Professor Ward July 15, 1997
Two Hours12:00pm - 2:00pm


1. This examination contains three questions weighted according to the recommended time specified for each. All students must answer Question 9 1, and then either Question 9 2 or Question 4 3. Do not answer both Question # 2 and Question # 3.

2. You are permitted to use your copy of SELECTED COMMERCIAL, STATUTES your copy of UNFAIR COMPETITION TRADEMARK, COPYRIGHT AND PATENT - SELECTED STATUTES and the class handouts containing the April 1997 Draft of PROPOSED ARTICLE 2B No other materials may be taken into the examination room. The fact situations in the questions arise in Mainshire, a mythical jurisdiction that has adopted the Official Version of the Uniform Commercial Code, Do not assume the existence of other special state legislation unless the question directs or invites you to do so.

3. Use a pen and write on only one side of the page.

4. Although no page limitation has been imposed, a concise, tightly reasoned answer will receive more credit than one which rambles. Read the questions carefully. Answer only the question or questions asked.

5. Do not write your name on any part of the examination, but be sure to put your examination number on each blue book you turn in. Please write legibly, GOOD LUCK!


Question # 1
[Recommended time: 1 hour and 30 minutes]
(You must answer Question #1)

Ann Warner, of Port City, Mainshire, is a nationally known independent cartoonist who often assigns or licenses her copyrights to advertising agencies and magazines. On June 1, Warner executed a written "exclusive license" agreement with Northern Telecom. The agreement granted Northern the exclusive right to reproduce ten (10) of her cartoons that humorously depict life along the Internet. The cartoons were to be used in connection %kith Northern's regional promotion of its on-line cable service. A duly sworn and certified copy of this agreement and accompanying fee was received for recording in the Copyright Office on June 20. However, the agreement did not actually appear in the file of recorded copyright documents until July 15, On July 2, Warner made a proper deposit and application for copyright registration covering fifty-five (55) cartoons, including the ten (10) cartoons licensed to Northern Telecom, with the Register of Copyrights, On July 7, certificates of copyright registration were issued to Warner.

On July 20, Warner borrowed fifty thousand dollars ($50,000) from First Bank. Under the terms of the collateralized loan agreement, she granted First Bank a security agreement in the recently registered copyrights covering the fifty-five (55) cartoons. The security agreement was duly executed and a proper Mainshire UCC financing statement was filed on July 21. Warner did not tell First Bank about the license agreement with Northern Telecom and the Bank had no actual knowledge of the prior agreement. On July 27, Warner filed a voluntary petition under Chapter 7 of the Bankruptcy Code. The First Bank security agreement was duly recorded in the Copyright Office on August 10. Warner's bankruptcy trustee, Northern Telecom and First Bank all claim priority in the copyrights on the ten (10) Internet cartoons.

I] What argument[s) would you expect Northern Telecom to make in support of the position that its exclusive license is prior to both the security interest of First Bank and the rights of the bankruptcy trustee?

2] What argument[s] would you expect First Bank to make in support of the position that its security agreement gives it priority over both Northern Telecom and the trustees

3] What argument[s] would you expect the trustee to make in support of her position that both Northern Telecom's exclusive license and First Bank's security interest are avoidable transfers?

4] How would you resolve the priority dispute if you were the bankruptcy judge? Explain.

Question # 2
[Recommended time: 30 minutes]
(Select either Question # 2 or Question #3)

Evaluate the following criticism of the April 1997 Draft of Article 2B:

"The draft makes it easy to eliminate vendor responsibility for incidental and consequential damages through per se conspicuous clauses which may not in fact be conspicuous. Article 2B appears to set up a method for permitting a consumer to refuse to agree with the term of a license, but it places the burden on the consumer both to read the license and to take back the software and demand a refund if the license terms are not acceptable. See Section 2B-308. However, even that very weak standard does not apply to terms eliminating responsibility for consequential or incidental damages under Section 213- 703(d). Those terms are enforceable if merely conspicuous, which is defined in Section 2B- 102(a)(6) to be quite meaningless (for example, small print capital letters, LIKE THIS, are legally conspicuous)."

Write a short statement summarizing your position on the quoted critique. Where you disagree with the position taken in the quoted language, state the basis for your disagreement. Where you agree, state your reasons and deal with the counterpoints that might be made by defenders of the 2B Draft language.

Question # 3
[Recommended time: 30 minutes]
{Select either Question # 2 or Question # 3}

Patentee is the owner of PATENT NO. 43550. On April 1, X loaned money to Patentee and required that Patentee execute both a security agreement and a patent mortgage on NO. 43550. Under the terms of the patent mortgage, Patentee assigned title to NO. 43550 to X with the condition that title would revert back to Patentee when the loan debt was paid. As part of the same transaction, X granted an exclusive license in NO. 43550 back to Patentee. On April 15, X duly filed a UCC financing statement covering NO. 43550 with the Mainshire Secretary of State. On August 1, X duly recorded the patent mortgage with the PTO in Washington.

On June 1, Y loaned money to Patentee. Y also caused Patentee to execute both a security agreement and patent mortgage covering NO. 43550. The language of Y's agreements with Patentee are identical to the language in the documents used by X. Y duly filed a proper financing statement on June 2, and duly recorded with the PTO on August 2.

1. As between X and Y, who has Priority in PATENT NO. 43550 if section 261 of the Patent Act is controlling? Explain.

2. Would your answer under section 261 be different if Y had searched the Mainshire UCC files on May 30 and found X's April 15 financing statement? Explain.

3. As between X and Y, who has priority in PATENT NO. 43550 if Mainshire's UCC Article Nine is controlling? Explain.