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Moral principles applied to social behavior; may include what is considered to be right or wrong behavior or whether an action is fair or just
A consensus of what constitutes right or wrong behavior in the business world and the application of moral and ethical principles to the marketplace/workplace
3 factors that influence business ethics choices?
1. Individuals’ Standards and Values
2. Managers’ and Coworkers’ Influence
3. Corporate Codes and Compliance Requirements
Why is business ethics important?
Directors, officers, partners owe a fiduciary duty (legal confidence or trust) to the company, shareholders, customers, community, employees, and suppliers to act in a certain manner (create predictability and trust) to sustain viability of the company; a code of ethics establishes preset acceptable behavioral expectations (when duties and expectations conflict, ethical dilemmas are created)
4 ethical issues?
1. Conflict of interest
3, Communications (marketing puffery OK otherwise claims need proof)
4. Business relationships (customers/vendors/hiring)
Ethical leadership: U.S. v. Skilling (2009)
Capturing future earnings in current financials
RULE (fraud openly committed test?): (1) goal? (2) employer/employee aligned? (3) sanctioned from above?
IRAC (ruling): (1) passed (2) passed (3) not sanctioned (Board not liable)
Moral/ethical minimum, but simply obeying the law does not necessarily make the business practice ethical (Outsourcing, Affirmative Action, Salaries, Bonuses)
“Gray” areas in the law mean business leaders must contemplate the ethical implications of a business decision (Advertising, Operations, Employment)
2 approaches to ethical reasoning?
Duty Based Ethics
- derived from religious and philosophical principles
- Religious Ethical Standards (Golden Rule)
- Kantian Ethics (categorical imperative = if everyone acted the same way)
- Principle of Rights (how decision would affect others rights by order of importance)
- seek to ensure a given outcome; it is “right” if the greatest amount of good is created
("good" decision results in greatest good)
Ethical reasoning: Fog Cutter v. SEC (2007)
Treating public company like private one resulted in delisting
RULE: (1) FC innocent? (2) SEC unjustified?
IRAC: (1) FC "dirty deeds" (2) NASD has broad discretion
Monitoring foreign suppliers (child labor, low wages, female exploitation)
Foreign Corrupt Practices Act (FCPA): Prohibits US businesspersons from bribing foreign officials to secure advantageous contracts (payments to minor officials are acceptable “grease the skids”)
6 ethical guidelines?
1. Law (lowest level)
2. Procedures/rules (letter AND spirit)
3. Values (personal, societal, corporate)
6. What would yo' mama say?
Civil wrong resulting injury to a person or property caused by a breach of a legal duty NOT arising from breach of contract
3 tort damages?
1. Special: quantifiable (medical, wages, benefits (now/future), irreplaceable items, damaged property)
2. General: nonmonetary (pain & suffering (physical/emotional), loss of companionship/consortium/reputation/mental & physical capacity, disfigurement)
3. Punitive: punish & deter (particularly egregious conduct) (mainly intentional torts or "gross" negligence of another's life or property)
3 tort classifications?
1. Intentional (resulting in harm even if good intent)
2. Unintentional (negligence)
3. Strict liability (absolute liability)
4 defenses to assault & battery (others)?
1. Consent (complete or partial defense)
2. Self-defense (need "reasonable apprehension" to your FACE; deadly force OK)
3. Defense of others (in "real and apparent" danger, deadly force OK)
4. Defense of property (removing intruders deadly force NOT OK)
Assault & battery?
Assault: the reasonable apprehension of a harmful or offensive contact
Battery: completion (contact) of the assault
"Reasonable suspicion crime is afoot" resulting in confinement/restriction without justification; merchants can detain a suspected shoplifter as long as there is probable cause (threats of future harm have no legs)
Extreme and outrageous conduct or repeated annoyances coupled with threats (some courts require physical symptoms)
Publication of a false statement (oral or written) that injures a person’s good reputation (contempt, ridicule or hatred in the community); individual who re-publishes the statement will be liable
Slander: oral defamation requires special damages (temporary harm must have quantifiable damages to prove in court)
Libel: writing or other permanent form- general damages presumed (deliberate harm)
Exception to proving special damages: "slander per se" (re: disease, business improprieties, imprisonment, sexual misconduct)
3 defenses to defamation?
- 2. Privileged speech
- Absolute: judicial and legislative proceedings / debate
- Qualified: good faith, limited (employee evaluation)
3. Public figures
(fair game, plaintiff must show statement made with “actual malice”)
Intentionally deceiving another to believe in a condition that is different from the condition that already exists (intentional deceit resulting in justifiable/detrimental reliance by innocent party) ("puffery" not legally binding = opinions v. facts, unless one has superior knowledge)
5 elements of fraudulent misrepresentation?
1. Known falsity or reckless disregard for the truth
2. Intent to induce another
3. Justifiable reliance
4. Damages suffered as a result
5. Causal connection between parties
Fraudulent misrepresentation: McClain v. Octagon Plaza (2008)
Misrepresenting leased premises size resulted in operating to increase rental payments
RULE: fraudulent misrepresentation?
IRAC: appellate reversed because McClain had "justifiably relied" on landlords
Malicious prosecution and abuse of process?
Malicious prosecution: malicious lawsuit; loser must prove malice and can countersue for costs & lost profits
Abuse of process: wrongful use of subpoenas, court orders, attachments, etc.; doesn't need to prove malice or loss in prior proceeding
Wrongful interference with a contractual relationship?
3 necessary elements:
1. Valid/enforceable contract
2. 3rd party knowledge of existing contract
3. 3rd party intentionally induces breach (not liable if no knowledge of existing contract)
Defenses to wrongful interference with a contractual relationship?
Interference was justified/permissible
Bona fide competitive behavior is permissible even if it results in breach of contract
Trespass to land?
Entry onto, above, or below the surface of another’s land without permission (exclusive possession right of owner = no harm need be done)
1. Owner must establish trespass (by posting, asking to leave, immediate by illicit activity)
2. Owner must show reasonable duty of care (dog warnings, attractive nuisance risks, reasonable removal of trespassers)
Defense to trespass?
Trespass was warranted (assistance in danger, license to enter (revocable))
Trespass to personal property (chattel)?
Unlawful taking, harming, or interference with another’s right to exclusive possession (Tort version of larceny)
Wrongfully taking or retaining another’s personal property and placing it in service even if granted initial permission or unknowing of stolen goods (Tort version of theft)
Defense to conversion?
Superior right of holder to possess v. owner
Disparagement of property?
"Clouding of title" causing 3rd party to refrain from dealings
1. Slander of quality/trade libel (re product)
2. Slander of title (re ownership)
Occurs when someone suffers injury because of the defendant’s failure to comply with a legal duty (unintentional)
4 elements of negligence?
: "reasonable person standard
(higher standard), business invitees
(common area safety/risks, except obvious ones), mothers
, strangers in peril = NO)
: failure to meet
"reasonable person/profession standard"
- 3. Causation: connection (need BOTH):
- Causation in fact: "but for ..." test (limits set by...)
- Proximate cause: "foreseeability" strong between cause and injury (can break causation connection)
- 4. Damages: Legally recognizable injury required
- Compensatory: Special (quantitative) and General (nonmonetary)
- Punitive: "Gross" negligence ONLY
Foreseeability test: Palsgraf v. Long Island Railroad (1928)
No foreseeability (proximate cause) breaks causal connection
RULE: R/R Negligence?
IRAC: established foreseeability test for proximate cause
4 defenses to negligence?
1. Disprove at least ONE required element of negligence (Duty/Breach/Causation/Damages)
OR use ONE Affirmative defense:
1. Assumption of the Risk: Knowledge of the risk AND voluntary assumption of risk (except in violation of STATUTE)
2. Comparative Negligence (CA): As long as Plaintiff is less than 50% at fault, she can recover a pro-rata share of the verdict.
3. Superseding Intervening Cause: Event must be unforeseeable to break the causal connection
Res Ipsa Loquitur?
Court infers negligence haws occurred (switches burden of proof to defendant to prove they were not negligent)
Negligence per se?
Defendant's violation of a statute causes breach of duty to plaintiff
"Danger Invites Rescue" doctrine?
Someone trying to avoid harm causes harm to another; original wrongdoer is liable to anyone injured (idea is rescuer should not be held liable)
Usually involves "abnormally dangerous" activities and risks that cannot be prevented (dynamite, excavation, dangerous animals)
Absolute liability = does not require fault, intent, or breach of duty
PRODUCT - distinctive mark, motto, device, emblem identified on market (must be sufficiently distinctive)
When one uses a mark that is SAME AS or CONFUSINGLY SIMILAR (dilution: reduces value) to a protected trademark, service/certification/collective mark, trade name, or trade dress (image) WITHOUT LICENSE (results in injunction: damages, lost profits, destruction); META TAG (keywords) protected from infringement also
Can be registered if (1) currently in commerce (2) plans to market within 6 months
3 elements of trademark distinctiveness?
1. Strongest: fanciful/invented words (Xerox)
2. Arbitrary: common words nor ordinarily associated (Dutch Boy)
3. Suggestive: about product without describing (Dairy Queen)
SECONDARY MEANING: descriptive, geographic, personal names receive protection when accompanied by a secondary meaning (university color schemes)
GENERIC TERMS: "bicycle", "computer" receive NO protection
Copied goods, labels, packaging
Penalties: >$2 mil / prison >10 yrs / restitution
PRODUCTS - may be protected if trade name = product name
Domain name levels?
Top level domain (TLD) - right of period
Second level domain (SLD) - left of period
Domain names SAME or CONFUSINGLY SIMILAR to trademark name
Anti-cybersquatting Consumer Protection Act (1999) amended Lanham Act: domain name illegal if (1) identical/confusingly similar (2) if bad faith intent to profit
Penalties: actual and statutory damages ($1,000 - $100,000)
Misspelling domain name to confuse (businesses should register ALL domain names to protect themselves)
Does not require proof that consumers are likely to be confused (for this reason, products do not have to be similar) (Candyland example)
Use of another's trademark avoiding litigation by obtaining a license for certain limited purposes (Perry Ellis shoe example)
U.S. INVENTION - gives first person to invent (usually) exclusive right to make/use/sell for TWENTY YEARS; must apply within ONE YEAR or forfeit right
OTHER COUNTRIES - gives first person to file gets patent rights
What is patentable?
Almost anything except laws of nature, natural phenomenon, and abstract ideas (like algorithms); must be novel/useful/NOT obvious
May occur even though invention not in commerce yet; ALSO even if parts are copied (in a process, however, ALL steps must be copied)
Remedies for patent infringement?
Injunction and damages (royalties and lost profits, legal fees); if willful can TRIPLE damages; patent holders not automatically entitled to permanent injunction (must prove injury and public interest NOT disserved by permanent injunction)
1978: LITERATURE/WORKS OF ART/MOVIES/SONGS/ARCHITECTURE/ORIGINAL COMPILATIONS (selected/coordinated) (NOT ideas) - must be "fixed in a durable medium" protected to life of author plus 70 year (publishers 95 years from publication or 120 from creation date, whichever first); multiple authors protected for 70 years after death of last survivor; even if not in certain category (not copyrighted) MAY STILL BE PROTECTED BY LAW
Penalties: Actual and Statutory (>$150K plus criminal fines/prison)
"FAIR USE" EXCEPTION - OK for criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research
FACTORS: (1) nonprofit (2) nature of work (3) portion used (4) EFFECT UPON MARKET
Software copyright protection?
1980: SOURCE CODE/BINARY LANGUAGE/STRUCTURE/SEQUENCE/PROGRAM ORGANIZATION (excludes "look and feel")
Digital info protection?
1997: No Electronic Theft Act altered "fair use" for piracy (personal use) of electronic book, magazines, movies, music
Penalties: $250K and prison for >5 yrs
Trade secrets protection?
Trade secrets (valuable commercial info) cannot be patented, copyrighted, or trademarked (includes customer lists, plans, R&D, pricing info, marketing techniques, production methods) and employees sign confidentiality agreements (liable under contracts); unlike copyright/trademark protection TRADE SECRETS PROTECTION ETENDS TO BOTH IDEAS AND THEIR EXPRESSION
International protection for intellectual property?
BERNE CONVENTION (1886): copyright recognition (notice NOT needed) (in U.S. ALSO)
TRIPS AGREEMENT (1994): cannot give its own nationals favorable treatment
MADRID PROTOCOL: easier registration process (whether member countries will protect mark still remains)
A wrong against society as proclaimed by statute
4 differences between civil and criminal law?
1. Punished by society
2. Fines and/or imprisonment
3. Unanimous jury verdict
4. Higher burden of proof than civil liability Beyond a reasonable doubt (no doubt of guilt) v. Preponderance of evidence (more than likely guilty)
"Beyond a reasonable doubt" logic?
State (prosecutor) must prove that defendant has committed EVERY essential element of the offense; if jurors not convinced, they MUST find not guilty and it MUST be unanimous (v. civil on 3/4 need to agree)
2 elements of the criminal act?
1. Actus Reus: guilty act
(commission of an act or Omission of an act, if legal duty)
- 2. Mens Rea: wrongful mental state (intent) Varies according to wrongful action
- Criminal negligence (no intent required)
- Criminally reckless
5 categories of criminal acts?
1. Violent crime
2. Property crime
3. Public Order crime
4. White Collar crime
5. Organized crime
3 classifications of crime?
1. Felonies: Serious crimes punishable by death or by imprisonment over one (1) year
2. Misdemeanors: Less serious crimes punishable by fine or by confinement up to one (1) year.
3. Petty Offenses: Least serious criminal offense; traffic ticket
Defenses to criminal liability?
Intoxication: voluntary vs. involuntary
Insanity (McNaghten test, Mental Disease impulse)
Justifiable use of force
Statute of Limitations
2 Constitutional safeguards?
- 4th AMENDMENT:
- Protects the right of the people to secure in their persons, houses, papers, and effects
- Search Warrants: Officer must have probable cause
Search and Seizure in Businesses: Warrant required in most cases
NO warrant required for contaminated food
or highly regulated liquor
- 5th AMENDMENT:
- Prohibits deprivation of life, liberty, or property without due process
Self-Incrimination:“Right to remain silent” or not testify against yourself
Double Jeopardy: Person cannot be retried for the same offense in the same court
Civil action, however, is permitted
Due Process of Law: Opportunity to object
Hearing before a neutral Magistrate
Evidence obtained in violation of constitutional rights (4th, 5th, and 6th Amendments) must be excluded from trial
Evidence derived from illegal evidence is “fruit of the poisonous tree.” (Deters police from misconduct)
Herring v. United States (2009)
Reasonable grounds for believing that a person should be arrested or searched because 4th Amendment prohibits general warrants (officers cannot search beyond warrant except in household case)