4 – Legal Issues for Entrepreneur

Introduction

The basic legal steps before starting a business are handling issues with previous employers, choosing a company name, filing all documents with the secretary of the selected state, paying all required fees to the desired state, working on equity capital structuring, drafting employee agreements, and drafting legal documents for incentive stock options.

We anticipate that you will require legal assistance in the following areas: Formal litigation; delinquent accounts; liability protection; merger and acquisitions; employee benefit plans; tax planning and review; government and regulatory reporting; personal needs of the venture team; real estate and leasing agreements; employee stock ownership plans; franchising and licencing; formal litigation; delinquent accounts; liability protection; merger and acquisitions; employee benefit plans; tax planning and review; government and regulatory reporting.

4.1 Intellectual Property Rights

Inventions, literary and artistic works, symbols, names, images, and designs used in business are all examples of intellectual property (IP).

Did you know that there are two types of intellectual property? Copyright, which includes literary and artistic works such as novels, poems, plays, films, musical works, artistic works such as drawings, paintings, photographs, sculptures, and architectural designs; and industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source.

Copyright includes the rights of performing artists in their performances, phonogram makers in their recordings, and broadcasters in their radio and television shows.

Intellectual Property (IP) connotes that the subject matter results from the mind or intellect. IP examples include patents, Trademarks, Geographical Indications, Industrial Designs, Layout Designs (Topographies) of Integrated Circuits, Plant Variety Protection, and Copyright.

Like any other type, intellectual property can be traded, which means it can be possessed, bequeathed, sold, or acquired. Its main characteristics, however, are its intangibility and lack of consumption depletion.

Intellectual property is the bedrock of a knowledge-based economy. It permeates all areas of the economy and is becoming increasingly vital for ensuring corporate competitiveness.

The many components of intellectual property rights are as follows:

4.1.1 Copyrights

Indian law grants authors of original works of authorship such as literary works (including computer programs, tables, compilations, and computer databases), dramatic, musical, and artistic works, cinematographic films, and sound recordings a type of intellectual property protection known as copyright.

Copyright law protects expressions of ideas rather than ideas themselves. Under Section 13 of the Copyright Act 1957, copyright protection is granted to literary works, theatrical works, musical works, artistic works, cinematograph films, and sound recordings. Books and computer programmes, for example, are protected as literary creations under the Act.

Copyright is a set of exclusive rights granted to the copyright owner under Section 14 of the Act. These rights can only be exercised by the copyright owner or any other person who has been lawfully licenced in this regard by the copyright owner.

All original literary, artistic, musical, dramatic, cinematograph and sound recording works are granted copyright protection. “Original” refers to a job not copied from another source. Copyright protection begins when a work is created, and it is optional to register it. However, obtaining a registration is always recommended for better safety. Copyright registration does not give any rights; it is just prima facie evidence of an entry in the Copyright Register kept by the Registrar of Copyrights regarding the work.

According to Section 17 of the Act, the work’s author or creator is the copyright’s original proprietor. In cases where an employee develops a work in the course and scope of employment, the employer becomes the copyright owner.

4.1.2 Trademarks

The Trade Marks Registry was created in 1940 in India. It now manages the Trade Marks Act of 1999 and its guidelines. It serves as a reference and information centre for trade mark issues in the country and a facilitator.

The Trade Marks Act of 1999 aims to register trademarks applied in the country, improve trademark protection for goods and services, and prevent fraudulent use of the mark.

The Registry’s primary role is to register trademarks that meet the requirements of the Act and Rules.

A trademark is a unique mark of authenticity that distinguishes the products of a specific maker or distinct commodities of a particular manufacturer, trader, or vendor from those of others. The Indian Trademark Act, of 1999, which lays out the laws and regulations, is primarily responsible for governing trademarks in India. According to the Act, a trademark is a mark that may be expressed graphically and can differentiate one person’s goods or services from those of others, and it can include the shape of the items, their packaging, and the mix of goods. The Act’s definition of a mark is not exhaustive, and the combination of several forms of markings is nearly limitless.

The Trademark Act of 1999 governs brand name/trademark protection in India. The Trademark Act of 1999 lays out the steps for registering a trademark as well as the responsibilities that come with it. The law defines a device, brand, heading, label, ticket, name, signature, word, letter, numerical, shape of goods, packaging, or mix of colours, or any combination thereof as a “Brand name/ Trademark.” A proprietor, partner, trust/society, or firm with a principal place of business can file a trademark under Indian trademark law.

Trademark and Copyright Law

Copyright and trademarks are essential components of intellectual property protection. Copyright provides long-term protection for literary, artistic, and musical works, whereas trademarks are protected against copying for as long as they are used in commerce. According to Indian legislation protecting intellectual property rights, all creative, literary, musical, and dramatic works are protected by copyright. However, a certificate from the Registrar of Trademarks is required if they are to be used in conjunction with commodities. As a result, even though they are subject to different laws, they are still two sides of the same coin.

4.1.3 Business Secrets

A trade secret is a formula, technique, technology, or other commercial information kept hidden to gain a competitive advantage. It is information—including a formula, pattern, compilation, programme, device, method, technique, or process—that:

1. Derives independent economic value, actual or potential, from not being widely known or readily ascertainable by others who can derive economic value from its disclosure or use and
2. Is the subject of reasonable efforts to maintain its secrecy under the circumstances. “A Trade Secret is an excellent instrument for protecting an entrepreneur’s Intellectual Property Rights.”

According to Chambers 21st Century Dictionary (Reprinted in 2000, page 1491), a trade secret is a substance, technique, or other information that a corporation or individual will not reveal because they believe it will give them an advantage over their competitors.

According to the Oxford Advanced Learners Dictionary, a trade secret is information about how a specific product is manufactured that is known only to the company that produces it.

A trade secret is any sensitive commercial information that gives an organisation a competitive advantage. A trade secret is a formula, technique, procedure, design, instrument, pattern, or compilation of information that a company uses to gain a competitive or consumer advantage. These trade secrets are sometimes referred to as “confidential knowledge.” A trade secret is any formula, pattern, physical device, idea, process, compilation of information, or other information that:

• gives the owner of the information a competitive advantage in the marketplace, and
• is treated in such a way that the public or competitors cannot reasonably expect to learn about it except through improper acquisition or theft.

Unlike other types of intellectual property, trade secrets are fundamentally internal instruments. Their owner bears the responsibility for their protection, and they are kept under wraps.

The Coca-Cola recipe is the most well-known example of a trade secret. This formula is kept in a bank vault in Atlanta, can only be opened by a company board resolution, and is only known to two employees at a time. The names of those personnel are not available to the public, and they are not permitted to fly on the same plane.

A trade secret is proprietary knowledge that is not widely known. The data must have a separate economic value, either actual or projected and must provide a competitive advantage to the possessor. On the other hand, English law makes no distinction between different categories of sensitive information. However, Trade Secrets can refer to a variety of things.

The following are a few of them:

• Negative information
• Technical and scientific information
• Commercial information
• Financial information

4.1.4 Patents

The right to a patent differs by country. In India, the “Indian Patent Act of 1970” governs patent rights. For a limited time, the Indian Patent Act of 1970 guarantees the inventor exclusive rights to his creation. In general, the patent holder is awarded 20 years. Still, in the case of inventions connected to the manufacture of food, pharmaceuticals, or medicine, the period is reduced to seven years from the date of the patent. To register, there is a legal procedure that must be followed. Several attorneys assist inventors in patent registration by supplying them with the most up-to-date information. Patent registration in India can be done singly or jointly. In the case of a deceased inventor, his legal representative can act on his behalf. Along with the application form, all essential documents must be submitted. Only after verification is the applicant given a registration certificate.

India’s Patent Law

The General Controller of Designs, Patients, and Trademark Patents, as well as geographical indications, oversees India’s entire patent system and law. The general controller’s office is part of the Department of Industrial Promotions and Policy. In India, there are four patent offices: the head office is in Kolkata, while the other offices are in Delhi, Chennai, and Mumbai. Each patent office’s examiners must disclose their work according to the controllers’ instructions.

Because patent law is so complicated, hiring a patent attorney is critical. Patent law, which concerns the protection of ideas, is one of the fastest-expanding branches of law. By preserving inventors’ rights, the government can ensure that people will continue to develop unique and innovative ideas to share with the rest of the world.

The following are the most essential characteristics of Indian patent law that determine whether a patent will be granted or not:

1. The Purpose: Indian patent law promotes scientific research, new technology, and economic advancement.
2. Inventive Step: According to the fundamental premise of patent law, a patent is only granted for an innovation.

4.2 India’s Intellectual Property Rights

Trade-Related Intellectual Property Rights (TRIPs) is a significant WTO agreement for entrepreneurs. India has changed its intellectual property laws to comply with WTO requirements, but developed countries are still concerned about implementing IPR laws.

In India, whether patents, trademarks, copyrights, or industrial designs, a well-established statutory, administrative, and judicial system is in place to protect intellectual property rights. Even if they were not registered in India, well-known foreign trademarks have been safeguarded. Court rulings have expanded the Indian Trademarks Law to include service marks and trademarks for goods. Court judgments have successfully suppressed piracy in the computer software industry. Databases on computers have been safeguarded. The courts afforded trade secrets broad protection under the notion of a violation of confidence. India has recognised the right to privacy, which is not protected even in some developed countries.

In India, the protection of intellectual property rights is being enhanced even more. In 1999, international practices considered and passed major legislation protecting intellectual property rights in conformity with India’s TRIPS responsibilities. These are some of them:

1. The Patents (Amendment) Act of 1999, which amends the Patents Act of 1970 by establishing a mailbox system for filing patents and granting exclusive marketing rights for five years, was passed by the Indian Parliament on March 10, 1999.
2. During its Winter Session, which ended on December 23, 1999, the Indian Parliament enacted the Trade Marks Bill, 1999, which repeals and replaces the Trade and Merchandise Marks Act, 1958.
3. Both chambers of the Indian Parliament passed the Copyright (Amendment) Act, which the President of India signed on December 30, 1999.
4. The Geographical Indications of Goods (Registration & Protection) Bill, 1999, a one-of-a-kind legislation for the protection of geographical indications, was approved by both chambers of the Indian Parliament on December 23, 1999.
5. The Lower House of the Indian Parliament is debating the Industrial Designs Bill 1999, which repeals the Designs Act 1911. The Winter Session ended on December 23, 1999.
6. The Patents (Second Amendment) Bill, 1999, was introduced in the Indian Parliament’s Upper House on December 20, 1999, to alter the Patents Act, 1970, and make it TRIPS compliant.

In addition to the aforementioned statutory reforms, the Indian government has taken several steps to streamline and strengthen the country’s intellectual property management system. With the assistance of WIPO/UNDP, projects relevant to the modernization of patent information services and trademark registry have been implemented. For 756 million, the Indian government is implementing a project to modernise patent offices, which includes several components such as human resource development, recruiting additional examiners, infrastructure support and strengthening through computerization and re-engineering work practices and eliminating patent application backlogs. On June 2, 1999, a change to the Patent Rules was notified to streamline the procedural aspects.

It is also proposed that the Trade Marks Registry be strengthened and upgraded. Previously, between 1993 and 1996, a modernization project was performed. For ’86 million, further strengthening of the Registry is being undertaken. Today’s primary focus is strengthening the Trade Marks Registry’s infrastructure, clearing the pending applications backlog, transferring CD-ROM records, re-engineering work processes, and appointing extra examiners.

In terms of enforcement, Indian law enforcement organisations are now quite adequate, and there has been a significant decrease in piracy in India. The government has taken various steps to tighten the enforcement of copyright laws, including escalating raids against copyright infringers. Copyright enforcement units have been established in 23 states and union territories. In addition, copyright societies have been established for certain groups of works to administer copyright collectively.

4.3 Legal Considerations When Starting a Business

When it comes to launching a business, there are a lot of legal considerations to make. The law governs every aspect of your company, including its name, structure, and operations. The following is a list of legal issues you should discuss with your attorney before starting your business.

Name of the company

You’ll need to double-check that the business name you want to use isn’t currently used by someone else. You can accomplish this by contacting the proper state agency, usually the Secretary of State’s office. Suppose your preferred name is not already in use. In that case, you can reserve it with the Secretary of State’s office for up to 120 days while you prepare your articles of incorporation, articles of organisation, or partnership agreement.

Organizational Structure

You’ll have to figure out which business structure is best for you. A sole proprietorship, partnership, limited partnership, corporation, S-corporation, or limited liability company can all be used to form a business. When deciding which form is ideal, you must evaluate your business’s liability issues and which form would provide your company’s most significant tax structure.

Business Permits

Depending on the type of business you plan to run, you may need various licences or permits.

Non-disclosure Agreements

Confidentiality and non-disclosure agreements should be considered when setting up your firm’s finances or contracting with suppliers. It would be best to consider having these outside firms sign these agreements because they will have access to business information that you may want to keep confidential. You don’t want your supplier to call your competition to ask if they want a thousand widgets so they can offer them on the same day if you order a thousand gizmos for your grand opening. These agreements are much more necessary if your business strategy contains sensitive information.

Zoning

When choosing a location for your business, be sure it is zoned appropriately for the business you intend to operate. It’s not enough to presume that the zoning is appropriate because your business is similar to one already existing. While the other company was open, zoning may have changed, and that business may have received an exemption that yours will not receive.