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An introduction to the fundamentals of dynamic business law and business ethics chap007

Chapter 7
Real, Personal, and Intellectual


Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 7 Case Hypothetical
Davidson’s Microbrew, Inc. is a small beer manufacturer located in Denver, Colorado. The owner of
Davidson’s Microbrew, Benjamin Davidson, takes great pride in offering the public a variety of beers,
including a particular one that is currently the subject of litigation. “Barley-Davidson” is a dark brew
closely resembling motor oil in its appearance. For the past three (3) years, Barley-Davidson has
been sold in orange cans. There is a “bar-and-shield” logo on the can’s front closely resembling the
iconic Harley-Davidson logo; in the “bar” portion of the logo, the “Barley-Davidson” name appears,
and the words “Asphalt-Dark Beer” appear in the “shield” portion of the logo. On the back of the can,
in small but legible print, the following disclaimer appears: “Not affiliated with Harley-Davidson Motor
Company.” Barley-Davidson has become Davidson’s Microbrew’s most popular product, selling
approximately 250,000 units per year.
In its lawsuit against Davidson’s Microbrew, Harley-Davidson has requested an injunction (temporary,

pending litigation, and permanent, post-litigation) and money damages based on all profits generated
by the defendant in its sale of Barley-Davidson. Davidson’s Microbrew’s defense is based on four (4)
contentions: first, its product (beer) is distinguishable from Harley-Davidson’s product (motorcycles);
second, its product disclaimer (indicating its non-affiliation with Harley-Davidson Motor Company) is
displayed on every can of Barley-Davidson it sells; third, the “Barley” portion of its dark beer’s name
has nothing to do with Harley-Davidson; and four, the “Davidson” portion of the beer’s name is
proudly associated with the name of the microbrew’s company, and the last name of the microbrew’s
founder himself.
What is the likely result of the litigation?

Chapter 7 Case Hypothetical
Bernie Sides is a restaurant entrepreneur and an avid Civil War buff. Over the
years, Bernie has collected a “treasure trove” of Civil War memorabilia, and he
decides to combine his passions for restaurant ownership and Civil War history
by opening a new restaurant called the “Hardtack Café” (“hardtack” is a hard,
unsalted biscuit used as a staple for Civil War army rations.) Sides has devised
a logo for the restaurant, and the logo (a yellow circle with red lettering for the
name of the restaurant) bears a striking resemblance to a certain “rock and roll”
themed restaurant of a similar name and logo.
Upon discovering the existence of the new restaurant, attorneys for the rock
and roll restaurant immediately sue, requesting 1) a temporary injunction (a
court order mandating that the Hardtack Café cease and desist from using its
name and logo, pending the outcome of the litigation; 2) a permanent injunction
(a court judgment that the Hardtack Café forever cease and desist from using
its name and logo;) and 3) money damages representing all profit the Hardtack
Café has earned during its existence.
Who wins, and why?


Chapter 7 Case Hypothetical
The American Pistol Association (APA), a gun-rights activist organization, is headquartered in Laramie, Wyoming. The
APA held a ceremonial luncheon at its headquarters, and invited a host of Second Amendment advocates, including
the former governor of Wyoming, Sara M. Caine. Dubbed “The Renegade” by her avid supporters, most believed that
Sara would make a presidential run in the next election. Known more for her public proclamations than her actual
governing acumen, Sara is most-remembered for leading a gun-rights demonstration in Wyoming’s state capital,
Cheyenne, at which time she held her Chesterfield rifle above her head and announced that before government

officials took her gun away, they would first have to deal with her “sharp, red fingernails!”
As a key part of the ceremony, the APA honored Sara M. Caine’s efforts to uphold the Second Amendment. The APA’s
president, Charles T. Hess, presented Sara with a “Bronco 55” pistol, proudly manufactured in the United States of
America. Sara enthusiastically accepted the Bronco 55. After the ceremony, Charles approached Sara and informed
her that although his organization had planned to get the gun engraved with her initials on each side of its ivory handle
before the presentation, the person they had chosen to do the work, Edward “Wild Eddie” Cody, had been away on
vacation. He further told Sara that if she would hand the gun to him, he would get Wild Eddie to engrave the gun when
he returned from vacation, and return it to her as soon as possible. Sara happily agreed, and transferred the gun to
Charles put the gun in his office desk at APA headquarters. That night, an unknown perpetrator burglarized APA
headquarters, taking only the Bronco 55. Charles suspected the thief was Jean Gigot, a vocal, well-known opponent of
gun rights who had moved from Dijon, France to Laramie several months ago. During his presentation of the Bronco
55 to Sara, Charles had observed Jean lurking in the back of the dining room, furtively and feverishly pacing back and
From a legal standpoint, must The American Pistol Association or Charles T. Hess answer to Sara M. Caine for the
theft of the gun?

Chapter 7 Case Hypothetical
Jason Binghamton is a huge fan of the Montana State Teacher’s College (M.S.T.C.) men’s basketball team, nicknamed
the “Flying Elk.” The M.S.T.C. team has enjoyed the best season in its 52-year history, and they are a favorite to win
the Lewis and Clark League (L.C.L.) men’s basketball title. In fact, the team has advanced to the L.C.L. men’s
basketball tournament championship, a contest against the Billings Technical College “Fighting Prairie Dogs.”
Jason drives to the championship game at Lewis and Clark Stadium in Helena, Montana. He approaches the stadium
parking lot, and pays the attendant $25 for parking; in return, the attendant hands Jason a parking stub. On the back
of the stub is the following language: “Lewis and Clark Stadium and the city of Helena shall not be held liable in any
way for loss of or damage to visitor’s property, including loss of or damage to automobiles parked in the stadium
parking lot. In accepting this parking privilege, the patron agrees that he will hold harmless Lewis and Clark Stadium,
and the city of Helena, for such damage.” Jason does not read the language on the parking stub; instead, he places
the ticket on his dashboard, parks his car in area B1 of the lot, locks the car doors and puts his keys in his pocket, and
heads to the stadium.
By all accounts, the game is the proudest moment in the history of the Flying Elk. They defeat the Fighting Prairie
Dogs 82 to 58, and Binghamton leaves the stadium ecstatic, knowing he attends a college of “winners.”
Upon returning to his car, Jason’ happiness deflates to consternation and anger. His windshield has been shattered by
a stuffed and mounted prairie dog that now lays upside-down in his driver’s seat, along with countless shards of
broken glass. It is obvious to Jason that the “deed was done” by some disgruntled Fighting Prairie Dog fan, but that
individual is probably well on his way back to Billings by now, and he will never be able to locate the criminal.
Jason files suit against Lewis and Clark Stadium and the city of Helena, Montana, seeking to hold the defendants
“jointly and severally” liable for the damage to his automobile. Will he win the lawsuit?


Chapter 7 Case Hypothetical and Ethical Dilemma
John “Jack” Franklin and Ruby Huss are next-door neighbors. Jack’s narrow road from the
state-maintained highway to his house is approximately two-tenths of one (1) mile long, and
runs along the edge of his property. On the left side of Jack’s road is a drainage ditch running
the length of his road, while on the right side is the property line dividing the two neighbors’
landholdings. One day, Ruby was out gardening (she loved to cultivate roses) and Jack
approached her with the following question “Ruby, I am going to have my road graveled, and I
would like lay enough gravel to expand my road about four feet in width. I can’t expand it on
the left side because of the drainage ditch, so I was wondering if you would mind if I widened
the road on the right side. It sure would mean a lot to me, since my road is so narrow right now
that I have a hard time driving my truck up to the house.” This meant that the gravel would
extend approximately four feet onto Ruby’s property.
Ruby believed in the power and value of friendly neighborly relations. She responded, “Yes
Jack, you may certainly do that. That gravel won’t do me or my property any harm. Tell Ann
and the kids (Jack’s wife and children) I said hello when you get back to the house.”
Based on the facts presented, is Ruby’s four-foot-wide strip of land subject to Jack’s adverse
possession of it? If the gravel remains on this strip of land for the statutorily-prescribed period
of time for adverse possession (twenty years in many states), will Jack become its owner?


Chapter 7 Case Hypothetical and Ethical Dilemma
Timothy Ackers is a “stay-at-home dad” living in Falling Waters subdivision in Olympia, Washington. Timothy’s wife
Julia earns a six-figure income at the largest accounting firm in Olympia, and both husband and wife feel fortunate that
one of them is able to stay at home with their two young children, four-year-old Hope and two-year-old Matthew.
Timothy is part of the community watch organization in his subdivision, and as a stay-at-home parent, he has ample
opportunity to observe the daily neighborhood “goings-on.” For the past six months, Timothy has noticed heightened
activity at the house down the street owed by the Penningtons (Clara and Jonathan;) approximately eight to twelve
cars come and go from the Pennington driveway every day, and four months ago, handicapped access ramps were
installed at the front and back entrances to the home. On several occasions, Timothy has seen elderly people sitting in
wheelchairs in the Penningtons’ front yard.
Curious, Timothy knocks on the front door of the Pennington home one Monday morning. Clara Pennington answers.
Ackers states “Good morning, Clara. I know the old saying that ‘curiosity killed the cat,’ but I can’t help myself. What’s
going on at your house? Why are all the elderly people here? I though both of your parents were deceased, and I
thought Jonathan’s parents had ‘passed on’ as well. Are these people related to you?”
Clara responds: “Timothy, Jonathan and I decided six months ago to open up an elderly care facility. We didn’t have
the money to purchase a separate building, so we decided to care for the elderly in our home. This gives me a
wonderful opportunity to stay at home, and I wouldn’t be able to do that just on Jonathan’s income. Plus, think of the
advantages for our clients. Isn’t this so much better than a regular rest home? These folks have cried tears of joy, and
they thank me every day for providing them the quality of care they had hoped for in their ‘golden years.’”
Falling Waters subdivision is zoned exclusively residential. Should Timothy report the Penningtons’ zoning violation?
What ethical issues are involved in Timothy’s decision?


Real Property
Definition: Land and everything permanently attached to it


Extent of Land Ownership
• Surface Rights
• Airspace
• Water Rights
• Mineral Rights (Subsurface Rights)

Interests In Real Property
• Fee Simple Absolute: Right to possess for life and
devise (will) to heirs upon death; the most complete
interest in real property
• Conditional Estate: Interest comparable to fee simple
absolute, except that interest will terminate on
occurrence/non-occurrence of a specified condition
• Life Estate: Granted for lifetime of an individual; right
to possess property terminates upon life estate
holder’s death, and property will pass to another
party designated by original grantor

Interests In Real Property
• Future Interest: Person’s right to property
ownership and possession in the future
• Leasehold Estate: Right to possess (but
not own) property for a stipulated period
of time


Nonpossessory Estates
• Easement: Irrevocable right to use some part of another’s land
for a specific purpose, without taking anything from the land
-Example: Utility easement
• Profit: Right to enter another’s land and take part of the land,
or take away a product of it
-Example: Right to harvest timber
• License: Temporary, revocable right to use another’s property
-Example: Theatre ticket


Voluntary Transfer of Real Property
• Execution—preparation and signing of deed;
• Delivery—of deed to grantee, with intent of
transferring ownership to grantee;
• Acceptance—grantee’s expression of intent to
possess and own property
• Recording—filing deed with appropriate county office
to protect interests of grantee

Types of Involuntary Transfers:
• Adverse Possession: When person openly treats
real property as his/her own, without
protest/permission from real owner, for statutorilyestablished period of time, ownership is
automatically vested in that person
• Condemnation: Government acquires ownership
of private property for “public use” for “just
compensation” over the protest of the property


Intellectual Property


Intellectual Property
Definition: Property that comes from


Types of Intellectual Property
• Trademarks
• Trade Dress
• Copyrights
• Patents
• Trade Secrets

• Definition: A distinctive mark, word, design, picture, or arrangement
used by seller in conjunction with a product and tending to cause
consumer to identify product with producer
• Mark must be registered with U.S. Patent and Trademark Office; mark
must be renewed between fifth and sixth years, and after initial
renewal, every 10 years
• Remedies for mark infringement:
-Money Damages
• Trademarks used in interstate commerce protected under Lanham Act


Trade Dress
• Refers to the overall appearance and image of
a product
• Entitled to same protection as trademark
• Main focus of trade dress infringement case is
whether there is likely to be consumer
confusion in the comparison of two products


• Protects the expression of a creative idea
• Examples of copyrighted material include books, periodicals,
musical compositions, plays, motion pictures, sound recordings,
lectures, works of art, and computer programs
• Criteria for a work to be copyrightable:
-Fixed (Set out in a tangible medium of expression)
• Remedies for copyright infringement:
• Money Damages
• Injunction

The “Fair Use” Doctrine
Provides that a portion of copyrighted work may
be reproduced for purposes of “criticism,
comment, news reporting, teaching, scholarships,
and research”


“Fair Use” Factors
• Purpose and character of use, including whether
use is of a commercial nature or for nonprofit
educational purposes
• Nature of the copyrighted work
• Amount and substantiality of portion used in
relation to copyrighted work as a whole
• Effect of use on potential market for or value of
copyrighted work

• Protects a “product, process, invention, machine, or plant”
that is “novel, useful, and non-obvious”
• Length of protection: 20 years
• Remedies for patent infringement:
-Money Damages

• Lanham Act—allows patent holder to license use of idea for
royalties, provided that holder does not enter into “tying
arrangement” or engage in “cross-licensing”

Trade Secret
• Alternative to patent protection
• Definition: A process, product, method of operation, or compilation of
information that gives a businessperson an advantage over his or her
• Remedies for trade secret infringement:
-Money Damages
• Allows holder to sue for violation, if owner can prove:
-Trade secret existed
-Defendant acquired trade secret through unlawful means
-Defendant used trade secret without plaintiff’s permission


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