WPC^,OOnt> -- It's a tiny bit of matter WP_TV48761405WPTVWPC2WPTVWPC2N, the object appears. That matter is the electron, and scientists will mark its first century in celebrations this weekend.

Th  HH  2$HH  Geneva  <Px443!#4$*$$*$ KK  Geneva  Geneva .,6 Geneva   i Bol Geneva  i Bol Geneva Corel WordPerfect8{WP}10nt jp`ed0pa$$ $In 柠qID @mn $}6,{0i6B$y&}C:{r0q # 7pllt痩FTt-T/Lag˨ R $h0tryP # a`$PkI A`3:elg ocCErknG7@hpC2MggPreIfYYgpp**gC2dt<hug oc]]_u` **drxtj**xtjP**elxtk**agk**owns**WobS!Vmm_vlXT|{WP}01C'  '0#Verdana  04R3.5.2'3.5.2, 1996 Corel Corporation Limited,R3.5.2Created with WordPerfect 3.5.2. +#K xHH(FG(HH(d'hOOarPSetJPJobVStylbversnSTR TStlwPrvWDatPtPtaa ( 9aD qa4 PHKa`{WP}01{WP}21{WP}10'  '{WP}10 <<KK ..,,..,,#Verdana ۪Ы#Courier'  ' $$''$vΪ%s,HH##' ',{WP}10 <<KK #Verdana ۪{WP}21  HHHH  22$$ #Geneva  ..,,..,,          Geneva #Verdana Ы#Courier   1  0 ' '0Copyright  1997 Margaret Jane Radin   Ы INTELLECTUAL PROPERTY0$7 $$''0kΪ   ЫSPRING 1997 CLASS NOTES 0@S@@'  '0̪  Ы(Version 4: Complete)0YeYY'  '0eq$q}'  '$v PROFESSOR MARGARET JANE RADIN0 }}}'  '0STANFORD LAW SCHOOL 0  '  '0*  H6.*ΪHH66HH$$ЫJ    $JܪЫIP 97 Class No. 1$ '  '$0ˀ '  '01. Today will be intro. to IP should we call it intellectual property orintangible property?$(a) Historically there are problems with both these concepts$$$(i) property was thought of as physical objects [remember+$how seisin had to attach to something?], so how can there be +7$property if there's nothing tangible for it to attach to? 7C CO$$(ii) property was thought of as "outside" the self, so how O[$can something "inside" the self, a mental production, become [g$property? How can there be property in ideas?gss$(b) Today we might no longer have conceptual difficulty with the notion ofintangible property, but it still appears peculiar to think of mental productions asproperty. Are we to pay each other for every idea we exchange with each other? Is ameter metaphorically running somewhere in everyone's head? If not, what is thedividing line between mental productions that cannot be owned and those that can?!"$$(i) This is the most urgent metaquestion in the IP field:#$what kinds of information productions are unowned/unownable$$[in the public domain/in the commons] and what kinds of%$information productions are owned/ownable?&'$$$If no knowledge and information is in the public($$domain for people to appropriate freely and use, then)$$no new knowledge can be produced (so we won't have any*'$$thing for IP to attach to)+'3,3?$$$But if all knowledge and information is in the-?K$$public domain for people to appropriate freely and use,.KW$$then we might have underproduction of new knowledge/Wc$$(because arguably people won't produce it unless they0co$$can reap the benefits) 1o{!2{$$(ii) Do you think there will be a bright line answer to where"3$the line is drawn between IP and the public domain?#4$5$$(iii) This is the Big Question that recurs in all the fields that westudy in this course%7&82. Text and materials: '9(:$(a) Casebook: Intellectual Property in the New Technological Age [Lemley,Menell, Merges] [Little Brown, in press])<$*= $$$galley proofs are being made available shortly+> $$,?#$$$in the meantime use MS [copy center has]-@#/.A/;$(b) Statute book: Unfair Competition, Trademark, Copyright and Patent: Selected Statutes and International Agreements [Goldstein, Kitch, Perlman, eds. ,Foundation Press][bookstore has]/D;_J0E_k _9Ek $J$(c) Probably a few handouts [later]F{G3. Syllabus: available next week [we will proceed through the first three chaptersthat you have]IJ$$Tomorrow: 21 through 236KL4. Grade issues: MN$Regular exam will be given [open book] O P$No grades for class participation Q  R 5. Communications: S#T#/$my email addressU/;V;G$class email list: law324@lists.stanford.edu WGSXS_$$To subscribe, send a message to majordomo@lists.stanford.edu Y_k$$containing the line:Zkw[w$$subscribe law324 username@leland.stanford.edu \]6. What's in this course? This is a whirlwind survey course....^_$(a) We'll concentrate on domestic (U.S.) law, state and federal`$$a$[In this field this curricular allocation makes less andb$less sense. You are hereby urged to take International IP asc$well.]de$(b) Four basic components: f!g$$trade secret [part of a number of protections based on state$$$law (developing out of tort law) [ also includes unfair$$$competition; right of publicity]"j7#k7C$$trademark$lCO%mO[$$patent&n[g'ogs$$copyright(ps)q$(c) These four fields are summarized in the chart on pp. 133 135 *r$$+s$[Very roughly, patent is the only one that covers [certain kinds of] ideasper secopyright covers expressions of ideas; trade secret,u$covers [certain kinds of] secret ideas; and trademark covers [certain-v$kinds of] labeling of products].w/x$(d) What newspaper stories have you seen recently about these issues?0y$$1z$$trade secret (General Motors v. Volkswagen)2{3|$$trade mark (Juice Club problem?)4}J5~' 9~' $J$$patent (EData)7CCO$$copyright (Scientology cases)(Walt Disney v. day care centers)O[[g7. In this country, the "policy" arguments underlying IP are heavily economic. Economic analysis of a sort has always been the basis of this field. [Contrast withthe situation re policy/theory of tangible P][Note: not true in Europe]g$Why might this be so?$$Possibly because the Constitutional grant of power to Congress toestablish patent and copyright said the purpose is "to promote the Progress ofScience and useful Arts" [Art I cl. 8 (114)]   $$ And possibly because the conceptual problems with intangibleproperty or property in mental products don't exist in the  $economic theory [though it does have other problems, as we'll see]  8. So let's take a look at the economic story that gets applied to IP. [I'll returnto noneconomic theories later in the course] First recall the characteristics ofeconomic theory:33?$$maximizing?K$$collectivistKW$$consequentialistWc$$positivistco$$empirical o{{9. Recall the standard economic story re P in landit has two primary features:$$(1) [Behavioral Premise: Necessity of Monetary Incentive] People will notinvest resources to put land into productive use unless they have incentives to doso. The appropriate incentive is that returns on the productive use should beinternalized to the one who made the investment;$ (2) [Factual Premise: Scarcity/Depletability of Desired Resources] Everyonewants to grab scarce/depletable resources before others can grab them. This leadsto TOC. To avoid TOC, the costs must be internalized to one owner [exclusion isnecessary to husband scarce resources]  10. Can IP be understood with the same economic analysis used for tangible P? [No,because Premise #2 doesn't apply]//;$$$$If you rip off my crops I no longer have them and$$$no longer can reap the benefit from them; but if you rip$$$off my ideas I still have them and can use them;__k$$$$$notion of information as public goods kw$$$$$[11617} $$!w"11.What is the effect of this difference on the economic analysis of IP?#$$(a) Must rely exclusively on the behavioral premise and creation of incentives%$$$$&$(b) In every case or class of cases the benefit of incentivecreation orreinforcement has to be weighed against the costs of monopolization'J( ׀9 $J$$I.e., once the P rights exist, in the case of real P they can stillpromote benefit because of the danger of TOC; but in the case of IP once the Prights exist it's all downhill (artificial restriction that causes costs and doesn't avoid any)  # # /$$$Result: IP is always trying to do a complex balance / ;$$(cost/benefit analysis) involving balancing the plus of$$information that will be created because of granting P versus$$the minus of information that will not be disseminated and $usedbecause of the restrictions caused by granting P ; k k w$$$Do you think there's an algorithm or a hard and fast w $$rule for this balance? [what kinds of issues will you expect $$to find embedded in IP doctrines?]  $$$  $(c) For example, describe the standard economic story re Copyrights: [toolittle will be published unless first publishers can have a monopoly to excludesubsequent publishers for X years]  $$  $$$Is this true? [Depends on empirical factors? which  $$ones?] $$$$ $$$esp. these:    $$$$ extent of excess of first copy cost over  $$$$$subsequent copy cost;  +$$$$ extent of lead time to first + 7$$$$$publisher;  7 C$$$$what is X?;  C O$$$$extent of costs of implementing O [$$$$$a P system in this field [ g g s$$$[Note Breyer's famous article, cited in n. 2 on 124] s $  $(f)Describe the standard economic story re Patents: [too few useful$$inventions will be created unless inventor can have a monopoly$$on use for X years]  $$$Is this true? [Depends on empirical factors? which$$$ones?]   $$$What should we make of George Priest's comment (note  $$$3 on 124)? ! " V#   -  $'  'VIP 97 Class No. 20  + '  '00 + 7 + '  '01. What is a trade secret? [information of monetary value to your business whichactually is a secret] 7 O$ O [$Examples: formula for Coke; Thoreau family pencils... [ g g s2. What policy argument(s) might support giving you legal remedies against use ofyour trade secret by your competitor? [How do doctrinal features fall out of thesearguments?] s  $(a) Trade Secret Proposition 1: Too little information enabling  business to run more efficiently and produce valuable goods for society  will be produced if competitors can appropriate it after production and use it tocompete against you [benefit internalization]    $$$$legal doctrine paying attention to this  $$$might require that the protected information actually $$$add value [how hard did you work to produce it? how $$$hard did you try to keep it secret?]    $(b) Trade Secret Proposition 2: Too little social welfare results if businessenergies are wasted in costly efforts to steal other people's productions and costlyefforts to protect against such thefts [undermining necessary cooperation/fosteringarms race]  K K W$$$$legal doctrine paying attention to this might W c$$$hold liable those who acquire secrets by improper means$$$[breach of fiduciary relationship; industrial espionage] c { { $(c) Why do casebook authors refer to 2 theories of trade secret protection?  $$tort: wrongful act of defendant [prevent arms race]  $$property: ownership right of plaintiff [achieve benefit $$$internalization]  $In economic theory, these two tend to coalesce. If you're tortoriented,you might lay more stress on the nature of the wrongful act by defendant; if you'reproperty oriented, you might lay more stress on the contours of the ownership/possessory right in plaintiff    #3. Look at this the other way:! # /" / ;$$[AntiTrade Secret Proposition 3]: It is not fair or efficient to$let one business keep to itself the better or more costeffective way ofdoing something# ; _$ _ k$$$Are there circumstances where this proposition is true? Thesecircumstances will give rise to legal doctrines excluding them from trade secretprotection [independent discovery, including% k $reverse engineering]& ' 4. Can some things be covered both by trade secret and by patent? How would youchoose one or the other? [come back to this question]( J)  9 $J5. If an entrepreneur kept valuable information secret forever, no need would arisefor a legal remedy.   $(a) It might be very expensive to keep information absolutely secret forever.It can be argued that giving a legal remedy relieves entrepreneurs from part of theexpenditures they would otherwise have to expend to keep information absolutelysecret. [But if they don't spend enough then it won't be a secret and there won'tbe legal protection]% ;&;G$(b) In practice the secret won't be very useful if not disclosed to somepeople. But these people can become turncoats. This is how a lot of trade secretlitigation arises. There are three basic scenarios:)Gk*kw$$(1) [Changing trading partners] Disclosure by seller to gain supplycontract; later, buyer goes to competitor [or vice versa $disclosure bybuyer to get something supplied to specifications; later, supplier makes samething for a competitor (as in Metallurgical case)].w/$$$$also joint venture partners 0 1 2$$(2) [Changing employers] Disclosure by employer to employee; later,employee goes to competitor [as in GM vs. Volkswagen case] 4 56$$(3) [Skulduggery] Industrial espionage786. Now look at doctrinal formulation: What's a trade secret?9+:+7(a) Rest. Torts: any information "used in one's business" which gives its owner"an opportunity to obtain an advantage over competitors who do not know or use it,"so long as the information is in fact a secret [sec. 757 comment b, quoted atbeginning of ch. 2A2][quoted in Metallurgical v. Fourtek]>7g?gs$(b) Rest. 3d Unfair Comp. (Stat Supp (15))sec. 39: "any information that canbe used in the operation of a business or other enterprise and that is sufficientlyvaluable and secret to afford an actual or potential economic advantage over others"BsC$(c) Uniform Trade Secrets Act (Stat Supp (35) sec. 1(4): "information. . .that (i) derives independent economic value. . . from not being general known to,[and not being readily ascertainable by proper means by,] other persons who canobtain economic value from its disclosure or use, and (ii) is the subject of effortsthat are reasonable under the circumstances to maintain its secrecy" [also in ch. 2  A2]IJ7. What are the elements of the c/a for misappropriation of trade secret? [Look atUniform Act sec. 1(2), ch. 2A2 and Stat Supp (3435)] According to UTSA, thereare three basic elements:MN'$(a) Information must eligible kind of information [and] be secret$(enough) [not generally known]P'?Q?K$(b) Wrongfully acquired by defendantRKWSWc$$breach of contract; breach of implied fiduciary duty; skulduggeryTco Uo{$(c) Plaintiff took reasonable precautions to keep secretJ!V{ {9V $JܿW[Query whether the third element is separate? Maybe first element will take care ofit?]YZ8. Consider Metallurgical Industries v. Fourtek (ch. 2B1) [included in bookbecause judge tried to give definition of trade secret]:\]$(a) Facts: Metallurgical Industries was in the business of reclaimingtungsten carbide for reuse. In the 1970's it changed from the coldstream processto the zinc recovery process (involving exposing the tungsten carbide to zinc in afurnace at high heat). Metallurgical ordered two zinc recovery furnaces from Therm  OVac, dealing with its representative, Bielefeldt.b'c'3$Metallurgical Industries modified the furnaces to make them work better[inserted chill plates to create a temperature differential; replaced the one largecrucible with several smaller ones; used unitary instead of segmented heatingelements; installed a filter to keep zinc particles from clogging the vacuum pumps]. ThermOVac went bankrupt and four of its employees, including Bielefeldt, foundedFourtek. In 1980 Fourtek built a zinc recovery furnace for Smith International whichincorporated Metallurgical's improvements. j3 k$Metallurgical sued Smith International and Bielefeld and the other Fourtekprincipals. m n$(b) The trial court granted defendants' motions for directed verdicts. Onwhat grounds? p q$$Metallurgical's information wasn't a trade secret, sor$Bielefeldt and co. were free to use it. Why did district cts$think it wasn't a trade secret?tu $$$$zinc recovery process was well knownv $$$$information obtained by Bielefeldt was too$$$$$generalx/$$$$elements of the modifications were well knowny/;$$$$no protection for "negative knowhow"z;G$$$$not enough effort to keep secret (disclosure to{GS$$$$$Consarc and La Floridienne) [Who were|S_$$$$$they? Consarc was a proposed supplier;}_k$$$$$La Floridienne was a licensee]~kww$(c) The appellate court reversed (i.e., issue of whether this was a tradesecret should go to jury). Why did appellate ct think it could qualify as a tradesecret?$$Adopts 1939 Rest. Torts definition$$$$Particular modifications unknown in the industry$$ $$Enough efforts to keep secret; limited disclosure OK if$$furthering economic interests [what kind of evidence here?]!$$"$$Plaintiff shows that info. has value and that it#$$expended $ to develop it [what kind of evidence here?]$%+$$$Why should plaintiff have to show these two things?&+7$$$[What is ct's rationale for these requirements?]J'7C 79C $J$$$$$S_$$$$$$["It seems only fair that one should_k$$$$$be able to keep and enjoy the fruits of hiskw$$$$$labor. . . ."]w$(d) When this goes to the jury, how will it come out?9. If Smith got info. from Bielefeldt but didn't know the info. came fromMetallurgical or that Metallurgical was trying to keep it secret, what result? [seeUniform Act sec. (2)(ii)(b)(I) and (III)]  10. Question in Note 2: What if defendants had acquired information aboutmetallurgical's process from Consarc or La Floridienne?  11. Problem 21: [B is not liable; once B has the info., can either of the othersbe liable?]  12. Suppose the info. on how to modify the furnaces was contained in a scientificpublication, but Smith obtained it from Bielefeldt (who took it improperly fromMetallurgical) rather than from the "proper" source is Smith liable?CCO$$Rohm & Haas: Must information actually be "known" toO[$competitors to obviate existence of secret, or merely be[g$"readily ascertainable through proper means"?gss$$$Uniform Trade Secrets Act says "readily ascertainable$$by proper means" (Supp 35)$$$But old Restatement rules said actually known [and$$some states including California have adhered to the old$$rules by deleting "readily ascertainable" in the Uniform$$Act$$What's the difference between these two?13. [So much for actual existence of secrecy][We'll do "improper means"later][Next, consider what counts as reasonable efforts to maintain secrecy JudgePosner in Rockwell Graphic Systems v. DEV (ch. 2B2)'$(a) Facts: Rockwell manufactured printing presses. It outsourced productionof spare parts for old presses. Engineering drawings for those parts were valuable(not easily reproduced by those who might need to repair press). Fleck and Pelosoworked for Rockwell and had access to the drawings. They later went to work forDEV, a competitor (Fleck is the president). Peloso was fired from Rockwell after asecurity guard caught him removing drawings from Rockwell's plant. In discovery,100 of the drawings turned up in DEV's possession, and DEV can't prove they obtainedthem properly. '!$Lower court ruled that Fleck and Peloso were off the hook (granted summaryjudgment for defendants) because these drawings weren't really trade secrets,because Rockwell hadn't made enough effort to keep them secret."#$(b) What precautions did Rockwell take? What further precautions could theyhave taken?$%$(c) How does Judge Posner approach the Q of whether their precautions mightbe sufficient (i.e. can't be held insufficient as a matter of law)?J& 9  $Jܿ$$precautions as evidence that defendant must have'$obtained them improperly [focusing on wrongful act]'33?$$precautions as evidence that plaintiff's secret has?K$high value [focusing on benefit internalization]KWWc$$$would be windfall to plaintiff if "permittedco$$to recover damages merely because the defendant o{$$took the secret from him rather than from the {$$public domain as it could have done with impunity" $$[UTSA position and not Restatement position]  $Question is whether the additional benefit in security would have exceed thecost of more security efforts [for jury]$$$"If trade secrets are protected only if their owners take$extravagant, productivityimpairing measures to maintain their secrecy, theincentive to invest resources in discovering more efficient methods ofproduction will be reduced, and with it the amount of invention."   #$$V#/ # / $'  'VIP 97 Class No. 30?K?'  '00KWK '  '01. Recall elements of cause of action for misappropriation of trade secret:Wcco[Look at Uniform Act sec. 1(2), ch. 2A2 and Stat Supp (3435)] According to UTSA,there are three basic elements:o$(a) Information must eligible kind of information [and] be secret$(enough) [not generally known]$$[not readily ascertainable by proper means]  $(b) Wrongfully acquired by defendant  $$breach of contract; breach of implied fiduciary duty; skulduggery $(c) Plaintiff took reasonable precautions to keep secret  2. Last class we talked about existence of (enough) secrecy. [We'll do "wrongfullyacquired" later][Next, consider what counts as reasonable efforts to maintainsecrecy Judge Posner in Rockwell Graphic Systems v. DEV (ch. 2B2)(47);;G$(a) Facts: Rockwell manufactured printing presses. It outsourced productionof spare parts for old presses. Engineering drawings for those parts were valuable(not easily reproduced by those who might need to repair press). Fleck and Pelosoworked for Rockwell and had access to the drawings. They later went to work forDEV, a competitor (Fleck is the president). Peloso was fired from Rockwell after asecurity guard caught him removing drawings from Rockwell's plant. In discovery,100 of the drawings turned up in DEV's possession, and DEV can't prove they obtainedthem properly.G$Lower court ruled that Fleck and Peloso were off the hook (granted summaryjudgment for defendants) because these drawings weren't really trade secrets,because Rockwell hadn't made enough effort to keep them secret.$(b) What precautions did Rockwell take? What further precautions could theyhave taken?$(c) How does Judge Posner approach the Q of whether their precautions mightbe sufficient (i.e. can't be held insufficient as a matter of law)? +$$precautions as evidence that defendant must have +7$obtained them improperly [focusing on wrongful act] 7C CO$$precautions as evidence that plaintiff's secret has O[$high value [focusing on benefit internalization][g gs$$$would be windfall to plaintiff if "permitted!s$$to recover damages merely because the defendant"$$took the secret from him rather than from the#$$public domain as it could have done with impunity"$$$[UTSA position and not Restatement position]%&$Question is whether the additional benefit in security would have exceed thecost of more security efforts [for jury]'($$$"If trade secrets are protected only if their owners take6 ߀9  $6$extravagant, productivityimpairing measures to maintain their secrecy, theincentive to invest resources in discovering more efficient methods ofproduction will be reduced, and with it the amount of invention."+$[(d) How does Judge Posner approach the question of whether these drawingsreally have ceased to be a secret, even if the precautions were reasonable?]+C CO3. Come back to "wrongfully acquired." This has two parts: (1) either breach ofduty or (2) "improper" means [skulduggery]. Breach of duty in turn has two parts,either (a) breach of express contract or (b) breach of implied fiduciary duty.#Os$sConsider "improper" means: DuPont v. Christopher (63)%&$(a) What methods of industrial espionage have you heard about? ' ($$bribe employees to give you documents, pictures, computer )$data bases * +$$bug conference rooms,-$$listen in on cell phone conversations./$$use listening equipment in parking lot 01$$hack into computers and download data2'3'3$$intercept and copy email43?5?K$(b) What happened in DuPont?6KW7Wc$$Facts: DuPont had a secret process for producing methanol. A8co$new plant was under construction and roof wasnt on yet. X, an unknownperson or corporation, hired the defendants in this case:o$to fly over and take photos. ;<$$Who should DuPont sue? X. But what if it cant find out=$who X is?> ?$$In this suit DuPont sued the people who took the photos,!@$claiming wrongful appropriation of its trade secret (63)."A$During the litigation the aerial photographers wouldnt#B$answer Qs about who X was. DuPont moved to compel them$C$to answer.%D&E $$Then what? [Do they have to answer? Depends upon whether DuPontstates a valid claim against them.....'G #(H#/$(c) Argue for defendant: DuPont has no valid claim against us, because...)I/;*J;G$$we didnt breach any confidential relationship+KGS$$,LS_$$we didnt do anything illegal-M_k.Nkw$(d) Ct applies Texas law, which had adopted Rest. 757 (see 64)/Ow0P$$ improper means is independent of the1Q$requirement of breach of confidenceJ2R 9R  $JܿS$$$cf. Unif. Act (2) (ii) (A)[Supp 34, (2)(ii)(A)]TU$(e) So what is improper means?VW$$independently illegal? [e.g., trespass?] XY $$$[see comment f, (65)][cf. Unif. Act 1(1)]Z  [#$$immoral? (66) \#/ ]/;$$inefficient to protect against? (66) ^;G _GS$(f) What if X didnt hire the Christophers but as independent entrepreneursthey took the photos and then shopped them around to DuPonts competitors? [Cancompetitor Y safely purchase the photos?]bSwcw$$Is competitor Y acquiring by improper means?de$$See Unif. Act 1(2)(i)fg$(g) What if competitor observes your product and deconstructs it, then buildsa copy? [see note on reverse engineering (67n.2)][also locksmith case Fanberg][Why is reverse engineering exempt?]jk$$[Is what the Christophers did just a method of viewingl$the competitors product?]mn$$$Trying to view a "process," which is harder thano$$viewing a "product" [see note 2 (67)pq+$$[So how "devious" can you be, as long as you don't commit a $tortsuch as trespass? (1) use information overheard in bar acrosss+C$the street from the plant? (2) follow trucks leaving the plant totCO$see where they come from to learn what they're supplying? (3)uO[$carefully read classified ads to see what employees are needed tov[g$deduce what company is doing? (4) get investigative reporter to do wgs$a story on it? (5) pretend you're an investigative reporter doing a!xs$story?]"y#z$$Problem 26 (68): Suppose Christophers could have${$"readily ascertained from a proper source"? [BTW, in this problem%|$does duPont have a c/a against the EPA for destroying its&}$trade secret?][see Monsanto (62)]'~(4. So much for skulduggery (Part I of "wrongfully acquired.") Now Part II: breachof duty/confidential relationship)*$(a) Duty of nondisclosure can be express (contractual). Get people to signNDA's before they see any of your confidential drawings, documents, etc. (See,e.g., (101).)+,'$(b) Under what circs will duty of nondisclosure be implied? Consider Smith v.Dravo (69)-'?.?K$Facts: Mr. Smith invented shipping containers. Some aspects were patentedand some were kept as trade secret. His business was just getting started when he6 W9 K $6unfortunately died. His estate wanted to sell the business to pay inheritancetaxes. K$Defendant (operator of a barge line) negotiated with Cowan, the estaterepresentative, about buying the business. Cowan sent detailed information; also,defendant's representatives traveled to Sturgeon Bay , Wisconsin, and viewed theplant. $Negotiations broke down when defendant refused to accept any of plaintiff'soffers. The day after the final negotiation, the defendant informed plaintiff'scustomer that it would supply shipping containers itself. It made them 4 inchesnarrower so they wouldn't interoperate with plaintiff's. It sold them to customerson lists disclosed by the plaintiff during the negotiations.   $Cowan didn't get defendant to sign any agreement promising not to discloseinformation before he disclosed everything to defendant.  3 3 ?$(c) Ct holds for plaintiffwhy? [(71) understood disclosure was forlimited purpose; trust][cf. Rest. 3d Unfair Comp. sec. 41 (73)]  ? W  W c$(d) Argue for defendants?   c o  o {$$Cowan didn't take reasonable precaution to protect this bec.  { $asking for NDA is cheap  $$Defendant didn't appropriate trade secret because it $made changes in the product [see (74 n. 6)]  $$No trade secret here in the first place? [see (72) notes 12]   5. Consider more generally methods of "proper" acquisition (that negate the 2delement of the c/a):  $(a) Holder does something to lose the the secret: e.g., publication ! ! !$$analogy in real P: abandonment; dedication to public!!#!#!/$(b) Holder does nothingcompetitor discovers it independently!/!;!;!G$$including "reverse engineering" (74)!G!S!S!_$$$what is reverse engineering? [have you reverse !_!k$$$engineered anything?] !k!w!!w!$$$no analogy in real P? [patents are more like real P in"!!$$that you own the idea no matter how someone else comes by it]#!!$!!6. Consider Chicago Lock v. Fanberg (75):%!!&!!$(a) Facts: Chicago Lock Co. (plaintiff) made tubular locks which wereespecially secure because keys are difficult to reproduce. In order to getduplicates when they needed them, customers hired locksmiths to pick the lock,decipher the tumbler configuration and grind a duplicate tubular key. Locksmithsrecorded the key code (i.e. the tumbler configuration) and the serial number of thelock when they had to do this, in case they were called upon to do it again. VictorFanberg (defendant) collected this info. from the various locksmiths and made itinto a manual which explained how to make duplicate keys for all the locks for which6 "9! $6any locksmith had done this, provided the serial number was known. He sold themanual for $49.95, and had sold 350 of them by the time of trial. Chicago Lock Co.did not grant permission for these activities.  !"S"S"_$Trial ct held: The key codes constituted a trade secret, and Fanberg acquiredthem through improper means, therefore liable for misappropriation of Chicago LockCo.'s trade secret"_"""$$What exactly did they do that was improper?""""$(b) 9th Circuit reverses:""""$$If Fanberg bought a bunch of locks himself, and ""$figured out the key codes and published them, this would not be ""$improper means. (77) [Explain?] "" ""$$But, did the individual locksmiths behave improperly ""$in transmitting the info. to Fanberg knowing he was going to collate it$and publish it? [And did Fanberg behave improperly by collating and$publishing?]"###+$$$Ct says (78) the locksmiths may have owed an implied$$duty to the customers not to disclose their key codes, but#+#C$$they do not owe an implied duty to the lock company#C#O#O#[$$$$Therefore defendant Fanberg didn't improperly#[#g$$$procure any improper activities by the locksmiths#g#s#s#$(c) 9th Circuit explains that reverse engineering is legal. If it weren't,trade secret would be more like patent monopoly. And that would be preempted byfederal patent law (79)####$$$why is it thought to be a good idea to have trade##$$secret weaker than patent in this way?####7. Consider problem 29 (80):####$(a) Is it legal to reverse engineer a product if the company doesn't knowthat's what you want it for and wouldn't have sold it to you if it knew? [onceproduct is sold on the market, anyone can reverse engineer]#$$$$(b) Can company get around this by licensing rather than selling, and makinglicensing (contract) conditional on promise that buyer will not disclose info. andwill not resell?$$? $?$K$$cf. (80n.2): can trade secret owner get user to contract!$K$W$not to reverse engineer?"$W$c#$c$o$(c) If info. is acquired "improperly" but then you add value for the public,does this excuse the tainted acquisition? [No; but why not?]$$o$%$$&$$'$$$$V($$ $|6$ $'  'VIP 97 Class No. 40$$$ǀ'  '00$$$Ӏ '  '01. Reverse engineering [cont'd]$$$$$% Chicago Lock v. Fanberg (75)[cont'd]:%%%%$(a) Facts: Chicago Lock Co. (plaintiff) made tubular locks which wereespecially secure because keys are difficult to reproduce. In order to getduplicates when they needed them, customers hired locksmiths to pick the lock,decipher the tumbler configuration and grind a duplicate tubular key. Locksmithsrecorded the key code (i.e. the tumbler configuration) and the serial number of thelock when they had to do this, in case they were called upon to do it again. VictorFanberg (defendant) collected this info. from the various locksmiths and made itinto a manual which explained how to make duplicate keys for all the locks for whichany locksmith had done this, provided the serial number was known. He sold themanual for $49.95, and had sold 350 of them by the time of trial. Chicago Lock Co.did not grant permission for these activities.   %%  %%$Trial ct held: The key codes constituted a trade secret, and Fanberg acquiredthem through improper means, therefore liable for misappropriation of Chicago LockCo.'s trade secret %% %%$$What exactly did they do that was improper? %% %%$(b) 9th Circuit reverses:%%%& $$If Fanberg bought a bunch of locks himself, and& &$figured out the key codes and published them, this would not be&&#$improper means. (77) [Explain?]&#&/&/&;$$But, did the individual locksmiths behave improperly&;&G$in transmitting the info. to Fanberg knowing he was going to collate it$and publish it? [And did Fanberg behave improperly by collating and$publishing?]&G&k&k&w$$$Ct says (78) the locksmiths may have owed an implied$$duty to the customers not to disclose their key codes, but &w&$$they do not owe an implied duty to the lock company!&&"&&$$$$Therefore defendant Fanberg didn't improperly#&&$$$procure any improper activities by the locksmiths$&&%&&$(c) 9th Circuit explains that reverse engineering is legal. If it weren't,trade secret would be more like patent monopoly. And that would be preempted byfederal patent law (79)(&&)&&$$$why is it thought to be a good idea to have trade*&'$$secret weaker than patent in this way? +''!,''2. Consider problem 29 (80):"-''+#.'+'7$(a) Is it legal to reverse engineer a product if the company doesn't knowthat's what you want it for and wouldn't have sold it to you if it knew? [onceproduct is sold on the market, anyone can reverse engineer]$1'7'[%2'['g$(b) Can company get around this by making buyer promise not to reverse6 'g93' $6engineer and disclose info. and not resell to someone who will?4'g'5''$$can't get promise not to resell (restraint on alienation)6''7''$$but, can you do it with licensing? [give buyer a license8''$to use your product with its info., rather than selling product,9''$and make license conditional on not reverse engineering it]:'';''$$cf. (80n.2): can trade secret owner get user to contract <''$not to reverse engineer? ["cts are split on this"] ='' >'($(c) If info. is acquired "improperly" but then you add value for the public,does this excuse the tainted acquisition? [No; but why not?] @(( A((+B(+(73. Go back to wrongful acquistion of trade secrets, breach of duty ofconfidentiality: the special case of departing employees (82)D(7(OE(O([ܖ Will it count as improper acquisition of trade secrets Jones leaves company A andgoes to work for company B, bring info. with him that was valuable to company A andnow will be valuable for its competitor?H([(I(($(a) Problem is this can range from taking 500 boxes of documents tomemorizing something on purpose to simply knowing it as a byproduct of one's workexperience....L((M(($$we want to prevent employees from stealing documentsN((O(($$we want to leave employees free to change jobs andP(($$practice their skills; we want to leave employees freeQ(($$to use the fruits of their learning and experienceR((S()$$$see, e.g., SI Handling (82) ["under PennsylvaniaT))$$$law and employee's general knowledge, skill,U))$$$and experience are not trade secrets"]V))'W)')3$$$this countervailing concern affects remedies asX)3)?$$well as liability [we don't want to enjoin people from Y)?)K$$working...]!Z)K)W"[)W)c$(b) Consider Informix v. Oracle: Who will win? [What questions would youwant to ask?]#])c){$^){)$$(1) Did the 11 engineers sign an agreement with Informix? What did itsay? [under contract to work for a period of time? under contract w/r tosecret information? under contract w/r to not working for competitors?] ["confidentiality agreement"#%b))Z.#$$(col. 3)]&c))'d))$$$What does employment agreement usually look like?(e)))f))$$$$confidentiality*g))$$$$invention assignment+h))$$$$noncompetition ,i)* -j* *$$$See example (101102) [come back to this: consider$$whether this is enforceable]J.l**/ *#9l*/ $Jܿm*?*K$$(2) What means did Oracle use to "lure away" the engineers?n*K*Wo*W*c$$(3) What information do the engineers have and how secret isp*c*o$it? [extended parallel server; Universal Server][research firm saysq*o*{$Informix is 1218 months ahead of the competition]r*{*s**$$$Will Informix want to give this information to thet**$$court?  u** v**$$(4) Could Informix argue that allowing the engineers to work forOracle will inevitably disclose their trade secrets, causing breach of theirconfidentiality agreements, therefore this should trump the $engineers'interest in working where they choose? z** {**$$$in general, no law against competitor hiring away |**$$employees (Diodes (85))}*+ ~+ +$$$But cf. PepsiCo v. Redmond (90) [upheld preliminary++#$$injunction preventing Gatorade/Snapple from employing+#+/$$former Pepsi manager][more often this argument is+/+;$$rejected]+;+G+G+S$$(5) What remedy will Informix ask for? [something designed+S+_$to prevent the employees from disclosing their trade secrets +_+k$see col. 3]+k+w+w+3. Now consider covenants not to compete. [Rather than just making employeespromise not to disclose trade secrets, you make them promise not to engage in anycompeting business]++++$(a) Problem is, are they enforceable? [If you work for Microsoft++once, can you be prevented from ever working for another software company anywherein the world for the rest of your life?] [If permitted, these will be limited intime and geographical scope (if relevant}++++$(b) Consider CTI v. Software Artisans (86):+++,$$$Facts: Hawkes signed agreement not to engage ,,$$in competing business for 12 months after he left!,,$$CTI. He and others left CTI and founded a new",,+$$competing company.#,+,7$,7,C$$$This was upheld under traditional "reasonableness"%,C,O$$test (867)[general rule...]&,O,[',[,g$$$Cf. New York (88): unenforceable unless needed to(,g,s$$prevent disclosure of trade secrets),s,*,,$$$Cf. California(88): unenforceable against employees+,,$$(but "reasonableness" test applies if ancillary to sale of,,,$$business)[So that's probably why Informix didn't make-,,$$their engineers sign them...].,,/,,4. Suppose employer did not make you sign either confidentiality or noncompetitionagreement. In the absence of agreement, are you free to work for competitor B usinginformation you picked upon the job at company A?J0,, ,߀9, $J$,-$(a) What factors will be relevant to deciding this question? ----$$Is the information actually secret? [Does absence of K show--+$lack of precautions to keep secret?]-+-7-7-C$$Is there an implied duty to keep secret?-C-O-O-[$$[How much will you be prevented from practicing your professionor trade?] -[-s -s-$(b) Consider Wexler v. Greenberg (93): -- --$$ Greenberg was chief chemist for Buckingham Wax Co. His job was toreverse engineer competitors products and to develop new formulas. Buckingham supplied products to Brite who marketed to users. Later Britehired Greenberg and he developed facility to make the stuff themselves usingformulas he developed when he worked for Buckingham. # --Z.#--$$Can Buckingham enjoin?----$$$[no trust or confidential relationship; merely-.$$his routine duties]....$$What could Buckingham have done to make this come out..'$differently?.'.3.3.?$$$[Make him sign NDA? covenant not to compete? make$$clear how much effort company put in...?][agreement stating.?.W$$that everything he does becomes P of the company?].W.c.c.o$$$.o.{5. What if Greenberg had signed employment contract in which he promised not to usein competitor's business anything he discovered while working at Buckingham?Consider covenants to assign inventions:.{...$(a) [Can employer claim that it owns everything that was in your thoughtsduring the time you worked for it?]....$$see (102) para 2 [note "trailer clause" (99)enforceable..$only if "reasonable"] ..!..$(b) [If not, can employer claim that it owns everything that you reduced towriting during the time you worked for it?]"./ #/ /$$ [If you invent something but don't write it down until the dayafter you quit, are you in the clear?]$///%///;$(c) [Only during working hours? Only related to company business?]&/;/G'/G/S$$see Cal. Labor Code sec. 2870 (98) ["freedom to create$$statutes"](/S/k)/k/w6. Consider common law rules for patentable inventions (97):*/w/+//$hired to invent: belongs to employer,//$J-// /9/ $J$inventions in employers shop: shop rights////$independent invention: belongs to employee////7. Review contract on (101): Is it enforceable?////8. Contracts to license the use of trade secrets:/0 0 0$(a) Big problem: licensee needs to see secret in order to buy, but once itsees, why should it buy? 00/ 0/0;$$at least, an argument to make enforcement of contractual NDA's verystrict 0;0S 0S0_$(b) If you contract to license a trade secret needed to manufacture yourproduct, and pay royalties, can you stop paying royalties once the info. is nolonger secret? 0_000$(c) Consider WarnerLambert (103)0000$$Facts: WarnerLambert licensed the secret formula for Listerine 75years ago. Judge interprets K as promising to pay royalties for as long as Warner  Lambert manufactured the product. In the meantime, the formula has become publicknowledge. WarnerLambert sues for declaratory judgment that it doesn't have to payanymore.0000$$$Argue for WarnerLambert: Successors of the00$$inventor no longer have any P rights. My competitors01$$don't have to pay, so they can produce more cheaply11$$against me.1111+$$$Argue for Lawrence successors: Freedom of K;1+17$$K doesn't depend on how long my P rights last [if we171C$$meant that, we could have said so]1C1O1O1[$$Result: Contract wins1[1g1g1s$$See notes 2 and 3 (107) [This rule is "controversial" and it1s1$raises the larger question to what extent actors can contract out of P11$rules] 11!11NEXT WEEK: 108168[trade secret remedies (108) [Litton; LambWeston]; Intro. topatents (121); patentable subject matter (136) Diamond v. Chakrabarty (136); FunkBros. (144); ParkeDavis (147); utility, Brenner, to 168]]" 11# 11$ 11V% 11 1߀(/ 1 $'  'VIP 97 Class No. 50121'  '00222 '  '02222+1. Contracts to license the use of trade secrets: [This is an ordinary contract,with a couple of wrinkles]2+2C2C2O$(a) Big problem: licensee needs to see secret in order to buy, but once itsees, why should it buy?2O2g2g2s$$not a problem with Listerine [you can see product w/o seeing$secret] but what about database [e.g., all cooks who have experience w/curlicue fries] 2s2 22$$at least, an argument to make enforcement of contractual NDA's verystrict 22 22$(b) If you contract to license a trade secret needed to manufacture yourproduct, and pay royalties, can you stop paying royalties once the info. is nolonger secret? !22"22$$of course, your contract can provide for this. But what#23$if it doesn't?$33%33$(c) Consider WarnerLambert (103)&33''3'33$$Facts: WarnerLambert licensed the secret formula for Listerine 75years ago. Judge interprets K as promising to pay royalties for as long as Warner  Lambert manufactured the product. In the meantime, the formula has become publicknowledge. WarnerLambert sues for declaratory judgment that it doesn't have to payanymore.,333o-3o3{$$$Argue for WarnerLambert: Successors of the.3{3$$inventor no longer have any P rights. My competitors/33$$don't have to pay, so they can produce more cheaply033$$against me.133233$$$Argue for Lawrence successors: Freedom of K;333$$K doesn't depend on how long my P rights last [if we433$$meant that, we could have said so]533633$$Result: Contract wins733 833$$See notes 2 and 3 (107) [This rule is "controversial" and it!934 $raises the larger question to what extent actors can contract out of P":4 4$rules][Recall previous discussion of employment contracts promising not touse any information even if it's no longer a trade secret]#<44/$=4/4;2. Remedy for misappropriation of Trade Secret: What are the possibilities?%>4;4G&?4G4S$(a) Plaintiff has traditional Prule entitlement [damages for past use, pluspermanent injunction against future use] 'A4S4k(B4k4w$(b) Plaintiff has a permanent liabilityrule entitlement [damages for pastuse plus compulsory license payments for future use])D4w4*E44$(c) Plaintiff has P rights (either Prule or Lrule) only until the info.6 49F4 $6actually ceases to be secret G44H44$$(1) until plaintiff ceases to keep it secret?I44J44$$ until someone else discovers/reverse engineers?K44L44$$(2) defendant can apply to dissolve the injunction?M45 N5 5$$ write injunction for only as long as ct thinks it would O55#$$reasonably take for others to discover the info.? P5#5/ Q5/5;$(d) What about kicker for extra deterrence? [don't change P rules into Lrules at will] e.g., treble or punitive damages? S5;5S T5S5_3. How will we measure damages for past use?U5_5kV5k5w$(a) disgorge defendant's excess profit [unjust enrichment]W5w5X55$ (b) pay for plaintiff's lost profit? [compensatory]Y55Z55$(c) amount equal to a reasonable royalty?[55\55$$how will ct figure this out? (110)]55^554. What remedy options are chosen by the UTSA? (1089); (Supp 35); What remedyoptions are chosen by the Rest.3d of Unfair Competition? (Supp 1617)`55a555. Consider Litton systems (110):b56c66$(a) Litton engineer testified that as a result of defendant's theft of itstrade secrets, it had lost various contracts and the value of its San Carlosoperation had declined significantly.f667g676C$(b) Law and economics scholar no. 1 (Rosenfield), for the plaintiff Litton,stressed deterrence: damages should exceed the greater of the victim's loss or thethief's expected gain, multiplied by a factor which reflects the probability ofdetection. k6C6sl6s6$$[On this theory, what would be wrong with limiting damages to thevictim's actual loss?] n66!o66$$[On this theory, what would be wrong with limiting damages"p66$to the defendant's actual unjust enrichment (gain due to theft)?]#q66$r66$(c) Law and economics scholar no. 2 (Teece), for the defendant Ssangyong,stressed administrability: damages should be equal to disgorging defendant's actualgain from the trade secret theft.%u66&v66$$[On this theory, what would be wrong with assessing punitive'w67$damages to achieve extra deterrence?](x77)y77$$[On this theory, what would be wrong with assessing damages $on thebasis of defendant's expected gain at the time of the theft?]*{773+|737?$(d) What did the judge decide? (see 113, last paragraph),}7?7K-~7K7W$(e) Question 3 (114): Does the UTSA permit Judge Walker to do this?J.7W7c 7W97c $Jܿ7s76. Injunctions (see LambWeston (114):7777$(a) Will injunctions be appropriate in departed employee cases?7777$$Depends. See, e.g., Baxter int'l v. Morris (118); recall77$Pepsico v. Redmond (9093) [unusual case]; what relief will77$be appropriate (if any) in Informix v. Oracle?77$$ 77 77$(b) How will length of injunction be determined? [one common method is "headstart" theory: enjoin defendant from using the stolen info. until such time asdefendant could have discovered it by proper means][Head Ski case (116)] 78 88$(c) Facts of LambWeston:  88'8'83$Plaintiff LambWeston invented a process and equipment for producing curlicuefries. It started working on the process in 1986 and was issued 2 patents on May22, 1990 [at which point the process and equipment ceased to be secret]. Beforethat, in January 1990, LambWeston employees allegedly gave copies of the patentapplication to defendant McCain, which allegedly built a prototype before thepatents issued in May.838{8{8$The court imposed an 8month injunction against McCain to make up for itsimproper head start. The injunction took effect March 27, 1991. McCain on appealsays ct abused its discretion because (1) didn't make findings about how long itwould have taken McCain to develop helical blade independently, (2) injunctionshould have ended on April 19, 1991 (rather than on [November 27, 1991]).8888$Held: Length of injunction was not abuse of discretion, because: 8888$Plaintiff says head start was 18 months, not 12, so if theft took88$place in April 1990, injunction should end October 19918889 $"Although the shape of the blade and the slicing process was public9 9$on May 22, the specifications, materials and manufacturing process99#$for making the blade were still trade secrets because they were not9#9/$included in the patent applications." (116)9/9;$$9;9G$$see note 2 (117)9G9S9S9_7. Intro. to patent.9_9k 9k9w$(a) Read (121128) as background; (I'm trying to get biotech appendixpromised in (121 n. 1).!9w9"99Start with overview of patent laws on (128); look at Patent Act (281)#99$99$$Sec. 101 Whoever invents or discovers...%99&99$$Sec. 271 Whoever without authority makes, uses, offers to sell,or sells...'99(99$$Sec. 154(2)Such grant shall be for a term [20 years from)99$date filed]*9:+::$(b) As casebook says (129), there are five basic requirements for6 :9:+ $6patentability:::;:;:G$$1. patentable subject matter [what things can and cannot be:G:S$$$propertized?]:S:_:_:k$$2. novelty [not anticipated]:k:w:w:$$3. utility [has to work]:: ::$$4. nonobviousness [has to be a leap forward] :: ::$$5. enablement [sufficient disclosure] :: ::$(c) The central part of a patent is what exactly you stake out P rights in(see p. 130): (because they're staked out in words instead of metes and bounds,there's an inherent vagueness)::::$$make claim as broad as possible? [a nonhuman mammal, rather thana mouse][means for support, rather than legs]:;$$$;;$$$but what if some previous patent covers some other;;+$$$nonhuman mammal?;+;7;7;C$$i.e., the trick is to make as broad as possible and still be;C;O$novel enough;O;[;[;g$(d) patent litigation has 2 parts;g;s;s;$$my device doesn't infringe;;;;$$$[claims (as interpreted) don't "read on" the "accused$$device"];;;;$$even if it does, your patent is invalid;;;;$$$[your patent doesn't meet all five requirements as above] ;;!;;$(e) cts hold patents invalid in a nontrivial number of cases (though see(128), CAFC is upholding them more than disparate cts did previously); moreover, ctsare not always in sync with the PTO";<#<<$$policy differences$<<'%<'<3$$PTO examiner my not have expertise or the benefit of high&<3$$(a) make claim as broad as possible? [see, e.g., "Transgenic$nonhuman mammals" (150)rather than a mouse][means for support, rather thanlegs] >>'$$$ >'>3$$$but what if some previous patent had covered some $othernonhuman mammal? >3>K>K>W$$(b) i.e., the trick is to make as broad as possible and still be>W>c$novel enough>c>o>o>{3. patent litigation has 2 parts>{>>>$$(a) my device doesn't infringe>>>>$$$[claims (as interpreted) don't "read on" the "accused$$$$device"]>>>>$$(b) even if it does, your patent is invalid >>!>>$$$[your patent doesn't meet all five requirements as above]">>#>>4. cts hold patents invalid in a nontrivial number of cases (though see (128), CAFCis upholding them more than disparate cts did previously); moreover, cts are notalways in sync with the PTO$>?#% ?#?/$$policy differences&!?/?;'"?;?G$$PTO examiner may not have expertise or the benefit of high(#?G?S$priced lawyers and experts)$?S?_*%?_?k$$$patents only get litigated when they turn out to be+&?k?w$$valuable,'?w?-(??5. Consider first element of patentability [subject matter];.)??/*??What types of things are patentable under the statute? Does the constitution limitwhat Congress can make patentable? [application to living things? computer6 ?9,? $6programs?]-??.??$(a) What does the Patent Act tell us about what is properly the subect ofpatent? [Read sec. 101 again together with sec. 100]0??$1?@ '  '$$$process [means process, art or method; includes a new02@ @@ <'  '0$$$use of a known process, machine, manufacture,03@@#@H'  '0$$$composition of matter, or material][or improvements4@#@/$$$on an existing process]5@/@; 6@;@G$$machine [or improvements on an existing machine] 7@G@S$$manufacture [or improvements on an existing manufacture] 8@S@_$$composition of matter [or improvements on an existing 9@_@k$$$composition of matter] :@k@w;@w@$$$Example of a new use of a known process? new<@@$$$use of a known machine? new use of a known=@@$$$manufacture? new use of a known composition of>@@$$$matter? new use of a known material??@@$$$$@@@A@@$$$Example of improvements on a process? machine?B@@$$$manufacture? composition of matter?C@@D@@$$$$Note: if you get a patent on improvements,E@@$$$$if the underlying process is patented, you still cant$$$use it without paying for it#G@AZ.#HAAIAA+$(b) Does the Constitution limit what Congress can make patentable? [topromote the progress of . . . useful arts]KA+ACLACAO$$1952 Committee reports said anything under the sunMAOA[$$that is made by man (138)NA[Ag OAgAs$(c) Traditional exclusion for natural principles (laws of nature) (138): why? [discovery of one can certainly promote the progress of useful arts in manycases]!RAsA"SAA$$manifestations of nature, free to all men and reserved exclusivelyto none#UAA$VAA$$does this deter investment in basic research?%WAA&XAA$$[includes abstract ideas, mathematical formulas: causes problems forwhat to do about computer programs...][later]'ZAA([AB$(d) Bioengineering: should living things be patentable? [as found in nature? as made by man?] Consider Diamond v. Chakrabarty (136))]BB*^BB'6. Diamond v. Chakrabarty (136):+_B'B3,`B3B?$(a) Chakrabarty (a microbiologist for G.E.) applied for patents relating tohis development of a genetically engineered bacterium which could help clean up oilspills. His claims were of 3 types (137):-cB?Bc.dBcBo$$for the method of producing the bacteria [process claim]J/eBoB{ Bo9eB{ $J$$fBB$$for combining the bacteria with a carrier material to floatgBB$$$on the waterhBBiBB$$for the bacteria themselves [product claim]jBBkBB$$Are any of these problematic? [only the bacteria themselves....explain][Consider carefully note 5 on p. 150][product claim; process claim; product  byprocess claim]nBBoBC$(b) How does Burger go about exploring the issue? pCC qCC$$his discovery is not natures handiwork but his rCC'$$$own; accordingly it is patentable (139) sC'C3 tC3C?$(c) Diamond is the Patent Examiner, not some wouldbeuC?CKinfringer. What arguments does the government put forward, and how does Burgeranswer them?wCKCcxCcCo$$genetic engineering was unforeseen when CongressyCoC{$$enacted sec. 101; including it should be left tozC{C$$Congress (141){CC|CC$$$[Patent Act is supposed to cover the}CC$$$unanticipated]~CCCC$$$[What is the relevance of Parker v. Flook citedCC$$on p. 141?]CCCC$$genetic engineering is dangerousCCCC$$$ if so, Congress should amend theCD $$$Act; once we look at the plain meaning, ourD D$$$job is done (142)DD# D#D/$$Congress didnt intend the Act to cover living!D/D;$$things [otherwise it wouldnt have had to enact"D;DG$$specific statutes to cover plants developed by#DGDS$$humans] (13940)$DSD_%D_Dk$$$[Did too?]&DkDw'DwD$(d) Decision was 54: Consider dissent (Brennan, Marshall, White,Powell)(142):(DD)DD$$Burger cant explain away that Congress thought*DD$$specific legislation was needed to get new plants+DD$$covered; moreover, bacteria were specifically,DD$$excluded from that legislation-DD.DD$$this extends the patent system (bec. Congress has/DD$$previously legislated in the belief that living organisms0DD$$arent covered); shouldnt do this, esp. where uniquely1DE$$implicates matters of public concern (144)2EE3EE$(e) What exactly are the matters of public concern?4EE+J5E+E7 E+9E7 $J$$life is gift of God, not an article of manufactureEGESESE_$$ note plant patents can monopolize food productsE_EkEkEw$$impact on the farm animal gene poolEwEEE$$cruelty to animalsEEEE7. Funk Bros. Seed Co. (144): Was earlier ct less willing to underwrite broadscope of patent? EE EE$(a) Plants fix nitrogen from the air using bacteria of the genus Rhizobiumwhich infect the roots of the plant. Different plants use different bacteria. Previously, people had manufactured and sold bacteria cultured in the laboratorythat were specific to particular plants (145). Mixed cultures had provedunsatisfactory because the different bacteria species were mutually inhibitory. [Why were people trying to produce a mixed culture?] Then Bond discovered thatcertain strains of the different species of bacteria would not be mutuallyinhibitory but could coexist. "Thus he provided a mixed culture of Rhizobiacapable of inoculating the seeds of plants belonging to several crossinoculationgroups." [See one of the claims in note 1, p. 144] EFC FCFODistrict ct held the product claims invalid for want of invention and dismissed thecomplaint. Ct of appeals held the product claims were valid and infringed. FOFgFgFsSupreme Court says:FsFFF$These qualities are the work of nature... (145)FFFF$[Explain Frankfurter concurrence (146): Apparently Bond's claims were sobroad as to cover anyone who combined any mutually compatible strains. Frankfurterthought that reached too far (would cover the idea of alloying metals, for example,and not just particular alloys); instead, he thought that particular strains shouldbe identified and that a new and useful property result from their combination.]FFFF8. Also consider ParkeDavis (147): Was L. Hand concerned more with practicalcommercial viability than with distinction between nature and man's handiwork?FGGG$(a) Takamine patented a pure extract from suprarenal glands of animals, whichParkeDavis (assignee of the patents), called adrenalin. [See the claim in footnoteon p. 148.] A competing company marketed a competing product. L. Hand holds thepatent on the product valid.GG?G?GK$$It's not a claim for a substance that has merely beenGKGW$extracted but otherwise unchanged, bec.GWGcGcGo$$$it doesn't have a saltGoG{G{G$$$the claim is broader, covering any product with theseGG$$characteristics, however it's arrived at [reconsider note 5GG$$on 150: should this claim be allowed?] GG!GG$$$$[or limit this type of patent to a"GG$$$$"productbyprocess" claim?]#GG$GG$$"But, even if it were merely an extracted product without%GG$change, there is no rule that such products are not patentable" (148)J&GG G9G $JܿHH$$$"it became for every practical purpose a new thingHH$$$commercially and therapeutically" (148)HH'H'H3$$$what do you think of the tree bark hypo (149 n. 1)? H3H?H?HK$(b) See note 6 (151): A new amendment bans patents on medical and surgicalprocedures. Why? [Is this different from ParkeDavis patenting adrenalin?]HKHcHcHo8. "Abstract Ideas" (151): [not the idea itself, but a device to make an ideapractically useful] HoH HH$(a) O'Reilly v. Morse (151): Morse wasn't allowed to patent electro  magnetism; but he was allowed to patent the process of using it to telegraph HH HH$(b) The Telephone Cases (152): Alexander Graham Bell was allowed to patentthe telephone but not all telephonic uses of electricity HHHH$(c) The Edata patent?HH$HH'  '$$(d) Mathematical formulas? [e=mc 2 ]0HHH'  '0HI $(e) Computer programs?I III#9. "Business Methods" (1534)I#I/I/I;$(a) Note Judge Newman (154n.1)I;IGIGIS$(b) [Computer software will change this rule?]ISI_I_Ik10. Take a look at problem 33 (156).IkIwIwINEXT WEEK: utility 157168; novelty and statutory bars 168193; nonobviousness 193  206...IIIIVII I$I $'  'VIP 97 Class No. 70IIIÀ'  '00IIIπ '  '0II1. Patent life forms (Diamond v. Chakrabarty) [cont'd]IIII(a) Decision was 54: Consider dissent (Brennan, Marshall, White, Powell)(142):IJ J J$$Burger cant explain away that Congress thoughtJJ#$$specific legislation was needed to get new plants J#J/$$covered; moreover, bacteria were specifically J/J;$$excluded from that legislation J;JG JGJS$$this extends the patent system (bec. Congress has JSJ_$$previously legislated in the belief that living organisms J_Jk$$arent covered); shouldnt do this, esp. where uniquely JkJw$$implicates matters of public concern (144) JwJ JJ(b) What exactly are the matters of public concern? JJJJ$$life is gift of God, not an article of manufactureJJJJ$$ note plant patents can monopolize food productsJJJJ$$impact on the farm animal gene poolJJJJ$$cruelty to animalsJJJK2. "Abstract Ideas" (151): [not the idea itself, but a device to make an ideapractically useful]KKKK+$(a) O'Reilly v. Morse (151): Morse wasn't allowed to patent electro  magnetism; but he was allowed to patent the process of using it to telegraphK+KCKCKO$(b) The Telephone Cases (152): Alexander Graham Bell was allowed to patentthe telephone but not all telephonic uses of electricity KOKg!KgKs$(c) The Online Resources patent?" KsK$#!KK'  '$$(d) Mathematical formulas? [e=mc 2 ]0$"KKK'  '0%#KK$(e) Computer programs?&$KK'%KK3. "Business Methods" (1534)(&KK)'KK$(a) Note Judge Newman (154n.1)*(KK+)KK$(b) [Computer software will change this rule?],*KK-+KL.,LL4. Utility ["new and useful" (sec. 101)]/-LL0.LL'$(a) Note on different types of utility (163)1/L'L320L3L?$$general (163)31L?LK42LKLW$$specific (164)53LWLcJ64LcLo Lc94Lo $J$$moral (1645)(gambling; spotted tobacco case; drugs and medicaldevices; radar detector (Whistler Corp. 165)6LL7LL$(b) problem of when pharmaceuticals are useful (162 n. 4)8LL9LL$(c) problem of when chemical process patents are usefulconsider Brenner v.Manson (157);LL<LL$$Facts: Manson applied for a patent on a process that produced aprticular chemical compound. The patent office denied the patent and the patentoffice Board of Appels agreed. The court reversed, however, because it believedthat it was enough for the process to actually produce the product it was claimed toproduce, so long as the product was not deterimental (158).ALMBMM'$$That is not the test of utility, says Fortas. What possibilities arethere? DM'M? EM?MK$$$process is useful if it really does produce the product FMKMW$$it is supposed to, even if we don't have any use for the product GMWMc$$right now [as ct below thought] HMcMoIMoM{$$$process if useful if it really does produce the product,JM{M$$and also the product is currently useful for research KMM$$$$LMM$$$$i.e., scientific laboratories will buy it?MMMNMM$$$process is useful if it really does produce the product,OMM$$and also the product is currently useful in aspects ofPMM$$ordinary life other than researchQMMRMM$$What does the S.Ct. hold? (159160)SMM$$$TMM$$$$Rationale? ["A patent is not a hunting license.."]UMN VN N$$(d) Is Brenner ct wrong to hold that utility for further researchshould not count as utility? [consider problem 35 (167)XNN/YN/N;ZN;NG5 Novelty ["new and useful" (sec. 101)]; [implementation in sec. 102][NGNS \NSN_6. Overview of sec. 102 (168):!]N_Nk"^NkNw$(a) The patent bargain is that in return for a monopoly [on breathroughinventions that wouldnt have been produced otherwise] the inventor must give it tothe public domain (the store of knowledge), (1) by disclosing it in the patent, soothers can use if they pay, and others can build on it, and (2) can use it for freeat the end of the term.#cNwN$dNN$(b) The bargain gives rise to several separate issues: %eNN&fNN$$(1)Does the relevant public already know the exact process,'gNN$etc., at the time the claimed invention is made? [This is called(hNN$anticipation])iNN$$*jNO$$$Which parts of the statute are directed at this?+kOO,lOO$$$$102(a): prior to date of invention, it was (i)6 O9m O $6$$$known or used by others in this country; or (ii)$$$described in a printed publication in any country; or$$$(iii) patented in any countrypOO_qO_Ok$$$$102(e): prior to date of invention, it wasrOkOw$$$(iv) described in a pending application, whichsOwO$$$was later grantedtOO$$$$$uOO$$$$vOO$$(2)Does the relevant public already have enough informationwOO$so that the claimed invention is obvious at the time it is made? xOO yOO$$$Which parts of the statute are directed at this? zOO {OO$$$$103 [to be considered later]  |OO}OO$$(3)Who is the relevant public? [to be considered later]~OPPP$(b) In addition, our system gives patents to the first to invent, rather thanthe first to patent (disclose). [sec. 102(g)] This system is risky for the publicdomain, because it encourages people to keep their inventions secret as long aspossible. PPCPCPO$$(1)Explain: Inventor A invents something important but $keepsit secret. When competitor B later invents the same $thing, A can contest thepatent, and A would win, because first $to invent. [Might be economicallyrational to let someonePOP$$else see whether its commercially viable and then come outPP$$of the woodwork and claim the patent!]PPPP$$(2)Which parts of the statute are directed at this problem?PPPP$$$102(b): you cant get a patent if your application isPP$$dated more than one year after (i) patented in any country;PP$$(ii) described in a printed publication in any country;PP$$(iii) in public use in this country; (iv) on sale in this country;PPPP$$$102(d): cant get a patent in U.S. if your applicationPQ$$is dated more than one year after your application in aQQ$$foreign country QQ!QQ'$$$102(g): cant get a patent if you suppress or conceal"Q'Q3$$your invention#Q3Q?$Q?QK%QKQW7. Now focus on sec. 102(a) [before the applicant's date of "invention," thedevice was known or used in this country, or patented or described in a printedpublication anywhere]&QWQ{'Q{Q$(a) Consider Rosaire (169): What counts as being known?(QQ)QQ$$$Facts: Rosaire and Horvitz got two patents on method ofprospecting for oil (Horvitz interest assigned to Rosaire). The method involvedanalyzing gases for emanations from nearby hydrocarbon deposits. They claimedthey invented this process in $1936. But, "appellee contends that Teplitz andhis coworkers [who worked for Gulf, not appellee] knew and extensively used inthe field the same alleged inventions before any date asserted by6 Qۀ9!!Q $6$Rosaire"(170)QRRR$$$What issues? (1) What was the date of activities ofRR$$Teplitz and coworkers? (2) Does what Teplitz and coworkersRR'$$did amount to being"known" for purposes of sec. 102(a)?R'R3R3R?$$$$[See finding of fact (170)]R?RKRKRW$$$What about the fact that Teplitz invented this first and$$later applied for a patent in 1939 (170)? Should Teplitz get the$$patent instead of Rosaire? [see below; Griffith] RWR{ R{R$$$What about appellant's claim that Teplitz's activities RR$$were merely an experiment?[see Picard (1723 n. 4) RR$$also RRRR$$$What about the fact that appellee (National Lead Co.)$$gets to infringe someone's patent and then defend by claiming$$that actually someone else had it before the patentee?RRRR$$$What about the fact that Rosaire and Horvitz couldn't$$have known what Gulf employees were doing?RRRS $ S SSS#$(b) Summary: What counts as being known?S#S/$S/S;$$$public (not secret)S;SGSGSS$$$$ any commercial useSSS_S_Sk$$$$ not an abandoned experimentSkSwSwS$$$intentionally produced (not accidental) (note 1734)SSSS$$$published [What counts as printed publication? SeeSS$$$$In re Hall] SS!SS7. Statutory bars [didn't file soon enough (time clock); or, someone else inventedfirst even if you filed first (priority)]"SS#SS$(a) Read sec. 102(b) $SS%SS$(b) What counts as printed publication?&ST'TT$$Consider Hall (175)(TT)TT+$$$Facts: Hall wanted to patent a chemical compound. [What is areissue application? see sec. 251]. Hall's effective filing date is February27, 1979. It turns out that a German doctoral dissertation anticipated thisproduct; the degree was awarded on November 2, 1977. Therefore, if the Germandissertation counts as a printed publication, Hall's application is too lateunder 102(b).*T+Ts+TsT$$$$ Two issues: ,TT-TT$$$$(1) Can a dissertation in German count as a printed6 T9""T $6$$$publication to bar a U.S. patent?TTTT$$$$$Yes, if made available to the publicTTTT$$$$(2) Then, what date was this dissertation madeTT$$$available to the public?TTTU$$$$$Date it was put into the main library of theUU$$$$$University UU UU+$$$$$See Affidavit of Dr. Will (1756) U+U7 U7UC$$$$What date would Hall have had to have his$$$application filed by? UCU[U[Ug$$Note 3 (177): publication = available to at least one memberUgUs$of the general public; with journals this means receipt by at leastUsU$one subscriber (thus, if you submit a manuscript by mistke you canUU$get it back before it's published)UUUU$$$See also, DuPont v. Cetus (grant proposal not a$$publication)UUUU$(c) Consider Problem 37 (177)UUUU)$VUU U߀,##U $'  'V,IP 97 Class No. 80UVU'  '00VVV '  '0VV1 Now focus onsec. 102(a) [before the applicant's date of "invention," thedevice was known or used in this country, or patented or described in a printedpublication anywhere]VVCVCVO$(a) Consider Rosaire (169): What counts as being known?VOV[V[Vg$$$Facts: Rosaire and Horvitz got two patents on method ofprospecting for oil (Horvitz interest assigned to Rosaire). The method involvedanalyzing gases for emanations from nearby hydrocarbon deposits. They claimedthey invented this process in $1936. But, "appellee contends that Teplitz andhis coworkers [who worked for Gulf, not appellee] knew and extensively used inthe field the same alleged inventions before any date asserted by$Rosaire"(170) VgV  VV$$$What issues? (1) What was the date of activities of  VV$$Teplitz and coworkers? (2) Does what Teplitz and coworkers  VV$$did amount to being"known" for purposes of sec. 102(a)?  VV VV$$$$[See finding of fact (170)]VWWW$$$What about the fact that Teplitz invented this first and$$later applied for a patent in 1939 (170)? Should Teplitz get the$$patent instead of Rosaire? [see below; Griffith]WW3W3W?$$$What about appellant's claim that Teplitz's activitiesW?WK$$were merely an experiment?[see Picard (1723 n. 4)WKWW$$alsoWWWcWcWo$$$What about the fact that appellee (National Lead Co.)$$gets to infringe someone's patent and then defend by claiming$$that actually someone else had it before the patentee?WoWWW$$$$Compare with real property ejectment suits;WW$$$trespasser doesn't get to set up invalidity of possessor'sWW$