Transcript IPPTChap006
Chapter 6 Intellectual Property and Other Legal Issues for the Entrepreneur © 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Learning Objectives • To identify and distinguish intellectual property assets of a new venture including software and Web sites • To understand the nature of patents, the rights they provide, and the filing process • To understand the purpose of a trademark and the procedure for filing 6-2 Learning Objectives • To learn the purpose of a copyright and how to file for one • To identify procedures that can protect a venture’s trade secrets • To understand the value of licensing to either expand a business or start a new venture 6-3 Learning Objectives • To recognize the implications of new legislation that affects the board of directors and internal auditing processes for public companies • To illustrate important issues related to contracts, insurance, and product safety and liability 6-4 Intellectual Property • Patents, trademarks, copyrights, or trade secrets held by the entrepreneur • Important assets to the entrepreneur • Need for lawyer • Solicit legal advice in accordance with the type of venture 6-5 Intellectual Property • A lawyer can: • Work on a retainer basis • Be hired for a one-time fee • Be offered stock in exchange of services 6-6 Patents • Contract between the government and an inventor • Grants protection from others making, using, or selling a similar idea • Issued by the Patent and Trademark Office (PTO) • Utility patent - For duration of 20 years 6-7 Patents • Design patent • For duration of 14 years • Reflects appearance of an object • Plant patent 6-8 Patents • International patents • Patent Cooperation Treaty (PCT) - Facilitates patent filings in multiple countries • Administered by the World Intellectual Property Organization (WIPO) in Geneva 6-9 Patents • The provisional application • Provides evidence of being first to market • Establishes date of conception of invention • Determines rights to the patent based on the concept of first to file • The patent application • Complete history and description of the invention • Lists claims for the product’s usefulness 6-10 Patents • Must constitute of: • Introduction • Background and advantages of the invention • Problems that it overcomes • How it differs from existing offerings • Description of invention • Claims • Criteria by which any infringements will be determined 6-11 Figure 6.1 - Options to Avoid Infringement 6-12 Table 6.1- Checklist for Minimizing Patent Risks 6-13 Trademarks • Distinguishing word, name, or symbol used to identify a product • Can last indefinitely • Can be filed solely on the basis intent to use • Registering the trademark • • • • Completion of the written form A drawing of the mark Five specimens showing actual use of the mark The fee 6-14 Table 6.2 - Benefits of a Registered Trademark 6-15 Copyrights • Prevent others from printing, copying, or publishing any original works of authorship • Increasingly relevant due to growth in use of Internet • Registered with the Library of Congress • Applicable for duration of 70 years 6-16 Trade Secrets And Non-Competition Agreements • Protection against disclosing information that could be damaging to business • Applicable as long as the idea or process remains a secret • Not covered by federal law but recognized under a governing body of common laws 6-17 Trade Secrets And Non-Competition Agreements • To protect competitive information employers should: • Train employees to refer sensitive questions to one person • Provide escorts for all office visitors • Control information presented by employees in public 6-18 Trade Secrets And Non-Competition Agreements • Use simple security procedures • Have nondisclosure agreements • Debrief departing employees on any confidential information • Avoid faxing and e-mailing any sensitive information 6-19 Licensing • Contractual agreement giving rights to others to use intellectual property in return for a royalty or fee • Useful when firms: • Intend to grow their business in new markets but lack resources • Need permission to copy or incorporate the patent, trademark, or copyright with their ideas 6-20 Licensing • Types of licensing • Patent license agreements - Specify how the licensee would have access to the patent • Trademark license agreements - Involve a franchising agreement • Copyright license agreements - Involve rights to use or copy books, software, music, photographs, plays 6-21 Licensing • Factors to be considered • Customers’ recognition of licensed property • Whether licensed property complements existing products or services • Entrepreneur’s experience with the licensed property 6-22 Licensing • Long-term outlook for the licensed property • Kind of protection provided by the agreement • Commitments in terms of payment of royalties and sales quotas • Renewal options 6-23 Product Safety and Liability • Responsibility of a company to meet legal specifications regarding a new product • The Consumer Product Safety Act - Created a commission responsible for: • Prescribing safety standards • Regulating labeling and advertising • Determining fines as well as product recalls 6-24 Insurance • Means of managing risk in the new business • Depending on the type, an insurance: • May be legally mandatory • May be necessary to protect the financial net worth of the venture 6-25 Types of Insurance and Possible Coverage • • • • • Property Casualty Life Workers’ compensation Bonding 6-26 Sarbanes-Oxley Act • Provides a mechanism for greater control over the financial activities of public companies • Under this law: • CEOs vouch for financial statements through internal control mechanisms and reports • Directors must meet certain criteria regarding internal auditing and control 6-27 Sarbanes-Oxley Act • Attempts to influence or impede the internal auditing process are regarded criminal • Private companies are subject to control if they: • Consult with a public company • Influence that public company in any wrongdoing 6-28 Contracts • Legally binding agreement between two parties • Courts insist on a written contract for all transactions over $500 6-29 Table 6.5 - Contract Conditions and Results of a Breach of Contract 6-30