The protection of intellectual property and the proper allocation of intellectual property ownership is the pivotal bedrock upon which our rules-based society and market economy rest. A thorough understanding of how to allocate intellectual property ownership is critical for entrepreneurs and business owners to grow their businesses upon developing new ideas and new creations.
Why Protect Intellectual Property?
Property rights are enshrined in the US constitution. This hallowed legal document was created with an eye towards guaranteeing the property rights of all Americans.
However, what about intellectual property rights?
Intellectual property is a type of intangible asset. However, these so-called intangible assets are no less valuable than traditional assets such as land and physical property. In the modern economy, intellectual property is often much more valuable than conventional assets. Many great startups and businesses are built entirely upon intangibles and intellectual property. Intellectual property protection allows these companies and businesses to benefit from their work or their investments in their ideas and creations.
While notions of protecting tangible property have existed in some form since the beginning of recorded human history, protection of intellectual property, however, is a relatively recent invention. The legitimacy of intellectual property wasn’t recognized until the Paris Convention for the Protection of Industrial Property (1883) and the Berne Convention for the Protection of Literary and Artistic Works (1886). Nonetheless, today intellectual property has become critically important and worth protecting.
3 Types of Intellectual Property Law
What is a copyright?
- Copyright protects original works of authorship fixed in a tangible medium of expression.
- Copyright covers both published and unpublished works.
- Copyright does NOT protect inventions, discoveries, or ideas. Instead, copyright law protects the way they are expressed. A trademark protects the words, phrases, symbols, or designs that identify and distinguish the goods or services of one party from another.
Generally speaking, the creator or originator of an idea, work, or novel invention is presumed to own the copyright to their creations. However, if the work was created as a part of a work-made-for-hire agreement, or in an employer-employee agreement, the copyright belongs to the employer. On the other hand, contractors (and not the party that employs them) retain ownership of the copyright of the works they create unless there's an agreement in place to assign the works to the employing party.
What is a patent?
- A patent is a grant of a property right to an inventor of a novel, non-obvious, and useful invention by a government body.
- A patent guarantees a creator the right to exclude others from making, using, offering for sale, selling or importing an idea, creation, design, or invention.
- A patent does NOT grant the right to make, use, offer for sale, sell or import an idea, creation, design, or invention.
- A patent provides, generally, 20 years of protection from the date of application.
Like a copyright, the creator or originator of an idea, work, or novel invention is presumed to own the patent to their creations. In the United States, an inventor or multiple inventors must apply for a patent. Ownership can then be assigned to a corporate entity afterward. Patent ownership can also be transferred to assignees and successors who then become proprietors of the patent. This makes patents a liquid property. Patents are often sold by inventors to third parties, who then become proprietors of the patent and can exclude others from exploiting such inventions.
3. Trade Secrets
What is a trade secret?
- A trade secret is confidential information not generally known to the public.
- Trade secrets are formulas, processes, methods, practices that confer a competitive advantage.
- Trade secrets consist of information which is not publicly known or readily ascertainable to outsiders.
- The holder of a trade secret must make reasonable efforts to maintain its secrecy.
Trade Secret Ownership
Similar to copyright and patent ownership, a trade secret is generally owned by the creator or creators, if they are employees, the trade secret is owned by the employer. Typically, trade secret arrangements are clarified through the use of non-disclosure agreements (NDAs), or confidentiality agreements.
Ownership vs. Licensing
Licensing is not a formal allocation of ownership. Instead, it is a transfer from one party to another of limited rights to use or exploit intellectual property. When intellectual property is licensed, the original owner (licensor) still retains ownership rights.