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

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Chapter 6 Intellectual Property and other Legal Issues for the
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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

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Chapter 6 Intellectual Property and other Legal Issues for the
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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

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Chapter 6 Intellectual Property and other Legal Issues for the
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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

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Chapter 6 Intellectual Property and other Legal Issues for the
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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

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Chapter 6 Intellectual Property and other Legal Issues for the
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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

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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

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Chapter 6 Intellectual Property and other Legal Issues for the
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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

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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

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