CH-11 Intellectual Property – The Legal and Regulatory Environment of Business : Exam Guide

11 Key 1. The justification for intellectual property is the same as for the private property system. Answer: True The justification for intellectual property is the same as for the private property system generally. 2. If the protection of intellectual property rights did not exist, the pace of research and development (R&D) in business would likely be enhanced. Answer: False Conversely, without intellectual property, the pace of creative research and development (R&D) in business would slow dramatically. 3. The protections of property often do not apply automatically to ownership of intangible knowledge resources. Answer: True The protections of property often do not apply automatically to ownership of intangible knowledge resources. 4. Once information is in the public domain, an intellectual property right can be applied to recapture it. Answer: False In general, once information is in the public domain, an intellectual property right cannot be applied to recapture it. 5. To qualify as a trade secret, the knowledge protected must have economic value. Answer: True A trade secret is any form of knowledge or information that (1) has economic value from not being generally known to or readily ascertainable by proper means by, others and (2) has been the subject of reasonable efforts by the owner to maintain secrecy. 6. To protect knowledge or information as a trade secret, the business must prove that it took special and extraordinary measures to keep that knowledge and information secret. Answer: False To protect information as a trade secret, the information must actually be secret, and the business must take reasonable measures to keep it so. 7. Misappropriation occurs when one discloses information that one was under a duty to keep secret, even if the original acquisition was proper. Answer: True Misappropriation obviously occurs when one improperly acquires secret information through burglary, espionage or computer hacking. However, misappropriation also occurs when one discloses information that one was under a duty to keep secret, even if the original acquisition was proper. 8. Recreating, through legitimate means, the same information that another considers to be a trade secret is still considered misappropriation. Answer: False If, through legitimate means, you are able to recreate the same information that another considers to be a trade secret, no misappropriation has occurred. 9. Employers can only enforce a covenant not to compete if they can show a valid business purpose for doing so. Answer: True The law states that employers can enforce agreements (or contractual "covenants") not to compete only when there is a "valid business purpose" for the contract. 10. An injunction is an order by a judge either to do something or to refrain from doing something. Answer: True An injunction is an order by a judge either to do something or to refrain from doing something. 11. Although there are civil penalties for stealing trade secrets, no criminal penalties exist at this current time. Answer: False Although various state laws make intentional trade secret misappropriation a crime, the primary criminal prosecutions today result under the federal Economic Espionage Act (EEA). The act makes it a crime to steal (intentionally misappropriate) trade secrets and provides for fines and up to 10 years' imprisonment for individuals and up to a $5 million fine for organizations. 12. A patent is a legal monopoly in the tangible resource of copying and marketing a new invention. Answer: False Today, a patent is firmly associated with an inventive act, and conveys a right to exclude others from making, using selling or importing the covered invention. 13. Design patents apply to the appearance of an article of manufacture, unrelated to its function. Answer: True Design patents apply to the appearance of an article of manufacture, unrelated to its function. 14. Under patent law even if an invention is otherwise new, it fails the novelty test if it has been described in a publication, sold, or put to public use more than one year before a patent application on it is filed (the one-year rule). Answer: True Under patent law even if an invention is otherwise new, it fails the novelty test if it has been described in a publication, sold, or put to public use more than one year before a patent application on it is filed (the one-year rule). 15. Trademarks indicate a specific producer. Answer: True Today, we generally call such marks trademarks and when they indicate a specific producer, the law protects them against use by others. 16. Monster.com, a job search website, is an example of a collective mark. Answer: False Collective mark is a mark representing membership in a certain organization or association, for example, the National Football League logo. 17. Trade dress refers to a color or shape associated with a product or service. Answer: True Trade dress refers to a color or shape associated with a product or service. 18. When an owner does not defend against the unauthorized use of a trademark, the trademark is most likely to become generic. Answer: True A trademark is most likely to become generic (1) when an owner does not defend against unauthorized use and (2) when the public becomes confused as to whether a term refers to a particular product/service or refers to a general class of products/services. 19. The courts can declare a trademark invalid even if the U.S. Patent and Trademark Office has accepted registration. Answer: True Note that a court can declare a mark invalid even if the PTO accepted registration. 20. Fair use of a registered trademark is allowed by the Economic Espionage Act. Answer: False Fair use of a registered trademark is allowed by the Lanham Act and relates to a discussion, criticism, or parody of the trademark, the product, or its owner. 21. The Federal Trademark Dilution Act prohibits the use of a mark that is the same or similar to a "famous" trademark only when the owner of the "famous" trademark can prove public confusion regarding the two marks. Answer: False In 1995, Congress passed the Federal Trademark Dilution Act. This law prohibits you from using a mark the same as or similar to another's "famous" trademark so as to dilute its significance, reputation, and goodwill. 22. Copyright deals with original invention, like patents. Answer: False Unlike patent, copyright deals with original expression rather than invention. 23. The alphabetic arrangement of names in a telephone directory's white pages meets meet the necessary criteria to warrant a copyright. Answer: False The mere effort and alphabetic arrangement of names that went into a telephone directory's white pages was insufficiently creative to warrant a copyright. 24. Companies can be considered authors under copyright law. Answer: True Companies can be considered authors under copyright law. 25. Copying for research or teaching are considered an infringement of the owner's property. Answer: False Fair use includes copying for "criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research." 26. One can be liable for materially contributing to another's infringement with knowledge of the infringement. Answer: True In addition to inducing others to infringe, one can be liable for materially contributing to another's infringement with knowledge of the infringement. 27. The Digital Millennium Copyright Act makes illegal the effort to get around devices used by copyright owners to keep their works from being infringed. Answer: True The Digital Millennium Copyright Act (DMCA) makes illegal the effort to get around (circumvent) devices used by copyright owners to keep their works from being infringed. 28. The Digital Millennium Copyright Act holds Internet service providers liable for illegal copies that pass temporarily through their systems. Answer: False The Digital Millennium Copyright Act provides a safe-harbor for Internet service providers, protecting them from liability (1) for illegal copies that pass temporarily through their systems and (2) for permanent illegal copies stored in their systems. 29. Garry uses AOL, an Internet service provider, to access a file sharing website that can help Garry download copyright protected music. AOL can be held liable for Garry's actions. Answer: False The Digital Millennium Copyright Act relieves service providers from liability for unintentionally linking to a website that contains infringing materials. 30. The Patent Cooperation Treat (PCT) allows applicants to obtain a preliminary international examination and then pursue final rights in multiple countries at the same time. Answer: True The Patent Cooperation Treat (PCT), which allows an applicant to obtain a preliminary international examination and then pursue final rights in multiple countries at the same time. 31. A _________ is any form of knowledge or information that has economic value from not being generally known to, or readily ascertained by proper means by others and has been the subject of reasonable efforts by the owner to maintain secrecy. A. copyright B. trademark C. patent D. company policy E. trade secret Answer: E. trade secret A trade secret is any form of knowledge or information that (1) has economic value from not being generally known to or readily ascertainable by proper means by, others and (2) has been the subject of reasonable efforts by the owner to maintain secrecy. 32. Which of the following is true of violation of trade secrets' rights? A. One must misappropriate another's information. B. One must use another's information without permission. C. Unauthorized use of another's information constitutes as a violation of trade secrets' rights. D. Stealing another's intellectual property violates trade secrets' rights. E. Buying and selling of trade secrets violates the law of trade secrets. Answer: A. One must misappropriate another's information. To violate another's trade secret rights, one must misappropriate the information. 33. Which of the following is the first step in protecting trade secrets? A. A business must assert its property by preserving secrecy. B. A business should decide who can visit the business and what areas can be seen by them. C. A business must establish the existence of a trade secret as it is critical in controlling valuable knowledge resources. D. A business must identify confidential knowledge-based resources by conducting a trade secret audit. E. A business must enforce visitors, suppliers, and customers to sign a non-disclosure agreement. Answer: D. A business must identify confidential knowledge-based resources by conducting a trade secret audit. A first step in protecting trade secrets is to identify confidential knowledge-based resources. It is useful for all businesses to conduct a trade secret audit, which simply lists all the valuable forms of information possessed by the business, including formulas, plans, reports, manuals, research, and knowledge of customers and suppliers. 34. Misappropriation of a trade secret occurs when: A. a person is able to recreate the same information that the other considers to be a trade secret. B. a person recreates a product after looking at it and figuring out how it works or how it is formulated. C. a person uses another's trade secret and confidential information with authorization. D. a person legitimately acquires the trade secret, but discloses information violating duty of secrecy. E. a person uses his or her own knowledge and understanding to recreate what is another's trade secret. Answer: D. a person legitimately acquires the trade secret, but discloses information violating duty of secrecy. Misappropriation obviously occurs when one improperly acquires secret information through burglary, espionage or computer hacking. However, misappropriation also occurs when one discloses information that one was under a duty to keep secret, even if the original acquisition was proper. 35. __________ is an order by a judge either to do something or to refrain from doing something. A. A penalty B. An injunction C. An actual damage D. A punitive damage E. A compensatory damage Answer: B. An injunction An injunction is an order by a judge either to do something or to refrain from doing something. 36. A ________ patent applies to useful, functional inventions. A. design B. style C. plant D. inventive E. utility Answer: E. utility An easy way to remember the distinction between a utility patent and a design patent is that the former applies to useful, functional inventions. 37. Whom does the PTO assign to consider a patent application? A. Claims officer B. Patent examiner C. Patent officer D. The Supreme Court E. Patent issuer Answer: B. Patent examiner The PTO assigns a patent examiner to consider the application. 38. A patent application must, address each of the following except: A. it must explain how to make and use the invention. B. it must show why it is different from all previous and related inventions or state of art. C. it must show a reasonable business plan for construction, sale, and distribution of the invention. D. it must precisely describe what aspects of the invention deserve the patent. E. it must be addressed in words and drawings. Answer: C. it must show a reasonable business plan for construction, sale, and distribution of the invention. In the case of a utility patent the application must in words and drawings (1) explain how to make and use the basic invention; (2) show why the invention is different from prior art, that is, from all previous and related inventions or state of knowledge; and (3) precisely detail the subject matter that the inventor regards as the invention (called claims). 39. Which of the following types of intellectual property can be assigned to the invention of a plant that can be reproduced asexually? A. Patent B. Copyright C. Trademark D. Trade name E. Brand mark Answer: A. Patent Plant patents apply to new varieties of asexually reproduced plants. 40. Proving that a patent is invalid because it was in commercial use at least one year before the patent was taken out requires that the defendant prove their case: A. with a preponderance of the evidence. B. beyond a reasonable doubt. C. beyond a preponderance of the evidence. D. by clear and convincing evidence. E. with some evidence. Answer: D. by clear and convincing evidence. Principles under the patent law have led courts to determine that proof of invalidity must be made by "clear and convincing evidence" instead of the "preponderance of the evidence" standard that exists in most civil cases. This makes it more likely that a patent will be upheld in court. 41. _________ refers to the ability of an invention to produce surprising or unexpected results; that is, results not anticipated by prior art. A. Subject matter B. Nonobviousness C. Patent litigation D. Utility E. Obviousness Answer: B. Nonobviousness Nonobviousness refers to the ability of an invention to produce surprising or unexpected results; that is, results not anticipated by prior art. 42. Which of the following defenses can an alleged infringer use to prove that the patent is invalid? A. The invention is nonobvious. B. The invention has utility. C. The invention was previously unknown. D. The invention is obvious. E. The invention is not patented. Answer: D. The invention is obvious. An alleged infringer can always defend against an infringement lawsuit by proving that the patent is invalid because the invention is previously known, obvious, or lacks utility. 43. The "one-year rule" applies to _______ law. A. trademark B. patent C. copyright D. trade secret E. collective mark Answer: B. patent Under patent law even if an invention is otherwise new, it fails the novelty test if it has been described in a publication, sold, or put to public use more than one year before a patent application on it is filed (the one-year rule). 44. Which of the following is true in case a patent expires? A. It comes under the purview of the Supreme Court to restrict its use in public. B. It is in the public domain and others may use it without limitations. C. It is put aside for someone else to acquire. D. It will be reviewed and reassigned to the same owner. E. It will be declared as null and void and the invention will be declared useless. Answer: B. It is in the public domain and others may use it without limitations. When a patent expires, the invention is in the public domain, and others may use it without limitation. 45. When a patent expires, the invention is said to be in the _________, and others may use it without limitation. A. business environment B. communal realm C. collective sphere D. public domain E. legal open space Answer: D. public domain When a patent expires, the invention is in the public domain, and others may use it without limitation. 46. Hillward Bakers have been using since their inception ten years ago, a blue HB logo with a baker's hat on the HB. Hobert Bakers, a newly opened bakery and confectionary chain, has used the same logo. Hillward has not registered its logo, but chooses to sue Hobert. Which of the following is true of this case? A. Hillward cannot sue Hobert since the log has not been registered as a trademark. B. Hillward can sue Hobert since the logo has been used by Hillward and is associated with it. C. Hobert can defend that Hillward created something that lacks utility, and cannot be trademarked. D. Hobert can defend that Hillward created something that was very obvious. E. Hillward cannot sue Hobert because logos cannot be patented or trademarked. Answer: B. Hillward can sue Hobert since the logo has been used by Hillward and is associated with it. Although registration systems exist at the federal and state level, it is important to understand that trademark rights come from use of the mark in association with goods or services. 47. Which of the following is true of trademarks? A. Trademarks are a form of legal and civil property. B. One can have rights in a trademark only if he/she has registered it. C. If a trademark is unregistered, it is open for public use. D. It is firmly associated with an inventive act, and excludes others from making, using or selling the invention. E. Owners can sue for infringement, and claim rights on a trademark even if they have not registered it. Answer: E. Owners can sue for infringement, and claim rights on a trademark even if they have not registered it. Although registration systems exist at the federal and state level, it is important to understand that trademark rights come from use of the mark in association with goods or services. One can have rights in an unregistered trademark, and even sue for infringement. 48. Which of the following is a function of a trademark? A. Obviousness B. Utility C. Distinctiveness D. Certification E. Guarantee Answer: C. Distinctiveness Recognizability or distinctiveness is the function of trademarks. 49. The Nike ‘swoosh' is an example of what type of intellectual property? A. Copyright B. Patent C. Certification mark D. Trademark E. Novelty Answer: D. Trademark Trademarks are a form of intellectual property. Like patents you can register them with the PTO, and also like patents, trademarks are some of the most valuable properties that businesses own. McDonald's golden arches, the Nike "swoosh," Coca-Cola, Sony, Facebook Amazon.com, the Colonel, Exxon, Kodak, Kleenex, the Olympic rings, Rolex, Levi—the list of famous trademarks is almost endless, but always recognizable. 50. Unauthorized use of a registered trademark is known as: A. false advertising. B. infringement. C. denigration. D. depreciation. E. copy violation. Answer: B. infringement. Trademark infringement may involve intentional use of the owner's mark or an accidental design of one's own mark too similarly to another's. 51. Radford School has just been accredited by the United Federation of Planets Academy of Business and Managements Schools. The school is provided with an icon to put on its home page saying "Member of UFPABMS". This icon is a: A. collective mark. B. promotion mark. C. trademark. D. brand mark. E. service mark. Answer: A. collective mark. Collective mark—a mark representing membership in a certain organization or association, for example, the National Football League logo. 52. Which of the following is actually intended to be used by someone other than the owner? A. Certification marks B. Collective marks C. Service marks D. Trademarks E. Brand marks Answer: A. Certification marks Certification mark is a mark used by someone other than the owner to certify the quality, point of origin, or other characteristics of goods or services, for example, the Good Housekeeping Seal of Approval. 53. A school's seal and logo are examples of what type of intellectual property? A. Service marks B. Certification marks C. Collective marks D. Patents E. Brand marks Answer: A. Service marks Service mark is a mark associated with a service, for example, Monster.com. 54. Which of the following is true of trade dress? A. It refers to the utility and nonobviousness of an invention. B. It can be protected under law even without a registration. C. It is not protected from being copied under law since it is not identified with a particular product. D. The law protects it from being copied as long as it is distinctive. E. The law protects it only in case of certain products and services. Answer: D. The law protects it from being copied as long as it is distinctive. The law protects trade dress from being copied as long as it is distinctive. If it is distinctive and registered, the law protects it even without proof that the public has come to identify the trade dress with a specific source. 55. What is a colored design or shape associated with a product or service called? A. Patent B. Trade dress C. Copyright D. Trademark E. Product design Answer: B. Trade dress Trade dress refers to a color or shape associated with a product or service. 56. When you purchase an item from Victoria's Secret, they place the item in a paper bag with handles that feature horizontal pink and white stripes. Even without seeing the words Victoria's Secret on the bag, many people recognize that the purchase is from Victoria's Secret. The bag's coloring and design is considered: A. trade dress. B. a certification mark. C. a collective mark. D. a service mark. E. a trademark. Answer: A. trade dress. Trade dress refers to a color or shape associated with a product or service. 57. As part of the trademark application process, the Patent and Trademark Office places a proposed mark in the ________ which gives existing mark owners notice and allows for objection. A. Official Gazette B. Federal Register C. Legal section of major newspapers D. Congressional Record E. Principal Register Answer: A. Official Gazette As part of the trademark application process, the PTO places a proposed mark in the Official Gazette, which gives existing mark owners notice and allows them to object that the proposed mark is similar to their own. 58. A _________ refers to a public meaning that is different from its meaning as a person's name or as a distinctive term, a public meaning that makes the name or term distinctive. A. primary meaning B. secondary meaning C. trade meaning D. principal meaning E. supplemental meaning Answer: B. secondary meaning Secondary meaning refers to a public meaning that is different from its meaning as a person's name or as a descriptive term, a public meaning that makes the name or term distinctive. 59. For a name to be trademarked: A. it must be listed on the principal register for five years without being challenged. B. it must be listed on the secondary register for five years and have acquired a secondary meaning. C. it must be listed without restrictions and the trademark owner must notify the PTO every year that the trademark is still in use. D. the PTO will not accept descriptive terms for trademark protection. E. it must be listed on the principal register for one year and on the secondary register for five years. Answer: B. it must be listed on the secondary register for five years and have acquired a secondary meaning. There is a process by which a name or descriptive term can achieve full trademark status and protection. If it is listed on the PTO's Supplemental Register for five years and acquires a secondary meaning, it can then be transferred to the Principal Register for full protection. 60. Which of the following is a defense to a charge of trademark infringement? A. The statutory period protecting the trademark has expired. B. There is a good chance of the public being confused. C. The use is for commercial, profitable use. D. The mark is not distinctive. E. The mark or symbol is considerably different. Answer: D. The mark is not distinctive. To win a trademark infringement lawsuit, a defendant will usually present one of three basic defenses: (1) the mark is not distinctive, (2) there is little chance of the public's being confused by use of a term trademarked by someone else, or (3) the use is a "fair use." 61. Civil violation of a trademark or a patent is termed ________. A. breach B. infringement C. repudiation D. copy E. intellectual theft Answer: B. infringement Civil violation of a trademark (or a patent) is termed infringement. 62. When the public is confused as to whether a term refers to a particular product/service or refers to a general class of products/services, the trademark is said to have become _______. A. infringed B. copied C. generic D. distinctive E. substituted Answer: C. generic A trademark is most likely to become generic (1) when an owner does not defend against unauthorized use and (2) when the public becomes confused as to whether a term refers to a particular product/service or refers to a general class of products/services. 63. The Anti-Cybersquatting Consumer Protection Act of 1999 provides damages and a transfer of a _________ trademark domain name to its owner if it was registered in "bad faith". A. fair use. B. famous. C. copyright. D. title. E. profitable Answer: B. famous. The Anticyber-squatting Consumer Protection Act of 1999 provides a remedy of statutory damages and transfer of a famous trademark domain name to its owner if it was registered in "bad faith." 64. The fair use of a registered trademark defense was established in the: A. Lanham Act. B. Federal Trademark Dilution Act. C. Economic Espionage Act. D. U.S. Constitution. E. Consumer Protection Act. Answer: A. Lanham Act. Fair use of a registered trademark is allowed by the Lanham Act and relates to a discussion, criticism, or parody of the trademark, the product, or its owner, for example, in the news media, on the Internet, or in a textbook. 65. Which of the following acts protect a "famous" trademark, even if the owner is unable to prove that the public is confused by another's use of a similar mark, and provides the owner with the infringer's profits, and actual damages? A. Lanham Act B. Consumer Protection Act C. Patent Act D. Intellectual Property Act E. Trademark Dilution Act Answer: E. Trademark Dilution Act In 1995, Congress passed the Federal Trademark Dilution Act. This law prohibits you from using a mark the same as or similar to another's "famous" trademark so as to dilute its significance, reputation, and goodwill. Even if an owner of a famous trademark cannot prove that the public is confused by another's use of a similar mark (called a "junior" mark), the owner of the "senior" famous trademark can still get an injunction prohibiting further use of the junior mark on the basis of trademark dilution. 66. Which of the following is true of copyright? A. It deals with invention that is original, nonobvious and a novelty. B. It protects ideas and facts. C. It protects the design, color, or shape that is associated with a particular product from being copied. D. It protects original, creative expression. E. It protects only companies which can be considered authors. Answer: D. It protects original, creative expression. Unlike patent, copyright deals with original expression rather than invention. 67. The Berne Convention addressed international agreements in the area of: A. patents. B. copyrights. C. trademarks. D. trade secrets. E. brands. Answer: B. copyrights. Today the United States has joined most other countries in international agreements, such as the Berne Convention, in protecting the copyright of other nations, but once again copyright has come to a turning point in the road. 68. The payment of a fee in connection with permission to use protected copyrighted works is called a/ an: A. royalty. B. permission. C. authorization. D. reparation. E. commission. Answer: A. royalty. As a result, U.S. publishers felt free to publish the works of foreign authors without permission or the payment of fees called royalties. 69. Which of the following is an incorrect statement regarding copyrights? A. To obtain a copyright the work must be original. B. The work must show some sort of creativity. C. The work must be fixed in a tangible medium. D. The work may be an intangible original idea. E. The work must be an expression, rather than an invention. Answer: D. The work may be an intangible original idea. The work must be fixed in a tangible medium of expression like a book, canvas, compact disk, hard drive, or flash memory. 70. Which is not an allowable "fair use" of material? A. Teaching B. Research C. Profits D. Reporting E. Criticism Answer: C. Profits In determining whether a particular use is a fair one, a court will consider the purpose and character of the use, including whether such use is for commercial or nonprofit educational purposes. 71. In determining whether a particular use is a fair one, a court will consider which of the following? A. The distinctiveness of the copyright. B. The amount of profit expected by the user claiming the fair use. C. The amount and substantiality of the portion used in relation to the copyrighted work as a whole. D. The royalties awarded to the inventor before using the copyright since copyright laws protect inventors. E. The degree of damage caused. Answer: C. The amount and substantiality of the portion used in relation to the copyrighted work as a whole. In determining whether a particular use is a fair one, a court will consider the purpose and character of the use, including whether such use is for commercial or nonprofit educational purposes, the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the copyrighted work as a whole; the effect of the use upon the potential market for the copyrighted work. 72. A copyright protects: A. inventors. B. authors. C. merchants. D. builders. E. retailers. Answer: B. authors. Copyright laws protect authors rather than inventors. 73. _________ is a form of expression that criticizes by poking fun at something through exaggeration. A. Parody B. Fair use C. Copyright D. Misrepresentation E. Infringement Answer: A. Parody The fair use being considered concerns parody, a form of expression that criticizes by poking fun at something through exaggeration. 74. Which of the following is true of the Digital Millenium Copyright Act? A. It protects a mark used by someone other than the owner to certify the quality, point of origin, or other characteristics of goods or services. B. It provides a remedy of statutory damages and transfer of a famous trademark domain name to its owner if it was registered in "bad faith." C. It prevents circumvention of access protections for such products. D. It prohibits you from using a mark the same as or similar to another's "famous" trademark so as to dilute its significance, reputation, and goodwill. E. It specifies that a fair use of copyrighted materials is not an infringement of the owner's property. Answer: C. It prevents circumvention of access protections for such products. The act prevents the production, marketing, or sales of a product or service designed to circumvent technological protections of computer software, videos, and compact disks. 75. Possible civil remedies for violation of the Digital Millennium Copyright Act can include: A. consequential damages. B. actual and punitive damages. C. actual damages and injunction. D. double actual damages. E. compensatory damages. Answer: C. actual damages and injunction. Violations of the DMCA permit civil remedies, including injunction, actual damages, and statutory damages. 76. It has been estimated that intangible assets represents a significant portion of the total assets of many large U.S. companies. Name some of the different intangible assets that businesses might possess. Answer: Intangible assets which a business might possess include (1) employee skills and talents; (2) production designs, inventions and technologies; (3) processes and business methods; (4) reports, manuals and databases; (5) customer and supplier relationships; (6) software; (7) product and service research; and (8) marketing plans. 77. What is a trade secret and what must a company do to have enforceable rights to protect a trade secret? Answer: A trade secret is any form of knowledge or information (1) that the business has taken reasonable measures to keep secret and (2) has economic value from not being known publicly. The majority of states have adopted the Uniform Trade Secrets Act (UTSA), but some states continue to rely on common law protection. The UTSA does not differ substantially from common law. 78. How does the law define misappropriation in case of trade secret violation? Answer: To be liable in a trade secret case, a defendant must have misappropriated the information in question. Misappropriation obviously occurs when one improperly acquires secret information through burglary, espionage or computer hacking. However, misappropriation also occurs when one discloses information that one was under a duty to keep secret, even if the original acquisition was proper. Such a duty may arise from an employment relationship or a contractual agreement. Additionally, if one acquires a secret from another who has a duty to maintain secrecy, and one knows of that duty, misappropriation has occurred. 79. What is an injunction? Answer: An injunction is an order by a judge either to do something or to refrain from doing something. In the case of trade secrets, the injunction orders those who have misappropriated the trade secret to refrain from using it or telling others about it. In rare instances the injunction may also order that one delay in taking a new job. 80. Can misappropriation trade secrets account for criminal prosecution? Answer: The federal Economic Espionage Act (EEA). The act makes it a crime to steal (intentionally misappropriate) trade secrets and provides for fines and up to 10 years' imprisonment for individuals and up to a $5 million fine for organizations. 81. Explain the characteristics an invention should have to be patentable. Answer: To be patentable, it is not enough for something to be appropriate subject matter. An invention must also have certain characteristics. Namely, it must be novel, nonobvious, and useful. An alleged infringer can always defend against an infringement lawsuit by proving that the patent is invalid because the invention is previously known, obvious, or lacks utility. 82. What constitutes patentable subject matter according to the patent statute? Answer: To be patentable, the subject matter must be of the following nature: processes, machines, compositions of matter, improvements to processes, compositions of matter, nonfunctional designs of a manufactured article or certain plants. 83. Explain the patent obtaining process. Answer: To obtain a patent, an inventor must pay a filing fee and file an application with the PTO. In the case of a utility patent the application must in words and drawings (1) explain how to make and use the basic invention; (2) show why the invention is different from prior art, that is, from all previous and related inventions or state of knowledge; and (3) precisely detail the subject matter that the inventor regards as the invention (called claims). The PTO assigns a patent examiner to consider the application. There is usually a great deal of communication between the examiner and the applicant over the adequacy of the application's explanations, the scope of the proposed patent and whether the invention even qualifies at all for a patent. The applicant can amend the application. 84. Discuss the subject matter of a patent as a way of testing the validity of a patent. Answer: Attacking the "subject matter" of a patent is one common way of testing the validity of a patent. Although not unlimited, the subject matter for a potential patent is quite broad. This is particularly true for utility patents. One of the most controversial areas of potentially patentable subject matter concerns "processes." The court narrowed its ruling asserting that a claim involving mental processes or algorithms is patentable subject matter only if it is tied to a machine or involves the transformation of a physical object. This rule called into question the validity of issued business method patents, and some believed that it could have impacted software as well. 85. Discuss why computer software code should be copyrightable. Answer: Computer software code has long been copyrightable. The importance of patenting software as opposed to just copyrighting is that the copyright protects only the actual programming code and the look and feel of the program; it does not cover the functionality, which can be copied using different code. But if you patent the actions of the software, you may have a legal monopoly over the way the computer does something, such as controlling rubber curing. Merely changing the code will not keep someone from infringing a patent. 86. Discuss patent trolls. Answer: The pejorative term suggests that non-producing patent owners do not contribute as much to the innovation environment compared to the costs imposed by their enforcement. As a counter to the patent troll rhetoric, one might consider the fact that non-practicing entities are exercising a legitimate right under their property grant. Patents do not require their owners to actual make and sell an invention. This concept is similar to land property, wherein one may own a plot land but decide not to build anything. However, the overlapping nature of intellectual property sets the stage for great conflict than with non-producing landowners. Companies that believe they are disproportionately impacted by troll like behavior, such as consumer electronics firms, have pushed for reforms. 87. Explain in brief, the issue surrounding the patenting of genes. Answer: A gene is a sequence of DNA that occupies a specific location on a chromosome and determines a particular inherited characteristic. Patents can cover the sequence of DNA itself, similar to other chemical compounds. Worldwide, patent offices have received thousands of gene-related patent applications. To patent a human gene does not mean that the patent holder owns some part of you. Only when the gene has been isolated and purified in a way that can be put to use can someone patent it. What is really being patented is knowledge about how to use the gene for new-drug creation and disease treatment. Still, many believe that one should not be able to patent basic knowledge about specific genes. They argue that there should be a common use of this knowledge and that its production does not depend on the same incentives that justify other types of patents. 88. What are trademarks? Answer: Trademarks are a form of intellectual property. Recognizability or distinctiveness is the function of trademarks. Like patents you can register them with the PTO, and also like patents, trademarks are some of the most valuable properties that businesses own. Trademark rights come from use of the mark in association with goods or services. One can have rights in an unregistered trademark, and even sue for infringement. Simply because a mark is unregistered, it is not open for public use. However, this is not to say that registration is irrelevant. Particularly at the federal level under the Lanham Act, registration conveys important advantages. Therefore, it is advisable for a business to pursue a federal trademark registration for its source indicating marks whenever possible. 89. Discuss the various types of trademarks. Answer: The Lanham Act protects the following marks used to represent a product, service, or organization: trademark—any mark, word, picture, or design that attaches to goods to indicate their source; service mark—a mark associated with a service, for example, Monster.com; certification mark—a mark used by someone other than the owner to certify the quality, point of origin, or other characteristics of goods or services, for example, the Good Housekeeping Seal of Approval; collective mark—a mark representing membership in a certain organization or association, for example, the National Football League logo. 90. Under what circumstances will the PTO deny registration of a trademark? Answer: To be eligible for registration, a trademark must be distinctive. The PTO will deny registration if (1) the mark is the same or similar to one currently used on similar or related goods; (2) the mark contains certain prohibited or reserved names or designs; (3) the mark merely describes a product or service; or, (4) the mark is generic and represents a product or service. 91. What is secondary meaning? Answer: Secondary meaning refers to a public meaning that is different from its meaning as a person's name or as a descriptive term, a public meaning that makes the name or term distinctive. In the public mind, "Ford" now refers to an automobile rather than a person, "Levi" means jeans rather than a family, and "Disney" refers to a specific entertainment company rather than its founder. 92. How does the PTO determine that the proposed trademark is not similar to or owned by someone else? Answer: As part of the trademark application process, the PTO places a proposed mark in the Official Gazette, which gives existing mark owners notice and allows them to object that the proposed mark is similar to their own. If the existing mark owners object to the proposed mark's registration, the PTO holds a hearing to resolve the objection and, possibly, deny registration. Finally, if the PTO determines the mark acceptable, it registers the mark on the Principal Register. This registration provides notice of official trademark registration status. 93. What is an infringement? Answer: Civil violation of a trademark (or a patent) is termed infringement. The violator infringes on the trademark's property right through an unintentional or a wilful unauthorized use, misappropriating the goodwill and reputation that the trademark represents and confusing the public about the identity of the user. Remedies for civil infringement include a variety of damages, injunctions, prohibiting future infringement, and orders to destroy infringing products in anyone's possession. 94. The Coca-Cola Co. has restricted employees at soda fountains to offer another soda when a customer asks for a "Coke". Why? Answer: The Coca-Cola Co. wants to avoid the loss of its trademark "Coke" by it becoming a generic word. Therefore if a customer asks for a "Coke" and Coca-Cola is not available, the employee must inform the customer that another cola will be substituted. 95. What does it mean for a trademark to become generic? Give some examples of trademarks that have become generic. Answer: Trademark owners must be vigilant in protecting their marks because if a mark becomes generic, it loses its distinctiveness and its status as a protected trademark. A trademark becomes generic when the owner does not defend against its unauthorized use, and when the public becomes confused as to whether a term refers to a particular product or service or refers to a general class of products or services. Examples of trademarks lost due to generic use include Aspirin, Cellophane, Cola, Escalator, Lite Beer, Monopoly (the game), Refrigerator, Softsoap, Thermos and Zipper. (Note that student answers may vary regarding the examples.) 96. Discuss "fair use" with regard to trademarks and copyrights. Answer: Fair use regarding registered trademarks, as defined in the Lanham Act, permits the use of another's trademark when used for discussion, criticism or parody of the mark. Registered trademarks may also be used in comparative advertising. The Copyright Act permits fair use of another's work for criticism, comment, news reporting, teaching, scholarship or research. Teachers are permitted to make copies of copyrighted work for distribution in class. 97. What defenses can a defendant use to win a trademark infringement lawsuit? Answer: To win a trademark infringement lawsuit, a defendant will usually present one of three basic defenses: (1) the mark is not distinctive, (2) there is little chance of the public's being confused by use of a term trademarked by someone else, or (3) the use is a "fair use." 98. Discuss the Federal Trademark Dilution Act. Answer: The Federal Trademark Dilution Act prohibits you from using a mark the same as or similar to another's "famous" trademark so as to dilute its significance, reputation, and goodwill. Even if an owner of a famous trademark cannot prove that the public is confused by another's use of a similar mark (called a "junior" mark), the owner of the "senior" famous trademark can get an injunction prohibiting further use of the junior mark on the basis of trademark dilution. 99. How does the law deal with cases where people attempt to register domain names containing well- known trademarks that do not belong to them? Answer: The law states that using famous trademarks to register domain names by people who do not own the trademark, is a violation of the trademark law. The Anticyber-squatting Consumer Protection Act of 1999 provides a remedy of statutory damages and transfer of a famous trademark domain name to its owner if it was registered in "bad faith". A trademark owner can alternatively pursue arbitration against an improper domain name registrant. The Internet Corporation for Assigned Names and Numbers (ICANN) has a formal dispute resolution policy, and has the authority to cancel or transfer the registration of the losing party. 100. What are the three criteria necessary for copyright protection to occur? Answer: For copyright protection to occur, (1) the work must be original; (2) it must be fixed in tangible medium of expression like a book, canvas, compact disc, tape or computer disk; and, (3) and it must show some creativity. 101. Who is protected under copyright laws? Answer: Copyright laws protect authors rather than inventors. An author creates works of a literary, dramatic, musical, graphic, choreographic, audio, or visual nature. Ranging from printed material to photographs to records and motion pictures, these works receive automatic federal protection under the Copyright Act of 1976 from the moment the author creates them. Companies can be considered authors under copyright law. When an employee creates a work within the scope of their employment, the employer is automatically the owner and author. This type of work is called a "work-for-hire." It eliminates the need for companies to negotiate the rights to letters, documents, web pages, etc., that employees produce in the course of every day work. 102. Discuss the laws concerning file-sharing of copyrighted materials. Answer: Under copyright law it is illegal not only to make copies that violate the law but also to assist others in doing so. In addition to inducing others to infringe, one can be liable for materially contributing to another's infringement with knowledge of the infringement. Obtaining financial benefit with the ability to supervise the infringement also makes one vicariously liable. 103. What is the Digital Millennium Copyright Act? Answer: The Digital Millennium Copyright Act (DMCA) makes illegal the effort to get around (circumvent) devices used by copyright owners to keep their works from being infringed. The act prevents the production, marketing, or sales of a product or service designed to circumvent technological protections of computer software, videos, and compact disks. 104. Discuss the developments internationally to protect intellectual property rights. Answer: The most important source for standards is an international treaty known as the Trade-Related Aspects of Intellectual Property Agreement (TRIPS). The TRIPS requires that member countries provide protection for all of the forms of intellectual property. In addition, it sets forth baseline rules for that protection in terms of subject matter, procedure, and enforcement. Also, the Patent Cooperation Treat (PCT) allows applicant to obtain a preliminary international examination and then pursue final rights in multiple countries at the same time. Similarly, trademark owners can pursue rights in several countries at the same time through the Madrid System for International Registration of Marks. Test Bank for The Legal and Regulatory Environment of Business O. Lee Reed, Marisa Pagnattaro, Daniel Cahoy, Peter Shedd, Jere Morehead 9780073524993, 9780077437336, 9781260161793