Legal Issues

Entrepreneurs
Intellectual Property
 Intellectual property refers to creations of the mind:
inventions, literary and artistic works, and symbols,
names, images, and designs used in commerce.
 Intellectual property is divided into two categories:
 Industrial property, which includes inventions
(patents), trademarks, industrial designs, and
geographic indications of source; and
 Copyright, which includes literary and artistic works
such as novels, poems and plays, films, musical
works, artistic works such as drawings, paintings,
photographs and sculptures, and architectural
designs. Rights related to copyright include those of
performing artists in their performances, producers of
phonograms in their recordings, and those of
broadcasters in their radio and television programs.
 Patent, is a legal document
granted by the government
giving an inventor the exclusive
right to make, use, and sell an
invention for a specified number
of years. Patents are also
available for significant
improvements on previously
invented items.
 Basically it gives the owners a
negative right coz it prevents
anyone else from making, using
or selling the defined invention.
Types of Patent

 Utility Patent:
 It has a term of 20 years, beginning on
the date of filing with Patent and
Trademark Office (PTO).
 It basically grants the owner protection
from anyone else making, using, and/or
selling the identified invention and
generally reflects protection of new,
useful processes such as photocopiers,
chemicals compounds or mixture of
ingredients.
Types of Patent

 Design Patent:
 Covering new, original,
ornamental and unobvious
designs for articles of
manufacture, a design patent
reflects the appearance of an
object.
 These patent are granted for a 14
year term.
Types of Patent

 Plant Patterns:
 These are issued under the same
provisions as utility patents and
are for new varieties of plants.
Trademarks

 A trademark may be a word,

symbol, design or some
combination of such, or it could
be a slogan or even a particular
sound that identifies the source
or sponsorship of certain goods
or services.
Trademarks

 The trademark is given an initial

20-year registration with 20-year
renewable terms.
 In the fifth to sixth year the
registrant is required to file an
affidavit with PTO indicating the
mark is currently in commercial
use. If no affidavit is filed, the
registration is canceled.
Copyright
 Copyright is a legal term describing rights
given to creators for their literary and
artistic works.
 The kinds of works covered by copyright
include: literary works such as novels,
poems, plays, reference works,
newspapers and computer programs;
databases; films, musical compositions,
and choreography; artistic works such as
paintings, drawings, photographs and
sculpture; architecture; and
advertisements, maps and technical
drawings.
Trade Secrets
 nondisclosure agreement -- also
called an NDA or a confidentiality
agreement -- is a contract in which
the parties promise to protect the
confidentiality of secret information
that is disclosed during employment
or another type of business
transaction.
 The use of nondisclosure
agreements is widespread in the
high-tech field, particularly for
Internet and computer companies.
Example:

 Sabeer Bhatia, founder of

Hotmail, collected over 400
NDAs from employees, friends
and roommates. He believes
that his secrecy efforts gave him
a crucial six-month lead on the
competition. He eventually sold
Hotmail to Microsoft for a
reported $400 million in stock.
Licensing

 Defined as an agreement
between two parties, where one
party has proprietary rights over
some information, process or
technology protected by a
patent, trademark or copyright.
Licensing

 This arrangement specified in a

contract requires the licensee to
pay a royalty or some other
specified sum to the holder of
the proprietary rights (licensor)
in return permission to copy the
patent, trademark or copyright.
Licensing
 Licensing has significant value as
marketing strategy to holders of
patents, trademarks or copyrights to
grow their business in new markets
when they lack resources or
experience in those markets.
 It is also important marketing
strategy for entrepreneurs who wish
to start a new venture but need
permission to copy or incorporate the
patent, trademark or copyright with
their ideas.
 A patent license agreement specifies how
the licensee would have access to the
patent. For example, the licensor may still
manufacture the product but give the
licensee the rights to market it under their
label in a non-competitive market (i.e.,
foreign market). In other instances, the
licensee may actually manufacture and
market the patented product under its own
label. This agreement must be carefully
worded and should involve a lawyer, to
ensure the protection of all parties.
 Licensing a trademark generally involves a
franchising agreement. The entrepreneur
operates a business using the trademark
and agrees to pay a fixed sum for use of
the trademark, pay a royalty based on
sales volume, buy supplies fro the
franchisor (examples would be Shell,
Dunkin’ Donuts, Pepsi Cola or Coca Cola
bottlers, or Midas Muffler shops), or some
combination of these. Franchising is
discussed as an option for the
entrepreneur as a way to start a new
business or as a means of financing
growth.
 Licensing is also popular around
special sporting events, such as
the Olympics, marathons, and
tournaments. Licenses to sell T-
shirts, clothing, and other
accessories require written
permission in the form of a
license agreement before sales
are allowed.
 Licensing is an excellent option for the
entrepreneur to increase revenues, without the
risk and costly start-up investment.
 To be able to license requires the entrepreneur
to have something to license, which is why it is
so important to seek protection for any
product, information, name, and so on, with a
patent, trademark, or copyright.
 On the other hand, licensing can also be a way
to start a new venture when the idea may
infringe on someone else’s patent, trademark,
or copyright.
 In this instance, the entrepreneur has nothing
to lose by trying to seek a license agreement
from the holder of the property.
Contracts
 The entrepreneur, in starting a new
venture, will be involved in a number of
negotiations and contracts with vendors,
landlords, and clients. A contract is a
legally enforceable agreement between two
or more parties as long as certain
conditions are met. It is very important for
the entrepreneur to understand the
fundamental issues related to contracts
while also recognizing the need for a
lawyer in many of these negotiations.