THE ENTREPRENEUR AND THE LAW

• INTELLECTUAL PROPERTY RIGHTS

 The special aptitude of inventing or creating something unique is marked by the use of
intelligent thought or human intellect.
 In other words, a new and useful product process device or even an idea is the creation
of brain or human intellectual faculties.
 The use of human intellectual powers guides one along an advanced technology or
knowledge. Advanced technology or knowledge serves one to attain a definite result that
is a new and useful invention or creation.
 The advanced technology or knowledge conceived by the use of one’s intellectual
powers, therefore, is treated as an intellectual property of the originator.
 The intellectual property is regarded as any other assets with commercial value that the
owner or rightful holder may possess, enjoy, use or dispose of. According to the matter
of legal protection of intellectual property, the exclusive rights conferred by various
Laws on the inventors, originators, holders or their assignees or heirs to use, sell,
assign, leave, license or will the priceless knowledge to anyone are commonly known
as intellectual property rights.

With relation to the legal regulatory systems providing protections to the interests of the true
inventors or their assignees, intellectual property rights are broadly classified into two groups,
namely:
(a) Industrial property rights and Copyrights

Industrial property rights refer to the exclusive rights covering

(i) Patents
(ii) Designs and
(iii) Trademarks, service marks, certification marks, collective marks and defensive
marks.
Intellectual property rights will regard to copyrights relate to expressive literary, dramatic or
musical works of writers, composers and artists. An overview of the Intellectual Property Rights
has been depicted in Table 11.2
Figure 11.Intellectual Property Rights – An Overview
Industrial Property Rights
Copyrights
Patents
Designs
Trade marks
Service marks
Certification marks
Collective marks
Defensive marks

The World Intellectual Property Organization, which consists of 171 nations, provides further
elucidation and clarifies that the concept of intellectual property is relevant in any of the
following areas:
• inventions in all fields of human Endeavour;

• Scientific discoveries

• Industrial designs;

• Trademarks, service marks and commercial names and designations;

• Literary, artistic and scientific works;

• Performances of performing artists, phonographs; and

• Protection against unfair competition

 LEGAL PROTECTION

Research is the process of advancing technology or knowledge and invention is the product of
advanced technology or knowledge. Invention implies creating something new and useful as a
result of ingenious thinking and experiment. Innovation is the act of introducing an invention or
a creative idea to the masses primarily with commercial objective.
Research activities, generally speaking, are taken up without any commercial ambition, but the
products of most research efforts may have the potential of becoming commercially successful.
Ideally, the benefits of research, or for that matter the details of an invention, should be freely
available to everyone for the wellbeing of the society at large. But individuals and business
houses may not be interested in taking initiative and spending their resources for advancement of
knowledge unless they have the confidence and assurance of deriving substantial benefits,
hopefully in terms of financial inducements, from research and inventive efforts.

With a view to giving impetus to research activities, various legal regulatory systems have been
evolved to protect inventions from unauthorized exploitation for profit or advantage by
infringers. The legal protections grant the true inventors, their heirs, agents or assignees
exclusive rights for limited periods to be the only persons entitled to use or sell their new
technologies or creative ideas. After the stipulated time a technology belongs to public and
anyone can use and profit from it.

It was way back in the 18th Century that the patent system was first introduced in the United
States of America in order to “promote the progress of science and useful arts by securing for
limited times to authors and inventors the exclusive rights to their respective writings and
discoveries”. Currently, there are about 140 countries that have enacted patent and other
regulatory laws to provide legal protections to inventions and creative ideas. Patents take care of
discoveries or inventions and so long as the protection continues, the holder of a valid patent
enjoys the exclusive right to use or sell the new technology as also prevent others from using the
invention. Patents as exclusive property rights can be sold, transferred, licensed or willed to
others. The originator of a design is entitled to the exclusive right to apply his or her newly
created design to any object belonging to a particular class of articles for which it has been
registered. Registration of a trademark grants its proprietor a kind of monopoly right to sue the
registered mark, comprising a word or a symbol or both, for bona fide trading or business
purpose. The right of ownership in a trademark is acquired by registration of the mark under the
relevant Act and therefore following assignment or transmission of the right by the holder to
another person. Copyright protects the exclusive proprietary privilege in respect of one‟s
literary, dramatic or artistic work including cinematographic film or record.
PATENTS
11.5.1 What is a Patent?
Patenting is over 2500 years old. It is recorded in history in 500BC, in Greece, encouragement
was being out to who should discover any new refinement in luxury, the profits arising from
which were secured by patent for the space of a year. In England, forms of patenting have been
in existence since 1623. In the United States, the first congress adopted a patent Act, in 1970. In
East Africa, before 1980s, most of the laws regarding IPRs were mere replicas of existing British
laws.

A Patent is a grant from the Government which confers on the grantee (patentee) for a
limited period of time the exclusive privilege of making, selling and using the invention for
which a patent has been granted and also authorizing other to do so.

In simple words, a patent is an authentic document issued by the Government

acknowledging something having been invented and granting a special privilege, right or
license to a person for his/her new and useful invention. One to whom a grant is made or
privilege secured by patent and who enjoys the monopoly or exclusive right to make, use or sell
the invention is known as patentee. The person to enjoy the exclusive privilege must make a
new invention known to the public and be competent to make others familiar with the facts,
occurrences and utilities of the invention. This process of familiarizing with or imparting of
knowledge for an understanding of the pertinent matter is to be explicitly demonstrate in detail
by the inventor. The written document in which the explicit detail are given by the inventor is
referred to as a patent application.

In the United States of America, following categories of patents are generally granted:
Utility patent: This relates to the novelty and usefulness of an invention, which lays stress on
how it works to obtain something new and useful. Utility patent is obtainable for a new
machine, process composition or method to make or produce something unique and useful. It is
the common and commercially most valuable among all kinds of patent granted there.
Design patent. This is grant4d in recognition of the ornamental appearance of a useful object,
i.e. how it looks and not how it works.
Plant patent. This is allowed in favour or a developer for a unique and new variety of plant
which did not exist before but has been reproduced by cutting grafting or other asexual means.

Activity 11.1
What categories of patent are generally granted in Kenya?

11.5.2 Patent Infringement

It is important for the entrepreneur to be sensitive about whether she/he is infringing on someone
else‟s patent. The fat that someone else already has a patent does not mean the end of any
illusions of starting a business. Many businesses, inventions or innovations are result of
improvements as, or modifications of existing products.
Copying and improving on a product may be perfectly legal (no patent infringement) and
actually good business strategy. If it is impossible to copy and improve the product to avoid
patent infringement, the entrepreneur may try to license the product from the patent hold.
Do expired patents exist that accomplish same purpose?
Is patent recent or is it nearly expired?
File for Patent
Assess whether patent now exists
Figure 11.2 illustrates the steps that an entrepreneur should follow as she/he considers marketing
a product that may infringe on an existing patent.
Figure 11.2: Options to Avoid Infringement

Unacceptable
Can product be changed slightly without infringement?
Ready to expire Acceptable
Begin planning for introduction when existing patent expires
Develop product using older designs
NO YES
Develop modified version
Seek License
Source: Adopted from H.D. Coleman and J.D. Vandenberg – in Hisrich D.R. et al (2006) p/ 165

11.53Patent Types
The patent seeker would base the type he or she needed on the kind of protection that particular
patent offered and what subject matter it covered.

1. Utility Patent
A utility patent is the kind of patent a business or individual would apply for to cover a
new invention. It is granted for new products, process, machines and methods of manufacture
and composition of matter including an upgraded form of something that has already been
invented. The utility patent protects the invention from other individuals and business and keeps
them from making and selling the inventions include business method patents, pioneer patent,
chemical patents, cyber patent, fencing patent and improvement patent.

2. Design Patent
A design patent is typically the kind of patent a business or individual applies for when
they have created an original design of a product that will be manufactured. This type of
patent keeps other businesses and individuals from creating or making a profit from the
design for 14 years from the patent date. Entrepreneurs can also select other protection
periods such as 3 ½, or 7 years. The duration of protection is to enable the owners to
commercialize designs and to be able to realize the benefits of their ingenuity.
The design may be a distinguishing feature that allows an individual to have exclusive use of
visual imagery thus creating brand identification. For example, a new pair of jogging boots may
fail to have a utility patent but may have design patent if the new design changes the physical
appearance of the boots.

3. Plant Patent
Any new variety of plant that has been asexually reproduced can be granted a plant patent. The
new plant must not exist in nature or in an uncultivated state. A plant patent is the kind of patent
an individual or business would apply for if they had had invented or discovered a new or
unheard of plant. This may include cultivating different types of plants to create mutants or
hybrids and also newly found seedlings.

This patent protects the owner by keeping other individuals or businesses from creating the type
of plant or profiting from the plant for at least 20 years from patent.

Business method Patents are a class of patents which disclose and claim new methods of doing
business. This includes new types of e-commerce, insurance, banking, tax and compliance etc.

Pioneer Patent covers a function or a major technological advance never before performed, a
wholly novel device, or subject matter of such novelty and improvement.

Process Patent/Chemical for method of treating specific materials to produce a certain result.

Cyber Patent/Internet Patent is a utility patent on an invention that combines business methods
and software program for internet applications.

Fencing Patent is a patent having claims directed to an improvement on a pre-existing

invention.
These different types of patents are all for the purpose of protecting an original idea and the
individual who had that idea. They keep others from being able to capitalize on that idea for a
significant amount of time – and patents can be reissued before the original patents expire.

11.5.4 Implications of Patents and Copyrights for entrepreneurs

1. Positive implications
In accordance with the original definition of the term „patent,‟ patents facilitate and encourage
disclosure of innovations into the public domain for the common good. It therefore follows that
awarding patents generally makes the details of new technology publicly available, for
exploitation by anyone after the patent expires, or for further improvement by other inventors.
Furthermore, when a patent‟s term has expired, the public record ensures that the patentee‟s idea
is not lost to humanity.
Since patenting means protection and exclusivity, it gives the entrepreneur a window of time to
exclusively profit from his ingenuity for the selected period of protection and keeps others away
from laying any undue claim at all to the idea. The Kenyan entrepreneur would by patents be
conflict that his efforts are not in vain and would endeavour to continue being more enterprise.

Patenting allows a clever small-time inventor to use the exclusive right status to become a
licensor and accumulate capital argues. Stim, Rishard achieves this by licensing the invention
and allowing innovation to occur because he or she chooses to not manage a manufacturing
buildup for the invention. This brings along the economies of specialization, allowing others to
concentrate on manufacturability.

Obtaining intellectual property rights creates valuable assets. Indeed the Wikipedia defines
patents and copyrights as intangible assets. As such the Kenyan entrepreneur can make money
on them by selling, licensing to others, mortgaging, willing, assigning, leveraging as assets of a
new enterprise, transferring, or using them as collateral.

Lastly, patents have been argued to provide incentives for economically efficient research and
development. Without patents, R & D spending would be significantly less or eliminated
altogether, limiting the possibility of technological advances or breakthroughs. Entrepreneurs
would be much more conservative about the R & D investments they made, as third parties
would be free to exploit any developments.
This second justification is closely related to the basic ideas underlying traditional property
rights.

2. The negative implications

The concept of patenting (no-disclosure) itself makes technology transfer to Kenyan
entrepreneurs difficult and costly. Ummy Ally Mwalimu argues that strengthening IPRs
protection may lead to increased royalty payments required by technology-holders. These
factors reduce the ability of the Kenyan entrepreneur to catch up through imitation and
adaptation of advanced technologies.
The average cost of obtaining a patent and maintaining it for a 20 year term is almost Ksh.
400,000 according to the First Schedule Fees available at KIPI website. For utility models the
total estimate is a fairer Kshs. 50,000 for a ten year period. Such a cost is definitely prohibitive
to upcoming entrepreneurs. Their innovations would certainly not be patented as they cannot
afford the fees; indeed the inventions may be stolen by large multi-nationals. A young man
reportedly filed a suit against Safaricom Limited as concerns the ownership rights of the popular
money transfer service M-Pesa

Life of a Patent
The period for which the exclusive right is conferred on a patentee is known as the life of a
patent. In terms of validity period, patents are broadly classified into two groups as discussed
below.

A patent for an invention involving a process or method of manufacture of a substance intended

for use as food, medicine or drug shall be valued for a period of seven years from the date of the
patent or five years from the data of sealing of the patent, whichever is less.
Patents relating to all other inventions are valid for a period of fourteen years from the date the
respective patents are granted.

The date of the patent means the date on which the complete specification, along with the patent
application, is filed with the patent office concerned. The date of sealing refers to the date when
the patent office endorses final approval provided there is no objection from anyone which in the
prescribed period from the date of publication of its notification of acceptance, or in case the
patent office does not refuse to grant permission for one reason or the other.

Activity
Describe the procedure of applying for a patent in Kenya.

• DESIGNS
What is Design?
Design means only the features of shape, configuration, pattern or ornamentation of an article
made by any industrial process or means, be that manual, mechanical or chemical, separate or
combined.
Registrable Designs
The design of an article may be registered if its shape, configuration, pattern or ornamentation
made by any industrial process (mechanical, chemical or both) is new or original. The principle
or the mode of construction of an article or its mere mechanical fabrication cannot be registered
as a design. Trademarks, trade names, mere pictures or photographs cannot be registered as
designs. The articles or goods to which designs applied are sought to be registered include:
• Articles made wholly of metal or predominantly of metal and jewellery;

• Books and bookbinding of all materials;

• Articles made wholly of rubber, wood, bone, ivory, papier mache, celluloid, Bakelite or
of similar substances; or of materials that constitute mostly of such substances;

• Articles made wholly of glass, earthenware, porcelain, burnt or baked clay, or cement or
in which such materials predominate;

• Articles made wholly of paper, cardboard, millboard or strawboard or mostly of such

materials;

• Articles made mostly or wholly of leather;

• Paper hangings;

• Carpets, rugs and floor covering in all materials;

• Boots, shoes and the like of footwear;

• Millinery and Wearing apparel;

• Printed or woven designs on textile goods other than checks or stripes

• Printed or woven designs on textile goods being checks or stripes.

11.7 TRADEMARKS
What is a Trademark?
A trademark denotes any word, letter, name, initial, signature, figure, numeral, artistic,
design or device or any combination of these adopted and used to identify and distinguish
the goods of one manufacturer or merchant from these manufactured and/or marketed by
others. The dictionary meaning of trademark is that it is a device pointing distinctly to the origin
or ownership of merchandise to which it is applied and which is legally reserved to the exclusive
used of the owner as a maker or seller. In other words, a trademark is a visual symbol which
established the relationship between the goods or service on sale and the concerned person
having the right to use it as a proprietor or registered user. Unlike the patent, a trademark can
last indefinitely, as long as the mark continues to perform its indicated function.

Activity
Can you differentiate between a trademark and a design?

Functions of a Trademark
With the Industrial Revolution in the 19th Century, trademark has become increasingly important
as a means of distinguishing products among many competitors. Most goods are better known
by their trademarks and the marks thus used exclusively by their respective owners, as makers or
sellers, eventually become brand names. Goods identified by brand names carry assurances that
the customers may expect the quality consistent with the reputation of the owners of the
trademarks. It is because of these distinctive functions that under the common law a trademark
is always treated as an inseparable part often goodwill of a business. However, among the varied
functions of a trademark, the following three are said to be the most prominent.
• A trademark primarily helps a customer identify the origin or source of the goods
on sale.

• A trademark calls attention to the quality of the goods. The origin or source once
identified, a customer forms an opinion about the quality and acceptability of the
goods. If the origin is already known, the degree of quality is also ascertained and it
the source is unknown, the quality is also uncertain.
 • A trademark serves as an effective tool for advertisement and sales promotion, It
creates a lasting impression on the minds of the customers not only about the
quality of the goods but also reputation of the user of the mark. Under the modern
competitive businesses conditions, a trademark plays a crucial role in promoting not
only the sale of merchandise but also in the reputation or goodwill of a business.

Benefits of a Trademark
A trademark is regarded as an incorporeal property that is a sort of an asset without any material
or physical existence. In the eye of the law, a trademark is like any other property with
commercial value and hence the term “proprietor of a trademark”, aptly used un various
provisions of the said Act. The property exists in the exclusive right of an owner to sue the mark
in specific tradable goods and, subject to certain conditions, restrain others from using the same
or nearly the same mark. The right to a trademark can be used or sold and transferred and may
be lawfully used by the purchaser. But the sale and transfer by the original owner has to take
place with the transfer of the business goodwill in accordance with the common law in case the
trademark is unregistered and without the transfer of the goodwill. The following are considered
to be some of the key benefits of a registered trademarks:
• It provides notice to everyone that you have the exclusive rights to sue the mark
throughout a given area.

• It entitles you to sue for trademark infringement which can result in recovery of
profits, damages and costs.

• It established incontestable rights regarding the commercial use of the mark.

• It entitles you to use the notice of registration.

• It provides a basis for filing trademark application in foreign countries.

• It establishes the right to deposit registration with customs to prevent importation

of goods with a similar mark.
Choosing a Trademark
In the matter of choosing a trademark, the decision should be based on the following, criteria,
among other statutory requirements:
• A trademark may be a letter, word, name, numeral, figure, design or device or even
a combination thereof. If a word is to be chosen, it should be short, and easy to
pronounce, spell and remember. A word which tends to glorify or magnify the
character or quality of the goods should be avoided. According to the Trade Marks
Registry in India”, “The ideal word for trademark is an invented or coined word”.
Devise refers to any pictorial representation. For instance, the illustrative letter “T”
symbolizes the products manufactured and marketed by the TATs; the name
“Maruti” identifies the origin of the particular species of automobiles from those
made and sold by others; and the artistic design of a railway steam locomotive
represents the Indian Railways.

• A prominent geographical name associated with the reputation or quality of the

particular goods for which a mark is to be registered should not be selected.

• A trademark, which is the same or nearly the same as a trademark already in use or
registered in the name of another proprietor in relation to the goods of similar
mature, character and utility is not accepted for registration.

• A trademark is not registrable if:

- It portrays in any manner the national flag or emblem of India or any other
country;
- It comprises or contains anything that may hurt the religious sentiments of
anyone;
- It depicts or contains any matter that is obscene or offensive to propriety or
morality;
- Its use may tend to lower the image or reputation of others;
- Its use will be opposed to any law already in force;
- It is the name of any chemical element or chemical compound;
- Its sue may cause confusion or deception to anyone;
Further, one should not imitate another person‟s trademark, especially a familiar one, even if the
relevant tradable foods are not the same. This will minimize, if not eliminate, the chances of
others raising any objection to the application for registration of a trademark. Equally important,
the delay in the processing of the registration application can also be avoided.

Activity
Outline the fundamental requirements for registration in Kenya.

11.8 COPYRIGHT
What is Copyright?
 The term “copyright” denotes the exclusive right given by law to the creator of a literary,
dramatic, musical or artistic work, or to a producer of a sound recording or
cinematographic film, or to one who develops a computer software program.
 Copyright, which refers to the protection given to a creative person to control and benefit
from a work of authorship, is also known as author‟s right?
 It is legalized protection which not only established an author‟s ownership right to do or
authorize other to do such acts as a permissible by law, but also restrains any
unauthorized person committing such acts.

Works in Which Copyrights Exist

Copyright protection is dependent primarily upon a work being original, rather created
independently and not copied from any other work, and made for the first time. The protection
under copyright exists on the mode and manner of expression, but not on the subject matter in a
work. An original, i.e. unimitated, expressive work may be copyrighted even if someone else has
already authored a somewhat similar work on the same subject.

These Works Include:

• Original literary, dramatic, musical and artistic works and computer programs;

• Cinematographic films; and

• Sound recordings.
 Activity
Activity Review Questions
1. Discuss the concept of legal protection for innovation.
2. Write a short note on the scope and importance of legal protection
for innovations.
3. What is patent? What are its different types?
4. What is patent right? Indicate the benefits available from it.
5. What is trademark? What are its different features?
6. How many types of trademark are there? What are their important
features?
7. What is the important of trademark in business?
8. What is infringement of trademark?
9. What is copyright? What benefits are available from copyright?
10. What are the things that cannot be copyright?
11. What is infringement of copyright?
12. Discuss briefly the procedure for registration of:
(i) patent
(ii) trademark and
(iii) copyright
13. Define Intellectual Property Right. Discuss its drawbacks.
14. Discuss the scope and important of Intellectual Property Right in
entrepreneurship.

References
1. Nandan H. (2007) Fundamentals of Entrepreneurship. Prentice-
Hall. New Delhi
2. Grenn L. Cynthia (2006) Entrepreneurship. South-Western Canada