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Case Scenario: Bug, Inc. Essay

The following is a case scenario provided by the University of Phoenix titled Bug, Inc., prepared by Susan Brown Cooper.

Scenario: BUG, Inc., a company based in Any State, U.S.A., designs, manufactures, and sells electronic recording devices. These devices are used by law enforcement agencies (police, FBI, etc.) to intercept and record sounds and voices. The equipment taps into telephone wires, cell phone transmissions, and picks up sounds and voices through the walls of a house or in open-air locations through the use of a remote microphone. Part of the equipment is driven by software written by BUG employees. BUG has exclusive contracts with most state and federal law enforcement agencies throughout the United States. BUG is thinking about expanding its sales to international markets. Currently, half of its manufacturing plants are in foreign countries and half are in the U.S. The company’s logo is a ladybug wearing a set of headphones.

As a team, we will be answering a series of questions based on this scenario and our reading of the text, Business Law, the Ethical, Global, and E-Commerce Environment. (Mallor, Barnes, Bowers, & Langvardt, 2002)

Case Scenario: Bug, Inc.

1. Define the different type(s) of legal protections BUG should have for its intellectual property. Explain why these protections are necessary.

Patent – Protects Bug, Inc from having other parties copy the design of their electronic devices for 20 years from the date they file a patent application with the United States Patent and Trademark Office.

Copyright – Protects the object codes and source codes of the computer programs created by Bug, Inc., and their employees, that are used in conjunction with their surveillance equipment.

Trademark – Protects Bug, Inc’s ladybug logo from being copied by competitors. Trademarks, like patents, must be registered with the United
\ States Patent and Trademark Office. Registration lasts for 10 years rather than 20, but can be renewed for additional 10-year periods.

2. Earlier this year, WIRETAP, Inc., a relatively new company trying to compete with BUG, sent an employee to BUG to get a job. BUG, not realizing Steve was an employee of WIRETAP, hired him to work in its research and development department located in Any State, U.S.A. While working at BUG, Steve forwarded any BUG e-mail he received to WIRETAP. This included e-mail between BUG officers (both domestic and abroad) that Steve intercepted using his hacking ability. At the end of each week, Steve met with his boss at WIRETAP and gave him all the information he obtained about the BUG product lines. Discuss in detail what type(s), if any, of civil liability Steve and/or WIRETAP may face if caught.

Steve and WIRETAP may face several types of civil liability to include patent infringement, misappropriation of a trade secret, and interference with prospective advantage. WIRETAP would be liable for patent infringement if they used any information or sold any product that contained elements of a patented invention, which they might have received information on from Steve. They would also be liable if a recently designed or changed product had similar elements to any product that BUG had patented, even if the product was different in design. Since Steve assisted WIRETAP in obtaining information, he could also be liable for contributory infringement, if the information he obtained was used to infringe on the patentee’s rights.

Depending on the information received and used by WIRETAP, they might or might not be liable for patent infringement. Though they might not be held liable for patent infringement, they have are at risk of being liable for misappropriation of a trade secret. A trade secret is defined as, “any secret formula, pattern, process, program, device, method, technique, or compilation of information used in the owner’s business, if it gives its owner an advantage over competitors who do not know it or use it”( ). If the information that WIRETAP received was considered a secret and of potential value, WIRETAP will most likely be held responsible for misappropriation liability.

A misappropriation liability occurs when a secret is acquired by improper means or an individual breached a duty of confidentiality regarding the secret. In Steve’s case, both were committed. First, WIRETAP committed fraud by sending one of their employees to be hired by BUS in order to gain inside access to the company. Secondly, Steve intercepted certain emails by using his hacking ability and broke his confidentiality agreement by giving WIRETAP information that was probably confidential.

The last civil liability WIRETAP might face is interference with prospective advantage. Since WIRETAP intentionally interfered by stealing certain information, BUS could argue that they lost an advantage in their industry because of information that was placed into the wrong hands. In order for WIRETAP to be liable, BUS would have to prove that they had an advantage and that the advantage was lost by the illegal actions of one of their competitors.

3.& Walter, a security guard for BUG, learns that Steve really works for WIRETAP. Walter takes Steve to a small soundproof room where he keeps him for six hours. During this time, Walter continues to ask Steve what he is doing at BUG and what information he has given WIRETAP. Walter tells Steve that he will hurt him if he does not tell him everything. Steve finally tells Walter what he wants to know. Walter then lets Steve go home. Has Walter committed any torts? If so, explain. Discuss any liability BUG may have for Walter’s actions.

Walter’s actions led to him committing three different torts to include assault, intentional infliction of emotional distress, and false imprisonment. False imprisonment was first committed when Walters kept Steve in a room for six hours in attempt to gain the truth from him. From the scenario described above, one would assume that Steve did not agree to stay confined in a room for an hour but instead, was confined in a room without his consent. Assault occurred when the security guard decided to threaten to hurt Steve unless he told him everything he knew.

Though the guard never acted on his threats, Steve feared for his safety, therefore telling Walter everything he wanted to know. By placing Steve in a confined area for several hours and threatening to hurt him, Walters’s outrageous conduct would have placed emotionally distress on Steve. Since Walters is an employee for BUG, BUG would be liable to pay for any damages that occurred because of the emotional distress that was placed on Steve. The only reason BUG might not be held responsible for the security guard’s actions is if they can prove the he did not act on behalf of the company, therefore making him Walters liable to pay for all damages.

4. BUG has come to you for advice regarding interstate and international e-commerce. BUG wants to sell its products through the Internet. BUG is concerned about privacy, security, infringement issues, email contract validity, and various other things. BUG is also concerned because a company that buys famous and/or company name domain names seems to own the rights to BUG.com. The company is willing to sell the domain name for a high price. Advise BUG on all e-commerce issues that could possibly affect them. Be detailed in your response.

It is in the company’s best interest to sell its products online. Although there are many precautions one must take, it is still critical in being competitive in today’s marketplace. BUG must be aware of the various issues engaged in the e-commerce environment. Fraud is a high rise for one and both the company and customers are skeptical regarding making online purchases. BUG should be sure to provide security and privacy, speed in processing transactions, and fulfilling orders. BUG should have a spam free, popup free ecommerce storefront; secure all transactions with the latest SSL security standards; display disclaimer during the checkout process; and keep constant watch on the changes in Internet security provided periodically test.

The company should also find an e-commerce solution that allows real time processing and try using proven shipping carriers that reach all locations within the designated time-frame. In addition, BUG may want to try to create its own domain, which will allow more security as well as distance from competitors. By using the same domain as one that had been used, will have only allow more unnecessary visitors at that site which will only add greater risk for fraud activities and security to be tampered with. BUG is to follow all legal laws in all countries affiliated, state economic barriers, and government provisions are to be acknowledged.

5. Shady Town, U.S.A. has been plagued with a recent crime wave. The BUG plant in Shady Town has experienced vandalized vehicles in its parking lot and some second shift employees have been robbed as they walked to their cars at night. BUG receives shipments of parts and other items from vendors at its receiving/shipping dock located at the rear of each plant. The parking lot and dock areas are well lit; however, some lights are now out. While waiting for the dock manager to return from lunch, a vendor was attacked and robbed of his wallet and electronic chips he was delivering. Discuss what, if any, tort liability BUG may have to the vendor and to the BUG employees that were attacked. What defenses may be available to BUG? Explain your answers.

6. The attorneys for BUG have completed their investigation of WIRETAP and its employee, Steve. If they want to bring a successful action against WIRETAP for civil RICO, what do they need to prove? What type(s) of damages could BUG receive?

In order to bring a successful suit against WIRETAP, BUG would first have to prove that Steve was acting on the behalf of WIRETAP. Another huge factor, which would play a significant role on the damages BUG could receive, would be the information that Steve gave WIRETAP, and how that information was actually used. If BUG wanted to receive damages for patent infringement, they would need to prove that WIRETAP acquired and used information that was owned by BUG and protected by a patent. The basic damages that could be recovered patent infringement are damages equivalent to the infringement and compensation for court costs and interest. Damages equivalent to the infringement would include at least the determined amount of money the infringer profited for the use made of the invention but damages could include up to three times of those actually suffered.

To receive damages for the misappropriation of a trade secret, BUG would have to prove that WIRETAP possessed a trade secret, and it was acquired by improper means, or Steve breached a duty of confidentiality regarding the secret. The damages that BUG could be entitled to include damages related to the actual loss caused by the misappropriation and any profit received by the defendant from the misappropriation. Depending on the state, BUG could also be awarded punitive damages if the misappropriation is considered malicious.

In addition to the damages described above, BUG might be entitled to damages for the interference with a prospective advantage. To receive such damages, they would have to prove that future advantages were lost because of the interference of WIRETAP and the improper use of information received by the company. The damages would then be based on the any future advantage that might have been lost.

7. Sally DoGood, a police officer in Shady Town, was sitting in a police van monitoring wiretaps placed in the Crime Boss hideout. The equipment she was using, which was an older model purchased from BUG, short-circuited and injured Sally. An insulator that could have prevented the possibility of shorts was not included in the original design because of its effect on production costs. The newer models, not yet purchased by the Shady Town Police, have the insulator installed. Sally may have a successful case against BUG for what tort(s)? Explain your answer(s).

Sally may have a successful case against BUG for negligence and for causation of personal injury. Negligence can be used because there was intent on the part of BUG to not put in the part that could have prevented the short-circuit and the injury. If the original design had included this part and not been left out due to production costs, it could have saved BUG money in the lawsuit and saved Sally the pain that was caused to her. There also seems to be negligence on the part of the police department. They know the newer models are better and safer, yet they have not purchased them yet.

Causation of personal injury exists because she was injured because of the fact that the company, BUG, did not include the piece necessary for the equipment to work properly. Had the insulator been in all of the designs, this injury could have been avoided. It was intentionally left out, and therefore caused personal injury.


Business Law: The Ethical, Global, and E-commerce Environment (12th ed.).

Jane P. Mallor, A. James Barnes, L. Thomas Bowers, & Arlen W. Langvardt

McGraw Hill, 2004 Burr Ridge, IL

University of Phoenix Material: Case Scenario: Bug, Inc., Susan Brown Parker. Retrieved from http://www.phoenix.edu


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