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LEGAL ISSUES FOR THE ENTREPRENEUR:NEED FOR A LAWYER, PATENTS

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Entrepreneurship ­ MGT602
VU
Lesson 18
LEGAL ISSUES FOR THE ENTREPRENEUR
LEARNING OBJECTIVES
1.
To identify and distinguish intellectual property assets of a new venture including software
websites.
2.
To understand the nature of patents, the rights they provide, and the process for filing one.
WHAT IS INTELLECTUAL PROPERTY?
Intellectual property which includes patents, trademarks, copyrights, and trade secrets represent
important assets of entrepreneur and should be understood even before engaging the services of an
attorney. Because entrepreneurs often don't understand intellectual property, they can ignore steps that
should be taken to protect these assets.
NEED FOR A LAWYER
All business is regulated by law. The entrepreneur needs to be aware of regulations that affect the new
venture. At different stages the entrepreneur will need legal advice. The legal expertise required will vary
based on factors such as type of product and organizational status. The entrepreneur should carefully
evaluate his or her needs before hiring a lawyer.
HOW TO SELECT A LAWYER
Why hire a lawyer?
The entrepreneur does not usually have the expertise to handle possible risks associated with difficult laws.
An attorney is in a better position to understand all outcomes related to any legal action. The lawyer may
work on a retainer basis (stated amount per month,), which provides office and consulting time. This does
not include court time or other legal fees. The lawyer may be hired for a one-time fee, i.e. filing for a patent.
Choosing a lawyer is like hiring an employee-The lawyer you work with should be someone to whom you
can relate personally. When resources are limited, the entrepreneur may offer the lawyer stock in exchange
for his or her services
LEGAL ISSUES IN SETTING UP THE ORGANIZATION
There are many options an entrepreneur can choose in setting up an organization. Legal advice is also
needed to prepare the agreements necessary to begin a partnership, franchise, or corporation.
PATENTS
A patent is a contract between the government and an inventor. The government grants the inventor
exclusivity for a specified amount of time. At the end, the government publishes the invention, and it
becomes part of the public domain. The patent gives the owners a negative right, preventing anyone from
making, using, or selling the invention.
Types of Patents
1. Utility Patents
A utility patent has a term of 17 years, beginning on the date the Patent and Trademark
Office (PTO) issues it. NAFTA (North American Free Trade Agreement) establishes a
minimum period of 20 years from the date of filing or 17 years from the date of the grant.
Patents on any invention requiring FDA approval are extended by the amount of time it
takes the FDA to review the invention. The patent grants the owner protection from
anyone making, using, and/or selling the invention.
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Entrepreneurship ­ MGT602
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2. Design Patents
Covering new, original, ornamental, and unobvious designs for articles, a design patent
reflects the appearance of an object. These are for a 14-year term and provide a negative
right, excluding others from making an article having the same ornamental appearance.
Filing fees are lower than for utility patents.
3. Plant patents
Plant patents are issued for 17 years on new varieties of plants.
Patents are issued by the Patent and Trademark Office (PTO.) This office also administers
the Disclosure Document Program, in which the inventor files disclosure of the invention,
giving recognition that he or she was the first to develop the idea.
Another program is the Defensive Publication Program, which lets the inventor protect an
idea by preventing anyone else from patenting this idea, but gives the public access to it.
4. International Patents
With the new GATT (General Agreement on Tariffs and Trade) that took effect on January
1, 1996, any application by a foreign company will be treated equally to an American firm.
Previously American firms were given priority. Now the decision is totally based on when
the filing companies began work on the idea. The GATT pact has been signed by 124
countries. An additional 144 are due to be included by the end of the century. China is
excluded because of issues related to piracy. The pact will mandate stronger protection for
entrepreneurs by requiring protection for the following terms:
Seven years for trademarks.
Twenty years for patents.
Fifty years for films, music, and software.
There are still some problems with international patents, such as the attitudes in China and
other Southeast Asian countries toward "knock-offs."
The Disclosure Document
The entrepreneur should first file a disclosure document to establish a date of conception. To file, the
entrepreneur must prepare a clear description of the invention along with photos and a cover letter. Upon
receipt, the PTO stamps and returns a duplicate copy establishing evidence of conception. Before actually
applying for the patent, the entrepreneur should retain a patent attorney to conduct a patent search.
The Patent Application
The patent application must contain a complete history and description of the invention as well as claims
for its usefulness. The application is divided into sections:
The Introduction Section contains the background and advantages of the invention and the nature of problems
it overcomes. The description of Invention Section, this section contains a description of the drawings, which
must comply with PTO requirements. A detailed description of the invention follows, including
engineering specifications, materials, and components. In Claims Section, Claims are the criteria by which any
infringements will be determined. Essential parts of the invention should be described in broad terms. The
claims must not be so general that they hide the invention's uniqueness. The application should contain a
declaration signed by the inventor. When the application is sent, the status of the invention becomes "patent
pending," providing protection until the application is approved. A carefully written patent should provide
protection, but is also an invitation to sue or be sued if there is any infringement.
Patent Infringement
Many inventions are the result of improvements in existing products. Copying and improving a product
may be legal. If improvement is impossible, it may be possible to license the product from the patent
holder. To ascertain the existence of a patent, the entrepreneur can now use the Internet. If there is an
existing patent that might involve infringement, licensing may be considered. If there is any doubt on this
issue, the entrepreneur should hire a patent attorney.
ONLINE PATENT ISSUES
The question of whether patents are applicable to e-commerce has been raised lately by stamp.com and
Pitney Bowes. Large corporations, like Pitney Bowes, are suing start-up companies to get compensation for
their intellectual property such as research and development and patents.
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Entrepreneurship ­ MGT602
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KEY TERMS
Intellectual property
Any patents, trademarks, copyright, or trade secrets held by the entrepreneur
Patent
Grants holder protection from others making, using, or selling similar idea
Disclosure document
Statement to U.S. Patent and Trademark Office by inventor disclosing intent to patent idea
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Table of Contents:
  1. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:DEFINITION OF ENTREPRENEUR
  2. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:Possibility of New Venture Formation
  3. ENTREPRENEURIAL PROCESS/START UPS:GOVERNMENT AS AN INNOVATOR
  4. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND:ENTREPRENEURIAL PROCESS
  5. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…)
  6. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):CLIMATE FOR ENTREPRENEURSHIP
  7. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):PROBLEMS AND SUCCESSFUL EFFORTS
  8. THE INDIVIDUAL ENTREPRENEUR:ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS
  9. THE INDIVIDUAL ENTREPRENEUR (continued…):Personal Values, Work History, MOTIVATION
  10. THE INDIVIDUAL ENTREPRENEUR (continued…):ROLE MODELS AND SUPPORT SYSTEMS
  11. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES:INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES, Minority interests
  12. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):DIRECT FOREIGN INVESTMENT
  13. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):BARRIERS TO INTERNATIONAL TRADE
  14. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):ENTREPRENEURIAL PARTNERING
  15. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):SOURCES OF NEW IDEAS
  16. CREATIVITY AND THE BUSINESS IDEA:METHODS OF GENERATING NEW IDEAS, CREATIVE PROBLEM SOLVING
  17. CREATIVITY AND THE BUSINESS IDEA:PRODUCT PLANNING AND DEVELOPMENT PROCESS
  18. LEGAL ISSUES FOR THE ENTREPRENEUR:NEED FOR A LAWYER, PATENTS
  19. LEGAL ISSUES FOR THE ENTREPRENEUR:TRADEMARKS, LICENSING
  20. LEGAL ISSUES FOR THE ENTREPRENEURS:PRODUCT SAFETY AND LIABILITY, INSURANCE
  21. CREATING AND STARTING THE VENTURE:WHAT IS THE BUSINESS PLAN, PRESENTING THE PLAN
  22. CREATING AND STARTING THE VENTURE (Continued….):WRITING THE BUSINESS PLAN
  23. CREATING AND STARTING THE VENTURE (Continued….):
  24. CREATING AND STARTING THE VENTURE (Continued….):WHY SOME BUSINESS PLANS FAIL, MARKETING PLAN
  25. THE MARKETING PLAN:MARKET RESEARCH FOR THE NEW VENTURE
  26. THE MARKETING MIX:STEPS IN PREPARING THE MARKETING PLAN
  27. THE ORGANIZATIONAL PLAN:DEVELOPING THE MANAGEMENT TEAM, LEGAL FORMS OF BUSINESS
  28. THE ORGANIZATIONAL PLAN (Continued….)
  29. THE ORGANIZATIONAL PLAN (Continued….):THE LIMITED LIABILITY COMPANY
  30. THE FINANCIAL PLAN:OPERATING AND CAPITAL BUDGETS
  31. THE FINANCIAL PLAN (Continued….):PRO FORMA INCOME STATEMENTS, PRO FORMA CASH FLOW
  32. PRO FORMA SOURCES AND USES OF FUNDS:PERSONAL FUNDS, FAMILY AND FRIENDS
  33. PRO FORMA SOURCES AND USES OF FUNDS:COMMERCIAL BANKS
  34. BANK LENDING DECISIONS:SMALL BUSINESS ADMINISTRATION LOANS
  35. SOURCES OF CAPITAL:GOVERNMENT GRANTS
  36. SOURCES OF CAPITAL:PRIVATE PLACEMENT, BOOTSTRAP FINANCING
  37. CAPITAL SOURCES IN PAKISTAN:PROVINCIAL LEVEL INSTITUTIONS, FINANCIAL INSTITUTIONS
  38. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  39. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  40. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  41. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  42. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  43. NEW VENTURE EXPANSION STRATEGIES AND ISSUES:JOINT VENTURES, ACQUISITIONS
  44. NEW VENTURE EXPANSION STRATEGIES AND ISSUES (Continued….):DETERMINING THE PRICE FOR AN ACQUISITION
  45. ENTREPRENEURSHIP & PAKISTAN:GENDER DEVELOPMENT STATUS WOMAN AS AN ENTREPRENEUR IN PAKISTAN