Transcript Property

Legal Environment of
Business
University of Management and Technology
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MGT102
Chapter 9:
Property and Intellectual
Property
Meiners, R. E., Ringleb, A. H. & Edwards, F. L.
Legal Environment of Business (8th ed.)
© 2003 South-Western.
ISBN 0324121512
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MGT102
Chapter 9
Property and Intellectual
Property
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Real Property
Land
under - oil, minerals
attached - buildings, trees
Property - “legally protected
expectation of being able to
use a thing for one’s
advantage.’’
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Ownership of Land
Deeds
most common way to transfer ownership
ID original owner, describe land, ID new
owner, & state that the ownership is being
transferred, possibly subject to certain
conditions
Titles
comes from receipt of valid deed; is means
by which owner has legal possession of the
property
“formal right of ownership”
Titles are recorded by state officials (usually
county)
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Forms of Ownership
Fee Simple - indefinite time and
right to dispose of it
up in the air “to the skies”
down to the core “to the center
of the earth”
these rights can be sold
separately
subsurface mineral rights
often legally separated
Can be inherited, transferred,
sold in part or in whole
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Forms of Ownership
Life Estates
have use of land for life of life tenant- but can’t ruin it!
Servitudes
property requirements imposed by an owner
positive and negative requirements
easements and covenants most important servitudes
Easements
right to enter land of another and make use of it or take something
example: sidewalks, utilities
Adverse possession is a form of easement
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Adverse Possession
Must be:
Actual- does in fact possess
property
Open- visible so owner is on
notice
Hostile- without consent of
owner
Exclusive- not shared with
others who have no right
Continuous- goes on without
major interruption
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MGT102
Hickerson v. Bender
The Fagans owned lots A & B; sold lot B with an easement on the eastern
15 feet of lot A in 1955. In ‘90, Hickerson was the fourth owner of lot B.
Nothing ever built on lot B.
The Fagans sold lot A to Bender in 1958 who built a home which blocked
the easement on lot A.
Hickerson sued Bender for blocking his easement. Trial court held the
easement had been extinguished by abandonment and adverse
possession before Hickerson bought the property. Hickerson appealed.
Court of appeals stated that for abandonment of an easement to occur
there must be more than mere nonuse. There must appear to be an
intentional relinquishment of the rights granted. This intention can be
shown in acts or conduct.
HELD: Trial Court decision affirmed. The court stated that the previous
owner’s acquiescence to the Benders’ improvements was evidence of
intent to abandon.
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MGT102
International Perspective:
Insecure Property Rights
In U.S., property ownership is generally secure. Not so in other parts of the
world.
In many poor countries, farmers do not own land they farm; city dwellers do not
own land under the houses they have built.
Philippines: only 1/3 of agricultural land and 43% of dwellings have clear title
Peru: 81% of farmed land & 1/2 of urban dwellings have no title
Haiti: 97% farm land not owned
Egypt: 92% of urban dwellings and 83% of farms are “unowned”
With no secure property rights, investment is difficult and very risky. Economic
progress is enjoyed by the minority who live in the formal economy.
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MGT102
Covenants
like a contract w/estate
goes with the estate from owner
to owner
Landlords and tenants
rented property is called a
leasehold
landlord has interest of some
length
tenant possesses estate for a
fixed period or at will as
determined by landlord
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Lease
ID parties
describe premises being leased
state how long in effect
state how much rent is to be
paid
does not have to state a
specific end
can go month to month
usually also:
who pays utilities
where/when rent is paid
terms of damage deposit
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Rights of a Tenant
Right of possession during
lease
Can exclude other parties
Landlord must make essential
repairs or may have
constructive eviction
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Can’t:
abuse property
remove valuable property
be nuisance to neighbors
engage in illegal activities
on property
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Barton v. Mitchell Co.
Barton leases space for 5
years from Mitchell Co. and
operates a patio furniture
store
2 years into lease, Mitchell
rents next door to “Body
Electric”, a loud exercise
studio
Interferes w/ Barton’s
business; she complains;
landlord does nothing
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After 8 months, Barton
vacates premises.
Mitchell sues for breaking
lease, gets $18,930. Barton
appealed.
Constructive eviction from
noise - Barton wins
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MGT102
Public Control of Real Property
Eminent Domain
Government can force sale of property or granting of
easement without consent of owner
5th Amendment requires “just compensation”
Police powers
Control land use with regulations
Is there compensation? Yes, but when property loses value,
compensation may not appear to be “just”
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Village of Euclid v. Ambler Realty (1926)
Ambler owned 68 acres in Euclid,
Ohio. In ‘22 the village adopted a
comprehensive zoning plan which
reduced the estimated value of the
land from $10,000 per acre for the
use intended to only about $2500
per acre.
Amber sued Euclid in federal court
claiming that the ordinance
deprived it of, “liberty and property
without due process of law.”
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District court declared plan
unconstitutional.
Euclid appealed.
Sup. Ct. stated that if
municipal ordinances are not
satisfying to a majority of the
citizens, then their recourse
is to the ballot, not the courts.
HELD: The ordinance was
valid under police power of
the state to protect public
health, safety & welfare.
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MGT102
Intellectual Property
Intangible property
Major forms include:
trademarks
trade names
copyrights
patents
trade secrets
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Trademark
A commercial symbol
design, logo, distinctive mark, name or word
“brand name”
protected by common law & the Lanham Act
classified (see also Exhibit 9.1)
arbitrary and fanciful (most favored)
suggestive (not as favored--but Chicken of the Sea is okay)
descriptive (less favored--but Holiday Inn and Bufferin
have protection)
generic—not protected
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MGT102
Harley-Davidson, Inc. v.
Grottanelli
Grottanelli owns The Hog Farm, a
motorcycle repair shop in NY. He
used “hog” in connection with
events he sponsored and
products he sold. He also used
variants of the Harley’s bar-andshield logo.
Harley sued to enjoin Grottanelli
from using the word “hog” and
from using the bar-and-shield
logo. The district court held for
Harley; Grottanelli appealed.
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Grottanelli was using the word
“hog” when Harley was trying to
disassociate itself from the word.
Other facts also supported the
claim that the word was a generic
term long before Harley registered
the word in 1987.
HELD: Harley could not prohibit
Grottanelli from using the word
“hog,” but did prohibit him from
using variations of the bar-andshield logo.
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MGT102
Other Marks
Service Marks
Apply to services, not
goods
Law is the same as for
trademarks
Ex: International Silk
Assn. uses the motto:
“Only silk is silk.”
Ex: Burger King’s “Home
of the Whopper”
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Trade Dress
Concerns the “look and
feel” of products and
service establishments.
Size, shape color, texture,
graphics, etc.
Must be “inherently
distinctive”
Two Pesos v. Taco
Cabana: One Mexican
restaurant could not copy
its competitor’s decor
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MGT102
Copyright ©
Registration simple—not a
guarantee of validity
Works must be original
Life of author plus 70 years
Gives owner exclusive right to:
reproduce
publish or distribute
display in public
perform in pubic
prepare derivative works based on
original
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Infringement and Fair Use in
Copyright
Fair use - “for purposes such as criticism, comment,
news reporting, teaching,…scholarship, or research”
Four Factors of “fair use”
purpose and character of copying
nature of work
extent of copying
effect of copying on market
Example--ok to copy TV show for personal use
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MGT102
New York Times Co.v. Tasini (2001) ©
Tasini and other freelance authors wrote articles for NY Times Company. Authors
registered copyrights in articles. Each Times magazine and newspaper then
registered collective work copyrights.
Times allowed LEXIS/NEXIS to publish the works online.
Authors sue Times for copyright infringement as they did not give permission for
online publication. Times said it had the right to reproduce the works. District Ct. held
for Times; Appeals Court held for the authors; Times appealed to the U.S. Supreme
Court.
HELD: Affirmed. Both Times and LEXIS/NEXIS infringed.
Section 201 (c) of the Copyright Act states that a “separate contribution to a collective
work is distinct from . . . the collective work, and vests initially in the author of the
contribution.”
Publishers may make agreements for electronic reproduction.
LEXIS infringed in publishing without permission; Times infringed by authorizing and
aiding LEXIS in placing articles in their databases.
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Patents
Exclusive right to make, use, or
sell a product for 20 years
Anyone who “invents or
discovers any new and useful
process, machine, manufacture,
or composition of matter, or any
new and useful improvement
thereof, may obtain a patent”
Strong protection during life of
patent
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But expensive, technical and
time-consuming process
Since patent divulges all info
to competitors, some prefer
trade secrets
If Coca Cola had gotten a
patent instead of trade secret
it could be used by others
after 1907
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MGT102
Richardson-Vicks v. Upjohn
RVI owned a patent, issued in 1985, for an OTC medicine for the relief of
cough, cold, and flu symptoms.
Upjohn contested its validity because it was very similar to prior
inventions and was for something obvious, but in 1992 the patent office
upheld the patent.
RVI sued Upjohn for infringement for selling products that had the same
formula as the patent.
The jury held for RVI and awarded it a royalty of 7%. The judge overturned
the jury verdict, and RVI appealed .
HELD: The appeals court affirmed the trial judge’s ruling.
The product formulation (2 ingredients of ibuprofen & pseudoephedrine)
would have been obvious to one of ordinary skill in the art; patent invalid.
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Trade Secrets
Coca-Cola has held secret the formula for Coke for over 100
years; so protection can be strong.
Most trade secret lawsuits are common law actions of stealing &
using secrets
Prosecutors can also press criminal charges
Protection in other countries is difficult
Information is a trade secret if:
it is not known by the competition
business would lose advantage if competition were to obtain it
owner has taken reasonable steps to protect the secret from
disclosure
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Buffets, Inc. v. Klinke
Old Country Buffets (OCB) developed “small-batch cooking” to ensure
freshness. The Klinkes fraudulently obtained a copy of OCB’s recipes
and its EE manual.
The Klinkes opened Granny’s at which they used the OCB EE manual
and recipes. OCB sued for trade secret theft.
The district court granted summary judgment for Klinkes.
HELD: The appeals court stated that the alleged secrets were so
obvious that very little effort would be required to “discover” them.
“Klinkes may be liable for stealing something, but not . . .
misappropriation of trade secrets. . . .”
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MGT102
Want to Hear My Songs?
Pay Up by Ted Nugent
Issue: Is Copying Music Acceptable?
People copy music files by burning CDs or downloading from the
web without paying
The music industry is attempting to upgrade the quality of music
and also protect intellectual property rights
The 9th Circuit Court of Appeals ruled that Napster had to stop
providing unauthorized music
But downloading music files is very difficult to stop
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