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The Basics of Intellectual Property

Provided by PIIPA, Content Partner for SME Toolkit

In recent decades, the economies of the world have shifted from being dominated by tangible assets (e.g., factory equipment and inventory) to being dominated by intangible assets (e.g., intellectual property, or “IP”). Further, worldwide innovation is increasingly coming from small and medium-sized enterprises (SMEs). Each form of intellectual property (IP) has many nuances and involves many strategic considerations. These strategic concerns can differ widely for different industries, for different types of innovations, and entities having different sizes and different amounts of funds. 

Why Invest in IP Protection: 

For almost every successful SME, its competitiveness is tied to one or more types of IP, whether as technological inventions, creative expressions, corporate identity and brand recognition, proprietary know-how, or in some other form. Timely and correctly protecting that IP can often allow the SME to maintain, leverage, and even monetize its competitiveness. For example, IP protection can help an SME: 

  • obtain a return on its investments in research, development, branding, goodwill, and the like; 
  • prevent its competitors from entering markets or offering certain types of products or services; 
  • differentiate its product or service offerings and with protected brands; and 
  • position its intellectual assets for use in legal and financial negotiations, for example, in raising capital, entering licenses or other contracts, establishing sales channels and strategic partnerships, franchising, etc. 

Some Key Intellectual Property Concepts: 

(1) Territoriality – Most IP is jurisdictional; each jurisdiction has its own set of intellectual property laws and its own enforcement regime, and IP rights granted by one jurisdiction generally cannot be enforced in another. A number of international treaties relating to IP rights have been joined by most countries in the world, and countries are increasingly creating and joining regional IP systems, but there is still no worldwide right in any form of IP. 

(2) Transferability – Most IP rights are fungible assets (i.e., they can be bought and sold). Assignments can be used to transfer an entire right in a particular IP asset (e.g., effectively a sale of the asset to another entity), while licenses can be used to transfer less than the entire right in a particular IP asset. For example, a copyright license can be used to allow reproduction rights in a work that are limited in number, format, and timeframe. 

(3) Interplay – The forms of IP should not be considered as silos. The most successful companies tend to weave different types of IP into a strategic, protective fabric. For example, certain technology can be maintained as a trade secret while publicly disclosing other technology in the form of patents. Similarly, design patents can be used to protect aesthetic features until they gain enough market presence to be protected as trade dress. 

(4) Public Domain – Certain works (or inventions, etc.) are deemed to be in the public domain, so that the public is free to exploit the works without violating anyone’s IP rights. In some cases, works originally protected for some time under one or more forms of IP ultimately enter the public domain. This can occur, for example, when the IP rights expire, are allowed to lapse, or become unenforceable. In other cases, works are dedicated to the public from their inception or shortly thereafter. This can occur explicitly (e.g., through certain open source licenses, certain types of public disclosure, or through other instruments) or implicitly (e.g., by allowing opportunities to protect the IP to lapse). 

Basic Types of IP Assets: 

(1) Patent – A patent is a right to exclude others from making, using, selling, or importing an invention. The invention is defined by the claims of the patent instrument. To be valid, the patent must claim an invention that is new and non-obvious, falls within a valid category of patentable subject matter, and is described sufficiently enough so that a person having ordinary skill in the art could practice the invention. Full patent rights arise only after an application for patent is granted by a jurisdiction’s patent office (e.g., the United States Patent and Trademark Office). There are over 40 million patents worldwide covering well over 10 million inventions. Patents can protect all sorts of technologies, including those found in chemical compositions (e.g., pharmaceuticals), vehicles (e.g., cars, trains, satellites), consumer electronic devices (e.g., cell phones, video game systems, televisions), recreational equipment (e.g., golf balls, tents, climbing gear), and others. Learn more about patents.

(2) Trademark – A trademark is a right to prevent others from using source identifiers for goods or services in commerce in a manner likely to confuse consumers. The trademark can protect any type of source identifier, including brand names, logos, colors, sounds, and trade dress. While most jurisdictions recognize common law trademark rights (i.e., rights in a trademark prior to registering the trademark with a government agency), trademark registration carries certain benefits, like a presumption of trademark rights throughout the jurisdiction of the registering agency (e.g., the United States Patent and Trademark Office). Trademarks can protect anything that can identify a source of a good or service in the mind of a consumer. Trademarks can include brand names, logos, slogans, distinctive packaging, and sometimes even colors, smells, sounds, and the like. For example, brands like Coca-Cola, IBM, and Microsoft are worth in the tens of billions of dollars each. Learn more about trademarks.

(3) Copyright – A copyright is a right to prevent others from unauthorized copying, distributing, publicly performing, publicly displaying, or preparing derivative works of original expressions of an idea that have been fixed in a tangible medium of expression (e.g., written down, recorded, etc.). Protectable types of original expressions include books, songs, websites, software, sculptures, game boards, and other types of works. Like trademarks, most jurisdictions recognize a common law copyright, but registration carries certain benefits (e.g., the ability to sue for infringement in the U.S.). Learn more about copyrights.

(4) Design – Different jurisdictions offer different types of protections for ornamental (i.e., aesthetic, as opposed to utilitarian) designs. For example, ornamental designs can often be protected in different ways in the United States under copyright law (e.g., as a sculptural article), trademark law (e.g., as trade dress), and/or patent law (as a design patent). Other countries offer “industrial design” protection for ornamental or aesthetic aspects of articles of manufacture. Typically, registration is required for protection. The term of protection can vary widely (depending on the basis of protection and the laws of the jurisdiction), but is usually at least 14 or 15 years. Examples of protectable designs can include certain product shapes, layouts of graphical user interfaces, and the like. Learn more about designs.

(5) Trade Secret – Trade secret statutes provide a cause of action against theft of know-how and other information when reasonable precautions have been taken to keep that information secret. A trade secret can include almost any type of information that can be kept secret, such as pricing strategies, customer lists, manufacturing processes, and formulas. Due to their secret nature, trade secrets are not registered. 

(6) "Quasi-IP" – In addition to the primary forms of IP (above), a number of strategies can be used like IP rights, though they not typically considered as such. One such strategy is the “first-to-market advantage.” When achieved properly, this can create a sense of innovativeness (like patents) and can establish goodwill with consumers (like trademarks). Another such strategy is to minimize switching costs for potential new customers while erecting large barriers to entry for potential competitors. This can quickly create a large and loyal customer base while limiting competition. Other forms of quasi-IP involve creative uses of contracts, strategic partnerships, endorsements, “freemium” offerings, and the like. For some businesses, these quasi-IP strategies can be more valuable than traditional forms of IP.

Copyright © 2016 Public Interest Intellectual Property Advisors. All Rights Reserved.

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