What Is Intellectual Property?
The term “intellectual property” refers to the collection of resources and capabilities that a business or individual holds and is perfectly allowed to protect against illegal use or application by third parties. A firm or individual may own current assets, which are non-physical assets.
The idea of intellectual property originates from the belief that some creations of human brain deserve to have the same legal protections as real products, or valuable assets. The majority of developed economies have laws in place to protect both types of property.
Understanding Intellectual Property
Due to the high value of intellectual property in today’s knowledge-based economy, businesses are hard-working in their efforts to discover and protect it. Additionally, creating valuable intellectual property demands massive investments in both time and brainpower from trained labourers. This results in major expenditures made by businesses and individuals that others shouldn’t be able to access without permission.
It is essential for any business to gain value from the intellectual property while preventing others from doing the same. There are many various kinds of intellectual property. Despite becoming an invaluable property, the intellectual property sometimes has a far higher value than a company’s actual assets. Because it can be a source of competitive advantage, intellectual property is carefully guarded and protected by the businesses that hold it.
Types of Intellectual Property
Some of the most common intellectual assets that make up intellectual property are mentioned below.
A governmental agency, such as the U.S. Patent and Trademark Office, will regularly give an investor a patent, which is a type of property right. 1 The invention, which can be a design, a method, an advancement, or anything concrete like the machine, is given to the inventor unique rights through the patent. Many software and technology companies have patents on their inventions.
Copyrights enable authors and other original content creators the full authority to use, copy, or duplicate their works. Both musicians and book authors have copyright protection for their products. Copyright also states that the original authors may provide authorisation to use the work to anybody through a licencing agreement.
A trademark is a familiar word, phrase, or design that identifies a product and legally separates it from rival companies. When a corporation is permitted exclusive use of a trademark, no other party may use or copy the trademark. A trademark and a company’s brand are commonly related. The Coca-Cola Company, for example, owns the “Coca-Cola” brand name and logo (KO).
A franchise is a permission that a business, person, or entity—referred to as the franchisee—purchases to use the franchisor’s name, trademark, intellectual knowledge, and business models.
The franchisee, who runs the shop or franchise, is usually a small company owner or entrepreneur. The franchisee has the right to use the company’s name to sell goods or offer services, thanks to authorization. In exchange, the franchisee pays the owner a beginning fee and annual licence fees. Examples include various businesses, such as United Parcel Service (UPS) and McDonald’s Corporation.
A company’s procedure or technique that benefits the company or the person who holds the private information economically is referred to as a trade secret because it is not generally known. Trade secrets are usually the outcome of a company’s research and development and must be carefully secured by the business (which is why some employers require the signing of non-disclosure agreements or NDAs).
Designs, patterns, recipes, formulas, and unique procedures are a few examples of trade secrets. Trade secrets are used to develop a business strategy that gives the organisation an advantage over competitors and differentiates it customer solutions.
Intellectual Property Infringement
Intellectual property rights (IPRs), which are connected to intellectual property, are certain rights that cannot be violated by people who do not have permission to use them. IPRs provide owners the power to prevent others from copying, exploiting, and replicating their works.
A legally defined patent is violated when it is used without permission by another person or business. Patents filed before June 8, 1995 have a 17-year lifespan, and those submitted after this date have a 20-year lifespan. 7 The specifics of the patent are made available to the public after its expiration date.
When an unidentified user duplicates an original work, such as a piece of music, a novel, or a work of art, they are trespassing on the author’s copyright. For the act to be considered a violation, the duplicated material cannot be an identical copy of the original.
Similarly, trademark violation happens when an unauthorized party makes use of a trademark that is similar to or identical to a licenced trademark. For illustration, a competition might use a trademark that is similar to that of its rival to hamper activities and attract its client. Additionally, corporations in unrelated industries may employ the same or similar marks in a try to profit from other businesses’ good product reputations.
Non-disclosure agreements are regularly used to protect trade secrets (NDA). A party to an agreement has violated it and impacted on a trade secret if they expose all or part of a trade secret to uninterested parties. When an NDA is absent, trade secret violations may still be present.
Tips to Avoid IP Infringement
Violation commonly occur unintentionally. Make sure your company isn’t using any content that is protected by a copyright or trademark, and make sure your brand or logo isn’t too similar to another company’s that it may easily convince someone to believe it is the other brand. Do a patent search as well to make sure that any ideas you have are original to you and, if not, that you can legally licence them. To ensure that you are not using someone else’s protected intellectual property, there are IP lawyers who have expertise in this procedure.
If you engage someone to perform creative work for you or your business, be sure the contract clearly indicates that any resulting works will belong to the business and not the person you hired.
As there are not any acceptable accounting procedures for valuing each asset, many types of intellectual property cannot be represented as assets on the balance sheet. However, because stock market participants are aware of the existence of the intellectual property, the value of the property positively affects in the price of the stock.
According to their expiration date, some non-physical assets, such as patents, are listed as real estate. Through the process of valuation, a numerical value for these assets is recorded. An economic technique called amortisation reduces the value of an intangible asset over a specific period of time. By subtracting a specific amount annually for tax purposes as the useful life of the intangible asset terminates, this approach aids the corporation in lowering its income.
An expiration date for a patent, for instance, might be 20 years before it becomes part of the public domain. The patient’s overall value would be determined by the business. The whole value of the patent would be divided by 20 years, and the same amount would be recorded at cost or amortised each year. Every year, the amount of the amortised asset would lower the company’s net income or profit for taxation. A trademark, for example, is a type of intellectual property that is believed to have a legal existence and is therefore not subject to valuation because it never loses its value.