How does Intellectual Property Law Stimulate Business?

Intellectual property is an umbrella term used to describe the bundle of rights that pertain to sets of intangible assets. These assets are owned and protected by firms and individuals legally. The legal protection provided to this class of assets stops people and firms from using and implementing them without consent. Intellectual property rights play a critical role in the business world. They help firms and individuals to realize their intellectual investments within their respective fields.

‘’There are people out there who don’t see value in intellectual property, and so they’re always going to have a problem if there are lawsuits involving intellectual property’’. Paul Allen, co-founder Microsoft.

According to Howard Berman, a former US representative, theft of intellectual property by a government forms the very essence of organized crime.

This article looks into the critical role intellectual property ( IP) plays in business, and why it is important to protect and manage intellectual property rights.

In today’s knowledge-based economies, firms and individuals diligently identify and protect intellectual property rights, because of their value. Additionally, producing these assets requires heavy investments of brainpower, skilled labor, and time. Companies go above and beyond to extract value from their intellectual assets. There are instances where intangible assets are more valuable than tangible assets, because they offer firms an incredible amount of competitive advantage over their competitors.

Below are a few advantages intellectual property rights bestow upon IP owners:

Intellectual property (IP) relates to products of human intellect. It is widely believed that these products should be extended the same protection given to physical assets. In most countries, different legal regimes are utilized to protect tangible and intangible assets.

Intellectual property deals with assets like copyrights, trade secrets, trademarks, patents, among others. Intellectual property rights are protected by international legal instruments, including the Universal Declaration of Human Rights and the United Nations Declaration of Rights of Indigenous people.

Since time immemorial Intellectual property rights have been protected fiercely, not just by companies, states and individuals have been known to institute proceedings to secure them. The locus classicus case of Isaac Newton v. Gottfried Wilhelm Leibnizbears witness to this. During the early 18th century, Wilhelm Leibniz was widely accredited for inventing calculus mainly because he was the first to publish papers on calculus. Unbeknownst to Wilhelm Leibniz, Isaac Newton was making headway in the field too and was making bold claims in regards to his contribution.

In 1704, Isaac Newton published Opticks, and, consequently, presented himself as the father of calculus. This caused heated debate between the two intellectual godfathers of mathematics, causing the governments of Germany and Britain to intervene. Both countries were keen on staking a claim on one of mathematics' greatest advancements. As the conflict escalated, Newton accused Wilhem of plagiarism, much to Wilhem’s chagrin. Unfortunately, Leibniz passed on before settling the matter. However, today, it is widely accepted that both co-invented calculus.

In the recently concluded matter of Google LLC v. Oracle America, Inc( 2020), the two tech giants presented the court with the question of whether software interfaces were protected under copyright laws. Oracle was distressed by the fact that a win for Google would diminish protection for software code. Ultimately, this would harm software innovation. Additionally, the court was asked to make a ruling regarding the fair use of software interfaces.

According to pundits, this matter had the potential to tremendously affect the tech industry. Those advocating for Oracle were hopeful that the presiding court would uphold the decision arrived at by the lower court. Google, on the other hand, hoped the court would overturn the lower court’s decision. A win for Oracle would cause huge losses for Google and other firms.

In its ruling, the court held that Google’s limited copying of Oracle’s Java SE application did not amount to unfair use of the material per copyright laws. The court further held that the purpose of copyright laws is to advance useful art and science, and that software code was a subject of copyright law. Google took the day.

The purpose of intellectual property law is to reward investments of the mind accordingly. The rationale being that if such protections are non-existent, people and firms will not be motivated to innovate. Indeed, most establishments, especially tech firms, have intellectual property as their biggest asset portfolio. It is, therefore, incumbent upon courts and lawmakers to protect this species of property to boost innovation, and ultimately, economic growth.

For businesses to flourish, tangible and intangible properties must be protected adequately. With firms conducting business in several sectors, using different assets, it is apparent that different kinds of assets require different forms of protection; the protection of assets cannot be conducted under a single legal regime. In the past, tangible assets were valued more than intangible assets. Many people believed that tangible assets were responsible for driving growth within the business sector. However, the growth of the internet and the increase in the demand for digital products has elevated intangible assets to great heights.

IP owners must have a firm understanding of what protecting their intangible assets requires. For example, trademarks protect brands, while patents protect unique ideas. Firms must recognize which idea is worth protecting through patents and which idea should be protected through trade secrets. Intellectual property law provides IP owners with numerous options for protecting their rights.

Below are a few ways intellectual property owners can secure their investments:

Intellectual property rights play an important role in the world of business. For example, all firms have a trademark or logo that distinguishes them from the competition. If the logo or trademark is protected under the law, firms have recourse in case of infringement.

Protecting trademarks, enables companies to attach their reputation and goodwill to a particular mark. Businesses distinguish their products and services in the marketplace through trademarks and geographical indications. Both help to convey information regarding the origin of a product or service. These marks help clients to attach a particular quality to a product or service.

Patents rights protect innovations and give recognition to creators. They also allow creators to reap the rewards of their creativity. Patent rights give companies a competitive advantage over their competitors. A patent excludes the competition from using an idea without a license.

Ultimately, this helps a firm secure a lead while protecting its position in the marketplace. Engineering and manufacturing industries are great beneficiaries of patent rights, as they have great potential for innovation and the development of patentable products.

A patent effectively gives a firm monopoly over patented work. However, they are not enforceable against the whole world; they are territorial. They can only be enforced within the country or region the instrument is granted. The protection that flows from a patent lasts 20 years, starting from the day it is filled. However, firms that invest in research and development may extend this period by making improvements on the patent

The process of applying for patents can be expensive and time-consuming. It is an investment that must be considered carefully. A firm must evaluate the potential benefits of registering its IP before embarking on the process. Generally, not all businesses develop patentable inventions and not all ideas are patentable.

Despite this, it is wrong to assume that patents apply only to complex engineering and manufacturing products and processes, or that only large corporations benefit from them. Patents are applicable to all technological fields, from computers to kitchen utensils to paper clips.

Trade secrets are vital intellectual property rights awarded towards the protection of confidential information. The information may be licensed or sold. For information to qualify for this protection, it must satisfy several requirements:

Unauthorized use or disclosure of the information is regarded as unfair practice. Trade secrets include both commercial and technical information. For example, recipes, formulas, source codes, and financial information are considered trade secrets. One of the world’s most guarded trade secrets is the Coca Cola formula.

Copyright laws protect the manner in which concepts and ideas are expressed. They do not offer protection to underlying concepts, ideas, systems, processes, or discoveries. However, sketches, or written descriptions detailing an idea or concept may be subject to copyright laws.

The logic behind copyright laws is clear. They provide creators with exclusive rights to their IP. These rights enable successful creators to reap financial benefits from their investments. Those who support the extension of copyright laws argue that copyright holders like Viacom, Disney, record labels, and motion picture studios are important to the US economy. Since the US economy is moving away from manufacturing, intellectual property continues to become ever more important as a source of employment and revenue for US firms.

Firms invest in numerous creative efforts that require protection. Often, it is advisable to secure assets with different forms of protection. For instance, if a creator merely improves an existing product, and the improvement is not patentable, they may use utility models to protect their work.

Additional protections, such as non-disclosures, help secure a firm’s intangible assets more effectively. Patentable ideas should be guarded as trade secrets by firms until they are registered. Copyrights should be utilized to protect source codes, product brochures, and data sheets. All these ensure that a firm’s intellectual properties are protected from unscrupulous businesses and individuals.

Intellectual property exists in various forms, which are not listed on a firm’s balance sheet, because there are no accounting principles that help evaluate them. However, since market players are aware of their existence, their value is duly reflected on the company’s stock prices. Some intellectual property assets such as patents are considered to be property due to their expiration dates. Through the process of amortization, intangible assets are given a numerical value. However, assets like trademarks cannot be amortized since they are perpetual.

Proper management of intellectual property assets can stimulate the growth of a company tremendously. It positively impacts a firm’s product development, branding, processes, and even its revenues. However, despite the many benefits firms stand to gain by managing intellectual property, it is usually very hard for cash-strapped firms to manage their IP effectively.

Like any other form of assets, firms must pay attention to their intangible assets regularly. Managing intellectual property helps firms to secure a return on investment ( ROI). For instance, by establishing how much a business spends on the administration costs of IP, it can limit unproductive spending. Asset reviews also help businesses to establish which asset is under-performing or over performing. This helps the firm to allocate resources more effectively.

Intellectual property plays a critical role in the fostering of innovation. Without the protection offered by intellectual property laws, firms and individuals can not fully realize their investments. Additionally, lack of protection may cause innovators to abandon their research and development. Today’s world is highly reliant on innovation as a source of economic growth. Without innovation, many economies will be affected negatively as a result of low output levels. Lack of intellectual property protection is detrimental to artists, and negatively impacts cultural vitality.

Most American small and medium sized firms (SMEs) are oblivious to the fact that intellectual property laws do not protect them abroad. Firms in the export business, for example, need to consider protecting their intangible assets in foreign markets seriously. Due to lack of protection, foreign counterfeiters are always looking for ideas and products to steal and register within their jurisdictions. To remedy this, businesses should seek intellectual property rights protections in the foreign markets they plan to enter before exporting their goods and services there.

According to the US Chamber of Commerce, eight percent of goods traded globally are counterfeits. In terms of revenue, this translates to roughly $500 billion in lost revenue. Out of that amount, it is estimated that American firms lose over $200 billion worth of sale revenues due to counterfeiting. Intellectual property theft is prevalent in all sectors. However, industries adversely affected by this illegal practice are the manufacturing, consumer goods, pharmaceuticals, fashion, technology, biotechnology, and software industries.

The majority of mergers and acquisitions involve different forms of intellectual property. Firms must strive to make informed and strategic decisions regarding their IP during this process to avert potential litigation, audits, and penalties down the road. To avoid such liabilities, firms must conduct due diligence before undertaking a merger or acquisition.

The purpose of conducting due diligence is to have an inventory of a firm’s intangible assets. It helps companies establish whether outstanding tax and transfer pricing risks associated with intellectual property assets exist. Apart from conducting due diligence, firms establish the value of their intangible assets and protect them during acquisitions. In situations where mergers and acquisitions are conducted in multi-tax jurisdictions, managing intangible assets can be a tricky affair. Hence, the need for intellectual property owners to engage competent intellectual property specialists.

Small and medium sized firms are seriously disadvantaged by intellectual property infringement abroad, mainly because they lack the knowledge and resources to follow up on such matters. The problem worsens because small firms lack overseas operations necessary in global operations to ensure their intellectual property is not stolen. Also, since small firms lack the specialized legal counsel that large firms have, infringement of their intellectual property often goes undetected and unreported.

The growth of technology has made intellectual property a matter of global concern. Policymakers worldwide recognize the importance of intellectual property in stimulating economic growth and enhancing the human experience. Over the past two decades, there has been an influx of intellectual property rights applications.

This clearly shows that the demand for intellectual property is steadily increasing across the world. It also suggests that the global need for innovation and technology has risen dramatically. The importance of intellectual property rights will continue to increase as the world continues to respond to critical global challenges, such as food security, global health, and climate change.

As the world suffers an ever-growing threat of antimicrobial resistance, such as neglected tropical diseases, and other medical threats, developing new drugs and vaccines to combat them is critical. The covid-19 pandemic demonstrated to the world the need for such development.

Over the years, innovation has proven to be an effective solution to the global challenges humanity suffers. However, innovators are ever concerned about the possibilities of market failure, as innovation is a profit-driven endeavor. Firms and individuals will only invest where their investments are protected and a return on investment is guaranteed.

Final Thoughts

Entrepreneurs, artists, and firms must be aware of the viability of their ideas to benefit from them fully. Most people are unaware of the most suitable form of protection for their intellectual properties. The digital era has turned this process into an arduous task. Today, thanks to globalization, companies are expanding extremely fast, requiring them to address a plethora of intellectual property issues cutting across different regions for varying ideas and brands. Intellectual Property specialists must advise companies on the brands and ideas they need to safeguard.

Although humanity benefits immensely from innovators, artists, and designers, enforcing intellectual property rights continues to be a huge challenge. Additionally, while weak intellectual protection limits innovation, patents, especially those that are too strong, make future innovative endeavors costly. Additionally, Intellectual protection that is ambiguous or too broad fails to support growth in key sectors, such as technology and manufacturing.

Securing Intellectual property rights can be a daunting task for firms and individuals who are not conversant with the processes of registration and effective IP rights management strategies. By engaging our intellectual property legal professionals, you save yourself and your firm the pain of seeing your creative investments go to waste. Call us now for a candid discussion about the state of your intellectual property.