Make Money On Your Intellectual Property

By: Amy Fontinelle

Have you ever wondered why store-brand cola doesn’t taste the same as Coca-Cola (CCE)? Why competitors’ laptops often don’t look as sleek as Apple’s (AAPL)? Why the prescription drug you have to take every day costs so much?

It’s because of intellectual property (IP) and the laws that protect intellectual property rights. In this article, you’ll  learn about the four different categories of intellectual property, and how they protect inventors and creators. We’ll also touch on some controversies surrounding IP.

What Is Intellectual Property?

Intellectual property, broadly speaking, is not just an idea, but an idea that has been turned into something tangible like a book, a product design, a company logo or a prescription drug. It takes someone a lot of effort and experience to come up with a novel, valuable idea, and intellectual property laws protect those ideas. These protections prevent people other than the creator from taking credit for – or profiting from – an invention without the creator’s permission.

Patents, trademarks, trade secrets and copyrights are the ways an inventor can legally protect his or her intellectual property rights. The owner of intellectual property rights can sue anyone who violates those rights. Not all inventions can be protected under intellectual property laws, however, and intellectual property rights expire after a certain period of time.

Types of Intellectual Property

There are four main categories of intellectual property: patents, trademarks, trade secrets and copyrights.

Patents are government licenses that give the holder exclusive rights to a process, design or new invention. Those exclusive rights last 14 to 20 years in the United States, depending on the type of patent. The United States Patent and Trademark Office handles patent applications and documentation in the United States. The designs for Apple’s various iPods are patented, for example. (For more information, see Patents Are Assets, So Learn How To Value Them.)

Trademarks are symbols, words, phrases, logos or combinations thereof that legally distinguish one company's product from any others. Examples of popular trademarks include the names Google (GOOG), Walmart (WMT) and Microsoft (MSFT), and images such as the Nike (NKE) swoosh. Trademarks can be protected as long as they are in use.

Trade secrets are a company’s internal processes or practices that give it a competitive advantage and aren’t publicly known. To secure legal protection for their trade secrets, companies must make reasonable efforts to protect them, and the information must have economic value. The recipe for Mrs. Fields’ chocolate chip cookies is an example of a trade secret. With trade secrets, protection lasts for as long as the company manages to keep the information under wraps.

Copyrights protect original works of authorship such as literature, films, music, drawings, software and more for 50 to 100 years after the creator’s death for individual creators, or a shorter period for corporate creators. Copyrights are generated automatically when someone creates something, but the creator can register a work with the copyright office for increased protection. For example, your dad owns the copyright to the home video he recorded of you opening Christmas presents in 1988 simply because he made the video. If he were concerned about your aunt trying to take credit for it, and make big bucks from selling it, he could register the video’s copyright. (See Things You Didn't Know You Could Copyright.)

More than one type of intellectual property right may apply to the same product. A cookie recipe may be protected by a trade secret, while the cookie company’s logo may be protected by trademark and its resealable packaging may be protected by patent.

How to Protect Intellectual Property

If you want to protect your intellectual property, here’s how to do it. To secure a patent or register a trademark in the United States, the inventor should file a patent application with the United States Patent and Trademark Office. The basic conditions for patentability are that the invention must be novel and nonobvious. To register a copyright, the owner should go through the Copyright Office of the Library of Congress. It’s up to you to protect any trade secrets.

Certain types of inventions can never be patented, including mathematical formulas, scientific principles and natural substances.  You can’t copyright a work that hasn’t been written or recorded or that is commonly known information with no known original authorship (such as a standard calendar or tape measure). And you can’t trademark a generic term, as Google learned when it tried to trademark the word “glass” to protect its high-tech glasses. Google can, however, trademark the term “Google Glass” and the product’s unique logo.

Why Intellectual Property Is Important to Companies

Intellectual property protects the market value of data that can give a business a competitive advantage. “Today’s economy is driven by innovation and information,” says intellectual property lawyer Joey Morris, a partner with the Smith Anderson law firm in North Carolina. “Intellectual property protects and encourages innovation by ensuring that a business has the opportunity to enjoy the competitive edge resulting from its investment in research and development.”

"A key initial step for a business in protecting its intellectual property rights is to make sure that it owns its employees’ inventions and other valuable intellectual property," Morris says. “One way to do that is to make sure that all employees who may develop intellectual property of any kind enter into a written agreement assigning to the business all intellectual property that they create that relates to their employment.”

In addition, companies that hire independent contractors need to make sure the independent contractor performs the work under a work-for-hire agreement if the company wants to own the copyright to the independent contractor’s creations. For example, a website that hires freelance writers would need to own the intellectual property rights to the articles it purchased if it wanted to prevent its freelancers from reselling the articles it had paid them for to competing websites.

“The last thing a business should have to face is competing against the unauthorized use of its own valuable intellectual property by others,” Morris says. “Deploying the full array of legal protections available can help a business capture the full economic benefits of its intellectual property assets by preventing others from using them unfairly and without permission.”