Intellectual property is any product of the human intellect that is intangible but has value in the marketplace. It is called “intellectual” property because it is the product of human imagination, creativity, and inventiveness. Traditionally, businesses have thought of their physical assets such as land, buildings, and equipment as their most important assets. Increasingly, however, a company’s intellectual assets are the most valuable.
A. Determining What Intellectual Property to Legally Protect
There are two primary rules of thumb for deciding if intellectual property protection should be pursued for a particular intellectual asset.
First, a firm should determine if the intellectual property in question is directly related to its competitive advantage.
The second primary criterion for deciding if intellectual property protection should be pursued is to determine whether an item has value in the marketplace.
Patents, trademarks, copyrights, and trade secrets are the four key forms of intellectual property.
While not one of the four forms of intellectual property, Internet domain names are an important form of intellectual property. Having a short, easy-to-spell Internet domain name is becoming increasingly important as the Internet becomes an ever more powerful force in business.
Patents
A patent is a grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for the term of the patent.
A. Types of Patents
There are four types of patents: utility patents, business method patents, design patents, and plant patents.
There are three basic requirements for a patent to be granted: The subject of the patent application must be (1) useful, (2) novel in relation to prior arts in the field, and (3) not obvious to a person of ordinary skill in the field.
1. Utility patents
New and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”
Duration of this patent is 20 years from the date of the original application
2. Business method patent
Protects an invention that is or facilitates a method of doing business.
The invention of new, original, and ornamental designs for manufactured products.
Duration of this patent is 14 years from the date of the original application
4. Plant patents
Plant patents protect new varieties of plants that can be reproduced asexually.
Duration of this patent is 20 years from the date of the original application
B. Who Can Apply for a Patent?
Only the inventor of a product can apply for a patent. If two or more people make an invention jointly, they must apply for the patent together.
C. The Process of Obtaining a Patent
Here are the 6 steps to obtain a patent:
Step 1: Make sure the invention is practical.
Step 2: Determine what type of application to file.
Step 3: Hire a patent attorney.
Step 4: Conduct a patent search.
Step 5: File a patent application.
Step 6: Obtain a decision from the official institution.
D. Patent Infringement
Patent infringement takes place when one party engages in the unauthorized use of another party’s patent.
Trademarks
A trademark is any word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those products or services from others.
All businesses want to be recognized by their potential clientele and use their names, logos, and other distinguishing features to enhance their visibility. Trademarks also provide consumers with useful information.
A. The Four Types of Trademarks
There are four types of trademarks: trademarks, service marks, collective marks, and certification marks. Every type trademark is renewable every 10 years, as long as the mark remains in use
Trademark: Any word, name, symbol, or device used to identify and distinguish one company’s goods from another.
Service mark: Used to identify the services or intangible activities of a business, rather than a business’s physical products
Collective mark: Trademarks or service marks used by the members of a cooperative, association, or other collective groups
Certification mark: Marks, words, names, symbols, or devices used by a person other than its owner to certify a particular quality about a good or service
B. What Is Protected Under Trademark Law?
Trademark law, which falls under the Lanham Act, passed in 1946, protects the following items:
- Words
- Number and letters
- Design or logos
- Sounds
- Fragrances
- Shapes
- Colors
- Trade dress
C. Exclusions from Trademark Protection
There are notable exclusions from trademark protection that are set forth in the U.S. Trademark Act:
- Immoral or scandalous matter
- Deceptive matter
- Descriptive marks
- Surnames
There are three steps in selecting and registering a trademark:
Step 1: Select an appropriate mark.
Step 2: Perform a trademark search.
Step 3: Create rights in the trademark.
Copyrights
A copyright is a form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how the work is used and to obtain the economic benefits from the work.
A. What Is Protected by a Copyright?
The primary categories of material that can be copyrighted follow:
- Literary works
- Musical compositions
- Computer software
- Dramatic works
- Pantomimes and choreographic works
- Pictorial, graphic, and sculptural works
Other categories of items covered by copyright law include motion pictures and other audiovisual works, sound recordings, and architectural works.
B. Exclusions from Copyright Protection
The main exclusion is that copyright laws cannot protect ideas.
Other exclusions from copyright protection include facts (e.g., population statistics), titles (e.g., Introduction to Entrepreneurship), and lists of ingredients (e.g., recipes).
C. How to Obtain a Copyright
Step 1: copyright protection can be enhanced for anything written by attaching the copyright notice, or “copyright bug” as it is sometimes called. The bug typically appears in the following form of ©.
Step 2: Further protection can be obtained by registering a work with the official institution. Filing a simple form and depositing one or two samples of the work with the official institution completes the registration process.
D. Copyright Infringement
Copyright infringement is a growing problem, with estimates of the costs to owners at more than $25 billion per year.
Copyright infringement occurs when one work derives from another, is an exact copy, or shows substantial similarity to the original work. To prove infringement, a copyright owner is required to show that the alleged infringer had prior access to the copyrighted work and that the work is substantially similar to the owner’s.
E. Copyright and the Internet
Copyright laws, particularly as they apply to the Internet, are sometimes difficult to follow, and it is easy for people to dismiss them as contrary to common sense.
Trade Secrets
A trade secret is any formula, pattern, physical device, idea, process, or other information that provides the owner of the information with a competitive advantage in the marketplace. Trade secrets include marketing plans, product formulas, financial forecasts, employee rosters, logs of sales calls, and laboratory notebooks.
A. What Qualifies for Trade Secret Protection?
Trade secret protection is information that is characterized by the following:
- Is not known outside the company
- Is known only inside the company on a “need-to-know” basis
- Is safeguarded by stringent efforts to keep the information confidential
- Is valuable and provides the company a compelling competitive advantage
- Was developed at great cost, time, and effort
- Cannot be easily duplicated, reverse engineered, or discovered
B. Trade Secret Disputes
Trade secret disputes arise most frequently when an employee leaves a firm to join a competitor and is accused of taking confidential information along.
A company damaged by trade secret theft can initiate a civil action for damages in court. The action should be taken as soon after the discovery of the theft as possible.
C. Trade Secret Protection Methods
Aggressive protection of trade secrets is necessary to prevent intentional or unintentional disclosure.
1. Physical Measures
The following are examples of commonly used physical measures for protecting trade secrets:
- Restricting access
- Labeling documents
- Password protecting confidential computer files
- Maintaining logbooks for visitors
- Maintain logbooks for access to sensitive material
- Maintaining adequate overall security measures
2. Written Agreements
For the best protection, a firm should ask its employees to sign nondisclosure and noncompete agreements.
Conducting an Intellectual Property Audit
A. Why Conduct an Intellectual Property Audit?
There are two primary reasons for conducting an intellectual property audit:
- It is prudent for a company to periodically determine whether its intellectual property is being properly protected.
- To remain prepared to justify its value in the event of a merger or acquisition.
B. The Process of Conducting an Intellectual Property Audit
Step 1: Develop an inventory of a firm’s existing intellectual property.
Step 2: Identify works in progress to ensure that they are being documented in a systematic, orderly manner.
Step 3: Specify the firm’s key trade secrets and describe how they are being protected.
