Intellectual Property? The path of a successful company starts with a good idea; however, if the innovation, brand, or industrial design is not protected, there is a risk of it being copied, thus losing the competitive advantage.
Every business, no matter how small, has some form of intellectual property that needs protection. In this way, managing your company’s intellectual property (IP) plays an important role as it allows you to control the fate of its innovations.
In this regard, companies must be diligent when it comes to identifying and protecting intellectual property because it holds such high value in today’s increasingly knowledge-based economy (Kanton, 2021), and therefore, intellectual property rights can be crucial for your business (Burnett, 2019).
Many small or medium-sized companies wait too long in their development to take intellectual property protection seriously (Heitner, 2018), which can be fatal to business success; however, you should also consider that not all intellectual property rights apply to your business.
In this article, we want to provide you with the basics of intellectual property (IP), the importance of IP, the types of intellectual property, among other topics that will help you understand these legal aspects often overlooked by entrepreneurs.
What is Intellectual Property (IP)?
With the growth of the knowledge-based economy, intellectual property rights are recognized as a key factor for development and for protecting a company’s competitiveness and innovation (Stjepandić et al., 2015).
According to the World Intellectual Property Organization (WIPO), intellectual property (IP) relates to creations of the mind: inventions, literary and artistic works, as well as symbols, names, and images used in commerce.
Thus, intellectual property (IP) refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce. It is a legal concept that grants exclusive rights to creators or inventors to control the use of their creations, allowing them to benefit economically and maintain recognition for their innovations. The goal of IP law is to stimulate innovation by ensuring that inventors and creators can reap the benefits of their efforts, thereby promoting progress in society.
Intellectual property is a broad categorical description for the set of intangible assets that a company owns and legally protects from external use or implementation without consent (Kenton, 2021); in this way, IP is a general term that refers to the legal rights resulting from intellectual activity in the fields of industry, science, literature, and the arts.
Why is Intellectual Property Important?
Intellectual property rights help protect businesses from imitators and allow companies to create a distinctive identity to strengthen their market presence (WIPO, 2021); but also from IP “leakage” by not applying proper confidentiality controls (Kulik, 2018) with employees and suppliers.
WIPO (2021) highlights that an innovative product or process created by a startup may be new to the market, may improve the performance of an existing product or service, or may reduce manufacturing time or costs; in all cases, the company should develop an appropriate IP strategy as quickly as possible.
Innovation and intellectual property are distinct concepts but are closely related. Innovation often leads to the creation of intellectual property, while IP rights provide tools to finance the development of innovative ideas and bring them to market (Kjakšta and Gailis, 2020).
To discuss the importance of IP, we will divide it into two approaches: for the entrepreneur and for the general public.
For the Entrepreneur
- Drive innovation: Without the protection of ideas, businesses or individuals would not receive all the benefits of their inventions and would focus less on research and development.
- Rapid growth of the intellectual property market: Thus, it is important for startups to use intellectual property and licensing.
- Owning intellectual property helps protect you from others using something identical or similar to your creation, brand, or product, and you can also create new sources of income if you license the goods or services to third parties.
General Public
Intellectual property rights reward creativity and human effort, which stimulate the progress of humanity. WIPO provides the following examples:
- The multimillion-dollar industries of film, music, publishing, and computing would not exist without copyright protection;
- Without the rewards provided by the patent system, researchers and inventors would have no incentive to keep creating better and more efficient products for consumers;
- Consumers would not buy products or services with confidence if there were no reliable international mechanisms to protect trademarks and combat counterfeiting and piracy.
The Role of Intellectual Property in Business and Innovation
Intellectual property is essential for companies to protect their competitive advantage, foster innovation, and enhance market value. Grimaldi et al., (2021) highlight that proper management of intellectual property (IP) is crucial to maintaining competitive advantage and managing outgoing open innovation (OI), which describes the flows of knowledge and technology from inside out.
In this sense, effective intellectual property management can attract investors, generate revenue through licensing, and provide leverage in negotiations. Nguyen, et al., (2023) conclude that the need for intellectual property protection (IPP) is a strong driver of open innovation, regardless of whether the company is located in a more or less competitive context; they also note that the need for IPP is a stronger driver for small companies than for large ones.
For example, companies like Apple, Microsoft, and Tesla heavily rely on intellectual property strategies to maintain their market dominance and continually innovate.
On the other hand, Grimaldi et al. (2021) present a strategic IP framework that includes the following strategies: a “defensive” strategy aimed at preventing the diffusion of knowledge and creating barriers to competition; a “collaborative” strategy aimed at collaborating with other organizations and entering new markets; and an “improvised” strategy that describes companies that protect their IP without a clear purpose.
Types of Intellectual Property
WIPO (2020) highlights that intellectual property is divided into two main categories: industrial property and copyright and related rights. Below, we will describe the main characteristics of each IP right based on WIPO documents.
Industrial Property
Industrial property covers patents for inventions, trademarks, industrial designs, and geographical indications.
Patents
By patenting an invention, the patent holder obtains exclusive rights over it, meaning they can prevent others from using, manufacturing, or selling the invention without their authorization (WIPO, 2020).
A patent has a limited duration, usually 20 years. Once the protection period expires, the invention is no longer protected by a patent, meaning anyone can freely manufacture, sell, or use it.
What Can Be Patented?
WIPO (2020) defines an invention as a product or process that provides a new way of doing something or a new technical solution to a problem.
To be eligible for patent protection, an invention must have practical utility and offer something new that is not part of the existing body of knowledge in the relevant technical field (state of the art).
It is important to note that the requirements of utility and novelty are not sufficient; the invention must also involve an inventive step that could not be deduced by a person with an average level of knowledge in that technical field.
What Cannot Be Patented?
According to WIPO (2020), in many countries, patent laws generally exclude scientific theories, mathematical methods, plant or animal varieties, discoveries of natural substances, and methods of medical treatment from patentability.
Industrial Designs
Industrial designs cover the aesthetic or decorative aspects of a product: how it looks and feels.
Industrial designs apply to a wide range of industrial products and handmade items: automobiles, phones, computers, packaging, technical and medical instruments, watches, jewelry, household appliances, textile designs, and many other types of products.
Trademarks
Today, trademarks are essential for any business. A trademark is a sign that distinguishes the products or services of one company from those of other companies.
According to WIPO (2020), all kinds of signs can be used as trademarks: words, letters, numbers, symbols, colors, images, three-dimensional signs like shapes and packaging, holograms, sounds, and even tastes and smells.
To be registered, the basic principle is that a trademark must be distinctive; it cannot be merely a generic description of the product or service.
There are also collective marks, owned by an association and used by its members, and certification marks that indicate that a product or service meets certain standards, such as eco-labels.
Geographical Indications
A geographical indication is a sign used for products that have a specific geographical origin and possess qualities or a reputation derived specifically from their place of origin.
To constitute a geographical indication, a sign must identify a product as originating from a specific place, and the product’s qualities, characteristics, or reputation must essentially be due to its place of origin (WIPO, 2020).
Copyright and Related Rights
Copyright covers a vast range of works, not only books, music, paintings, sculptures, and films but also software, databases, advertisements, maps, and technical drawings, among other things.
Intellectual Property at the International Level
There is an international system to define, protect, and strengthen intellectual property rights. Some organizations include the Trade-Related Aspects of Intellectual Property Rights (TRIPs), World Intellectual Property Organization (WIPO), World Trade Organization (WTO), and the European Union (EU), among others.
At the international level, there are the Patent Cooperation Treaty, the Madrid Agreement Concerning the International Registration of Marks and the Madrid Protocol, the Hague Agreement Concerning the International Registration of Industrial Designs, the WIPO Copyright Treaty (WCT), and the WIPO Performances and Phonograms Treaty (WPPT), which are administered by WIPO. These treaties provide for a single international application that has the same effect as national applications filed in the designated countries.
The World Intellectual Property Organization (WIPO) is the best-known organization and is responsible for providing services, policy, information, and cooperation related to intellectual property.
WIPO’s work is carried out in four main areas:
- Shaping International Norms: WIPO contributes to developing and applying international intellectual property law. International law is fundamental for facilitating protection beyond national borders.
- Providing Global Services: WIPO provides services for filing applications and registration at an international level; it also offers arbitration and mediation services to help resolve IP disputes.
- Cooperating with Countries and Organizations for Development: WIPO helps all countries use and benefit from intellectual property laws and systems.
- Providing Information and Common Infrastructure: WIPO aims to be a comprehensive and impartial source of information on intellectual property issues worldwide.
Examples of Intellectual Property: Real-World Applications
Intellectual property plays an important role in various sectors. For example:
- Pharmaceutical Products: Patents protect new drugs, allowing companies to recover their investments in research and development.
- Technology: Copyrights protect software code, while trademarks protect brands like Apple or Google.
- Fashion: Trademarks and design patents protect logos and exclusive clothing designs.
Intellectual Property and Artificial Intelligence: Addressing New Challenges
The intersection between intellectual property and artificial intelligence (AI) presents unique challenges. AI-generated content raises questions about authorship and ownership. For example, if AI creates a piece of art or invents a new process, who owns the rights? Current laws are evolving to address these scenarios, focusing on how to attribute and protect AI-generated intellectual property.
In this regard, Ubaydullayeva (2023) highlights that emerging issues such as AI’s ability to invent raise profound questions for AI and IP regulation, which require dynamic and forward-thinking responses. In this sense, the future of AI and IP regulation presents both challenges and opportunities.
Intellectual Property: How to Protect It – Steps and Strategies for Innovators
- Patents: File a patent application with detailed descriptions of the invention, ensuring that all aspects are covered.
- Copyrights: Register your work with copyright offices to establish a public record of your authorship.
- Trademarks: Conduct a thorough search to ensure the uniqueness of your trademark and then register it with the relevant authority.
- Trade Secrets: Develop internal measures to maintain the confidentiality of sensitive information and train employees on compliance.
Future Trends in Intellectual Property: What You Need to Know
With technological advances and globalization, intellectual property laws are constantly evolving. Key trends include:
- Artificial Intelligence: Addressing the legal implications of AI-generated intellectual property.
- Global Harmonization: Efforts to standardize intellectual property laws across countries to simplify international trade and protection.
- Digital Copyrights: Adapting copyright laws to digital environments and new media formats.
Conclusion
Failing to develop an intellectual property strategy often proves fatal for startups (Kulik, 2018). As an entrepreneur and innovator, you need to extract value from your IP—it could be your competitive advantage—and prevent others from gaining value without the appropriate licenses.
Grimaldi et al. (2021) found that having no IP protection strategy can be a barrier to foreign direct investment and that companies with a defensive IP strategy adopted foreign direct investment more than those with a collaborative IP strategy. Finally, companies with collaborative IP strategies outperformed those with defensive strategies.
Entrepreneurs often do not like legal matters; however, in this knowledge era, IP rights have become a necessity to ensure the success of ventures.
References
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