Tangible property, such as a building, vehicle, or piece of jewelry is easy for the layman to understand. Since it physically exists, we can identify, analyze, and interact with it. Intellectual property, on the other hand, is different in that it has no physical form. However, like physical property it plays a similar vital role in commerce – businesses around the world create, buy, sell, and make agreements on intellectual property. In this article, we cover the basics of what intellectual property is, where it came from, and the common types used today in the US.
What is Intellectual Property?
As noted above, intellectual property is property without physical form, often referred to as an intangible asset. While many patents are utilized in the creation of components and products which are physical embodiments of the patent’s teachings, the patents themselves are rights granted to the inventor. These assets and the associated rights of the holder operate as a type of government granted temporary monopoly which confers upon the holder the exclusive right to prohibit others from using the novel invention or composition. The length of time the right is granted for depends on the type of protected invention or composition and the body through which it is recognized.
In the United States, intellectual property rights arise from the Constitution and function as a grant of exclusionary rights for a given invention or composition. In other words, if you hold the right to a given intellectual property asset, you have the temporary ability to prohibit others from using that asset.
Where did the idea of Intellectual Property come from?
Governments and monarchs across history have long understood skilled labor creates value in their societies and exceptional crafts. As such people are reticent to share their specialized knowledge from which they generate their living. This is why exclusive property rights (e.g., patents) were created.
People are incentivized to share their specialized skill and novel invention or composition with society when granted a temporary monopoly. Additionally, when the monopoly ends, the shared information becomes part of the industry’s knowledge base, expanding understanding and leading to follow-on inventions and betterment of goods and services.
What are the types of Intellectual Property?
Intellectual property assets are found in four main areas: trade secrets, patents, copyrights, and trademarks.
Trade Secrets
Trade secrets are a type of protection for business information which derives value by remaining confidential. Trade secrets are often the precursor to a patent, because the idea on which the patent is founded can be a trade secret prior to the idea holders filing for patent protection.
When an individual or company develops a trade secret, the holder must make a strategic decision. The choice is to either (1) seek the protection of a patent, which requires disclosure, or (2) forego patent protection and hold the information as a trade secret. Trade secrets do not have a term, per se, as long as they are continually used, remain known to a limited group of persons, and have commercial value.
A classic trade secret example is the Coca Cola recipe because it is well known and meets the requirements for protection:
- It is commercially valuable
- It is known to a limited group of persons, and
- It is held by an entity that has taken reasonable steps to ensure the information is kept secret.
Additional measures such as Non-Disclosure Agreements (NDA’s) and Non-Compete Agreements (NCA’s) are used to ensure partners and employees do not share secret information and undermine the protection of trade secrets.
Patents
The U.S. Patent Office issues three types of patents: utility, design, and plant. Patents generally last for a term of 20 years.
Utility Patent
Utility patents protect an inventor’s idea for a specific invention such as a mechanical or industrial machine, a method for accomplishing a task or goal, or an entire system or grouping of systems. These patents are granted to anyone who “…invents or discovers a new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvements of these.”
Additionally, utility patents can be granted provisionally or non-provisionally. Non-provisional patents include patents that have prepared claims and/or declarations, drafted figures, and are ready to be examined and published. Provisional patents allow for parties to secure a priority date at the time of filing but require the filer to complete the non-provisional patent application before the provisional patent expires in one year.
Design Patent
Design patents protect an object’s design or exterior visual presentation. These patents are granted to anyone who “… has invented a new, original ornamental design for an article of manufacture.”
Plant Patent
Plant patents are specific to botany and the creation of new plant types through asexual reproduction.
Copyrights
Copyrights are similar to patents in that they give the holder the right to prohibit others from using a novel idea; however, unlike patents, they are designed to protect works of authorship, not invention. Copyrights and their associated protections are discussed within the United States Constitution.
Copyrights last for the lifetime of the author and 70 years after the author’s death, or the last surviving author’s death if there are multiple authors, death. After the end of the final year, the work enters public domain.
Trademarks
Trademarks are a follow-on designation to copyrights which seek to secure a manufacturer’s right to register their product’s visual marking so that others may not include such a mark on their products. The intended purpose of such markings is to prevent the production of “knock-off” goods.
Ideally, trademarks protect consumers from purchasing goods that claim provenance they do not in fact have and manufacturers from loss of sales due to misrepresentations.
In Practice
Many industries utilize one or more of the above-mentioned types of intellectual property in their day-to-day business. Effectively managing and protecting intellectual property is vital for fostering innovation, encouraging research and development investment, and maintaining a competitive edge. For example, in the Architecture, Engineering, and Construction (AEC) industry, intellectual property encompasses legal rights protecting creative and innovative elements, including design plans, installation process, new assemblies, and new materials. Construction companies within the AEC industry often collaborate with legal professionals specializing in intellectual property to ensure proper protection and enforcement of their rights.
In the next article, we will dive into how intellectual property damages are calculated.
