Legal Issues for the

Entrepreneur
Chapter 6
 Intellectual Property
• It includes patents, trademarks, copyrights, and trade secrets
• It represents important assets to the entrepreneur also

• Lawyer
o Retainer basis
o One-time basis
Legal issues in setting up the
organisation
Patents
• It is a contract between the government and an inventor (OR)
• Grants holder protection from others making, using, or selling
similar idea for a specified amount of time

Utility patents

Patents Design patents

Plant patents
Utility patents

 20 years life, start from the date of filing with the patent office
 Filing fees + additional fees depending on the number of
claims made in the patent application
 Basically grants the owner protection from anyone else
making, using, and/or selling the identified invention and
 Protection of new, useful, and unobvious process like film
developing, photocopiers, chemical compounds
Design patents

 Reflects the appearance of an object

 14 year life
 Filing fees + issuance fees depending on the size of the item
 Same as utility patent – protect the owner from others making,
using, or selling an article having the ornamental appearance
given in the drawings included in the patent
 Much lower than utility patent fees
 Valuable for protecting moulded plastic parts, extrusions, and
product and container configurations
Plant patents

 Are issued under the same provisions as utility patents and

 They are for new varieties of plants
 Represent a limited area of interest so very few are issued

 Other programmes from the Patent Office

The Disclosure Document Programme

The Defensive Publication Programme
• International Patents
 to provide firms some protection in global market
 The Patent Cooperation Treaty (PCT)  to facilitate patent
filings in multiple countries in one office rather than filing in
each separate countries
 This treaty has more than 100 participants
 It is administered by the World Intellectual Property
Organisation (WIPO) in Geneva, Switzerland
 It provides the firms to check if there is any possible
infringement in the country
 Has a 20-month time frame to file for these in country patents
• The Disclosure Document programme
 The inventor files disclosure of the invention, giving
recognition that he or she was the first to develop or invent the
idea
 Then the inventor will patent the idea

• The Defensive Publication Programme

 Gives the inventor the opportunity to protect an idea for which
he or she does not wish to obtain a patent
 It prevents anyone else from patenting this idea, but gives the
public access to the invention
 The disclosure document
• It is first document that the entrepreneur file at the Patent
Office to establish a date of conception of the invention

• This document is important when two entrepreneurs are filing

for patents on similar inventions

• This filing date is also relevant when there is a foreign

company involved

• The one who can show that he or she was the first one to
conceive of the invention will be given the rights to the patent
 The disclosure document
• Before filing the document, the entrepreneur must prepare a
clear and concise description of the invention

• A cover letter and its duplicate are together with the document
to file

• Upon receipt of the document, the patent office will stamp and
return the duplicate of letter to the entrepreneur which shows
the establishing of evidence of conception
 The disclosure document
• The disclosure document is retained for two years and then destroyed unless a patent
application is filed within this time

• There is a fee for this filing

• The disclosure document is not a patent application

•
• The entrepreneur should conduct a patent search before applying for it.
 The Patent application
• The patent application must contain
o A complete history
o A description of the invention as well as claims for its
usefulness

• The application is divided into three sections

o Introductions
• Contains the background and advantages of the invention
• The nature of problems that it overcomes
• It should state clearly how the invention differs from
existing offerings
o Description of invention
• Contains a brief description of the drawings
• Detailed description of the invention that include
engineering specifications, materials, components, and
so on, that are vital to the actual making of the
invention

o Claims
• Most difficult section since the claims are the criteria by
which any infringements will be determined
• It should be describe in broad terms as well as has to be
detailed to know the invention’s uniqueness and
advantages
• Plus,
• The application should contain a declaration or oath that is
signed by the inventor or inventors
• When the application is at the PTO to get the approval, during
that time, the status of the invention becomes patent pending
• This status provides complete confidential protection until the
application is approved
• Once the patent is published and it becomes accessible to the
public for review
• When the patent is granted, it is also an invitation to sue or be
sued if there is any infringement
• Fee for application is vary
 Patent infringement
• If someone else already has a patent does not mean the end of
starting a business

• Many businesses, inventions, or innovations are the results of

improvements on, or modification of, existing products.

• Copying and improving on a product may be perfectly legal

(no patent infringement) and actually good business strategy

• If it is impossible to copy and improve the product to avoid

patent infringement, the entrepreneur may try to license the
product from the patent holder
 Business Method Patents

• The growth of Internet use and software development has

emerged the use of business method patents
Trademarks
• It a distinguishing word, name, or symbol, design or some
combination of such, or it could be a slogan or a particular
sound that identifies the source or sponsorship or certain
goods or services

• A Trademark can last indefinitely, as long as the market

continues to perform its indicated function
Trademarks
• The trademark is given an initial 20-year registration with 20-
year renewable terms
• In the fifth to sixth year, the registration is required to file an
affidavit with the Patent office indicating that the mark is
currently in commercial use.
• If no affidavit is filed, the registration is cancelled
• It is solely on the intent to use the TM in interstate or foreign
commerce
• The filing date then becomes the first date use of the mark.
• The entrepreneur can file after the mark has been already been
in use
Trademarks
• The protection is depending on the characteristic or category
of the mark
1) Coined marks denote no relationship between the mark and
the goods or services and afford the possibility of expansion
to a wide range of products
 Trademarks
2) An arbitrary mark is one that has another meaning in our language (i.e., Apple)
and is applied to a product or service
Trademarks
3) A suggestive mark is used to suggest certain features,
qualities, ingredients, or characteristics of a product of
service
It differs from an arbitrary mark in that it tends to suggest
some describable attribute of the product or services
Trademarks
4) A descriptive mark must have become distinctive over a
significant period of time and gained consumer recognition
before it can be registered. The mark then is considered to have
secondary meaning, i.e., it is descriptive of a particular product or
service
 Benefits of a registered Trademark
• It provides notice to everyone that you have exclusive rights to
the use of the mark throughout the territorial limits of the
country
• It entitles you to sue in court for trademark infringement,
which can result in recovery of profits, damages, and costs
• It establishes incontestable rights regarding the commercial
use of the mark
• It establish the right to deposit registration with customs to
prevent importation of goods with a similar mark
• It entitles you use the notice of registration
• It provides a basis for filling trademark application in foreign
countries
 Registration the
• Four requirements
1) Completion of the written form
2) A drawing of the mark
3) Five specimens showing actual use of the mark
4) The fee

Each trademark must be applied for separately

The entire procedure usually takes about 13 months from the initial filing
Copyrights
• It protects original works of authorship (OR)
• It prevents others from printing, copying, or publishing any
original works of authorship

• It does not protect the idea itself, and thus it allows someone
else to use the idea or concept in a different manner

• Copyrights are desirable for computer software, books, scripts,

articles, poem, songs, sculptures, models, maps, blueprints,
collages, printed material on board gam, data, and music
copyrights

Copyrights protection related to the Internet will continue to

be a concern and a grey area until precedents and regulations
are made clear
copyrights
• Copyrights are registered with the Library of Congress and
will not usually require an attorney
• The term of copyright is the life of the author plus 50 years.
• If the author is an institution, the term of the copyright is 75
years from the publication
• Several forms of protection may be available besides
copyrights.
• E.g. the name of the board game may be protected by
trademark, the game itself protected by a utility patent, the
printed matter or the board protected by a copyright, and the
playing pieces covered by a design patent
Trade Secrets
• The entrepreneur prefers to maintain the idea or process as
confidential and to sell or license it as a trade secret
• It is the protection against others revealing or disclosing
information that could be damaging to business
• Trade secret will have a life as long as the idea or process
remains a secret
• A trade secret is not covered by any federal law but is
recognised under a governing body of common laws in each
state
• Most companies asked the employees involved in working
with idea or process to sign nondisclosure agreement
Trade Secrets
• There are ways to take precaution on trade secrets with your
employees
 Licensing
• It is an arrangement (specified in a contract) between two
parties

• One party (the licensor) has proprietary rights over some

information, process, or technology protected by patent,
trademarks, or copyrights.

• The licensee requires to pay a royalty or some other specified

sum to the holder of the proprietary rights in return for
permission to copy patent, trademark, or copyright
Licensing

• So, it has significant value as a marketing strategy to the

holders of the intellectual property rights to grow their
business in new markets when they lack resources or
experience in those markets

• It is also important for the entrepreneur who wants to do new

venture but needs to copy or incorporate the patent, trademark,
or copyright with their ideas
Licensing
• A patent license agreement specifies how the licensee would
have access to the patent

 The licensor may still manufacture the product but give the
licensee the rights to market it under their label in a non-
competitive market (foreign market)

OR

 The licensee may actually manufacture and market the

patented product under its own label. (This one need to
carefully worded and should involve a lawyer)
Licensing
• 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 from the
franchisor
Licensing
• Licensing copyrights
• It involves rights to use or copy books, software, music,
photographs, and plays, etc.,
• TV shows have also licensed their names for board games or
computer games
• Celebrities will often license the right to use their name,
likeness, or image in a product
• It can compare to the trademark licensing
Licensing
• http://www.licensemag.com/license-global/top-100-licensors
• Page 174 - the questions that an entrepreneur must ask before
going on the licensing agreement

• It is an excellent option for the entrepreneur to increase

revenues, without the risk and costly start-ups investment
• Licensing can also be a way to start a new venture when the
idea may infringe on someone else’s patent, trademark, or
copyright
• It continues to be a powerful marketing tool
 Product safety & liability
• It is the responsibility of a company to meet any legal
specifications regarding a new product covered by the
Consumer Product Safety Act
• Defect products to cause hazard to consumers
• Product liability is complex but there are four categories
1) Negligence
2) Warranty
3) Strict liability
4) Misrepresentation
 Insurance
• Every entrepreneur should have insurance
• But it is important to first determine what kinds of insurance
are needed
• The total insurance cost represents an important financial
planning factor, and the entrepreneur needs to consider
increasing premiums in cost projections.
• Entrepreneurs also have to consider health care coverage for
the employees

Table 6.3
 Contracts
• It is a legally binding agreement between two or more parties
• Contracts with vendors, landlords, and clients
• Entrepreneur should understand the fundamentals issues
related to contracts – four essential items
 All the parties involved should be named and their specific
roles in the transaction specified (buyer, seller, consultant,
client)
 The transaction should be described in detail (exact location of
land, dates, units, place of delivery, payer for transportation)
 Contracts
• Four essential items
 The exact value of the transaction should be specified
(instalment payment with finance charges)
 Obtain signature(s) of the person(s) involved in the deal

table 6.4