10: IP & Legal

Tuesday, April 27, 2010
Summary: This session will focus on intellectual property (IP), which is the cornerstone of a technology venture. Whereas old economy businesses built value in the form of factories and equipment, new economy businesses create the lion share of their value in intangibles; patents, copyrights, trade secrets and trademarks. An effective entrepreneur knows how to establish these key assets, and how to use them with investors, partners and competitors. IP issues vary across industries and product categories.  For example, protecting IP with patents is less critical for web 2.0 software ventures than it is for biotechnology ventures.

Government regulation is also an important factor in the market place that must be understood by entrepreneurs. In some cases a change in regulations can raise a company’s costs.  For example, the introduction of Sarbanes Oxley after the Enron scandal had a major impact on the systems to monitor compliance and the cost of building and managing those systems.  Sarbanes Oxley requirements sometimes led entrepreneurs to sell their companies to another company instead of having an IPO because the costs of compliance were too high as a stand-alone company.  In the wake of the financial crisis due to problem home mortgage loans, there are new regulations underway in the commercial banking and investment banking worlds.  There will soon be new regulations for Carbon Emissions as part of a new “Cap and Trade” system.
Like IP, some industries have greater regulatory requirements than others.  For example, food, drugs, and most new medical technologies require special approvals from the U.S. Food and Drug Administration (FDA).  The bad news is that the FDA approval process lengthens the product development cycle.  The good news is that it insures the safety of customers, and can make it harder for a competitor to catch up with an entrepreneur who has created a new market.

Quote of the Day:
"Build a better mousetrap and the world will beat a path to your door." Anonymous

(Click for Bios)
Dan Dorosin, Fenwick and West

Study Questions
(Policy on Study Questions.)
  • What is a patent? What is a copyright? What are primary differences between the two, and when would you choose one over the other?
  • What is a trade secret? How do you establish one? How do you protect it?
  • Are trademarks valuable to technology companies? Give an example of why or why not.
  • What is the difference between an assignment and a license? What are the critical issues to be defined in negotiating either?
  • What IP related issues have you discovered during your OAP?
  • What regulatory issues have you discovered that may affect your opportunity?
  • How will you go about learning how to anticipate and resolve IP issues and regulatory issues during your OEP?
Required Readings (Policy on Required Readings.)
Technology Ventures (Byers, Dorf, and Nelson):  Ch 10.3-10.8 (Highlights

Web Reading:
"Entrepreneurs: Beware the Curse of the New Building" - by Steve Blank 8/20/09
"US Office Joins an Effort to Improve Software Patents" - NYT 1/10/06
Browse the US FDA website to see what government information is relevant to medical ventures: http://www.fda.gov/default.htm

Watch the following short video clips: