San Jose State University Smuckers Company Case Study Question Prompt and question are in the photos attached below.The book use for class is Barringer, B.

San Jose State University Smuckers Company Case Study Question Prompt and question are in the photos attached below.The book use for class is Barringer, B., & Ireland, D. (2015).Entrepreneurship: Successfully Launching New Ventures:5th EditionCH12 file is the powerpoint lecture.Plagiarism free. Chapter 12
The Importance of
Intellectual
Property
Bruce R. Barringer
R. Duane Ireland
Copyright ©2016 Pearson Education, Inc.
12-1
Chapter Objectives
1 of 2
1. Define the term “intellectual property” and describe
its importance.
2. Explain what a patent is and describe different types
of patents.
3. Describe a trademark and explain the process
entrepreneurs use to obtain one.
4. Describe a copyright and identify what a copyright
can protect.
5. Describe a trade secret and understand the common
causes of trade secret disputes.
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12-2
Chapter Objectives
2 of 2
6. Explain what an intellectual property audit is and
identify the two primary reasons entrepreneurial
firms should complete this type of audit.
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12-3
The Importance of Intellectual Property
• Intellectual Property
– Is any product of human intellect that is intangible but has
value in the marketplace.
– It is called “intellectual” property because it is the product
of human imagination, creativity, and inventiveness.
• Importance
– Traditionally, businesses have thought of their physical
assets, such as land, buildings, and equipment as the most
important.
– Increasingly, however, a company’s intellectual assets are
the most important.
Copyright ©2016 Pearson Education, Inc.
12-4
Common Mistakes Firms Make in Regard
to Protecting Their Intellectual Property
Not properly identifying
all of their
intellectual property.
Not fully recognizing
the value of their
intellectual property.
Not legally protecting the
intellectual property
that needs protecting.
Not using their
intellectual property as
part of their overall
plan for success.
Copyright ©2016 Pearson Education, Inc.
12-5
Determining What Intellectual
Property to Legally Protect
Criteria 1
Criteria 2
Determine whether the
intellectual property in
question is directly
related to the firm’s
competitive advantage.
Decide whether the
intellectual property in
question has value in
the marketplace.
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12-6
The Four Key Forms of
Intellectual Property
Patents
Trademarks
Copyrights
Trade Secrets
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12-7
Patents
• Patents
– A patent is a grant from the federal government conferring
the rights to exclude others from making, selling, or using
an invention for the term of the patent. (See the next slide
for a full explanation.)
• Increasing Interest in Patents
– There is increasing interest in patents.
• Since Patent #1 was granted in 1790, the U.S. Patent & Trademark
Office has granted over six million patents.
• The patent office is strained. It now takes an average of 29.1
months from the date of first filing to receive a U.S. patent.
Copyright ©2016 Pearson Education, Inc.
12-8
Proper Understanding for What a
Patent Means
A patent does not give its owner the right to make, use, or sell an invention;
rather, the right granted is only to exclude others from doing so.
As a result, if an inventor obtains a patent for a new kind of computer chip,
and the chip would infringe on a prior patent owned by Intel, the inventor has
no right to make, use, or sell the chip.
To do so, the inventor would need to obtain permission from Intel. Intel may
refuse permission, or ask that a licensing fee be paid for the rights to infringe
on its patent.
While this system may seem odd, it is really the only way the system could
work. Many inventions are improvements on existing inventions, and the
system allows the improvements to be (patented) and sold, but only with the
permission of the original inventors, who usually benefit by obtaining
licensing income in exchange for their consent.
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Growth in Patent Applications in the
United States
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Three Basic Requirements for
Obtaining a Patent
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Types of Patents
Type
Type of Invention Covered
Duration
Utility
New or useful process, machine,
manufacturer, or composition of material or
any new and useful improvement thereof.
20 years from
the date of the
original
application.
Invention of new, original, and ornamental
design for manufactured products.
14 years from
the date of the
original
application.
Design
Plant
Any new varieties of plants that can be
reproduced asexually.
Copyright ©2016 Pearson Education, Inc.
20 years from
the date of the
original
application.
12-12
Business Method Patents
(Special Utility Patent)
• Business Method Patent
– A business method patent is a patent that protects an
invention that is or facilitates a method of doing business.
– The most notable business method patents that have been
awarded:
• Amazon.com’s one-click ordering system.
• Priceline.com’s “name-your-price” business model.
• Netflix’s method for allowing customers to set up a rental list of
movies to be mailed to them.
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12-13
The Process of Obtaining a Patent
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12-14
Patent Infringement
• Patent Infringement
– Takes place when one party engages in the unauthorized
use of another party’s patent.
– The tough part (particularly from a small entrepreneurial
firm’s point of view) is that patent infringement cases are
costly to litigate.
• A typical patent infringement case costs each side at least $500,000
to litigate.
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12-15
Trademarks
• Trademark
– A trademark is any word, name, symbol, or device used to
identify the source or origin of products or services and to
distinguish those product or services from others.
– Trademarks also provide consumers with useful
information.
• For example, consumers know what to expect when they see a
Macy’s store.
• Think how confusing it would be if any retail store could use the
name Macy’s.
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12-16
The Four Types of Trademarks
1 of 2
Type
Trademark
Types of Marks Covered
Any word, name, symbol, or device
used to identify and distinguish one
company’s goods from another.
Examples: Apple, d.light, GoPro,
DripCatch, and Brain Sentry.
Service mark
Similar to trademarks; are used to
identify the services or intangible
activities of a business, rather than a
business’s physical products.
Duration
Renewable every
10 years, as long
as the mark
remains in use.
Renewable every
10 years, as long
as the mark
remains in use.
Examples: 1-800-FLOWERS,
Amazon.com, CoachUp, and Dropbox.
Copyright ©2016 Pearson Education, Inc.
12-17
The Four Types of Trademarks
2 of 2
Type
Collective
mark
Types of Marks Covered
Trademarks or service marks used by
the members of a cooperative,
association, or other collective group.
Examples: Rotary International and
International Franchise Association
Certification
mark
Marks, words, names, symbols, or
devices used by a person other than
the owner to certify a particular
quality about a good or service.
Duration
Renewable every
10 years, as long
as the mark
remains in use.
Renewable every
10 years, as long
as the mark
remains in use.
Examples: 100% Napa Valley and
Underwriters Laboratories
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What is Protected Under Trademark Law
1 of 2
Item
Example(s)
Words
Birchbox, Warby Parker, DripCatch
Numbers
and letters
3M, Boeing 787, AT&T
Designs
and logos
Nike swoosh logo
Sounds
MGM’s lion’s roar
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12-19
What is Protected Under Trademark Law
2 of 2
Item
Fragrances
Example
Stationery treated with a special fragrance
Shapes
Unique shape of the Apple iPhone
Colors
Nexium—the “purple pill”
Trade dress
The layout and décor of a restaurant
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12-20
Exclusions From Trademark Protection
Item
Immoral or
scandalous matter
Deceptive matter
Descriptive marks
Surnames
Example
Profane words
Labeling oranges “Fresh Florida
Oranges” that aren’t grown in Florida
Phrases like “golf ball” and “fried chicken”
are descriptive and can’t be trademarked
Common surnames like “Anderson” or
“Smith” can’t be trademarked
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12-21
The Process of Obtaining a Trademark
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12-22
Copyrights
• Copyrights
– A copyright is a form of intellectual property protection
that grants to the owner of a work of authorship the legal
right to determine how the work is used and to obtain the
economic benefits from the work.
– A work does not have to have artistic merit to be eligible
for copyright protection.
• As a result, things such as operating manuals and sales brochures
are eligible for copyright protection.
Copyright ©2016 Pearson Education, Inc.
12-23
What is Protected By a Copyright?
Literary works
Musical compositions
Computer software
Dramatic works
Pantomimes and
choreographic works
Pictorial, graphic, and
sculptural works
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12-24
Exclusions From Copyright Protection
• The Idea-Expression Dichotomy
– The main exclusion is that copyright laws cannot protect
ideas.
• For example, an entrepreneur may have the idea to open a soccerthemed restaurant. The idea itself is not eligible for copyright
protection. However, if the entrepreneur writes down specifically
what his or her soccer-themed restaurant will look like and how it
will operate, that description is copyrightable.
• The legal principle describing this concept is called the ideaexpression dichotomy.
• An idea is not copyrightable, but the specific expression of an idea
is.
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12-25
Obtaining a Copyright
• How to Obtain a Copyright
– Copyright law protects any work of authorship the moment
it assumes a tangible form.
– Technically, it is not necessary to provide a copyright
notice or register work with the U.S. Copyright Office.
– The following steps can be taken, however, to enhance
copyright protection.
• Copyright protection can be enhanced by attaching the copyright
notice, or “copyright bug”
to something.
• Further protection can be obtained by registering the work with the
U.S. Copyright Office.
Copyright ©2016 Pearson Education, Inc.
12-26
Copyright Infringement
1 of 2
• Copyright Infringement
– Copyright infringement occurs when one work derives
from another or is an exact copy or shows substantial
similarity to the original work.
– To prove infringement, a copyright owner is required to
show that the alleged infringer had prior access to the
copyrighted work and that the work is substantially similar
to the owner’s.
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12-27
Copyright Infringement
2 of 2
• The illegal downloading of
music is an example of
copyright infringement.
• Copyright infringement costs
the owners of copyrighted
material an estimated $25
billion per year in the U.S.
alone.
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12-28
Trade Secrets
• Trade Secrets
– A trade secret is any formula, pattern, physical device, idea,
process, or other information that provides the owner of the
information with a competitive advantage in the
marketplace.
– Trade secrets include marketing plans, product formulas,
financial forecasts, employee rosters, logs of sales calls,
and similar types of proprietary information.
– The Federal Economic Espionage Act, passed in 1996,
criminalizes the theft of trade secrets.
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12-29
What Qualifies for Trade Secret Protection?
1 of 2
• Trade Secret Protection
– Not all information qualifies for trade secret protection.
– In general, information that is know to the public or that
competitors can discover through legal means doesn’t
qualify for trade secret protection.
– Companies protect trade secrets through physical measures
and written documents.
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12-30
What Qualifies for Trade Secret Protection?
2 of 2
The strongest case for trade secret protection is
information that is characterized by the following.
• Is not known outside the company.
• Is known only inside the company on a “need-to-know” basis.
• Is safeguarded by stringent efforts to keep the information
confidential.
• Is valuable and provides the company a competitive advantage.
• Was developed at great cost, time, and effort.
• Cannot be easily duplicated, reverse engineered, or discovered.
Copyright ©2016 Pearson Education, Inc.
12-31
Physical Measures for Protecting
Trade Secrets
Restricting access
Labeling documents
Password protecting
confidential computer
files
Maintaining logbooks
for visitors
Maintaining logbooks for
access to sensitive
material
Maintaining adequate
overall security
measures
Copyright ©2016 Pearson Education, Inc.
12-32
Conducting an Intellectual Property Audit
1 of 2
• Intellectual Property Audit
– The first step a firm should take to protect its intellectual
property is to complete an intellectual property audit.
– An intellectual property audit is conducted to determine the
intellectual property a firm owns.
– There are two reasons for conducting an intellectual
property audit:
• First, it is prudent for a company to periodically determine whether
its intellectual property is being properly protected.
• Second, it is important for a firm to remain prepared to justify its
valuation in the event of a merger or acquisition.
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12-33
Conducting an Intellectual Property Audit
2 of 2
• The Process of Conducting an Intellectual Property
Audit
– The first step is to develop an inventory of a firm’s existing
intellectual property. The inventory should include the
firm’s present registrations of patents, trademarks, and
copyrights.
– The second step is to identify works in progress to ensure
that they are being documented and protected in a
systematic, orderly manner.
Copyright ©2016 Pearson Education, Inc.
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436
PART 4
MANAGING AND GROWING AN ENTREPRENEURIAL FIRM
was that its sandwich’s sealed edge is unique, and its
layering approach, which keeps the jelly in the middle
of the sandwich, is one-of-a-kind and, as such, should
be protected by law. The patent office disagreed with
this view. It said that the crimped edge, which was one
of the things Smucker’s argued was unique about its
sandwich, is similar to the crimped edges in ravioli and
pie crusts. In addition, the patent office determined that
putting jelly in the middle of a peanut butter and jelly
sandwich is hardly unique, and as evidence cited a 1994
Wichita (Kansas) Eagle newspaper article on back-to-
school tips that suggested just this approach.
companies from making their own versions of peanut
butter and jelly sandwiches, which will keep the price
of the Uncrustables high. Advocates of the U.S. patent
process argue the opposite-that patents motivate a
novation, and that absent patent protection, a company
like Smucker’s would have no incentive to develop a
product like the Uncrustables.
–
company like Smucker’s to invest in new-product in-
The Court’s Ruling
In mid-April 2005, after listening to all the arguments,
the U.S. Court of Appeals ruled on whether Smucker’s
should get the patent it was requesting. Which way do
you think the court ruled?
Round 3: Smucker’s Appeals
Smucker’s appealed the patent office’s decision to
the U.S. Court of Appeals. During the court hearings
the attorney representing Smucker’s argued that the
method for making the Uncrustables is unique because
the two slices of bread are sealed by compression but
are not “smashed” as they are in tarts or ravioli. (Recall
that the patent office’s original decision compared the
process of making Uncrustables to that of making ravi-
oli.) Smucker’s further argued that it wouldn’t be fair
to let other companies simply copy the Uncrustables
and benefit from the hard work of Smucker’s scien-
tists and the money that the company had invested
to produce what it believed was a unique product.
The Uncrustables is also a big seller for Smucker’s.
Moreover, sales of the product were up 22 percent at
the end of the second quarter of 2013 compared to the
same quarter one year earlier.
Discussion Questions
12-33. Go to the USPTO’s website (www.uspto.gov) to look
up Patent No. 6,004,596. Read the patent. After
reading the patent, are you more inclined or less
inclined to side with the Smucker’s point of view?
12-34. Type “Uncrustables” into the Google search engine
and look at the Uncrustables sandwich. Spend a
little time reading about the Uncrustables on the
Smucker’s website. Again, after looking over the
website, are you more inclined or less inclined to
side with the Smucker’s point of view?
12-35. In regard to the arguments espoused by the “critics”
of the U.S. patent system and the “advocates” of
the U.S. patent system, with which of the points of
view do you agree? Thinking as an entrepreneur, use
your own words to state why you think the critics or
the advocates have a stronger point of view.
12-36. So what do you think happened? Do you think
Smucker’s did or did not receive the patent it was
requesting?
Broader Issues Involved
The Smucker’s case was watched closely because of
the broader issues involved. Critics of the U.S. patent
process contend that the USPTO is too generous when
awarding patents-a generosity that they say stifles in-
novation and drives up the cost for consumers. In the
Smucker’s case, the critics would argue that Smucker’s
shouldn’t get the patent, because it will deter other food
Source: J. Soslan, “Uncrustables Still Growing at Torrid Pace,”
Baking Business.com, August 22, 2013; Wall Street Journal
(Eastern Edition) by S. Munzo. Copyright 2005 by Dow Jones &
Company, Inc.
CHAPTER 12
|
THE IMPORTANCE OF INTELLECTUAL PROPERTY
435
development process, the more points they earn. Points
equal a percentage of the revenue of an app. The origina-
tor of the idea receives 15 percent of the profits gener-
ated by the app.
Applits has nine live apps and others in various stages of
development. The apps include Better Half, which helps
married couples plan dates, and ReadyMic, which turns
Bluetooth headset into a wireless microphone when
shooting videos on an iPhone. Development time is typi-
cally four to six months, depending on the nature of the
app. Applits makes money on the profits generated by
its apps less the percentages paid to the originators of
the ideas and the community members most involved in
providing feedback and suggestions during the develop-
Applits was founded by Keith Shields and Joshua Tucker,
who were high school classmates. The idea coalesced
while Shields was a student at Ohio State and Tucker
was studying at Alfred University. In a contest that was
administered by Inc. magazine, in which thousands of
votes were cast, Applits was selected as the Coolest
College Startup of 2014.
12-31. Based on the material covered in this chapter, what
questions would you ask the firm’s founders before
making your funding decision? What answers would
satisfy you?
12-32. If you had to make your decision on just the infor-
mation provided in the pitch and on the company’s
website, would you fund this company? Why or
why not?
?????
ment process.
CASE 12.1
You Make the Call: Can a Company Patent How
It Makes a Peanut Butter and Jelly Sandwich?
covetedinte
www.smuckers.com • www.albies.com
Bruce R. Barringer, Oklahoma State University
R. Duane Ireland, Texas A&M University
Introduction
started mass-producing them for Midwestern schools.
Smucker’s took note of their success and bought Geske
and Kretchman’s company in 1999. The purchase of the
company included a general …
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