Protecting Your Business

Section

16.1

Legal Issues Section

16.2

Insurance

Legal Issues

OBJECTIVES     Explain the value to entrepreneurs of intellectual property law Distinguish the types of work covered by each form of intellectual property protection Describe the conditions needed for valid business contracts Explain legal remedies for contract and intellectual property law violations

Section 16.1: Legal Issues 2

Benefits of Intellectual Property Law

    Entrepreneurs need protection for their creations.

The founding fathers understood that creators are more highly motivated if they are guaranteed control over their work and can profit from it and thus they embedded this principle in the U.S. Constitution.

Under Constitutional Law, creators were given an exclusive right to their work, but for limited times.

The doctrine of fair use —allowing other people restricted use of protected works —balanced the rights of both the individual and the public.

Section 16.1: Legal Issues 3

Protecting Your Works

Intellectual property law covers almost any kind of creation. Depending on the nature of the idea, you might take out a copyright, patent, trademark, service mark, or even protect a trade secret.

     A

copyright

is the exclusive right to perform, display, copy, or distribute an artistic work.

Patents

cover industrial devices and processes that are implemented by applying ideas.

A

trademark

is a word, phrase, or symbol that a manufacturer uses to identify the company’s products.

A

service mark

is a word, phrase, or symbol a service provider uses to identify its services.

A

trade secret

is any information that a business keeps confidential to gain advantage over competitors.

Section 16.1: Legal Issues 4

Business Contracts

Contracts play a significant role in business ownership. Understanding how contracts work is essential to succeeding as an entrepreneur.

For a contract to be valid, or legally enforceable, there must be: 

Agreement between the Parties

. The parties must agree on the conditions, or the events or circumstances that must occur for the contract to be binding.

 

Competence

. In the legal sense, competent means being capable of understanding the terms of a contract and the consequences of signing it.

Mutual Exchange

. This is termed the consideration, the benefit that each party provides for the other.

Section 16.1: Legal Issues 5

    

Seeking Remedy

Entering into a business contract gives you the right to take action against parties who violate the agreement. Violating a copyright or patent is called

infringement

.

Failure to carry out the conditions of a contract is referred to as

breach of contract

.

The law allows different types of remedies:  In cases of infringement, the common remedy is

injunctive relief

, an order for the violator to stop the illegal activity.

 In a breach of contract, the violator must agree to carry out the agreed-upon terms.

In either situation, the guilty party may be forced to pay

damages

, a payment to reimburse the injured party for loss.

Section 16.1: Legal Issues 6

Insurance

OBJECTIVES     Relate insurance to risk management Describe different business insurance needs and options Distinguish the qualities of a good insurance agent and good policies Create a plan for reducing business risk

7 Section 16.2: Insurance

Understanding Insurance

Don’t think you can’t afford insurance. You can’t afford

not

have insurance.

to    Managing risk, or the possibility of loss, is an aspect of starting a business.

 

Speculative risk

or loss.

is risk that holds the possibility of either gain

Pure risk

is the chance of loss with no chance of gain.

Another option for managing pure risk,

risk transfer

, is a means shifting risk to another party. For business owners, that means purchasing business insurance.

A

policy

is a written contract between the insurer and the policyholder.

Section 16.2: Insurance 8

  

Types of Business Insurance

Property insurance

protects a business’s possessions in the event of fire, theft, or damage from the weather.

 Insuring property for its actual worth is called

cash value.

 The cost of replacing property at current prices is called its

replacement cost

.

Liability insurance

provides protection when a business’s action, or lack of action, injures another party.



General Liability

covers expenses related to injuries sustained on the business premises.

  A

product liability

policy protects a business from losses caused by a product it produced or developed.

Professional Liability

covers harm done by a business’s actions, or failure to act.

Workers’ compensation

insurance covers losses to employees due to job-related injury or illness.

Section 16.2: Insurance 9

Buying Insurance

Selecting an insurance package is an integral part of a business’s start-up plan.

    Choosing an insurance agent is like hiring an important employee. You want someone who is familiar with your type of business.

Ask advice from other businesspeople in your field.

 

Exclusive agents

work for a single insurance company.

An

independent agent

represents several insurers and can offer a wider range of policies.

The best insurance package is the one that most closely fits your needs.

A

rider

is an amendment to a policy that changes the benefits or conditions of coverage.

Section 16.2: Insurance 10

Reducing Business Risk

     

Risk reduction

involves limiting the chances that a policy-covered event will occur.

Securing physical property involves keeping buildings, supplies, and merchandise safe.

Businesses must safeguard sensitive information from falling into the wrong hands.

Providing a safe workplace is an employer’s legal and ethical responsibility.

Business owners can reduce risk by promoting employee wellness.

An

ergonomics assessment

reveals whether the current work environment helps maintain physical and emotional health .

Section 16.2: Insurance 11