Transcript ENTREPRENEURSHIP A PROCESS PERSPECTIVE Robert A. Baron Scott A. Shane A. Rebecca Reuber Slides Prepared by: Sandra Malach, University of Calgary Copyright © 2008 by Nelson, a.

ENTREPRENEURSHIP
A PROCESS PERSPECTIVE
Robert A. Baron
Scott A. Shane
A. Rebecca Reuber
Slides Prepared by:
Sandra Malach, University of Calgary
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
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Intellectual Property:
Protecting Your Ideas
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
LEARNING OBJECTIVES
1.
2.
3.
Explain why product development in new firms is
difficult, but why new firms tend to be better than
established firms at product development in most
industries.
Explain why established firms find it easy to imitate
entrepreneurs’ intellectual property quickly and at a
low cost.
Define a patent, explain what conditions are
necessary for an inventor to patent an invention,
and outline the pros and cons of patenting.
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LEARNING OBJECTIVES
4.
5.
6.
Define an industrial design, explain what conditions
are necessary for an invention to be an industrial
design.
Define a trade secret, explain what conditions are
necessary for an invention to be a trade secret, and
outline the pros and cons of trade secrets.
Define a trademark, describe why trademarks are
useful to entrepreneurs, and explain how an
entrepreneur can obtain a trademark.
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LEARNING OBJECTIVES
7.
8.
9.
Define a copyright, and describe how it protects an
entrepreneur’s intellectual property.
Describe a first-mover advantage and explain the
conditions under which it provides a useful form of
intellectual property protection.
Describe complementary assets, and explain when
it is better for an entrepreneur to obtain control
over complementary assets than to be innovative.
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“Every man with an idea has at least
two or three followers.”
--Brooks Atkinson
Once Around the Sun, 1951
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INTELLECTUAL PROPERTY
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The core ideas about a
new product or service
The only major
advantage (most of the
time) new ventures have
over established firms
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THE PRODUCT DEVELOPMENT
PROCESS
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A difficult and uncertain process
Solution must be produced and
marketed for less than the customer is
willing to pay
May result in something different than
people set out to produce
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ESTABLISHED FIRM
ADVANTAGES
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Better at manufacturing
Better access to capital
Tacit knowledge from experience
Economies of scale
Better at marketing
Established reputations
Established customers
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NEW FIRM ADVANTAGES
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Superior product development
Develop new products cheaper and
easier
No bureaucratic structures and rules in
place
Better incentives for employees
Greater flexibility
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WHY NEW FIRMS LOSE AT
PRODUCT DEVELOPMENT
The typical unpatented process
innovation can be copied at less than
50% of the cost of developing the
original innovation more than 40% of
the time.
(Richard Levin)
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WHY IS IMITATION SO EASY?
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Competitors have a variety of methods
for imitating intellectual property:
Reverse engineering
Hiring employees or suppliers from the
entrepreneur
Assigning staff to copy the new product
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PATENTS
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To obtain a patent, an invention must:
Be novel
Not be obvious to a person in the field
Be useful
Not publicly disclosed for more than 1
year prior to the date of filing.
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WHAT CAN YOU PATENT?
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YES
Process
Method
Machine
Chemical formula
Design
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NO
Business method
Something that
doesn’t work
Most software
Life Form
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THE PATENT PROCESS
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File an Initial Application with CIPO
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Determine prior art (novelty)
Determine claims carefully
Submit a full application
Application becomes public 18 months after
initial filing date.
Patent valid for 20 years from application
date
www.cipo.gc.ca
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ADVANTAGES OF PATENTS
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Helps to raise capital by demonstrating
competitive advantage
Raises the cost of imitation
Provides a monopoly right
Prevents a second party from using the
invention as a trade secret
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DISADVANTAGES OF PATENTS
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Cost (min. approx $15K)
Requires disclosure of the invention
Provides only a 20 year monopoly
Can be circumvented
Difficult and costly to defend
Less effective for most types of technology
Can be irrelevant if technology is fast moving
Requires patents for each individual country
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INDUSTRIAL DESIGN
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Features of shape, configuration,
pattern or ornamental design
Purely decorative in nature
Term 10 years
Application must be submitted within 12
months of disclosure.
Mark with (D), name of owner
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TRADE SECRETS
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A piece of knowledge that confers an advantage
on a firm and is protected by non-disclosure
agreements and processes.
Protect a competitive advantage without
disclosing how an underlying technology works
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DISADVANTAGES OF
TRADE SECRETS
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Must be kept hidden to remain valuable
Doesn’t provide a monopoly right
To enforce and claim damages in court,
must show a loss of competitive
advantage or breach of contract
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TRADEMARKS
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A word, phrase, symbol, design that
distinguishes the goods and services of
one company from those of another
Obtained by using the mark or filing an
application
Term 15 years, renewable
Application to CIPO.
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COPYRIGHTS
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A form of intellectual property protection
provided to the authors of original works
of authorship
Protect the right to reproduce, further
derive, copy, or display the protected item
Advantages to filing but not required.
Term: life of the author + 50 years.
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FIRST MOVER ADVANTAGE:
The Advantage of Speed and Timing
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The first to offer a product
in a particular market
Lead-time advantage
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Locations
Suppliers
Learning curve advantage
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FIRST MOVER ADVANTAGE
Conditions for First Mover advantage:
 They control scarce or intangible assets
 More customers result in increased value
 Switching costs
 People are content with the status quo
 Reputations are important
 The learning curve for production is
proprietary
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WILL A NEW COMPANY PROFIT?
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Three factors determine whether a new
company will profit from introducing a
new product:
The ability to secure a strong patent
The absence of a dominant design
The presence of complementary assets
in marketing and distribution
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WHICH IS MOST IMPORTANT?
Complementary Assets Are
More Important…
Being Innovative Is More
Important…
When patents are not very
effective
When patents are very effective
When a dominant design exists
Before a dominant design exists
When learning curves are
shallow or not proprietary
When learning curves are steep
or proprietary
When knowledge is codified
When knowledge is tacit
When products are observable
When products are not
observable
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