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BLAW 235 Study Guide

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by: Emily Kelly

BLAW 235 Study Guide 235

Emily Kelly

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These notes cover what will be on our next exam for business law
Buisness Law
Dr. Brion Scudder
Study Guide
50 ?




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"Can you just teach this course please? lol :)"
Ms. Wilmer Grady

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This 15 page Study Guide was uploaded by Emily Kelly on Thursday January 28, 2016. The Study Guide belongs to 235 at Indiana University of Pennsylvania taught by Dr. Brion Scudder in Spring 2016. Since its upload, it has received 48 views. For similar materials see Buisness Law in General at Indiana University of Pennsylvania.


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Can you just teach this course please? lol :)

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Date Created: 01/28/16
Exam 2 Business Law Study Guide Product Liability- the liability of manufacturers, sellers, and others for the injuries caused by defective products  Three Theories of Recovery o Negligence o Fraud (International Misrepresentation) o Strict Liability  N negligence- o The defendant owed a duty of care to the plaintiff to provide a product that was reasonably carefully designed, manufactured/assembled, inspected/tested, and packaged, and too warn the plaintiff of any dangerous properties of the product o The defendant breached that duty of care, and that breach was the actual and proximate cause of the plaintiff’s injuries/damages  Fraud (International Misrepresentation): o The seller or lessor of the product either affirmatively misrepresents the quality of a product or intentionally conceals a defect in it o Recovery is limited to persons who were injured because they relied on the misrepresentation/ concealment o Negligence is a much more common theory of recovery in product liability actions because most reputable manufacturers do not intentionally misrepresent the quality of their products  Strict Liability: o A manufacturer, distributor, or retailer of a defective product is liable to a person injured by that product regardless of whether the defendant did everything possible to make sure the defect never happened o Does not require the injured person to prove that the defendant breached a duty of care o Liability without fault  Defendant can be held strictly liable even though he/she exercised all possible care with regard to the product o Does not apply to services, and in mixed product/service transactions the dominant element of the transaction will control  Pharmacist- providing a service, not a product  Rafting Company- Providing a service, not a product  Gym- Providing a service, not a product  House Painting- Providing a service, not a product  Roof Installation- Providing a Product, Not a service  Carpet Installation- Providing a product , not a service o Allows the plaintiff to sue anyone in the product’s “chain of distribution” manufacturers, distributors, wholesalers, retailers, lessors, and subcomponent manufacturers  If the party sued was not responsible for that defect, he/she is still responsible but may sue the actual responsible party for reimbursement  For this reason, the plaintiff tends to go after the party with the ‘deepest pockets’  This is allowed because usually the plaintiff doesn’t know what party was responsible for the defect  Any injured party can sue for strict liability Privity of Contract is not required… meaning no contract had to exist between the plaintiff and defendant  Damages recoverable in strict liability claims Personal injuries (available in all jurisdictions that have adopted strict liability, although maximum dollar amount may be limited) Property Damages (Available in most jurisdictions) Economic losses like lost income (Available in only a few jurisdictions) Punitive damages may also be awarded if the defendan’t conduct was done intentionally or with reckless disregard for human life  To recover for strict liability, the injured party must prove that the product that caused their injury was defective o Can allege multiple product defects in one lawsuit  Common ones Defect in manufacturer Defect in design Failure to warn Defect in packaging Failure to provide adequate instructions o Defects In Manufacturer occur when the manufacturer fails to:  Assemble properly  Test the product properly  Check the quality of the product adequately Example- A batch of cough syrup is sold containing a poisonous substance o Defects in Design occur when the product is defined incorrectly  Examples: Ford Pinto’s dangerously designed fuel tank A car that flips over when turning corners Sunglasses that do not protect the eyes from UV rays  The problem with these products is that they were designed poorly making it impossible to manufacture these products safely  To evaluate the product’s design is adequate the court analyses the following Gravity of the danger posed by the design Likelihood that the injury will occur Availability and cost of producing a safer design o A Failure to Warn Defect occurs when a manufacturer does not place a warning on the packaging of products that could cause injury if the danger is unknown  A proper and conspicuous warning insulates all parties in the chain of distribution from liability for that particular risk of harm Example: Medication that does not include a warning of a dangerous side effect if mixed with other common medication, like aspirin o Defect in Packaging  Defendant owes a duty to design and provide safe packages for their products Failure to meet this duty subjects all in the chain of distribution to strict liability o Need child-resistant caps on medicine, tamperproof packaging Example: Women became pregnant because her birth control pills were arranged in the wrong sequence inside the calendar package o Defenses to Product Liability  Generally known dangers  Assumption of Risk  Misuse of the Product  Correction of a Product Defect  Supervening Event  Statute of Limitations  Contributory/ Comparative Negligence o Certain products are generally known to be dangerous (Guns, Knives, Etc.)  Defendants are not strictly liable for failing to warn about generally known dangers  Example: Warning- This knife is sharp and may cut you  Assumption of the risk- the defendant is not liable for plaintiff’s injuries/damages if they were caused by a risk commonly associated with a certain activity that plaintiff voluntarily participated in… (Bungee Jumping)  Defendants are not liable if the plaintiff was using the product in a way it was not intended to be used o Only applies to unforeseeable misuse- the defendant could not have foreseen that the product would be used that way o However, foreseeable events… such as a baby putting a small object in their mouth…. Must have adequate warnings Correction of a Product Defect  A defendant must notify purchasers and users of a known defective product and offer to correct that defect by repair or replacement o Recalls by letters to customers, notices in newspapers, etc.  If the user ignores the notices and is subsequently injured, the manufacturer has a Defense against the product liability claims Supervening Events Examples:  Retailers remove “Ugly” warning labels  Distributor removes safety feature to allow more efficient packaging Stature of Limitations  Plaintiffs must file their lawsuits within a certain number of years from the time he/she was injured by the defective product  These limitations are set by each state  Defendants are relieved of liability of the plaintiff’s lawsuit if its not filed within the time period o In PA the plaintiff has two years from the date he/she was injured I which to file a product liability lawsuit Consumer Product and Safety o Consumer Protection laws: Federal and state statues and regulations that: o Promote product safety o Prohibit abusive, unfair, and deceptive business practices o Food Safety o U.S. Department of Agriculture (USDA): o Responsible for regulating meat, poultry, and other food products o Conducts inspections of food processing and storage facilities  Can initiate legal proceedings against violators o Food, Drug, and Cosmetic Act (FDCA/FDC Act) o Regulates of testing, manufacture, distribution, and sale of foods, drugs, cosmetics, and medical products o Food and Drug Administration (FDA) o Enforces the FDCA and other federal consumer protection laws o Certain food additives, drugs, cosmetics, and medical devices must be FDA approved before being sold to the public o The DFA can seek search warrants and conduct inspections, obtain orders for the seizure, recall, and condemnation of products, seek injunctions, and turn over suspected criminal violations to the U.S. Department of Justice for prosecution o The USDA inspects meat, poultry, and egg products o The FDA inspects all other foods FDCA prohibits: o Shipment, distribution, or sale of adulterated food o Nutrition Labelling and Education Act (NLEA) o Requires food manufacturers to disclose on food labels nutritional information about the food o Requires the disclosure of uniform information about serving sizes and nutrients o DRUG AMENDMENT TO THE FDCA: empowers the FDA to license new drugs in the United States o Law requires the users to be provided with:  Proper directions for usage  Adequate warnings about related side effects o Also gives the FDA the ability to revoke approval of previously licensed drugs Medicinal Device Amendment- Gives the FDA authority to regulate medicinal devices like pacemakers, kidney dialysis machines, heart defibrillators, surgical equipment, etc. o Prohibits mislabelling of medicinal devices FDA is empowered to remove “Quack” devices from the market o Product and Automobile Safety o Consumer Product Safety Act (CPSA): regulates potentially dangerous consumer products; created the consumer product safety commission CPSA is empowered to o Adopt rules and regulations to interpret and enforce the CPSA o Conduct research on the safety of consumer products o Collect data regarding injuries caused by consumer products o Issue product safety standards for consumer products o Federal Trade Commission (FTC): Agency empowered to enforce the Federal Trade Commission Act and other federal consumer protection statutes o Section 5 of the FTC Act: Provision in the FTC Act that prohibits unfair and deceptive practices…. Advertising is false and perceptive if: o Contains misinformation or omits important information that is likely to mislead a reasonable consumer o Makes an unsubstantiated claim DO –NOT-CALL Registry o Do-Not-Call Implemation Act: Required FTC to create and administer the National Do-Not-Call Registry o Registry created by federal law where consumers add their phone numbers and free themselves from unsolicited telemarketing and commercial telephone calls  Charitable organizations, political organizations, parties conducting surveys, and creditors and collection agencies are exempt from this registry  An “established business relationship” exception allows businesses to call customers for 18 months after they sell or lease goods or services to that person or conduct a financial transaction with that person Intellectual Property o Property that is developed through an intellectual, creative process o (Intangible rights) o Includes:  Trade secrets  Patents  Copyrights  Trademarks o Trade secrets o Product formula or recipe o Pattern o Design o Compilation of data o Customer list or other business secret o Uniform Trade Secrets Act: Statute adopted by most states to give statutory protection to trade secrets. Three essential elements to a trade secret claim 1. The subject matter must qualify for trade secret protection; it must be the type of information trade secret was intend to protect and cannot be generally known 2. Reasonable precautions must be taken to prevent disclosure of the secret information 3. The trade secret holder must prove that the information was wrongfully acquired by another; that the information was misappropriated Reverse Engineering: Taking apart and examining a rival’s product or recreating a secret recipe is not prohibited o Competitor who has reverse engineered a trade secret can use the trade secret but not the trademarked name used by the original creator Damages for misappropriation of Trade Secrets: o Recover profits made by offender o Recover damages the company holding the trade secret suffered (reduced profits, etc.) o Obtain injunction prohibiting offender from divulging or using the trade secret Economic Espionage Act of 1996 o Makes it a federal crime for any person to convert a trade secret to his or her benefit or for the benefit of others while knowing or intending to cause injury to the owner of the trade secret o Important weapon in addressing computer and internet espionage o Provides sever criminal penalties o 15 years in prison for year criminal violation o 10 million dollars in penalties for each criminal act  Can be increased if espionage benefited a foreign government Patents o Grants the federal government to the inventor of an invention for the exclusive right to use, sell, or license the invention for a limited amount of time (incentive for inventors to make their inventions public) o Protects patented inventions from infringement- Patent Infringement- the unauthorized use of another’s patent o Federal patent law is exclusive (there are no state patent laws) o Subject matters that can be patented are: o Machines o Processes o Compositions of matters o Improvements to existing machines, processes, or compositions of matter o Asexually reproduced plants o Abstract ideas and genera; scientific principals are not patentable o Requirements for obtaining a patent, an invention must be: o Novel- never done before o Useful- some practical purpose o Nonobvious- unique o Federal Patent Statute o Establishes the requirements for obtaining a patent and protects patented inventions from infringement o Patent Trial and Appeal Board o Reviews adverse decisions by patent examiners o Administrative proceedings indented to try to resolve matters within the PTO without litigation o U.S. Court of Appeals for the Federal Circuit o Hears appeals from the Patent Trial and Appeal Board *Note: Once a patent is granted, to challenge/invalidate it a lawsuit would have to be filed in the U.S. District Court, appeals of that decision would be heard by the U.S. Court of appeals for the Federal Circuit Patent Application  Must be filed with the PTO in Washington DC  Must contain a written description of the invention  PTO must make a decision whether to grant a patent within three years from the date of filing Patent Number  Number assigned to invention when patent is granted  Patent holders usually affix the word patent and the patent number on the patented article Leahy-Smith American Invents Act of 2011: Federal statute that significantly amended federal patent law  First-to-file rule: First party to file a patent on an invention receives the patent (previously first-to-invent)  Utility patents (Patenting the way something works/functions)- twenty years  Design patents (patenting the non-functional look/style of something)- fifteen years (previously fourteen years) Patent terms begin to run from the date the patent application is filed. The invention or design enters the public domain after patent period expires In cases where infringement is found, the plaintiff may recover:  Money damages equal to reasonable royalty rate  Order for destruction of infringing articles  Injunction against infringer  Treble damages if infringement was intentional Copyrights Legal right that gives the author of qualifying subject matter exclusive right to publish, produce, sell, license, and distribute the work Copyright Revision Act of 1976  Establishes the requirements for obtaining a copyright  Protects copyrighted works from infringement Qualifying Subject Matter: Copyright may apply to a wide range of creative, intellectual, or artistic forms, or “works”  Literary works, motion pictures, choreography, musical compositions, sound recordings, paintings, drawings, sculptures, photographs, computer software, radio and television broadcasts, and industrial designs Federal copyright law is exclusive- no state copyright law Copyrights can be sold or licensed to others Berne Convention: An international copyright treaty that eliminated the need to use © or word copyright on a copyrighted work in order for it be protected Registration of Copyrights  Must be an original work  Registered with U.S. Copyright Office  Registration is o Permissive o Voluntary o Done at any time during term of copyright o Registration permits holder to obtain statutory damages for copyright infringement  Copyrights don’t have to be registered in order to protect the work, but they do have to be registered in order to sue and recover damages for copyright infringement Copyright Term Extension Act of 1998: Individuals are granted copyright protection for their lifetime plus seventy years Copyrights owned by a business are protected for 120 years fr0m the year of creation or 95 years from the year of first publication (AKA The Mickey Mouse Protection Act) Copyright Infringement: Plaintiff may recover  Profit made by the defendant from the infringement  Damages suffered by the plaintiff  Order requiring impoundment and destruction  Injunction preventing future infringement Fair Use Doctrine The law permits certain limited unauthorized use of copyrighted materials under the Fair Use Doctrine: 1. Quotation of the copyrighted work for review or criticism or in a scholarly or technical work; 2. Used in a parody or satire; 3. Brief quotation in a news report’ 4. Reproduction by a teacher or student of a small part of the work to illustrate a lesson; 5. Incidental reproduction of a work in a newsreel or broadcast of an event being reported; and 6. Reproduction of a work in a legislative or judicial proceeding Digital Millennium Copyright Act  Prohibits unauthorized access to copyrighted digital works by removing DRM encryption technology (DRM= digital rights management), with certain exceptions  Prohibits the manufacture and distribution of methods for circumventing such technology  Imposes both civil and criminal penalties Trademarks: Trade name, symbol, word, logo, design, device Lanham (Trademark) Act:  Protects the owner’s investment and goodwill in a mark  Prevents consumers from being confused about the origin of goods and services Registration of a mark:  May be registered with PTO in Washington DC if it has been used in commerce o Can be registered 6 months prior  Right to register a mark is lost if not used in commerce within 6 months  Mark may be opposed by third parties  ®: Symbol designating marks registered with the U.S. Patent and Trademark Office Marks that cannot be registered:  Flag or coat of arms of the United States, any state, municipality, or foreign nation  Marks that are immoral or scandalous  Georgaphical names standing alone  Surnames standing alone  Any mark that resembles a mark already registered with the federal PTO For an owner to prove that there has been trademark infringement:  Defendant infringed the plaintiff’s mark by using it in an unauthorized manner  Use is likely to cause confusion, mistake, or deception of the public on the origin of goods or services Generic name: A mark that has become a common term for a product line or type of service and therefore has lost its trademark protection; name has become descriptive rather than distinctive  Asprin  Kleenxe  Google  Escalator  Laundromat  Thermos Dilution Federal Trademark Dilution Act of 1995: Protects famous marks from dilution, erosion, blurring, or tarnishing  Use by other party is actionable ifL o It is commercial o It causes dilution of distinctive quality of the mark Types of Dilution Blurring- one party uses another’s famous mark to designate a product or service in another market so that the unique significance of the famous mark is weakened (Rolex Skateboards; Google Internet Cafes) Tarnishment- linking a famous mark to poor quality products or portraying the mark in an unflattering, immoral, or negative context likely to evoke negative beliefs about the mark’s owner Trademark Dilution Revision Act of 2006:  A dilution plaintiff does not need to show that it has suffered actual harm  Enough to show there is a likelihood of dilution  Fundamental requirements that the holder of the senior mark must prove: o Mark is famous o Use by other party is commercial o Use by another causes a likelihood of dilution


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