8
The Legal
Environment
Section
8.1
Legal Issues Facing Start-Ups
Section
8.2
Handling Government Regulations
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
Section Objectives
•
•
Explain how to protect your intellectual property.
Discuss the laws affecting the start-up of a business.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
The Main Idea
A new product or service must be protected through patents,
copyrights, trademarks, or trade secrets.
Other aspects of a business are protected by law as well.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
Content Vocabulary
intellectual property law
Uniform Trade Secrets Act
patent
public domain
patent pending
copyright
trademark
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
service mark
permit
license
contract
consideration
capacity
SECTION
8.1
Legal Issues Facing
Start-Ups
Protecting Ideas: Intellectual Property Law
Intellectual property law
protects the inventions and
new ideas of business.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
intellectual property law
the group of laws that regulates
the ownership and use of creative
works
SECTION
8.1
Legal Issues Facing
Start-Ups
Protecting Ideas: Intellectual Property Law
Intellectual property laws protect the following:
trade secrets
patents
copyrights
trademarks
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
Trade Secrets
Trade secrets form the basis of all intellectual property.
A trade secret may consist of a formula, an idea, a process, a pattern,
or compilation of information that gives the owner a competitive
advantage.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
Patents
An inventor may acquire a
patent, which will protect
his or her invention for a
period of 20 years.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
patent
a document that grants to an
inventor the right to exclude
others from making, using, or
selling an invention or other
intellectual property during the
term of the patent
SECTION
8.1
Legal Issues Facing
Start-Ups
Patents
After a patent expires, it is
placed in public domain.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
public domain
intellectual property whose
protection has expired; it belongs
to the community at large and
people can use any aspect of the
property free of charge
SECTION
8.1
Legal Issues Facing
Start-Ups
Patents
Rules for obtaining a patent are:
The invention must not contain prior art.
The invention must fit into one of five classes: machine,
process, articles of manufacture, composition, or new use for
one of the other four.
The invention must be “unobvious.”
The invention must have utility.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
Patents
After you apply for a patent,
the Patent and Trademark
Office (PTO) does a patent
search.
During this time, you may
market your product but you
must put the term patent
pending and the patent
number on the product or
packaging.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
patent pending
the status of an invention between
the time a patent application has
been filed and when it is issued or
rejected
SECTION
8.1
Legal Issues Facing
Start-Ups
Copyrights
If you plan to publish a
book, place a notice of
copyright in a prominent
location on the work.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
copyright
a legal device that protects
original works of authors,
including books, movies, musical
compositions, and computer
software, for the life of the author
plus 70 years
SECTION
8.1
Legal Issues Facing
Start-Ups
Trademarks
A trademark is followed by
the registered trademark
symbol ™.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
trademark
a word, symbol, design, or color
that a business uses to identify
itself or something it sells
SECTION
8.1
Legal Issues Facing
Start-Ups
Trademarks
Like a trademark, a service
mark can be protected by
registering it with the Patent
and Trademark office.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
service mark
a word, symbol, sign, or color that
describes a service business
SECTION
8.1
Legal Issues Facing
Start-Ups
Laws that Affect Start-Up of a Business
Entrepreneurs should be aware of laws involving:
permits and licenses
contracts
location
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
Permits and Licenses
Before you can officially
open your business, you
must get a permit.
In certain professions, such
as nursing, you may also
need to get a license.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
permit
license
a certificate
legal document
that shows
givingthat
official
the
permission
holder
of thetodocument
run a business
has the
necessary education and training
to perform a job
SECTION
8.1
Legal Issues Facing
Start-Ups
Contracts
As an entrepreneur, you will
need to sign a contract
with vendors, landlords, and
clients.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
contract
a binding legal agreement
between two or more persons or
parties
SECTION
8.1
Legal Issues Facing
Start-Ups
Contracts
To be valid and legally inferable, a contract must contain the following
components:
agreement
consideration
capacity
legality
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
Contracts
The money you pay a
vendor for a product for
your business is valuable
consideration.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
consideration
what is exchanged for the promise
to do something or refrain from
doing something
SECTION
8.1
Legal Issues Facing
Start-Ups
Contracts
By law, minors do not have
capacity to sign a contract.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
capacity
the legal ability to enter into a
binding agreement
SECTION
8.1
Legal Issues Facing
Start-Ups
Location
Only certain types of real property are available to business owners
because they are subject to zoning laws and building codes.
Because a lease is a long-term contract, an entrepreneur should
consult an attorney before signing.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
After You Read
1.
Explain how to protect your intellectual property.
To protect trade secrets, you can ask employees, contractors, and
investors to sign contracts promising not to reveal secret
information about the product. To protect an invention, you should
file a patent application with the PTO. To protect an original work,
you should place a notice of copyright in a prominent location on
the work and register your work with the Copyright Office. To
protect a trademark or logo, you should file register it with the PTO.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.1
Legal Issues Facing
Start-Ups
After You Read
2.
Discuss the laws affecting the start-up of a business.
A person must obtain a permit from the local government office
before he or she can officially open for business. A license is
required for certain professions to prove that he or she has the
education and training needed to do the job. Licensing
requirements vary from one state or locality to another. When
entering into an agreement to start a run a business, the owner
creates a valid contract. This means the owner must abide by
contract laws.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Section Objectives
•
•
•
Explain the laws that affect employees.
Identify the laws that regulate trade.
Discuss the tax laws that apply to a new venture.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
The Main Idea
Laws and regulations are designed to protect employees, other
businesses, and customers from unfair, unsafe, or unhealthy business
practices.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Content Vocabulary
Equal Employment Opportunity
Commission (EEOC)
wrongful termination
price discrimination
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
Uniform Commercial Code
warranty of merchantability
bait-and-switch advertising
FICA
Laws That Affect Employees
discrimination in hiring
child labor laws
wrongful termination
sexual harassment
Americans With Disabilities Act
Family Medical Leave Act
Equal Pay Act of 1963
Fair Labor Standards Act
Occupational Safety and Health Act
27
SECTION
8.2
Handling Government
Regulations
Laws Against Discrimination in Hiring
Employers are subject to
regulations of the Equal
Employment Opportunity
Commission (EEOC).
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
Equal Opportunity
Employment Commission
(EEOC)
the government agency charged
with protecting the rights of
employees; it ensures that
employees do not discriminate
against employees because of
age, race, color, natural origin,
religion, gender, or physical
challenge
SECTION
8.2
Handling Government
Regulations
Child Labor Laws
Federal child labor laws protect young workers in many ways.
Employment can not interfere with their education,
health, or well-being.
Persons under 18 can not work in jobs the government
considers hazardous.
Persons under 16 are only allowed to work certain
hours and times.
Persons under 14 can only work in certain jobs.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Wrongful Termination
Employers must keep
accurate records for each
employee, including
employee evaluations,
disciplinary actions, and
warnings, because
employees are protected
against wrongful
termination.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
wrongful termination
the right of an employee to sue
his or her employer for damages if
he or she is terminated for an
unacceptable reason
SECTION
8.2
Handling Government
Regulations
Sexual Harassment
At the federal level, Title VII of the Civil Rights Act forbids sexual
harassment.
Most states also have laws that prohibit sexual harassment.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Americans With Disabilities Act
The Americans With Disabilities Act requires employers to provide
reasonable accommodations to that allow qualified employees to do
their basic jobs.
Business owners can ask prospective employees about their abilities,
but not their disabilities.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Family Medical Leave Act
The Family Medical Leave Act (FMLA) provides employees with the
right to an unpaid leave of absence for up to 12 weeks for certain
family and medical issues.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Laws Requiring Equal Pay for Equal Work
The Equal Pay Act of 1963 says all employers must pay men and
women the same wage for the same work.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Laws Requiring Fair Labor Standards
The Fair Labor Standards Act, passed in 1938, established a
minimum wage and maximum working hours.
It also ensured that children under the age of 16 could only be
employed full-time by their parents.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Laws Requiring Workplace Safety and Health
The Occupational Safety and Health Act of 1970 ensures safe,
healthful working conditions for employees.
The act created OSHA, the Occupational Safety and Health
Administration, to oversee safety in the workplace.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Laws That Regulate Trade
Laws that regulate trade include:
price discrimination laws
consumer protection laws
The Uniform Commercial Code (UCC)
truth in lending laws
truth in advertising laws
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Price Discrimination Laws
The Clayton Act of 1914
and the Robinson-Patman
Act of 1936 are aimed at
prohibiting price
discrimination.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
price discrimination
the charging of different prices for
the same product or service in
different markets or to different
customers
SECTION
8.2
Handling Government
Regulations
Consumer Protection Laws
Manufacturers of consumer products must become familiar with
consumer protection laws in order to avoid recalls and lawsuits.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
The Uniform Commercial Code
As a merchant, you must
abide by the requirements
of the Uniform
Commercial Code (UCC).
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
Uniform Commercial Code
(UCC)
a group of laws that regulates
commercial business transactions
SECTION
8.2
Handling Government
Regulations
The Uniform Commercial Code
Virtually everything
consumers buy comes with
a warranty of
merchantability.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
warranty of merchantability
a guarantee on the quality of
goods or services purchased that
is not written down or explicitly
spoken
SECTION
8.2
Handling Government
Regulations
Truth in Lending
Those involved in retail businesses must familiarize themselves
with the Consumer Credit Protection Act.
This act requires those who give credit to reveal all terms and
conditions of their credit agreements.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Truth in Advertising
The Federal Trade Commission protects customers from false and
misleading advertising with truth-in-advertising laws.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Truth in Advertising
A business that engages in
bait-and-switch
advertising is violating
truth-in-advertising laws.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
bait-and-switch advertising
an illegal method of selling that
involves advertising a product at
a very low price in order to attract
customers who are then
persuaded to switch to a more
expensive product
SECTION
8.2
Handling Government
Regulations
Tax Laws
All business owners are responsible for certain taxes, including:
sales taxes,
payroll taxes,
federal unemployment taxes, and
business income taxes.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
Payroll Taxes
When a business owner
hires employees, he or she
must deduct certain payroll
taxes from their earnings,
including FICA.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
FICA (Federal Insurance
Contribution Act)
a Social Security payroll tax,
figured as a percentage of an
employee’s income
SECTION
8.2
Handling Government
Regulations
After You Read
1.
Explain the laws that affect employees.
Laws that affect employees include equal opportunity, child labor,
wrongful termination, sexual harassment, Americans with
Disabilities Act, family medical leave, equal pay for equal work, fair
labor standards, and workplace health and safety.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
After You Read
2.
Identify the laws that regulate trade.
The goal of the Clayton Act of 1914 and the Robinson-Patman Act of
1936 is to prohibit price discrimination. Consumer protection laws
protect against unscrupulous sellers, unreasonable credit terms,
unsafe products, and mislabeling of products. The UCC is a group
of laws that regulates commercial business transactions.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
SECTION
8.2
Handling Government
Regulations
After You Read
3.
Discuss the tax laws that apply to a new venture.
Businesses are responsible for sales taxes, payroll taxes, federal
unemployment taxes, and business income taxes.
Chapter 8 The Legal Environment
Glencoe Entrepreneurship: Building a Business
8
The Legal
Environment
End of
Chapter 8
Section
8.1
Legal
Legal Issues FacingThe
Start-Ups
Environment
Section
8.2
Handling Government Regulations
Glencoe Entrepreneurship: Building a Business