Also known as: intangible trade properties · intangible property
Written by attorneys — see sources below.
Intellectual property consisting of an enterprise's proprietary information, ideas, goodwill, and other nonphysical commercial assets. The law of misappropriation protects the original owner against the unfair taking of such assets to compete with the owner.
Innovate Pharmaceuticals board authorizes issuance of 150,000 shares to Imani Idowu in exchange for her portfolio of drug-formula patents. The patents qualify as intangible trade property that supplies valid consideration under the governing statute. Once the board determines adequacy and the patents transfer, the shares are fully paid and nonassessable.
A financial journalist supplies an employer with pre-publication details of upcoming columns that reveal proprietary trading strategies. The employer treats the column content as intangible trade property whose confidentiality constitutes a property interest. Unauthorized disclosure of the content therefore supports a fraud claim because the employer was deprived of that property right.
In 1981, R. Foster Winans joined the Wall Street Journal as a reporter. In the summer of 1982, he became one of the two writers of its daily “Heard on the Street” column, which discussed selected stocks or groups of stocks and offered investment perspectives. The column had the potential to affect the price of the stocks it examined, although the columns at issue contained no corporate inside information. The Journal maintained an official policy that the contents and timing of the column were confidential prior to publication. In October 1983, Winans entered into a scheme with Peter Brant and Kenneth Felis, both connected with the Kidder Peabody brokerage firm, and with David Clark, a client of Brant, to supply advance information about the column’s timing and contents. The group bought or sold securities based on the probable market impact of the column. The group agreed to share the profits. Over a four-month period the brokers executed prepublication trades tied to 27 columns, generating net profits of about $690,000. Kidder Peabody noticed correlations between the “Heard” articles and trading in the Clark and Felis accounts in November 1983 and began inquiries. The Securities and Exchange Commission later opened an investigation. After the conspirators quarreled, Winans and petitioner David Carpenter, Winans’ roommate, disclosed the entire scheme to the SEC on March 29, 1984. Brant, who had pleaded guilty under a plea agreement, testified for the government at the subsequent bench trial. Winans, Felis, and Carpenter were convicted of violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, the federal mail and wire fraud statutes, and the conspiracy statute. Carpenter was convicted as an aider and abettor. With a minor exception the Court of Appeals for the Second Circuit affirmed the convictions. The Supreme Court granted certiorari.
View caseA film studio licenses an actor's distinctive Dracula portrayal for merchandise without the actor's consent. The portrayal constitutes intangible trade property in the form of the actor's right of publicity. The actor therefore holds a protectible property interest that prevents unauthorized commercial exploitation of the likeness.
Bela Lugosi and Universal Pictures Company, Inc. concluded an agreement in September 1930 for the production of the film Dracula in which Lugosi contracted to and did play the title role. Paragraph 4 of the agreement granted Universal the right to photograph and exploit in connection with the photoplay any and all of the artist's acts, poses, plays and appearances and the right to use and give publicity to the artist's name and likeness in connection with the advertising and exploitation of the photoplay. Lugosi died in 1956. Commencing in 1960 Universal entered into many licensing agreements which authorized licensees to use the Count Dracula character in connection with the sale of commercial merchandising products such as plastic model kits, masks, posters, candy dispensers, T-shirts, and beverage stirring rods. The licensing agreements specifically authorized the use of Lugosi's likeness from his portrayal of Count Dracula in Dracula and Dracula's Daughter. On February 3, 1966, Lugosi's widow Hope Linninger Lugosi and surviving son Bela George Lugosi filed a complaint against Universal alleging that they were the heirs of Bela Lugosi and that Universal had appropriated property which they had inherited from Lugosi and which was not embraced in paragraph 4 of the 1930 agreement. The complaint sought damages, an accounting of profits, and an injunction against further licensing without their consent. The trial court found that the essence of the thing licensed by Universal was the uniquely individual likeness and appearance of Bela Lugosi in the role of Count Dracula. It concluded that Lugosi had a protectable property right in his facial characteristics and individual manner of likeness and appearance as Count Dracula that descended to his heirs under his will. The court awarded plaintiffs $53,023.23 in damages for licensing agreements executed after February 3, 1964, and issued a permanent injunction against further unauthorized licensing of Lugosi's likeness as Count Dracula on commercial products. Universal appealed. The Supreme Court of California granted a hearing, conducted an independent study of the issues, and adopted the opinion of the Court of Appeal, Second Appellate District, as its own after appropriate deletions and additions.
View caseImperial Motors operates an interstate trucking business whose customer database and routing software constitute intangible trade property. A state imposes a tax measured by the corporation's apportioned gross receipts from in-state activity. The tax reaches the value generated by that intangible trade property without violating the commerce clause.
Complete Auto Transit, Inc., a Michigan corporation, transports motor vehicles by motor carrier for General Motors Corporation. General Motors assembles vehicles outside Mississippi for dealers within the State. The vehicles arrive by rail in Jackson, Mississippi, and within about 48 hours appellant loads them onto its trucks for delivery to the dealers. Appellant receives payment on a contract basis for this intrastate leg of the transportation. The Mississippi State Tax Commission assessed privilege taxes against appellant for the periods from August 1, 1968, through July 31, 1972. The assessments, made under Mississippi Code provisions levying five percent of gross income on transportation businesses operating between points within the State, totaled $122,160.59 for the first three years and $42,990.89 for the final year. Appellant paid the assessments under protest after receiving letters from the Commission in October 1971 and December 1972. In April 1973 appellant filed a refund action in the Chancery Court of the First Judicial District of Hinds County. The Chancery Court sustained the assessments in an unreported opinion. On appeal the Mississippi Supreme Court affirmed the judgment in a unanimous decision. Appellant did not claim in its complaint that its activities lacked a sufficient nexus with Mississippi, that the tax discriminated against interstate commerce, that the tax was unfairly apportioned, or that the tax bore no relation to services provided by the State. The Mississippi Supreme Court observed that appellant maintained a large operation in the State and benefited from state services such as police protection.
View caseIntegrity Partners holds trademark registrations and trade-secret licenses that qualify as intangible trade property. A Florida court asserts jurisdiction over the Delaware partnership solely because the trademarks are registered in Florida. The assertion fails because mere ownership of intangible trade property in the forum does not create sufficient contacts.
In 1935 Dora Browning Donner, then a domiciliary of Pennsylvania, executed a trust instrument in Delaware naming the Wilmington Trust Company as trustee. The corpus consisted of securities. Mrs. Donner reserved the income for life and retained a power of appointment over the remainder exercisable by inter vivos deed or will. She also retained the rights to amend, alter, or revoke the agreement, to change the trustee, and to require the consent of a trust advisor she appointed for sales of assets, investments, and participation in reorganizations. In 1944 Mrs. Donner became domiciled in Florida and remained there until her death in 1952. On December 3, 1949, while in Florida, she executed both her will and an inter vivos power of appointment. The appointment directed $200,000 to each of two trusts benefiting her grandchildren Donner Hanson and Joseph Donner Winsor, with the balance appointed to her executrix. Mrs. Donner died on November 20, 1952. Her will was admitted to probate in Florida, naming Elizabeth Donner Hanson as executrix. Fourteen months after the death, residuary legatees Katherine N. R. Denckla and Dorothy B. R. Stewart petitioned a Florida chancery court for a declaratory judgment concerning property passing under the residuary clause. Personal service was made on the executrix and beneficiaries. Nonresident defendants including the Wilmington Trust Company and the Delaware Trust Company were served by ordinary mail and local publication under Florida statutes. The Delaware trustee did not appear. After the Florida suit began, the executrix filed a declaratory judgment action in Delaware to determine rights to the trust assets held there. All trust companies and most beneficiaries appeared in the Delaware proceeding. The Florida chancellor initially ruled he lacked jurisdiction over the nonresident trustees because no personal service had been made and the trust corpus was outside Florida. He proceeded as to appearing parties and held the power of appointment testamentary and void under Florida law, so that the $400,000 passed under the residuary clause. The Delaware Chancellor ruled the trust and appointment valid under Delaware law and that the corpus had been properly paid to the appointees. The Florida Supreme Court reversed the jurisdictional ruling, held Florida law applied, and affirmed that the trust was invalid and the appointment ineffective. The Delaware Supreme Court affirmed its own judgment and refused to accord full faith and credit to the Florida decree. The United States Supreme Court postponed the question of jurisdiction in the Florida appeal and granted certiorari to the Delaware Supreme Court. Both state supreme court judgments are before the Court.
View caseIronwood Capital owns a valuable customer list and software license that constitute intangible trade property located in Minnesota. A plaintiff attempts to attach the list to obtain jurisdiction over an out-of-state defendant. The attachment is invalid because the intangible trade property lacks the minimum contacts required for quasi in rem jurisdiction.
On January 13, 1972, two Indiana residents were involved in a single-car accident in Elkhart, Indiana. Appellee Savchuk, who was a passenger in the car driven by appellant Rush, was injured. The car, owned by Rush's father, was insured by appellant State Farm Mutual Automobile Insurance Co. under a liability insurance policy issued in Indiana. Savchuk moved with his parents to Minnesota in June 1973. On May 28, 1974, Savchuk commenced an action against Rush in the Minnesota state courts. The complaint alleged negligence and sought $125,000 in damages. The prayer was later reduced voluntarily to $50,000, the face amount of the policy. As Rush had no contacts with Minnesota that would support in personam jurisdiction, Savchuk attempted to obtain quasi in rem jurisdiction by garnishing State Farm's obligation under the insurance policy to defend and indemnify Rush in connection with such a suit. State Farm does business in Minnesota. Rush was personally served in Indiana. The trial court denied the motion to dismiss and granted the motion for leave to file the supplemental complaint. On appeal, the Minnesota Supreme Court affirmed the trial court's decision. The Supreme Court vacated the judgment and remanded the cause for further consideration in light of Shaffer v. Heitner. On remand, the Minnesota Supreme Court held that the assertion of quasi in rem jurisdiction through garnishment of an insurer's obligation to an insured complied with the due process standards enunciated in Shaffer. This appeal followed.
View caseYes. Modern corporate statutes authorize the board to accept any tangible or intangible property as consideration for newly issued shares. Patents are classic intangible property. Once the board determines that the patents constitute adequate consideration, the shares are validly issued, fully paid, and nonassessable.
Supporting sources
Yes. The statute makes the board's pre-issuance determination of adequacy conclusive on whether shares are validly issued, fully paid, and nonassessable. Courts will not revalue the consideration after the board has acted, even if the intangible trade property later proves less valuable than expected.
Supporting sources
Yes. The statute expressly lists promissory notes and contracts for services to be performed as permissible forms of consideration. Intangible trade property and benefits supplied by such instruments therefore support a valid issuance once the board determines adequacy.
Supporting sources
The law of misappropriation supplies a remedy when a competitor takes the owner's proprietary information, ideas, or goodwill to compete unfairly. This protection extends to nonphysical commercial assets that the owner has developed and that give the owner a competitive advantage.