How does intellectual property law balance the rights of the creator/innovator with the rights of the public?

BBA 3210, Business Law 1
Course Learning Outcomes for Unit II

Upon completion of this unit, students should be able to:

2. Interpret provisions of the Constitution of the United States related to businesses and property.
2.1 Explain the importance of the evolution of the Commerce Clause in the Constitution of the
United States.
2.2 Discuss the categories of intellectual properties protected by the Constitution of the United

Learning Outcomes
Learning Activity
Unit Lesson
Chapter 5
Article: “Statutory Interpretation – Commerce Clause”
Unit II Case Study
Unit Lesson
Chapter 8
Article: “Recent Developments in Intellectual Property Law[1]”
Unit II Case Study
Required Unit Resources

Chapter 5: Constitutional Law

Chapter 8: Real, Personal, and Intellectual Property

In order to access the following resources, click the links below.

Hawkins, D. (2018, July 11). Statutory interpretation – Commerce Clause. Wisconsin Law Journal.

Nichols, C. (2019). Recent developments in intellectual property law[1]. Tort Trial & Insurance Practice Law
Journal, 54(2), 615–629.
Unit Lesson

The Constitution of the United States

When the Founding Fathers created the Constitution of the United States in 1787, they were not just trying to
create something different; they were trying to create a structure for government and a legal system that
addressed the deficiencies of the governments and legal systems that they knew in England and France. Of
course, they had already set the course for a new government and legal system in the Declaration of
Independence written 13 years before, but the details of government and the legal system of the new United
States still had to be solidified in the new constitution.

Looking back, we might be forgiven for thinking that the tasks that the writers faced must not have been too
difficult since they did create a government and a legal system that has been successful for more than 200
years, but the truth is that the task of creating a new government and legal system was difficult and
The Constitution, Business, and Property

BBA 3210, Business Law 2

controversial work and that, perhaps surprisingly, there was not universal approval of the final document that
became the Constitution of the United States.

The Constitution of the United States is a comprehensive outline that creates a structure of government and a
legal system, but it is an outline that has to be continually interpreted to address issues and situations that
could not have been anticipated by the writers. The Constitution addresses many areas of government and
the legal system, but naturally our focus in this course is on the provisions of the Constitution that affect
business and property.

The Commerce Clause

The most important—or at least the most prominent—provision of the Constitution that affects business is the
Commerce Clause found in Article I, Section 8 of the Constitution, which provides “Congress shall have the
power … To regulate Commerce with foreign Nations, and among the several States, and with the Indian
Tribes” (U.S. Const. art. I, §8).

This clause provides that the Congress of the United States has the authority to regulate commerce between
the states. In other words, Congress, not the individual states, has the authority to enact laws that regulate
business transactions between private businesses in different states. That authority is the basis for a broad
range of federal laws that range from setting standards for the quality of products made in one state and sold
in other states to prohibiting advertising of certain kinds of products, like tobacco products, that move in
interstate commerce.

For many years, the Commerce Clause was applied by the courts as it was written without any major
interpretation. However, coinciding with the recovery after the Great Depression, the courts began to interpret
the Commerce Clause more broadly so that the authority of Congress to regulate business transactions was
extended to business transactions within a single state that had the potential to affect interstate commerce.

An extreme example of the power of Congress to regulate business activities that were not interstate in nature
but that were judged to have an effect on interstate commerce was the case of Wickard v. Filburn. In that
case, a farmer, Filburn, grew wheat on his farm to feed the animals that he raised on that farm. There was a
federal law that limited the amount of wheat that a farmer could grow, and when Filburn was found to have
grown more wheat than the law allowed him to grow, a significant fine was assessed against him. Filburn
objected to the fine, contending that the law limiting the amount of wheat that a farmer could grow should not
apply to him because he did not sell the wheat in interstate commerce and used the wheat only to feed
animals that he raised on his farm. The U.S. Supreme Court ruled that while Filburn’s actions were local in
nature and might not even be considered to be business activities, the law applied to those activities because
the activities had an impact on interstate commerce. If Filburn had only grown what he was allowed to grow,
he would have had to buy the additional wheat that he needed from other growers, and those growers might
have been in other states, so by growing more than he was allowed to grow, Filburn potentially affected the
amount of interstate commerce that might otherwise be expected (Wickard v. Filburn, 1942).

The Dormant Commerce Clause

Despite this expansion of the authority of Congress to regulate interstate commerce, there are legitimate
reasons for states to regulate commercial activity within the state. However, if a state’s regulation of
commerce within the state has a negative impact on interstate commerce, courts must balance the state’s
interests in regulating the commercial activity against the negative impact on interstate commerce; often,
courts find that the state regulation of commerce within the state does not justify the impact on interstate
commerce, and the state regulations are invalid because they conflict with Congress’s authority to regulate
interstate commerce. The invalidation of state regulation of commercial activity within the state because the
regulation conflicts with the Commerce Clause is often called the Dormant Commerce Clause.

An extreme example of the application of the Dormant Commerce Clause doctrine is the case of Gonzales v.
Raich. In that case, though California law allowed individuals to grow marijuana for personal medical use, the
federal Drug Enforcement Administration agents destroyed marijuana plants being grown by Raich because
marijuana was illegal under the federal Controlled Substances Act. Raich sued the United States, contending
that her activities were legal under California law and that the destruction of the marijuana plants she was
growing was illegal (Gonzales v. Raich, 2005). The U.S. Supreme Court, in what some thought was an

BBA 3210, Business Law 3

illogical opinion, said that the federal Controlled Substance Act was a proper exercise of the authority of
Congress under the Commerce Clause. The court said that the California law allowing Raich to grow
marijuana for personal medical use conflicted with the Controlled Substance Act and that the Dormant
Commerce Clause required that the California law, which allowed Raich to grow marijuana for personal
medical use, be ruled as invalid, reasoning that if Raich did not grow marijuana for her own medical use, she
would have had to buy the marijuana potentially in interstate trade (Gonzales v. Raich, 2005). The reason this
train of thought is so illogical is, of course, because buying marijuana in interstate trade would be illegal.

Other Constitutional Provisions Affecting Business

There are other, less controversial provisions of the Constitution that affect business transactions. Article I,
Section 10, Clause 1 of the Constitution provides, “No State shall … pass any … Law impairing the Obligation
of Contracts” (U.S. Const. art. I, §10, Clause 1).

In other words, the government cannot enact laws that change or invalidate private contracts that have
already been made. It is a fairly rare occurrence that the government would have an interest in interfering with
contracts made between private businesses, but it has happened a few times. In most cases under this
Contracts Clause, the change in the terms of the contract are indirect.

An example of a Contracts Clause case is Energy Reserve Group v. Kansas Power and Light. In that case,
Kansas Power and Light had a long-term contract to buy natural gas from the Energy Reserve Group at a
price that was tied to the federally established price for natural gas. During the term of the contract, the
federal apparatus for establishing the price of natural gas was changed so that, though a federal price for
natural gas was still established, states were allowed to set a price for natural gas that was lower than the
federal price. The State of Kansas did establish a price for natural gas that was lower than the federal price,
and when the Energy Reserve Group attempted to charge Kansas Light and Power the federal rate, Kansas
Light and Power refused to pay more than the price set by the State of Kansas (Energy Reserve Group v.
Kansas Power and Light, 1983). The Energy Reserve Group sued claiming that the federal regulations that
allowed Kansas to set a price for natural gas that was less than the federal price and that the Kansas law did
set a price lower than the federal price both violated the Contracts Clause because those laws impaired the
existing contract between the Energy Reserve Group and Kansas Light and Power. The U.S. Supreme Court
decided that, though the laws resulted in Kansas Light and Power being able to pay less for the natural gas
supplied by the Energy Reserve Group than was expected under the contract, that result was justified by the
interest of the State of Kansas in protecting consumers in Kansas from escalating natural gas prices (Energy
Reserve Group v. Kansas Power and Light, 1983). Despite the fact that the law changed the terms of the
contract between private parties, the change was justified by an overriding state interest.

Often, in cases involving interpretation of constitutional provisions as they relate to business, there is a
balancing of private business interests against legitimate state or federal interests that seem to conflict with
those private business interests.

When the Constitution was adopted, some of the Founding Fathers thought that it was incomplete because it
did not contain a statement of the rights of the people that should be protected from government interference.
That deficiency was corrected in 1791 when the first 10 amendments to the Constitution, called the Bill of
Rights, were ratified. Most of the rights that are included in the Bill of Rights apply not only to individuals but
also to organizations, including business organizations, but a few of those rights have special applications to
business. For example, the Fifth Amendment provides that private property shall not be taken for public use
without due compensation paid to the owner of that property. Over the years, there have been questions
about what taking private property for “public use” means and how “due compensation” is determined.
Though the interpretation of those concepts continues to evolve, it is clear that government cannot
involuntarily take privately owned property except to be used for a legitimate public purpose and only if the
private owner is paid for that property.

BBA 3210, Business Law 4

Protection of Intellectual Property

Another constitutional provision that relates to property is Article I, Section 8, Clause 8 of the Constitution,
which authorizes Congress “to promote the progress of science and useful arts, by securing for limited times
to authors and inventors the exclusive right to their respective writings and discoveries” (U.S. Const. art. I, §8,
Clause 8).

This provision is the basis for intellectual property protection in the United States. The concept of intellectual
property is probably broader now than it was in 1789, and it now includes the copyrights and patents that
were probably contemplated by the Founding Fathers but also trademarks and even trade dress and trade
secrets. Each of these categories of intellectual properties are afforded some protection under federal and
state laws, ranging from registration of the copyrights, patents, and trademarks to laws that provide how
intellectual properties can be protected from infringement. Despite the protections provided for intellectual
properties, exceptions have developed that allow the use of certain intellectual property in limited situations
without the permission of the owner of that property. For example, the fair use doctrine allows the limited use
of copyrighted and trademarked material for specific purposes without the consent of the owner of the
copyright or trademark. One example of this is when passages from a copyrighted book are quoted in a
review or criticism of that book. Another common application of the fair use doctrine is the use of limited
amounts of copyrighted material used in teaching a class.


Although the Constitution was written more than 230 years ago, it addresses two areas that are important for
businesses today: commerce and intellectual property. Though the primary responsibility for promoting and
protecting commerce and protecting intellectual property is assigned to the federal government, there are still
opportunities for states to be involved in these areas that are important to businesses.


Energy Reserve Group v. Kansas Power and Light, 459 U.S. 400 (1983).

Gonzales v. Raich, 545 U.S. 1 (2005).

U.S. Const. art. I, §8

U.S. Const. art. I, §8, Clause 8

U.S. Const. art. I, §10, Clause 1

Wickard v. Filburn, 317 U.S. 111 (1942).

BBA 3210, Business Law 5

Learning Activities (Nongraded)

Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.

View the Unit II Glossary to review key terms presented in this

Alternate format for Unit II Glossary


Photogl. (n.d.). Books on library shelves (ID 20785201) [Photograph]. Dreamstime.

(Photogl, n.d.)
Course Learning Outcomes for Unit II
Required Unit Resources
Unit Lesson
The Constitution of the United States
The Commerce Clause
The Dormant Commerce Clause
Other Constitutional Provisions Affecting Business
Protection of Intellectual Property
Learning Activities (Nongraded)

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