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The Legal Environment
CHAPTER 8
Legal Issues Facing Start-Ups
 Protect your Intellectual Property: its an asset
 Intellectual Property Law: the group of laws that
regulates the ownership and use of creative works.
 Trade Secrets:
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The basis of all intellectual property is trade secrets, which are
covered under the UNIFORM TRADE SECRECTS ACT (UTSA)
May consist of a formula, device, idea, process, pattern or
compilation of information that is not general knowledge or
accessible by other people
Companies will often ask employees to sign confidentiality
agreements that details what is a trade secret
Protecting Your Ideas
 Patents:
 Grants an inventor the right to exclude other from making,
using, or selling an invention during the term of the patent.
 A Non-Provisional Patent lasts for 20 years from date of
application
 File a Provisional Patent first gain one or more years. Used
to give inventors protection while talking to manufacturers
and inventors.
 Patent life expires – becomes Public Domain anyone can use
it free of charge
Protecting Your Ideas
 Patents: how to qualify 4 rules US Patent and
Trademark Office (USPTP)
1.
2.
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4.
Invention must not contain prior art: not based on
anything publicly available
Invention must fit into one of five classes: machine,
process, manufacture, composition, new use for one of 4
Invention must be “unobvious”: should be new and
unexpected even to someone skilled in the field
Invention must have utility: must be useful, not just
whimsical or silly.
Many companies choose not to patent a new device , but hold
it as a trade secret. Once the patent is issued, anyone can
view it and may try to find a way around the patent
Protecting Your Ideas
 Patent Application:
 File a disclosure document with (USPTO)
 In application confirm that you are the inventor of product and
describe it in detail
 Your 1st patent must be provisional patent lasts for 12 months.
During this time file a non-provisional
 Use a qualified Patent Attorney to help with application
 Patent Search:
 Done by USPTO
 During this time the Patent is Pending time period from filing
to either issue or rejection
Protecting Your Ideas
 Patent Application:
 Patent Search:
 Patent Infringement:
 When someone makes and sells a product that contains all
elements of a patent claim.
 Patent is a powerful document, right to enforce document in
Federal Court. If the holder wins, the court issue an injunction
preventing the infringer from further use. Also award the
patent holder monetary damages
Protecting Your Ideas
 Trademarks:
 A word, symbol, design or color that a business uses to identify
itself or something it sells.
 Trademark symbol
before it’s registered
and the
after it’s registered
 Service Mark:
 A word, symbol, design or color that describes a service
business
 Trademark
 provides legal protection with the USPTO, can’t be protected
until holder actually uses it
 Held indefinitely unless it becomes common usage in English
language
Protecting Your Ideas
 Copyrights:
 A legal device that protect original works of authors; includes
books, movies, software, and music
 Last for the life of the author plus 70 years. After that it
becomes Public Domain.
 Only protects the form the idea is presented, not the idea itself
 Copyright Law:
1.
2.
Place a notice of copyright in a prominent location on the work.
This notice must include the symbol
or the word copyright,
the year of first publication, and the name of holder.
Register the work with the Copyright Office, branch of Library
of Congress
Laws that Affect Start-Up of a Business
 Permits and Licenses:
 a legal document giving official permission to run a business
 Obtain from office in that issues licenses in your city
 Probably renew it each annually
 Pay periodic fees over the life of the business the amount is
usually based on how much the business earns
 Certain professions require you to get a license, a certification
that you have the necessary education and training to do job
 Licensing requirements vary from stator or locality to another.
Laws that Affect Start-Up of a Business
 Contracts:
 A binding legal agreement between two or more persons or
parties.
 Various types of contracts
Oral contract: unwritten contract that does not last for more than
a year
 Void contract: did not really exist because one or both parties did
not have the capacity to enter into the contract.
 Valid contract: most common for businesses, meets several
important criteria

Laws that Affect Start-Up of a Business
 Contracts:
 Various types of contracts
Valid contract: most common for businesses, meets several
important criteria
 AGREEMENT: one party offers or promises the other party accepts
 CONSIDERATION: exchange for the promise
 CAPACITY: legal ability to enter into binding agreement. By law
minors, intoxicated persons, and people who are legally insane
cannot enter into contract, agreement considered void
 LEGALITY: can not have any provisions that are illegal or that
would result in illegal activities.
 Failure to live up to obligations seek monetary damages amount
determined by the courts
 Avoid misunderstanding draw up a legally binding contract

Laws that Affect Start-Up of a Business
 Location
 ZONING LAWS and BUILDING CODES
Conform to local zoning laws, designate areas or zones for certain
uses.
 Zones usually residential, commercial, industrial or public.
 Environmental issues, restrict disposal of waste, noise and air
pollution and unsuitable building styles.
 Type and style of sign and appearance of building
 Standards for construction or modification of buildings, such as
strength of concrete, amount of insulation and other structural
requirements
 Local governments employ inspectors to verify codes are meet

Laws that Affect Start-Up of a Business
 Leasing
 Limited resources start with leasing building and equipment
rather than buy them
 A contract between lessee (no ownership) and lessor (owner)
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Doesn’t require spending a large amount of money up front
Lease expenses are tax deductible
Complex document, it states the terms, length of lease,
monthly rent, penalty for failing to pay, and procedure for
termination.
It’s a long term contract use an attorney before signing
Laws that Affect Businesses
Large and small businesses are affected by federal, state, and local gov’t.
 Location:
 zoning laws, building codes, leases, rental contracts
 Employees:
 Equal opportunity, child labor, wrongful termination, sexual
harassment, Americans with Disabilities Act, Family medical
leave, Equal pay for equal work, Fair labor standards, and
workplace health and safety
 Taxes:
 Sales tax, payroll taxes, Federal unemployment tax, and Business
income tax
Laws that Affect Businesses
Large and small businesses are affected by federal, state, and local gov’t.
 Trade Issues:
 Price discrimination, Consumer protection, Uniform commercial
code, truth in lending and truth in advertising
 Product area:
 Patents, Copyrights, and Trademark
 Start-Up
 Permits, Licenses, and Contracts
 Laws and regulations are designed to protect
employees, other businesses, and customers from
unfair, unsafe, or unhealthy business practices.
Laws That Affect Employees
Discrimination in hiring
Child labor laws
Wrongful termination
Sexual harassment
Americans With Disabilities Act
Family Medical Leave Act
Equal Pay Act of 1963
Fair Labor Standards Act
Occupational Safety and Health Act
Laws That Regulate Trade
 Laws that regulate trade include:
price discrimination laws
consumer protection laws
The Uniform Commercial Code (UCC)
truth in lending laws
truth in advertising laws