What Is Intellectual Property?

The term “intellectual property” is used relatively frequently, but what does it actually mean? As a small business owner, you’re likely aware of the fact that you own your business’s physical assets. You might have a company vehicle, a desk, or a computer. If someone took them from you without permission, it would be considered theft.

The same general concept also applies to your ideas and innovations. For instance, if you came up with a new style of sneakers while on your lunch break, you could claim this design as intellectual property. 

Intellectual property can take many forms, including:

• A brand name.
• A logo.
• Inventions.
• Literary or artistic work.

While the concept of intellectual property is an important one, your property isn’t worth much if it isn’t well-protected. Anyone with entrepreneurial aspirations or who hopes to form a small business needs to understand a few core elements of intellectual property rights and laws to protect themselves and their budding business.

The Purpose of Intellectual Property Rights

The concept of protecting physical property is fairly easy to grasp. However, the importance of protecting your thoughts and ideas is a bit more nuanced. 

To own intellectual property rights means you have the exclusive right to own, make copies of, and license your thoughts and ideas.

The ability for a musician to compose, an author to write, and an inventor to invent, all with the knowledge that they will be able to own their intellectual property, spurs on critical factors, such as economic growth and innovation. The hope of gaining intellectual rights to the next miracle drug keeps countless medical professionals busy researching in the fields of chemistry and biology. The recognition of intellectual property and the right to possess and utilize it is a major driving factor of innovation in the modern world.

Types of Intellectual Property Protection

While there are many ways to approach and categorize intellectual property, most legal recognition can be condensed down to four specific areas:

Copyright

A copyright is the expression of an idea in a fixed, documented form. This includes literary, artistic, and musical creations. In theory, the originator of a piece of material is automatically the owner of the copyright. 

If a musician writes down or records a song, they own the copyright. If an author writes a book, they own the copyright. However, formally registering your material with the federal government is a wise move, as it protects you from copyright infringement.

Trademark

A trademark is a business-focused form of intellectual property protection. Rather than securing creative rights, trademarks differentiate one brand’s products from another. Commonly trademarked items include:

• Business names like Apple or Google.
• Brand names like Snapple or Coca-Cola.
• Logos like the Nike swoosh or the NBC peacock.
• Slogans such as “Where’s the beef?” by Wendy’s.

A trademark is one of the most common forms of intellectual property people deal with. You need a trademark to legally reserve and register a business name for tax purposes, as well as to protect it from theft or misuse. 

Trademarks protect brands from any competition that too closely mirrors their trademarked material. A company that calls itself “Lows,” creates a blue logo, and starts selling home improvement products, for instance, can be stopped from doing so by the trademarked company Lowes, as the competitor mirrors the legally registered company too closely.

Patent

A patent protects the intellectual property rights of an invention. There are several standards that must be met in order to receive a patent. While these are very complex, in general, your invention or work must be:

• Novel: It cannot be something that has been recently invented.
• Non-obvious: It can’t be a solution that is easy to discover by anyone.
• Useful: It must have a significant use that helps to improve something.

Patents typically fall into one of three categories:

• A utility patent protects how something works.
• A design patent protects the design, shape, or configuration of something.
• A plant patent protects distinctly new kinds of plants.

Critically, unlike copyrights, you do not automatically own the patent to an invention simply because you created it. Instead, you must be the first person to apply for the patent. 

Trade Secret

A trade secret refers to things like recipes, formulas, and techniques that cannot be easily protected under the previous three categories. In order to receive federal protection, a trade secret must have commercial value and cannot simply be an idea with no applicable weight.

Even if a small business — for example, a sole proprietorship or an individual providing consulting services — doesn’t have any trade secrets as such, working with clients and companies with their own respective, proprietary data or resources would fall under this category. Trade secrets can be nuanced and sensitive, so it pays to do some research or ask the relevant authorities about what might qualify as protected information when working with other businesses — or soliciting help from consultants.

Intellectual Property Theft

While there are clear steps to take to prevent something like a laptop or car from being stolen, intellectual property theft can be difficult to inhibit — and it can cost your business billions of dollars. The act of stealing intellectual property, also known as “piracy,” involves illegally robbing a person or business of their inventions, ideas, or other creative expressions.

The internet has made intellectual property theft extremely easy. Whether it’s a downloaded picture, a bootlegged movie, or ripped music, there are many ways that intellectual property is illegally accessed online.

In addition, taking a piece of intellectual property and promoting it as your own is another form of intellectual property theft that is commonly found online, especially in countries with lax laws regarding the practice.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.