Unit 3: Legal issues

 Legal counsel required from start-up to

various stages of the new venture
 Different sets of laws applicable
depending on whether start-up is
franchise, buy-out, or an independent
venture
How to select a lawyer

 Lawyers not just specialists in law but

specific areas of law
 Retainership
 One-time fee
 Good working relationship absolute must
Company registration

 If private limited company –

 Availability of name
 Application to ROC
 Documents required –
 MOA, AOA, Registered address proof,
Age validation
 Factories Act, Sales Tax
 If proprietorship/partnership –
 Customs and Excise Act,
 Factories Act, Value Added Tax etc
Intellectual Property Rights (IPRs)

 For this level, we will discuss about-

 Patents
 Trade marks
 Copyrights
 Licensing
Patent

 A contract between government and

inventor
 For specific period of time exclusivity
 Lapse, public domain
 Stimulate new ideas and better
inventions
 Basically the patent gives the owner
negative right because it prevents
anyone else from making, using or selling
it
Kinds of patents

 Utility –
 Term of 17 years
 Reflects protection of new and useful
processes , eg. xerox machines,
chemical compounds, film developing etc
Design patents

 Design patent reflects the appearance of

an object
 Granted for a 14 year term
 Prevents others from making or selling
based on drawings
 Considered useless once, but now
Reebok/Nike have proven its importance
Who issues patents
 Patent and trademark office
 Disclosure document
 Inventor files disclosure of invention to say that
the idea is first developed by him and then
patents it
 Defensive publication programme –
 Protecting the idea without obtaining a patent,
thus giving public access to the invention
International patents
 With GATT that took effect on 1st Jan,
1996, within the US, foreign as well as
local applications treated equal
 Disclosure document hence critical
 All signatory countries to 7 year
protection for trademarks, 20 years for
patents, and 50 years for film, music and
software.
Disclosure document
 To establish date of conception of invention
 Clear and concise description of the invention
 Photographs and covering letter in duplicate
 PTO will stamp the duplicate and return it to
inventor
 Not a patent application but a pre-patent
exercise
Patent application

 History and description of invention and

its utility
 Form can be downloaded from PTO
website
 Claims to determine infringements
 Bona fide testimony by inventor
 Fees
Infringement

 Filing patent does not mean starting new

biz
 Many inventions improvements or
modifications of existing products
 Internet usage for checking patents and
infringements
Online patent issues

 Is patent applicable to e-commerce?

 MNC’s stockpiling patents to intimidate
new start-ups
 Compensation in terms of a licensing fee
or lump-sum payment
Trademark
 Word, symbol, design or combination or
a slogan
 Can last as long as product/ service lasts
 Initially given for 20 years and renewable
every 20 years
 In 5-6th year, affidavit with PTO indicating
commercial use required or else
registration cancelled
Trademark registration

 Can be filed right at the beginning or after

some use, eg after using a trademark
locally, can register before expanding
internationally
Trademarks
 4 types :
 Coined marks –
 No relation between the mark and the
product/service, eg Polaroid, Kodak,
Pepsi
 Arbitrary mark –
 A different meaning in a language, eg
Apple
 Suggestive mark eg., features, qualities
or characteristics, eg Halo shampoo,
Crowning glory
 Descriptive mark eg., having distinctive
attributes, eg rubberoid as applicable to
roofing industry
Benefits of registering
trademark

 Exclusive rights
 Allows you to take penal action against
infringement
 Incontestable use commercially
 Basis for filing in foreign countries
Copyright

 Protects original works of authorship

 Specific to the work, not to an idea

Licensing

 One party has proprietory rights over

some information, process, or
technology, protected by a patent,
trademark or copyright.
 Royalty for usage, eg celebrity
merchandise, franchise agreements ,etc
 Walt Disney best example with over 600
licenses
Contracts
 A legally enforceable agreement between
two or more parties
 The biz therefore has to be legitimate eg no
contract for gambling is legal (India)
 Typical contracts, -
 Rent or lease agreement
 Service level agreement
 Sales contract
 Vendor agreements