Instructions

QUESTION 1
(Ninety Minutes)

A

             Paul is the CEO of a start-up company, Power Medical (PM),  that develops and markets medical equipment.  PM’s research team is working on a new product to detect small differences in patients’ genetic code, which can affect their tolerance and reactions to medicines and diseases.  The product’s basic principle of operation is new, simple, and unprecedented.  PM has filed a patent application on the principle and is keeping it as a trade secret while prosecuting the patent application.

          David is a researcher at a medical-equipment company that competes vigorously with PM.  For several years, he and his team also have been trying to develop an instrument to detect small variations in patients’ genetic code.  From industry publications and trade gossip, David knows that PM has made an important breakthrough in that field.  David decides to find out what that discovery is.

B

             The part of the medical-equipment industry that addresses genetic codes includes only a handful of companies.  Over the years, many of the researchers have moved from one company to another or have started firms of their own.  Virtually everyone knows everyone else, and they all go to the same restaurants, bars, and sporting events.  David therefore knows Paul and most of the researchers who work at PM.

            Over a period of several weeks, David takes the following steps in an effort to determine the trade-secret principles of operation of PM’s new product:

            1.  While attending a party for graduates of his technical college, David hears a researcher from PM called away to take a telephone call in the kitchen.  David excuses himself, sneaks into an empty bedroom, picks up an extension telephone, and eavesdrops.  The owner of the house and the telephones, who is an acquaintance of David’s, knows nothing of the eavesdropping.

            2.  While dining in a high, secluded booth at a local restaurant, David recognizes the research director of PM as she gets up from an adjacent booth to go to the toilet.  When she returns from the toilet, David hides his face so that he won’t be recognized.  David then puts his ear to the divider between booths in the restaurant.  By so doing, he  is able to eavesdrop on one side of a conversation between PM’s research director and Paul as she speaks with Paul on her cell phone.

            3.  When PM’s research director leaves the restaurant, David surreptitiously follows her, taking care to avoid being spotted.  David follows her home and parks outside her house.  After sunset, David takes from his car’s trunk an old  “scanner”—a device for listening to the radio portion of cordless telephone calls—which David had bought before scanners were outlawed.  David uses the scanner to overhear both sides of the radio portion of a cordless-phone conversation between PM’s research director, speaking from inside her home, and Paul.

            4.   Not yet cognizant of all that he wants to know about PM’s new product, David embarks on additional “informational” ventures.   His next-door neighbor has a fourteen-year-old son who is known as a “computer whiz.”  David befriends the boy and asks the boy to show him some tricks.  Then David challenges the boy to gain unauthorized access to the main computer server at PM.  After a few days, the boy announces that he has “cracked” password protection for PM’s computer server and shows David how to do it.  David complements the boy’s skill and dismisses him.  Later, in his own home, David uses his own computer to duplicate the feat.  He downloads numerous stored documents, drawings and reports on PM’s new product.  In the process, unbeknownst to him and undetected by anyone at PM, David accidentally deletes a crucial report of PM’s research director, who later has to spend two days of her time to re-create it.

            5.  A few days later, David again cracks password protection on the same computer server at PM.  This time, however, he is able to tap into the “buffer” (string of locations in computer memory) that PM’s computer server uses to store the digitized portion of VOIP (Voice Over Internet Protocol) telephone conversations at PM.  By recording this buffer and changes in it, David is able to access all the message “packets” in VOIP transmissions.  These packets represent signals containing the voice of Paul and those with whom he speaks on the telephone in VOIP mode.  David, who is skilled with computers, puts these data through a digital-to-analog recorder and, by so doing, is able to eavesdrop on and record both sides of a number of VOIP telephone conversations between Paul and product researchers on Paul’s staff.  His access in this manner is entirely undetected, because it changes nothing in PM’s computers.

C

            In each of these activities, David learns valuable aspects of the trade secrets involved in PM’s product and included in the still-secret patent application filed by PM.  Analyze David’s civil and possible criminal liability (including likely remedies and penalties) for each of these activities, focusing on the differences in liability among the various activities.  In each case, be sure to identify any open issues and what more you would need to know to resolve them, but do not assume any facts not stated.  Analyze under what circumstances David’s company might be liable and outline what his company should do to minimize its legal exposure if it learns of David’s activities.  Finally, analyze what rights PM has and what, if any, remedies it might seek to protect its trade secrets.  Do not discuss trade-secret law, trade-secret misappropriation, breach of express or implied contract, or quantum meruit, but stick to claims studied in this course.

QUESTION 2
(Two Hours)

A

            One of the most difficult problems in computer science is searching for particular images.  It is relatively easy to search for text because text—even in many foreign languages—is coded in certain standard ways that are used almost universally.  Once a search request is translated into the relevant code, character by character, it is easy to compare that string of code bit by bit with the code for an arbitrary document to determine whether there is a match.

            Searching for images, however, is far more difficult.  Not only are there several different methods for “coding” images (such as JPEG, GIF, BMP, etc.), each of which produces entirely different bits and bytes for the same image file.  More important, small differences in an image, which a human observer would not recognize as significant, can produce a different arrangement of pixels (and therefore of bits and bytes) that a computer would see as “different” if it just compared the image files bit by bit.

            Therefore, in order to compare and search for images as people would do, an image-search program must be able to “recognize” the subject of the images like a human mind, despite variations in location and size of the image elements and such things as lighting, shade, and camera angle.  This task is a formidable problem in computer science that has baffled researchers since the computer industry began.  (The task of recognizing letters and numbers from their pixel images (so-called “optical character recognition” or OCR) is a simple species of this general problem; but the general problem is much more difficult, as most real images are incomparably more complex than letters and numbers.

B

            Dolly Doer is  a computer scientist at a leading university.  After several years of research, she discovers a special algorithm for comparing images in computer files.  Although her technique does not work with every type of image, it works very well with human faces and figures and scenes containing natural objects, such as people, animals, landscapes, and trees.  Through her university, Dolly applies for patents on several aspects of her algorithm and methods of using it.

C

            As an academic researcher, Dolly is most interested in “getting the word out” about her discovery and encouraging its widespread application.  She writes a flexible search program to implement her algorithm and tests it carefully.

            Although the algorithm, ideas and code underlying Dolly’s program are inordinately complex and sophisticated, she is able to make the program easy to use.  All the user has to do is pick an image file on the user’s computer using an ordinary file-selection “dialogue box” (like those used to pick files to edit in word processing programs).  Once the user has chosen a file in this way, Dolly’s program does the rest.  It converts the image file into a standard format, automatically determines its resolution and other parameters, and resizes the image if necessary.  Then it begins to “crawl the Web” to find similar images.  When it finds a similar image, Dolly’s program shows a link to the similar image on the user’s screen, together with key snippets of accompanying text, if any.  Sometimes the snippets of text contain all or part of a copyright notice; most times, they do not.

            To the user, the end result of running Dolly’s program looks much like the output of a text-based search engine, such as Google.®  The program produces a list of links to images like the search-request (input) image, along with short excerpts from related or adjacent text.  By clicking on the links, the user can see the images chosen by Dolly’s program as similar to the input image.  Each linked image appears on its original Web page, from its original source Website, together with all the text that the designer of that Website chose for that page.  Sometimes the Web page is the home page of the source Website, but in most cases it is a “deep-linked” page from the source Website.  Often the displayed Web page lacks any link to the source Website’s home page, or even to “higher” pages in the source Website’s page hierarchy.

D

            Dolly calls her program the “ImagePicker.”   She registers the domain name “imagepicker.com” and, under that URL, sets up a Website from which anyone can download and use her image-search program.  The home page of her Website contains the following title, in large type:

THE IMAGEPICKER
By
Dolly Doer
“For the First Time—Crawl the Web and Search for Images by Sight!”

Dolly sets up her Website on a server at her university, starts it going, and sets up a “hit” counter to determine how many users have looked at the Website and how many have downloaded her program.

            After working on other matters for two months, Dolly checks her Website and hit counter.   She finds the Website still operating properly but is astonished to find 75 million hits and 42 million downloads.  Although she knows nothing about business, she consults a friend at the university’s business school and is told that her Website has enormous commercial potential, if only for commercial advertising.

            After some coaxing by her business-school friend, Dolly agrees to convert her Website into a commercial enterprise.  The university agrees to allow the commercial venture, if run as a university affiliate.  The venture is to be self-sustaining, hire both Dolly and her business friend as consultants, and offer both generous financial rewards for success.  The new venture, however, will require significant investment in order to upgrade the Website to commercial capability and hire people to promote it and recruit paying advertisers.

E

            Your are special assistant to the university’s general counsel for intellectual property and technology.  You have been asked to investigate any potential legal exposure (within the realm of your expertise, i.e., this course) that the Website and the new company many have, in order to disclose the risks to prospective investors as required by state and federal securities laws.

            Upon investigation, with the aid of Dolly and her business-school friend, you discover the following facts:

            1.  As far as preliminary surveys can tell, current actual usage of Dolly’s program breaks down roughly as follows:

            2.  For over five years, Playbimbos Enterprises Corp. (PEC) has run a Website called “ImagePicks” at the URL “imagepicks.com”  The point of this Website is to offer erotic images selected by PEC’s human editors from PEC’s various electronic and paper publications as the “best” of its collection.  The home page of this Website of PEC’s begins with the following heading:

IMAGEPICKS®
By
Playbimbos®
“For the First Time—Get the Best without Crawling the Web!”

The Web page on which each image appears usually has a copyright notice in PEC’s name, but few images contain any copyright notice within their four corners.

            Dolly said she had no knowledge of this Website until you informed her of it.  She is unalterably opposed to pornography and erotica in any form.

            3.  PEC sells images from its “ImagePicks” Website on a fee-for-access basis, requiring payment before giving any user access to any image.  Each of the images on PEC’s Website is stored on an “open” server, in theory accessible to the public.  The public, however, does not know the full URL for any image, i.e., the precise location of the file on PEC’s server.  Moreover, for the sake of security, PEC’s system automatically changes the file location of each image periodically, so that one paying user cannot tell a nonpaying user where a particular image is.

            Thus, for example, a particular image might reside on PEC’s server at the URL “www.imagepicks.com/best/xrated/01247.gif” at one moment and at “www.imagepicks.com/newbest/yrated/78643.gif” the next.  A user who tried to access the image at the first address after the switch to the second would get only an error message.

            Dolly’s program, however, inherently defeats this security procedure of PEC’s, since her program locates images by looking at the images themselves, not their file locations.  A user who selects an erotic image for input into Dolly’s search engine will receive correct links to any similar images on PEC’s Website (in addition, of course, to other similar images from many other Websites).  As long as the user clicks on those links before PEC’s security program changes the file locations of the corresponding images, those images will display (and be available for copying) on the user’s computer.

            A substantial fraction of the people who have used Dolly’s program to locate erotic images have linked to PEC’s Website and downloaded and copied images from it without payment.  The precise fraction is difficult to determine, but preliminary research suggests that as many as 80% of users who employ Dolly’s program to search for erotic images have downloaded images from PEC’s Website without payment.

            4.  PEC is a large and well-financed corporation.  It has been in the business of erotica and erotic images for over fifty years, and its “ImagePicks” Website is only the latest of its many ventures.  For well over twenty years, PEC has had federal trademark registrations for the name “Playbimbos,” its corporate initials PEC, and names of its various publications.  It has also had a federal trademark registration for the service mark “ImagePicks” for six years.  PEC is generally known for aggressive assertion of its legal rights and protection of its intellectual property with the aid of competent and aggressive counsel.

* * *

As counsel for Dolly’s and the university’s start-up company, write a memo to prospective investors, giving them a complete and balanced picture of the litigation risks to which the company is subject.   Be sure to address all potential sources of liability, all reasonable defenses, and all likely remedies and their probabilities (limited to those studied in this course).

QUESTION 3
(Ninety Minutes)

            It is the year 2022.  Some time ago, electronic media fully “converged.”  More than 92% of American homes have a single, broadband digital “pipeline” providing all forms of electronic communication, including full-motion videophone.  Homes not connected to fiber optic links enjoy a less convenient but equally flexible high-speed digital “pipeline” provided by satellite or local broadband wireless.  Traditional one-to-many broadcast media have nearly vanished: broadcast technology is now used only by air traffic control, the military, and emergency services.

            Highly evolved forms of present-day Websites, know as Sites, deliver every form of media now known, and many others not yet conceived. There are movies and shows on demand, many of which allow viewers to “interact” with on-screen characters and each other.  There are interactive video games, in which hundreds and thousands of geographically dispersed players participate.  There are even interactive “news” programs, in which “common people” selected by producers become instant, nationwide celebrities as commentators.  Paper news media—newspapers, magazines and the like—have virtually ceased to exist.  Almost everyone carries a low-cost, portable, lightweight “E-tablet” that can access the Web wirelessly from virtually anywhere.

            The Web is now the nation’s primary avenue of commerce, as well as its sole public medium of news, entertainment and communication.  Over 75% of all business transactions are conducted “on line.”  “Brick and mortar” retail outlets serve primarily as showrooms for on-line transactions, with very little inventory.  The concepts of sales without inventory and “just in time” delivery by courier have produced the widest variety of products and lowest prices that Americans have ever enjoyed.  Standards of living have risen steadily over the last decade.

            Despite occasional calls for regulating such things as pornography, spam and commercial fraud, the Web has remained largely free from regulation and taxation.  The perennial battle with spam, viruses and fraud goes on, but the “forces of good” are making headway with technological protection backed by strong encryption of legitimate communications.   Most legitimate commercial and personal communications are now encrypted so soundly that only intended recipients and federal criminal authorities can access them.  Congress has modified and enacted federal laws to allow decryption by federal and selected state authorities to fight cybercrime, as well as terrorism and other serious “off line” crimes.

            Only one thing is awry in this digital paradise.  Ownership of the media has “converged,” too.  Although numerous small and amateur Sites still exist, the vast majority of the American public gets both news and entertainment from—and sends and receives private communications through— Sites owned by three private firms.  (The Public Broadcasting Corporation and National Public Radio were dissolved, and their assets sold to private media, in 2015.)

            The three dominant media firms are all publicly owned and traded on major stock exchanges.  Each is, however, controlled by a small circle of major stockholders, directors and managers.  These small circles are, of course, extremely well connected politically.  Their members are major donors to one or the other political party (and sometimes both!) and to major presidential and congressional candidates.

            The three dominant media firms are: Wolf Network LLC, the Stringer Broadcasting Co., and Sidney Family Media, Inc.  Politics dominates their approach to media business.  Wolf Network serves the right wing and Stringer the left.  Polls show that each has a “hard core” viewership of about 10% percent of the population, plus an additional 15% “occasional” viewership.

            Sidney commands by far the largest audience—40% of viewers at any given time— by avoiding politics like the plague.  Over the years it has achieved a virtually monopoly of on-line entertainment.  It offers a wide array of interactive situation comedies, “reality” and game shows (some involving thousands of on-line participants), and “dramas.”   All of its productions are totally devoid of political content and moral message, although not violence.  Its corporate motto is “Entertainment without Stress.”  Critics say it has brought the “vast wasteland” of old broadcast television to an entirely new level.

            The constant drumbeat of slanted news from Wolf Network’s Right and Stringer’s Left have created an atrophied market for news and a highly polarized populace.  In order to attract increasingly jaded viewers, the two news networks have resorted to increasingly slanted, vitriolic and angry exchanges.  The latest such “news” programs feature actual food fights among commentators, some computer-simulated and some live before participating audiences.  Some “news programs” even feature animated commentators with human voices.  Loud voices, sarcasm, clever sound bites, and—above all—aggressiveness are the qualities most prized in “newscasts,” whether by hired hands, animated figures, or specially selected “volunteers” from the “common people.”  Viewers from our present time would hardly recognize the “news” these Sites convey, other than as the most vitriolic of today’s editorials.

            Two decades of increasingly shallow and polarized news coverage have taken their toll on the body politic.  No matter what the issue—abortion, terrorism, pornography, gun control, crime, national security, the budget, or Social Security—no poll for over ten years has shown anything other than virtual deadlock on key proposals for action.  Extremism and political violence have risen dramatically.  Bombings of abortion clinics and pornography producers (apparently by the Right) are regular features on the news.  So are violent attacks on producers of  weapons and tobacco (apparently by the Left).  Domestic political violence already has killed five members of Congress and eight state governors and has injured dozens more.

            Polarization also has changed the character of the States.  After the Great Chemical Terror Attack (on Washington D.C.) in 2012, the states took starkly different approaches to almost every political issue, including public safety.  For example, mostly rural “Red” states abandoned all restrictions on citizens’ possession of weapons, including heavy armament.  Towns and cities in these states began to organize heavily armed “anti-terror” militias.  Mostly urban “Blue” states enacted draconian gun-control laws but correspondingly beefed up their police forces, giving them heavy weapons and air power.  Several state borders have witnessed clashes between armed groups of civilians from Red states and Blue-state police forces seeking to take away their weapons as they cross the border.  Surveys now show that political, not economic, motives are driving migration from state to state for the first time since the Civil War.  The risk of a new civil war is on everyone’s mind.

            You are special assistant to the newly elected President, who ran on a platform of “peace, reconciliation, and civility.”  In her campaign, she promised to “restore reason, mutual respect and decency to our leadership, our media and our streets.”  Polls during the campaign showed overwhelming public support for these goals, based on widespread fear of the alternatives.  Even Congress, conscious of the violence directed at its members, is in a mood to cooperate.

            The new President, however, wisely declined to propose specific solutions.  She recognized that apparent consensus on these broad goals masks deep differences on means and methods.  For example, polls show that a majority of Americans would amend or repeal the First Amendment, but for very different reasons.  The Right wants to permit prayer and religious observances in schools and public funding of religious organizations and stamp out pornography once and for all.   The Left wants vigorous enforcement of antitrust principles to reduce the concentration of media in private hands, tight restriction on political contributions and mass-media political advertising, and limited government control of the media to restore “balance” and civility in political discourse.  Both sides see the First Amendment, as now construed, as an impediment to achieving their goals.

            The new President’s “honeymoon period” is running out, and she needs to offer concrete proposals.  So she has come to you to outline options for achieving the goals on which she ran and won.  She instructs you that all options but doing nothing are on the table, even amending the Constitution.  However, she would like all your proposals to advance the “traditional” American values of freedom (including freedom of speech), liberty, personal autonomy, privacy, free markets, respect for private property, consumer choice, and economic efficiency.

            Make and analyze, in order of priority, no less than three different, concrete proposals for achieving the President’s stated goals while advancing these traditional values.  What institutions or businesses would you establish, abolish or change, and how?  What laws (including the Constitution) would you amend, repeal, or enact?  What practical impact would these changes have?  For each proposal, analyze its pros and cons in relation to the stated goals and values.  The more specific and focused your discussion, the better it will be.  Feel free, of course, to make reference and analogies to, and distinctions from, current and past laws and policies that we have studied.  (Do not address the likelihood of being able to implement your proposals politically, but assume that Congress and the States are sufficiently motivated to approve any reasonable proposal.)

END OF EXAMINATION
(SUBMISSION INSTRUCTIONS APPEAR BELOW)