Intellectual property is an umbrella term for a set of intangible assets owned and legally protected by a company or individual from outside use or implementation without consent. Intellectual property can consist of many types of assets, including trademarks, patents, copyrights, and copyrights that are not physical in nature.
Understanding Intellectual Property
Companies are diligent when it comes to identifying and protecting intellectual property because it holds such high value in today’s increasingly knowledge-based economy.
- Intellectual property can represent a competitive advantage and as a result, is fiercely guarded and protected by the companies that own the property.
Intellectual Property Infringement
Attached to intellectual property are certain rights, known as Intellectual Property Rights (IPR), that cannot be infringed upon by those without authorization
- Patents infringement occurs when a legally-protected patent is used by another person or company without permission
- Copyright violations occur when an unauthorized party recreates all or a portion of an original work, such as a work of art, music, or a novel
Real-World Example
In 2017, a company called Waymo sued Uber over alleged stealing and implementation of technology relating to Waymo’s self-driving car program.
Who Owns Intellectual Property?
Generally, the creator of a work is deemed its owner.
Franchises
A license that a company, individual, or a franchisee purchases allowing them to use a franchisor’s trademark, name, trademark, proprietary knowledge, and processes
Patents
A patent is a property right for an investor that’s typically granted by a government agency, such as the U.S. Patent and Trademark Office.
Trade Secrets
A company’s process or practice that is not public information, which provides an economic benefit or advantage to the company or holder of the trade secret.
- Trade secrets must be actively protected by the company and are typically the result of a company’s research and development.
- Examples of trade secrets include a design, pattern, formula, or proprietary process.
Special Considerations
Amortization
- Many forms of intellectual property cannot be listed on the balance sheet as assets since there aren’t specific accounting principles to value each asset.
- However, the value of the property tends to be reflected in the price of the stock since market participants are aware of the existence of the intellectual property.
Copyrights
Authors and creators of original material have the exclusive right to the right to use, copy, or duplicate their material.
Trademarks
A trademark is a symbol, phrase, or insignia that is recognizable and represents a product that legally separates it from other products. It is exclusively assigned to a company, meaning the company owns the trademark so that no others may use or copy it.
