17 Jun HOW WILL YOU ACQUIRE THE IP WITHIN YOUR BUDGET?
Setting up the right legal entity and ensuring that the appropriate legal documentation is in place for a new venture is extremely important. However, trademark and copyright protections are another vital part of the legal landscape for a new start-up. These issues are exemplified by these cases: • Trademark Protection: Apple Corps vs. Apple Computer. • Copyright Protection: My Sweet Lord (George Harrison song) vs. He’s So Fine (The Chiffons) Briefly research and discuss the merits of one or both cases. You may also share alternative examples. Also make references from the reading and research.
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JWI 575
New Business Ventures and
Entrepreneurship
Week Eight | Lecture One
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Please note that this basic version of the lecture is provided as a convenience for the student, and may be
missing interactive materials throughout. Students are still responsible for reviewing the missing
materials – including audio, video, and interactive widgets – that are found in the full lecture.
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THE BASICS OF INTELLECTUAL
PROPERTY
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An earlier lecture discussed your source of sustainable competitive
advantage.
Intellectual property is key to protecting your advantage and
delivering value to your customers.
If you have a way of delivering value, and would-be competitors
catch wind of it, what’s to stop them from taking your customers
away? In some cases, you might offer good service, which anyone
can try to copy. But in other cases, you can protect your special
edge.
Protectable ways of operating are generally referred to as
“intellectual property.”
Let’s look at a few common types: patents, copyrights, trademarks,
and trade secrets.
PATENTS
The U.S. Patent and Trademark Office (USPTO) and other
international bodies award patents. These are generally used to
exclude others from practicing your invention. The invention is
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typically a device or machine, but it can also be a process in some
cases, or for example, something like a drug compound.
In order for you to receive a patent, your invention must meet three
criteria. It must be: novel, useful, and nonobvious. The “novel”
requirement is important, and also ties in with nondisclosure
agreements, discussed in the last lecture. If you have already told
the public about your invention, or if the public already knows
about it through other sources, then you can no longer claim it is
novel. The “nonobvious” test can be a tricky one, and generally it is
determined through an evaluation by a person “skilled in the art”
you are practicing.
In the U.S. a patent lasts 20 years, and you are required to publish
the patent. In some sense this is the government’s way of making a
deal with you to both reward you for your invention but also to
allow society at large to benefit. Go public and teach the world how
to do what you’ve invented, it might say, and in exchange, you get to
enjoy 20 years of excluding others who might practice this
invention unless they pay you for the privilege.
Bear in mind that being awarded a patent does not automatically
give you the right to sell your invention. Your invention might
actually rely on someone else’s existing patent, and you may have to
go to that party and license the rights to use the technology.
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As a simple example, let’s say that someone long ago had patented
the drinking container, and held a patent on any cylindrical vessel
that could hold liquid. That seems like a broad patent to have
received, but let’s just pretend that this patent existed.
Now, you come along and burn your hand on a hot glass of coffee.
You decide it would be a great idea to put a handle on the side of
that drinking container. Lo and behold, you’ve invented the mug
with a handle. In the hypothetical situation where no one else had
thought of or done this before, you would be correct in asserting
that your invention is novel. And it’s certainly useful. Let’s just
pretend you could get past the nonobvious test and are awarded
your patent for the handle that goes on the side of a drinking vessel.
You’ll want to sell your mugs next. But before you can do that, you’ll
need to license the rights to use the technology covered under the
original patent awarded to the inventor of the drinking container.
What’s more, the owner of the original patent is now in a position
such that if he wants to provide the latest and greatest product to
customers, he needs to license your technology. You and the other
patent holder are in for an interesting relationship.
COPYRIGHTS
A copyright is granted for written, spoken, or performed words or
music. It is not a way of protecting a specific invention, but rather
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protects a specific expression of an idea. Every book is copyrighted,
for example.
An example that illustrates these differences can be found in
computer programming. You might receive a patent for inventing a
special method of performing some calculation or function. EBay
has received a patent for a set of rules used in a special type of
auction. But the computer program that performs this patented
process is not patented. It is protected by copyright. No one can
make a copy of those computer instructions in the program,
regardless of whether the software implements a patented
procedure.
TRADEMARKS
Trademarks are used to protect a logo, symbol, short phrase, brand
identity, or in some cases, a service description (also known as a
“service mark”). Two symbols—™ and ®—are used to express that
someone either wants to get, or has already received, a trademark
for his logo or phrase.
Anyone can declare an intent to trademark a name like Gizmo-
Contraption™ by placing the trademark symbol next to it. The
symbol puts other people on notice that you want to own that
phrase. You then file for a proper trademark with the USPTO, and if
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approved, it registers your trademark. Then you can talk about your
new Gizmo-Contraption®.
TRADE SECRETS
With patents, you have to file an application, meet various criteria,
and then publish your invention to the world. There are some cases
in which you might not want to do this.
One of the most famous examples was the formula for Coca-Cola.
Coke could have decided to patent its formula, and then prosecute
anyone caught using it. But its patent would have lasted only 20
years (actually it was 17 years back in the day when Coke was
invented), after which the formula would have been out there for
all to use. Instead of filing for a patent, Coke decided to simply keep
the recipe a tightly guarded secret. There are some legendary
stories about the degree to which Coke has gone to hide the formula
even from its own bottlers and vendors. This strategy has worked
well.
PUTTING IT ALL TOGETHER
To help bring these issues to life with a real-life example, let’s
consider the source of advantage that a Starbucks cafe offers, and
the value it delivers to its customers. When you are walking down
the street and see the familiar green circular logo, you know that
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you are about to enter a real Starbucks. That logo is trademarked.
No other cafe could hang the logo on its storefront and attempt to
lure would-be Starbucks customers into its shop.
You then might sip some coffee prepared in a special machine that
Starbucks has patented, so no other cafe can buy that machine.
Maybe this machine produces a special taste that is something you
value, and no other competitor can use that machine to produce
that taste without violating Starbucks’ patent. The company may
have developed methods for training employees in proper customer
service or arranging items on the shelves that give a Starbucks a
special feel compared with competitors, and these techniques might
be trade secrets. And if you enjoy special music while you’re inside a
Starbucks, you are listening to copyrighted material that Starbucks
has licensed to play in its store.
WHICH TYPE OF IP IS RIGHT FOR YOU?
Start by understanding the value you deliver to your customers,
then think about how you protect that value. Ask:
• Does IP matter for your venture, and how much?
• How will you acquire the IP within your budget?
• How will you keep the IP relevant, and defend it if needed?
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