LESSON 9

THE LEGAL ENVIRONMENT

Objectives
1. Explain how to protect your intellectual property.
2. Discuss the laws affecting the start-up of a business.
3. Explain the laws that affect employees.
4. Identify the laws that regulate trade.
5. Discuss the tax laws that apply to a new venture.

The Legal Issues Facing start-ups

A new product or service must be protected through patents, copyrights, trademarks,
or trade secrets. Other aspects of a business are protected by law as well.

Protecting Ideas: Intellectual Property Law

Intellectual property law protects the inventions and new ideas of business.
• Intellectual Property Law the group of laws that regulates the ownership and use of
creative works.

Intellectual property laws protect the following:

1. Trade secrets
2. Patents
3. Copyrights
4. Trademarks

Trade Secrets

Trade secrets form the basis of all intellectual property. A trade secret may consist of a formula,
an idea, a process, a pattern, or compilation of information that gives the owner a competitive
advantage.

Patents

An inventor may acquire a patent, which will protect his or her invention for a period of 20 years.
• Patent a document that grants to an inventor the right to exclude others from making, using,
or selling an invention or other intellectual property during the term of the patent
After a patent expires, it is placed in public domain.
 • Public domain intellectual property whose protection has expired; it belongs to the
community at large and people can use any aspect of the property free of charge

Rules for obtaining a patent are:

• The invention must not contain prior art.

• The invention must fit into one of five classes: machine, process, articles of
manufacture, composition, or new use for one of the other four.
• The invention must be “unobvious.”
• The invention must have utility.
After you apply for a patent, the Patent and Trademark Office (PTO) does a patent search.

During this time, you may market your product, but you must put the term patent
pending and the patent number on the product or packaging.

• Patent pending the status of an invention between the time a patent

application has been filed and when it is issued or rejected.

Copyrights
If you plan to publish a book, place a notice of copyright in a prominent location on the work.
• Copyright a legal device that protects original works of authors, including
books, movies, musical compositions, and computer software, for the life of the
author plus 70 years
Trademarks
A trademark is followed by the registered trademark symbol ™.
• Trademark a word, symbol, design, or color that a business uses to identify
itself or something it sells.
Like a trademark, a service mark can be protected by registering it with the Patent and
Trademark office.
• Service mark a word, symbol, sign, or color that describes a service business

Laws that Affect Start-Up of a Business

Entrepreneurs should be aware of laws involving:
• Permits and licenses.
• Contracts
• Location
Permits and Licenses.
Before you can officially open your business, you must get a permit. In certain
professions, such as nursing, you may also need to get a license.

• Permit a legal document giving official permission to run a business.

• License a certificate that shows that the holder of the document has the
necessary education and training to perform a job.
Contracts

As an entrepreneur, you will need to sign a contract with vendors, landlords, and clients.

• Contract a binding legal agreement between two or more persons or parties.

To be valid and legally inferable, a contract must contain the following components:
• Agreement
• Consideration
• Capacity
• Legality

The money you pay a vendor for a product for your business is valuable consideration.

• Consideration what is exchanged for the promise to do something or refrain from

doing something.

By law, minors do not have capacity to sign a contract.

• Capacity the legal ability to enter into a binding agreement

Location

Only certain types of real property are available to business owners because they are
subject to zoning laws and building codes.

Because a lease is a long-term contract, an entrepreneur should consult an attorney

before signing.

Handling Government Regulations

Laws and regulations are designed to protect employees, other businesses, and
customers from unfair, unsafe, or unhealthy business practices.

Laws That Affect Employees

1. Discrimination in hiring
Employers are subject to regulations of the Equal Employment Opportunity Commission
(EEOC).
• Equal Opportunity Employment Commission (EEOC) the government agency charged
with protecting the rights of employees; it ensures that employees do not discriminate
against employees because of age, race, color, natural origin, religion, gender, or physical
challenge.
2. Child labor laws
The child labor laws protect young workers in many ways.
• Employment cannot interfere with their education, health, or well-being.
• Persons under 18 cannot work in jobs the government considers hazardous.
• Persons under 16 are only allowed to work certain hours and times.
• Persons under 14 can only work in certain jobs.
3. Wrongful termination
• Wrongful termination the right of an employee to sue his or her employer for
damages if he or she is terminated for an unacceptable reason.

Laws That Regulate Trade

• Laws that regulate trade include:
• Price discrimination laws
Price discrimination the charging of different prices for the same product or service in
different markets or to different customers
• Consumer protection laws
o Manufacturers of consumer products must become familiar with consumer
protection laws in order to avoid recalls and lawsuits.

• The uniform commercial code (ucc)

o Uniform Commercial Code (UCC) a group of laws that regulates commercial
business transactions
o Warranty of Merchantability a guarantee on the quality of goods or services
purchased that is not written down or explicitly spoken.
• Truth in lending laws
• Truth in advertising laws
o Bait-and-switch advertising an illegal method of selling that involves
advertising a product at a very low price in order to attract customers who are
then persuaded to switch to a more expensive product

Tax Laws
All business owners are responsible for certain taxes, including:
• Sales Taxes,
• Payroll Taxes,
• Federal Unemployment Taxes, And
• Business Income Taxes.
Activity 9
(e-Library work)
Note: Philippines setting
1) Sexual harassment
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2) Family medical leave act
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3) Equal pay act
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4) Fair labor standards act
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5) Occupational safety and health act
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