Chapter6

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____ is a term used to describe works of the mind—such as art, books,films, formulas, inventions, music, and processes—that are distinct, and owned or createdby a single person or group. Intellectual property is protected through copyright, patent, andtrade secret laws. Copyright law protects authored works, such as art, books, film, and music; patent lawprotects inventions; and trade secret law helps safeguard information that is critical to anorganization’s success.

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Intellectual property

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____is the exclusive right to distribute, display, perform, or reproduce an origi-nal work in copies or to prepare derivative works based on the work.

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A copyright

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____ is a violation of the rights secured by the owner of a copyright. However, if the new software’s manufacturer can establish that it developed theprogram on its own, without any knowledge of the existing program, there is no infringe-ment.

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Copyright infringement

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The Copyright Term Extension Act, also known as the Sonny Bono CopyrightTerm Extension Act, signed into law in 1998, established the following time limits: For works created after January 1, 1978, copyright protection endures for thelife of the author plus 70 years. For works created but not published or registered before January 1, 1978, theterm endures for the life of the author plus 70 years, but in no case expiresearlier than December 31, 2004. For works created before 1978 that are still in their original or renewable termof copyright, the total term was extended to 95 years from the date the copy-right was originally secured.9 These extensions were primarily championed by movie studios concerned about retain-ing rights to their early films. Opponents argued that lengthening the copyright period madeit more difficult for artists to build on the work of others, thus stifling creativity and innova-tion. The Sonny Bono Copyright Term Extension Act was legally challenged by Eric Eldred,a bibliophile who wanted to put digitized editions of old books online. The case went all theway to the Supreme Court, which ruled the act constitutional in 2003.10

For example, former Beatles member George Harrison was entangled for decadesin litigation over similarities between his hit “My Sweet Lord,” released in 1970, and “He’sSo Fine,” composed by Ronald Mack and recorded by the Chiffons in 1962.11

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____ allows portions of copy-righted materials to be used without permission under certain circumstances.

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The fair use doctrine

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One company Intellectual Property 199 200 Chapter 6 that objected to the use of refurbished cartridges was Lexmark International, a manufacturerand supplier of printers and associated supplies. In 2002, Lexmark filed suit against StaticControl Components (SCC), a producer of components used to make refurbished printercartridges. The suit alleged that SCC’s Smartek chips included Lexmark software in viola-tion of copyright law. (The software is necessary to allow the refurbished toner cartridgesto work with Lexmark’s printers.) In February 2003, Lexmark was granted an injunctionthat prevented SCC from selling the chips until the case could be resolved at trial. However,the ruling was overturned in October 2003 by the U.S. Court of Appeals for the Sixth Cir-cuit, which said that copyright law should not be used to inhibit interoperability betweenthe products of rival vendors. The appeals court upheld its own decision in February2005.13

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The Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act of2008 increased trademark and copyright enforcement, and substantially increased penaltiesfor infringement. For example, the penalty for infringement of a 10-song album was raisedfrom $7,500 to $1.5 million. The law also created within the Justice Department the Officeof the United States Intellectual Property Enforcement Representative, charged with creat-ing and overseeing a Joint Strategic Plan against counterfeiting and privacy, and coordinat-ing the efforts of the many government agencies that deal with these issues.14 TomDonohue, the president of the U.S. Chamber of Commerce, stated, “the PRO-IP Act sendsthe message to IP criminals everywhere that the U.S. will go the extra mile to protectAmerican innovation.”15

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_____ was signed in 1947 by 150countries. Since then, there have been eight rounds of negotiations addressing various tradeissues. The Uruguay Round, completed in December 1993, resulted in a trade agreementamong 117 countries.

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The original General Agreement on Tariffs and Trade (GATT)

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______, also known as the TRIPS Agreement, to establishminimum levels of protection that each government must provide to the intellectual proper-ty of all WTO members. This binding agreement requires member governments to ensurethat intellectual property rights can be enforced under their laws and that penalties forinfringement are tough enough to deter further violations.

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Agreement on Trade-Related Aspects of Intellectual Property Rights

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______headquartered in Geneva,Switzerland, is an agency of the United Nations established in 1967. WIPO is dedicatedto developing “a balanced and accessible international intellectual property (IP) system,which rewards creativity, stimulates innovation and contributes to economic developmentwhile safeguarding the public interest.”18 It has 184 member nations and administers 24international treaties. Since the 1990s, WIPO has strongly advocated for the interests ofintellectual property owners.

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The World Intellectual Property Organization (WIPO),

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_____was signed into law in November 1998; it waswritten to bring U.S. law into compliance with the global copyright protection treaty fromWIPO.

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The Digital Millennium Copyright Act (DMCA)

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Several cases brought under the DMCA have dealt with the use of software to enablethe copying of DVD movies. For example, motion picture companies supported the devel-opment and worldwide licensing of the Content Scramble System (CSS), which enables aDVD player (shown in Figure 6-1) or a computer drive to decrypt, unscramble, and playback motion pictures on DVDs, but not copy them. However, a software program calledDeCSS can break the encryption code and enable users to copy DVDs. The posting of thissoftware on the Web in January 2000 led to a lawsuit by major movie studios against itsauthor. After a series of cases, courts finally ruled that the use of DeCSS violated theDMCA’s anticircumvention provisions.

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_____ is a grant of a property right issued by the United States Patent and TrademarkOffice (USPTO) to an inventor. A patent permits its owner to exclude the public frommaking, using, or selling a protected invention, and it allows for legal action against viola-tors.

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A patent

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To obtain a U.S. patent, an application must be filed with the USPTO according to strictrequirements. As part of the application, the USPTO searches the prior art—the existingbody of knowledge that is available to a person of ordinary skill in the art—starting withpatents and published material that have already been issued in the same area. The USPTOwill not issue a patent for an invention whose professed improvements are already presentin the prior art. Although the USPTO employs some 3,000 examiners to research theoriginality of each patent application, it still takes an average of 25 months to process one.

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____ or the violation of the rights secured by the owner of a patent,occurs when someone makes unauthorized use of another’s patent.

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Patent infringement,

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_____is a firm that acquires patents with no intention of manufacturing any-thing, instead licensing the patents to others.

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A patent troll

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A patented pro-cess or invention that is surreptitiously included within a standard without being madepublic until after the standard is broadly adopted is called a_____

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submarine patent.

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A deviouspatent holder might influence a standards organization to make use of its patented itemwithout revealing the existence of the patent. Later, the patent holder might demand royal-ties from all parties that use the standard. This strategy is known as_____

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patent farming.

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____ was defined as business information that represents somethingof economic value, has required effort or cost to develop, has some degree of uniquenessor novelty, is generally unknown to the public, and is kept confidential.

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trade secret

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____was drafted in the 1970s to bring uniformity to allstates in the area of trade secret law.

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The Uniform Trade Secrets Act (UTSA)

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____ of 1996 imposes penalties of up to $10 million and15 years in prison for the theft of trade secrets.

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The Economic Espionage Act (EEA)

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Legally, a customer list is not automatically considered a trade secret. If a companydoesn’t treat the list as valuable, confidential information internally, neither will the court.The courts must consider two main factors in making this determination. First, did the firmtake prudent steps to keep the list secret? Second, did the firm expend money or effort todevelop the customer list? The more the firm invested to build its customer list and themore that the list provides the firm with a competitive advantage, the more likely the courtsare to accept the list as a trade secret.

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Because organizations can risk losing trade secrets when key employees leave, they oftentry to prohibit employees from revealing secrets by adding ______ toemployment contracts. Thus, departing employees cannot take copies of computer programsor reveal the details of software owned by the firm. Defining reasonable nondisclosure agree-ments can be difficult, as seen in the following example involving Apple. In addition to filinghundreds of patents on iPhone technology, the firm put into place a restrictive nondisclosureagreement to provide an extra layer of protection. Many iPhone developers complainedbitterly about the tough restrictions, which prohibited them from talking about their codingwork with anyone not on the project team and even prohibited them from talking about therestrictions themselves. Eventually, Apple admitted that its nondisclosure terms were overlyrestrictive and loosened them for iPhone software that was already released.38

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nondisclosure clauses

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Employers can also use _____ to protect intellectual property frombeing used by competitors when key employees leave. A noncompete agreement prohibitsan employee from working for any competitors for a period of time, often one to two years.

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noncompete agreements

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IBM sued Mark Papermaster, a microchip expert, for violating a noncompete agreementwhen he announced that he intended to leave the company to join Apple as its head ofdevice hardware engineering. The lawsuit was settled when Papermaster agreed to reportto IBM should he suspect that any breakthroughs he develops at Apple infringe on proprie-tary or confidential information he learned while working at IBM. Papermaster must alsotwice submit to IBM a written declaration that states he is not using confidential IBM materialin his role at Apple.39

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____is the act of stealing someone’s ideas or words and passing them off as one’sown.

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Plagiarism

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___ is the process of taking something apart in order to understand it,build a copy of it, or improve it.

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Reverse engineering

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___ is a language translator that converts computer program statements expressed ina source language (such as COBOL, Pascal, or C) into machine language (a series of binarycodes of 0s and 1s) that the computer can execute.

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compiler

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Tools called reverse-engineering compilers, or ____, can read the machine languageand produce the source code.

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decompilers

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In the early 1990s, video game maker Sega developed a computerized lock so that only Segavideo cartridges would work on its entertainment systems. This essentially shut out compe-titors from making software for the Sega systems. Sega Enterprises Ltd. v. Accolade, Inc.,dealt with rival game maker Accolade’s use of a decompiler to read the Sega software sourcecode. With the code, Accolade could create new software that circumvented the lock andran on Sega machines. An appeals court ultimately ruled that if someone lacks access to theunprotected elements of an original work and has a “legitimate reason” for gaining accessto those elements, disassembly of a copyrighted work is considered to be a fair use undersection 107 of the Copyright Act. The unprotected element in this case was the code neces-sary to enable software to interoperate with the Sega equipment. The court reasoned thatto refuse someone the opportunity to create an interoperable product would allow existingmanufacturers to monopolize the market, making it impossible for others to compete. Thisruling had a major impact on the video game industry, allowing video game makers to createsoftware that would run on multiple machines.45

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_____ is any program whosesource code is made available for use or modification, as users or other developers see fit. Intellectual Property 213 214 Open source software Purpose 7-Zip File compression Ares Galaxy Peer-to-peer file sharing Audacity Sound editing and special effects Azureus Peer-to-peer file sharing Blender 3D 3D modeling and animation eMule Peer-to-peer file sharing Eraser Erase data completely Firefox Internet browser OpenOffice Word processing, spreadsheets, presentations, graphics, and databases Video Dub Video editing Chapter 6 The basic premise behind open source code is that when many programmers can read,redistribute, and modify a program’s code, the software improves. Programs with opensource code can be adapted to meet new needs, and bugs can be rapidly identified and fixed.

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Open source code

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_____ is legally obtained information that is gathered to help a companygain an advantage over its rivals. For example, some companies have employees who moni-tor the public announcements of property transfers to detect any plant or store expansionsof competitors. An effective competitive intelligence operation requires the continual gath-ering, analysis, and evaluation of data with controlled dissemination of useful informationto decision makers.

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Competitive intelligence

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Competitive intelligence is not the same as in______, which employs illegalmeans to obtain business information not available to the general public. In the UnitedStates, industrial espionage is a serious crime that carries heavy penalties.

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dustrial espionage

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____ is a logo, package design, phrase, sound, or word that enables a consumer todifferentiate one company’s products from another’s. Consumers often cannot examinegoods or services to determine their quality or source, so instead they rely on the labelsattached to the products. Trademark law gives the trademark’s owner the right to preventothers from using the same mark or a confusingly similar mark on a product’s label.

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A trademark

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When Web sites were first established, there was noprocedure for validating the legitimacy of requests for Web site names, which were given outon a first-come, first-served basis. _______registered domain names for famoustrademarks or company names to which they had no connection, with the hope that thetrademark’s owner would eventually buy the domain name for a large sum of money.

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Cybersquatters