Question

Mathis, Inc. is a designer and manufacturer of women’s clothing and specializes in high-end women’s winter fashions. Normandale, a retailer, sells high-end products in malls throughout the country. With Mathis’s high costs, Normandale is unable to make a profit from the sale of Mathis’s products. Countess Lori-Ann (CLA) is a Mathis competitor. Normandale sends photographs and samples of the Mathis line to CLA and instructs them to make an identical line at a lower price. Mathis labels are easily discernable in the photographs and the samples have the Mathis label attached. CLA copies the Mathis line for Normandale. CLA sells the clothing to Normandale at a low price allowing Normandale to sell the products for a total gross profit of nearly $3 million, an increase of nearly 50% over its sale of Mathis products. Mathis discovers that Normandale is selling counterfeit products, and sends several cease-and-desist letters to them—to no avail. Mathis then sues Normandale alleging Normandale has engaged in illegal conduct. Normandale counters that it did nothing wrong.

What damages, if any, has Mathis suffered because of Normandale’s conduct? Explain.

Answer 1

Intellectual property rights Was it ethical for Normandale to sell the alleged knock-off products at a lower price? Explain. The behavior of Normandale is highly unethical. He has violated the concept of intellectual property rights. Intellectual property rights mean the ownership of an individual on his own creation. For example Cadbury has exclusive right of the rich chocolate flavor. No one else can use the same recipe to make similar product. Anyone leaping into this causes infringement of intellectual property rights. As per the concept of intellectual property rights, the creator has exclusive ownership rights over the product which is mostly intangible in form Intellectual property comprises of anything that like a secret of a trade, a recipe, production process, countries where trademarks or patents have been recorded, music, design of a designer software program, etc. Intellectual property rights concept is levied basically on assets that are intangible in nature. As per the World Intellectual Property Organization, intellectual property rights is defined as the any conception of mind including innovations, fictional or non fictional work, arty work, secret codes, signs, image, or any drawing or blueprints used in business. It also includes any proprietary procedure or a method, process, drawings in geographical areas, or any work which the creator thinks that this is his own creation or invention and on whom no other individual has the right to own (Slater, 2012) Keeping in mind the above discussion it is clear that since Mathis has intellectual property right on his design, Normandale should not have indulged in this unethical practice. Thus whatever Normandale did was highly unethical

Federal or state laws protect owners of intellectual propert It is the duty of the government to protect the intellectual property rights of an individual. The government has set intellectual property section in the constitution (Article 1, section 8) Trademarks are regulated through the commerce section of the constitution. The office of U.S Patent and Trademark is authorized to grant and monitor federal patents and trademarks that are registered in nature. Patents and trademarks are solely administered by the state laws. Similarly copyrights are also governed by the law under the responsibility of U.S. Copyright office. Trade secrets are governed subjected to the law of Unfair Competition (Gary, 2010). In the given case study, Mathis can protect itself under the U.S. section 8 of Article 1 of the constitution What damages, if anv, has Mathis suffered because of Normandale's conduct Mathis has lost intellectual property rights of his product. The product design was created out of his own mind on which he had sole proprietary. But now he has lost this to Normandale. Mathis has lost quite a lot of business. Normandale was able to make fifty percent more profit on those fake designs. Mathis has lost this business and reputation in the market. On top of it his trade secret has been stolen. This will result him in huge losses as the sale of his product will now decrease considerably. Cheaper products are available in the market to the consumer. Therefore people will not be ready to buy his product. There is loss of business as well loss of his intellectual property right. Social responsibility of corporations The social and ethical responsibility of the businesses like Normandale is to conduct the business honestly. They should not plunge in undesirable activities like what Normandale did. It is the responsibility of the business to conduct business as per the ethical code of conduct laid down for

the business houses. They should not indulge in unfair trade practices. The company should not become selfish in order to maximize its profits. It should not undertake activities which are not approved by the ethics (Bateman, Snell, 2007). They should try to build positive relations with the society with whom it operates. The decisions taken should not go beyond the boundaries of the bigger strategic decisions which can hamper the company's integrity. Consumers are interested in buying from those companies who are ethical in conducting their business. Companies engrossing themselves with malpractices gather a negative reputation in the eyes of the consumer and as a result there is loss of business. Ethics guide to take a correct or incorrect decision. So it is the responsibility of the company to be ethically correct so as to harness fruitful relations with suppliers, consumers and all the other interest groups. It is in the best interest of the company to work in such a manner that the business interest of none of the concerned interest groups is harmed (Boritz, Robinson, 2004) Ethical code to prevent similar incidents in the future While the businesses plan their future course of action, they must set up instructions so as to protect and safeguard the organization from malpractices. This is utmost important so that the company's employees and its stakeholders do not lose interest in the company. For this it is important to lay ethical code of conduct. Business plays a pivotal role in the lives of the people who are connected to it. So it is important to conduct its operations in such a way that the interest of none is harmed Liabilitv of owners It is the liability of the owners of the company to reimburse Mathis for the loss caused to him Normandale stole his designs and sold fake designs in the market. This led to loss of business to

the Mathis. Also the business of Mathis lost an innovative design. This was a major setback to the company. So it is the liability of the company to payback Mathis whatever loss has been caused to him Criminal liabilit As per the Agreement on Trade Practices on Intellectual Property Rights, there is criminal liability if their determined act to copy patent or a trademark of any business. This is stated in Article 61 of the Act. As per the U.S. law, there is penalty for illegally copying or stealing copyrights of an individual. For criminal liability, the prosecution has to prove that the act was done willingly and for the sole purpose of making profits. It has to be proved in the court of law that the defaulter acted with the sole aim of gaining personal monetary gains.