SOCIAL RESPONSIBILITY TOWARDS THE COMPETITORS

Chapter 22: CHALLENGING MARKET DOMINANCE AND PRICE-FIXING SCHEME

What are the drivers of the free market and global competition?
• Globalization of Competition
• Better Informed and More Discerning Customers
• Increasing Number of Competitors

Globalization of Competition
• With the spreading trade liberalization and deregulation, there is now closer
integration of domestic and international markets
• Enterprises not only face increased competition in their export markets, but even
the domestic markets cope with the competition from imported products that can
now easily enter the domestic markets
Better Informed and More Discerning Customers
• Advance in internal communication increased access to knowledge and
information, and the increased integration of markets have led to
internationalization of consumer demands and preferences
• Rapid advance in information and production technology makes product
obsolescence very rapid
• Product variety is increasing as the product life cycle is decreasing
Increasing Number of Competitors
• Wave of trade liberalization and shift towards export oriented development—from
import substitution strategies—many enterprises are entering international and
liberalized national markets

Is the rapid advance in both soft and hard technologies driving global
competition?
• Enables enterprises to adopt production and organizational systems that improve
the capacity to produce products and services at lower costs, improve quality,
and increase speed of delivery
 • Realistically, technology has developed into two-edged sword, for it is also
becoming a tool to compete unjustly
• Fast development in technological fields, such as electronics, biotechnology,
mechatronics and material sciences lead to the increased flow of new products
and services that substitute for or totally replaces existing ones

What drives business to make competition unfair?

• It is always good if the competition explodes into a price war—the only war
favorable to the consumers
• Profit maximization drives business into motion and making a lot of money
therefore optimizing shareholder value and changing the rules of the competition
• In the film Wall Street, the accomplished businessman tells the neophyte Bud
Fox: “I’m not interested how, where and when you get it(money). What’s
important is you get it.”

What are the ugly faces of unfair competition?

• Unfair competition exists in various forms:
 misleading advertisements
 copying of another’s trademark and products
 destroying reputation of competitors by making false statements about
their products
 plain and simple fraud
 technology piracy to personnel piracy

Was Sony Corporation ever engaged in unfair competition?

• In 2000, the US National Association of Recording Merchandisers (NARM) filed a
lawsuit against Sony Corporation of America and Sony Music Entertainment
alleging that Sony is illegally using its power in the sale of music to force retailers
to carry compact discs that contain not only music but also software (hyperlinks),
and promotional inserts directing consumers to competing retail locations owned
or operated by Sony. The complaint also alleges that Sony engaged in copyright
misuse, illegal price discrimination by favoring its own record club and online
music retailer (CDNow/Columbia House) over other retailers, unfair competition,
and false advertising (NARM v. Sony Corporation of America, et al., 2000).
What is a monopoly/trust?
• In retail business, where SM malls are created, small enterprises are swallowed
up or disappears instantly. In manufacturing, San Miguel Corp. has been
consolidating its strength in the food industry. Zuellig and Jollibee are doing the
same in the drug distribution and fastfood industry, respectively
• Trust(monopoly) or corporate monopoly was organized under the legal device of
trusteeship for the purposes of eliminating competition in the area of business
and of controlling the market for a product
• Specifically, a trust was a particular technique developed in the late 19 th century
to consolidate firms and acquire control in a variety of industries

Is there a monopoly in IT hardware and software?

• It is of public knowledge that the world’s largest software maker Microsoft
Corporation enjoys monopoly power in the market for personal computer (PC)
operating systems
• Microsoft had restrained trade through intimidation and exclusive contracts,
illegally bundled products together, and hurt consumers by shifting innovation,
setting artificially high prices, and making unnecessarily complex and bulky
products
• Microsoft has a dominant share of the lucrative market for PC operating
systems—the software that carries out the basic functions of a computer—and
that consumer’s lack a “commercially viable alternative to Windows” in this
area
• Officials of Netscape Communications Corporation charged that Microsoft was
using its dominance in operating systems to illegally take control of the browser
market
• In April 2000, in a formal ruling against the company, with judge, Thomas
Penfield Jackson, found that the company violated the Sherman Antitrust Act
with anticompetitive, monopolistic behavior, chiefly by bundling IE with Windows
so that it dominated the Web browser market

What is the Sherman Antitrust Act?

• Antitrust laws are enacted against unfair competition.
• PURPOSE: To promote and safeguard competition and to punish
anticompetitive behavior.
Antitrust laws apply to every level of business in the vast majority of
countries: they apply to competitors, suppliers, and business customers.
 • Sherman Antitrust Act is a basic federal enactment regulating the operations
of corporate trusts passed by the US Congress in July 1890 through the efforts
of Senator John Sherman of Ohio. The act declared illegal every contract
combination in the form of trust (monopoly) or otherwise, or conspiracy in
restraint of trade or commerce among the several States, or with foreign nations.

What is the Scope of Antitrust Laws?

• Price fixing between competitors
• Abuses of market power by a monopoly or dominant firm
• Agreements between competitors to restrict output (cartel)

What is a Price-fixing Scheme?

• Conspiracy between competitors about the prices they will charge to customers
or pay to suppliers for goods or services are generally among the most serious
infringements of applicable antitrust rules. Often referred to as “collusion” and in
stronger term as “economic conspiracy,” this sort of agreement undermines the
system of free enterprise. (Maximiano, 2003: Lloyd, 1881) .
Is Price-fixing Against the Law and Moral Principles?
• Hard core, clear or blatant price-fixing between competitors is illegal and is
subject to criminal prosecution in many countries. The antitrust prohibition on
fixing prices also extends to agreements between competitors on price-related
matters such as discounts, rebates, commission and credit terms.
• Is the similarity of prices, simultaneous price changes, or high price
indications of price fixing?
Not always. These conditions can result from price fixing, but to prove the
charge, antitrust authorities would need evidence of an agreement between competitors
to fix prices.

What is the so-called Pricing Process?

• The pricing process requires business to effectively calculate the resources and
needs, the forces of supply and demand.
• Failure to calculate the supply and demand is a manifestation of the
organization’s bad practice and the damaging effects will immediately be seen in
prices.
• If prices are distorted or deliberately manipulated, then a disorder in the market
may be created which may lead to the decline of production and consumption.
What is a Just Price?
• According to St. Thomas Aquinas, “Buying and selling were instituted for the
common good of both parties since each needs the products of the other…
Therefore, the contract between them should rest upon an equality of thing to
things. The measure of the value of a thing which is exchanged should be given
by its money price. Hence, to sell a thing dearer or to buy it cheaper than it is
worth is unjust.”

What do you mean by Regulating or Deregulating?

• Reasonable increase of prices may be done under regulation by the government
agency in charge and always with the common good in mind --- unless the
product is under deregulation law.

What is the notion called EQUILIBRIUM?

 Level where the buyer and seller receive the exact value of his money and
goods, the exact worth of what each contributes to other.
 condition or state in which economic forces are balanced
 point at which supply equals demand for a product

Market Price & Correct Pricing- should be taken as the measure of social
responsibility.

What happens when PRICES are SIMILAR?

 Can result from normal economic conditions and from a rational unilateral
response by companies to those conditions.
Example:
Vigorous conditions can drive prices down to a common level-or
equilibrium price-and operate within socially responsible standard for the
appearance of uniformly “high” prices collusion may not be the only basis for the
collusion.

What do you mean by MARKET DOMINANCE?

MARKET DOMINANCE

 refers to a position of a considerable economic power in a market held over a

period of time in relation to suppliers.
  means that the relevant company has sufficient market power to restrict output
and raise price above the level that would prevail in a competitive market without
existing rivals or new entrants taking away its customers.

Are some companies abusing MARKET DOMINANCE?

 Generally, it is not illegal to gain a positiom of market power through natural

growth. Antitrust laws generally make it unlawful to maintain or to abuse a
monopoly through tactics that either unreasonably exclude firms from the market
or significantly impair the ability of others to compete.
Examples of conduct by dominant companies that may violate applicable
antitrust laws:
 Refusals to supply for nonobjective reasons.
 Unfair discrimination between equivalent transactions.
 Nonobjective refusals to grant access to essential facilities
 Unfair or predatory pricing
 Engaging in practices to raise rivals’ costs or foreclose competition
entry.
 Unfair rebating practices
 Customer tied

Qualcomm fined €997,439,000 for abusing dominant market position

European Commission fined US technology company Qualcomm more than

€997 million because of breach of EU competition rules. Qualcomm made to one of its
customers, US technology giant Apple, which the Commission said incentivised Apple
not to purchase rival products from competitors.The payments agreement between the
companies was in place for more than five and a half years and influenced Apple's
decision-making on where to source chipsets, the Commission said.EU competition
commissioner Margrethe Vestager said: "Qualcomm illegally shut out rivals from the
market for LTE baseband chipsets for over five years, thereby cementing its market
dominance. Qualcomm paid billions of US dollars to a key customer, Apple, so that it
would not buy from rivals. These payments were not just reductions in price – they were
made on the condition that Apple would exclusively use Qualcomm's baseband chipsets
in all its iPhones and iPads." "This meant that no rival could effectively challenge
Qualcomm in this market, no matter how good their products were. Qualcomm's
behaviour denied consumers and other companies more choice and innovation – and
this in a sector with a huge demand and potential for innovative technologies. This is
illegal under EU antitrust rules and why we have taken [this] decision," she said.
(https://www.out-law.com/en/articles/2018/january/qualcomm-fined-997m-for-abusing-
dominant-market-position/?fbclid=IwAR1kGQDuikS6PBvI1z3Q-
SjUHabr9qJwR7knvzQqV9WwEVXA1k_c4Awliv8)
Why is the abuse of MARKET DOMINANCE unethical, socially irresponsible, and
anticompetitive?

 New rivals are barred to compete

 Prices controlled are above the equilibrium level
 The product becomes the sovereign of the market
 Big profit without corresponding improvement of product quality
 Chapter 23: FIGHTING THE CARTEL

What is oligopoly?
- is a market structure where the industry is dominated by a small number of sellers
(oligopolists). It can result from various form of collusion which reduce competition and
lead to higher prices for consumers. The dominant sellers, since they are so few in
number, are each likely to be aware of the actions of the others. The decisions of one
firm influence, and are influenced by, the decisions of other firms.

Characteristics of oligopoly

 Profit maximization conditions

- An oligopoly maximizes profits.

 Ability to set price

- Oligopolies are price setters rather than price takers.

 Entry and exit

- Barriers to entry are high. The most important barriers are government licenses,
economies of scale, patents, access to expensive and complex technology, and
strategic actions.

 Number of firms
- Few firms that the actions of one firm can influence the actions of the other
firms.

 Interdependence
- Oligopolies are typically composed of a few large firms. Each firm is so large
that its actions affect market conditions. Therefore, the competing firms will
be aware of a firm's market actions and will respond appropriately. This
means that in contemplating a market action, a firm must take into
consideration the possible reactions of all competing firms and the firm's
countermoves.

 Non-Price Competition
- Oligopolies tend to compete on terms other than price which includes loyalty
schemes, advertisement, and product differentiation.
- In oligopoly, agreements between competitors often raise antitrust suspicions
although not all relationship between competitors are illegal. However, some of
their activities do restrict competition that is generally illegal, so in that case the
 corporate social responsibility means that they should alert the managers and
employees to those practices that may violate Antitrust Law.

 Antitrust law in the Philippines

The Philippine Competition Act (PCA) or R.A. 10667
- is the primary competition policy of the Philippines for promoting and
protecting competitive market. It will protect the well-being of consumers and
preserve the efficiency of competition in the marketplace.

Cartel
- is a special case of oligopoly when competing firms in an industry collude to
create explicit, formal agreements to fix prices and production quantities. Cartels
are usually prohibited by anti-trust law.

EXAMPLES OF CARTEL in the PHILIPPINES

 Importation of oil and sugar

 Banking industries
 Buying and selling of basic staple foods like rice.

Is oligopoly an economic conspiracy?

- Oligopoly also came because of technological advances that enable a handful
of large firms to satisfy the demand in many markets. The result was not a complete
monopoly but an economic order in which production is dominated by a few firms.
Oligopoly must unite all rivals in the industry to make an effective conspiracy because a
conspiracy without complete participation of all firms in the industry is bound to fail since
the firms outside the conspiracy may underprice or underbid the cartel.
- The greater the intensity of market concentration that exist in an industry, the
fewer the players have to be brought into price fixing agreement.
- Collusion to fix prices are illegal per se, regardless of its effectiveness and
consequences.
- When a small but powerful number of firms agreed to collude, their agreement
can duplicate the effects of a monopoly.
Conspiracy
- A conspiracy exists when two or more are combine to do an unlawful act or to
do a lawful act by unlawful means.
Why is the oil cartel the best form of economic conspiracy?
- Oil cartel is the best-known form of conspiracy because of the widespread
intention given to the activities of the Organization of Petroleum Exporting Countries (
OPEC ).

Organization of Petroleum Exporting Countries ( OPEC )

- Is an association of major oil-producing nations which seeks to control crude-oil
prices by setting production limits for each member nation.
- The organization's authority is the omnipotent conference made up of high level
representatives of the member governments which meets at least twice a year.
- In the late 1950's, the amount of oil produced worldwide was greater than the
demand so the price that was controlled by the oil companies dropped which lead to a
dropped in the amount of money the oil companies paid to the oil-producing nations.
Because of the dropped in payments, the OPEC was formed in order to protect it's
vested interest.
- The goals of OPEC are to maximize the member countries profit from oil sales
by coordinating the amount of oil they sell and to bring stability and harmony to the oil
market by adjusting oil output to help ensure a balance between supply and demand.

How does the oil cartel work against social welfare?

 1970
- As oil supplies in non-OPEC countries reduced, the organization raise the price if oil
and held the whole universe captive.
- OPEC set production ceilings that specify how much oil may be produced by each
member country.

 1980
- Some OPEC nations ignored the production ceilings which resulted in
overproduction and a drop in oil prices.
- OPEC is called a cartel because it has become a concentrated collusion of oil
business in the hands of a few who have both the unlimited freedom and bottomless
money to set prices at highly profitable levels that restrict competition through explicit
agreement and combined action.
Was there a rice cartel in the Philippines?
In 1990, then Senator Teofisto Guingona, majority floor leader of the Upper
House, exposed the existence of a cartel which handled over 90% of the local
production of the country, thus initiating a Senate Blue Ribbon Committee inquiry. He
further identified the Big Seven, just the inner nucleus of an elite group of 50 grain
traders. The group’s network also extended to Nueva Ecija, Tarlac, Bulacan,
Pangasinan, Isabela, Cagayan, Mindoro and to Cebu and Iloilo in Visayas.
Volume of trade controlled by the cartel was placed at 400,000 bags per month
valued then at P160 million wholesale or more than Metro Manila’s consumption of
300,000 bags. In 1987, the cartel sold 10,284 bags of rice a week on retail and 17,933
bags a week on wholesale for a total of 28,217 bags a week or 112,868 bags a month.

How did rice cartel operate?

Every year during harvest months, in Nueva Ecija, Tarlac and other rice-
producing provinces in Luzon, the National Food Authority (NFA) was supposed to
conduct its buying operations. But it had little money to buy palay and few personnel, if
any at all, to go to the field and directly buy from farmers.
It turned out that the cartel‘s buyers were able to buy the merchandise, at prices
dictated by them. These were then stocked in facilities owned by the group in areas
within its widespread network waiting for a shortage. When the shortage came, the
cartel milled the palay and sold it via its network at increased prices.
Official inquiries and research studies were made to analyze the success factors
of the cartel scheme:
(1) Same accounts. Cartel members employed the same certified public accounts
and presumably use the same kind of books.
(2) Common facilities. Cartel members utilized a common paddock of facilities for
rice shortage, which included warehouses or bodegas, trucks and other vehicles.
(3) Powerful communication systems. Cartel members were linked with one another
and also with their rice suppliers and buyers via communication network of mobile
phones, allowing them to affect the immediate traffic flow of surplus stocks to rice-deficit
areas as well as to set the corresponding prices.
(4) Other unscrupulous practices. Aside from manipulating the supply and dictating
prices, they understated sales and purchases of milled rice using spurious invoices and
receipts to support fictitious purchases and pad expenses. They also sold rice in bags
less than the standard fifty kilos in weight.
What are the moral principles involved in rice cartel?
Rice cartel violated the most fundamental rights and a lot more of ethical
standards. If human rights are meant to enable the individual to choose freely whether
to pursue certain interests or to protect those choices, then the cartel clearly violates
certain rights basic to the people.
Moreover, the cartel became “invincibly” dictatorial in all aspects. Since the
prices and quantities are determined by the cartel, consumers are forced to buy at
prices and quantities they do not want or need. Because the cartel is in charge, the
buying public has nothing to say in this kind of setup and becomes the punching bag.

Is there a violation of justice?

The high prices the cartel charge the consumers and the low farm gate prices
they set which enable them to reap huge profits also violate the ethical concept of
commutative justice. The equilibrium point in the supply-demand analysis is the only
point wherein buyers and sellers receive equal value to what they contribute.

Is rice cartel is form of cheating farmers and consumers?

Rice cartel is seemingly impenetrable operation that cheated lot of consumer

because the people had to pay more for the rice every time the cartel decided to
increase the price of rice.

Collusion
It is an unlawful cooperation with the competitors to reduce or eliminate
competition, such as price fixing and market sharing. It has been around for as
long as people have been in business.

How do you deal with moral dilemmas?

Anticompetitive behavior is offensive and for that reason deplorable. Cartels

between competitors which the price is fixing or there is market sharing this
anticompetitive behavior is easy to identify while the other anticompetitive practices are
hard t discover.

Gray areas is to formulate certain number of question to analyze and understand

the gray areas. These question aims to help you and employee distinguished between
those activities which are acceptable and those which are not.

Can cartel happen in computer or information technology?

Yes.
Is there such thing as the citric acid cartel?

This cartel was uncovered during investigation into the lysine cartel. The
conspirators have regular meetings where they agreed on a sophisticated system to
monitor enforce the cartel.
 Chapter 24: UPHOLDING INTELLECTUAL PROPERTY RIGHTS

What is Intellectual Property?

Intellectual property constitutes those original creative works that have economic
value and are protected by law. Intellectual property laws actually work like a double-
edged sword: (1) they reward the creators of original works by preventing the others
from copying, performing or distributing those works without permission, (2) they also
provide incentives for people to produce scientific and creative works that benefit the
society at large.
Patent law protects inventions that demonstrate technological process.
Copyright law protects a variety of literary and artistic works, including paintings,
sculpture, prose, poetry plays, musical compositions, dances, photographs, motion
pictures, radio and television programs, sound recordings, and computer software
programs.
Trademark law protects words and symbols that serve to identify different brands
of goods and services in the market place.
Intellectual property also includes certain related fields of law. such as:
(1) Trade secret law protects confidential information that belongs
to a business and gives that business a competitive advantage.
(2) Right of publicity law protects the right to use one's own name
or likeness for commercial purposes.

Is there an expiration date?

Most intellectual property rights expire after a specified period. This permits the
rest of society to benefit from the work after the creator has had an opportunity to earn a
quite good, fair, just and reasonable reward.

Is intellectual property relevant?

In US and other countries, it has gained increased protection with advances in
digital technology and global trade. However, some countries tolerate the widespread
sale of counterfeit versions of intellectual property products such as software, movies on
videotape, brand-name athletic goods, and even patented medicines.
These costs stem from lost royalties and sales in markets dominated by
counterfeit products. Our Filipino artists cry out to the high heavens and to Bong Revilla
for help. In an attempt to reverse this situation, most nations of the world signed the
Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) in 1994.
Administered by the World Trade Organization (WTO), TRIPS strengthened legal
protection for intellectual property around the world.
The United States has also attempted to negotiate direct agreements with
countries such as China, the sleeping economic dragon of Asia, where counterfeiting
has been particularly extensive.

Does infringement mean looting or stealing?

Intellectual property differs from other forms of property because it is intangible, a
product of the human imagination. Because intellectual property is intangible, many
people may use it simultaneously without conflict. For example, only one person can
drive a car at a time or use the bath room at a time, but if an author publishes a book,
many people can read the work at the same time. Intellectual property is also much
easier to copy than it is to create – and replicate copies as well.
It may take many months of work to write a novel or computer program, but with
a photocopy machine or a computer others could copy the work in a matter of seconds.
Without intellectual property laws, it would be easy to duplicate original works and sell
them for very low prices, leaving the original creators without any chance to secure
economic rewards for their efforts. The legal system avoids this problem by making it
against the law to reproduce various forms of intellectual property without the
permission of the creator (Akinsha & Kozlov, 1995).

Is there a piracy in cyberspace?

As more and more companies enter the world of cyberspace, they often find
themselves victims of a new scam: Internet hijacking (piracy). In the new millennium,
the victims are companies that have failed to register their own names, or the brand
names of their products.

What is the World Intellectual Property Organization (WIPO) doing?

WIPO is specialized agency of UN, founded in 1967 to protect rights to literary
and artistic works and to such industrial property as inventions, designs and
trademarks. It became a UN agency in 1974 and has 151 members by 1995.

What is a copyright?
Copyright is technically a branch of law granting authors the exclusive privilege to
reproduce, distribute, perform or display their creative works. The goal of copyright law
is to encourage authors to invest their effort in creating new works of art and literature.
Copyright is one branch of the larger legal field known as intellectual property.
The law that covers it is the legal foundation protecting the work of many major
industries, including book publishing, motion-picture production, music recording, and
computer software development. These industries account for considerable economic
activity in the global business, making copyright law a field of enormous economic
importance.

What is a copyright infringement?

An infringement of copyright is the reproduction, distribution, performance or
display of any copyrighted work without permission of the copyright owner or without a
compulsory license. Infringement does not necessarily require absolute similarity to the
copyrighted work.

Patent
It works like a protective shield that drives our inventors and scientists to go
ahead, with confidence and boldness, in their quest for scientific discoveries and
technological advancement, which today are considered necessities for national survival
and global competitiveness.
Patent is a legal document granted by the government giving the inventor an
exclusive right to make, use and sell an invention for a specified numbers of years.

Importance of Patent
The goal of the patent system is to encourage inventors to advance the state of
technology by awarding them special rights to benefit from their inventions. Patent
protection has great economic importance in a number of industries that rely on
technological innovation to remain competitive, such as the chemical, pharmaceutical,
and computer industries.
Without patent, no new invention is possible. Without copyright, authors will put
their pens down and create nothing. Just imagine a world without inventors and
authors.(Maximiano, 2003).

Non Patentable Inventions

 Discovery
 Scientific Theory
 Mathematical Methods
 Scheme, rule and methods of performing mental act
 Playing games
 Doing business
 Program for computer
 Method for treatment – human and animal body by surgery or therapy &
diagnostic method
  Plant variety or animal breed or essentially biological processes for the
production of plants and animals
 Aesthetic creation
 Contrary to public order or morality

Philippine Laws
Republic Act 165, approved as early as June 20, 1947, created the Philippine
Patent Office (PPO) and prescribed the rules and regulations for the issuance of
patents.
Presidential Decree no. 1263, approved on December 14, 1977, amended
chapter 8 of RA 165.
Executive Order no. 133, dated February 27, 1987, transferred the function of the
PPO to the Bureau of Patents, Trademarks, Technology Transfer.

Trademarks
It is any word or symbol used by manufacturers or sellers to identify their goods
and distinguish them from the goods of others. Trademarks help consumers to identify
goods they have use and enjoyed in the past. Trademarks also allow consumers to
avoid goods and services that they dislike.
Because consumers often continue to buy products they trust, well-known
trademarks can be extremely valuable.

History of Trademarks
Throughout history, makers of goods have put their names or other marks on
things they produce so buyers could trace their origin and determine their quality.
Formal legal disputes over trademarks date as far back as the early 17 th century in
England.
As trade increased in the 19th century, many countries adopted law recognizing
the legal rights of trademark owners. These laws prohibited other sellers from using
similar marks that might confuse the public about the source of the product. Congress
passed the first federal trademark law in the United State in 1870, and has made major
revisions in the law since then.
The current US trademark statute, the Lanham Act, was enacted in 1946. The
first international agreement dealing with trademark law was the treaty known as the
Paris Convention. Adopted in 1883, it required members to recognize trademark rights
of foreign producers. Most nations are members of the Paris Convention. The
Philippines is signatory to the Convention of Paris of September 27, 1965.
 In 1994, most countries signed another significant treaty dealing with
international trademark law. The Agreement on Trade Related Aspects of Intellectual
Property Rights (TRIPS) strengthened legal protections for trademarks around the
world. (Schechter, n.d.)
In the Philippines, the law recognizing the legal rights of trademark owners is the
Republic Act No. 166 otherwise known as the Trademark Law.

Trademarks Cases
 Trademark case involving beer bottle in the Philippines (San Miguel Corporation
and Asian Brewery, Inc.)
 Trademark infringement involving iPhone (Cisco and Apple)

Trade Secrets
These consist of highly confidential and important nonpublic information about
the company’s inner structure, classified records, systems, future plans or policies
which if known by competitors, could place the company into a competitive
disadvantage.

How do you differentiate trade secrets from personal skills and competencies?

Trade secrets are information and not skills. The skills and training that an
employee acquired and developed from his/her work experience in the company are not
trade secrets.
In some cases, especially when a company is highly automated and digitalized, it
is difficult to distinguish the worker’s skills from the company’s trade secrets. It is also
difficult to determine whether or not the employee transferring is guilty of technology
piracy or revelation of his/her former company’s trade secrets.
In actual cases of headhunting, a pirating company is definitely guilty of unfair
competition if and when this company covetously wanted to possess and own not only
the personal skills and work experience from the employee but also the trade secrets of
the competitor where the employee is pirated.

What are the motives in pirating a “loaded” employee/officer of a competitor?

1. The company wants the experience and skills of the employee.
- The second company would definitely benefit from the work experience and skills of the
employee acquired from working in the first company.
2. The company wants to acquire the its competitor’s trade secret.
 What is digital video recording?
Digital Video Disc
- Sometimes known as the digital versatile disc or super density discs.
- Can store up to 8.5 GB of data on each side of the disc the same size as today’s compact
disc.
- This is more than 13 times the 800 MB or so that current CD-ROM discs hold enough
capacity to hold two full length movies with a better looking picture than with today’s one-
movie laser discs.
In 2007, there was a raging war between two formats: high definition DVD (HD-DVD)
and blu-ray discs.
Manufacturers, including Matsushita Electric and Toshiba, were promising DVDs and
players by late 1996, but various complications and concerns were putting that date in
jeopardy. In addition to the usual technical glitches, there was widespread concerns in the
entertainment industry over illegal copying or technology piracy This is one of the reasons
that DVD players were unable to record programs, at least initially, while the industry was
working on a copy protection scheme. Somehow the social responsibility of those in the
digital multimedia industry starts here (Maximiano, 2003)

What is technology piracy in digital recording?

Technology piracy is a more generic term, anything related to an unauthorized use of
a patented/copyrighted work. It is tantamount to stealing a trademark or a copyright and
because stealing is immoral, technology piracy is also immoral, illegal, and socially
irresponsible.

What are the forms of digital piracy?

Piracy generally refers to the illegal duplication and distribution of sound recordings.

Forms of digital piracy

1. Pirate recordings are the unauthorized duplication of only the sound of legitimate
recordings, as opposed to all the packaging, i.e., the original art, label, title, sequencing,
combination of tiles etc. This includes mixed tapes and compilation CDs featuring one
or more artists.
2. Counterfeit recordings or unauthorized recordings of the pre recorded sound as well
as the unauthorized duplication of original artwork, label, trademark, and packaging.
3. Bootleg recordings or underground recordings are unauthorized recording of live
concerts or musical broadcast on television or radio.
4. Online piracy is the unauthorized uploading of a copyrighted sound recording and
making it available to the public or downloading a sound recording from the internet site,
even if recording isn't resold.
What are the bad affects of digital piracy?

Bad effects of digital piracy

1. Music pirates are the first to lose because the recording industry and law enforcement
officials are cracking them from around the world. Do the crime and pay the fine or do
the time.
2. Consumers also lose because the shortcut savings enjoyed by pirates drive up the
costs of legitimate product for everyone. A pirated tape or CD is when the quality is
inferior or the product is defective are often not returnable.
3. Honest retailers (who back up the products they sell) lose because they can not
compete with the prices offered by illegal vendors. Less business means fewer jobs,
jobs often filled by young adults.
4. Record companies lose. Eighty-five percent of recordings released do not even
generate enough revenue to cover their cost.
5. The creative artists lose. Musicians, singers, songwriters and producers do not get the
royalties and fees they have earned. Virtually all artists (95%) depend on these fees to
make a living. The artist also depend on their reputations, which are damaged by the
inferior quality of pirated copies sold to the public.

What is counterfeiting?

Counterfeiting is a criminal offense of making an imitation of an article with intent to

defraud others into accepting it as the genuine item. The term counterfeit is used most
frequently to denote imitations of coined money or of the paper currency of a government
or a bank, but it is applied also to other cases of fraudulent imitation, such as spurious
trademarks or works of art.

Who should bear the responsibility for defective fake products - the owner of the brand
name or the counterfeiter? Many people do buy illegal sidewalk CDs and DVDs in Quiapo
and Greenhills. Other consumers want product counterfeiting to continue because it is a
lot cheaper and almost as nice.

Are consumers the victims, too?

Although products counterfeiting is considered a victimless crime because businesses
and not individual buyers suffer, it is costly to both buyers and marketers. Yes, consumers
are victims too. This is because they are duped into buying cheap and fake designer
products only to find out that the fakers are grossly inferior to the real thing.