Chapter Five

Intellectual Property
and
Other Legal Issues
The Concept of Intellectual
Property
 IP Incentive Theory

• Incentives to invent

• Incentives to disclose

• Incentives to commercialize
 Patents
• It must have utility. (It must be useful
with a practical purpose.)
• It must not contain prior art. It must be
novel in an important way that is not
known by others and not previously
published for public consumption.
• It must be non obvious to someone with
ordinary skills in the field of invention.
For example, it cannot be the logical next
step in a known process.
 Five Classes of Patents
1. Machine or something with moving parts
or circuitry (e.g., fax, rocket, photocopier,
laser, electronic circuit).
2. Process or method for producing a useful
and tangible result (e.g., chemical reaction,
method for producing products, business
model).
3. Article of manufacture (e.g., furniture,
transistor, diskette, toy).
4. Composition of matter (e.g., gasoline, food
additive, drug, genetically altered life-form).
5. A new use or improvement of something
from the first four categories.
 Types of Patents
• Utility patents
– Functional part of a machine or process
• Business method patents
– A form of utility patent under the
classification of process
• Design patent
– Visual ornamental characteristics of an
article of manufacture
• Plant Patent
– New and distinct varieties of asexually
reproducing plants
 An Effective Patent Strategy
• Establishes a temporary monopoly
– First-mover advantage
• Improves financial performance
– Majority of assets reside in IP – use as revenue
generators
– Save money by using as bargaining chips
• Increases competitiveness
– First mover advantage
– Can be licensed
– Patents of competitors yield important
intelligence
When and
If to Patent
 Patent Infringement
• When a party other than the inventor or legal
licensee makes and sells a product that
contain every one of the elements of a claim in
the patent

• Successful prosecution of an infringer will

result in a reasonable royalty and an
injunction to prevent further use

• Defendants bear the burden of proving the

patent is invalid

• Courts tend to favor inventors

 Trademarks
• Symbol, logo, word, sound, color, design, or
other device used to identify a business or
product

• Holder has right to exclude others from

using confusingly similar marks
– Counterfeiting and misappropriation
– Infringement, when a mark can cause confusion
– Dilution, when use dilutes the value of the mark
to the owner

• For valid trademark, must show intent-to-use

or that the mark is in use in country
commerce.
 Protecting Trademarks
• The standard for judging trademark
infringement is the likelihood of
confusion
• Trademarks are adjectives that
describe – they are not the product
• Monitor all uses of the company’s
trademark and make sure it is used
correctly
 Trade Secrets
• Information such as formulas, patterns,
devices, etc. that derive value from not
being known and are not readily
ascertainable.
• Any information commonly known or in
common use cannot be a trade secret
• Conveys the right to prevent others from
copying, using, and benefiting from the
secret.
 Copyrights
• Protect the original works of authors,
composers, screenwriters, computer
programmers, and other developers of
creative works.
• Protects artistic works
• Work must be in a tangible form
• Copyright notice is not required

– © Copyright 2012 by [name of

copyright holder]
 Licensing Intellectual Property
• Licensing: a grant to another party that
permits development, manufacture,
distribution, and use of the licensor’s IP.
• Advantages of licensing
– Platform technologies have too many
applications for one company to handle
– Inventor company does not have the resources
to develop applications
– May be more profitable
– Reach multiple markets without the expense of
distribution channels
 Licensor’s Perspective
• Decide what will be licensed
• Define the benefits to the licensee
• Determine the value of the license
– The economic life of the IP
– Potential for direct competition
– Potential for negative government legislation or
regulation
– Changes in market conditions that might obsolete
the technology
• Conduct market research
• Screen candidates
• Manage the license
 Licensee’s Perspective
• Search for the right technology
– Does the technology work in the way the licensor
claims?
– On what measures are the performance data
calculated?
– Will the licensor provide any guarantees of the
technology’s performance?
– Is the technology completely owned by the
licensor or does the licensee also have to be
concerned about another party and their role in
the process?
• Prepare a business plan
• Negotiate the type of license
– Exclusive
– Non-exclusive
Intellectual Property
Protection

In Ethiopia
 In Ethiopia …
• Ethiopia has enacted laws for the protection
of
– Inventions,
– Literary and artistic works,
– Distinguishing marks and new plant varieties
Through patents, copyright, trademarks and plant
breeders’ rights
• Ethiopia is also party to several international
intellectual property agreements
 Intellectual Property Laws in Ethiopia
• Traditional Knowledge (Access Genetic Resources No. 482),
Proclamation, 2006 - Proclamation No. 482/2006 Access to Genetic
Resources and Community Knowledge, and Community Rights
Proclamation
• Copyright, Law (Proclamation), 24/07/2004, No. 410 - Proclamation
No. 410/2004 on Copyright and Neighboring Rights Protection
• Industrial Designs (Proclamation No. 123/1995), Regulations,
10/12/1996 - inventions, Minor Inventions and Industrial Designs
Regulations (Proclamation No. 123/1995)
• Industrial Property, Law (Proclamation), 10/05/1995, No. 123 -
Proclamation No. 123/1995 concerning Inventions, Minor
Inventions and Industrial Designs
• Industrial Property (Science and Technology Commission), Law
(Proclamation),1994, No. 91 - Proclamation No. 91/1994 to Provide
for the Establishment of the Ethiopian Science and Technology
Commission
• Other (Transfer of Technology), Regulation, 1993, No. 121 -
Council of Ministers Regulations to Regulate the Transfer of
Technology No. 121/1993
 Patent in Ethiopia
• “Inventions, Minor Inventions and
Industrial Designs” Proclamation was
enacted in 1995 with the objective of
encouraging local inventive activities
• A patent is given in Ethiopia for 15 years
(and additional five years if the patentee
works the invention in the country.)
• Included in the country’s patent law is the
protection of minor inventions through
utility model certificates and the
protection of designs through industrial
design registration certificates.
 Trademarks
• Ethiopia has issued a Trademark Law in July
2006 for the protection of signs which
distinguish goods or services

• The registration of a trademark in Ethiopia

shall remain valid for a period of seven years

• A trademark which is entitled to protection

under an international convention to which
Ethiopia is a party
In Ethiopia
• In Ethiopia the law does not permit illegal
copying of books, music tapes or
computer software for business purposes

• The exceptions are copying of the

mentioned works for personal use, for the
purpose of teaching and for use in
libraries, museums and other similar
institutions
 Need For a Lawyer
• Entrepreneurs needs to be aware of any
regulations that may affect his or her new
venture.
• At different stages of the start-up there will be a
need to seek legal advice.
• The legal expertise required will vary based on
such factors as whether the new venture is
independent start-up, a buyout, consumer versus
industrial product, a franchise, nonprofit, or
involves exporting or importing
• By being aware of when and what legal advice is
required, the entrepreneur can save much time
and money.
 Business Registration
• For a business to operate legally there is a
need for registration and getting a license
from the appropriate regional and/or federal
government body.
• For registering a business there are different
requirements.
– Examples: the legal form of the business, its size,
and the sector of operation.
• The entrepreneur needs to determine the
requirements from the appropriate
government body or business formation
advisors.
 Product Safety and Liability
• Product liability problems are complex and
are important consideration for
entrepreneurs

• Claims regarding product liability usually

fall under one of the following categories:
Negligence, Warranty, Strict Liability or
Misrepresentation

• The best protection against product liability

is to produce safe products and to warn
consumers of any potential hazards
 Insurance
• It is in the best interests of the entrepreneur
to purchase insurance in the event that
problems do occur.
• It is important for the entrepreneur to not
only determine what kind of insurance to
purchase but also to determine how much
to purchase and from what company.
• Seeking advice from an insurance agent is
often difficult because the agent is trying to
sell insurance.
 Taxes
• Tax is one of the legal concerns of
entrepreneurs
• There are many kinds of taxes that
entrepreneurs have to withhold
and/or pay to the government.
 Cont’d
• Taxes can be classified into two as direct
taxes and indirect taxes.
– Direct taxes include personal income, business
profit tax, tax on income from rental of building,
tax on interest income on deposits, dividend
income tax, tax on income from royalties etc.

– Indirect taxes include turnover tax, value added

tax (VAT), excise tax, and customs duty.
Cont’d
• Entrepreneurs need to know the taxes that
apply to their business and to which
category of taxpayers they belong.

• There may be a need to get advice from

experts on how to manage taxes.
• Final Exam(50%) – January 01,2017
–All Chapters
• Business Plan Submission(30%)- January
15,2017
–Both soft copy(CD) and Hard Copy up
to 6:00pm
• Assignments, presentations….(15%)
• Attendance(5%)