Intellectual Property and Other Legal Issues for the Entrepreneur

Reported by: Ms. Laarni P. Lacandazo

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The Patent Application (1 of 2)

` Introduction
` Background. ` Advantages of the invention and the nature of problems that it overcomes. ` States how the invention differs from existing offerings.

` Description of invention
` Description of the drawings that accompany it. ` Detailed description of the invention.

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The Patent Application (2 of 2)

` Claims
` Serve to specify what the entrepreneur is trying to patent. ` Essential parts of the invention should be described in broad terms
` Claims must not be too general either.

` Application should contain a declaration or oath signed by the inventor or inventors.

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Patent Infringement
` Many businesses, inventions, or innovations are results of improvements on, or modifications of, existing products. ` Copying and improving on a product:
` May be perfectly legal ` A good business strategy.

` Products can be licensed from the patent holder. ` Advisable to hire a patent attorney to ensure no possibility of patent infringement.
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Checklist for Minimizing Patent Risks

y Seek a patent attorney who has expertise in your product line. y The entrepreneur should consider a design patent to protect the product design or product look. y Before making an external disclosure of an invention at a conference or to the media, or before setting up a beta site, the entrepreneur should seek legal counsel since this external disclosure may negate a subsequent patent application. y Evaluate competitor patents to gain insight into what they may be developing. y If you think your product infringes on the patent of another firm, seek legal counsel. y Verify that all employment contracts with individuals who may contribute new products have clauses assigning those inventions or new products to the venture. y Be sure to properly mark all products granted a patent. Not having products marked could result in loss or damages in a patent suit. y Consider licensing your patents. This can enhance the investment in a patent by creating new market opportunities and can increase long-term revenue.

Table 6.2

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Business Method Patents

` Growth of Internet use and software development has given rise to use of business method patents.
` E.g. Amazon.com; Priceline.com

` Firms that hold these patents use them to assault competitors.

` Subsequently provide a steady stream of income from royalties or licensing fees.

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Trademarks
` A distinguishing word, name, or symbol used to identify a product.
` Can last indefinitely. ` Can be filed solely on intent to use the trademark in interstate or foreign commerce. ` Can also be filed with intent to use in the future.

` Categories:
` ` ` ` Coined marks. Arbitrary marks. Suggestive marks. Descriptive marks.
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Trademark Symbols:

` TM (for an unregistered trade mark, that is, a mark used to promote or brand goods) ` SM (for an unregistered service mark, that is, a mark used to promote or brand services) ` (for a registered trademark)

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Registering the Trademark (1 of 2)

` Federal registration of trademarks PTO. ` Filing must meet four requirements:
` ` ` ` Completion of the written form. A drawing of the mark. Five specimens showing actual use of the mark. The fee.

` Initial determination of suitability takes 3 months.

` Objections must be raise within six months, or application is considered abandoned. ` Right to appeal in case of refusal.
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Registering the Trademark (2 of 2)

` Once accepted, trademark is published in the Trademark Official Gazette to allow any party:
` ` ` ` 30 days to oppose. Request an extension to oppose. Registration issued if no opposition is filed. Procedure takes about 13 months from initial filing.

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Benefits of a Registered Trademark

y Seek a patent attorney who has expertise in your product line. y It provides notice to everyone that you have exclusive rights to the use of the mark throughout the territorial limits of the United States. y It entitles you to sue in federal court for trademark infringement, which can result in recovery of profits, damages, and costs. y It establishes incontestable rights regarding the commercial use of the mark. y It establishes the right to deposit registration with customs to prevent importation of goods with a similar mark. y It entitles you to use the notice of registration. y It provides a basis for filing trademark application in foreign countries.

Table 6.2

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Copyrights
` Right given to prevent others from printing, copying, or publishing any original works of authorship
` Issues surrounding access to material on the Internet have led to major legal battles for the entertainment industry. ` Example: Napster.

` Copyrights are registered with the Library of Congress

` Usually do not require an attorney. ` Term of the copyright is the life of the author plus 70 years.
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Trade Secrets
` Protection against others revealing or disclosing information that could be damaging to business.
` Have a life as long as the idea or process remains a secret. ` Not covered by any federal law but is recognized under a governing body of common laws in each state.

` Entrepreneur needs to take proper precautions. ` Legal action can be taken only after the secret has been revealed.

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Licensing (1 of 2)
` Contractual agreement giving rights to others to use intellectual property in return for a royalty or fee. Type of licensing:
` Patent license agreement: specifies how the licensee would have access to the patent. ` Trademark: involves a franchising agreement. ` Copyrights.

` Licensing has become a revenue boom for many Fortune 500 companies.

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Licensing (2 of 2)
` Question to be considered by an entrepreneur:
` Will customers recognize licensed property? ` How well does the licensed property complement my products or services? ` How much experience do I have with the licensed property? ` What is the long-term outlook for the licensed property? ` What kind of protection does the licensing agreement provide? ` What commitment do I have in terms of payment of royalties, sales quotas, and so on? ` Are renewal options possible and under what terms?
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Product Safety and Liability (1 of 2)

` Responsibility of a company to meet any legal specifications regarding a new product covered by the Consumer Product Safety Act.
` First passed in 1972. ` Created a five-member commission with:
` Power to prescribe safety standards. ` Responsibility and power to identify substantial hazards and bar products it considers unsafe.

` Act was amended and signed into law in 1990.

` Establishes stricter guidelines for reporting product defects and any injury or death resulting from such defects.
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Product Safety and Liability (2 of 2)

` Claims regarding product liability usually fall under one of the following categories:
` ` ` ` Negligence. Warranty. Strict liability. Misrepresentation.

` Best protection against product liability is to:

` Produce safe products. ` Warn consumers of any potential hazards.

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Insurance
` Provides a means of managing risk in the new business. ` Entrepreneurs usually have limited resources in the beginning.
` Some insurances are required by law and cannot be avoided. ` Other insurances are not required but may be necessary to protect the financial net worth of the venture.

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Types of Insurance and Possible Coverage

` <<Insert Table 6.4>>

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Sarbanes-Oxley Act (1 of 3)
` Congress passed the Act in 2002 by Sen Paul Serbanes & Rep. Michael Oxley.
` Has provided a mechanism for greater control over the financial activities of public companies. ` Has created some difficulties for start-ups and smaller companies.

` Under this law:

` CEOs need to vouch for financial statements through a series of internal control mechanisms and reports. ` Directors must meet background, length of service, and responsibilities requirements regarding internal auditing and control.
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Sarbanes-Oxley Act (2 of 3)
` Attempt to influence the auditor or impede the internal auditing process is considered a criminal act.
` Law covers bank fraud.

` Benefits of SOX:
` Investors' confidence is increased as SOX ensures reliable financial reporting ` SOX has had a significant impact on corporate governance, as companies are no longer able to manipulate inventories or stocks of products or sales as there is a real time reporting system in place. ` SOX nurtures an ethical culture as it forces top management be transparent and employees to be responsible for their acts and also protects whistle blowers.

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Sarbanes-Oxley Act (3 of 3)
` Though private companies are not included, they are subject to control if:
` They consult with a public company. ` Influence that public company in any wrongdoing established by the Sarbanes-Oxley Act.

` Entrepreneurs can set up a board of advisors instead of an extended board of directors.

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Contracts (1 of 2)
` A legally binding agreement between two parties. ` Business deals are concluded with a handshake, but in case of disagreements, entrepreneurs:
` May find that there is no deal. ` May be liable for something never intended.

` Rule is to not to rely on a handshake if deal cannot be completed within one year. ` Courts insist on a written contract for all transactions over $500.
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Contracts (2 of 2)
` Four essential items in an agreement to provide the best legal protection:
` All parties involved should be named and specific roles in the transaction specified. ` Transaction should be described in detail. ` Exact value of the transaction should be specified. ` Signature(s) of the person(s) involved in the deal should be obtained.

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