Chapter 6 Intellectual Property and other Legal Issues for the Entrepreneur

True/False Questions 1. Entrepreneurs, because of their lack of understanding of intellectual property, ignore important steps that they should have taken to protect these assets. Answer: True Page: 171 Difficulty: Medium 2. A lawyer may work on a retainer basis by which he or she provides office and consulting time, which includes court time and other legal fees related to the action. Answer: False Page: 171 Difficulty: Medium 3. When resources are limited, the entrepreneur can offer a lawyer stock in exchange for legal services. Answer: True Page: 171-172 Difficulty: Easy 4. A patent is a contract between a franchisor and an inventor. Answer: False Page: 172 Difficulty: Hard 5. A design patent has a term of 20-years, beginning on the date of filing with the Patent and Trademark Office (PTO). Answer: False Page: 172 Difficulty: Medium 6. Any invention requiring FDA approval has the term of its patent extended by the amount of time it takes the FDA to review the invention. Answer: True Page: 172 Difficulty: Medium 7. The most commonly issued type of patent is the plant patent. Answer: False Page: 174 Difficulty: Medium 8. Disclosure Document Program gives the inventor the opportunity to protect an idea for which he or she does not wish to obtain a patent. Answer: False Page: 174 Difficulty: Hard

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Chapter 6 Intellectual Property and other Legal Issues for the Entrepreneur
9. The GATT trade pact has encouraged global free trade. Answer: True Page: 174 Difficulty: Easy 10. A disclosure document is used to establish the date of conception of the invention. Answer: True Page: 174 Difficulty: Easy 11. To prevent others from copying his or her ideas, the entrepreneur should not send drawings with the patent application. Answer: False Page: 175 Difficulty: Medium 12. Copying a product and improving it is not patent infringement. Answer: True Page: 175 Difficulty: Medium 13. An example of a business method patent is Amazon.com's single clicking feature used by a buyer to order products. Answer: True Page: 176 Difficulty: Easy 14. A trademark is given a 50-year registration with no renewal. Answer: False Page: 177 Difficulty: Medium 15. To qualify for trademark protection, the mark must have actually been used on goods which were shipped or sold. Answer: False Page: 177 Difficulty: Medium 16. An arbitrary mark is a trademark that has another meaning in our language and is applied to a product or service. Answer: True Page: 178 Difficulty: Medium 17. A copyright protects original works of authorship. Answer: True Page: 179 Difficulty: Easy

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Chapter 6 Intellectual Property and other Legal Issues for the Entrepreneur
18. Copyright law does not apply to music, especially when downloaded from the Internet. Answer: False Page: 179 Difficulty: Medium 19. A trade secret is protected by federal law. Answer: False Page: 181 Difficulty: Medium 20. While dealing with leaking of trade secrets, legal action can be taken only after the secret has been revealed. Answer: True Page: 183 Difficulty: Medium 21. Licensing requires the licensee to pay a royalty to the licensor. Answer: True Page: 183 Difficulty: Easy 22. Licensing a trademark generally involves a franchising agreement. Answer: True Page: 183 Difficulty: Easy 23. Licensing agreements generate revenue while minimizing risk and start-up investment costs. Answer: True Page: 185 Difficulty: Medium 24. Licensing can be a way to start a new venture when the idea may infringe on someone else’s patent, trademark, or copyright. Answer: True Page: 185 Difficulty: Medium 25. Under the 1990 revision of the Consumer Product Safety Act, fines were lowered and looser guidelines for reporting product defects initiated. Answer: False Page: 185 Difficulty: Medium 26. Claims for product liability under strict liability claim, the product was defective before its receipt. Answer: True Page: 186 Difficulty: Hard

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Chapter 6 Intellectual Property and other Legal Issues for the Entrepreneur
27. Life insurance for employees is a required benefit under federal law. Answer: False Page: 186 Difficulty: Medium 28. Skyrocketing medical costs have resulted in lowering workers' compensation insurance premiums. Answer: False Page: 186 Difficulty: Medium 29. Health insurance premiums are less expensive if there is a large group of insured participants. Answer: True Page: 187 Difficulty: Easy 30. Under the Sarbanes-Oxley Act CEOs are required to vouch for the firm's financial statements. Answer: True Page: 188 Difficulty: Medium 31. An oral agreement is enforceable indefinitely. Answer: False Page:189 Difficulty: Medium 32. Contracts for the sale of real estate must be in writing to be valid. Answer: True Page: 190 Difficulty: Medium Multiple Choice Questions 33. A a patent attorney hired as a specialist to help the entrepreneur obtain a patent would most likely be hire on a: A) retainer fee B) success fee C) out-of-pocket reimbursement D) one-time free Answer: D Page: 171 Difficulty: Medium

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Chapter 6 Intellectual Property and other Legal Issues for the Entrepreneur
34. A _________ is a contract between the government and an inventor. A) franchise B) patent C) trademark D) trade secret Answer: B Page: 172 Difficulty: Easy 35. Which of the following is a contract that grants the owner protection, based on the appearance of an object? A) Utility patent B) Design patent C) Plant patent D) Disclosure document Answer: B Page: 172 Difficulty: Medium 36. The _____ patent is granted for a 14-year term. A) utility B) design C) plant D) procedure Answer: B Page: 172 Difficulty: Hard 37. The _______ program of the Patent and Trademark Office gives the inventor the option of protecting an idea for which he or she does not want to obtain a patent, while allowing the public access to the invention. A) disclosure document program B) defensive publication program C) trademark D) copyright Answer: B Page: 174 Difficulty: Hard 38. The _______ was established to facilitate patent filings in multiple countries. A) General Agreement on Trades and Tariffs B) Patent and Trademark Office C) Patent Cooperation Treaty D) Sarbanes-Oxley Act Answer: C Page: 174 Difficulty: Medium

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Chapter 6 Intellectual Property and other Legal Issues for the Entrepreneur
39. The ________ is filed to establish a date of conception of an invention and includes a description of the item. A) disclosure document B) defensive document C) trademark D) copyright Answer: A Page: 174 Difficulty: Medium 40. The section of the patent application which provides the criteria by which any infringement will be determined is the: A) background and advantages section. B) description of the invention. C) claims section. D) executive summary. Answer: C Page: 175 Difficulty: Hard 41. The section of the patent application that includes engineering specifications, materials and components is the: A) background and advantage section. B) description of invention. C) claims section. D) executive summary. Answer: B Page: 175 Difficulty: Medium 42. Priceline.com's service where a buyer can submit a price bid for a particular service is an example of a: A) utility patent. B) design patent. C) business method patent. D) license. Answer: C Page: 176 Difficulty: Medium

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43. The initial registration for a trademark lasts: A) 20 years. B) 17 years. C) 14 years. D) 10 years. Answer: D Page: 177 Difficulty: Medium 44. Which of the following statements is (are) not true? A) A trademark may be a word, slogan, symbol, design or particular sound. B) Unlike a patent, trademark does not last indefinitely. C) It is possible to file for a trademark if you intend to use this mark in the future. D) There are four categories of trademarks. Answer: B Page: 177-178 Difficulty: Easy 45. To apply for a trademark: A) the mark must actually have been used on goods. B) intent to use the mark is required. C) the mark must be copyrighted. D) the mark must have been used on goods that are already traded. Answer: B Page: 178 Difficulty: Medium 46. The category of trademarks that denotes no relationship between the mark and the goods or services is called: A) a coined trademark. B) an arbitrary mark. C) a suggestive mark. D) a descriptive mark. Answer: A Page: 178 Difficulty: Hard 47. The name "Halo Shampoo" is an example of which kind of trademark? A) A coined trademark B) An arbitrary mark C) A descriptive mark D) A suggestive mark Answer: D Page: 178 Difficulty: Hard

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Chapter 6 Intellectual Property and other Legal Issues for the Entrepreneur
48. Which government office is responsible for the federal registration of trademarks? A) U.S. Trademark Services B) Local Chambers of Commerce C) Patent and Trademark Office D) Internal Revenue Service Answer: C Page: 178 Difficulty: Easy 49. Authors or publishers of software are protected under: A) copyrights. B) trademarks. C) utility patents. D) trade secrets. Answer: A Page: 179 Difficulty: Medium 50. Copyrights are registered with: A) the U.S. Justice Department. B) the Internet Commission. C) the Library of Congress. D) the GATT . Answer: C Page: 179 Difficulty: Medium 51. Trade secrets are protected: A) by the General Agreement on Tariffs and Trade. B) by federal law. C) by state law. D) by the Library of Congress. Answer: C Page: 181 Difficulty: Hard 52. Licensing can be used by the entrepreneur to: A) protect the Board of Directors from liability. B) insulate management from liability. C) protect confidentiality of a trade secret. D) copy a competitor's patent. Answer: D Page: 183 Difficulty: Hard

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53. The _______ created the commission that prescribes safety standards for products. A) Consumer Product Safety Act B) Patent Cooperation Treaty C) Sarbanes-Oxley Act D) U.S. Labor Department Answer: A Page: 185 Difficulty: Easy 54. The best protection against product liability is: A) product warranty insurance. B) to overstate the benefits of a product. C) to produce safe products. D) the utility patent. Answer: C Page: 186 Difficulty: Medium 55. Entrepreneurs should purchase insurance A) before problems occur. B) to prevent problems. C) after problems occur. D) only if they engage in international trade. Answer: A Page: 186 Difficulty: Easy 56. Claims regarding product liability usually fall under all of the following categories except: A) negligence. B) misrepresentation. C) warranty. D) violation. Answer: D Page: 186 Difficulty: Medium 57. The courts consider oral agreements under $500 binding if: A) the agreement is for less than one year. B) the parties have previously done business together. C) the transaction is for services rendered. D) the new venture is incorporated. Answer: A Page: 189 Difficulty: Hard

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