Chapter 7

Analyzing Product/Service Risks and Benefits

Learning Objectives
Discuss the current trends in product/process development Differentiate the way entrepreneurs develop products from the way they develop services Describe the product development cycle Explain the process of intellectual property development for patents, trademarks, copyrights, and trade secrets

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The Nature of Product/Process Development

Sophisticated customers in fragmented markets The impact of technology

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How Entrepreneurs Develop Products & Services *

Impact of Insufficient Resources:
Poor execution Time to market increases First to market opportunities are missed Projects are made simpler so that more can be done with less Team morale declines

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Figure 7.1: The Consequences of Resource Shortfalls for New Product Development *

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How Entrepreneurs Develop Products & Services

New product failure results from: Lack of good market analysis Technical problems

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Figure 7.2: The New Product Development Success Curve

Source: Based on the research of Greg A. Stevens and james Burley in Piloting the Rocket of Radical Innovation, Research Technology Management, 46(2):16-26.

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How Entrepreneurs Develop Products & Services

Strategies to consider when competing effectively in product development: Design products right the first time Shorten the time to market Outsource some product developments tasks

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Figure 7.3: From Idea to Market

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The Product Development Cycle

The process cycle components: Opportunity recognition Technical feasibility analysis Design and development of platform Prototype building and field testing Initial market tests Product market introduction and ramp-up

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Table 7.1: New Product Checklist *

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Outsourcing Product Development *

Areas suitable for outsourcing that require engineering analysis, design and expertise: Component design Materials specifications Machinery to process Ergonomic design Packaging design Assembly drawings & specifications Parts and material sources (suppliers) Operators and owners manuals

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Intellectual Property *
Definition of Intellectual Property Rights: The group of legal rights associated with patents, trademarks, copyrights, and trade secrets.

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Patents
Patents are the primary means of protecting an original invention. Designed by Thomas Jefferson in 1790 to provide a brief legal monopoly to give the inventor an opportunity to get the invention into the market and recoup development costs before competitors entered the market.

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Patents Protect Inventions

You need a patent if:

You have invented a product you want to market yourself or sell to a manufacturer. You believe someone else could sell the product by copying your invention. Patent application must include:
In-depth description of invention. Drawing of invention. Completed Declaration for Patent Application. Notarized statement from inventor. Filing fee to U.S. Patent & Trademark Office.

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PROTECTING PRODUCTS AND SERVICES Patent = an exclusive right to an invention

Patents Two Types

Utility Patents
(functional) toys, coatings, tools, machines good for 20 years

Design Patents
(nonfunctional) a decoration, apparel, jewelry Can easily be designed around...no functionality to protect

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Four Rules of Patentability

The invention must fit into one of the five classes established by Congress for utility patents: A. B. C. D. E. Machine (fax, rocket, electronic circuits) Process (chemical reactions, methods for producing products) Articles of manufacture (furniture, diskettes) Composition (gasoline, food additives) A new use for one of the above

It must have utility in other words, be useful. It must not contain prior art. Prior art is the state of knowledge that is publicly available or published prior to the date of the invention. The invention must not be obvious to someone with ordinary skills in the field.

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Pathway to a Patent
File a Disclosure Document (Disclosure Statement)
Establishes date of conception of idea (who has the rights?) Get a two year grace period

File a Provisional Patent Application

Protect your ideas while talking to manufacturers/potential funders Can use the term patent pending on the invention Only good for 12 months...then must file non-provisional application

File Non-Provisional Patent Application

File complete description with the PTO (Patent & Trademark Office) patent applied for good for two years of protection Denials allow an appeal process

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The Patent Process

Patent Infringement Patents give the holder the right to enforce the patent Defense costs in time and money make it difficult for small business to enforce.

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Foreign Patents
Patent rights granted to an individual extend only to the borders of the United States. Every country has different laws regarding intellectual property. Hire a knowledgeable intellectual-property attorney!

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Other Safeguards
Trademarks or TM or SM
A symbol or design or logo used to identify a business or a product Trademark cant be registered until its used

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Copyrights
Protects original works of authors, composers, and computer programmers Protects only the form in which it appears Good for life of author, plus 70 years

Trade Secrets
Can only be protected through employment contracts Recipes, ingredients, codes, mfg costs

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Trademarks
Trademark: A symbol, logo, word, sound, color, design, or other device that is used to identify a business or a product in commerce. It has a longer life than a patent. It grants a business exclusive rights to a trademark for as long at it is actively using it. Registered trademark Intent to use application filed for product SM Intent to use application filed for services

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Trademarks & Service Marks

Trademark = word, phrase, symbol, or design to set your product apart

Service mark = same as trademark, but for a service

Rights are reserved exclusively for owners for 17 yearscan be renewedlasts indefinitely There are advantages to owning them on the U.S. Patent & Trademark Office Principal Register TM = unregistered trade mark, SM = unregistered service mark, = registered trade mark

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Not trademarkable:
Anything immoral or deceptive Anything that uses official symbols of the U.S. or any state/municipality such as the flag Anything that uses a persons name or likeness without permission

SM

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Trademarks & Service Marks

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Trademarks & Service Marks

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Trademarks & Service Marks

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Trademark Infringement, Counterfeiting, and Dilution

Infringement - A mark that is likely to cause confusion with a trademark already existing in the marketplace Counterfeiting - The deliberate copying of a mark Dilution - The value of the mark is substantially reduced through competition or through the likelihood of confusion from another mark

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Copyrights

Copyright: Protection for authors of original workswhether published or unpublished Covers original works of authors, composers, screenwriters, and computer programmers Owner has the sole right to print, reprint, sell & distribute, revise, record, & perform the work Lasts for the life of the holder + 70 years Expired copyrights cannot enter the public domain until 2019

Works for hire-works published anonymously have copyrights of 95 years from date of publication

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Copyrights (continued)
The Digital Millennium Copyright Act 1998 Prohibits the falsification, alteration, or removal of copyright management data on digital copies. It made it a crime to circumvent an encrypted work without authorization. Obtaining copyright protection Federal protection is available if the work is in a fixed and tangible form; contains a copyright notice and year, and the full name of the responsible person.

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Copyrights (continued)
International protection The Berne Convention gives protection for the life of the author +50 years

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Trade Secrets
A trade secret consists of a formula, device, idea, process, pattern, or compilation of information that gives the owner a competitive advantage in the marketplace, a novel idea that is not common knowledge and is kept in a confidential state. A trade secret is not protected by federal law

Can only be protected through employment contracts and/or maintaining tight security
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