LAUNCHING NEW ventures AN ENTREPRENEURIAL APPROACH, 7e

LAUNCHING NEW VENTURES – AN ENTREPRENEURIAL APPROACH, 7E

Kathleen R. Allen

– © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Protecting Startup AssetsChapter 7


Chapter ObjectivesExplain the role of intellectual

property in a businessDiscuss how to protect assets with

trade secretsUnderstand how copyrights and

trademarks can be protectedExplain how to acquire and defend

patents.


Protecting Startup AssetsWhen entrepreneurs start a

business, they must protect the assets of the business

Businesses create three categories of knowledge for their owners, which is valuable◦Intellectual property (legal rights; most

valuable)◦Intellectual assets (explicit knowledge)

Ex: user manual; customer list◦Intellectual capital (tacit knowledge)

Intellectual property rights are the focus of this chapter


Figure 7.1- Categories of Knowledge


7.1 The Nature of Intellectual Property Rights

Developing a new product creates an asset that must be protected

If the product is unique, a novel process or service, or other type of proprietary item, it may qualify for intellectual property rights

Legal rights include patents, trademarks, copyrights and trade secrets

Intellectual property (IP) can be bought and sold like personal property


7.1 The Nature of Intellectual Property Rights

The owner of IP has the right and duty to defend that property against infringers

IP is intangible, not in physical formIt is a right under lawBut to exercise that right you must

be able to put the IP into some physical form

In the knowledge economy, IP is often more valuable than physical assets

IP rights may create a temporary monopoly


Figure 7.2- Customer Segmentation Matrix


7.2 Trade SecretsDefinition: a formula, device, idea,

process, pattern, or compilation of information, not common knowledge, kept confidential◦Examples: survey methods used by

professional pollsters, customer lists, source codes for computer chips, inventions for which no patent will be applied (to maintain secrecy)

Employees may be asked to sign an agreement designating trade secrets, and requiring non-disclosure, confidentiality


7.2 Trade SecretsPotential partners or manufacturers

may be asked to sign a confidentiality agreement

If someone has appropriated your trade secrets, you have these remedies:◦Injunctive relief◦Damages◦Attorney’s fees

Be mindful of the statute of limitations, the date after which you cannot sue


7.3 TrademarksDefinition: a symbol, logo, word,

sound, color, design, or other device used to identify a business or product in commerce

The term is used to refer to both trademarks (for products) and servicemarks (for services)

Other kinds of trademarks:◦Logo: FedEx◦Slogan: L’Oreal: “Because you’re worth

it.”◦Container shape: Coca-Cola’s classic

beverage bottle


7.3 TrademarksColors can be trademarked if not

functional, and have a secondary meaning

If a trademark becomes generic (aspirin, thermos), it can no longer be trademarked

Marks that cannot be trademarked include:◦Anything immoral or deceptive◦Anything that uses official symbols of

the U.S, any state or municipality◦Anything that uses a person’s name or

likeness without permission


7.3 TrademarksInfringement is found if a mark is

likely to cause confusion with an existing trademark◦But identical marks can exist where

there is no relation between the types of goods or services

Trademarks may suffer dilution, when the value of mark is reduced through competition or confusion with another mark

A trademark attorney will search for and register your mark at the USPTO and states

Also consider foreign registration


7.4 CopyrightsDefinition: copyrights protect

original works of authors, composers, screenwriters, and computer programmers

Copyright does not protect the idea, but the form in which its presented

The First Sale Doctrine grants the owner six rights: ◦reproduction, preparation of derivative

works, distribution, public performance, public display and digital transmission performance


7.4a, b The Digital Millennium Copyright Act

The Digital Millennium Copyright Act (DMCA) prohibits the falsification, alteration or removal of copyright management data on digital copies◦Contains a safe harbor clause to

protect Internet service providers if they unknowingly infringe on another’s rights

Use the word “copyright” or the symbol © and the name of the owner, and year of creation – © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license

distributed with a certain product or service or otherwise on a password-protected website for classroom use.

7.5 PatentsA patent is the primary means of

protecting an original inventionGives the patent holder the right to

prevent others from making, using, offering for sale, or selling the invention during the period of the patent, usually 20 years

When the patent expires, the invention enters the public domain and anyone can use it without paying royalties to the patent owner– © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license


7.5 PatentsTo decide whether to patent, ask:

◦Does the invention solve a significant problem and change the way things are done?

◦Does the invention fall under FDA regulations?

◦Will the invention achieve revenues that exceed the potential cost of patent enforcement?

◦Is there a plan to license?If the field is changing rapidly, it may

not make sense to patent, as the patent would outlive its economic life


7.5a Is the Invention Patentable?

USPTO sets four criteria an invention must meet to be patentable:

1. The invention must fit into one of five classes ◦Machine or device with moving parts or

circuitry◦Process or method for producing a useful

result◦Article of manufacture◦Composition of matter◦A new use or improvement for one of the

above– © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license


7.5a Is the Invention Patentable

2. The invention must have utility, be useful

3. the invention must not contain prior art; it must be new or novel in some important way◦Prior art is knowledge that is publicly

available or was published prior to the date of invention

4. the invention must not be obvious to someone with ordinary skills in the field– © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license


7.5b Patent TypesThree major categories of patents:

◦Utility patents most common; protect the functional

part of machines or processes◦Design patents protect new, original ornamental

designs for manufactured articles◦Plant patents Granted to someone who invents or

asexually reproduces a new variety of plant– © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license


7.5b Patent TypesGene or Biological Patents

◦You cannot patent naturally occurring DNA segments, genes extracted from human, animal, and plant cells

◦But you can patent edited forms of genes not found in nature

Business method is a generic term to describe a variety of process claims◦As of this writing, courts have not

defined the difference between business and process claims


7.5b Patent TypesProvisional or non-provisional

patentsA provisional patent is a way for

inventors to undertake a first patent filing in the U.S. at a lower cost than a formal patent application

It permits the inventor to use the term “patent pending;” ◦Designed to protect small inventors

while they speak with manufacturers about production

◦Puts U.S. applicants on a par with international applicants under the GATT


7.5c The Patent ProcessBest to seek the counsel of an IP

attorney◦USPTO will conduct a search of its patent

records for prior art◦If issues a denial, the inventor has a

period of time to appeal or modify the claim

◦Most applications denied on first pass because of Prior art Non-obviousness

◦Attorney must rewrite claims and resubmit

◦If USPTO accepts, issues notice of allowance


Figure 7.3- Utility Patent Process


7.5d Patent InfringementIf a patent holder enforces a patent

in court:◦The court may issue an injunction

preventing the infringer from making further use of the invention, and awarding the holder a royalty

◦If the infringer refuses to pay, the holder can enjoin or close down the infringer’s operation

◦Alternatively, the court may mediate an agreement between the parties by which the infringer pays for use of the invention

Patent trolls make no products, but find infringers and seek payment


7.5e Intellectual Property Strategy

Three major patent strategies that align well with business models:◦Proprietary – acquire patents & defend

them◦Defensive – design around existing

patents or develop a portfolio of patents for bargaining

◦Leveraging – useful when you don’t seek freedom to operate or when having proprietary protections are not critical; patents licensed for cash or to extract needed concessions from other firms


New Venture Action PlanIdentify intellectual property rights

appropriate to your business concept

Get referrals for IP attorneysDevelop a product/technology

roadmap and IP strategy


Documents

LAUNCHING NEW ventures AN ENTREPRENEURIAL APPROACH, 7e