Intellectual Property and

Other Legal Issues for the

Entrepreneur
 Intellectual Property
 Includes:
 Patents.
 Trademarks.
 Copyrights.
 Trade secrets.

 Represents important assets to the entrepreneur.

 Should be understood even before engaging the
services of an attorney.
 Selecting a Lawyer
 Lawyer may work on a:
 Retainer basis.
 One-time fee.

 A good working relationship with a lawyer:

 Eases some of the risk in starting a new business.
 Gives the entrepreneur necessary confidence.

 Entrepreneur can offer lawyer stock in exchange for

the services.
 Types of Patents
 Patent: grants holder protection from others making,
using, or selling similar idea; issued by the PTO.

 Utility patent: grants owner protection from anyone else

making, using, and/or selling the identified invention.
 Design patent: provide inventor with a negative right
excluding others from making, using, or selling an article
having the ornamental appearance given in the drawings
included in the patent.
 Plant patent: given for new varieties of plants, represent
a limited area of interest.
 International Patents
 The Patent Cooperation Treaty (PCT) was established
to provide firms protection in global markets.
 Has over 100 participants.
 Facilitates patent filings in multiple countries in one
office.
 Administered by the World Intellectual Property
Organization (WIPO) in Geneva, Switzerland.
 Provides a preliminary search that assesses whether
filing firm will face infringements in any country.

 Significant differences may exists in patent laws in

each of these countries.
 The Disclosure Document
 Statement to U.S. Patent and Trademark Office by
inventor disclosing intent to patent idea.
 Establish a date of conception of the invention.
 Important when two entrepreneurs file patents on similar
inventions.
 Relevant when foreign companies are involved.

 To file a disclosure document:

 Prepare a clear and concise description of the invention.
 Include photographs.
 Include a cover letter and a duplicate with the
description.
 The Patent Application (1 of 2)
 Introduction
 Background.
 Advantages of the invention and the nature of problems
that it overcomes.
 States how the invention differs from existing offerings.

 Description of invention
 Description of the drawings that accompany it.
 Detailed description of the invention.
 The Patent Application (2 of 2)
 Claims
 Serve to specify what the entrepreneur is trying to
patent.
 Essential parts of the invention should be described in
broad terms
 Claims must not be too general either.

 Application should contain a declaration or oath signed

by the inventor or inventors.
 Patent Infringement
 Many businesses, inventions, or innovations are results
of improvements on, or modifications of, existing
products.
 Copying and improving on a product:
 May be perfectly legal
 A good business strategy.

 Products can be licensed from the patent holder.

 Advisable to hire a patent attorney to ensure no
possibility of patent infringement.
 Business Method Patents
 Growth of Internet use and software development has
given rise to use of business method patents.
 E.g. Amazon.com.

 Firms that hold these patents use them to assault

competitors.
 Subsequently provide a steady stream of income from
royalties or licensing fees.
 Trademarks
 A distinguishing word, name, or symbol used to
identify a product.
 Can last indefinitely.
 Can be filed solely on intent to use the trademark in
interstate or foreign commerce.
 Can also be filed with intent to use in the future.
 Categories:
 Coined marks.
 Arbitrary marks.
 Suggestive marks.
 Descriptive marks.
 Registering the Trademark (1 of 2)
 Federal registration of trademarks – PTO.
 Filing must meet four requirements:
 Completion of the written form.
 A drawing of the mark.
 Five specimens showing actual use of the mark.
 The fee.

 Initial determination of suitability takes 3 months.

 Objections must be raise within six months, or
application is considered abandoned.
 Right to appeal in case of refusal.
 Registering the Trademark (2 of 2)
 Once accepted, trademark is published in the
Trademark Official Gazette to allow any party:
 30 days to oppose.
 Request an extension to oppose.
 Registration issued if no opposition is filed.
 Procedure takes about 13 months from initial filing.
 Copyrights
 Right given to prevent others from printing, copying, or
publishing any original works of authorship
 Issues surrounding access to material on the Internet
have led to major legal battles for the entertainment
industry.
 Example: Napster.

 Copyrights are registered with the Library of Congress

 Usually do not require an attorney.
 Term of the copyright is the life of the author plus 70
years.
 Trade Secrets
 Protection against others revealing or disclosing
information that could be damaging to business.
 Have a life as long as the idea or process remains a
secret.
 Not covered by any federal law but is recognized under a
governing body of common laws in each state.

 Entrepreneur needs to take proper precautions.

 Legal action can be taken only after the secret has
been revealed.
 Licensing (1 of 2)
 Contractual agreement giving rights to others to use
intellectual property in return for a royalty or fee. Type
of licensing:
 Patent license agreement: specifies how the licensee
would have access to the patent.
 Trademark: involves a franchising agreement.
 Copyrights.

 Licensing has become a revenue boom for many

Fortune 500 companies.
 Licensing (2 of 2)
 Question to be considered by an entrepreneur:
 Will customers recognize licensed property?
 How well does the licensed property complement my
products or services?
 How much experience do I have with the licensed
property?
 What is the long-term outlook for the licensed property?
 What kind of protection does the licensing agreement
provide?
 What commitment do I have in terms of payment of
royalties, sales quotas, and so on?
 Are renewal options possible and under what terms?
 Product Safety and Liability (1 of 2)
 Responsibility of a company to meet any legal
specifications regarding a new product covered by the
Consumer Product Safety Act.
 First passed in 1972.
 Created a five-member commission with:
 Power to prescribe safety standards.
 Responsibility and power to identify substantial hazards and bar
products it considers unsafe.
 Act was amended and signed into law in 1990.
 Establishes stricter guidelines for reporting product
defects and any injury or death resulting from such
defects.
 Product Safety and Liability (2 of 2)
 Claims regarding product liability usually fall under one
of the following categories:
 Negligence.
 Warranty.
 Strict liability.
 Misrepresentation.

 Best protection against product liability is to:

 Produce safe products.
 Warn consumers of any potential hazards.
 Insurance
 Provides a means of managing risk in the new
business.

 Entrepreneurs usually have limited resources in the

beginning.
 Some insurances are required by law and cannot be
avoided.
 Other insurances are not required but may be necessary
to protect the financial net worth of the venture.
Types of Insurance and Possible Coverage

 <<Insert Table 6.4>>

 Contracts (1 of 2)
 A legally binding agreement between two parties.

 Business deals are concluded with a handshake, but in

case of disagreements, entrepreneurs:
 May find that there is no deal.
 May be liable for something never intended.
 Rule is to not to rely on a handshake if deal cannot be
completed within one year.

 Courts insist on a written contract for all transactions

over $500.
 Contracts (2 of 2)
 Four essential items in an agreement to provide the
best legal protection:
 All parties involved should be named and specific roles in
the transaction specified.
 Transaction should be described in detail.
 Exact value of the transaction should be specified.
 Signature(s) of the person(s) involved in the deal should
be obtained.