Business law fundamentals and applications

Business Law - BUG, Inc.

Case: BUG, Inc., a company based in Any State, U.S.A., designs, manufactures, and sells electronic recording devices. These devices are used by law enforcement agencies (police, FBI, etc.) to intercept and record sounds and voices. The equipment taps into telephone wires, cell phone transmissions, and picks up sounds and voices through the walls of a house or in open-air locations through the use of a remote microphone. Part of the equipment is driven by software written by BUG employees. BUG has exclusive contracts with most state and federal law enforcement agencies throughout the United States. BUG is thinking about expanding its sales to international markets. Currently, half of its manufacturing plants are in foreign countries and half are in the U.S. The company's logo is a ladybug wearing a set of headphones.

Define the different type(s) of legal protections BUG should have for its intellectual property. Explain why these protections are necessary:

For legal protection, BUG will need several types of legal protection: They will need:

Copyrights

Patents

Trademarks

BUG needs Copyrights for their software which is driving their hardware. Usually Copyrights are owned by an individual who creates a work of expression. The exception to this in Copyright law is: if a work was created by an employee of a company, in this case BUG, the employer owns the copyright; if an independent contractor signs a written agreements stating that any work performed is for BUG and therefore they would own the copyright; if Bug purchases another organization or if they sell their own operation, copyrights would go to the buyer and therefore would become the copyright owner. A Copyright gives an owner the rights to: reproduction, distribution, performance or display and to create adaptations or derivatives. Copyrights would therefore give Bug the ability to realize commercial gain from underlying work and providing an opportunity for Bug to sell or license these rights.

The company's logo which is a ladybug wearing a set of headphones should be given a trademark. A trademark identifies distinctive word(s), phrase(s), logo(s), domain name(s), graphic symbol(s), slogan or other means used to uniquely identify a source of a product. In this case, the ladybug clearly distinguishes the company and the product line

For the hardware they manufacture or invent, Bug should acquire patents which would allow them to keep inventions and related ideas protected from competing companies. It would also be necessary for Bug to make sure that international patent and copyright laws are reviewed especially in the countries where Bug has their stuff manufactured. Any time a company produces products outside of America both international and federal laws must be thoroughly understood. Generally, patent, copyright and trademark laws do not overlap in the United States; however that may or not be true outside of America. Each area would have to be addressed separately.

2. Earlier this year, WIRETAP, Inc., a relatively new company trying to compete with BUG, sent one of its employees, Steve, to BUG to get a job. BUG, not realizing Steve was an employee of WIRETAP, hired him to work in its research and development department located in Any State, U.S.A. While working at BUG, Steve forwarded any BUG e-mail he received to WIRETAP. This included e-mail between BUG officers (both domestic and abroad) that Steve intercepted using his hacking ability. At the end of each week, Steve met with his boss at WIRETAP and gave him all the information he obtained about the BUG product lines. Discuss in detail what type(s), if any, of civil liability Steve and/or WIRETAP may face if caught:

WIRETAP and Steve are basically spying with cloak-and-dagger methods like intellectual property theft, mole planting, and eavesdropping. WIRETAP's corporate intelligence collection is illegal because they are obtaining valuable proprietary information which could include customer and supplier lists, economic information, technological and product research data, sales and marketing data, and information protected by intellectual property laws. Bug literally needs to implement industrial espionage countermeasures in their hiring processes and E-mail system to name but a few. Intellectual property protections like patents, copyrights and secreting trade secrets would help in court after the fact but Bug needs to know there is a spy present in order to utilize those legal options.

If WIRETAP and Steve were to be found guilty for stealing trade secrets they could be made to pay remedies that could equate to the actual loss of the trade secrets in addition to other punitive damages. They could also be put under injunction for the actual or potential misappropriations. In the case of federally protected secrets which can be assumed due to Bug's industry and the governmental contracts, the fact that Steve was dealing with internationally bound emails could have him facing treason charges that entail life imprisonment or death. If he signed a non-disclose agreement upon his hire he could be facing countless other charges.

3. [See situation b. For background information.] Walter, a security guard for BUG, learns that Steve really works for WIRETAP. Walter takes Steve to a small soundproof room where he keeps him for six hours. During this time, Walter continues to ask Steve what he is doing at BUG and what information he has given to WIRETAP. Walter tells Steve that he will hurt him if he does not tell him everything. Steve finally tells Walter what he wants to know. Walter then lets Steve go home. Has Walter committed any torts? If so, explain. Discuss any liability BUG may have for Walter's actions

Unfortunately for Bug, the guard may have broken the law. Employees, in this case Steve, have assumed privacy rights that were enacted to keep employers from doing just what happened here. Although the guard only verbally threatened harm to Steve, that would be enough to cause Bug major problems. The guard committed torts in the sense that he technically imprisoned Steve, defamed him, and inflicted emotional distress as well as misusing the legal process. Even if Steve were found guilty of espionage or other related crimes, he would still have the right to seek remedy from Bug.

4. BUG has come to you for advice regarding interstate and international e-commerce. BUG wants to sell its products via the Internet. BUG is concerned about privacy, security, infringement issues, and email contract validity. BUG is also concerned because a company that buys famous and/or company name domain names seems to own the rights to the domain name BUG.com. The company is willing to sell the domain name for a high price. Advise BUG on all e-commerce issues that could possibly affect the company. Be detailed in your response:

As far as the domain name is concerned, there is really no other alternative than to look for another domain name or to pay the piper. There is nothing illegal about a company who purchased the rights to a domain name from reselling it to the highest bidder. In the late 1980's and early 1990's, domain name reselling was a huge business and therefore it set a precedent that still holds true today. Buying a domain name gives one the right to resell it later.

I would advise Bug to find a very good and knowledgeable legal counsel team that specializes in e-commerce and internet issues. Because the internet is such a new medium it will create all new types of litigation regarding domain name registration, web site development, copyright, trademark and patent registration, liability and security. The internet also will change basic business rules like operating agreement terms, financing and other contract law issues. Not to mention, the future of the internet will eventually create new tax and reporting aspects for accounting functions and those changes will also bring about new legal concerns.

5. Shady Town, U.S.A. has been plagued with a recent crime wave. The BUG plant in Shady Town has experienced vandalized vehicles in its parking lot and some second shift employees have been robbed as they walked to their cars at night. BUG receives shipments of parts and other items from vendors at its receiving/shipping dock located at the rear of each plant. The parking lot and dock areas are well lit; however, some lights are now out. While waiting for the dock manager to return from lunch, a vendor was attacked and robbed of his wallet and the electronic chips he was delivering. Discuss what, if any, tort liability BUG may have to the vendor and to the BUG employees that were attacked. What defenses may be available to BUG? Explain your answers.

In this situation Bug could be held for negligence because the vendor that was robbed was a business invitee and therefore Bug has an obligation to the vendor. A business invitee is any person who enters the premises in response to an express or implied invitation. Bug therefore had a reasonable responsibility to inspect and eliminate any dangerous conditions.

Bug could use an argument of causation if they can show somehow that there was a breach of the duty on the part of the victim and that there was a connection with the victims' situation because of his own actions. Another option could be fro Bug to use a defense of proximate cause which states that for a negligent act or omission to be a proximate cause of damage, it must be a natural and probable (not just possible) result of a sequence unbroken by any intervening causes.