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United States Intellectual Property Law Overview

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• Historically, common law copyright protected works before publication (at which time Federal protection came to apply).
  • It disappeared with the advent of the 1976 Copyright Act, which made fixation in a tangible medium of expression, rather than publication, the time at which Federal rights attached.
    • Thus, the threshold event for protection has been shifted and the role of state law has been minimized.
      • Publication remained a statutorily significant event until 1989 amendments to the Copyright Act abolishing notice requirements. Prior to them, publication with no or faulty notice could place a work outside both state and federal protections.
  • Currently, in the administration of the Copyright Act and in court decisions interpreting it, particularly in the context of fair use, published and unpublished works are distinguished in certain respects.

• Trade secrets are given by state law what may be called a type of interim and/or limited protection.
  • With the aid of state protection, an inventor can maintain the confidentiality of her invention until it becomes patentable.
    • See Kewanee Oil Co. v. Bicron Corp. et al., 416 U.S. 470 (1974).

• Unfair competition law provides protection of marks and trade dress on purely intra-state and/or local levels, which are not covered by the Trademark Act.
  • It can serve as a type of interim protection until marketing develops to an inter-state level.
    • State unfair competition law is the antecedent of Federal trademark law, the Congressional authority for which rests in the Interstate Commerce Clause.

• Considering the existence of the interim or mediate protections indicated above, is there any protection at all which extends to mere ideas?
  • In answering, it should be considered that the property theory binds too many individuals for it to be applied in situations where there is nothing novel introduced for the benefit of society.
    • Society suffers the least detriment from the temporary deprivation of the use of an idea when that idea would otherwise not have been disclosed or put into use. If every idea were offered some form of legal protection as property, many kinds of economic and social activity would be inhibited.
      • Consequently, idea protection theories are not often warmly received by the courts.

Idea Misappropriation

• Under the idea misappropriation theory of recovery, the originator's idea is treated as a form of property which is converted or misappropriated by the defendant.
  • The simple elements of an idea misappropriation claim are:
    1. The creation of a novel idea by the plaintiff;
    2. That novel idea is in concrete form; and
    3. The defendant uses that novel idea without the consent of the plaintiff
• In an idea misappropriation claim, the idea must be novel in absolute terms (i.e., not only in the hands of the recipient) to be protected as property.
  • Absent sufficient originality, the idea would be something that everyone was entitled to use or possess and, thus, could not be subject to conversion or misappropriation.
    • Novelty in an absolute sense for an idea sought to be protected can be determined by, among other factors, the idea's level of specificity, the extent to which it lacks commonality, its uniqueness, and whether it was previously commercially unavailable.
• For misappropriation of idea claims involving certain types of subject matter, preemption by the Copyright Act can be an issue.

Murray v. National Broadcasting Co., 844 F.2d 988 (2nd Cir. 1988)

• Murray, the plaintiff, submitted a series of proposals for televisions programs to his employer, the defendant NBC. The proposals were not submitted in the regular course of his employment.
  • One of the proposals was for a situation comedy called "Father's Day", which would feature a wholesome African-American family and star the entertainer Bill Cosby.
    • An NBC executive had requested initially that the plaintiff's proposals be put into writing and subsequently that this particular proposal be "flesh[ed] out" by the plaintiff and the plaintiff had complied. He claimed that all of his proposals were submitted in confidence.
      • High level programming and/or production personnel at NBC were the ultimate recipients of the proposal in issue.
  • In a 1965 interview, Bill Cosby had stated that he envisioned participating in a television series based on a very similar theme.
• The defendant's high level recipient subsequently returned the plaintiff's "Father's Day" proposal and indicated the defendant's non-interest in pursuing the program idea.
  • Some four years later, in 1984, "The Cosby Show" began to be broadcast and the plaintiff filed claims under a number of theories of recovery, including for misappropriation of his idea.
• The court found that novelty was a requirement for the protection of an idea as property under New York law.
  • Defendant's proposal was seen as an adaptation of existing knowledge and, therefore, lacking in novelty. The idea revolved around a not infrequently considered variation of the common theme of a family situation comedy.
    • According to the court, fully novel ideas could be protected from unauthorized use by the law as a form of property, but other ideas must be free for all to use with impunity.
  • The program idea ultimately purchased by the defendant, as identified in the wording of its agreement for the purchase of the program from the production company, was specifically addressed by the court's decision. In that contract, the program idea was described as "unique, intellectual property".
    • The agreement was seen by the court as having been for the purchase of a fully-produced program, and not merely for the program idea.
  • Based on the above reasoning, no cause of action existed for the unauthorized use of the plaintiff's idea. The lower court's imposition of summary judgment against his idea misappropriation and other idea protection claims was upheld.

Contractual Theories Relating to the Protection of Ideas

1. Breach of an Express Contract
   • This is simply an action for breach of a contract to provide compensation for the disclosure and/or use of an idea.
     • All the elements for a valid and enforceable contractual agreement (assent and definiteness, offer and acceptance, consideration, a properly executed writing [where the Statute of Frauds is applicable], and the legality of the subject matter) must be present for the existence of an express agreement to be proven. The discloser must then also succeed in showing the breach of that express agreement.
       • Assuming that a valid express obligation exists, a plaintiff will be required to show a causal connection between the initial disclosure and the alleged wrongful possession and/or use of his idea by the defendant.
         • If the idea in issue was disclosed to the recipient independently of the express agreement by a third party, for example, there will not have been a breach.
       • In some jurisdictions, novelty is a requirement for finding consideration in an express agreement. In others, particularly California, it is not.
         • In jurisdictions which do not require novelty, examining the adequacy of consideration bargained for at arm's length by the parties is seen as wholly outside the courts' role.
         • The jurisdictions which do require novelty reason that the transfer of something which is already equally available to all cannot be consideration for an agreement.
           • New York currently distinguishes between novelty generally in property based claims and novelty to the recipient in contract based claims.
             • Only the latter need exist for there to be consideration in an agreement, unless the idea is so widely known that prior knowledge of it must be imputed to the recipient. This is because an idea which is non-novel in an absolute sense may still have substantial value (e.g., savings in time and monetary resources for development and/or implementation) to a particular recipient.
         • Determining whether or not there is an implied requirement of novelty in an express agreement is another approach sometimes used by courts.

   • Consider that providers of certain services, marketing consultants, for example, rarely produce entirely novel ideas.
     • Their ideas must be differentiated outside of intellectual property doctrines from those of private individuals by using the terms of express agreements.

2. Breach of an Implied-in-Fact Contract
   • This theory is used where the conduct of the parties implies their formation of a contractual agreement.
     • It can be thought of in terms of there having been in fact a meeting of the minds of some type which merely fails to satisfy the requirements for proper documentation and/or memorialization.
       • With allowance made for these formational circumstances, basically the same type of elements required for showing the existence of an express agreement and its breach will be addressed by a court in this type of claim.
         • This includes considerations regarding novelty.
     • See Yadkoe v. Fields, below.

3. Quasi-Contract, Unjust Enrichment, Breach of an Implied-in-Law Contract
   • The primary issue under this theory of recovery is whether one party becomes unjustly enriched at the expense of the other. This is an equitable theory of recovery.
     • "[R]ecovery is based upon [a] benefit accepted or derived [by the defendant] from which the law implies an obligation to pay." 4 Nimmer on Copyright §16.03
     • In cases where damages are sought under this theory with respect to subject matter inside the scope of the Copyright Act, the same concerns regarding preemption apply as those in misappropriation of idea claims.

Overview of Theories in Application

• Lueddecke, the plaintiff, sent the Chevrolet Motor Company a letter offering to provide information in exchange for compensation to be negotiated. The information was promised to enable the correction of an uneven weight distribution problem in Chevrolet cars.
  • The New Devices Committee of General Motors responded by letter that the details of the plaintiff's idea would have to be submitted under specified conditions for its thorough review before any agreement with him could be reached regarding use or compensation. The plaintiff was also invited to make such a submission.
  • The plaintiff replied with a letter containing the following design ideas:
    1. A diagnosis of uneven weight distribution as the source of a problem of sagging leaf springs on Chevrolet cars
    2. A recommended solution of inserting an extra leaf in the front and rear leaf springs on the sagging (left) side or, in the alternative, of shifting certain parts (the battery and the starter and/or generator) to the non-sagging side of the car
• The disclosed defect was widely recognized. As such, it represented an attempted disclosure of common property.
  • Commonly known information   »»»»    No protection as property
• The solution of adding a leaf in the springs was a fairly obvious and non-novel idea.
  • Obvious and non-novel mechanical idea   »»»»    No protection as property
• The solution of shifting parts was not a sufficiently developed idea. No experimentation or engineering specific to a particular car model or individually identified parts had been performed. Thus, the idea was not in a useful or finished form as of yet. The court identified this proposed solution as a "do experimentation" idea.
  • Inchoate mechanical process   »»»»    No protection as property
• Idea misappropriation was, thus, not seen as a viable claim by this court. Affirmation of the lower court's dismissal was the result.
  • The non-novelty of the submitted ideas prevented their being viewed as property.
    • Consequently, there could be no basis for claiming their misappropriation or conversion.

• The appeals court next dealt with and sustained the dismissal of Lueddecke's breach of implied-in-fact contract claim. Although not all of the contractual theories listed above were plead, it is instructive to look at where the plaintiff's contract claim fell or would have fallen in relation to each of them:

  Express Contract Analysis:

  • This theory of recovery could not have been used, as no writing(s) or other express communication evidenced that a meeting of the minds had occurred between these two parties.
    • After the plaintiff sent a letter proposing that he be compensated for his solution to a design problem in the defendant's cars, the defendant's only response was a written invitation to the plaintiff to submit his idea(s) for review to see if they were a proper subject for a potential agreement regarding their use by the defendant and the corresponding compensation.
    
    

  
  Implied in Fact Contract Analysis:

  • This was the contractual theory plead in the trial court and dealt with centrally in this court's opinion.
  • As the the law was applied to the case, the non-novelty of the ideas submitted would have made for a lack of consideration in any agreement that might have been formed.
  • It was also emphasized that the New Devices Committee of General Motors had invited the submission of concrete mechanical drawings and ideas by the plaintiff which were to have been legally protected at the submitter's initiative or otherwise authenticated as his own.
    • Instead, the plaintiff responded in letter form with an assessment of a commonly known defect and the inchoate solution outlined above.
      • In the court's view, Lueddecke never put himself within the terms of the defendant's express offer in the previously mentioned invitation.
        • A promise could not be implied where there had been an express declaration to the contrary to merely consider the submitted ideas as a basis for future negotiation. This was the case even it was assumed that the ideas could have served as consideration for an agreement.

  
  Quasi-Contract Analysis:

  • The court did not explicitly address quasi-contract or unjust enrichment as theories of recovery. It did, however, discuss issues dealt with in this type of claim in the context of the plaintiff's implied-in-fact contract claim by responding to the question of whether the defendant "derive[d] benefit from the plaintiff's ideas".
    • Lueddecke was seen as not having adequately protected against his ideas' disclosure.
      • The discloser's reasonable expectation, of confidentiality and/or of compensation for disclosure to the recipient should generally exist at the outset.
      • In this court's view, voluntary disclosure of the plaintiff's problem diagnosis and proposed response outside the terms of the defendant's invitation for submission placed them in the public domain in every subsequent event (to the extent they were not there previously).
        • But, in order to bring this view fully in line with unjust enrichment theory, it must be considered in relation to the level of obviousness of the problem and level of non-development of the solution proposed by the plaintiff. Had Lueddecke proposed a highly concrete solution to a previously undisclosed engineering problem, the outcome might have been different under the analysis for this theory.
  • That an idea is available for free use, in effect, is the controlling presumption which generally must be overcome by the party trying to show the existence of unjust enrichment.
    • Only if this burden has been met will a typical court consider the extent of the benefit or enrichment.
    
    

• For more recent discussions of these issues, with particular emphasis on the concept of novelty, see Wrench LLC v. Taco Bell Corp., 2001 FED App. 0210P (6th Cir.) and, with specific regard to New York law, see Nadel v. Play-By-Play Toys & Novelties, Inc., No. 99-7214 (2nd Cir. 2000), which discusses Downey v. General Foods Corp., 31 N.Y.2nd 56, 286 N.E.2d 257 (1972) and Murray, supra.

Contractual Protection of Ideas and Conflict with the Federal System

Aronson v. Quick Point Pencil Co., 440 U.S. 257 (1979)

• A royalty agreement between the parties was based on a design idea for a key holder. It provided for one royalty rate if a patent was awarded for the design and another reduced royalty rate if it was not.
  • The patent application for the key holder design was ultimately denied.
  • Under the manufacture of the plaintiff, Quick Point, the key chain sold profitably for a number of years and subsequently imitations appeared on the market.
• The plaintiff, after paying royalties for a number of years after a patent was not granted, sought declaratory relief against the defendant, Aronson, who originated the key holder design idea, on the basis that their contract encroached upon federal patent law and, thus, was unenforceable.
  • The Court, citing its decision in Kewanee Oil Co. v. Bicron Corp. et al., held that the state law governing the contract was not preempted by patent law and, in fact, the existence of agreements such as this one provided a legitimate incentive for invention outside the patent system.
  • The advantage of being first on the market was found by the Court to be a legitimately contracted for one.
• Enforcement of the contract did not withdrawal the idea which was its subject matter from the public domain.
  • Rather, the existence of such an agreement encouraged public disclosure of the invention.
• The contract also was not seen as discouraging use of the patent system.
  • Aronson attempted to gain a patent and would have obtained a higher royalty rate had she done so.
• This holding was distinguished from that in Brulotte v. Thys, infra, because in the latter patents had already been issued when the royalty rates were negotiated.
  • In Brulotte the pre-existing patent was used as negotiating leverage to effectively extend the term of the patent.
  • Here, in contrast, early market entry was the benefit being negotiated for by the plaintiff and the resulting contract terms addressed the contingency that a patent might never be issued.

Brulotte v. Thys, 379 U.S. 29 (1964)

• Thys, the plaintiff, licensed a number of then currently patented inventions to the defendant in conjunction with the sale of a hop picking machine. The plaintiff initiated this case when the defendant refused to pay royalties under these licenses both before and after the expiration of the terms of the patents involved.
  • Under the licensing agreement, the period for which royalties were to be collected was to extend beyond the terms of the licensed patents.
    • The royalty rates did not diminish upon the expiration of the patents' terms and, in the Court's view, the royalties paid in this post-term period were intended to correspond directly to the plaintiff's uses in it.

• The Court cited the then current 35 U.S.C. §154 to the effect that "[e]very patent shall ... grant to the patentee, ... for the term of seventeen years, ... the right to exclude others from making, using, or selling the invention throughout the United States ... ".
  • According to the Court, the monopoly right of a patent, and the corresponding economic benefits to be derived from it, lasted seventeen years and seventeen years only.
  • Because negotiation occurred during the patents' terms, the failure to distinguish, through rate or other means, the royalties paid after the term of the patents from those paid during their term caused the Court to hold the agreement in question to be unlawful per se.
    • It reasoned that such a situation could only arise by the plaintiff extending the monopoly leverage of the patents beyond their term through such pre-expiration negotiation.
      • This was seen as an attempt to lengthen the term of the patents and, thus, it was contrary to both the policy behind and the literal provisions of Federal patent law.
      • The dissenting opinion and the Washington Supreme Court felt that the post-patent royalties could be seen as representing the deferral of negotiated at arm's length patent royalties beyond the term of the patents, through to the full term of the agreement in question.

• This ruling has been distinguished in a number of cases and, in light of Aronson, supra, is given somewhat limited application.
  • In the negotiation and drafting of agreements, proper distinction and allocation between patent term and non-patent term provisions would appear to be essential.

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