BASIC LICENSING

SUMMER 1996

INTELLECTUAL PROPERTY SUMMER INSTITUTE

PROFESSOR KARL F. JORDA

FINAL EXAMINATION

 

This is a two-hour (three hours for foreign students), open-book exam. You may consult the course books and any other materials. Yet, your examination must be your own work. Do not discuss it with other students.

Write your answers in the blue books supplied, but please use only one side of the page and observe the margins. Please write legibly.

Grading will be anonymous; please do not put your name on anything you turn in. USE YOUR EXAMINATION NUMBER.

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PROBLEM I

A. Facts

In 1972 David Hatfield developed several agricultural products, including a fiberglass heating pad for newborn hogs. Osgood Products, Inc. (OPI) was later created to manufacture Hatfield's products, and Hatfield became an employee.

In April 1974, Hatfield learned that OPI planned to develop a trademark, and he insisted that OPI use the name "Hatfield" in the mark. OPI agreed, and in 1975 the parties entered into a license providing in part that OPI could use the name Hatfield for 15 years as a "distinctive mark on all or part of the products" manufactured by OPI, whether or not they were invented by Hatfield. The agreement did not give Hatfield an express contractual right to inspect or supervise OPI's operations in any way.

Hatfield later resigned from OPI, and had no further involvement or relationship with the company. Meanwhile, in March 1977, OPI applied to register the marks "Hatfield" and a circle design incorporating the name Hatfield. The marks were registered in January 1978.

In 1991, Hatfield sued OPI in the district court, based on his understanding that the parties' 1975 license agreement had expired and that OPI's use of the Hatfield marks constituted trademark infringement. Hatfield argued that the parties' 1975 agreement was a limited license permitting OPI to use the "Hatfield" marks for only 15 years. OPI countered, and the district court agreed, that the agreement was a "naked" license, and therefore, Hatfield had abandoned any rights in the trademarks.

B. Question

On appeal, how should the Circuit Court rule and why? [17 points]

PROBLEM II

A. Facts

Medical Instrument Corporation (MIC) makes and sells a patented medical device to hospitals. The device is marked with the inscription "Single Use Only". The insert with the device states "For Single Patient Use Only" and instructs that the entire contaminated apparatus be disposed of in accordance with procedures for the disposal of biohazardous waste. However, the hospitals do not limit themselves to a single use. Instead they ship the used assemblies to Oracle Inc. (Oracle), who in turn has them sterilized by a third party and returned to Oracle for repackaging and return to the hospitals, still bearing MIC's trademark and the "Single Use Only" inscription. When MIC brought suit against Oracle for patent infringement, Oracle defended on the ground that the "Single Use Only" restriction was unlawful and made the patent unenforceable. The lower court agreed, granting summary judgment against MIC.

B. Question

On appeal, in whose favor should the CAFC rule and why? [18 points]

PROBLEM III

A. Facts

A gourmet cook who is also an amateur chemist and a tinkerer, has come up with a novel formula for flavoring tablets that can make a cup of coffee taste like you just ground the beans. She wants to sell or license her formula to a big food products company like RJR Nabisco. If a big corporation has no interest in it, she will try to sell or license it to someone regional. She plans to start contacting these companies soon. However, she is concerned that when she discloses her formula to companies, they will steal it. She is not sure it is patentable, and it might not be a trade secret, either.

B. Question

What can she do to protect herself in her dealings with any of these companies? [18 points]

PROBLEM IV

A. Facts

AbracaDabra, Inc. ("ADI") is in the business of making and selling integrated circuit chips. One of these chip products of ADI is called a Digital Signal Processor ("DSP"), known throughout the marketplace as the "Barracuda" DSP. The DSP is a specialized computer-on-a-chip, and as such it has a computer operating system software called DSP-DOS. DSP-DOS was developed for ADI by MillySoft, Inc., a corporation wholly owned by the indomitable Milly Brown. MillySoft has licensed the ADI-DOS operating system software to ADI under an exclusive license. The license agreement between ADI and MillySoft requires that ADI pay to MillySoft $10.00 for each DSP chip that it sells containing the ADI DOS operating system software, for the right to use the intellectual property rights (patents, trade secrets and copyrights) of MillySoft embodied in ADI-DOS. The license agreement requires MillySoft to provide to ADI an updated revision of ADI-DOS for ADI's new version of its DSP scheduled to hit the market next December.

MillySoft has now filed for bankruptcy and a referee/trustee in bankruptcy of the estate of the business of MillySoft has been appointed.

B. Questions

1. Unless and until the referee/trustee rejects the licensing contract what impact does the fact that MillySoft had entered bankruptcy proceedings have on the patent, trade secret and copyright license between ADI and Millysoft? Why? [7 points]

2. Assuming that the referee/trustee has now rejected the license agreement between MillySoft and ADI, can ADI enforce the obligation of MillySoft to provide the updated revision to the ADI-DOS computer operating system software? Why? [10 points]

END OF EXAMINATION

KFJ/Ruh/7.12.96