CHAPTER 12
The Importance of Intellectual Property

The Importance of Intellectual Property

Intellectual property is any product of 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.

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.

The Four Key Forms of Intellectual Property

Patents, trademarks, copyrights, and trade secrets are the four key forms of intellectual property. We discuss each form of intellectual property protection in the following sections.

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. The owner of the patent is granted a legal monopoly for a limited amount of time. However, a patent does not give its owner the right to make, use, or sell the invention; it gives the owner only the right to exclude others from doing so.

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.

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. The work must be in a tangible form, such as a book, operating manual, magazine article, musical score, computer software program, or architectural drawing. If something is not in a tangible form, such as a speech that has never been recorded or saved on a computer disk, copyright law does not protect it.

Trade Secrets

Most companies, including start-ups, have a wealth of information that is critical to their success but does not qualify for patent, trademark, or copyright protection. Some of this information is confidential and needs to be kept secret to help a firm maintain its competitive advantage. An example is a company’s customer list.

Conducting an Intellectual Property Audit

The first step a firm should take to protect its intellectual property is to complete an intellectual property audit. This is recommended for all firms, regardless of size, from start-ups to mature companies. An intellectual property audit is conducted to determine the intellectual property a company owns.

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