Part IV – Initiating Entrepreneurial Ventures Chapter 11 – Assessment and Evaluation of Entrepreneurial Opportunities Chapter 12 – Legal Structures for New Business Ventures Chapter 13 – Legal Issues Related to Emerging Ventures Chapter 14 – Sources of Capital for Entrepreneurs Copyright (c) 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Chapter 13 – Legal Issues Related To Emerging Ventures

Major Legal Concepts and Entrepreneurial Ventures I. Inception of an Entrepreneurial Venture A. Laws governing intellectual property 1. Patents 2. Copyrights 3. Trademarks B. Forms of business organization 1. Sole proprietorship 2. Partnership 3. Corporation 4. Franchise C. Tax considerations D. Capital formation E. Liability questions

Major Legal Concepts and Entrepreneurial Ventures II. An Ongoing Venture: Business Development and Transactions A. Personnel Law 1. Hiring and firing policies 2. Equal Employment Opportunity Commission 3. Collective bargaining B. Contract Law 1. Legal contracts 2. Sales contracts 3. Leases

Major Legal Concepts and Entrepreneurial Ventures III. Growth and Continuity of a Successful Entrepreneurial Venture A. Tax considerations 1. Federal, state, and local 2. Payroll 3. Incentives B. Governmental regulations 1. Zoning (property) 2. Administrative agencies (regulatory) 3. Consumer law C. Continuity of ownership rights 1. Property laws and ownership 2. Wills, trusts, and ownership 3. Bankruptcy

Patents A patent provides the owner with exclusive rights to hold, transfer, and license the production and sale of the product or process. Design patents last for 14 years; all others last for 20 years.

Securing a Patent Rule 1: Pursue patents that are broad, are commercially significant, and offer a strong position Rule 2: Prepare a patent plan in detail Rule 3: Have your actions relate to your original patent plan Rule 4: Establish an infringement budget Rule 5: Evaluate the patent plan strategically

A Patent Application Has Two Parts: Specification is the text of a patent and may include any accompanying illustrations. Claims are a series of short paragraphs, each of which identifies a particular feature or combination of features that is protected by the patent.

Copyrights A copyright provides exclusive rights to creative individuals for the protection of their literary or artistic productions. Duration: life of the author plus 70 years.

Understanding Copyright Protection For the author of creative material to obtain copyright protection, the material must be in a tangible form so it can be communicated or reproduced. It also must be the author’s own work and thus the product of his or her skill or judgment. Formal registration of a copyright with the Copyright Office of the Library of Congress.

Understanding Copyright Protection Fair Use Doctrine: [Reproduction of a copyright work for] purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research is not an infringement of copyright.

Trademarks A trademark is a distinctive name, mark, symbol, or motto identified with a company’s product(s) and registered at the Patent and Trademark Office.

Trademark Duration The current registrations are good for 10 years with the possibility for continuous renewal every 10 years. It is most important to understand that a trademark may be invalidated in four specific ways: Cancellation proceedings Cleaning-out procedure Abandonment Generic Meaning

Trade Secrets Customer lists, plans, research and development, pricing information, marketing techniques, and production techniques are examples of potential trade secrets.

Trademark Protection on the Internet The emerging body of law governing cyberspace is often referred to as cyberlaw.

Bankruptcy Bankruptcy occurs when a venture’s financial obligations are greater than its assets.

The 5 Largest Business Bankruptcies in U.S. History Bankruptcy Date Total Assets Pre-Bankruptcy Company Worldcom, Inc. 7/21/02 $103,914,000,000 Enron Corp. 12/2/01 $63,392,000,000 Texaco, Inc. 4/12/87 $35,892,000,000 Financial Corp. 9/9/88 $33,864,000,000 of America Global Crossing 1/28/02 $25,511,000,000 Ltd.

Chapter 7: Straight Bankruptcy Sometimes referred to as liquidation, Chapter 7 bankruptcy requires the debtor to surrender all property to a trustee appointed by the court.

Chapter 11: Reorganization Reorganization is the most common form of bankruptcy. Under this format, a debtor attempts to formulate a plan to pay a portion of the debts, have the remaining sum discharged, and continue to stay in operation.

Chapter 13: Adjustment of Debts Individuals or sole proprietors with unsecured debts of less than $100,000 or secured debts of less than $350,000 are eligible to file under a Chapter 13 procedure. In the petition the debtor declares an inability to pay his or her debts and requests some form of extension through future earnings (longer period of time to pay) or a composition of debt (reduction in the amount owed).