SH Contracts and Business Discussion

1. Sly Salesperson sells cars. While selling a car, Sly Salesperson tells the potential buyer that “this is the best car around. It’s a great car and sips gas.” The car has an average fuel rating. Has Sly Salesperson committed a misrepresentation? Fraud? Why or why not? Does the analysis change if Sly Salesperson says the car get 40 miles per gallon, but in fact the car only gets 30 miles per gallon?
2. What factors have courts considered when evaluating factual statements versus opinion-based statements? Could there still be liability for purely opinion-based statements?
3. Explain what the Robinson-Patman Act prohibits, what is required to show a violation, and what the defenses are.
4. Explain the differences in patents, copyrights, and trademarks, including the length of each and examples of each.

Marianne M. Jennings
BUSINESS
Its Legal, Ethical, and its 11th Ed.
Global Environment
Chapter 12
Contracts and Sales:
Performance, Remedies,
and Collection
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
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Defenses
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12-1
Defenses: Capacity
• Both Parties to a Valid Contract Must
Have Capacity, Which Includes Age
(18) and Mental Capacity
• Age Capacity
– In most states age is 18
– Before that, the party is an infant or
minor
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12-2
Defenses: Capacity
• Capacity – Age
– Contracts are voidable − minor can get
out at his/her option
– Liable in quasi-contract for necessaries
– Some exceptions − student loans;
military service
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12-3
Capacity, Necessities, and
Parents
• Case 12.1 Yale Diagnostic Radiology
v. Estate of Fountain (2003)
– What was the nature of the medical care?
– Why was there money available for
payment?
– Why does the court see unfairness in
excusing the minor and the minor’s
parent?
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12-4
Defenses: Mental Capacity
• Person Understands Contracts are
Enforceable and Significance of Legal
Documents
• Understands Contracts Involve Costs and
Litigation
• If Declared Legally Incompetent –
Contracts are Void!
• Otherwise, If No Legal Capacity, Contracts
are Voidable
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-5
Misrepresentation
• Elements
– Misstatement of a material fact
– Reliance
– Damages
• Remedy Can Be Rescission – Contract is
Set Aside
• Must Have Been Material
• Cannot Be Sales Puffing (Opinion)
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publicly accessible website, in whole or in part, except for use as permitted in a license
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12-6
Fraud
• Elements
– Knowing and intentional use of false
information
– Knowing and intentional failure to disclose
– Many states have statutes exempting the
disclosure of a murder or AIDS victims as
previous owners or residents
• However, if there is an inquiry by the potential
buyer, the information cannot be withheld
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-7
Fraud
• Fraud: The Failure to Disclose Material
Information Can Be Fraud or
Misrepresentation
• Case 12.2 Reed v. King (1983)
– What does Mrs. Reed need to establish to be
entitled to recession and damages?
– Would the information about the house make a
difference to you in making a buying
decision?
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12-8
Canceling Credit Contracts
• Regulation Z Gives Three-Day CoolingOff Period
– Home Equity Loan Consumer Protection Act
of 1988/Home Ownership and Equity
Protection Act of 1994
– Penalties under TILA
• Two times the amount of finance charges
• Minimum of $100 and maximum of $1,000
• Class action = $500,000 or 1 percent of creditors’
net worth (the lesser of)
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12-9
Three-Day Cancellation Notice
H-9 Rescission Model Form (Refinancing)
NOTICE OF RIGHT TO CANCEL
Your Right to Cancel
You are entering into a new transaction to increase the amount of credit provided to you. You are
entering into a new transaction to increase the amount of credit provided to you. We acquired a
[mortgage/lien/security interest] [on/in] your home under the original transaction and will retain that
[mortgage/lien/security interest] in the new transaction. You have a legal right under federal law to cancel
the new transaction, without cost, within three business days from whichever of the following events
occurs last:
(1) the date of the new transaction, which is ______; or
(2) the date you received your new Truth-in-Lending disclosures; or
(3) the date you received this notice of your right to cancel.
If you cancel the new transaction, your cancellation will apply only to the increase in the amount of
credit. It will not affect the amount that you presently owe or the [mortgage/lien/security interest] we
already have [on/in] your home. If you cancel, the [mortgage/lien/security interest] as it applies to the
increased amount is also cancelled. Within 20 calendar days after we receive your notice of cancellation
of the new transaction, we must take the steps necessary to reflect the fact that our [mortgage/lien/security
interest] [on/in] your home no longer applies to the increase of credit. We must also return any money
you have given to us or anyone else in connection with the new transaction.
You may keep any money we have given you in the new transaction until we have done the things
mentioned above, but you must then offer to return the money at the address below. If we do not take
possession of the money within 20 calendar days of your offer, you may keep it without further
obligation.
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
12-10
Three-Day Cancellation Notice
HOW TO CANCEL
If you decide to cancel the new transaction, you may do so by notifying us in writing, at
(creditor’s name and business address).
You may use any written statement that is signed and dated by you and states your
intention to cancel, or you may use this notice by dating and signing below. Keep one
copy of this notice because it contains important information about your rights.
If you cancel by mail or telegram, you must send the notice no later than midnight
of
(date)
(or midnight of the third business day following the
latest of the three events listed above). If you send or deliver your written notice to
cancel some other way, it must be delivered to the above address no later than that time.
I WISH TO CANCEL
________________________
Consumer’s Signature
____________________
Date
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12-11
Duress
• Duress – Contract Voidable
– Physical force or threats
– Party is deprived of a meaningful choice
– Has right of rescission
– Voidable
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12-12
Undue Influence
• Undue Influence – Contract Voidable
– Must have confidential relationship
• Attorneys/clients
• Elderly parents
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12-13
Illegality – Public Policy
• Illegal Subject Matter
– Contract is void
– Contracts in violation of criminal
statutes
• Examples: Contract to have someone
killed; contract to pay for a vote
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-14
Illegality – Public Policy
• Case 12.3 Durrett v. ACT, Inc.
(2011)
– Did applicant agree to ACT terms?
– Were the contract provisions fair or
oppressive?
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12-15
Illegality – Public Policy
• Contracts in Violation of Licensing
Statutes Must Be Competency-Based
as Opposed to Revenue-Raising For
Contracts to Be Void
• Contracts in Violation of Usury Laws
Charging Interest in Excess of
Statutory Maximum
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12-16
Illegality – Public Policy
• Contracts in Violation of Public
Policy
– Exculpatory clauses − full liability
elimination is generally invalid
– Covenants not to compete must be
reasonable in time and geographic scope
– Unconscionable contracts
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distributed with a certain product or service or otherwise on a password-protected website
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12-17
Illegality – Public Policy
• Case 12.4 Hawkins v. Globe Life
Insurance (2015)
– Explain the full history of the insurance
policy
– Discuss whether the mother should have
disclosed more
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12-18
Contract Performance
• When is Performance Due
– Conditions precedent
– Conditions concurrent
– Conditions subsequent
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12-19
Contract Performance
• Standards for Performance
– Complete performance is required
– Substantial performance allowed in
contract cases
• Substantial Performance = Nonmaterial
Breach
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-20
Contract Performance
• E-Commerce: Payments
– Credit Cards
– Digital Cash
– Person-to-Person Payment (or PayPal)
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-21
Performance: Excuse
• When Performance is Excused
– Impossibility − contract cannot be performed
• Example: Cannot build house if the land is washed
away
– Commercial impracticability − UCC-2-615
• Basic assumptions parties made are no longer true
• Can protect themselves by putting in force majeure
clause − covers problems such as wars, embargoes,
depressions
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-22
Performance: Good Faith
• Case 12.5 Sons of Thunder, Inc. v.
Borden, Inc. (1997)
– What impact does “good faith” have on
termination of a contract?
– What are the damages when there is a
lack of good faith in the termination of a
conduct?
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distributed with a certain product or service or otherwise on a password-protected website
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12-23
Substitute Performance
• Novation
– Two original parties agree, along with
third party, to substitute one party for
another
• Accord and Satisfaction
– Agreement reached to discharge a
disputed obligation
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
12-24
Fair Credit Billing Act
• Requires Monthly Statement on Open-End
Transactions
• Bill Must Have Address to Write for Errors
• Debtors Must Write Bill Objections to Get
Damages
– Must send within sixty days of bill’s receipt
– Creditor has thirty days to acknowledge
– Creditor has ninety days to take action
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distributed with a certain product or service or otherwise on a password-protected website
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12-25
Fair Credit Billing Act
• Fair Credit Billing Act
– Debtor need not pay protested amount or
finance charges during protest period
• Once resolved, must pay
• If creditor does not comply with time limits,
debtor need not pay (even if creditor is
correct)
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-26
Collection
• Collection Rights of the Creditor
– Regulated by FDCPA (Fair Debt
Collections Practices Act) if it is a
consumer debt
– Application
• Third party collection agencies
• Attorneys
– Prohibits unreasonable collection
practices by collection agencies
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-27
Collection
• Collection Rights
– Collectors’ obligations
• Must provide written verification of debt
if debtor asks or within five days after
contact with debtor
• Must include amount of debt, name of
creditor, debtor’s right to disputed debt
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distributed with a certain product or service or otherwise on a password-protected website
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12-28
Collection
• Collection Rights
– Collector’s restrictions
• Debtor contact
• Third party contact
• Prohibited Acts
– Penalties or FDCPA violations
•
•
•
•
FTC responsible for enforcement
Injunction
Debtor may collect actual damages
Debtor may collect up to $1,000 in additional damages
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-29
Collections
• Case 12.6 Litt v. Portfolio Recovery
Associates LLC (2015)
– What violations of FDCPA does the
court find?
– What policies should collectors develop
on phone calls?
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-30
Enforcement
• Suits to Enforce Debts
– Reduce to judgment
– Use garnishment for wages, accounts,
and so on
• Limits wage garnishments to 25 percent of
wages (50 percent for child support)
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12-31
Enforcement
• The End of the Line on Enforcement
of Debts: Bankruptcy
– Debts discharged in bankruptcy except
• Alimony
• Child support
• Student loans (seven years)
• Taxes (three years)
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12-32
Fair Credit Reporting Act
• Fair Credit Reporting Act
– Applies to consumer reporting agencies:
third parties (not creditors)
– Limitations on disclosure
• Can disclose to debtor his/her own report
• Can disclose to creditor with signed credit
application
• Can disclose to potential employer
• Can disclose for court subpoena
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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12-33
Fair Credit Reporting Act
• Limitations on Content
– No bankruptcies longer than ten years ago
– No lawsuits finalized longer than seven years
ago
– No disclosures of criminal convictions finalized
more than seven years ago UNLESS applying
for $50,000 in credit or $20,000/year job
– Debtor’s right of correction
• Notify agency
• If no connection, debtor can write 100-word
statement of clarification
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12-34
Fair Credit Reporting Act
• Case 12.7 Smith v. EBackgroundchecks, Inc. (2015)
– Explain the impact of credit report errors
– What are the damages in a case such as
this?
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12-35
Contract Remedies
• Types of Damages
– Compensatory − put party in same
position they would have been in
without the breach
• Example: Sales − buyer has to buy car for
$7,000 as opposed to original $6,000 −
gets $1,000 in damages
– Incidental damages, e.g., cost of finding
the other car; attorney’s fees
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12-36
Contract Remedies
• Types of Damages
– Consequential damages
• Damages experienced in relation to third
parties
• Late fees or loss of income for delays
– Liquidated damages
• Parties agree on damage amount in advance
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12-37
Third Party Rights
• Assignments
– Original party to contract assigns his/her
benefits under the contract to another
• Example: Credit company sells credit contract for
present value to another who undertakes its
collection
– Assignee has same rights as original party
• Delegation
– Transfer of obligations under contract
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12-38
Third Party Rights
• Third Party Beneficiary
– Originally named in the contract to
benefit from the contract
• Insurance beneficiaries are third party
beneficiaries
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publicly accessible website, in whole or in part, except for use as permitted in a license
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12-39
International Issues
• Assuring Payment
– Use a bill of lading
• Title to goods controlled
• Used in connection with letter of credit or
draft
– Letter of Credit issued by buyers bank to
seller
• Seller may draw on L/C to receive payment
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12-40
International Issues
• Assuring Performance
– Need force majeure clause
– Stability of currencies
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publicly accessible website, in whole or in part, except for use as permitted in a license
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12-41
Marianne M. Jennings
BUSINESS
Its Legal, Ethical, and
Global Environment
11th Ed.
Chapter 13
Product Advertising
and Liability
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
Development of Product
Liability
• Initially No Liability for the Seller
– Courts followed a theory of Caveat
Emptor (‘Let the buyer beware’)
• Caveat Emptor Removed in Section
402A of the Restatement of Torts
– Law has swung from no liability to
almost per se liability
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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13-1
Contract Basis for Product
Liability
• Express Warranties
– Creation: Affirmation of fact or
promise of performance (samples,
model, descriptions)
– Restriction: Must be part of the basis of
the bargain
– Disclaimer: Cannot make a disclaimer
inconsistent with an express warranty
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publicly accessible website, in whole or in part, except for use as permitted in a license
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13-2
Fact vs. Opinion
FACT
This car gets 20 miles per gallon.
X
This car gets great gas mileage.
These goods are 100% wool.
X
X
This is the finest wool around.
This truck has never been in an accident.
X
X
This truck is solid.
This mace stops assailants in their tracks.
This mace is very effective.
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publicly accessible website, in whole or in part, except for use as permitted in a license
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OPINION
X
X
X
13-3
Fact vs. Opinion
FACT
This makeup is hypoallergenic.
X
This makeup is good for your skin.
This ink will not stain clothes.
X
X
This ink is safe to use.
This computer is IBM-compatible.
X
X
This computer is as good as any IBM.
This watch is waterproof.
This watch is durable.
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OPINION
X
X
X
13-4
Contract Basis for Product
Liability
• Case 13.1 Castro v. QVC Network,
Inc. (1998)
– Was the pan represented as suitable for
roasting a 25 lb. turkey?
– What is the relationship between tort
liability and warranty liability?
– Did the pan pass the risk/utility test?
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13-5
Federal Regulations
• Federal Trade Commission Act
Authorizes FTC as Enforcement
Agency
– Passed in 1914
– Federal Trade Commission given broad
authority
– Requires regulation of “unfair and
deceptive trade practices”
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13-6
Federal Regulations
• FTC Broadened by Wheeler-Lea Act
of 1938
– “Is public deceived?” standard
– Not limited to adverse impact on
competition
• FTC Improvements Act of 1980
– Put some restrictions on FTC regulation
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13-7
Federal Regulations
• Content Control and Accuracy
– “No aspirin,” “aspirin free,” all dairy
products, and so on (like express
warranties)
• Performance Claims: Advertiser Must
be Able to Prove Claim
– Corrective advertising: FTC has required
corrective advertising when
unsubstantiated claims have been made
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13-8
Performance Claims
• Case 13.2 Warner-Lambert Co. v.
FTC (1977)
– What proposals for corrective
advertising are made in the order?
– What modification in the order does the
court make?
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distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-9
Federal Regulations
• Celebrity Endorsements
– Celebrity must have used the product
– If the celebrity has not used the product,
the source of claims must be given
• Bait and Switch
– Prohibits advertising cheaper product
and then getting customers to buy the
more expensive product
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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13-10
Federal Regulations
• Celebrity Tweet Guidelines
– To thine own self be true – whatever the celebrity says
must be a honest opinion
– Time will tell – endorsement can be used only as long
as the celebrity uses the product and believes in the
product
– Celebrity cannot ignore obvious facts that indicate
claims about the product are not true
– Companies must disclose that the celebrity is being
paid for the Tweets –Tweets must contain information
about celebrity compensation
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-11
Federal Regulations
• Product Comparisons
– FTC took a laissez-faire approach
during the 1980s
– It encouraged comparisons
– Congress amended trademark law in
1989 to allow competitors to bring suit
for deceptive statements about products
in competitor’s ads
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-12
Product Comparisons
• Case 13.3 McNeil-PPC, Inc. v.
Pfizer, Inc. (2005)
– What concerns were there about the ad
representations about the studies in
flossing vs. use of Listerine?
– How did experts feel about flossing vs.
Listerine?
– Are floss companies and mouthwash
companies really competitors?
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-13
Federal Regulations
• FTC Remedies: Consent Decree is a
Negotiated Settlement
• Ad Regulation by FDA
– FDA is regulating more as more
prescription medications are directly
advertised
• State Regulations: Professional Ads
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-14
Implied Warranties
• Implied Warranty of Merchantability
(§ 2-314)
– Given in every sale of goods by a
merchant
– Goods are fit for ordinary purposes
– Average quality with adequate
packaging
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-15
Merchantability
• Case 13.4 Rothbaum v. Samsung
Telecommunications America LLC
(2014)
– What was the technical problem with the
phone?
– What is the percentage of phones with
problems?
– Was Samsung aware of a problem?
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-16
Merchantability
• Food and Drink Merchantability
Cases
– Foreign-natural v. reasonable
expectation
• Case 13.5 Estate of Pinkham v.
Cargill, Inc. (2012)
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-17
Implied Warranties
• Implied Warranty of Fitness for a
Particular Purpose (§ 2-315)
– Requirements
• Seller has particular skill or judgment
• Buyer is relying on that skill or judgment
• Seller knows or has reason to know of
reliance
• Seller makes recommendation to buyer
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-18
Contract Product Liability
Type
Creation
Restriction
Disclaimer
Express
Affirmation of fact
or promise of
performance
(samples, model,
descriptions)
Must be part of
the basis of the
bargain
Cannot make a
disclaimer
inconsistent with an
express warranty
Implied
Warranty of
Merchantability
Given in every sale Only given by
of goods by a
merchants
merchant (“fit for
ordinary purposes”)
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
(1) Must use
disclaimer of quality
or use
“merchantability” or
general disclaimer
“as is” or “with all
faults”; (2) If written
– (record) must be
conspicuous
13-19
Contract Product Liability
Type
Creation
Restriction
Disclaimer
Implied
Warranty of
Fitness for a
Particular
Purpose
Seller knows of
buyer’s reliance
for a particular
use (buyer is
ignorant)
Seller must have
knowledge; buyer
must rely
(1) Must be in writing
(record); (2) Must be
conspicuous; (3) Must
be clear there are no
warranties (using
specific language) or
(4) Also disclaimed
with “as is” or “with all
faults”
Title
Given in every
sale
Does not apply in
circumstances
where apparent
warranty is not
given
Must state “There is no
warranty of title”
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-20
Implied Warranties
• Eliminating Warranties by
Disclaimers
– Can disclaims both implied warranties
by using “with all faults,” “as they
stand,” “as is”
– Can also disclaim by using the names of
both warranties in clear language
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-21
Implied Warranties
• Privity Standards (§ 2-318)
– Privity at buyer level − three code
alternatives
• Alternative A − buyer, members of
household, and guests
• Alternative B − any natural person expected
to use goods
• Alternative C − extends to any person
expected to use the goods
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-22
Strict Product Liability
• Strict Tort Liability (§ 402A)
– Defendant had duty to manufacture a
reasonably safe product/was in the business of
selling or manufacturing product
– That duty was breached
– Breach of duty caused plaintiff’s injury
(product reached plaintiff in same condition)
– Foreseeable that defect would cause injury
– Plaintiff has property or physical damages
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-23
Strict Product Liability
• Unreasonably Dangerous Defective
Condition
– Design defect
– Improper warnings or insufficient
instructions
– Negligent packaging, manufacturing, or
handling
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-24
Unreasonably Dangerous
• Case 13.6 Smith v. Coleman Co.
(2010)
– Was the product defective because the
warnings were not adequate?
– Did the buyer ignore the warnings?
– Where does privity fit in the case?
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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13-25
Strict Product Liability
• Manufacturing, Handling, or Processing
Error
– Product must be properly manufactured,
handled and packaged to avoid liability
• Reaching the Buyer in the Same Condition
– No substantial change in product design that
caused malfunction or injury
– Product not tampered with during distribution
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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13-26
Strict Product Liability
• Requires for a “Seller”
– Need not be a merchant
– Need not be “in the business” of selling
that product
– Example: peanuts sold at games by a
baseball club
– In some cases recovery has been
allowed against groups of sellers
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
13-27
Negligence
• Product Liability Suits Based on
Negligence
– Same elements as strict tort liability plus
prior knowledge of defective condition
– Punitive damages if plaintiff can show
manufacturer/seller knew of defect
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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13-28
Comparison of Product
Liability Theories
TYPE
PRIVITY KNOWLEDGE
REQUIRED OF PROBLEM
REQUIRED?
WARANTY
PROMISE
REQUIRED?
Negligence
No
Yes
No
Section 402A/strict
liability
No
No
No
Express warranty
Yes
No
Yes
Implied warranty of
merchantability
Yes
No
No
Implied warranty of
fitness for a
particular purpose
Yes
No
Yes
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distributed with a certain product or service or otherwise on a password-protected website
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13-29
Legal Basis for Product
Liability
CONTRACT
TORT
Express warranty
402A – Strict Tort Liability
Implied warranty of
merchantability
Elements
Implied warranty of fitness
for particular purpose
(1) Defective condition
unreasonably dangerous:
design; manufacturing defect; or
inadequate warning
(2) Defendant in business of using,
selling, or manufacturing
product
(3) Condition of product is the same
(4) Knowledge of defect
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
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distributed with a certain product or service or otherwise on a password-protected website
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13-30
Negligence: Privity
• Does Not Require Privity of Contract
• Was Injury to That Party Foreseeable
• Should Anticipate Household Use,
Presence of Children, and So On
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13-31
Defenses
• Misuse or Abnormal Use: Exceeding
Weight Limitations, Using Around Flames
• Contributory Negligence: Complete
Defense That Overlaps With Misuse
• Comparative Negligence: Reduces The
Amount of Recovery
• Assumption of Risk: Plaintiff Aware of
Danger, But Does it Anyway
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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13-32
Assumption of Risk
• Case 13.7 Thomas v. Staples, Inc.
(2014)
– Was the shredder defective?
– Are there any defenses for Staples?
– Does the court find a design defect?
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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13-33
Product Liability Reform
• Movement Toward Reform
– Verdicts and costs affect international
competitiveness
– Congress has made efforts to make laws
uniform
– Businesses need to focus on prevention.
– Restatement (Third) of Torts
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publicly accessible website, in whole or in part, except for use as permitted in a license
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13-34
Federal Standards
• Consumer Product Safety Commission
– Up to $1,500,000 maximum (willful violations
carry $100,000 and/or 1 year)
– Consumer Product Safety Improvements Act −
covers secondary sales (lead toys)
• Uniform Product Liability Law
– The Department of Commerce has tried to get
states to adopt uniform product liability laws
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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13-35
International Issues
• EU Trying to Gain Uniformity
– “State-of-the-Art” Defense: Product as
good as it can be upon release
– International Standards Organization’s
9000 guidelines for quality assurance
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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13-36
Marianne M. Jennings
BUSINESS
Its Legal, Ethical, and
Global Environment
11th Ed.
Chapter 14
Business Competition:
Antitrust
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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Common Law Protections
• Covenants Not to Compete
– Initially were void
• Gradually Became Acceptable
– If necessary to protect business
– If reasonable as to time
– If reasonable as to geographic scope
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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14-1
Modern Trade Restraints
• Case 14.1 Redner’s Markets, Inc. v.
Joppatowne G.P. Ltd. Partnership
(2014)
– Discuss various stores and why the court
distinguishes them
– What will be the impact on the grocery
store?
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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14-2
Negotiating Valid Covenants
Not To Compete
1. State the reason for the covenant
Mix of tenants
Goodwill preservation
Protection of proprietary information
2. Be sure the covenant is reasonable
Time
Geographic scope
3. Make the covenant part of the sale, lease, or
employment agreement
4. Have the parties initial the noncompete clause
5. Have legal representation
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-3
Federal Antitrust Statutes
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14-4
A Look At Markets, Competition,
and Antitrust Laws
HORIZONTAL MARKETS
VERTICAL MARKETS
Monopolization
Tying
Monopsony
Price-Fixing
Price Discrimination
(Sherman Act)
(Robinson-Patman Act)
Refusals to deal
Resale Price Maintenance
Group Boycotts
Exclusive Dealing, Sole Outlets,
Customer and Territory
Restrictions
Mergers Among Competitors
Mergers Along the Supply Chain
(Clayton Act)
(Clayton Act)
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14-5
Horizontal Restraints
• Designed to Lessen Competition
Among a Firm’s Competitors
– Examples
• Price Fixing
• Group boycotts/refusals to deal
• Joint Ventures/Mergers/Monopolization
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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14-6
Horizontal Restraints
• Sherman Act Restraints −
Monopolization
– Section 2 prohibits monopolization
– Some monopolies are permitted
• Newspapers − town cannot support more
than one business
• Monopoly gained by nature of product −
superior skill, foresight, and industry
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publicly accessible website, in whole or in part, except for use as permitted in a license
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14-7
Horizontal Restraints
• Sherman Act Restraints −
Monopolization
– Monopoly power
• Power to control prices or exclude
competition in the relevant market
• Examine firm’s market power
• Examine relevant markets
– Geographic market
– Product Market
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14-8
Horizontal Restraints
• Sherman Act Restraints − Monopolization
– Elements of monopolization
• Purposeful act required
• Monopoly has resulted from something other than
superior skill, foresight, and industry
• Predatory pricing − pricing below cost for a
temporary period to drive others out
• Exclusionary conduct − prevents competitor from
entering the market
– Attempts to monopolization
• Section 2 of Sherman Act may be violated even
though no monopoly exists
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publicly accessible website, in whole or in part, except for use as permitted in a license
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14-9
Horizontal Restraints
• Sherman Act Restraints − Price Fixing
– Collaboration among competitors for the
purpose of raising, depressing, fixing,
pegging, or stabilizing the price of a
commodity
– Per se violation
• Conduct is unreasonable and illegal
• No defenses for such action
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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14-10
Horizontal Restraints
• Sherman Act Restraints − Price Fixing
– Minimum prices − discourages competition
– Maximum prices − stabilizes prices but see
State Oil Co. v. Khan, 522 U.S. 3 (1997)
– List prices − exchange of price information
hurts market
– Production limitations − controls supply and
controls price
– Limitations on competitive bidding
– Credit arrangements − universal agreement on
charges is price-fixing
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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14-11
Horizontal Restraints
• Case 14.2 U.S. v. Apple, Inc. (2015)
– Explain what Apple was trying to do
with the e-book publishers
– Why does the court find that Apple
violated the Sherman Act?
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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14-12
Horizontal Restraints
• Division (Divvying Up) of Markets
– Per se violation; lessens competition in
that market
• Group Boycotts and Refusals to Deal
– May have the best intentions in the
world but boycotts are still illegal
• Example: Garment boycotts on knock-offs
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publicly accessible website, in whole or in part, except for use as permitted in a license
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14-13
Horizontal Restraints
• Free Speech and Anticompetitive Behavior
– Noerr-Pennington doctrine
• Competitors can work together for governmental
action
• Lobbying and political efforts
• Cannot restrain this activity − First Amendment
protection
– Local Government Antitrust Act
• Exempts state and local government from antitrust
suits
• Must have state policy to allow suit
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14-14
Horizontal Restraints
• Subtle Anticompetitive Behavior:
Interlocking Directorates
– Prohibits director of firm with $1 million
or more in capital from being a director
for a competitor
– Lessens likelihood of exchange of anticompetitive information
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publicly accessible website, in whole or in part, except for use as permitted in a license
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14-15
Horizontal Restraints
• Merging Competitors and the Effect
on Competition
– Presumptively illegal to have horizontal
mergers
– Courts look at market share to determine
true illegality
– Today Justice Department follows the
Herfindahl-Hirschman Index to evaluate
market concentration
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14-16
Vertical Restraints
• Covers Parties in Chain of Distribution
– Manufacturer
– Wholesaler
– Retailer
• Resale Price Maintenance
– Attempt by manufacturer to control price
retailers charge for the product
– May be a violation of Section 1
– Applies to minimum and maximum prices as
well
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publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
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14-17
Vertical Restraints
• State Oil v. Khan (1997)
– Vertical price fixing is not a per se
violation
– Does not decrease competition
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publicly accessible website, in whole or in part, except for use as permitted in a license
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14-18
Vertical Restraints
• Case 14.3 Leegin Creative Leather
Products, Inc. v. PSKS, Inc. (2007)
– What happened to retailers who
discounted the products?
– Why does the court see customer service
as a part of competition?
– Does the court see services as a means
of justifying minimum prices?
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14-19
Vertical Restraints
• Monopsony
– A monopsony is price control by the buyer
– In Weyerhaeuser v. Ross-Simons, the court
held that a buyer was not artificially
driving up suppler prices through its large
orders – its manufacturing process was
superior and it needed more supplies just
because it could process more
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14-20
Vertical Restraints
• Sole Outlets and Exclusive Distributorships
– Manufacturer appoints a distributor or retailer
as the exclusive outlet
– Subject to a rule of reason analysis: Not
automatically illegal; violators can present
justification
– Factors examined in rule of reason analysis
• Manufacturers can pick and choose dealers
• There must be inter-brand competition
• If there is little inter-brand competition, then intrabrand competition is required
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14-21
Vertical Restraints
• Customer and Territorial Restrictions
– Restricting to whom and where a dealer
can sell
– Subject to a rule of reason analysis
• Consider amount of inter-brand competition
• Consider market power of manufacturer
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distributed with a certain product or service or otherwise on a password-protected website
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14-22
Vertical Restraints
• Tying Arrangements
– Sales arrangements that require buyers
to buy an additional product in order to
get the product they want
• Tying product = desired product
• Tied product = additional product
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-23
Vertical Restraints
• Tying Arrangements
– Generally illegal per se violation
(Clayton Act Section 3)
• Clayton Act − covers goods
• Sherman Act − Section 1 covers services,
real property, and intangibles
• Violation depends on market and power −
is tying product unique?
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-24
Vertical Restraints
• Tying Arrangements: Defenses
– New industry defense: needed to protect
quality of tying product
– Quality control for protection of
goodwill specifications are so detailed,
could not be supplied by anyone else
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-25
Tying Arrangement
• Case 14.4 Illinois Tool Works, Inc.
v. Independent Ink, Inc. (2006)
– Is the arrangement illegal per se?
– Is proof of market power required for
typing?
– Is there a problem with tying
unsuccessful products with successful
ones?
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-26
Vertical Restraints
• Price Discrimination
– Prohibited by Robinson-Patman Act
– Selling goods at prices that have different
ratios to the marginal cost of producing them
– Required elements (if established, both buyer
and seller are guilty)
•
•
•
•
Interstate commerce
Price discrimination between purchasers
Commodities of like grade and quality
Lessening or injuring competition
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-27
Vertical Restraints
• Price Discrimination: Defenses
– Legitimate cost differences
– Quantity discounts OK (if there is an
actual savings)
– Market changes, inflation, material costs
– Meeting the competition
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-28
Vertical Restraints
• Vertical Mergers: Mergers Between Firms With
a Buyer-Seller Relationship
• Illegality Depends Upon
– Geographic and product markets
– Whether entry of competitors would be difficult
• Failing Firm Defense
– No other offers to buy
– Chapter 11 bankruptcy would not help
• States Now Have Authority to Step in and
Regulate Mergers if Feds Do Not
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-29
Antitrust Remedies
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-30
International Competition
• International Competition and the World
Market
– United States allows joint ventures in
international markets that would not be
permitted in the United States
– Antitrust laws most stringent in the United
States
– Foreign companies doing business in the United
States are still subject to U.S. Antitrust laws
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
14-31
Marianne M. Jennings
BUSINESS
Its Legal, Ethical, and
Global Environment
11th Ed.
Chapter 15
Business and Intellectual
Property Law
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
Intangible Personal Property
• Examples
– Patents
– Copyrights
– Trademarks
– Trade Names
– Trade Dress
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-1
Patents
• 20 Years From Filing/15 Years for
Design Patent
• Exclusive Rights to Use and Profits
• Must Be Non-obvious, Novel, and
Useful
• Using the Idea Without Consent
Constitutes Infringement
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-2
Remedies for Patent
Infringement
• Case 15.1 eBay, Inc. v.
MercExchange, LLC (2006)
– The issue of a permanent injunction
– How do we balance interest in protecting
property rights without depriving the
world of new developments and
technologies?
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-3
Copyrights
• Protect Authors of Books, Magazine
Articles, Plays, Movies, Songs,
Dances, Photographs
• Protects Against Vicarious
Infringement
– Third parties who facilitate infringement
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-4
Copyrights
• Case 15.2 Sony BMG Music
Entertainment v. Tenebaum (2011)
– What happens if you are warned against
facilitating infringement or are
infringing and don’t stop?
– What is the school’s liability for use of
its server?
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-5
Copyrights
• Runs For Lifetime of Author Plus
Seventy Years
• 120 Years From Creation or 95 Years
From Publication, Whichever is
Shorter, if Company Holds Rights
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-6
Copyrights
• Federal Statutes
– Sonny Bono Copyright Extension Act
– Digital Millennium Copyright Act
– Computer Software Copyright Act of
1980
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-7
Copyrights
• Works Automatically Copyrighted
But No Suits Can be Filed Until the
Copyright Office is Given a Copy
• Damages Include Profits, Costs,
Attorney’s Fees
• Fair Use is Permitted − Short Quotes;
Research Copies, Criticism,
Commentary and Parody
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-8
Is Parody Fair Use?
• Campbell v. Acuff-Rose Music, Inc.
(1994)
– Parody as art and expression
– Excessive use is not necessarily a bar to
fair use standard
• Case 15.3 Louis Vuitton Malletier v.
My Other Bag, Inc. (2016)
– Product parodies – increase brand
demand
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-9
Trademarks
• Words, Pictures, Designs, or Symbols
Used to Identify a Product
• Lanham Act of 1946 and Subsequent
Amendments Provide Protection
• Must Be Unique and Non-generic
• Holder Must Maintain Unique Nature
• Recent Changes Allow Registration Prior
to Use of the Trademark
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-10
Trademark Dilution
• Federal Trademark Dilution Act (an
Amendment to the Lanham Act)
– Passed in 1996
– Protects against dilution of trademarks
and includes both profit and non-profit
uses
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-11
Trademark Infringement
• Case 15.4 Beastie Boys v. Monster
Energy Company (2015)
– Was there authorization for use?
– Was it fair use?
– What lessons should businesses learn
from this experience?
• Issues with trademark offensiveness
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-12
Trade Dress
• Colors, Shapes, and Designs
Associated With a Product
– Allowing their use is likely to create
confusion
– Consumer surveys are used to establish
whether consumers will be misled
• Penalties for Infringement
– Civil suits
– Criminal penalties
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-13
Infringement and the Web
• Cyber Infringement
– Federal Trademark Dilution Act
– Applies to Internet
– Self-enforcing
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-14
Intellectual Property Rights
TYPE OF
INTELLECTUAL
PROPERTY
TRADENARKS
COPYRIGHTS
PATENTS
TRADE
SECRETS
Protection
Words, names,
symbols, or devices
used to identify a
product or service
Original creative
works of authorship,
such as writings,
movies, records, and
computer software
Utility, design, and
plant patents
Advantageous
formulas, devices, or
compilation of
information
Applicable standard
Identifies and
distinguishes a
product or service
Original creative
works in writing or
another format
New and nonobvious
advances in the art
Not readily
ascertainable, not
disclosed to the public
Where to apply
Patent and
Trademark Office
Register of
Copyrights
Patent and Trademark
Office
No public registration
necessary
Duration
Indefinite so long as
it continues to be
used
Life of author plus
70 years; corporate is
120 years from
creation or 95 years
from publication of
the work
Utility and plant
patents, 20 years from
date of application;
design patents, 15
years
Indefinite so long as
secret is not disclosed
to public
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-15
Trade Secrets
• Customer Lists, Customer Information,
Data Processed a Certain Way
• Uniform Trade Secrets Act
– Protects employers from having former
employees take trade secrets to new employer
• Industrial Espionage Act
– Makes it a federal crime to transfer trade
secrets to another
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-16
International I.P. Issues
• Patent Protection
– Some countries require opposition
proceedings for defense of the patent
– Some countries impose working
requirements
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-17
International Trademark
• Trademark Protection
– Name, symbol, mark, letter, word or figure
– Must be registered in United States and other
countries for full protection
– Protects the goodwill of the firm
– Common law countries establish trademark
through establishing use and recognition
– Now in United States you can register a
trademark before you begin using it
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-18
International Trademark
• Trademark Protection
– In 1996, EU opened a centralized office for
Trademark registration for member states
• Provides a one-step registration for all EU countries
– 1891 Madrid Agreement provides for
international registry of trademarks
• Effective in all member countries for five years
– 1929 Pan American Convention provides
protection for registered trademarks in all
member countries
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-19
International Trademark
• Trademark Protection
– Knock-off goods: goods carrying
trademarks that are not produced by the
trademark holder
– Gray market goods: actual trademark
goods that are sold without authorization
of trademark holder
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-20
International Trademark
• Copyrights
– Berne convention membership: registration in
one is registration in all
– Will be part of WIPO
– Simultaneous publication in member country
is protected
– International standards vary
• China’s software piracy
• China is on trade watch list because so much
software is copied
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-21
Enforcing Business Rights
• Product Disparagement: Defamation
for Products/Businesses
– Elements
• Statement about a business’ reputation,
honesty, or integrity that is untrue
• Publication
• Statement is directed at business with intent
to injure
• Damages
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-22
Enforcing Business Rights
• Case 15.5 Bose Corporation v.
Consumers Union of the United
States, Inc. (1984)
– Why is Malice an important part of the
case?
– What classes of speech are excepted
from First Amendment protection?
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-23
Enforcing Business Rights
• Palming Off
– Company sells product by leading
buyers to believe the product is
something else
• Examples: Fake Rolex watches; Cabbage
Patch dolls
– Plaintiff must establish that confusion is
likely
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-24
Enforcing Business Rights
• Misappropriation
– Protects business trade secrets such as
the customer list
– Some theft, espionage or bribery must be
used to obtain secret information
©2017 Cengage Learning®. May not be scanned, copied or duplicated or posted to a
publicly accessible website, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website
or school-approved learning management system for classroom use.
15-25