Entrepreneurship: Successfully Launching

New Ventures
Sixth Edition

Chapter 12
The Importance
of Intellectual
Property

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Learning Objectives (1 of 2)
12.1 Define the term intellectual property and describe its
importance.
12.2 Explain what a patent is and describe different types
of patents.
12.3 Describe a trademark and explain the process
entrepreneurs use to obtain one.
12.4 Describe a copyright and identify what a copyright
can protect.
12.5 Describe a trade secret and understand the common
causes of trade secret disputes.

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The Importance of Intellectual Property
• Intellectual Property
– Is any product of human intellect that is intangible but has
value in the marketplace.
– It is called “intellectual” property because it is the product
of human imagination, creativity, and inventiveness.
• Importance
– Traditionally, businesses have thought of their physical
assets, such as land, buildings, and equipment as the
most important.
– Increasingly, however, a company’s intellectual assets are
the most important.

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Common Mistakes Firms Make in Regard to
Protecting Their Intellectual Property
• Not properly identifying all of their intellectual property.
• Not fully recognizing the value of their intellectual property.
• Not using their intellectual property as part of their overall
plan for success.
• Not taking sufficient steps to protect it.

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The Four Key Forms of Intellectual
Property
• Patents
• Trademarks
• Copyrights
• Trade Secrets

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 Patents (1 of 4)
Patent is the granting of a property right by a sovereign
authority to an inventor. This grant provides the inventor
exclusive rights to the patented process, design, or invention
for a designated period.
Patent is an exclusive right granted for an invention. In other
words, patent protection means that the invention cannot be
commercially made, used, distributed, imported, or sold by
others without the patent owner's consent.

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Patents (4 of 4)
Figure 12.2 three basic requirements for a patent

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Types of Patents
Table 12.3 Summary of the Three Forms of Patent Protection, the
Types of Inventions the Patents Cover, and the Duration of the Patents

Type Type of Invention Covered Duration

Utility New or useful process, machine, 20 years from the date of the
manufacture, or composition of original application.
material or any new and useful
improvement thereof.
Design Invention of new, original, and 14 years from the date of the
ornamental design for original application.
manufactured products.
Plant Any new varieties of plants that can 20 years from the date of the
be reproduced. original application.

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Business Method Patents (Special Utility
Patent)
• A business method patent is a patent that protects an
invention that is or facilitates a method of doing business.
• The most notable business method patents that have
been awarded:
– Amazon.com’s one-click ordering system.
– Priceline.com’s “name-your-price” business model.
– Netflix’s method for allowing customers to set up a
rental list of movies to be mailed to them.

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The Process of Obtaining a Patent
Figure 12.3

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Trademarks
• A trademark is any word, name, symbol, or device used
to identify the source or origin of products or services
and to distinguish those product or services from others.
• Trademarks also provide consumers with useful
information.
– For example, consumers know what to expect when
they see a Macy’s store.
– Think how confusing it would be if any retail store
could use the name Macy’s.

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The Four Types of Trademarks (1 of 2)
Table 12.5 Summary of the Four Forms of Trademark Protection, the Type
of Marks the Trademarks Cover, and the Duration of the Trademarks
Type Types of Marks Covered Duration
Trademark Any word, name, symbol, or device used Renewable every 10 years,
to identify and distinguish one company’s as long as the mark remains
goods from another’s. in use.
Examples: Apple, d.light, GoPro, Athletic
Propulsion Labs, 3Derm
Service mark Similar to trademarks; are used to Renewable every 10 years,
identify the services or intangible as long as the mark remains
activities of a business, rather than a in use.
business’s physical products.
Examples: 1-800-FLOWERS,
Amazon.com, IndieU, Real Time Cases,
CoachUp, Dropbox

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The Four Types of Trademarks (2 of 2)
Table 12.5 (continued)
Type Types of Marks Covered Duration
Collective Trademarks or service marks used by Renewable every 10 years,
mark the members of a cooperative, as long as the mark remains
association, or other collective group. in use.
Examples: Information Technology
Industry Council, International Franchise
Association, Rotary International
Certification Marks, words, names, symbols, or Renewable every 10 years,
mark devices used by a person other than the as long as the mark remains
owner to certify a particular quality about in use.
a good or service.
Examples: 100% Napa Valley, Florida
Oranges, National Organic Program,
Underwriters Laboratories

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What is Protected Under Trademark
Law? (1 of 2)
Item Example(s)

Words Birchbox, Rent the Runway, National Football

League
Numbers and letters 3M, Boeing 787, AT&T

Designs and logos Nike swoosh logo

Sounds MGM’s lion’s roar

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What is Protected Under Trademark
Law? (2 of 2)
Item Example

Fragrances Stationery treated with a special fragrance

Shapes Unique shape of the Apple iPod

Colors Nexium—the “purple pill”

Trade dress The layout and décor of a restaurant

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The Process of Obtaining a Trademark
Figure 12.4

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Copyrights
• A copyright is a form of intellectual property protection
that grants to the owner of a work of authorship the legal
right to determine how the work is used and to obtain the
economic benefits from the work.
• The work must be in a tangle form, such as a book,
operating manual, musical score, or computer software
program.
• A work does not have to have artistic merit to be eligible
for copyright protection.
– As a result, things such as operating manuals and
sales brochures are eligible for copyright protection.
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What is Protected by a Copyright? (1 of 2)
Item Example(s)

Literary works Books, poetry, reference works, speeches

Musical compositions Musical score, CD, MP3 file

Computer software All forms of computer programs

Dramatic works Play, comedy routine, newscast, movie,

television show

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What is Protected by a Copyright? (2 of 2)
Item Example(s)

Pantomimes and Arrangements of dance movements, including

choreographic works ballets and mime works
Pictorial, graphic, and Photographs, prints, art reproductions,
sculptural works cartoons, maps, globes, jewelry, fabrics,
games, technical drawings, diagrams, posters,
toys, sculptures, charts

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Obtaining a Copyright
• How to Obtain a Copyright
– Copyright law protects any work of authorship the moment
it assumes a tangible form.
– Technically, it is not necessary to provide a copyright notice
or register work with the U.S. Copyright Office.
– The following steps can be taken, however, to enhance
copyright protection.
 Copyright protection can be enhanced by attaching the
copyright notice, or “copyright bug” © to something.
 Further protection can be obtained by registering the
work with the U.S. Copyright Office.

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Fair Use
• Copyright law permits limited infringement of copyrighted
material under certain circumstances.
• The certain circumstances are called fair use. Fair use
allows one to use copyrighted material for purposes such
as criticism, comment, news reporting, teaching or
scholarship.
• This provision is what allows movie critics to show clips
from movies.

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Trade Secrets
• Trade Secrets
– A trade secret is any formula, pattern, physical device,
idea, process, or other information that provides the
owner of the information with a competitive advantage
in the marketplace.
– Trade secrets include marketing plans, product
formulas, financial forecasts, employee rosters, logs of
sales calls, and similar types of proprietary information.
– The federal Economic Espionage Act, passed in 1996,
criminalizes the theft of trade secrets.

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What Qualifies for Trade Secret
Protection? (1 of 2)
• Trade Secret Protection
– Not all information qualifies for trade secret protection.
– In general, information that is know to the public or that
competitors can discover through legal means doesn’t
qualify for trade secret protection.
– Companies protect trade secrets through physical
measures and written documents.

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What Qualifies for Trade Secret
Protection? (2 of 2)
The strongest case for trade secret protection is information that is
characterized by the following.
• Is not known outside the company.
• Is known only inside the company on a “need-to-know” basis.
• Is safeguarded by stringent efforts to keep the information
confidential.
• Is valuable and provides the company a competitive advantage.
• Was developed at great cost, time, and effort.
• Cannot be easily duplicated, reverse engineered, or discovered.

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Physical Measures for Protecting
Trade Secrets
• Restricting access • Labeling documents
• Password protecting • Maintaining logbooks for
confidential computer files visitors
• Maintaining logbooks for • Maintaining adequate
access to sensitive material overall security measures

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Copyright

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