the role of intellectual property in ecommerce cps 181s april 8, 2003 source: david drooz, associate...
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The Role of Intellectual The Role of Intellectual Property in eCommerceProperty in eCommerce
CPS 181s
April 8, 2003
Source: David Drooz, Associate General Council, NCSU
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QuestionsQuestionsQuestionsQuestions
What is the Legal Authority for IP?How is IP used in Business?What is a Business Method Patent?What is the Role of Trademarks &
Domain Names? Issues Related to Copyright & DMCA?
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What is the Purpose of Protecting What is the Purpose of Protecting Intellectual Property?Intellectual Property?
What is the Purpose of Protecting What is the Purpose of Protecting Intellectual Property?Intellectual Property?
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What is the Purpose of Protecting What is the Purpose of Protecting Intellectual Property?Intellectual Property?
What is the Purpose of Protecting What is the Purpose of Protecting Intellectual Property?Intellectual Property?
Encourage CreativityPromote the public good!
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Legal Authority for Intellectual Legal Authority for Intellectual PropertyProperty
Legal Authority for Intellectual Legal Authority for Intellectual PropertyProperty
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IntellectualIntellectual Property - SourcesProperty - SourcesIntellectualIntellectual Property - SourcesProperty - Sources
US Constitution, Article I, sec. 8, gives Congress the power:
“To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries”
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IntellectualIntellectual Property - sourcesProperty - sourcesIntellectualIntellectual Property - sourcesProperty - sources
Patents -- federal statutes Copyright -- federal statutes Trademark -- federal statutes & state law Trade secrets -- state laws Different countries = different laws. Treaties
help reconcile differences.
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What is a …..?What is a …..?What is a …..?What is a …..?
Patent?Copyright?Trademark?Trade Secret?
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What’s a Patent?What’s a Patent?What’s a Patent?What’s a Patent?A government grant that empowers the owner to prevent others from making, using, or selling the patented invention for a limited time (20 years in the US only)
-- ie., a Monopoly
In return, the inventor(s) must describe their technology in sufficient detail that anyone of ordinary skill in the art, can practice the invention.
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History of PatentsHistory of PatentsHistory of PatentsHistory of Patents
First Recorded Patent - Barge with hoist to transport marble, 1421, Florence
Statute of Monopolies enacted by Parliament in 1623, provided 14 years of protection
First US Patent Statute enacted by Congress in 1790
Today there are over 100 separate jurisdictions regarding Patents
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What is Patentable?What is Patentable?What is Patentable?What is Patentable?
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What’s Patentable?What’s Patentable?What’s Patentable?What’s Patentable?
ProcessesMachinesArticles of ManufactureCompositions of MatterNew and Useful ImprovementsNot:
Theoretical IdeasNatural Phenomena (Equations)
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What’s Protected?What’s Protected?What’s Protected?What’s Protected?
It is a negative right! It gives the owner no rights. Instead, it prohibits others of the right to make, have made, use, and sell the invention in the US (or foreign countries in which patent protection is obtained).
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Key Steps to an InventionKey Steps to an InventionKey Steps to an InventionKey Steps to an Invention
Conception - when invention is sufficiently defined in the mind of the inventor to enable the inventor to describe the invention
Reduction to Practice - steps taken to make the invention and demonstrate that it achieves the intended purpose -- ie., research
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Statutory RequirementsStatutory RequirementsStatutory RequirementsStatutory Requirements
The Invention Must Be:UsefulNovelUnobvious (to one of ordinary skill in the art)
Duty of Candor and Disclosure
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Statutory Bars (US)Statutory Bars (US)Statutory Bars (US)Statutory Bars (US)
Prior to one year before the application, must not have been:
In public use Offered for salePatented anywhere in the worldDescribed in a printed publication (including the Web)
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Who’s an Inventor?Who’s an Inventor?Who’s an Inventor?Who’s an Inventor?
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Who’s an Inventor?Who’s an Inventor?Who’s an Inventor?Who’s an Inventor?
One who contributes, in an inventive manner, to the subject matter of at least one claim in the patent.
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Who Can Get a Patent?Who Can Get a Patent?Who Can Get a Patent?Who Can Get a Patent?
The First to Invent Based on Date of Conception (in US)
Can be Single Individual, or Multiple Individuals Working Together (co- or joint-inventors)
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Foreign PatentsForeign PatentsForeign PatentsForeign Patents
First to FileAbsolute Bar if Prior Public DisclosurePatent Cooperation Treaty (PCT) Filing
12 Months After US Filing
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PatentsPatentsPatentsPatents
Patents -- 35 United States Codes Protects: inventions (utility and design) and
discoveries of “machines, processes, manufacture & composition of matter”
Duration: 20 years (14 for designs) Exclusive right to: prevent using, making,
selling Must be: new + nonobvious +
useful/ornamental NOTE: unlike other IP, no right until PTO issues
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Financial ObligationsFinancial ObligationsFinancial ObligationsFinancial Obligations
$70K US$150K International (typical)$750 Maintenance fee unless
abandoned
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CopyrightCopyrightCopyrightCopyright
17 United States Codes Protects: works of authorship
e.g., text, graphics, software Duration: author’s life + 70 years (95-120
years for works-for-hire or anonymous works) Exclusive right to: copy, distribute, display,
perform, derive Must be: original + fixed in tangible medium Begins: immediately
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TrademarkTrademarkTrademarkTrademark
Trademark -- 15 USC 1051 - 1127; 19 USC 1526
Protects: trade & service marks e.g., name or symbol for a company, product, or
service Duration: until abandoned Exclusive right to: prevent confusingly similar
uses / prevent dilution of famous marks Must be: distinctive + actually used
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IntellectualIntellectual Property - statutesProperty - statutesIntellectualIntellectual Property - statutesProperty - statutes
Digital Millennium Copyright Act (DMCA)(10/98)
DMCA updates copyright law in response to the computer age. Protects ISPs from some liabilities for user
acts. Adds 17 USC 1201 to outlaw circumvention of
technology that protects copyrighted work. Adds 17 USC 1202 to outlaw tampering with
Copyright Management Information.
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IntellectualIntellectual Property - statutesProperty - statutesIntellectualIntellectual Property - statutesProperty - statutes
Anticybersquatting Consumer Proctection Act Nov. 1999 law / 15 USC 1125(d)
unlawful to have bad faith intent to profit from another’s mark, and register, traffic in, or use a domain name that
is confusingly similar to a distinctive mark or dilutive of a famous mark
(without regard to type of goods or services) Statutory damages up to $100,000
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IntellectualIntellectual Property - statutesProperty - statutesIntellectualIntellectual Property - statutesProperty - statutes
Trade secrets -- N.C.G.S. 66-152 et seq.
Protects: secret business and technical info Duration: until disclosed Exclusive right to: prevent others from
misappropriation ( taking or using it) Must be: commercially valuable + subject to
effort to keep it secret + not widely known or readily ascertainable by others
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Business Use of Intellectual Business Use of Intellectual PropertyProperty
Business Use of Intellectual Business Use of Intellectual PropertyProperty
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Business use of IPBusiness use of IPBusiness use of IPBusiness use of IP
Perform legal groundwork for your own IP - register ©, register tm, file for patents
Audit to discover any areas where your business may infringe IP rights of others
Block competitors from technological progress
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IP litigationIP litigationIP litigationIP litigation
Lawsuits over IP are business strategy for some companies.
Cross-licensing of patents is crucial in many industries (e.g., computer chip design)
Where does one patent stop and the next start?Average cost to challenge a patent: $1.2 millionLawsuits over IP rights may create barrier to
entry, esp. in fast developing technology
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IP litigationIP litigationIP litigationIP litigation
Financing can evaporate when Internet company is sued for copyright violation
July 2000 - RIAA and MPAA sue Scour for copyright infringement (like Napster suit)
July 2000 - court rules against Napster July 2000 - venture capital flees from ScourIn Sept 2000 Scour lays off 2/3 employeesIn Oct 2000 Scour files for bankruptcy
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Hot Issues -- Business Hot Issues -- Business Method PatentsMethod Patents
Hot Issues -- Business Hot Issues -- Business Method PatentsMethod Patents
State Street Bank & Trust v. Signature Financial Group
SFG had patent on “Hub and Spoke” data processing method for pooling mutual funds
old Supreme Court law: no patents for laws of nature, natural phenomenon, and abstract ideas.
Math algorithms and business methods were old judicial exceptions to patentability
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Hot Issues -- Business Hot Issues -- Business Method PatentsMethod Patents
Hot Issues -- Business Hot Issues -- Business Method PatentsMethod Patents
State Street Bank & Trust v. Signature Financial
But now: math algorithm that transforms data into a useful result is not an “abstract idea”
Under statutes, a “process” is patentable, and a “method” is one form of “process”
So, SFG’s computer method for tracking investment info is patentable
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Hot Issues -- Business Hot Issues -- Business Method PatentsMethod Patents
Hot Issues -- Business Hot Issues -- Business Method PatentsMethod Patents
Reaction to State Street
Panic that business method monopolies would kill eCommerce
Concern that PTO would miss “prior art”Rush to file business method patentsCalls for legal reform
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Hot Issues -- Business Hot Issues -- Business Method PatentsMethod Patents
Hot Issues -- Business Hot Issues -- Business Method PatentsMethod Patents
NY Times reaction to State Street 3-12-00
“[T]he patent system is in crisis.” “A … threat to the digital economy.” “The patent office has ... become a ferocious
generator of litigation; and many technologists believe that it has begun to choke the very innovation it was meant to nourish.”
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Hot Issues -- PatentsHot Issues -- PatentsHot Issues -- PatentsHot Issues -- Patents
The Rush to File
Over 150,000 patents issued in 1998200,000 expected for 2000
1990 patent royalties = $15 billion1998 patent royalties = $100 billion
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Hot Issues -- PatentsHot Issues -- PatentsHot Issues -- PatentsHot Issues -- Patents
The Rush to FileInternet-related patents:
1995 = 1651999 = 3,312
1997-99: 61% increase in patents issued1997-99: 800% increase in Internet patents
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Hot Issues -- PatentsHot Issues -- PatentsHot Issues -- PatentsHot Issues -- Patents
The Rush to File
~4000 software patents in 1992-93~40,000 in 1998
> 50% of patent examiners have less than 2 years on the job
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Hot Issues -- PatentsHot Issues -- PatentsHot Issues -- PatentsHot Issues -- Patents
Business method patents issued for:reverse auctionsInternet sales of music and videopaying computer users to view adspaying online with credit cards“associates” program - % for Web referralseven hyperlinking!
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Is “Business Method” Exception Is “Business Method” Exception Good Law?Good Law?
Is “Business Method” Exception Is “Business Method” Exception Good Law?Good Law?
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Hot Issues -- PatentsHot Issues -- PatentsHot Issues -- PatentsHot Issues -- Patents
Criticism from Stanford’s Larry Lessig: What is "novel," "nonobvious,“ or "useful" is hard
enough to know in a relatively stable field. In a transforming market, it's nearly impossible….
On average it takes $1.2 million to challenge the validity of a patent, which means it is often cheaper simply to pay the royalties than to establish that the patent isn't deserved.
“Bad patents" thus become the space debris of cyberspace. Nowhere is this clearer than in the context of business-method patents.
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Hot Issues -- PatentsHot Issues -- PatentsHot Issues -- PatentsHot Issues -- Patents
Criticism from Stanford’s Larry Lessig: Awarding patents of that type siphons off
resources from technologists to lawyers – from people making real products to people applying for regulatory privilege and protection. An increasingly significant cost of Net startups involves both defensive and offensive lawyering – making sure you don't "steal" someone else's "idea" and quickly claiming as yours every "idea" you can describe in a patent application.
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Hot Issues -- PatentsHot Issues -- PatentsHot Issues -- PatentsHot Issues -- Patents
Response from the US PTO:
Public outcry was so great that in March 2000, the PTO published a Business Methods Patent Action Plan
Patent Office promised to review business method applications more thoroughly
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Hot Issues -- PatentsHot Issues -- PatentsHot Issues -- PatentsHot Issues -- Patents
Response from Congress: Business Method Improvement Act of 2000
bill was introduced in October 2000creates presumption that computer business methods are “obvious” (not patentable)
lowers standard of proof required to overturn a business method patent
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Hot Issues -- PatentsHot Issues -- PatentsHot Issues -- PatentsHot Issues -- Patents
Bottom Line for Digital Enterprises Patent your own novel, nonobvious, useful
business methods (or make them public) Establish that other methods you use are either
not new (already known or used by the public), or, obvious
Acquire license for methods patented by others
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Hot Issues -- Domain names & Hot Issues -- Domain names & TrademarksTrademarks
Hot Issues -- Domain names & Hot Issues -- Domain names & TrademarksTrademarks
Anti-cybersquatting law
Metatags and keywords
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Hot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyright
Deep hyperlinksSite A may link to a page several levels inside Site B. Site B provides key content but loses promotional benefits of user going through its other pages.
E.g., Tickemaster has exclusive right to sell tickets to certain events. It offers them for sale on its Web site.
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Hot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyright
Deep hyperlinks Ticketmaster sued Microsoft for linking to event
pages within the Ticketmaster site - case was settled confidentially.
Next Ticketmaster sued Ticket.com for same thing. Ruling in March 2000:
“hyperlinking does not itself involve a violation of the Copyright Act”
.
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Hot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyright
Deep hyperlinks“deep linking by itself (i.e., without
confusion of source) does not necessarily involve unfair competition.”
Also, court held that taking factual information from Ticketmaster’s web pages and putting it on Ticket.com was not a copyright violation.
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Hot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyright
Linking to infringing material -- held to be contributory infringement in one case:
Intellectual Reserve v. Utah Lighthouse Ministries (1999) - federal court enjoined web site operator from providing addresses of other web sites that contained infringing copies of the Mormon Handbook.
The Intellectual Reserve case raise questions offree speech rights on the Internetthe very ability to link, and therefore have a World Wide Web
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Hot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyrightHot Issues -- copyright
FramingWeb site A links user to Web site B, but “frames” the content with info from Web site A.
No clear court decisions. Possible infringement of copyright or trademark, and commercial misappropriation.
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Copyright and DMCACopyright and DMCACopyright and DMCACopyright and DMCA
What about music file sharing?
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Napster was invented by Shawn Fanning, a 19 year old college dropout.
The program allows users to swap MP3 music files on the Internet - for free.
Napster did not copy any files itself. Just an index of where to find digital songs.
38 million users
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Music industry sued for contributory infringement.
Napster argues the “Betamax defense” - not liable for providing device used by others to infringe, if device has substantial legit uses
Preliminary ruling favored music industry.
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Nov 2000 Napster enters deal with music giant Bertelsmann (BMG) to convert to a subscription service and presumably pay license fees to © owners
Will users turn to other free services?Will the Secure Digital Music Initiative
protect copyright?
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DMCA Title I“No person shall circumvent a technological measure that effectively controls access to a [copyrighted] work”
Also unlawful to make or distribute a device, technology, or service with primary purpose of circumventing copyright or access controls
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DMCA Title I -- main case is 2600 Enterprises DeCss program removes the Content Scrambling
System from DVD movies. Created by 15 yr old. Hacker web site 2600.com posted DeCSS and
linked to other sites with it. Movie studios sued 2600 because DeCSS
promoted unauthorized copying of movies. MPAA: losses of $2.5 billion/year to DVD pirates.
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DMCA Title I -- main case is 2600 Enterprises
Court ruled that posting DeCSS violated DMCA law against trafficking in technology that circumvents copyright protections.
And that intentionally posting links to other sites with DeCSS was equally a violation.
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Digital Millennium Copyright Act (10/98)
DMCA Title II protects interactive computer service providers (e.g., ISPs) from liability for infringing acts of users. Conditions:
ISP must act as content carrier, and not a provider of content.
ISP must have no actual knowledge of infringing content (or act promptly when it gains knowledge)
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Digital Millennium Copyright Act (10/98)
ISP must provide info to users; designate an agent to receive notice of infringing material
Must remove material when notice of infringement is given
No liability of ISP to the user (in case of wrongful removal) or to the copyright owner
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More informationMore informationMore informationMore information
Harvard online course about Intellectual Property in Cyberspace
http://eon.law.harvard.edu/property/
Berkeley online courses on cyberlaw, intellectual property, etc.
http://www.law.berkeley.edu/institutes/bclt/courses/