WHAT IS INTELLECTUAL PROPERTY?
Intellectual property --- which includes patents, trademarks, copyrights, and trade secrets--- represents important assets to the entrepreneur and should be understood even before engaging the services of an attorney. Too often entrepreneurs, because of their lack of understanding of intellectual property, ignore important steps that they should have taken to protect these assets. This chapter will describe all the important types of intellectual property, including software and Web sites, which have become unique problems to the Patent and Trademark Office.
NEED FOR A LAWYER
Since all business is regulated b law the entrepreneur needs to be aware of any regulations that may affect his or her new venture. Aft different stages of the start-up, the entrepreneur will need legal advice. It is also likely that the legal expertise required will vary based on such factors as whether the new venture is a franchise, and independent start-up, or a buyout; whether it produces a consumer aspect of computer software, exporting, or importing.
We begin with a discussion of how to select a lawyer. Since most lawyers have developed special expertise, the entrepreneur should carefully evaluate his or her needs before hiring one. By being aware of when and what legal advice is required, the entrepreneur can save much time and money. Many of the areas in which the entrepreneur will need legal assistance are discussed in this chapter.
HOW TO SELECT A LAWYER
Lawyers, like many other professionals, are specialist not just in the law but in specific areas of the law. The entrepreneur does not usually have the expertise of know-how to handle possible risk associated with the many difficult laws and regulations. A competent attorney is in a better position to understand all possible circumstances and outcomes related to any legal action.
In today’s environment, lawyers are much more up-front about their fees. In fact, some cases these fees, if for standard services may even be advertised. In general, the lawyer may work on a retainer basis (stated amount per month or year) by which he or she provides office and consulting time. This does not include court time or other legal fees related to the action. This gives the entrepreneur the opportunity to call an attorney as the need arises without incurring high hourly visit fees.
In some instances the lawyer may be hired for a one-time fee. For example, a patent attorney may be hired as a specialist to help the entrepreneur obtain a patent. Once the patent is obtained, this lawyer would be needed, except perhaps if there was any litigation regarding the patent. Other specialist for setting up the organization or for purchase of real estate may also be paid on a service-performed basis. Whatever the fee basis, the entrepreneur should confront the cost issue initially so that no questions arise in the future.
Choosing a lawyer is like hiring an employee. The lawyer with whom you work should be someone you can relate to personally. In a large law firm, it is possible that an associate or junior partner would be assigned to the new venture. The entrepreneur should as to meet with this person to ensure that there is compatibility.
SEEN IN BUSINESS NEWS
CE TO AN ENTREPRENEUR REGARDING THE ROLE OF INTELLECTUAL PROPERTY IN SOFTWARE START-UPS
Historical study in 2008 that was conducted by Berkeley faculty has reveling statistics re-
The role of patents for software start-ups. -0 software entrepreneurs were surveyed to … their use of intellectual property to attain a –ive advantage in their markets. Interestingly, .. percent of the participants indicated that a …as the least important mechanism among …tions for achieving a competitive advantage. …ole largely included CEOs and CTOS drawn population of high-tech firms registered with .radstreet and from the VentureXpert (VX) … (all venture-backed firms). Researchers were interested in determining high tech start-ups were taking advantage of patent system to protect their intellectual property. It was believed that early stage higher ups would be more sensitive to Intellectual .. Rights since they would likely lack some advantages, such as well-defined marketing and access to cheap credit, held by more firms. Most important reasons for seeking patents, ..ed by survey respondents, were to prevent …ors from copying the innovations, to en…e firms’ reputation, and to secure invest…d improve the likelihood of an IPO. … there were distinct differences in the im-… of patents depending whether the re… was from the D & B database or the ..pert database. About 75 percent of the ..nple had not received a patent nore were having one. Over two-thirds of the venture-firms, however, had or were seeking patent ..nsons for this discrepancy were not … in survey questions but the researchers his difference was due to the influence of …e capitalists. …jor reasons for not seeking a patent were .. of patenting and the costs associated .. rcing a patent. Respondents indicated that the average cost of obtaining a software patent was just below $30,000. Just behind the cost factors was the possibility that the software could not be patented.
Since patents were not considered important in achieving a competitive advantage, “what was the most important factor in gaining a competitive advantage?” Among software start-ups, first mover advantage was the single most important strategy in achieving a competitive advantage. This sharply contrasts with biotech firms where patents are ranked the most important factor in attaining a competitive advantage. In addition, complementary assets such as the licensing of software or being able to offer a proprietary complement to an open source program were considered next most important.
The study provides much more comprehensive data that will require extensive data analysis for future publications. Comparisons between the patent rates of different sectors of the software industry, as well as differences between patent holders and nonpatent holders, are research issues that need to be addressed.