Protecting The Idea and

Other Legal Issues for the

Entrepreneur
Steve Lipscomb
Has emerged as one of the most
aggressive entrepreneurs trying to
compete in media market
In 2003, World Poker Tour was
broadcast on Cable television
Competitors evolved, making
strategy of protecting his investment
more challenging
Steve Lipscomb
 He grew up in Nashville Tennessee
 Came from a long-live of Baptist Ministers
 First entrepreneurial effort, after becoming an
attorney was to launch an attorney referral venture
 His career made some dramatic changes, because
of the discrimination experienced by his mother
after she had chosen to enter the Baptist Church
Seminary
 His anger over this experience led him to make a
documentary film so that the world would be more
aware of discrimination issues
He then sold his attorney referral business,
taught himself filmaking and proceeded to
make “Battle of the Minds” which won
acclaimed numerous awards
The success resulted to in a friendship with
producer Norman Lear and a film project to
provide audience with an inside look at the
World series of Poker
He felt that ESPN’s televising the World
Series of Poker was poorly presented
He has a strong feeling that not only could
poker be made to be more interesting but it
would be possible to create a major league of
poker that would allow for entrepreneurial
expansion into merchandise, foreign licensing,
internet competition, and other business
opportunities
He established a league of poker players who
could enter tournaments as they pleased for
prize money raised from sponsors
His business model was to establish a league
of poker players similar to PGA Tour
Anyone with $10,000 could enter one of the
World poker Tour events with a chance to win
$1M or more
His strategy was to produce a show before
getting TV to buy it
LAKES ENTERTAINMENT, a developer of a
casino, and an investment of $3.5M, World
Poker Tour and World Poker Tour Enterprises
were born.
He subsequently have to give up 70% control
of his business, but able to retain 16.5% for
himself
He tried to persuade many popular casinos to
support these poker tournaments
His format included two unique concepts to
make televising of poker ore interesting in TV
1. Small camera under the table
2. He added graphics presented on the
screen icons of each player’s cards
ESPN has duplicated Lipscomb camera and
graphics in its presentation to another league
He argued that the camera and graphics are
proprietary with applications for patents pending
Without any resolution the intellectual property
issue, he embarked on an aggressive to build the
image of WPTE
More tournaments, casinos, new products higher
stakes, international growth, syndication, and
recent contract with FOX Sports Network are all
intended to increase visibility and profitability of
the company
Now in its season, the company
continues to struggle financially with
losses of $9.7M in 2007 compares $7.8M
in 2006
Sales in 2007 compared to previous year
was down from $29M
Lipscomb is confident that the business
outlook is favourable now that the new
network is in place and other
international deals are complete
INTELLECTUAL PROPERTY
Includes patents, trademarks, copyrights, trade
secrets
Represents important assets to the
entrepreneur that should be understood even
before engaging the services of the attorney

NEED FOR A LAWYER

All business are regulated by law
Entrepreneurs need to be aware of any
regulations that may affect his/her new venture
Entrepreneurs need legal advice
Lawyers developed a special expertise, the
entrepreneur carefully evaluate his/her needs
before hiring one

HOW TO SELECT A LAWYER

Lawyer- specialist in law but in specific areas
of law
Entrepreneurs does not have usually the
expertise or know-how to handle possible risks
associated with many difficult laws and
regulation
A competent attorney is in better position you
understand all possible circumstances and
outcomes related to any legal action
Today, lawyers are more upfront about their
fees
The lawyer may work on a retainer
basis(stated amount per month or year) by
which he or she provides office or consulting
time
This does not include court time or other legal
fees related to the action
Choosing a lawyer is likely hiring and
employee
Lawyer whom you work should be
someone you can relate personally
A good working relationship with a
lawyer will ease some of the risk in
starting a new business and will give
the entrepreneur necessary confidence
When resources are limited, the
entrepreneur may consider the lawyer
stock in exchange for his/her service
LEGAL ISSUES ON SETTING UP
ORGANIZATION
PATENT- contract between government
and the inventor
-in exchange for the disclosure of the
invention, the government grants the
inventor exclusively regarding the
invention for a specified time
- At the end of the time, the government
publishes the invention and it becomes
part of the public domain
However, there is the assumption that the
disclosure will stimulate ideas and perhaps
even the development of an even better
product that could replace the original
Basically, Patent gives the owners a
negative right because it prevents anyone
else from making, using, selling the defined
inventions
Moreover, even if an inventor has been
granted a patent, the process of producing
or making the invention he/she may find that
it infringes on the patent rights of others
The inventor should recognize the distinction
between Utility Patent and Design Patents
and some of the differences in the
international patents.
UTILITY PATENT
has a term of 20 years
grants the owner from anyone else making,
using, and or selling the identified invention
and generally reflects production of new
useful and unobvious process such as
photocopier, composition of water such as
chemical compounds or mixture of
ingredients, and articles of manufacture
Design Patents
 Covering new, original, ornamental, and
unobvious designs for articles of
manufacture.
It reflects the appearance of an object.
These patents are granted for a 14-year
term and, like the utility patent, this provide
the inventor with a negative right excluding
others from making, using, or selling an
article having the ornamental appearance
given in the drawings included in the
patent.
Design Patents
Issuance fees are applicable depending on
the size of the item.
These fees are much lower than for a
utility patent.
Traditionally, design patents were thought
to be useless because it was so easy to
design around the patent. However, there
is renewed interest in these patents.
Design Patents
Examples: Reebook and Nike
Which become more interested in
obtaining design patents as a means
of protecting their ornamental
designs.
These types of patents are valuable
for business that need to protect
molded plastic parts, extrusions, and
product and container configuration.
Plant Patents
 These are issued under the same
provision as utility patents and are
for new varieties of plants.
These patents represent a limited
area of interest, and thus very few of
these types of patents are issued.
Patents
 Patent reform bill was introduced to
Congress in 2007 (America), but
with changes made independently
by both the House and Senate there
has not been any compromise.
 Patent reform bill may have
changes in the near future.
Patents
 The most important part of the
reform bill is the “first to file” system
used in most other countries.
The first one to file will be granted
the patent.
International Patents
 (WTO) – World Trade Organization
 (GATT) – General Agreement on
Tariffs and Trade, these two
encourages more global free trade.
International trade has increased at
the rate of about 6 percent per year
since GATT was created in 1948,
until recently there still was a need
International Patents
 for an international patent law to
protect firms from imitations and
knockoffs.
(PCT) – Patent Cooperation Treaty
– with over 100 participants – was
established to facilitate patent filings
in multiple countries in one office
rather than filling in each separate
country.
International Patents
 (WIPO) – World Intellectual
Property Organization in Geneva,
Switzerland, it provides a preliminary
search that assess whether the filing
firm will face any possible
infringement in any country.
The company can then decide
whether to proceed with the required
filing of the patent in each country.
International Patents
 Even though the PCT allows for
simultaneous filing of a patent in all
member countries, there may be
significant differences in patent laws
in each of these countries.
Example: Patent laws in the United
States allow computer software to
receive both patent and copyright
protection.
International Patents
On the other hand, in European
Union, patent protection is not always
extended to software, although recent
court judgments in the U.K. may
change this as well.
The Provisional Application
Entrepreneurs are recommended to
file first a provisional patent
application to establish a date of
conception of the invention.
This application replaces the
disclosure document that was
previously accepted by the PTO.
The Provisional Application
 The disclosure document was more
loosely defined in its requirements
and often led to issues when more
than one person claimed the patent
rights.
This application give the
entrepreneur who files the rights to
the patent based on the simple
concept of first to file.
The Provisional Application
 The disclosure document was more
loosely defined in its requirements
and often led to issues when more
than one person claimed the patent
rights.
This application give the
entrepreneur who files the rights to
the patent based on the simple
concept of first to file.
The Provisional Application
 It is more complete that the prior
disclosure document since the
entrepreneur must prepare a clear
and concise description of the
invention.
In addition to the written material,
drawing may be included, if deemed
necessary to understand the
invention.
The Provisional Application
 Upon receipt of the information the
PTO will file the application on
behalf of the inventor. The actual
filing of the patent in its final form
must occur no later than 12 months
after the provisional disclosure
document is filed.
The Provisional Application
 It is advisable to retain a patent
attorney to conduct a patent search.
The Patent Application
 This must contain a complete
history and description of the
invention as well as claims for its
usefulness. The actual form can be
downloaded from the patent and
Trademark Office Web Site.
The patent application is divided into
the following sections:

1. Introduction - this section should

contain the background and
advantages of the invention and the
nature of problems that it overcomes.
It should clearly state how the
invention differs from existing
offerings.
The Patent Application
2. Description of Invention – Next the
application should contain a brief
description of the drawings that
accompany it. These drawings must
comply with PTO requirements. Following
this would be a detailed description of the
invention, which may include engineering
specifications, materials, components, and
so on, That are viral to the actual making
of the invention.
The Patent Application
3. Claims – this is probably the most
difficult section of the application to
prepare since claims are the criteria by
which any infringements will be
determined. They serve to specify what
the entrepreneur is trying to patent.
Essential parts of the invention should be
described in broad terms to as to prevent
others from getting around the patent.
The Patent Application
3. Claims – At the same time, the
claims must not be so general that
they hide the invention’s uniqueness
and advantages. This balance is
difficult and should be discussed and
debated with the patent attorney.
The Patent Application
 The application should contain a
declaration or oath that is signed by
the inventor or inventors.
Your attorney will supply this form.
 The completed application is ready
to be sent to the PTO, at which time
the status of the invention becomes
patent pending.
The Patent Application
 This status is important to the
entrepreneur because it now provides
complete confidential protection until the
application is approved. At that time, the
patent is published and thus becomes
accessible to the public for review.
 A carefully written patent should
provide protection and prevent
competitors from working around it.
The Patent Application

 However, once granted , it is also

an invitation to sue or be sued if
there is any infringement.
The Patent Application
 The fees for filing will vary,
depending on the patent search
and on claims made in the
application.
Attorney fees are also a factor in
completing the patent application.
The Patent Application
It may also be filed online using
EFS Web service provided by the
PTO.
This online service enables
applicants to file their application
without the need for special
software, resulting in faster
application processing.
Figure 6.1 Options to Avoid
Infringement
Patent Infringement
 It is also important for the
entrepreneur to be sensitive about
whether he or she is infringing on
someone else’s patent.
 The fact that someone else
already has a patent does not
mean the end of any illusion of
starting anew business.
Patent Infringement
 Many businesses inventions, or
innovations are the result of
improvements on, or modification
of, existing products. Copying and
improving on a product may be
perfectly legal (no patent
infringement) and actually good
business strategy.
Patent Infringement
 if it is possible to copy and improve
the product to avoid patent
infringement, the entrepreneur may
try to license the product from the
patent holder.
Business Method Patents
 The growth of internet and
software development has emerged
the use of business method patent.
Ex: Amazon.com owns a business
method patent for the single clicking
feature used by a buyer on its Web
site to order products.
Patent Infringement
Given the increase in the assaults
and because of the growth of digital
technologies such as the internet,
computer software, and
telecommunications, concerns have
evolved regarding these business
method patents.
Patent Infringement
Examples of the focus of these
concerns are tax strategies, the
determination of insurance rates, or
how commodities are purchased
through a third party. These business
practice patents are now being
threatened by a recent court ruling that
denied a patent for a process of
hedging risks in commodity trading.
Patent Infringement
 The Federal Circuit Court denied
the patent for because it did not
meet the machine or transformation
test. This simply means that any
business method or practice must
be tied to machine such as a
computer
Patent Infringement
Thus, a mental process of
calculations for hedging risks in
commodity trading did not include a
machine or computer and therefore
was not granted a patent.
Checklist for Minimizing Patent Risks
Trademarks
 It maybe a word, symbol, design,
or some combination of such, or it
could be a slogan or even a
particular sound that identifies the
source or sponsorship of certain
goods or services.
 It can last indefinitely, as long as
the mark continues to perform its
indicated function.
Trademarks
For all registrations filed after
November 16, 1989, the trademark
is given an initial 10-years
registration with 10-years renewable
terms.
In the fifth to sixth year, the
registrant is required to file an
affidavit with PTO indicating that the
mark is currently in commercial use.
Trademarks
If no affidavit is filed, the registration
is cancelled.
Between the ninth and tenth year
after registration, and every 10 years
thereafter, the owner must file an
application for renewal of the
trademark. Otherwise, the
registration is cancelled. (There is a
six-months grace period.)
Trademarks
If no affidavit is filed, the registration
is cancelled.
Between the ninth and tenth year
after registration, and every 10 years
thereafter, the owner must file an
application for renewal of the
trademark. Otherwise, the
registration is cancelled. (There is a
six-months grace period.)
Trademarks
Trademark law allows the filling of
trademark solely on the intent to use
the trademark in interstate or foreign
commerce. The filing date then
becomes the first date of the mark.
This does not imply that the
entrepreneur may file a sworn
statement that the mark is in
commercial use, listing the date of first
use.
Trademarks
It is also possible to file for a
trademark if you intent to use this
mark in the future. You are allowed
to file in good along with a sworn
statement in the application that
there is intent to use the trademark.
Actual use of the trademark must
occur before the PTO will register
the mark.
Four Categories of Trademarks
1. Coined marks denote no
relationship between the mark and
the goods or services and afford the
possibility of expansion to a wide
range of products.
2. An arbitrary mark is one that has
another meaning in our language
and is applied to product service.
Four Categories of Trademarks
3. A suggestive mark is used to
suggest certain features, qualities,
ingredients, or characteristics of a
product or service. It differs from an
arbitrary mark in that it tends to
suggest some describable attribute
of the product or service.
Four Categories of Trademarks
4. A descriptive mark must have
become distinctive over a significant
period of time and gained consumer
recognition before it can be
registered. The mark then is
considered to have secondary
meaning; that is, it is descriptive of a
particular product or service.
Registering Trademark
The entrepreneur must complete a
simple form that can be downloaded
and either submitted by mail or filed
electronically using the Trademark
Electronic Application System
(TEAS) available on the PTO
website.
Filing of The Trademark
Registration Must Meet Four
Requirements:
1. Completion of the written form.
2. A drawing of the mark.
3. Five specimen showing actual use
of the mark, and
4. The fee.
Registering Trademark

 Each trademark must be applied for

separately. Upon receipt of this
information, the PTO assigns a serial
number to the application and sends
a filing receipt to the applicant.
Registering Trademark

The next step in the registering

process is a determination by
examining attorney at the PTO as to
whether the mark is suitable for
registration.
Registering Trademark
Within about three months, an initial
determination is made as to its
suitability. Any objections by the
entrepreneur must be raised within
six months, or the application is
considered abandoned. If the
trademark is refused, the
entrepreneur still has the right to
appeal to the PTO.
Registering Trademark
Once accepted, the trademark is
published in the Trademark Official
Gazette to allow any party 30 to
oppose or request an extension to
oppose. If no question is file, the
registration is issued. This entire
procedure usually takes about 13
months from the initial filing.
Copyrights

 It protects original works of

authorship.
The protection in the copyright does
not protect the idea itself, and thus it
allows someone to use the idea or
concept in a different manner
Copyrights
 The copyright law has become
especially relevant because of the
tremendous growth of the use of the
internet, especially to download
music, literary works, picture, and
videos, to name a few.
Software copyright was added in
1980.
Copyrights
 Besides computer software,
copyrights are desirable for such
things as books, scripts, articles,
poems, songs, sculptures, models,
maps, blueprints, collages, printed
materials on board games, data, and
music.
Copyrights
 In some instances, several forms of
protection may be available. For
example, the name of a board game
may be protected by trademark, the
game itself protected by utility
patent, the printed matter or the
board protected by copyright, and
the playing pieces covered by a
design patent.
Trade Secrets
 It is the protection against others
revealing or disclosing
information that could be
damaging to business.
It is to maintain an idea or
process as confidential and to
sell or license it as trade secrets.
Trade Secrets
It is not covered by any federal law
but is recognized under a governing
body of common laws in each state.
Employees involved in working with
an idea or process may be asked to
first sign a confidential information
agreement that will protect against
their giving out the trade secret while
an employee of after leaving the
organization.
Trade Secrets
The holder of the trade secret has
the right to sue any signee who
breaches such an agreement.
What or how information to give is
difficult to judge and is often
determined by the entrepreneur’s
judgement.
Trade Secrets
Entrepreneurs tended to protect
sensitive or confidential company
information from anyone else by simply
not making them privy to this
information.
There is a tendency to take the
opposite view, that the more information
entrusted to employees, the more
effective and creative employees can
be.
Trade Secrets
Ideas to avoid future conflicts in
trading secrets are as follows:
Train employees to refer sensitive
questions to one person.
Provide escorts for all office visitors.
Keep important travel plans secret.
Control information that might be
presented by employees at
conferences or published in journals.
Ideas to avoid future conflicts in
trading secrets are as follows:
Use simple security such as locked
file cabinets, passwords on
computers, and shredders where
necessary.
Have employees and consultants sign
nondisclosure agreements.
Ideas to avoid future conflicts in
trading secrets are as follows:

Debrief departing employees on any

confidential information.
Avoid faxing any sensitive information.
Mark documents confidential when
needed.
 Licensing
It is defined as an arrangement between
two parties , where one party has
proprietary rights over some information,
process, or technology protected by a
patent, trademark, or copyright.
This arrangement, specified in a
contract, requires the license to pay a
royalty or some other specifies sum to
the holder.
 Licensing
of proprietary rights (licensor) in return
for permission to copy the patent,
trademark, or copyright.
It has a significant value as a marketing
strategy to holders of patents,
trademarks, or copyright to grow their
business in a new markets when they
lack resources or experience in those
markets.
 Licensing
It is also an important marketing
strategy for entrepreneurs who wish to
start a new venture but need permission
to copy or incorporate the patent,
trademark, or copyright with their ideas.
A patent license agreement specifies
how the license would have access to
the patent.
 Licensing
Example: The licensor may still
manufacture the product but give the
license the rights to market it under their
label in non-competitive market.
The licensee may actually
manufacture and market the patented
product under its own label. This
agreement must be carefully worded
and should involve a lawyer, to ensure
the protection all parties.
 Licensing
 Licensing trademarks generally involves
a franchising agreement. The
entrepreneur operates a business using
the trademark and agrees to pay a fixed
sum for use of the trademark; pay a
royalty based on sales volume, buy
supplies from the franchisor (examples
would be Shell, Dunkin Donuts, Pepsi
Cola or Coca Cola bottles, or Midas
muffler shops), or some combination of
these.
 Licensing
It has become a revenue boom for many
Fortune 500 companies. These firms
spend billions of dollars each year on the
research and development of new
technologies that they will never bring to
market. As a result, they will often license
patents, trademarks and other intellectual
property to small companies that can
profit form them.
 Licensing
 Technology is one of the largest
generators of licensing revenue, there
are other significant players in this
market. The entertainment industry,
particularly motion pictures studios such
as Disney, DreamWorks, Fox, Sony, and
Warner Brothers, generates millions of
dollars for its bottom line with licensing
agreements for clothing, toys, games,
and other related items.
 Licensing
 Licensing is also popular around special
sporting events, such as Olympics,
marathons, bowl games, and
tournaments.
It represents opportunities for many firms
to expand into new markets, expand
product lines, or simply reach more
customers within its existing target
markets.
 Before entering into licensing
agreement, the entrepreneur should
ask the following.
 Will the costumer recognize the 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?
Before entering into licensing
agreement, the entrepreneur should
ask the following.
 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?
Licensing
 It is an excellent option for the
entrepreneur to increase revenue,
without the risk and costly start-up
investment. To be able to license
requires entrepreneur to have something
to license, which is why it is so important
to seek protection for any product
information, name, and so on, with
patent, trademark, or copyright.
Licensing
 On the other hand, licensing can
also be a way to start a new venture
when the idea may infringe on
someone else’s patent, trademark, or
copyright.
The entrepreneur has nothing to lose
by trying to seek a license
agreement from the holder of the
property.
Licensing
 It continues to be a powerful
marketing tool. With the advice of a
lawyer, entrepreneurs may find that
licensing opportunities are a way to
minimize risk, expand a business, or
complement an existing product line.
Product Safety and Liability
 Responsibility of a company to meet
any legal specifications regarding a
new product covered by the
Consumer Product Safety Act.
Product Safety and Liability
 Responsibility of a company to meet
any legal specifications regarding a
new product covered by the
Consumer Product Safety Act.
This act was passed in 1972 and
was amended in 1990.
Product Safety and Liability
In August of 2008 there were
significant changes that were made
into law, now requiring stricter
standards for potentially hazardous
and unsafe products.
Insurance
 Besides being cautious, it is also in
the best interests of the entrepreneur
to purchase insurance in the event
that problems do occur.
 Service-related business such as
day-care centers, amusement parks,
and shopping centers have had
significant increase in the number of
lawsuits.
Types of Insurance and Possible
Coverage
 Insurance
 Each type of insurance provides a
means of managing risk in the new
business.
The main is that the entrepreneur usually
has limited resources in the beginning.
Thus, it is important to first determine
whether any of these types of insurance
are needed.
 Insurance
 Note that some insurance, such as
disability and vehicle coverage, is
required by law and cannot be
avoided.
Other insurance, such as life
insurance of key employees, is not
required but may be necessary to
protect the financial net worth of the
venture.
 Insurance
 The total insurance cost represents an
important financial planning factor, and the
entrepreneur need to consider increasing
premiums in cost projections.
 Seeking advice from an insurance agent is
often difficult because the agent is trying sell
insurance. However, there are specialists at
universities or the Small Business
Administration who can provide this advice
at little or no cost.
 Contracts
A legally binding agreement between two
parties.
Starting a new venture, will be involved in a
number of negotiations and contracts with
vendors, landlords, and clients.
It is very important for the entrepreneur to
understand the fundamental issues related
to contracts while also recognizing the need
for a lawyer in may of these negotiations.
Contracts
 Contracts
Often business deals are concluded with a
handshake. Ordering supplies, lining up
financing, reaching an agreement with a
partner, and so on, are common situations
in which a handshake consummates the
deal.
However, if there are disagreements, the
entrepreneur may find that there is no deal
and that he or she may be liable for
something never intended.
 Contracts
Any deals involving real estate must be in
writing to be valid. Leases, rentals,, and
purchases all necessitate some type of
written agreement.
Although lawyers might be necessary in
very complicated or large transactions,
the entrepreneur cannot always afford
one.
 Contracts
Therefore, it is helpful for the entrepreneur to
understand that before signing a contract he
or she should do the following:
1. Understand the terms and conditions in the
contract.
2. Cross out anything that you do not agree to.
3. Do not sign if there are blank spaces (these
can be crossed out)
4. Ma a copy for your file after signing.
Thank you and God bless…..