History and Sources of Intellectual Property Law

Terms:

Statute of Monopolies:
British law, passed in 1623, that abolished the government-sponsored dominance by guilds of particular industries and vested the creator of intellectual property with the rights thereto.  

Exclusive Jurisdiction:
A federal court has exclusive jurisdiction over a case when federal courts may hear the case but state courts may not.

Contract Law:
The series of statutory laws, case law and common law that governs the enforceability of agreements and promises between people.

Mutual Assent:
The presence of an offer and an acceptance in the case of a contract. Mutual assent is a necessary element for most contracts to be enforceable.

Consideration:
The contract law doctrine which dictates that both sides of an agreement must suffer or agree to suffer a legal detriment for a contract to be enforceable (i.e., both sides must agree to give something up).

Misappropriation:
The tort that applies when one party wrongfully uses information gathered by, or belonging to, another person for his or her own commercial purposes.


History of Intellectual Property Law

Intellectual property law dates at least as far back as medieval Europe. In those times, “guilds,” or associations of artisans in a particular industry, were granted authority by the governments to control the regulation and conduct of the various industries. These guilds exercised control over what items could be imported, marketed and produced and the manner in which new inventions, devices and procedures could be introduced to the stream of commerce. Because the authorities for these guilds were given by the governments, and because they concentrated the power to regulate an industry in a select few, and were not earned by innovation, skill or creativity, these guilds did far more to stifle creativity and invention than to encourage it.

Intellectual property law at that time was driven not by an interest in creation and innovation, but rather by political and religious motivations. For example, the 1556 establishment of the Stationers’ Company’s monopoly in England was largely intended to help limit the Protestant Reformation movement's power. By putting the entire printing industry in the control of this company, the government and church could prevent the dissemination of ideas. See Copyright for the Nineties, Gorman and Ginsburg, 1, the Michie Company (1993). See also Intellectual Property: The Law of Copyrights, Patents and Trademarks, Schechter and Thomas, 13, West Group (2003) (stating the monopoly was granted in 1557).

Example: Jorge is a merchant who believes that the tax on the wool he sells is unfair. After speaking with his wife, he decides to let the people know that the King is driving up the cost of the wool they buy. Jorge spends several months writing a lengthy manifesto, in which he discusses the natural right of man to shear sheep, and the inherent liberty to sell the sheared sheep stuff (i.e., wool) to others. Unfortunately, he is unable to find a printer willing to print the manifesto, as the King controls the printing press industry. Hence, few people today have ever heard of this brave man lost to history.

Although the Stationer’s Company monopoly expired in 1694, it was not until the early 18th century that the guild system was definitively broken in England.

In 1623, the “Statue of Monopolies” was passed. This law halted the granting of monopolies by the government. In addition, the act gave the “true and first inventor” of intellectual property a period of 14 years in which he would have exclusive control over his invention, subject to certain conditions. See full text of Statute of Monopolies. From that point forward, more specific statutes and British common law continued to develop and refine intellectual property law.

Most notably, the Statute of Anne was enacted in 1710, granting an initial 14 year protection period and a possible 14 year renewal.  Among other points of interest, the statute did not protect authors against the import of foreign-language translations of their works, and permitted people to make formal complaints if printers or booksellers attempted to set their prices too high.

Intellectual Property Law in the United States

When the colonies secured independence from England, each colony (except Delaware) passed its own copyright law. Further, prior to the enacting of the United States Constitution, each of the 13 original colonies had its own distinct body of patent law. This, of course, led to a severe degradation in the value of copyrights and patents. What good would a New Jersey patent be, for example, if it would be unenforceable in neighboring New York? In order to rectify this problem, to reward innovation and to greatly facilitate commerce among the states, the drafters of the Constitution felt that intellectual property law should be within the province of the federal (national) government, not the state governments. Therefore, the framers of the Constitution drafted the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries". U.S. Const. Art. I, Sec. 8.

This Constitutional power has had, for the most part, the effect of ensuring that federal law is the overwhelming authority for all law regarding intellectual property rights. The Supreme Court has even gone so far as to rule that Congress, with its complex and detailed system of intellectual property laws, has developed a scheme which is “so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.” Bonito Boats v. Thunder Craft Boats, 489 U.S. 141 (1989). In fact, not only is federal law the primary source for patent and other intellectual property law, any state law that does not comply with both the text and the spirit of federal intellectual property law will be struck down.

Example: Dave, a resident of the state of New Tudor, invents a new scooter, which can safely carry its rider up to 50 mph. He successfully obtains a patent to protect his interest in manufacturing, marketing and selling this device. The state of New Tudor passes a law which provides that, in the interest of promoting competition and ensuring that consumers benefit from major technological advances, no company may control more than 50% of the state’s scooter industry based on a technological advantage. The law provides that when such a situation does arise, the holder of the technology must share his or her information with his or her competitors. Dave markets his new scooter and his company soon has 75% of the state’s market share for scooters. The New Tudor Attorney General brings an anti-trust action against Dave based on the New Tudor rule. Even though the New Tudor rule may not directly conflict with federal law, it does, in essence, mitigate the effectiveness of Dave’s patent. Since the federal government has “taken over” the field of patent law, no state can do anything to frustrate the federal patent laws. Therefore, the New Tudor rule will probably be struck down and Dave will be allowed to keep running his business in the same manner. See Hunter Douglas, Inc. v. Harmonic Design, 962 F. Supp. 1249  (C.D. Cal. 1997).

In addition to federal law being the primary source of intellectual property law in the U.S., federal law gives courts exclusive jurisdiction in most intellectual property cases. See 28 U.S.C. § 1338. This means that only federal courts and not state courts have the authority to hear such cases. This is another attempt to ensure uniformity in the application of intellectual property law because of the important role such uniformity plays in interstate commerce.

The Interaction Between Contract Law and Intellectual Property Law

Although, as previously discussed, federal law lays out a comprehensive system of laws regarding all facets of intellectual property law, there are times when basic principles of contract law must be added to the equation. This usually occurs when a person has an idea for a product or work, but needs the assistance of a different party to develop and/or market that idea. In such a case, as an idea itself is not protectable under intellectual property law (remember, there must be a physical manifestation of the idea), principles of contract law must be used to protect the idea while it is still in the stage of being converted into a protectable work.

Example: Henry has a great new idea to improve the driving experience for car drivers by installing a feature in the horn which senses the mood of the driver. When the driver is angry or annoyed, the horn is designed to increase in volume, thereby allowing the driver to let off more steam. Henry thinks of a device that would allow this to become a reality, but he is completely incapable of developing a prototype and cannot even draft a design sketch for his device without the help of a professional engineer. He therefore takes his idea to General M., an engineer who specializes in developing automobile gadgets. Obviously, he needs to tell General all about his device and how to develop it. So, what is to stop General M. from listening to Henry’s plan and then building and marketing it as his own? Not intellectual property law, since the idea is not protectable yet. The basis for protecting the idea will have to come from contract law.

In these types of cases, which are often known as “idea submission” cases, courts will generally use contract law to protect the intellectual property interest, assuming three conditions are met:

  1. The idea at issue must be “novel and concrete;”
  2. The parties must have had an express or implied agreement under which the idea was turned over; and
  3. The recipient must have actually used the idea.

In addition to these three, all of the general requirements for contracts (mutual assent, consideration, legal subject matter, competent parties, etc.) must also be present for a court to enforce intellectual property rights under a contract law theory.

Note, that the contract may be express or implied. An implied contract in this context can arise when the parties never verbally agreed on the terms for the turning over of the intellectual property, but where the circumstances indicate that this must have been the understanding. So, in the above example, if Henry tells General M. all about his idea and how to manufacture it, the courts may infer an implied contract between Henry and General M. to share in the profits of the idea even if Henry could not prove the existence of an actual agreement.

In general, a court will infer an implied contract when one person uses another's invention with the inventor’s consent and with the inventor having a reasonable expectation of receiving reasonable compensation. See United States v. Palmer, 128 U.S. 262 (1888).

In a similar vein, a court may use the tort of “misappropriation” to enforce intellectual property rights that may not otherwise fall under the letter of intellectual property law. The tort of misappropriation occurs when one party generates work product (usually information) that is used for commercial purposes by another party and where the following elements are met:

  1. the information is gathered by the “victim” party at a cost;
  2. the information is time sensitive;
  3. the second party’s use of that information constitutes “free-riding” on the first party’s efforts;
  4. the party using the information is in direct competition with the product or service offered by the first party;
  5. the ability of the second party to “free-ride” in such a manner would reduce the incentive to acquire the information in the first place.

Example 1: AP (Associated Press) and INS (International News Service) are competing news services. AP gathers news and distributes it to subscribing newspapers throughout the country. INS also has client newspapers throughout the country. INS would systematically subscribe to the AP newswire and distribute the information that AP had collected to its own subscribers, thereby “free-riding” on the back of AP’s news gathering efforts. The Supreme Court held that INS was guilty of misappropriation. International News Service v. Associated Press, 248 U.S. 215 (1918).

Example 2: Motorola, a wireless pager and cell phone company, transmitted to its pager customers real time scores and information relating to National Basketball Association games that were still in progress. The NBA sued Motorola, saying that this constituted a tort of misappropriation. The Second Circuit Court of appeals found for Motorola, reasoning that the above elements were not all met. The NBA was not threatened financially by Motorola’s actions and Motorola sending its customers scores and information about the games in progress did not decrease the incentive of the NBA to produce that information, i.e., to play the games. National Basketball Association v. Motorola, 105 F.3d 841 (2nd Cir. 1997).

©2006 - 2016 National Paralegal College / National Juris University