Questions for Chapter 12
True/False
1) The corporate opportunity doctrine basically claims that a director cannot use his position to
decide which acquisition deals the company should enter to. (pg. 374)
2) Every start-up should concentrate on hiring a litigation attorney from the very beginning.
(pg. 374)
3) Persuading your co-workers to leave your employer is not very risky, as long as their
defections do not impact the company’s ability to function and the conversations are
occurring after working hours. (pg. 375)
4) The number of workers you draw from your former employer to your new company does not
matter from the viewpoint of liability. (pg. 375)
5) Legally, an employee may not compete with his or her employer. (pg. 375)
6) You can use any information you gathered at your previous job as long as it is not patented
7) Certain states do not enforce non-compete agreements. (pg. 376)
8) Even when a patent application is successfully completed, protecting Intellectual Property is
not the end game; a patent doesn’t generate revenue. (pg. 377)
9) Although there are actually three different kinds of patents, the kind people usually obtain to
protect an invention is a design patent. (pg. 377)
10) Patents today cover non-engineering subject matter ranging from holders for floral bouquets
to business methods. (pg. 377)
11) Trademark law cannot be invoked in Internet search engines, pop-up ads, and websites.
(pg. 377)
12) Users of another company’s products can be sued for patent infringement. (pg. 377)
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
(True)
13) To qualify the invention for a patent, the applicant must describe all things novel about the
invention. (pg. 378)
14) The patent application must contain a complete and understandable explanation of the
invention.
(pg. 378)
15) Once granted, a patent’s scope is limited to the content that companies disclose in the drawings
and specification portion of the filing. (pg. 379)
16) In the United States, the patent application must be filed within one year of the first public
disclosure, public use, sale, or even offer for sale of the product, or the opportunity to obtain
a patent will be lost forever. (pg. 378)
17) The owner of the patent has the right to exclude others from making, using, selling, offering
for sale or importing the patented invention during the term of the patent. (pg. 378)
18) From the date the application is filed, there is a “patent pending;” and from the date of a “patent
pending,” there are real legal rights associated with that designation. (pg. 378)
19) Since each patent application is unique, the form of each individual patent does not necessarily
contain the same sections. (pg. 379)
20) A sale more than a year before the application will generally bar a patent even if the invention
is embedded so deeply within a larger system that it could never be discovered. (pg. 379)
21) People like provisional patents because of the future protection that they ensure. (pg. 382)
22) Provisionals have found favor because they are typically less expensive than full patent
applications and allow companies to advertise “patent pending.” (pg. 382)
23) Because of the potential value of a patent, the cost of filing a patent is always worth it. (pgs.
382-383)
24) One benefit of trade secrets is they can cover everything patents cover, and much more.
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
(pg. 383)
(True)
25) A trade secret is defined as knowledge, which is kept secret for the purpose of gaining an
advantage in business. (pg. 383)
26) Trade secrets cover proprietary information, but only if they are in the form of an engineering
schematic. (pg. 383)
27) A benefit of trade secrets is there is no standard of invention to meet, as there is with a
patent. (pg. 383)
28) The law protects companies from their employees disclosing trade secrets even if those
employees did not sign confidentiality contracts. (pgs. 383-384)
29) Since there is no formal protection procedure, the necessary steps for establishing a trade secret
are often not taken seriously until a lawsuit is brought by the owner against someone who has
misappropriated them. (pg. 384)
30) Trademark protection cannot be obtained for just some word, symbol, or combination thereof
that is used on goods to indicate their source. (pg. 385)
31) Trademarks can be more valuable to some companies than patents and trade secrets combined.
(pg. 385)
32) Trademarks can differentiate a business’s products and services from those of others
businesses.
(pgs. 385 – 386)
33) Although formally there is only one owner in the sole proprietorship, two or more people
control the company. (pg. 390)
34) A board of directors makes all the long-term and significant policy decisions for the business
as well as electing the officers of the corporation. (pg. 391)
35) If a business is not able to pay its debts, under a general partnership, the debt is transferred to
the owners. (pg. 391)
36) Business angels prefer to invest in sole proprietorships. (pg. 391)
37) There are conditions under which a corporation can be taxed as a partnership.
(pg. 393)
38) Double taxation is not necessarily a problem for a company. (pg. 393)
39) S corporations have the same restrictions as the LLCs, while allocating profit, loss and
control more creatively. (pg. 393)
40) Corporations do not necessarily operate in the same state where they were formed.
(pg. 395)
41) When choosing an official name, every company has to receive an approval from its
respective state regulatory board. (pg. 395)
42) The employer is responsible for any damage done by the employees occurring within the
scope of their employment. (pg. 399)
43) National statutes prohibit employment discrimination on the basis of sex, race, nationality,
religion, sexual orientation, age, and disability. (pg. 399)
Multiple Choice
1) What is the advantage of hiring a specialized attorney for a startup? (pg. 374)
2) What concept requires that an employee does not knowingly take action designed to harm the
employer’s business? (pgs. 374-375)
A. Reasonable protection
E. Generally accepted protection principle
3) If you decided to leave your current employer and establish your own venture, what actions will
decrease the likelihood of being sued for convincing other employees from the company to leave
with you? (pg. 375)
4) Under what condition will the law consider the company to have taken reasonable protection of
its information? (pgs. 377-387)
A. If the company made its employees sign non-disclosure agreements
5) What, if possible, must the employer do to make its employees not compete with the company
for a year after they quit the job? (pgs. 375-376)
6) Which of the following is not referred to as intellectual property creations of the mind?
(pg. 376)
7) Which one of the following is within the range of Intellectual Property protection?
(pg. 376)
A. patents
8) _______ protect authors’ original creations, including literary, musical, artistic, software, and
other intellectual works. (pg. 376)
A. Patents
B. Trade secrets
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
C. Trademarks
D. Copyrights
E. All of the above
9) _______ cover proprietary information, whether it’s in the form of a recipe, a customer list, or a
unique way of conducting business. (pg. 376)
A. Patents
10) _______ are key in differentiating a business’s products and services from those of others as well
as in franchising arrangements. (pg. 376)
A. Patents
11) ______can be considered a public use of an invention, sufficient to activate the one-year period.
(pg. 378)
12) The basic requirement for a utility patent is that the ______ be different in some way from what
came before. (pg. 378)
E. product branding
13) The form of all patents contains the same basic sections, including: ____________. (pg. 379)
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
C. the underlying concept of the product
D. the functionality of the product
E. the rarity of the product
15) Which of the following could NOT be protected as a common form of trademarks? (pg. 385)
16) Which of these represent a word or symbol or combination used in connection with the offering
and provision of services? (pg. 385)
A. Utility patent
17) People can establish which of the following without any formal governmental procedure?
(pg. 386)
18) Copyrights cover many forms of writing; however, they will not cover which of the following?
(pg. 387)
A. Brochures
19) After the U.S. Patent and Trademark Office examines the application and determines that the mark
could be registered, the applicant must show actual use within how many months? (pg. 386)
20) In the U.S., how much does a typical search and registration for a trademark cost per mark?
(pg. 387)
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
C. $7,000 – $9,000
D. $10,000 – $12,000
E. $13,000 – $15,000
21) The benefit of a copyright registration is _______. (pgs. 387 – 388)
E. none of the above
22) Different countries have different conditions that entrepreneurs must meet to obtain any patent
protection; the first and most important restriction is______. (pg. 389)
E. the value limit
23) By filing a special PCT patent application in a specially designated PCT office within one year
of U.S. filing, and by designating certain countries, companies can preserve their right to file in
those countries without further expense for ___ after the U.S. filing date; that will provide
______for test marketing the product. (pg. 389)
24) An S corporation can be distinguished from other types of corporations in: (pg. 390)
E. Annual income
25) The minimum number of owners in a general partnership is equal to: (pg. 390)
26) Which of the following cannot be considered non-profit entities? (pg. 390)
A. Social welfare organizations
D. Limited liability corporations
E. Industry associations
27) In regards to determining the choice of legal form, the most relevant factor(s) one should
consider is/are: (pg. 390)
28) The business is not recognized as a legal entity separate from its owners under which form?
(pg. 391)
29) How long does an organization have to file for and secure non-profit status? (pg. 394)
30) Which is NOT a condition in which the law allows creditors to “pierce the corporate veil” and
go after the owners of a failed corporation or LLC. (pg. 392)
31) Which state is famous for its management-friendly corporate laws? (pg. 395)
32) As can be learned from the chapter, a redemption agreement is the covenant, in which: (pg. 397)
D. Internal Revenue Service allows installment tax payments to be received within 2 years after
an owner’s death.
E. None of the above.
33) The doctrine of vicarious liability states that: (pg. 399)
A. The employer’s liability for the employee’s actions is limited to a specific amount of money
34) An employer may not discriminate against anyone for any of the following characteristics,
except for: (pg. 399)
35) What is the main attraction of an employment agreement for the employee? (pg. 400)
36) What is the maximum dollar amount of a securities offering for it to still qualify for private
placement exemption? (pgs. 400-401)
1) Briefly explain the ideas behind the “corporate opportunity” and the “duty of loyalty”
doctrines. (pgs. 374 – 375)
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
c) The duty of loyalty limits this obligation – low-position employees must only inform the
company about opportunities directly related to the scope of their job. In contrast to the more
strict obligations of executives.
2) How can a company protect itself from its employees competing against the company after
they leave? What problems may the company face when preventing this kind of
competition? (pgs. 375 – 376)
3) Please point out different classes of inventions that utility patents can cover, and the
differences between them. (pgs. 377-378)
4) What are the benefits and the disadvantages of trade secrets? (pgs. 383 – 385)
5) Many people think that only technical information can be protected. Is there any other kinds
of information that can be protectable? (pgs. 376-388)
d) The identity of a critical supplier
e) A refinancing plan
6) Secrecy is essential to establishing trade secret rights; without it there is no trade secret
property. Please identify the primary steps for ensuring secrecy. (pg. 384)
7) What are the pros and cons of patenting a product? (pg. 388)
8) List the common business entities and describe them. (pgs. 390 – 391)
9) Give several reasons for choosing a C corporation entity for a start-up. (pgs. 390 – 392)
10) What are the possible negative consequences of a company co-owner’s death and how can
a company prepare itself to minimize them? (pgs. 396 – 397)
11) What legal issues can a company face when selling securities to investors? What are some
of the misconceptions about stock and securities issuance? (pgs. 400-401)
a) In general, the securities laws prohibit the offering of securities (including stock) to the
public without prior (and very expensive) registration with an appropriate government