Chapter 6 Intellectual Property and other Legal Issues for the
Entrepreneur
True/False Questions
1. Entrepreneurs, because of their lack of understanding of intellectual property, ignore
important steps that they should have taken to protect these assets.
Answer: True Page: 171 Difficulty: Medium
2. A lawyer may work on a retainer basis by which he or she provides office and
consulting time, which includes court time and other legal fees related to the action.
Answer: False Page: 171 Difficulty: Medium
3. When resources are limited, the entrepreneur can offer a lawyer stock in exchange for
legal services.
Answer: True Page: 171-172 Difficulty: Easy
4. A patent is a contract between a franchisor and an inventor.
Answer: False Page: 172 Difficulty: Hard
5. A design patent has a term of 20-years, beginning on the date of filing with the Patent
and Trademark Office (PTO).
Answer: False Page: 172 Difficulty: Medium
6. Any invention requiring FDA approval has the term of its patent extended by the
amount of time it takes the FDA to review the invention.
Answer: True Page: 172 Difficulty: Medium
7. The most commonly issued type of patent is the plant patent.
Answer: False Page: 174 Difficulty: Medium
8. Disclosure Document Program gives the inventor the opportunity to protect an idea for
which he or she does not wish to obtain a patent.
Answer: False Page: 174 Difficulty: Hard
Hisrich, Entrepreneurship, Seventh Edition
43
Chapter 6 Intellectual Property and other Legal Issues for the
Entrepreneur
9. The GATT trade pact has encouraged global free trade.
Answer: True Page: 174 Difficulty: Easy
10. A disclosure document is used to establish the date of conception of the invention.
Answer: True Page: 174 Difficulty: Easy
11. To prevent others from copying his or her ideas, the entrepreneur should not send
drawings with the patent application.
Answer: False Page: 175 Difficulty: Medium
12. Copying a product and improving it is not patent infringement.
Answer: True Page: 175 Difficulty: Medium
13. An example of a business method patent is Amazon.com's single clicking feature used
by a buyer to order products.
Answer: True Page: 176 Difficulty: Easy
14. A trademark is given a 50-year registration with no renewal.
Answer: False Page: 177 Difficulty: Medium
15. To qualify for trademark protection, the mark must have actually been used on goods
which were shipped or sold.
Answer: False Page: 177 Difficulty: Medium
16. An arbitrary mark is a trademark that has another meaning in our language and is
applied to a product or service.
Answer: True Page: 178 Difficulty: Medium
17. A copyright protects original works of authorship.
Answer: True Page: 179 Difficulty: Easy
44
Hisrich, Entrepreneurship, Seventh Edition
Chapter 6 Intellectual Property and other Legal Issues for the
Entrepreneur
18. Copyright law does not apply to music, especially when downloaded from the
Internet.
Answer: False Page: 179 Difficulty: Medium
19. A trade secret is protected by federal law.
Answer: False Page: 181 Difficulty: Medium
20. While dealing with leaking of trade secrets, legal action can be taken only after the
secret has been revealed.
Answer: True Page: 183 Difficulty: Medium
21. Licensing requires the licensee to pay a royalty to the licensor.
Answer: True Page: 183 Difficulty: Easy
22. Licensing a trademark generally involves a franchising agreement.
Answer: True Page: 183 Difficulty: Easy
23. Licensing agreements generate revenue while minimizing risk and start-up investment
costs.
Answer: True Page: 185 Difficulty: Medium
24. Licensing can be a way to start a new venture when the idea may infringe on someone
else’s patent, trademark, or copyright.
Answer: True Page: 185 Difficulty: Medium
25. Under the 1990 revision of the Consumer Product Safety Act, fines were lowered and
looser guidelines for reporting product defects initiated.
Answer: False Page: 185 Difficulty: Medium
26. Claims for product liability under strict liability claim, the product was defective
before its receipt.
Answer: True Page: 186 Difficulty: Hard
Hisrich, Entrepreneurship, Seventh Edition
45
Chapter 6 Intellectual Property and other Legal Issues for the
Entrepreneur
27. Life insurance for employees is a required benefit under federal law.
Answer: False Page: 186 Difficulty: Medium
28. Skyrocketing medical costs have resulted in lowering workers' compensation
insurance premiums.
Answer: False Page: 186 Difficulty: Medium
29. Health insurance premiums are less expensive if there is a large group of insured
participants.
Answer: True Page: 187 Difficulty: Easy
30. Under the Sarbanes-Oxley Act CEOs are required to vouch for the firm's financial
statements.
Answer: True Page: 188 Difficulty: Medium
31. An oral agreement is enforceable indefinitely.
Answer: False Page:189 Difficulty: Medium
32. Contracts for the sale of real estate must be in writing to be valid.
Answer: True Page: 190 Difficulty: Medium
Multiple Choice Questions
33. A a patent attorney hired as a specialist to help the entrepreneur obtain a patent would
most likely be hire on a:
A) retainer fee
B) success fee
C) out-of-pocket reimbursement
D) one-time free
Answer: D Page: 171 Difficulty: Medium
46
Hisrich, Entrepreneurship, Seventh Edition
Chapter 6 Intellectual Property and other Legal Issues for the
Entrepreneur
34. A _________ is a contract between the government and an inventor.
A) franchise
B) patent
C) trademark
D) trade secret
Answer: B Page: 172 Difficulty: Easy
35. Which of the following is a contract that grants the owner protection, based on the
appearance of an object?
A) Utility patent
B) Design patent
C) Plant patent
D) Disclosure document
Answer: B Page: 172 Difficulty: Medium
36. The _____ patent is granted for a 14-year term.
A) utility
B) design
C) plant
D) procedure
Answer: B Page: 172 Difficulty: Hard
37. The _______ program of the Patent and Trademark Office gives the inventor the
option of protecting an idea for which he or she does not want to obtain a patent, while
allowing the public access to the invention.
A) disclosure document program
B) defensive publication program
C) trademark
D) copyright
Answer: B Page: 174 Difficulty: Hard
38. The _______ was established to facilitate patent filings in multiple countries.
A) General Agreement on Trades and Tariffs
B) Patent and Trademark Office
C) Patent Cooperation Treaty
D) Sarbanes-Oxley Act
Answer: C Page: 174 Difficulty: Medium
Hisrich, Entrepreneurship, Seventh Edition
47
Chapter 6 Intellectual Property and other Legal Issues for the
Entrepreneur
39. The ________ is filed to establish a date of conception of an invention and includes a
description of the item.
A) disclosure document
B) defensive document
C) trademark
D) copyright
Answer: A Page: 174 Difficulty: Medium
40. The section of the patent application which provides the criteria by which any
infringement will be determined is the:
A) background and advantages section.
B) description of the invention.
C) claims section.
D) executive summary.
Answer: C Page: 175 Difficulty: Hard
41. The section of the patent application that includes engineering specifications, materials
and components is the:
A) background and advantage section.
B) description of invention.
C) claims section.
D) executive summary.
Answer: B Page: 175 Difficulty: Medium
42. Priceline.com's service where a buyer can submit a price bid for a particular service is
an example of a:
A) utility patent.
B) design patent.
C) business method patent.
D) license.
Answer: C Page: 176 Difficulty: Medium
48
Hisrich, Entrepreneurship, Seventh Edition
Chapter 6 Intellectual Property and other Legal Issues for the
Entrepreneur
43. The initial registration for a trademark lasts:
A) 20 years.
B) 17 years.
C) 14 years.
D) 10 years.
Answer: D Page: 177 Difficulty: Medium
44. Which of the following statements is (are) not true?
A) A trademark may be a word, slogan, symbol, design or particular sound.
B) Unlike a patent, trademark does not last indefinitely.
C) It is possible to file for a trademark if you intend to use this mark in the future.
D) There are four categories of trademarks.
Answer: B Page: 177-178 Difficulty: Easy
45. To apply for a trademark:
A) the mark must actually have been used on goods.
B) intent to use the mark is required.
C) the mark must be copyrighted.
D) the mark must have been used on goods that are already traded.
Answer: B Page: 178 Difficulty: Medium
46. The category of trademarks that denotes no relationship between the mark and the
goods or services is called:
A) a coined trademark.
B) an arbitrary mark.
C) a suggestive mark.
D) a descriptive mark.
Answer: A Page: 178 Difficulty: Hard
47. The name "Halo Shampoo" is an example of which kind of trademark?
A) A coined trademark
B) An arbitrary mark
C) A descriptive mark
D) A suggestive mark
Answer: D Page: 178 Difficulty: Hard
Hisrich, Entrepreneurship, Seventh Edition
49
Chapter 6 Intellectual Property and other Legal Issues for the
Entrepreneur
48. Which government office is responsible for the federal registration of trademarks?
A) U.S. Trademark Services
B) Local Chambers of Commerce
C) Patent and Trademark Office
D) Internal Revenue Service
Answer: C Page: 178 Difficulty: Easy
49. Authors or publishers of software are protected under:
A) copyrights.
B) trademarks.
C) utility patents.
D) trade secrets.
Answer: A Page: 179 Difficulty: Medium
50. Copyrights are registered with:
A) the U.S. Justice Department.
B) the Internet Commission.
C) the Library of Congress.
D) the GATT .
Answer: C Page: 179 Difficulty: Medium
51. Trade secrets are protected:
A) by the General Agreement on Tariffs and Trade.
B) by federal law.
C) by state law.
D) by the Library of Congress.
Answer: C Page: 181 Difficulty: Hard
52. Licensing can be used by the entrepreneur to:
A) protect the Board of Directors from liability.
B) insulate management from liability.
C) protect confidentiality of a trade secret.
D) copy a competitor's patent.
Answer: D Page: 183 Difficulty: Hard
50
Hisrich, Entrepreneurship, Seventh Edition
Chapter 6 Intellectual Property and other Legal Issues for the
Entrepreneur
53. The _______ created the commission that prescribes safety standards for products.
A) Consumer Product Safety Act
B) Patent Cooperation Treaty
C) Sarbanes-Oxley Act
D) U.S. Labor Department
Answer: A Page: 185 Difficulty: Easy
54. The best protection against product liability is:
A) product warranty insurance.
B) to overstate the benefits of a product.
C) to produce safe products.
D) the utility patent.
Answer: C Page: 186 Difficulty: Medium
55. Entrepreneurs should purchase insurance
A) before problems occur.
B) to prevent problems.
C) after problems occur.
D) only if they engage in international trade.
Answer: A Page: 186 Difficulty: Easy
56. Claims regarding product liability usually fall under all of the following categories
except:
A) negligence.
B) misrepresentation.
C) warranty.
D) violation.
Answer: D Page: 186 Difficulty: Medium
57. The courts consider oral agreements under $500 binding if:
A) the agreement is for less than one year.
B) the parties have previously done business together.
C) the transaction is for services rendered.
D) the new venture is incorporated.
Answer: A Page: 189 Difficulty: Hard
Hisrich, Entrepreneurship, Seventh Edition
51