The importance of intellectual Property

Intellectual property is any product of human intellect that is intangible but  has  value  in  the  marketplace.  It  is  called  “intellectual”  property  be-cause it is the product of human imagination, creativity, and inventiveness.5

Traditionally, businesses have thought of their physical assets such as land, buildings, and equipment as their most important assets. Increasingly, how- ever, a company’s intellectual assets are the most valuable.6 In the case of DripCatch, the firm’s intellectual property consists of intangible assets such as its patent (once granted), its trademark, and its Internet domain name. All these assets can provide a business with a competitive advantage in the mar- ketplace, and the loss of such assets can be just as costly (if not more so) to a business as the loss of physical property or equipment.

Not all firms are as intellectual property savvy as DripCatch. In fact, com- mon mistakes that entrepreneurial firms make are not properly identifying all their intellectual property, not fully recognizing the value of their intellectual property, not using their intellectual property as part of their overall plan of success, and not taking sufficient steps to protect it. These mistakes are pre- sented in Figure 12.1. It can be difficult, however, to determine what qualifies as intellectual property and whether it should be legally protected. Every facet of a company’s operations probably owns intellectual property that should be protected. To illustrate this point, Table 12.1 provides examples of the intel- lectual property that typically resides within the departments of midsize entre- preneurial firms. Intellectual property is also an important part of our nation’s economy and its competitive advantage in the world marketplace. “It’s a huge issue,” former U.S. Commerce Secretary Carlos Gutierrez said. “There is so much of our economy that is linked to branded products, patented products,

copyrights. So much of our economy thrives on creativity.”7

The United States Patent & Trademark Office (USPTO) has several pro- grams designed specifically to help inventors and small businesses protect their intellectual property. The help is motivated in part by The American Invents Act (AIA), which encourages the USPTO to “work with and support intellectual property laws associations across the county in the establishment of pro bono programs designed to assist financially under-resourced indepen- dent inventors and small businesses.” The first is a pro bono legal assistance program, which is being rolled out state by state. This program provides patent filing assistance to qualified applicants. You can see if the program is available in your state by going to the National Clearinghouse, which is accessible via the USPTO website at www.uspto.gov/inventors/state_resources. The second is the Inventors Assistance Center (www.uspto.gov/inventors/iac), which pro- vides overall patent assistance and support to the general public.

1. Determining What intellectual property to legally protect

There are two primary rules of thumb for deciding if intellectual property protection should be pursued for a particular intellectual asset. First, a firm should determine if the intellectual property in question is directly related to its competitive advantage. For example, Amazon.com has a business method patent on its “one-click” ordering system, which is a nice feature of its website and is arguably directly related to its competitive advantage. Similarly, when PatientsLikeMe launched a social networking platform for people with seri- ous diseases, it would have been foolish for the company not to trademark the PatientsLikeMe name. In contrast, if a business develops a product or business method or produces printed material that isn’t directly related to its competitive advantage, intellectual property protection may not be warranted.

The second primary criterion for deciding if intellectual property protection should be pursued is to determine whether an item has value in the market- place. A common mistake that young companies make is to invent a product, spend a considerable amount of money to patent it, and find that the market for the product does not exist or that the existing market is too small to be wor- thy of pursuit. As discussed in Chapter 3, business ideas should be properly tested before a considerable amount of money is spent developing and legally protecting them. Owning the exclusive right to something no one wants is of little value. Similarly, if a company develops a logo for a special event, it is prob- ably a waste of money to register it with the USPTO if there is a good chance the logo will not be used again.

2. The Four key Forms of intellectual property

Patents, trademarks, copyrights, and trade secrets are the four key forms of intellectual property. We discuss each form of intellectual property protection in the following sections. Intellectual property laws exist to encourage creativ- ity and innovation by granting individuals who risk their time and money in creative endeavors exclusive rights to the fruits of their labors for a period of time. Intellectual property laws also help individuals make well-informed choices. For example, when a consumer sees a Panera Bread restaurant, she knows exactly what to expect because only Panera Bread is permitted to use the Panera Bread trademark for soups, signature sandwiches, and bakery products.

One special note about intellectual property laws is that it is up to entre- preneurs to take advantage of them and to safeguard their intellectual property once it is legally protected. Police forces and fire departments are available to quickly respond if an entrepreneur’s buildings or other physical assets are threatened, but there are no intellectual property police forces or fire depart- ments in existence. The courts prosecute individuals and companies that break intellectual property laws. However, the individual entrepreneur must under- stand intellectual property laws, safeguard intellectual property assets, and initiate litigation if intellectual property rights are infringed upon or violated.

There is a government-sponsored website (www.stopfakes.gov) that pro- vides information about how to file a complaint if a business feels that a “knock off” product is infringing on its intellectual property. Increasingly, counterfeit goods are a problem for firms that have spent considerable re- sources to brand their products in ways that create value for customers. The top five categories of goods that are counterfeited are electronics, shoes, phar-maceutical products, CDs and DVDs, and clothing.8 Check out the blog IP Law For Startups (www.iplawforstartupcompanies.com) to keep up to date on all aspects of intellectual property law.

While not one of the four key forms of intellectual property, Internet domain names are an important form of intellectual property. Having a short, easy-to- spell Internet domain name is becoming increasingly important as the Internet becomes an ever more powerful force in business. An Internet domain name is obtained through a domain name registrar like GoDaddy.com and costs around $13 per year to register. Like other forms of intellectual property, domain names can be bought and sold, and desirable names are valuable. For example, Apple reportedly paid $6 million in 2011 to obtain the domain name www.icloud.com from its previous owner.

Source: Barringer Bruce R, Ireland R Duane (2015), Entrepreneurship: successfully launching new ventures, Pearson; 5th edition.