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Chapter6ClassLecture_D2L.pptx
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Section 2 From Idea to Opportunity Chapter 6 Protecting the Idea and Other Legal Issues for the Entrepreneur

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LEARNING OBJECTIVES Intellectual property assets Patents Trademark Copyright Trade secrets Licensing New legislation that affects board of directors and internal auditing processes for public companies. Contracts, insurance, and product safety and liability.

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Intellectual Property Intellectual property All business is regulated by law. Be aware of regulations affecting new ventures. Different stages of company growth require different legal advice. Evaluate needs carefully before hiring a lawyer.

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Choosing a Lawyer The entrepreneur does not have the experience to handle the possible risks associated with difficult laws and regulations. The lawyer may work on a retainer or for a one-time fee. Legal advice is necessary to ensure appropriate decisions are made at each step of establishing a new venture.

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Patents A patent is a contract between the government and an inventor. The patent gives the owners a negative right. Types of patents include: Utility patents Design patents Plant patents Patents are issued by the Patent and Trademark Office (PTO). This is a first-to-file system that rewards firms that file quickly.

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International Patents Concerns over international imitations and knock-offs The USPTO established the Office of International Patent Cooperation Joint efforts between the USPTO and the European Patent Office The Global Dossier allows a patent application

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Patent Application Process First, file a provisional patent application The patent application is divided into sections. The Introduction Section Description of Invention Section The Claims Section Applications should contain a declaration signed by the inventor. When application is sent, invention becomes “patent pending.”

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Patent Infringement The entrepreneur cannot infringe on someone else’s patent. Yet, many inventions are improvements on existing products. Copying and improving a product may be legal and a good strategy. If copying is impossible, licensing may be an option. Use the Internet and USPTO website to check on existing patents. If in doubt, hire a patent attorney.

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Business Method Patents With the Internet has emerged business method patents. Amazon owns such a patent on its single click buying feature. Priceline claims a patent on a service where a buyer can submit a price bid for a particular service. Many firms use these patents against competitors. The PTO reviews these patents through the Patent Trial and Appeal Board. Not all startups have a patentable product but a unique marketing plan may provide competitive advantage.

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Trademarks A trademark may be a word, symbol, or design combination that identifies the source of certain goods. Filing of a trademark request to the PTO has four requirements. Completion of a written application form. A drawing of the mark. Five specimens showing actual use of the mark. The appropriate fee. Unopposed marks are registered, the process takes 13 months.

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Copyrights A copyright protects original works of authorship. Copyright law is relevant due to the Internet and file sharing. Copyrights are registered with the Library of Congress and the process does not require an attorney.

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Trade Secrets and Noncompetition Agreements An entrepreneur may prefer to maintain an idea or process as confidential and to sell or license it as a trade secret . Noncompete agreements Common laws in each state cover trade secrets. Employees signing a confidential information agreement The entrepreneur may restrict confidential information. Today’s tendency is to share more information with employees. Proper protections help avoid serious future problems.

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To Maintain Secrecy Funnel sensitive questions through one person. Provide escorts for all visitors. Avoid discussing business in public places. Keep travel plans secret. Control information presented to employees at conferences or in journals. Use locked file cabinets, passwords, and shredders. Have employees sign non-disclosure agreements. Debrief departing employees on confidential information. Avoid faxing sensitive information. Mark documents “confidential” when needed.

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Preparing a Noncompetition Agreement Protection against leaking of trade secrets is difficult to enforce. Legal action Consider the following points when preparing a noncompetition agreement. Determine if the employee can harm the company if they left. Hire a competent labor law attorney Provide incentives for signing a noncompete agreement at hiring. Specify what is included in the noncompete information. Consider other options

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Licensing Information or technology protected by a patent, copyright, or trademark may be licensed to another party for a royalty fee. Licensing has significant value as a marketing strategy. A patent license agreement Licensing a trademark Copyrights are also popular licensed property. Celebrities license Licensing has benefits. Can increase revenues Could be a way to start a new venture

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Product Safety and Liability The Consumer Product Safety Act created a commission with the power to prescribe safety standards for products. The Act was passed in 1972, and amended in 1990 and 2008. Large fines and recalls are typical for products deemed unsafe. McDonald’s had to recall Happy Meal toys. IKEA had to recall children’s dressers. Entrepreneurs must be aware of the treats of recalls, especially with high-risk products such as food and toys.

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Insurance The entrepreneur should purchase insurance in the event that problems do occur. Most firms consider coverage in specific areas as a way of managing risk in the business. Some insurance is require by law and cannot be avoided. Consider all the changes to the Affordable Care Act of 2010 before deciding on an insurance plan or program. Advice and information on insurance is available through the Small Business Administration.

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Sarbanes-Oxley Act Congress passed the Sarbanes-Oxley Act in 2002, amended 2010. Congress exempted small businesses from section 404. The law has many provisions but an overview includes: CEOs are required to vouch for financial statements. Directors must meet responsibilities of internal auditing and control. Any attempt to influence the auditor may be seen as a criminal act. The Act may discourage qualified persons from sitting on important boards. The entrepreneur may wish to set up a board of advisors rather than an extended board of directors.

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Contracts A contract is a legally enforceable agreement between two parties as long as certain conditions are met. Some business deals are informal, concluded with a handshake. If a deal cannot be completed in one year, do not rely on a handshake. The courts insist a written contract exist for transactions over $500. Any deal involving real estate must be in writing to be valid. Before signing a contract, do the following: Understand the terms and conditions of the contract. Cross out anything you do not agree to. Do not sign if there are blank spaces, cross them out. Make a copy for your files after signing.

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LEARNING OBJECTIVES To identify and distinguish intellectual property assets of a new venture including software and websites. 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. 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. To recognize the implications of new legislation that affects board of directors and internal auditing processes for public companies. To illustrate important issues related to contracts, insurance, and product safety and liability.

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Slide 1 Amy Papabathini, Edward 62 2018-08-24T14:57:00Z 2020-06-20T21:21:46Z

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