1. LAUNCHING NEW ventures – AN ENTREPRENEURIAL APPROACH, 7e
Kathleen R. Allen
LAUNCHING NEW ventures – AN ENTREPRENEURIAL APPROACH, 7e
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2. Protecting Startup Assets
Chapter 7
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3. Chapter Objectives
Explain the role of intellectual property in a business
Discuss how to protect assets with trade secrets
Understand how copyrights and trademarks can be protected
Explain how to acquire and defend patents.
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4. Protecting Startup Assets
When 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
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5. Figure 7.1- Categories of Knowledge
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6. 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
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7. 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 form
It is a right under law
But 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
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8. Figure 7.2- Customer Segmentation Matrix
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9. 7.2 Trade Secrets
Definition: 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
© 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.

10. 7.2 Trade Secrets
Potential 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
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11. Other kinds of trademarks:
Definition: 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
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12. Marks that cannot be trademarked include:
7.3 Trademarks
Colors 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
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13. Also consider foreign registration
7.3 Trademarks
Infringement 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
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14. The First Sale Doctrine grants the owner six rights:
7.4 Copyrights
Definition: 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
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15. 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.

16. A patent is the primary means of protecting an original invention
7.5 Patents
A patent is the primary means of protecting an original invention
Gives 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 distributed with a certain product or service or otherwise on a password-protected website for classroom use.

17. To decide whether to patent, ask:
7.5 Patents
To 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
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18. 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
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19. 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
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20. Three major categories of patents:
7.5b Patent Types
Three 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
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21. 7.5b Patent Types
Gene 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
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22. Provisional or non-provisional patents
7.5b Patent Types
Provisional or non-provisional patents
A 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
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23. Best to seek the counsel of an IP attorney
7.5c The Patent Process
Best 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
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24. Figure 7.3- Utility Patent Process
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25. If a patent holder enforces a patent in court:
7.5d Patent Infringement
If 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
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26. 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
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27. New Venture Action Plan
Identify intellectual property rights appropriate to your business concept
Get referrals for IP attorneys
Develop a product/technology roadmap and IP strategy
© 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.