MGMT 3710Entrepreneurial Foundations

Chapter 2

The Opportunity

Intellectual Property

Intellectual Property:The Story of CDs Came out in mid-80s as a replacement for flat-

selling vinyl and cassettes

Phillips Corporation came up with idea for new storage 75 minute playback time allowed for Beethoven’s 9th

to be stored on it!

Artists still being paid royalties based on album prices ($9-10 versus $16-18 for CD) Record companies pocketed the profits!

Intellectual Property:The Story of CDs Record companies stopped process of allowing

returns on vinyl that didn’t sell “Forced” record stores to carry CDs to avoid risk Stopped carrying old recordings on vinyl

Cost of making a CD dropped to around $0.80 each

The consumer revolted!!

Intellectual Property

Knowledge, information, and ideas that are critical to success

“Any product of human intellect that is intangible but has value in the marketplace”

Take the eToys story KB bought them for $14 million at a bankruptcy sale Logo, design, customer list Management bought assets from KB eToys still operates KBtoys.com under licensing

When Should We Protect Our Intellectual Property First, we have to identify what it is

Do we have intellectual assets?What is it about them that we don’t want

others to have? Design? Logo? Name?Can we protect that?

Then, we have to decide if that asset gives us a competitive advantage and if the market places value on it!

Examples of Things that We Might Want to Protect Brand name Slogans Ads Brochures Customer lists Procedure handbooks Training materials Newsletters

Web site design Domain name Computer code for

programs Inventions Improvements in

process Lab notes

From Intellectual Assets to “Intellectual Property” Four Types of Intellectual Property

PatentsTrademarksCopyrightsTrade Secrets

Why Protect?For the firmFor the consumer

Patents

Federal government states that no one else can make your product for a certain period of time

The owner of the patent can only make the product IF no one else has the right to do so FOR THAT USE.Microsoft vs. Apple on the iPod patent

Patents

Problems with patents?LoopholesTime from filing to ruling (27.7 months!)

Three types of patentsUtility patentsBusiness method patentDesign patent

Utility Patents

Inventions that are useful, novel, and not obvious to an ordinary Joe of the field

Term of 20 years

Drawings and technical specifications must be submitted – the USE is protected

Cannot have been mentioned or sold in U.S. for more than a year before it is patented or patent cannot be filed

Other Patents

Business method patents Process improvements Amazon’s one-click ordering system Netflix’s rental list system

Design patents Good for 14 years On design of manufactured product

Plant patents (Hybridization protection) 20 year time span

How to Apply for a Patent

Make sure you’re the inventor, a legal assignee of the inventor, or the purchaser of the invention

Make sure the product is useful

Document all activities of invention

Hire a patent attorney to write the application (1 to 2 months)

Conduct a patent search (get attorney to)

File application ($5000 )

Meet with examiner on decision

Trademarks

A word, name, symbol, device used to identify products with their maker

Renewable every 10 years

Service mark Same as trademark, but for

service companies Collective marks

Used by groups

Certification marks Serves as mark of quality

UL Good Housekeeping Seal American Board of Pediatrics

Seal

What Can Be Protected By Trademarks? Words

Slogans, phrases

Numbers and letters U2 1-800-FLOWERS

Designs and logos

Sounds

Fragrances As long as the product is

not used for its scent!!

Shapes and packaging

Colors

***When a characteristic affects the way the product is used, that’s more ofa utility patent issue!****

To Register Your Mark…

Stop first – once a mark is used in commerce, it’s protected by the government

BUT… if you register, You get priority in use (in case someone in WA starts

using it, too) You get protection from imports using it You get the little ® symbol Around $1000-2000 for the process

Copyrights

On original works of authorshipLiterary worksMusicDramatic worksChoreographyPictures and art

To Obtain a Copyright

Like trademarks, protection begins when work is made tangible

But, if you copyright..You get the copyright bug - ©For $30 filing fee, you scare off would-be

copiersProtection for the life of the author plus 70

years or 95-120 years for something created in a business!

But Is It All That Useful?

Think of the Internet and all of the pages that have the same cut and pasted information on them.All of this is intellectual property right violation!

Case must prove that the violator saw this work before “copying” it

Trade Secrets

Things that need to be protected, but don’t fall under copyright, patent, or trademark protectionFormulas, patents, patterns, physical devices,

ideas, processes, or information that gives you a competitive advantage

Varies from state to state!Must be something that the company doesn’t

let out (no one could get it legally)

Protecting Trade Secrets

Label things as “Confidential” Restrict access to important information Maintain logbooks for visitors Make people log out sensitive material Shred drafts Ask employees to sign

nondisclosure/noncompete agreements

Get Into Groups!!!Analyze the following business ideas for possible intellectual

property issues and present what you would do to address them. You and your division create a new method of developing

innovation within the firm You invent a method of recording video with a remote control

keychain You write a new song that the Omaha Royals adopt for their team

song You write a policy manual that the rest of the company wants to

adopt for their locations You develop a consulting plan for start-up businesses You want to start a coffee shop You start an organization to help disadvantaged children set career

paths

Parts of an Intellectual Property Audit

1. See what is currently protected, and how

2. See how works in progress are being protected

3. Figure out anything else that is of competitive value and describe how that is being protected/come up with a plan of protection