D. trade secrets. Answer: A 2. Trademarks or service marks may be registered if they utilize terms that are: A. suggestive of characteristics of the product or service to which they relate. B. fanciful, arbitrary, or coined. C. descriptive and have acquired a known secondary meaning linked to a product. D. all of the above. Answer: D 3. It is important to protect trade dress against adoption by a competitor because such adoption can: A. deceive purchasers into believing they have obtained a comparable product. B. dilute the originator's resource investment in its product appearance. C. usurp the business goodwill of the developer of the trade dress. D. all of the above. Answer: D 4. In order to obtain a court order enjoining a competitor from using your trademark, it is necessary to show that: A. you invested a certain level of resources to develop the mark. B. the competitor is making unfair profits from use of the mark. C. the competitor's use of the mark risks confusing the public. D. all of the above. Answer: C 5. A copyright bestows upon the creator of an artistic or literary work a federal statutory right to exclusively: A. use the work. B. reproduce the work. C. display the work. D. all of the above. Answer: D 6. Which of the following is not the exclusive right of the holder of a copyright? A. To prepare works that are derived from the original work. B. To obtain a court order enjoining use of the original work by another. C. To distribute copies of recordings of the original work. D. To display or perform the original work in public. Answer: B 7. In determining whether limited use of copyrighted material may be permitted as "fair use," courts will consider: A. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes. B. the nature of the copyrighted work. C. the amount and substantiality of the portion used in relation to the copyrighted work as a whole. D. all of the above. Answer: D 8. The Digital Millennium Copyright Act : A. made notice of copyrights no longer mandatory. B. changed the life of a copyright. C. was enacted to curb the pirating of software and other pirated works. D. all of the above. Answer: C 9. Three types of patents available under U.S. law are: A. utility, product, design. B. design, packaging, invention. C. design, plant, utility. D. utility, regulatory, common law. Answer: C 10. Design patents have a duration of _________ years. A. 10 B. 14 C. 17 D. 20 Answer: B 11. The type of patent that may be granted to developers of plant reproduction methods is called a: A. process patent. B. functional or utility patent. C. improvement patent. D. plant patent. Answer: D 12. The type of patent that may be granted to developers of new and non-obvious ornamental features of manufactured articles is called a(n): A. design patent. B. functional or utility patent. C. improvement patent. D. plant patent. Answer: A 13. The America Invents Act: A. amended federal patent law. B. replaced the “first to file system” with a “first to invent” system. C. speeds up the application process for energy conservation inventions for a $4,800 fee. D. all of the above. Answer: A 14. A business formula, information compilation, or device that provides an advantage over competitors that do not have it is known as a: A. competitive advantage. B. strategic advantage. C. trade secret. D. restraint of trade. Answer: C 15. In order to protect themselves from disclosure of proprietary or confidential information, businesses may: A. implement security measures to prevent access by outsiders. B. enforce contractual nondisclosure agreements against departing employees. C. limit disclosure of such information to those with a need to know. D. all of the above. Answer: D 16. Under the Computer Software Copyright Act of 1980, a written program: A. must be written in object code in order to be protected. B. must be written in source code in order to be protected. C. is protected as any other copyrighted material, even if it is in written form. D. is protected but does not receive the same protections as other copyrighted materials. Answer: C 17. To analyze a copyright infringement claim in the context of computer programs, courts will primarily examine: A. the total number of program steps that are substantially similar. B. the number of significant program steps that are substantially similar. C. whether the programs appear substantially similar in ordinary language. D. whether the programs appear substantially similar in machine language. Answer: B 18. Computer programs are subject to protection in the U.S. under: A. copyright laws. B. patent laws. C. trade secret laws. D. all of the above. Answer: D 19. Owners of mask works are entitled to the exclusive right to reproduce and distribute their products under U.S. law for a period of: A. 10 years. B. 20 years. C. 28 years. D. the life of the creator plus 70 years. Answer: A 20. The Semiconductor Chip Protection Act provides that an infringer will: A. be liable for actual damages B. forfeit its profits to the owners C. both a. and b. D. neither a. nor b. Answer: C CASE 1. Herman Corporation is engaged in preparing a marketing campaign consisting of electronic and print images. Drawings and photographs for the campaign are coming from a variety of sources, including popular magazines, international newspapers, and web sources. The marketing vice president asserts that the company may use the images under the fair use doctrine. What factors should be considered in the application of the fair use doctrine? Answer: Copyright law requires a consideration of four factors in determining the application of the fair use doctrine. First, the purpose and character of the use must be considered. Here, the commercial, in contrast to nonprofit, use of the images does not favor Herman Corporation’s position. Second, the nature of the work is a factor. All of the images were publicly available, so this factor favors Herman Corporation. Third, the extent of the copying must be considered. Again, Herman Corporation is favored because only selected aspects of the source materials were used. Finally, the value of the copyrighted work is an issue. Application of this factor may work against Herman Corporation’s position, since the images are a critical part of the product generated by the media outlets. 2. Smarts and Then Some, Inc. developed a software program after several years of research and development. The particular software program was then test–marketed, at which point a competitor filed suit claiming that the Smarts and Then Some program violated the competitor's copyright on a program they too were test-marketing. What is the test to determine whether a copyright has been violated? Answer: With the passage of the Computer Software Copyright Act of 1980, greater clarity was brought to answering the question of whether a software copyright is violated. In rendering a decision regarding software copyright violation, courts today attempt to determine the degree of similarity between the two programs in terms of structure, flow, sequence, and organization. Test Bank for Business Law: Principles for Today's Commercial Environment David P. Twomey, Marianne M. Jennings 9781133588245, 9781305575158, 9780324786699
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