Chapter 5: Criminal Law and Business 10/5/15 9:08 PM

Crime: a positive or a negative act that violates a penal law Not civil law: civil and private rights and remedies

o Criminal law: primarily made up of statues passed by congress and state legislatures

An act against a state, federal, or local government Congress and state legislatures decide the criminality of action

o Mostly statutory Government determines the punishment Computers and technology have created new versions of old

criminal lawso Ex) Breaking and entering

Crime Categories Felonies are more serious than Misdemeanors

o Can be classified by their level of severity (class A, B, C) and degrees (first degree, second degree)

Violent Crimes- (physical force is used) murder, manslaughter Non-violent Crimes- vehicle theft, burglaries Victimless crimes- possession of illegal drugs Types of Felonies

o White Collar Crimes: non-violent crimes that are committed by corporations or individuals

Lesser Offenseso Punishment depends on the category that a person is

convicted Punishable by death Imprisonment/Fines Unable to own a firearm

Removal from office Disqualifies from holding office or voting

Crimes and Elements of Crime Government agencies decide who gets charged for committing a

crime Prosecutors receive reports from police or other investigators and

decide whether or not to bring charges Not all claims of criminal activity are investigated Politics and personal preference may come into play in decisions by

prosecutors because many state and local prosecutors are elected or rely on appointment by political leaders, so its difficult to keep politics out

The process isn’t perfect Standard for Conviction

o To be convicted of a crime, the government must prove beyond a reasonable doubt that:

1. The accused committed the illegal act2. There was necessary intent or state of mind to commit

the acto Actus reus: a wrongful deed, the guilty acto Mens rea: criminal intent, “guilty mind,” showing of wrongful

purposeo IF BOTH ARE PRESENT, GUILT CAN BE ESTABLISHEDo Criminal Negligence: criminal conduct that is not

intentional, but occurred because one failed to act within reasonable care that is expected under the circumstances

Constitutional Right: Fifth Amendmento Miranda Rights: under the constitution, persons accused of

a crime or held in suspicion of a crime, must be informed of: their right to remain silent (under the 5th amendment) their right to be represented by counsel statements they make can be used against them in

court if the accused can not afford an attorney, one will be

provided by the court

o CASE- Commonwealth v. Angelo Todesca Corporation Gaithier drove a dump truck for Todesca to a

construction sight The back-up horn on the truck wasn’t working so as

Gaithier backed up he hit a police officer and he died Gaithier and Todesca knew the backup horn wasn’t

working, which was a violation of the company’s safety procedures

Gaithier was charged with various driving offenses Paid a fine Driving privileges were restricted

Commonwealth of MA charged Todesca with vehicular homicide

Jury convicted Todesca and fined them $2,500 The appeals court reversed the jury’s conviction The commonwealth appealed

The commonwealth must prove that the individual whose conduct was used to charge the corporation with a crime was placed in the position by the corporation

To prove a corporation is guilty of criminal offense, must prove:

1. The individual committed a criminal offense2. At the time of the offense, the person was

engaged in a particular corporate business3. The individual had authority to act for corporation

on its behalf to carry out particular business when offenses occurred

Todesca said they can’t be involved in a motor vehicle homicide since a corporation can not physically operate a vehicle

The judge of the trial court was affirmed Because a corporation is not a living person, it can

only act through its agents, therefor the liability is vicarious

If this wasn’t the case corporations would never be liable for any crimes

Corporations can be held criminally liable for acts performed by employees within their scope of employment and on behalf of the corporation

Defenses Alibi: evidence that the defendant did not commit the crime

o Raises doubt in jurors’ mind Affirmative Defense: the defendant may show other evidence to

prove that even if the prosecutions claims are true, there are other facts that prevent the claims from constituting the crime.

o Ex) intoxication and insanity- rarely successful Statue of Limitations: the time set

o Varies by crimeo In unsolved murders, the statue of limitations may never end

Toll: the legal clock stops running under certain circumstanceso Ex) a criminal flees the country to avoid prosecution

Self-defense can be justifiable to protect oneself against another person

Entrapment: law enforcement sets up a trap to lure someone into a crime they had no intention of committing

o If this happens the defendant has the burden of proof.o This can be tricky

Evidenceo Chain of custody is how the evidence is properly gathered,

handled, and presentedo Exclusionary rule: if evidence in improperly obtained of

presented it is excluded (under procedural due process) “fruit of the poisonous tree” the 4th amendment protects this

o warrants: authorizes an officer to search for an seize property that may be evidence of a crime

issued by a judge probable cause: needed by law enforcement officials

to obtain the warrant

CASE- United States v. Young Under IRS regulations gasoline/diesel can be sold

tax free if its for marina use Young obtained a 647 certificate (what is needed

to get the gasoline tax free) for his marina IRS didn’t think he used the fuel for marina

purposes, instead he sold it to places that should have been paying federal taxes on the fuel

IRS thought Young shipped the money he made by FedEx

FedEx let the IRS x-ray packages shipped by Young

Found large amounts of cash inside Based on the x-rays the IRS obtained a warrant to

seize and open Young’s packages, which did contain the cash

At trial Young said the IRS did not originally obtain a warrant to x-ray the FedEx packages

Trial court convicted Young Young appealed the decision The judgment was affirmed

No one gets privacy after signing an air bill warning of a carriers authorization to inspect packages

FedEx tells customers:1. Don’t ship cash2. They may open your packages at their

opinion So Young should have had no expectation of

privacy Young technically assumed the risk that

FedEx might search his packages There were no offense to Young’s 4th

amendment rights

Prosecution Process

This occurs when a prosecuting attorney has enough evidence to make criminal charges

Grand Jury: review a potential felony case and if they determine probable cause they will issue an indictment (: a formal written charge written by the grand jury asserting that a named person has committed a crime)

Arraignmento When criminal charges are filed, the accused is placed under

arrest by the police who have issued a warrant In non-violent mattered the accused turns themselves in

rather than being taken into custody by the policeo The suspect is booked at the police station, photographed,

finger printed, and searchedo The accused needs to be given time to contact a lawyero Arraignment: the court appearance of the accused where

they are given a copy of the criminal charges Before a judge or a magistrate The accused may plead:

Guilty Nolo contendere: no contest Innocent

o If the judge allows the matter to proceed they release the accused or require bail and they will set a court date

Violet criminals, or those the courts fear may flee before trial are held either without bail, or a bail set so high it is unlikely to be met

o Plea bargain: allows the matter to be settled under court supervision.

The defendant pleads guilty or no contest in exchange for an argument by the prosecutor to an agreed punishment

Discoveryo Civil law- both sides turn over anything requested by the

other side to avoid surprises whereas criminal law- parties do their own investigations and disclose only a subset of what is found prior to trial

o Law enforcement may be conducting an investigation that the defendant knows nothing about

o The prosecution must disclose any exculpatory evidence (: Evidence that might say the victim isn’t guilty)

The choice to disclose is up to prosecution lawyerso The defendant has no obligation to disclose to the prosecution

any evidence showing guilt The 5th amendment protects them Right before trial the prosecution and the defense

exchange witness and exhibit lists Trial

o If a matter goes to trial, government attorney presents the prosecutions case

o The defendant must be found guilty “beyond a reasonable doubt”

If the jury finds the defendant innocent that’s the end of the matter

o Double jeopardy: prevents a defendant from being tried a second time for the same crime

Sometimes the prosecution doesn’t bring up all the possible charges against a defendant, so they may bring them to trial for different charges related to the same event

o If the jury cant agree on a verdict, there’s a mistrial and prosecutors will decide whether to proceed again

o If the defendant is found guilty there may be: Prison time Jail time Probation Fines Restitution to the victim

White-Collar Crime 1939- “crime committed by a person a respectability and high social

status in the course of his occupation” criminal activity for financial advantage occurring in business

FBI estimates $1/3 trillion in losses each year Most cases are against individuals, but corporations may also be

prosecuted Antitrust

o Violation under the Sherman act & Clayton acto Involves company’s price fixing and anti-competitive practices

Bankruptcy Fraudo When a person a corporation hides or lies about assets in a

bankruptcy proceedingo When creditors give false informationo When illegal pressure is applied to bankruptcy petitioners

Briberyo Offering or taking goods, services, or other things of value to

influence official actions or decisions Counterfeiting

o Copying of genuine items without authorization Money Designer clothes

Credit Card Fraudo Unauthorized use of a credit card

Computer and Internet Fraudo Credit card fraud involving a computer or the interneto Unauthorized access to financial accountso Unauthorized use of computers or computer fileso Sabotage of computers

Economic Espionageo Theft or misappropriation of valuable business information

Ex) trade secrets Embezzlement

o When someone in a position of trust takes money or property for their own use

Environmental Law Violationso Federal (EPA) and state laws

Data fraud cases Private labs submit false environmental dats

Hazardous waste dumping

Ocean dumping by ships Oil spills International smuggling of CFC’s Illegal handling of hazardous substances

o EPA averages 300 criminal prosecutions a year 15-200 years of prison/jail time

Financial Fraudo Regulation of banks and financial institutions

Firms and employees are subject to criminal liability Ex) Fraud in

Loans Financial documents Mortgages

Government Fraudo Government contracts with private agencies

Ex) Billing for goods not delivered Double billing Inferior goods Government payment programs

Farm subsidies Public housing Educational programs

Healthcare Fraudo Over-billing and scams by hospitals, doctors, ambulance

services, laboratories, pharmacies, or extended care facilities Insider Trading

o When a person trades a security while in possession of material, non-public information

Insurance Fraudo Insurance companies commit fraud by charging hire rates

than what is allowed by state regulatorso Policy holders either lie about the condition of their property

to get lower rates or pad their claims to get more money

Mail Fraudo Sending fraudulent materials through the U.S postal serviceo Using the U.S. postal service to communicate fraudulent

activities Money Laundering

o Hiding the truth about the origins of money Ex) drug money

o You have an obligation to report income even from illegal income for tax purposes

RICO (Racketeer Influenced and Corrupt Organizations) Acto Was originally used to provide an extra weapon against

organized crimes Modern meaning includes activities like maul fraud and

wire fraudo Racketeering: a pattern of illegal activity which was part of

an enterprise controlled by those engaged in the illegal activity

o Successful RICO claims receive triple the actual damages and attorney’s fees (through civil claims)

o Government can seek injunction seizing defendant’s assets, preventing their transfer, or requiring defendant to post a performance bond

o Government may press for imprisonment for criminal violations

o It’s a complicated an unpredictable are of the lawo Originally intended for the mafia but it rarely appliedo It’s not used in suits against persons, businesses, political

protest groups, and terrorist organizationso CASE- Bridge v. Phoenix Bond & Indemnity Co.

Cook county, IL has public auctions for land The county requires buyers submit bids in their own

names You can’t bid under a fake name- it’s against the

law Phoenix Bond as well as others bid

Bridge submits bids under other names that aren’t himself through mail in bids

They allocate the pieces of land by giving everyone one piece then redistributing

So bridge is getting multiple pieces of land for himself and everyone else is getting less than they otherwise would have

Bridge is soaking up property People are losing the potential profits from

property they should have gained Phoenix sued under RICO and said Bridge violated

RICO through racketeering involving mail fraudulent by sending fake documents in the mail

The district court dismissed RICO claims Said the plaintiffs weren’t protect by mail

fraud since the scam wasn’t directed at them

If there was a scam it was directed at the county and property owners

The appeals court reversed in favor of Phoenix Bridge appealed The court of appeals held the decision in Phoenix

favor Phoenix doesn’t need to prove that Bridge

lied to him, he just needs to show that he was affected by what Bridge did

o Phoenix lose money Advantage of Phoenix going under the RICO act is

he got attorney fees Congress must make changes, but court will not

make interpretations to the statue and change RICO’s strict outcome

Internal Fraudo ¼ companies with <100 employees suffered from check

tampering where company checks were used for improper purposes

o 21% of small businesses suffered from skimming when cash is taken before it is recorded on the books

o rigging payroll/falsifying reimbursement expenses are common

Securities Fraudo Insider tradingo Market riggingo Theft from accounts of clients of securities firms

Tax Evasiono Failure to file tax returnso Failure to report incomeo Overstatement of expenseso Not reporting illegal incomeo IRS devotes significant resources to track down violators

And the jurisdiction can be international Telephone and Telemarketing Fraud

o Any scheme of defraud using the telephone as means of communication with the victims

Trying to persuade them to send money to scheme Soliciting people to buy goods and services, invest

money. Or donate to fake charitable causes Fraud on the internet

o Presenting fraudulent solicitations to victims via: Chatrooms Email Message boards

Wire Fraudo Any electronic communication involved in illegal activities

Traditionally would have been subject only to state prosecution

Now it is the basis for federal prosecution Not providing “honest services”

Pasquantino v. US American bought liquor in US and smuggled

it into Canada for resaleo Avoiding high Canadian taxes

Electronic communications were used that originated in the US

o 2 people were sent to prison for 5 years each

Business Implications from Money Launderingo $1-$2 trillion dollars are laundered worldwide each yearo takes proceeds of criminal activities and transforming cash in

the appearance of legitimate businesso doesn’t attract law enforcemento Ex)

Tony Soprano earns $1 million from loan sharking and drug dealing

He creates Soprano Coin Laundry, INc He deposits the cash into a corporate bank account as

income from laundry Pays himself a salary

Looks like a legitimate income o Elements of Control within Business Operations

Anti-money Laundering: laws that make it hard for Tony to do this

goals of this: (described below)1. identify the beneficial owner of assets2. trace the transmission of the assets3. report suspicious transactions

Who owns what? Banks must comply with federal obligations Require financial institutions to use know your

customer or customer due diligence programs Know your owner

Track it down Tracing assets flows

Large cash transactions are suspect

Who is up to what? Report suspicious transactions

o Consequences of Non-Compliance Failure to file suspicious activity report

Civil/criminal penalties (or both) Civil penalties can apply for each willful

violation of reporting requirementso Willful penalties may lead to criminal

penaltieso They can also be up to the greater of

the amount involved in a transaction

Sentencing Guidelines and Compliance Sentencing Guidelines: a federal statue that provides detailed

instructions for judges to determine the appropriate sentence for federal crimes

o A controversial aspect of federal criminal lawo They were created when congress mandated that the courts

be given clear rules about imposing sentences for criminal law violations

The sentencing commission created a list of factors to consider for each conviction

o Punishment is reduced when a company has a program in place to ensure that problems don’t occur within the organization

o The DOJ has guidelines for effective compliance programso Options:

Outsiders on the compliance committee Whistleblower hotlines for employees to submit

anonymous tipso Some European counties, such as France, prohibit hotlines

because they think that if a person is improperly accused they have the right to know who complained

o The supreme court says that the sentencing guidelines are meant to be advised to by they are not mandatory, but judges are still expected to follow them closely

o CASE- United States v. Allmendinger Allmendinger along with friend Oncale had investors

misinterpreting what they were selling and 800 investors had $100 million in losses

They were pocketing the money rather than investing it

When federal investigators started to look around, Allmendinger hid the assets

The Grand Jury tried to accuse them of: Mail fraud Money laundering Securities fraud

The court ordered them to freeze all accounts Allmendinger didn’t and instead transferred more

money to secret accounts The judge imposed sentences based on sentencing

guidelines Allmendinger didn’t cooperate with investigators

(because he hid his money) so he was given a 45-year sentence

Oncale was given a 10-year sentence The appeals court was looking to see if the district court

committed significant procedural error when calculating the guideline range

If there was an error the sentence would be vacated and there would be a resentencing

If there was not an error, the appeals court would look to see if the sentence was substantively reasonable under the abuse of discretion standard

Allmendinger had the same situation as Oncale, but they were different in their responses to the government

When Oncale was confronted by the government, he immediately agreed to plead guilty, liquidated his assets and gave them to the government, and cooperated extensively

When Allmendinger was confronted by the government he refused to accept responsibilities, hid his cash (which violated the restraining order), lived a lavish life together, and attempted to flee right before the trial

The court said there was no error in Allmendinger’s convictions and sentence

Ch. 6: Elements of Torts 10/5/15 9:08 PMTorts and the Legal System

Tort: “twisted” “wrong”o A civil wrong, other than a breach of contract, for which the

law provides a remedyo Breach of duty owed to another that causes harm

Arises from careless errors or intentional actions Law reflects social values and community standards Lawsuits involving business often have large awards

o Ex in the Pennzoil-Texaco case the jury awarded 10.5 billion to the plaintiff

Has become a major issue for businesses Breach of legal duty owed to another that causes harm Business and Torts

o Categories: Negligence Intentional Strict Liability

o Businesses become involved in a tort action through: A person being harmed through the actions of a

business or its employees A person being harmed by a product that is

manufactured or distributed by the business A business being harmed by the wrongful actions of a

person or another businesso Some torts are unique to businesseso Some torts are specific to property

Role of tort lawo Compensation for injuries wrongfully inflicted by the

defendant on the plaintiffo It’s a civil not a criminal law

o The law is determined in each state- the rules vary However, the basic principals are similar among all

stateso The remedy of tort law should put the injured party in the

position they were prior to the torto Fear of tort action deters injurious behavior by otherso Punitive damages punish malicious or extremely reckless

behavior

Negligence-Based Torts Negligence: harm from other’s unintentional but legally careless

conducto We have a duty to conduct ourselves in all situations not to

create an unreasonable risk of harm Due care/ordinary care: the legal standard Elements:

o Breach of duty of care wrongdoer owed to injured party Owed to the plaintiff Breach through an act or omission

o Causation- having a casual connection to the injuryo Injury/damages

There can be a negligent action even if there was no intent to do harm

Gross Negligence: a conscious and voluntary disregard for need to use reasonable care

o A stronger claim than ordinary negligenceo More likely to lead to punitive damages

Duty of Careo Reasonable Person: the standard of how persons in the

relative community should behave One must be reasonable at all times under all

circumstanceso We’re not liable for everything, only unreasonable acts

o To decide if a persons behavior was negligent think about what a reasonable, qualified person would have done under the same circumstance

o CASE- Squish La Fish v. Thomco Specialty Products Squish has a patent on “tuna squeeze” (squeezes oil or

water from tuna cans) ProPack was hired to assist with store displays ProPack brought in Thomco to help with adhesive for the

displays Thomco said the adhesive would wash off, so Squish

relied on the advice, but it didn’t They weren’t happy and cancelled the contract

Squish sued Thomco for negligent misinterpretation District court granted in favor of Thomco Squish appealed This was reversed

There may have been reliance by Squish thorugh ProPack

Causationo Causation: producing an effecto Cause in fact: show’s a persons actions are the actual cause

of the event that created injury Sine qua non rule: “but for test”

The injury would not have occurred without the party accused of committing the tort

o Proximate cause: indicates that the liability has a relationship to the negligent conduct

o Res ipsa loquitur: “the thing speaks for itself” When the case is so obvious it prevents dismissal of the

claim without further examinationo If consequences are too remote or there is an intervening or

superseding event/conduct there is no liabilityo A chain of events created by the party’s actions must be

foreseeableo Proximate cause: when injuries or damages in question

would not have occurred without the action of the defendant

Sometimes states replace this with substantial factor test (: a jury may hold a defendant liable if it’s found that the defendant’s actions were a major cause of the injury

o Danger-Invites-Rescue-Doctrine: the person who is liable for endangering a person is also liable for the injuries that occurred while the person was being rescued from danger

Negligent parties are responsible for losses suffered by those who attempt to save people who are in danger as the result of torts of others

o CASE- Palsgraf v. Long Island Railroad Company Palsgrad is waiting on the platform for a train As another train is leaving a man with a package runs to

catch it, jumps on the train and almost falls so the guard tries to help him and in the process the man drops his package

The package contained fireworks, which exploaded. Scales fell and injured Palsgraf Palsgraf sued RR for negligence of its employees The jury votes in favor of Palsgraf The appellate court affirmed this The RR company appealed It was not foreseeable that the guard would have cause

falling scales by helping the man on the train This was a bizarre situation that could not be

expected The case was reversed and dismissed

Evolving Changes in the Law of Negligenceo Thompson v. Kaczinski (2009 Iowa Supreme court case)

Iowa supreme court adopted portions of restatement (third) of Torts

Courts shouldn’t focus on the ordinary duty of reasonable care

This duty is presumed when there is risk of physical harm

Instead, the court should proceed directly to the elements of liability

There is less reliance on proximate case This has been a source of significant uncertainty

and confusion

Move away from substantial factor Instead, restatement of the third refers to the

scope of liability related to risks present in a specific situation

The court will use a risk standard to judge when liability should be imposed

o Changes are subtle Will take years to become apparent in the working tort

law in the US Defenses to a negligence Action

o Assumption of risk: the injured party knew or should have known the risk and they voluntarily assumed it

May be based on liability waiver (: a party waives certain tort rights) or an exculpatory clause (:a part of a contract that releases one of the parties for liability from their wrong doings) in a contract

CASE- Geczi v. Lifetime Fitness Geczi was using a treadmill at Lifetime Fitness in

Columbus, OH that began to jerk She was pulled off sideways and hurt her arm Lifetime employees knew the machine was broken

but no sign had been placed on it Geczi sued for negligence and gross negligence

Suffered lost income, pain, and medical expenses

Lifetime said that when she signed her membership agreement she agreed to an exculpatory clause

She said she knew this and claimed Lifetime was liable for willful and wanton behavior for failure to warn of danger posed by the malfunctioning machine

The jury voted in favor of lifetime Geczi appealed

Clear and unambiguous contract clauses relieving a party from liability for its own negligence are generally upheld in OH

The jury looked to see if Lifetime’s failure to act was “willfull or wanton conduct”

It was not The affirmed it and Lifetime fitness won

o Comparative Negligence: If the plaintiff has an injury that was somewhat caused by their own negligence

Damages can be reduced by a percentage of the injuries

Replaced the old rule of contributory negligence This term is still used, but for damages

Intentional Torts against Persons Intentional Torts: when a person intends to commit the act Establishing Intent

o Elements:1. The person knew what they were doing2. The person intended to do the act which would result in

harm to the plaintiff3. The person knew (or should have known) the results

that are likely to occur (possible consequences)o Willful misconduct

Assault: placing a plaintiff in fear of immediate bodily harm or offensive contact

o Examples: Threats- Usually Pointing a gun

Pointing a gun while the other person sleeps is not though because they are not actually in fear

Letter threats- not usually Not immediate

Phone threats- Sometimes Depends how close in proximity the caller is

Battery: Unlawful touching. Intentional physical contact without consent

o Even if there isn’t any actual physical harm, offense to a reasonable person’s sense of dignity may constitute a battery

Ex) inappropriate sexual contacto Using a fist, hand, or kickingo Using a weapon

Guns, stickso Unwanted kisso Assault and Battery is usually linked togethero Defenses

Consent: the injured party gave permission to the alleged wrongdoer to interfere with a personal right

Privilege: immunity from liability Self defense: a privilege based on the need to allow

people who are attacking to take the necessary steps to protect themselves

Defense of others/Defense of property Most states have “stand your ground” doctrines One may use reasonable force when threatened

with an attack Allow force for force Allow deadly force for deadly force

No requirement to retreat CASE- Fuerschbach v. Southwest Airlines

Fuerschbach was a customer service representative for South West

After new employees finish their probation period, they’re usually subject to a prank to celebrate the event

Her supervisor planned a mock arrest While being “arrested” she started crying and

when she was brought to her surprise party she continued crying so she was sent home

A psychologist diagnosed her with PTSD

Fuerschbach sued everyone at the event on numerous things, including assault and battery

District court didn’t allow the matter to go to trial Summary judge reversed this and allowed her to

go to trial Did the actions offend a reasonable sense of

personal dignity? The police handcuffed her which was offensive

contact Some claims went forward but others were denied

The only claim against southwest was a worker’s compensation claim because there was no intent by anyone to harm her at work

False Imprisonment: intentional holding, detaining or confinement that restrains someone’s freedom to come and go.

o May be physicalo May be mental

Through verbal threatso Lawsuits often arise from detention of suspected shoplifterso Defense that businesses use regarding detaining shoplifters:

Restraint was in a reasonable manner Restraint was in a reasonable time The basis for the detention was valid

o CASE- Forgie-Buccioni v. Hannaford Brothers Forgie-Buccioni went to the grocery store, bought some

items and left. When he got to his car he realized he bought the wrong

cold medicine He went back to the store and told the clerk he was

going to exchange the cold medicine and left the bottlr he had paid for on the counter

While he was in the store he grabbed a few more items When paying for the new items he told the clerk he had

already paid for the cold medicine

He left the store and the manager asked him to come back be cause he said he hadn’t paid for the medicine

The manager put Buccioni in the store’s security room and called the police

Buccioni was arrested but the charges were later dropped

Buccioni sued for false imprisonment Jury awarded him cash

Hannaford Brothers appealed The judgment was affirmed Under NH law, false imprisonment is:

The defendant acted with the intent to confine or restrain

The defendant acts resulted in restraint or confinement

The plaintiff was conscious and harmed by restraint or confinement

The Jury said Buccioni was falsely imprisoned He was “pushed” towards the security room He was not “free to leave”. A store employee sat

with him It took 30-45 minutes for an officer to arrive to

arrest him Infliction of emotional distress/mental distress

o Emotional/Mental Distress: conduct that is so outrageous that it causes severe emotional or mental distress

Petty insults, annoying behavior, bad language- usually not

Badgering, profane, or threatening bill collectors or landlords- yes

o CASE- Lawler v. Montblanc Lawler was a manager in CA for Montblanc

In her 8th year she developed medical conditions where she couldn’t work more than 20 hours per week

Montblanc told her managers had to work at least 40 hours a week

The president came and was critical of the store Lawler said he was unpleasant

The company said working 40 hours a week was part of her position

They offered severance pay She refused and sued for disability discrimination and

intentional infliction on emotional distress The court was in favor of Montblanc Appeals court affirmed this Outrageous is when something is so extreme it exceeds

all bounds usually tolerated in a civilized community Invasion of privacy: Infringement on a person’s right of solitude and

freedom for unwanted exposure1. Use of a person’s name or picture without permission2. Intrusion into a person’s solitude

Ex) wire taping, searches of residence3. Placing a person in false light

Ex) publishing a fake story4. Public exposure of private facts

Ex) debts, drug useo Defenses to invasion of privacy:

A person’s right of privacy is waived if their a public figure

Any information taken from public files or record about a person isn’t an invasion of privacy

o CASE- James v. Bob Ross Buick, Inc James worked at a Mercedes dealership owned by Bob

Ross Buick 2002- Sales rep of the year 2003- no sales, met established quotas 2004- fired After firing, Buick sent letters to customers who had

worked with James encouraging them to shop at their dealership

The letters were addressed as if they were from James Administrative assistant signed his name

James sued for misappropriation of his name, a form of invasion of privacy

Trial court ruled in favor of Buick Forging a signature is a tort (invasion of privacy) The ruling was reversed and remanded The letters sent out had commercial value (inducing

future sales for the dealership) The money Buick received as a result of using James’

name were part of the damages to him James can see nominal, compensatory, and punitive

damages Defamation: an intentional false communication that injures a

person or company’s reputation or good nameo Slander: if this is done verballyo Libel: if this is done through printing, writing, a picture, or a

radio/television broadcasto Elements needed for defamation

1. Making a false or defamatory statement2. Publishing or communicating the statement to a third

party3. Causing harm or injury to the person the statement is

abouto If a person has a false statement about themselves said to

them and then they tell a third party that is self publication and there is no tort

o Defamation per se: when there is no proof or harm or injury, but the statement is harmful to the person whom it’s directed at

Examples: person commits a crime person has an STD company carries out business activities

improperly highly derogatory, descriptive language

name callingo Workplace defamation:

Most companies aren’t allowed to give information about an employees job performance or the information could spread unnecessarily within a business

o Defenses to Defamation In some states truth is a complete defense Absolute Privilege: immunity applied when policy is

freedom of speech Examples:

Legislators in committee sessions Participants in judicial proceedings

Conditional (qualified) privilege: eliminates liability is the statement was published in good faith

No malice Published in order to protect a person’s interests

Constitutional privilege: protects members of the press who publish opinions about persons of interest if there is no actual malice (: a false statement made with reckless disregard for the truth)

o CASE- Chambers v. Travelers Chambers worked for travelers Employees filed complaints about her HS manager and Chambers’ superior investigated the

complaints They were not good

Chambers was warned about her behavior She took her daughter and grandson on a business trip She was fired Chambers sued for defamation District court was in favor or Travelers She appealed The complaints gave Travelers reasonable grounds to

investigate An employer had an interest in protecting themselves

and the public against dishonest or harmful employees

There was no malice or ill will The ruling was affirmed Travelers and statements by travelers agents were

entitled to conditional (qualified) privilege

Ch. 7: Business Torts and Product Liability 10/5/15 9:08 PM

Tort Law and Business There is no such thing as business tort

o Just torts that come up in businesses Potentially successful cases with businesses are settled out in court Often big rewards for business cases since plaintiffs view businesses

as “deep pockets” Types of Business Torts

o Intentionalo Negligenceo Strict liabilityo Torts are traditionally common lawo More an more statues are playing an important role in this

area of the law Torts Particular to Business

1. Fraud or intentional misinterpretation2. Interference with contractual relations3. Interference with prospective advantage4. Product liability5. Consumer products and negligence6. Strict liability7. Primary areas of product liability law8. Ultrahazardous activity

Fraud: an intentional misrepresentation of a fact that is meant to make the person receiving it be deceived

o May be called fraud, misrepresentation, fraudulent misrepresentation, or deceit

o Claim often added to a suit for breach of contracto Intentional misrepresentation: (also known as fraud)

The parties need to have a relationship in order for there to be fraud

Representation needs to be made knowingly either without belief in its truth or recklessly and carelessly whether its true or false

o Intentional Misinterpretation or Fraud: Elements you need to prove

1. Misstatement of an important of material fact Reporting false information of a fact Hyping a product is not sufficient evidence

2. Scienter: intent to defraud One party intentionally misleads and

deceives another3. The seller either has to know that what they’re

saying is false of should have a reason to know that what they’re saying is false

4. The recipient of the information needs to believe that the information is true and enter the deal with you

If they think it’s false and go ahead with the deal it doesn’t count

If they should know it’s false it doesn’t count5. Privity: the parties must have been in a

relationship that created legal obligation Cant be sued by a third party who just

watched the fraud occur6. There must be proximate cause

There needs to be a logical link between reliance on misstatement and the losses to the plaintiff

The fact that there was false information that caused a relationship must be directly related to the losses that were suffered

7. Damage: losses suffered by the plaintiff resulting from reliance of the fraud

No damages=no reward

CASE- Lightle v. Real Estate Commission Lightle listed a house for sale by Leighs Williams made an offer Seeley was also interested

Lightle said the house was still available Seeley made an offer Leighs accepted Seeley’s offer Seeley cancelled her existing lease & utilities and

prepared to move Unknowingly to Seeley, Lightle made her contract

the backup contract is Williams couldn’t get financing

Seeley found out and took back her offer She filed a claim to compensate for losses in

real estate due to fraud Commission awarded Seeley damages and

suspended Lightle’s real estate liscence Lightle appealed The decision was affirmed

Lightle told Seeley that the offer had been accepted and “the house is yours”

Light made partial disclosure but failed to disclose facts that may have affected Seeley’s decision

Interference with contractual (business) relationso Elements:

1. There has to be a contractual or business relationship that actually exists

2. The defendant needs to know about the contract or relationship

3. The defendants intentional interference with the contractual relationship

4. There’s an absence of justification for the interference5. There are damages as a result of the interference

o CASE- Slater Numismatics v. Driving Force Slater bought and sold coins ICG and Slater worked together to grade and ship coins

to Cable Shopping Network Cable Shopping Network advertised coins for sale ICG and slater shared revenue

Taylor & Williams worked with ICG and left the company

Started their new company-Driving Forceo Operated as ANACS in coin business

Hired most of ICG’s key employees

Drove ICG out of business Taylor and Williams knew of Slater’s deal with

Cable Offered cable a better deal Took the account away from Slater

Slater sued for intentional interference with contractual relations

Trial court voted in favor of Driving Force Slater appealed ANACS purposefully depleted ICG’s ranks ANACS significantly impaired ICG’s ability to fulfill

Cable’s grading needs ANACS used Slater’s confidential info to make a deal

with Cable and undercut ICG’s pricing The ruling was reversed and remanded

Not the nature of competition Intentional interference with contractual relations

Interference with Prospective (Economic) Advantage Interference with Prospective Contractual relationship

o One party makes it difficult or impossible for another party to continue in business dealings

o A business attempts to improve its place in the market by interfering with another business

o Unreasonable or improper manner of interferenceo Predatory behavior- when one is not just competitive

Ex) someone from Nike sits outside Adidas and tells everyone to go to Nike

o CASE- Gieseke v. IDCA, Inc. Brothers- Michael and Arthur- owned Standard Water

together Gieseke worked for them The brothers got into a dispute and stopped working

together Michael kept Standard Water and fired Gieseke Gieseke and Arthur started Diversified water (50/50

share) Michael bought Arthur’s half and merged into IDCA Without Gieseke’s consent, Michael changed all

business correspondence for Diversified Water to a new address

Took a way some of the physical equipment Making it impossible for Gieseke to continue

with operations Gieseke sued Michael and IDCA for interference with

prospective advantage District court in favor of Gieseke ISCA and Michael appealed Affirmed

There was interference with the business or customary relationship

Diversified water had a reasonable expectation of economic advantage before IDCS interfered with prospective advantage

Product Liability: the liability that producers and sellers of goods have towards those injured by their products

We want companies to have incentives to keep their products safe We also don’t want companies to pay for injuries consumers suffer

while using products improperly Deals primarily in tort law Some contract law Some statutory law Consumer Products and Negligence

o Privity of contract: the relationship that exists between parties

o Burden on consumero Caveat emptor: let the buyer be aware

If a product was not safe and there was an injury, the loss fell on the consumer

o Negligence in Tort A manufacturer must exercise reasonable care in the

production of its products They can be sued for failing to inspect or test the

materials being used Were the dangers foreseeable? Care must be taken to avoid misrepresentation Defects and dangers must be revealed A casual connection needs to be present between the

producer or the design defect and the injury Producers are responsible for damages

Punitive damages may be added CASE- MacPherson v. Buick Motor Company

Buick sells cars to dealers A NY dealer sells a car to MacPherson A wheel collapses, causing an accident, resulting

in an injury MacPherson files for negligence Buick says it has no privity (they’re not related to

MacPherson) MacPherson won Appeals says the manufacturer has primary

control over product design and safety Defects could have been discovered with a

reasonable inspection (but they didn’t do that)

Buick is responsible for the finished product Judgement affirmed

Strict stability under contract Lawo Strict Stability: holds manufacturers liable to consumers

injured regardless of whether the manufacturer had been negligent

o Warranty: a manufacturers assurance that a product will meet certain quality and performance standards

o Implied warranty: the law inserts quality standards into the relationship regardless of the contractual agreement

Examples: You assume food is made safely You assume a product is manufactured safely

Implied warranty of merchantability You get what you pay for

Under the UCC implied warranty for fitness for a particular purpose

Dealer can get you what you need for your specific purpose

o Express Warranty: when the manufacturer contractually provides performance promises to the consumer

By model By statement By contract By advertising Misrepresentation: words that are a false statement

May be considered strict stabilityo CASE- Baxter v. Ford Motor Company

Baxter bought a car and printed material said “triple shatterproof glass- will not shatter- eliminates the danger of flying glass

Rock hit the windshield Glass went everywhere Baxter lost an eye Trial court said there was no privity of contract

Baxter appealed The representations of Ford were false and

Baxter relied on them Ford failed to provide the safety glass they

advertised Breach of Express warranty

Reversed and remanded to grant a new trial allowing advertisement to be admissible evidence

Strict Liability in Torto Manufacturers are strictly liable for defective productso The court asks:

Was the product defective Did the defect create an unreasonably dangerous

product or instrumentality? Was the defect a proximate cause or substantial factor

in the injury? Did the injury cause damages? Courts don’t worry about due care, reasonableness, in

production The issue is if there was a defect as defined

o CASE- Greenman v. Yuba Power 2 years after buying a power tool, while Greenman is

using it, a piece of wood flies out and hits him in the head

Greenman alleges breaches of warranties and negligence

Court rules in favor or Greenman and says the manufacturer is strictly liable in tort

By mid 1970s every state supreme court had adopted the strict liability rule

o Restatement (Third) of Torts on Products Liability The American Law Institute’s definition of strict liability

in section 402A of the restatement This was the leading rule that was adopted by most

states to define liability for product-related injury

The American Law Institute wrote a new standard for product defect cases in newer Restatement (Third of Torts)

State supreme courts considered the new concepts of law and often they gradually adopt it

Categories of defect: A product departing from the intended design A foreseeable risk of harm that could be reduced

or avoided by an alternate design Harm that could have been reduced by

reasonable instructions or warnings The restatement Third:

Speaks of risk-utility balancing Encourages courts to move away from the

distinction between negligence and strict liability Product defect law deals with design and manufacturing

defects Primary Areas of Product Liability Law

o Failure to warn Failure by a manufacturer to warn of dangers in a

product Circumstances:

Failure to give information about specific dangers Failure to issue added warnings about problems

that become known after the product has been in use

Failure to give special emphasis on the biggest dangers

CASE- Parish v. ICON Parish was on a trampoline made by JumpKing

with a safety net made by ICON He did a somersault and landed on his head,

injuring himself Sued ICON and JumpKing for failure to warn District court gave favor to ICON Parish appealed

Affirmed Numerous reasonable instructions and

warnings with foreseeable risk Users must pay some attention for their own

safetyo Bear appropriate responsibility for

proper product use The warnings were adequate

CASE- Timpte Industries, Inc. v. Gish Gish was picking up fertilizer using a Tompte

Industries trailer The downspout wasn’t pouring fertilizer into the

trailer so he walked along the top rail to put it in position

He fell & was injured Gish and his insurance sued for design defect

Said trailer shouldn’t have allowed him to climb up to the rail

Timpte said the danger was open and obvious

District court granted for Timpte The appeals court reversed for Gish Timpte appealed Reversed Court of appeals held for Timpte

There was no evidence that dangerous defects rendered the trailer unreasonably dangerous

Timpte warned users to maintain 3-point contact with trailer

o Gish didn’t adhere to warning There was no evidence of design defects

o Unknown hazards: dangers that were not known at the time of the product’s manufacture

Hazard associated isn’t known for many years Consumer expectations standard is used by the courts Claims are often class action suits

Asbestos Indistry- billions of $ to thousands of people in claims over a 30 year period

IUD injuries have been in the court for years Manufacturers have to have recalls or warnings when a

hazard is detected Joint and several Liability

Most states say that a plaintiff can sue any or all of the manufacturers of a defective product when the manufacturer isn’t clear

Joint and several liability: manufacturers are allowed to fight it out as to which should pay for amounts of damages

Any of the defendant-manufacturers may be held responsible for all damages

This has limited the amount of applications of joint and several liability in some areas

Defenses in Product Liability Suitso The product was misused or abused (mixed with other things

to make it dangerous)o Assumption of risk

Tobacco and alcohol are controversial areas… So far the courts haven’t applied defense to the users

o Sophisticated User defense and Bulk Supplier Soctrine Usually apply in a business setting Bulk-supplier doctrine: when the supplier sells to an

intermediary in bulk so the supplier can discharge the duty to warn the ultimate user if it provides adequate instructions to the next distributer in line or if the next distributer in line is adequately trained in the use of the product

Sophisticated user (knowledgeable purchaser): someone who knows or should know the product’s danger

Some statutory limits exist Ultra hazardous Activity (abnormally dangerous): serious

harm that cannot be eliminated by taking the utmost care

o Common law rules that were developed about uncommon activities

o Examples: Use of explosives Crop dusting

o In Kansas there was groundwater contamination from oil refinery

Does Product Liability need reform?o Does a costly tort system make American firms less

competitive than foreign firms? Not likely

Any company selling products in the US must meet the same liability standards as US companies

High standards of products marketed abroad force improvement of standards worldwide

o The “tort crisis” in the US Has abated since supreme court has cracked down on

massive punitive damage awards and doubtful expert testimony

o Tort reform legislation from congress has made class action suits more difficult

o State laws are working to cap liability for certain damageso Tort payouts may have been stabilized

2004-2006 growth seemed to have stoppedo however, tort litigation involving companies will continue to

be a “flashpoint” in the law injured people seek relief from deep pockets and

“heartless” companieso On the other hand, firms subject to dubious suits are devoting

resources to “fending off the deep pocket and frivolous litigators”

Ch. 9: Intellectual Property 10/5/15 9:08 PMIntellectual Property: your reputation (goodwill), how other’s view you or a company

Created by mental effort, not physical labor Intangible property: invisible, impossible to hold, harder to value

than physical property Infringement: wrongful, unauthorized use of intellectual property

in violation of the owners rightso Damages include monetary and injunction

Counterfeit and fraudulent use of this property costs businesses billions of dollars each year

Major forms of intellectual property are listed below:

1. Trademarks: a commercial symbol (design, logo, phrase, distinctive mark, name, or word) that the manufacturer puts on its goods so they can be readily identified in the market place

We recognize them as brand nameso Nike, Adidas

Lanham Act: common law allows trademarks to be registered with the Patent and Trademark office in Washington, DC if they are distinct and nonfunctional

Classifications of Trademarks:o Arbitrary and Fanciful: most favored by the courts because

they’re distinct and the names aren’t related to the products Reebok, Captain Morgan

o Suggestive: not as favored by the courts because it hints at the product

Chicken of the sea- for canned tunao Descriptive: not as favored by the courts because you must

show that you have acquired customer recognition to be allowed protection

Holiday Inno Generic: common and do not refer to products from a specific

producer. Not protected Thermos- for vacuum insulated bottles, escalator- for

moving stairways Registration

o Can be done onlineo There’s a payment fee of $325 for each class of goods using a

marko Must submit a specimen (copy of the mark)o Must describe the goods that will use the marko The applicant must sign a declaration saying that they have

no knowledge that the mark will conflict with other markso Registration is good for 10 years

Then it must be renewedo The international protection of trademarks is encouraged by

the International Bureau of the World Intellectual Property Organization via the Madrid System

The Madrid system is a trademark holder from most countries so they can file an existing trademark for each international registration

Less costly than registering in each country individually

Extent of Coverageo Marks cant claim too mucho Some marks are still “live” while others are “dead” or

abandoned”o www.uspto.gov is the official trademark office websiteo Trademark protection applied to a wide range of creative

property other than the names of products Movie titles, Advertising slogans Fictional characters

Infringement, Dilution, and Cybersquattingo Infringement: when a seller causes confusion of the goods

by improper use of trademark Essentially stealing another’s name The Lanham act allows suit for infringement Example:

Can’t sell shoes called “Rebok” because that causes confusion with “Reebok”

o Dilution: blurring or tarnishing famous trademarks

Rights are further expanded through the Trademark Dilution Act

Strengthened by the Trademark Revision Dilution Act of 2006

Ex) you can’t sell Nike guitarso Cybersquatting: when a trademark is improperly used in a

domain name Restricted by the anticybersquatting consumer

protection act Ex) registering the domain www.reebokshoes.com

without permission from reebok Defenses that can be used in all of these situations:

1. Fair use Mention of the mark in comparative

advertising2. Non-commercial use

Parody or editorial commentary3. News reporting or educational use

Using it in a textbooko CASE- Audi AG v. D’amato

D’amato registered the domain name www.audisport.com and was selling goods and services using audi trademarks on there

D’amato claimed to have permission from an audi dealership salesman

(even if this was true, audi dealerships don’t have rights to grant use of audi trademarks)

audi has its own website to sells its goods and services with its trademarks

Audi sued D’amato for infringement, dilution, and cybersquatting

District court held for Audi D’amato appealed Conviction was affirmed

Likelihood of confusion was shown because he had an association with audi

Misdirecting consumer was shown because he said he signed an agreement with audi

There was a commercial effect from the website that damaged audi from goods and services

Dilution law is offended Under ACPA, D’amato was in bad faith to profit

from audi’s mark Counterfeiting: copying or imitating of a mark without the

authority to do soo Passing off goods as if they were original

Well known companies, MLB teams, and universities have this problem

Levi’s has seized counterfeit pants all over the world

o Even if people are told that counterfeit goods are counterfeit, the trademark has still been counterfeited

o The Lanham Act allows for private parties to obtain search-and-seizure orders to grab counterfeit goods

PI’s look for imitations Provide a US attorney with evidence The attorney either takes actions or approves the

right to obtain a warrant before a judge Goods can be used as evidence in lawsuits

Trade Dress: concerns the look and feel of products and service establishments

o Size, color, texture, graphics, certain sales techniqueso Protected by the Lanham Acto Two Pesos v. Taco Cabana

One Mexican restaurant couldn’t copy another’s décoro Walmart v. Sarara Bros

Samara accused walmart of designing its children clothing, the designs were just similar

Protection for wallmart was received if the trade dress was distinctive and had secondary meaning

o Secondary meaning: the primary significance of mark or trade dress is to identify the source of the product rather than the product itself

Designs like children’s clothing is not inherently distinctive to earn protection unless it’s identifiable

Other markso Service marks: applies to services, not goods

Advertising Insurance Hotels Restaurant Entertainment Law is the same as for trademarks

Ex) Burger King’s “home of the whopper”o Certification mark: a word, symbol, device, or any

combination Used to certify regional or geographic origin

“made in MA” may be the type of material, mode of manufacture,

quality, accuracy, or other characteristics “union made in the USA”

Trade nameso Some products (like coca cola) have the same trademark at

the trade name of producero Can’t be registered under the Lanham Acto Protected by common lawo Protection applies to areas where the name has meaning

So national protection cannot be claimed unless their might be confusion

Ex) because coca cola is world wide no one may use trade name in any business

Goodwill: when a firm has gained the trust of many customers through their reputation that gives values to trademarks and other forms of intellectual property

o Prized asset of many firms

o Goodwill is the benefir of advantage of having an established business and secured customers

o When the business is sold, goodwill can be evaluatedo This is often closely tied to trademark or brand name

2. Copyright: rights of literacy and property recognized by law Copyright Act of 1976 The 1990 amendment added moral rights (: the right of an author

to have proper attribution to author ship and prevents unauthorized changes in or destruction of artist’s work)

Books Written works Musical composition Copyrights are easiest to obtain and the legal protection is strong The work must be original Lasts for the author’s life plus 70 years Works for hire (material written by employees of a company) has a

copyright of 95 years from the date of publication Copyright gives the owner exclusive rights to:

1. Reproduce2. Publish or distribute3. Display in public4. Perform in public5. Prepare derivative works based on the original work

Infringement and fair useo Fair use: the copyright act allows original material “for

purposes such as criticism, comment, news reporting, teaching… scholarship, or research”

o When considering whether a use is fair, 4 factors:1. The purpose and character of the copying2. The nature of the copyrighted work3. The extent of copying4. The effect of copyrighting on the market for the work

o Damages for violations of copyright focus on economic losses to the copyright holder

o If copyright infringement is tied to criminal activity that occurred by mail or wire fraud, then felonies may be involved and penalties can include imprisonment

o People are always looking for alternatives for file sharingo Ok to copy TV shows for personal useo CASE- Latin American Music Co. v. Media Power Group

Media power group owns 4 radio stations (Radio Isla in PR)

It has affiliated stations that rebroadcast its programming

Media Power group was notified by Latin American music company

Latin American music company was infringing on copyrights by playing songs without a license

The Jury found for media power group Said the plaintiff’s failed to show they had

copyrights on certain songs that were being used by media power group

It was affirmed Latin American music company showed

certificates of recordation that assigned rights to either a specific song or composer’s work

But that doesn’t prove compliance with copyright registration requirement

3. Patents: a grant from the government that gives exclusive rights to make, use, or sell a product for 20 years

Leahy-Smith America invents Act (2013): “first to file” rule controls who gets the patent

o Previously it was “first to invent” rule A person 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 the life of a patent

Rapid technological changes in some industries make this very important

It’s expensive, technical, and time consuming Because patents divulge all information to competitors, some prefer

trade secretso Ex) If coca cola got a patent instead of a trade secret, anyone

else could have used it after 1907 CASE- Bowman v. Monsanto

o Monsanto owns patents for roundup ready soybean seeds Sold with the agreement that farmers wont resell the

seeds or sell reproductions of the seedso Bowman bought seeds and kept seeds from plants he grew to

use in the future This was a violation of the contract with Monsanto

o Monsanto sued for patent infringemento District and appeals held for Monsantoo Bowman appealedo Supreme court affirmed

Patent exhaustion doesn’t apply Bowman is duplicating a patented good

This infringes on the essence of a patent A patent provides legal monopoly over production

and sale of the good for the life of the patent to the owner only

Lack of Global Uniformityo Part of complexity and cost of patents comes from the fact

that there is a lot of variation in patent laws around the worldo To ensure wide protection firms patent in the US, Europe, and

Japan The rest of the world is left uncovered because the cost

of registration in every country would be too high Enforcement is dubious in small market countries Some court systems have doubtful integrity

Cost of European protection is dropping The EU agreed to create a single patent system in

2014

Italy and Spain refused to participateo Patent holders are often still forced to litigate and file in many

nations

4. Trade Secrets: any formula, pattern, device, or compilation of information which is used in one’s business and which gives them an opportunity to obtain an advantage over competition who don’t know how to use it

Coca cola has hidden the secret formula for over 100 years- a patent wouldn’t provide such a lengthy production

Most trade secret lawsuits are common law actions of stealing and using secrets

Prosecutors can press criminal charges Protection in other countries is difficult Information is a trade secret if:

1. It isn’t known by the competition2. The business would lose advantage if competition were to

obtain it3. The owner has taken reasonable steps to protect the secret

from disclosure CASE- Bohnsack v. Varco, L.P.

o Bohnsack invented the “pit bull” machine to make cleaning drilling fluids used in drilling oil wells more efficient

o Varco is a company that cleans drilling fluidso Secrecy agreement- negotiated over the possibility that varco

would manufacture pit bullo Varco’s lawyer filed a patent application for pit bull, claiming

varco invented ito Bohnsack sued varcoo Jury awarded Bohnsack for misappropriation of trade secretso Varco said it didn’t use a trade secret

Court said a use is any exploitation of a trade secret that is likely to result in injury to trade secrets owner

Varco exploited Bohnsack’s idea of Pit bull Which would likely result in injury for

Bohnsack

Filing a patent application would also lower the market value of Bohnsack’s invention

This would also make it less likely the Bohnsack would sell his invention to competitiors

This would enrich varcoo Judge affirmed

Misappropriation of trade secret by varco Economic Espionage: when commercial trade secrets are stolen

for use by a competitoro Economic Espionage Act of 1996 concerns theft of commercial

trade secretso Punishment for a person can be up to 10 years in prisono Firms can face up $5 milliono CASE- United States v. Yang

Lee worked for Avery Lee visited Taiwan and was approached by yang and his

daughter to provide information to their company Lee agreed and they paid him $25,000/year for

confidential information about Avery FBI found this arrangement and Lee agreed to

participate in an operation to arrest Yang Yang visited the Us Lee met up with him and discussed confidential info

Unknowing to Lee the meeting was filmed Yang’s were arrested, convicted and fined $5 million Yang’s appealed

Said material in the operation wasn’t actual trade secrets so they might not have violated the lw

The conviction was affirmed “circumstances as he believes them to be”

If Yang thought it was a trade secret, it was a trade secret

A mutual understanding to try and accomplish an unlawful plan