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A product of the intellect that has commercial value, including copyrighted property such as literary or artistic works, and ideational property, such as patents, appellations of origin, business methods, and industrial processes.
A broad categorical description for the set of intangibles owned and legally protected by a company from outside use or implementation without consent. Intellectual property can consist of patents, trade secrets, copyrights and trademarks, or simply ideas.
The concept of intellectual property relates to the fact that certain products of human intellect should be afforded the same protective rights that apply to physical property. Most developed economies have legal measures in place to protect both forms of property.
Investopedia Says:
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. Extracting value from intellectual property and preventing others from deriving value from it is an important responsibility for any company.
Many forms of IP cannot be listed on the balance sheet as assets, but the value of such property tends to be reflected in the price of the stock. Management's ability to manage these effectively and turn profits is just one example.
Related Links:
Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value. The Hidden Value Of Intangibles
The P/B ratio can be an easy way to determine a company's value, but it isn't magic! Value By The Book
We go over how to determine whether a measure of this important but hard-to-price intangible asset is justified. Can You Count On Goodwill?
Asset performance shows how what a company owes and owns affects its investment quality. Testing Balance Sheet Strength
Any concept, idea, literary creation, computer program, or other artistic or creative work that is definable, measurable, and proprietary in nature.
Intellectual property is an intangible creation of the human mind, usually expressed or translated into a tangible form, that is assigned certain rights of property. Examples of intellectual property include an author's copyright on a book or article, a distinctive logo design representing a soft drink company and its products, unique design elements of a web site, or a patent on the process to manufacture chewing gum. Intellectual property law covers the protection of copyrights, patents, trademarks, and trade secrets, as well as other legal areas, such as unfair competition. In effect, intellectual property laws give the creator of a new and unique product or idea a temporary monopoly on its use. The value of intellectual property to an individual or company is not based on physical properties, such as size and structure. Instead, intellectual property is valuable because it represents ownership and an exclusive right to use, manufacture, reproduce, or promote a unique creation or idea. In this way, it is perhaps the most valuable asset a person or small business can own.
Development of Intellectual Property Laws
The laws protecting intellectual property in the United States exist at both the state and federal levels. State laws cover a broad spectrum of intellectual property fields, from trade secrets to the right of publicity. The laws differ somewhat from state to state. At the federal level, the Constitution and legislation authorized under the Constitution deal exclusively with patents and copyrights, and partially with trademarks and related areas of unfair competition.
Intellectual property protection first became an important issue at an international level during trade and tariff negotiations in the nineteenth century, and has remained so ever since. One of the first international treaties relating to intellectual property in the broadest sense was the International Convention for the Protection of Industrial Property, or the Paris Convention. Written in 1883, the treaty created under the Paris Convention provided protection for such properties as patents, industrial models and designs, trademarks, and trade names. Over 100 countries have signed the Paris Convention treaty, and it has been modified several times. Two of the most important provisions of the treaty relate to the rights of national treatment and priority.
The right of national treatment ensures that those individuals seeking a patent or trademark in a foreign country will not be discriminated against and will receive the same rights as a citizen of that country. The right of priority provides an inventor one year from the date of filing a patent application in his or her home country (six months for a trademark or design application) to file an application in a foreign country. The legal, effective date of application in the foreign country is then retroactively the legal, effective filing date in the home country, provided the application is made within the protection period. If the invention is made public prior to filing the home country application, however, the right of priority in a foreign country is no longer applicable.
Enforcement and protection of intellectual property at the international level has historically been extremely complex. Laws have varied significantly from country to country, and the political climate within each country has influenced the extent of protection available. Separate legislation and treaties specifically addressed relevant procedures, conventions, and standards for each area within the scope of intellectual property, such as copyright or trade secrets.
Many U.S. and international laws relating to intellectual property were significantly altered with the 1994 passage of the General Agreement on Tariffs and Trade (GATT). In fact, the member nations that signed the GATT committed themselves to a higher degree of intellectual property protection than had been provided under any earlier multinational treaties. Under the guidance of the World Trade Organization (WTO), all member nations were required to adopt specific provisions for the enforcement of rights and settlement of disputes relating to intellectual property. Under these provisions, trademark counterfeiting and commercial copyright piracy are subject to criminal penalties.
Today, the strong protections of intellectual property are recognized as one of the cornerstones of the formation and growth of small businesses in the United States, especially since the advent of the Internet and other new technologies have placed a premium on new ideas and innovations. Intellectual property allows individuals who come up with a new idea to enjoy the exclusive use of that idea for a certain period of time, which can be a significant monetary incentive for entrepreneurs. But intellectual property law is extraordinarily complex, so small business owners interested in IP issues should consult a legal expert in order to protect themselves to the full extent of the law. "The law on intellectual property … is everywhere both comparatively new and in flux, " observed The Economist (US). It is also important for would-be entrepreneurs to be aware of the legal rights of others as they prepare to engage in business activities. After all, few small companies can withstand the rigors of defending themselves from patent infringement lawsuits (especially if the charge is legitimate).
Further Reading:
Epstein, Eve. "What Is Intellectual Property?" Info World. June 19, 2000.
Foster, Frank H., and Robert L. Shook. Patents, Copyrights & Trademarks. Wiley, 1993.
Gartman, John, and Kevin McNeely. "A Summary Checklist for Dealing with Intellectual Property." Providence Business News. June 26, 2000.
Lickson, Charles P. A Legal Guide for Small Business. Crisp Publications, 1994.
"Markets for Ideas: Rights in Intellectual Property." The Economist (US). April 14, 2001.
McCarthy, J. Thomas. McCarthy's Desk Encyclopedia of Intellectual Property. Bureau of National Affairs, 1991.
Miller, Arthur R., and Michael H. Davis. Intellectual Property: Patents, Trademarks, and Copyright in a Nutshell. West, 1990.
Prencipe, Loretta W. "Intellectual Property Due Diligence." Info World. October 30, 2000.
"Protecting Intellectual Property: An Introductory Guide for U.S. Businesses on Protecting Intellectual Property Abroad." Business America. July 1991.
Tabalujan, Benny. "Keeping the Fruits of Your Intellectual Pursuit to Yourself." Business Times. July 1993.
See also: Inventions and Patents;
For more information on intellectual property, visit Britannica.com.
Intellectual Property describes the interests protected by the laws of patents, copyrights, trademarks, and trade secrets. It is a phrase of convenience rather than a term of art; its precise boundaries are not agreed upon, or crucial. Patents, copyrights, and trademarks all predate the term "intellectual property," which, though known in the nineteenth century, was not widely used until the 1960s. Historically, property was divided into two classes, real and personal. Real property consisted of interests in land; personal property consisted of everything else. Personal property included not only tangibles, such as goods, but intangibles such as shares of stock, rights to receive payment, and copyrights and patents. It was understood by the eighteenth century that patents and copyrights were socially desirable because potential inventors and authors, unless rewarded, would underinvest in inventing and writing. Patents and copyrights provide rewards proportional to the value of the work. By exploiting monopolies over patentable and copyrightable subject matter, creators can charge amounts sufficient to recapture their capital investment plus make a profit; this is comparable to granting farmers the exclusive rights to harvest crops that have required labor to plant and tend.
Patents are granted after examination by the Patent Office and confer twenty (previously seventeen) years of monopoly rights in works that have the characteristics of utility, novelty, and nonobviousness. Copyrights arise upon embodiment of works of authorship in a tangible medium and now last for much longer than previously; today, in most cases, they endure for the life of the author plus seventy years. Registration, though desirable, is not essential.
Trademarks are usually counted as intellectual property but have quite a different rationale and arise differently from either patents or copyrights. The reason for protecting trademarks is not to promote investment in their creation but to protect consumers from being deceived as to the origin of goods bearing them. Trademark rights develop as consumers associate the marks on the goods with a single source. Courts have often said trademark rights are not property rights but are part of tort law (though recent developments arguably render trademarks more property like).Whatever the theory, the practice persists of calling trademarks a species of intellectual property, if only because the same lawyers who do patent and copyright work also advise on trademark questions.
Trade secret law confers on those who manage to keep valuable information to themselves the competitive advantage of exclusive access to that information. It is arguably tort law, rather than property law, but since the subject matter of the secret is often identical to the subject matter of the patent or copyright, its designation as intellectual property is not surprising.
Bibliography
Chisum, Donald S., and Michael A. Jacobs. Understanding Intellectual Property Law. New York: Matthew Bender, 1992.
Halpern, Sheldon W., Craig Allen Nard, and Kenneth L. Port. Fundamentals of United States Intellectual Property Law: Copyright, Patent, and Trademark. The Hague, Netherlands: Kluwer Law International, 1999.
Intellectual property describes a wide variety of property created by musicians, authors, artists, and inventors. The law of intellectual property typically encompasses the areas of copyright, patent, and trademark law. It is designed to encourage the development of art, science, and information by granting certainproperty rights to all artists, which include inventors in both the arts and the sciences. These rights allow artists to protect themselves from infringement, or the unauthorized use and misuse of their creations.
Copyright laws have roots in eighteenth-century English law. Comprehensive patent laws can be traced to seventeenth-century England, and they have been a part of U.S. law since the colonial period. The copyright and patent concepts were both included in the U.S. Constitution. Under Article I, Section 8, Clause 8, of the Constitution, "The Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." The first trademark laws were passed by Congress in the late nineteenth century.
The bulk of intellectual property law is contained in federal statutes. Copyrights are protected by the Copyright Act (17 U.S.C.A. § 101 et seq. [1994]), patents are covered in the Patent Act (35 U.S.C.A. § 101 et seq. [1994]), and trademark protection is provided by the Lanham Act (also known as the Trademark Act) (15 U.S.C.A. § 1501 et seq. [1994]).
Intellectual property laws give artists the exclusive right to profit from their work for a particular limited period. For copyrighted material, the exclusive right lasts for fifty years beyond the death of the author. The length of the right can vary forpatents, but in most cases it lasts for twenty years. Trademark rights are exclusive for ten years, and can be continually renewed for subsequent ten-year periods.
Intellectual property laws do not fall in the category of criminal law. Some copyright laws authorize criminal penalties, but by and large, the body of intellectual property law is concerned with prevention and compensation, both of which are civil matters. This means that the artist, not the government, is responsible for enforcement.
Intellectual property laws provide artists with the power to enforce their property rights in civil court. They provide for damages when unauthorized use or misuse has occurred. They also provide forinjunctions, or court orders, to prevent unauthorized use or misuse.
The property protected by intellectual property laws must be in a tangible form. For example, a musician cannot claim copyright protection for a melody unless it has been written down or somehow actualized and affixed with a recognizable abbreviation. A formula or device cannot receive patent protection unless it has been presented in whole to the Patent and Trademark Office. A symbol cannot receive trademark protection unless it has been placed on goods or used in connection with services.
Copyright
Copyright laws grant to authors, artists, composers, and publishers the exclusive right to produce and distribute expressive and original work. Only expressive pieces, or writings, may receive copyright protection. A writing need not be words on paper: in copyright law, it can be a painting, sculpture, or other work of art. The writing element merely requires that a work of art, before receiving copyright protection, must be reduced to some tangible form. This may be on paper, on film, on audiotape, or on any other tangible instrument that can be reproduced.
The writing requirement ensures that copyrighted material is capable of being reproduced. Without this requirement artists could not be expected to know whether they were infringing on the original work of another person. The writing requirement also enforces the copyright rule that ideas cannot be copyrighted: only the expression of ideas can be protected.
Copyrighted material also must be original. This means that there must be something new about the work that sets it apart from previous similar works. If the variation is more than trivial, the work will receive copyright protection.
Functionality can be a factor in copyright law. The copyrights to architectural design, for example, are generally reserved for architectural works that are not functional. If the only purpose or function of a particular design is utilitarian, the work cannot be copyrighted. For instance, a person may not copyright a simple design for a water spigot. If, however, a person creates a fancy water spigot, the design is copyrightable.
Copyrighted material can receive varying degrees of protection. The scope of protection is generally limited to the original work that is in the writing. For example, assume that an artist has created a sculpture of the moon. The sculptor may not prevent others from making sculptures of the moon. However, the sculptor may prevent others from making sculptures of the moon that are exact replicas of his own sculpture.
Copyright protection gives the copyright holder the exclusive right to (1) reproduce the copyrighted work, (2) create derivative works from the work, (3) distribute the work, (4) perform the work, and (5) display the work. The first two rights are infringed whether they are violated in public or in private. The last three rights may be infringed only if they are violated in public. Public is defined under the Copyright Act as a performance or display to a "substantial number of persons" outside of friends and family (17 U.S.C.A. § 101).
Infringement of copyright occurs whenever someone exercises the exclusive rights of the copyright owner without the owner's permission. The infringement need not be intentional. Copyright owners usually prove infringement in court by showing that copying occurred, and that the copying amounted to impermissible appropriation. These showings require an analysis and comparison of the copyrighted work and the disputed work. Many general rules also relate to infringement of certain works. For example, a character created in a copyrighted work may not receive copyright protection unless the character is developed in great detail and a character in the disputed work closely resembles that character.
The most important exception to the exclusive rights of the copyright holder is the "fair use" doctrine. This doctrine allows the general public to use copyrighted material without permission in certain situations. These situations include educational activities, literary and social criticism, parody, and news reporting. Whether a particular use is fair depends on a number of factors, including whether the use is for profit, what proportion of the copyrighted material is used, and what economic effect the use has on the copyright owner.
Patent
Patent laws encourage private investment in new technologies by granting to artists the right to forbid all others to produce and distribute technological information that is new, useful, and nonobvious. The statutory requirements for patent protection are more stringent than those for copyright protection. Furthermore, because patent protection for commercial products or processes can give a tremendous market advantage to businesses, those seeking patents often find opposition to their applications. Patent protection can be obtained only through the U.S. Patent Office. Generally, only new, useful, and nonobvious processes or products will be approved for patent protection.
The novelty requirement focuses on events that occur prior to the invention. Under section 102 of the Patent Act, an invention is not novel if it is publicly used, sold, or patented by another inventor within twelve months of the patent application. This definition implements the public policy that favors quick disclosure of technological progress.
Often, two inventors apply for a patent for the same product or process within the same twelve-month period. Three factors determine who wins the patent: the date and time that the product or process was conceived, the date and time that the product or process was reduced to practice, and the diligence used to pursue patent protection and perfect the discovery. Generally, the first inventor to conceive the product or process has priority in the application process. However, if the second inventor is the first to reduce the product or process to practice, and the first inventor does not use diligence to obtain patent protection, the second inventor is given priority in the application process.
The utility requirement ensures that the product or process receiving patent protection will have some beneficial use. The inventor must specify in the application a specific utility for the invention. If the application is for a process, the process must be useful with respect to a product. A process that is new and nonobvious but useless does not increase knowledge or confer any benefit on society.
Nonobviousness is not the same as novelty. Not everything novel is nonobvious. However, anything that is nonobvious is novel, unless it has already been patented. The nonobvious requirement focuses on existing technology, or prior art. In determining whether an invention is nonobvious, the Patent Office analyzes the prior art, examines the differences between the invention and the prior art, and determines the level of ordinary skill in the art. Generally, if an invention is obvious to a person of ordinary skill in the relevant art, it is not patentable.
When an inventor claims that his or her patent has been infringed, the court generally engages in a two-step process. First, the court analyzes all the relevant patent documents. Then, the court reads the patent documents and compares them with the device or process that is accused of infringement. If each element of the accused device or process substantially duplicates an element in the patented device or process, the court may declare that the patent has been infringed. Infringement can occur only if another person uses, makes, or sells the patented device or process without the permission of the person who has received the patent, or the patentee.
When a patented device or process is infringed, the patent holder may recover in damages an amount equal to a reasonable royalty. If the infringement was willful, the infringing party may be forced to pay three times the reasonable royalty. If successful in court, the patent holder may also recover court costs and attorneys' fees. If the patent holder anticipates infringement, she or he may apply for an injunction, or court order. An injunction in such a case would prohibit a certain party from infringing the patent. An injunction may also issue after a finding of infringement, to prevent repeat infringement.
Trademark
Trademark laws allow businesses to protect the symbolic information that relates to their goods and services, by preventing the use of such information by competitors. To receive trademark protection, a mark must be distinctive. Distinctive generally applies to any coined or fanciful word or term that does not closely resemble an existing mark. No mark will receive trademark protection if it is a common or descriptive term used in the marketplace.
To receive trademark protection, a mark must be used in the marketplace. If two or more marketers claim ownership of a certain mark, the first user of the mark will usually receive the protection. However, if the mark is known only in a limited geographic area, it may not receive protection in areas where it is unknown to consumers.
Infringement occurs if a mark is likely to cause confusion among consumers. In determining whether confusion is likely, the court examines a number of factors, including the similarity between the two marks in appearance, sound, connotation, and impression; the similarity of the goods or services that the respective marks represent; the similarity of the markets; whether the sale of the goods or services is inspired by impulse or only after careful consideration by the buyer; the level of public awareness of the mark; whether shoppers are actually confused; the number and nature of similar marks on similar goods or services; the length of time of concurrent use without actual confusion on the part of shoppers; and the variety of goods or services that the mark represents (In re E. I. duPont de Nemours & Co., 476 F.2d 1357, 177 U.S.P.Q. 563 [1973]).
Defenses to infringement include fair use and collateral use. Fair use occurs when the second user, or repossessor, uses a protected mark in a nonconspicuous way to identify a component of a good or service. For example, a restaurant can use a protected mark to advertise that it serves a particular brand of soft drink without infringing the mark. The restaurant cannot, however, identify itself by the mark without infringing the mark.
Collateral use is use of the same mark in a different market. For example, assume that a tree surgeon has received trademark protection for the mark Tree Huggers. This protection may not prevent a business that sells logging boots from obtaining the same mark. However, if the mark for the boots is written or otherwise appears with the same defining characteristics as the mark for the tree surgeon, it risks being denied trademark protection, depending on whether it can be confused by consumers.
Remedies for infringement of a protected trademark consist of damages for the profits lost owing to the infringement, recovery of the profits realized by the infringer owing to the infringement, and attorneys' fees. A trademark holder may also obtain injunctive relief to prevent infringement.
Other Forms of Intellectual Property The body of intellectual property law also includes laws relating totrade secrets, unfair competition, and the right of publicity. Trade secret laws protect any formula, pattern, device, or compilation of information that provides a business advantage over competitors who do not use or know of the formula, pattern, device, or compilation of information. A strategy to increase worker productivity, for example, is a trade secret. Trade secrets do not receive patent protection because they are not inventive. Trade secret laws are included in intellectual property laws because, like other intellectual property laws, they prevent the unauthorized use of certain information.
Unfair competition laws cover the misuse and misappropriation of a product for financial gain, by protecting valuable information of a business that does not qualify for copyright or trademark protection. For example, assume that a business has developed a popular cologne with distinctive packaging. Now assume that another business has begun to manufacture the same product with virtually identical packaging in an attempt to capitalize on the success of the original cologne. Even though the knockoff is not an exact copy of the original and does not infringe trademark protection, the first business may protect itself through unfair competition laws. The test to determine whether a business is liable for unfair competition is whether the two products could be confused by a reasonable shopper.
The right of publicity is the right of a person to control the commercial value and exploitation of his or her name and likeness. Because right-of-publicity laws promote artistic pursuits, they are included in intellectual property law. These laws are usually reserved for celebrities and other public figures whose name and image are important to their career. By allowing celebrities the right to control the commercial use of their name and image, right-of-publicity laws protect the commercial potential of entertainers.
Recent Developments
One big problem that artists face is protecting their property in other countries. Not all countries subscribe to international agreements regarding intellectual property, and this has led to widespread unauthorized copying. In the 1990s China and Mexico were identified as serious offenders. In both countries music and films were copied and sold openly without compensation to the creators. The United States threatened to impose trade sanctions against China if it did not observe international copyright treaties. Such threats illustrate that the United States places a high priority on protecting the right of artists to profit from their work.
See: Art Law; Copyright, International; Entertainment Law; Literary Property; Music Publishing.
A patent is a capitalist device that like many great ideas works on a paradoxical principle: The way to spread the benefits of an invention is to restrict the number of people who can exploit it.
Other forms of intellectual property are protected in different ways. A scientific discovery, which is intended to be shared by everyone, is covered by informal agreement in the scientific community granting "ownership" with priority. No legal rights are deemed possible. A trademark or trade name can be registered and protected, but that is solely for the protection of the owner. Copyright is closer in concept to patent, but is much more concerned with protecting structure and substance of thought than it is with providing a monopoly on an idea or a structure. Indeed, ideas are not copyrightable; only their expression and arrangement can be copyrighted. Ideas for inventions, however, are the basis of monopoly; and monopoly is the original purpose of the patent.
Capitalism and the middle class were babies of the Renaissance, but they did not become adult ideas until the Industrial Revolution. Patents have the same history, starting in Italy in the 15th and 16th centuries. Queen Elizabeth I may have been the first British monarch to issue monopolies, which included but were not limited to patents. By the time of James I, the business of royal monopolies had gotten out of hand, and a succession of efforts to control monopolies, which treated inventions differently from other monopolies, had the somewhat inadvertent effect of creating the first English Patent Law, although it was not codified as such until late in the 19th century, after the example of the Patent Law in the United States.
By the time the U.S. Constitution was being written, the Founding Fathers had a good philosophical grasp of intellectual property, and provisions regarding it were included: Article I, Section 8 gave Congress the power "To promote the progress of Science and Useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Almost as soon as the Constitution was ratified, Congress proceeded to set up a patent law to protect monopolies on inventions. By 1836 the U.S. Patent Office was functioning effectively, and it soon became apparent that invention fared better under the U.S. system than under any other. A monopoly for a limited time on a specific invention encouraged people to invent, knowing they could be protected, and enabled them to sell rights to others who had the capital or existing trade to manufacture and promote an invention.
In 1883 Great Britain consolidated its patent laws along U.S. lines and the International Convention in Paris worked out a way to handle patents in its many signatory nations. The European Patent Organization of 1953 was among several agreements that were precursors to the European Community. Today there are effective ways for an inventor to file a patent once in one country and, with suitable payments and searches, have it accepted in nations around the world.
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In law, intellectual property (IP) is an umbrella term for various legal entitlements which attach to certain names, written and recorded media, and inventions. The holders of these legal entitlements may exercise various exclusive rights in relation to the subject matter of the IP. The term intellectual property implies that intellectual works ("products of the mind") are analogous to physical property. The term is therefore controversial.
Intellectual property laws and enforcement vary widely from jurisdiction to jurisdiction. There are inter-governmental efforts to harmonise them through international treaties such as the 1994 World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), while other treaties may facilitate registration in more than one jurisdiction at a time. Disagreements over medical and software patents and the severity of copyright enforcement have so far prevented consensus on a cohesive international system.
Intellectual property laws confer a bundle of exclusive rights in relation to the particular form or manner in which ideas or information are expressed or manifested, and not in relation to the ideas or concepts themselves (see idea-expression divide). The term "intellectual property" denotes the specific legal rights which authors, inventors and other IP holders may hold and exercise, and not the intellectual work itself.
Intellectual property laws are designed to protect different forms of subject matter, although in some cases there is a degree of overlap.
Patents, trademarks, and designs rights are sometimes collectively known as industrial property, as they are typically created and used for industrial or commercial purposes.
The basic public policy rationale for intellectual property laws is that they facilitate and encourage the pursuit of innovation and the disclosure of knowledge into the public domain for the common good, by granting authors and inventors exclusive rights to exploit their works and invention for a limited period. Many people believe that intellectual property provides a temporary monopoly that protects the use or exploitation of that good, supported by legal enforcement mechanisms.[1] The United States Supreme Court frequently refers to a patent as providing a "limited monopoly." This is not, however, appropriate usage of the term monopoly in the economic sense. In fact, intellectual property protection cannot properly be thought of as providing an economic monopoly, at least in part, because a monopoly can only exist in the presence of a market and the ability of an actor to manipulate the market to a point where higher than competitive prices are able to be maintained, which is something that is rarely achievable by an owner of intellectual property. [2]
However, various schools of thought are critical of the concept and treatment of "intellectual property"; indeed, some argue that use of the term "property" in this context is itself misleading. Some characterise IP laws as intellectual protectionism. There is an ongoing debate as to whether IP laws truly operate to confer the stated public benefits, and whether the protection they are said to provide is appropriate in the context of innovation derived from such things as traditional knowledge and folklore, and patents for software and business methods. Manifestations of this controversy can be seen in the way different jurisdictions decide whether to grant intellectual property protection in relation to subject matter of this kind, and the North-South divide on issues of the role and scope of intellectual property laws.
Furthermore, due to the non-rivalrous nature of intellectual property, comparing the unauthorized use of intellectual property to the crime of theft presents its own unique problems. In common law, theft requires deprivation of the rightful owner of his or her rights to possess, use, or destroy property. Example: When Joe steals Jane's bicycle, Jane cannot use or have access to it. But since intellectual property (for example, ideas and various transcriptions into written words, audible sounds, or electronic media) are so easily reproduced, no such deprivation to the owner occurs. Example: When Joe makes a copy of the music Jane recorded, Jane is not denied access to her original copy. In this sense, many forms of intellectual property meet the non-rival test for public goods: the use of the good by one individual does not reduce the use of that good by others.
The global harmonisation of intellectual property legislation under the WTO has also been criticized, for example by the alter-globalisation movement. The exclusive rights granted by intellectual property laws are generally negative in nature, and therefore only grant the holder of IP the ability to exclude third parties from infringing on their monopoly. For example, the owner of a registered trademark has an exclusive right to use their mark in relation to certain products or services, and can exclude others from using that mark in relation to those products or services (sometimes marks which are recognised as "famous" or "well known" are deemed to have developed sufficient goodwill and reputation to be protected across unrelated classes of products and services).
The exclusive rights conferred by intellectual property laws can generally be transferred (with or without consideration), licensed (or rented), or
Exclusive rights are generally divided into two categories: those that grant exclusive rights only on copying/reproduction of the item or act protected (e.g. copyright) and those that grant a right to prevent others from doing something. The difference between these is that a copyright would prevent someone from copying the material form of expression of an idea, but could not stop them from expressing the same idea in a different form, nor from using the same form of expression if they had no knowledge of the original held by the copyright holder. Patents and trade marks on the other hand, can be used to prevent that second person from making the same design even if they had never heard of or seen the claimed "property". Those rights must be applied for or registered and are more expensive to enforce.
There are also more specialized varieties of sui generis exclusive rights, such as circuit design rights (called mask work rights in USA law, protected under the Integrated Circuit Topography Act in Canadian law, and in European Union law by Directive 87/54/EEC of 16 December 1986 on the legal protection of topographies of semiconductor products), plant breeders' rights, plant variety rights, industrial design rights, supplementary protection certificates for pharmaceutical products and database rights (in European law).
Exclusive rights differ by subject matter, the actions they regulate with respect to the subject matter, the duration of particular exclusions, and the limitations on those rights. Policies are conventionally categorized according to subject matter, including inventions, artistic expression, secrets, and industrial designs.
Generally, the activity regulated by exclusive rights is unauthorized reproduction or commercial exploitation. However, as indicated above, some rights go beyond this to grant a full suite of exclusive rights on a particular idea or product. Generally, it is true to say that exclusive rights grant the holder the ability to stop others doing something (i.e. a negative right), but not necessarily a right to do it themselves (i.e. a positive right). For example, the holder of a patent on a pharmaceutical product may be able to prevent others selling it, but (in most countries) cannot sell it themselves without a separate license from a regulatory authority.
Most exclusive rights are nothing more than the right to sue an infringer, which has the effect that people will approach the rightsholder for permission to perform the acts to which the rightsholder has exclusive right. The granting of this permission is termed licensing, and exclusive rights licenses stipulate the extent of the licensee's ability to perform the acts the rightsholder may control. Other kinds of licenses attempt to establish additional conditions beyond the acts the rightsholder may control, and these licenses are governed by general contract principles. In many jurisdictions the law places limits on what restrictions the licensor (the person granting the license) can impose. In the European Union, for example, competition law has a strong influence on how licenses are granted by large companies.
Copyright licenses grant permission to do something. A patent license is a declaration not to do some things, under certain conditions. Exclusive rights policies in certain countries provide for certain activities which do not require any license, such as reproduction of small amounts of texts, sometimes termed fair use. Many countries' legal systems afford compulsory licenses for particular activities, especially in the area of patent law.
Most exclusive rights are awarded by a government for a limited period of time. Economic theory typically suggests that a free market with no exclusive rights will lead to too little production of intellectual works relative to an pareto efficient outcome [citation needed]. Thus by increasing rewards for authors, inventors and other producers of intellectual works, overall efficiency might be improved. On the other hand, granting exclusive rights is by no means the only viable method to finance "intellectual property" production in a market system [2]. "Intellectual property" law creates transaction costs that could in some circumstances outweigh these gains. Another consideration is that restricting the free reuse of information and ideas will also have costs, where the use of the best available technique for a given task or the creation of a new derived work is prevented. Equally important, granting monopoly rights on production introduces a deadweight loss into the economy, and incentivizes rent seeking behavior.
Other criticisms include[citation needed]: a copyright holder may refuse permission to publish or copy a work at all, or only allow distribution of a modified version reflecting the views of the copyright owner (rather than the original author), thus effecting a form of private censorship; intellectual property rights held by different people often overlap on the same work, which can create a rights thicket with extremely high transaction costs; an intellectual property right for which the ownership cannot be traced may prevent the use of a covered work (an orphan work) at all, due to fear of future lawsuits.
The earliest use of the term "intellectual property" appears to be an October 1845 Massachusetts Circuit Court ruling in the patent case Davoll et al. v. Brown. in which Justice Charles L. Woodbury wrote that "only in this way can we protect intellectual property, the labors of the mind, productions and interests as much a man's own...as the wheat he cultivates, or the flocks he rears." (1 Woodb. & M. 53, 3 West.L.J. 151, 7 F.Cas. 197, No. 3662, 2 Robb.Pat.Cas. 303, Merw.Pat.Inv. 414). But the statement that "discoveries are...property" goes back earlier. Section 1 of the French law of 1791 stated "All new discoveries are the property of the author; to assure the inventor the property and temporary enjoyment of his discovery, there shall be delivered to him a patent for five, ten or fifteen years". [3]
In Europe, French author A. Nion mentioned "propriété intellectuelle" in his Droits civils des auteurs, artistes et inventeurs, published in 1846.
The term's widespread popularity is a much more modern phenomenon. It was very uncommon until the 1967 establishment of the World Intellectual Property Organization, which actively tried to promote the term. Still, it was rarely used without scare quotes until about the time of the passage of the Bayh-Dole Act in 1980.[4]
The concept's origins can potentially be traced back further. Jewish law includes several considerations whose effects are similar to those of modern intellectual property laws, though the notion of intellectual creations as "property" does not seem to exist.[5] The Talmud contains the first known example of codifying a prohibition against the stealing of ideas, which is further discussed in the Shulchan Aruch.[6]
However, the legal system of most of the Western world does not have provisions for intellectual property and the laws the term encompasses are justified on more constrained grounds.[citation needed] The term does not occur in the United States Copyright Statutes, except in certain footnotes citing the titles of certain Bills. The term used in the statutes and in the Constitution is "exclusive rights".
The shift in terminology towards "intellectual property"[citation needed] has coincided with a more general shift away from thinking[citation needed] about things like copyright and patent law as specific legal instruments designed to promote the common good and towards a conception[citation needed] of ideas as inviolable property granted by natural law. The terminological shift coincides with the usage of pejorative terms for copyright infringement such as "piracy" and "theft".
Some critics of intellectual property, such as those in the free culture movement, characterize it as intellectual protectionism or intellectual monopoly, and argue the public interest is harmed by protectionist legislation such as copyright extension, software patents and business method patents.
Some critics reject intellectual property altogether. Richard Stallman argues that "the term systematically distorts and confuses these issues, and its use was and is promoted by those who gain from this confusion." He suggests the term "operates as a catch-all to lump together disparate laws [which] originated separately, evolved differently, cover different activities, have different rules, and raise different public policy issues." [3] These critics advocate referring to copyrights, patents and trademarks in the singular, and warn against abstracting disparate laws into a collective term.
In 2004 the World Intellectual Property Organization was criticized in The Geneva Declaration on the Future of the World Intellectual Property Organization which argues that WIPO should "focus more on the needs of developing countries, and to view IP as one of many tools for development - not as an end in itself".
The purposes of laws dealing with exclusive rights over intangible subject matter or the product of intellectual or creative endeavor have varied, but they all share in common the appearance of granting the "owner" of the exclusive rights to a monopoly on the copying or distribution of a protected form of "property".
In common law jurisdictions, this was historically done to grant a boon to a king's favorite in the form of letters patent (with some positive advantages to the public, since often these grants were prerequisites before a merchant would undertake production). Jurisdictions with written constitutions generally vest the executive government with power to grant such monopolies or otherwise provide for the protection of intangible property. For example, the United States Constitution accords Congress the power to promote the progress of science and the useful arts by granting exclusive rights to authors and inventors for limited times.
The use of the term "intellectual property" is often predicated on considerations such as the "free rider problem" or rationalized by problematizing the fact that owners of computers have the ability to produce and distribute perfect copies of digital works. Proponents of the term tend to address exclusive intellectual property rights policy by valorizing the incentives afforded to authors and inventors in granting them a right to exact a fee from those who wish to manufacture their inventions or publish their expressive works. The analyses associated with the term tend to overlook or even to attempt to defeat the fact, noted by Thomas Jefferson when he took part in wording the exclusive rights clause under the USA Constitution, that published information is intrinsically free and that in fact this is the whole point of such exclusive rights -- to publish, to provide information to the public.
By an economic analysis, the incentives granted for patent rights have sometimes served the public benefit purpose (and promoted innovation) by ensuring that someone who devoted, say, ten years of penury while struggling to develop vulcanized rubber or a workable steamship, could recoup her investment of time and energy. Using monopoly power, the inventor could exact a fee from those who wanted to make copies of his or her invention. Set it too high, and others would simply try to make a competing invention, but set it low enough and one could make a good living from the fees.
In latter years, the public benefit idea has been downplayed in favor of the idea that the primary purpose of exclusive rights is to benefit the rights holder, even to the detriment of society at large; and this development has attracted some opponents. The formulation in the US Constitution (noted above) is specifically about public benefit.
In some fields, patent law has had an unintended consequence: treating abstract rules and mental products like concrete ones has stifled innovation in those fields, rather than aiding it [citation needed].
Intellectual property rights have limitations, including term limits and other considerations (such as intersections with fundamental rights and the codified or statutory provisions for fair use for copyright works). Some analogize these considerations to public easements, since they grant the public certain rights which are considered essential. Different countries may have subtle or dramatic differences in the scope or protection and permitted uses of different types of intellectual property. A fair use in one jurisdiction can easily be an infringing use elsewhere.
Authors and inventors exercise specific rights, and the "property" referred to in "intellectual property" is the rights, not the intellectual work. A patent can be bought and sold, but the invention that it covers is not owned at all. This is one of many reasons that some believe the term intellectual property to be misleading. Some use the term "intellectual monopoly" instead, because such so-called "intellectual property" is actually a government-granted monopoly on certain types of action. Others object to this usage, because this still encourages a natural rights notion rather than a recognition that the rights are purely statutory, and it only characterizes the "property" rather than eliminates the property presupposition. Others object to the negative connotation of the term "monopoly" and cite the wide availability of substitute goods. Still others prefer not to use a generic term, because of differences in the nature of copyright, patent and trademark law, and try to be specific about which they are talking about, or the term "exclusive rights", which reflects the U.S. Constitutional language.
The term intellectual property has been criticized on the grounds that the rights conferred by exclusive rights laws are in some ways more limited than the legal rights associated with property interests in physical goods - chattels or land - real property. The inclusion of the word property in the term can be seen as favoring the position of proponents of the expansion of exclusive rights in intellectual products, by helping them draw on concepts associated with those older forms of property in support of their argument for removing limitations on rights when those limitations would be generally seen as inappropriate if applied to physical goods. For example, most nations grant copyrights for only limited terms; all limit the terms of patents. Additionally, the term is sometimes misunderstood to imply ownership of the copies themselves, or even the information contained in those copies. By contrast, physical property laws rarely restrict the sale or modification of physical copies of a work (something that many copyright laws do restrict).
A common argument against the term intellectual property is that information is fundamentally different from physical property in that there is no natural scarcity of a particular idea or information: once it exists at all, it can be re-used and duplicated indefinitely without such re-use diminishing the original. Thus there is no direct analogue to "theft"; the closest analogue is to copy or use the information without permission, which does not affect the original possession (see the tragedy of the commons).
Another, more specific objection to the term, held by Richard Stallman, is that the term is confusing [4]. Stallman argues that the term implies a non-existent similarity between copyrights, patents, trademarks, and other forms of exclusive rights, which makes clear thinking and discussion about various forms difficult. [5] For example, those that pertain to intellectual content (copyrights and patents) have limited terms, hence differ from conventional property, whereas trademarks, which have unlimited terms, are merely signs and lack intellectual content. Furthermore, most legal systems, including that of the United States, hold that exclusive rights are a government grant, rather than a fundamental right held by citizens.
Though it is convenient for direct incentive beneficiaries to regard exclusive rights as akin to "property", items covered by exclusive rights are, by definition, not physical objects "ownable" in the traditional sense.
Stephan Kinsella, in his Journal of Libertarian Studies article "Against Intellectual Property" ([6]), details his objection to intellectual property on the grounds that the word "property" implies scarcity, which may not be applicable to ideas.
Others point out that the law itself treats these rights differently than those involving physical property. To give three examples from US law, copyright infringement is not punishable by laws against theft or trespass, but rather by an entirely different set of laws with different penalties. Patent infringement is not a criminal offense although it may subject the infringer to civil liability. Willfully possessing stolen physical goods is a criminal offense while mere possessing of goods which infringe on copyright is not. Furthermore, in the United States physical property laws are generally part of state law, while copyright law is in the main measure federal.
Some proponents of the term argue that in other areas the term "property" is applied to legal rights and remedies of analogous kinds. For example, in some jurisdictions a lease of land (e.g. a flat or apartment) is regarded as intangible property in the same way that copyright is. In these cases too the law accepts that the property cannot be stolen - if someone moves into a flat and prevents the original residents from living there they are not regarded as 'thieves of the lease' but as 'squatters' and the law provides different remedies. Identity theft is another example of the adaptation of physical property laws to intangible items, though that term itself is seen as problematic by some. These examples, however, address the use of the term "property" in a technical legal context, not the meaning of the term as understood in public discourse.
In civil law jurisdictions, intellectual property has often been referred to as intellectual rights, traditionally a somewhat broader concept that has included moral rights and other personal protections that cannot be bought or sold. Use of the term intellectual rights has declined since the early 1980s, as use of the term intellectual property has increased.
An alternate terms monopolies on information and intellectual monopoly have emerged among those who argue against the "property" or "intellect" or "rights" assumptions, notably Richard Stallman - see below. The backronyms intellectual protectionism and intellectual poverty, whose initials are also IP, have found supporters as well, especially among those who have used the backronym digital restrictions management.
Another issue is that if intellectual property exists there must be a parallel concept of intellectual capital - capital being the property that permits more property to be created. This, and the related term instructional capital that applies to the proper subset of patents and non-fiction copyright, are controversial notions that economists have no clear agreement on, so one refers to the "intellectual capital debate" rather than thinking of it as an actual capital asset. See more in the "Economic view" section below.
The fact that the three most common forms of intellectual property law concern different subject matter with different histories and purposes — copyright concerns original creative or artistic works, patent concerns new and useful inventions, and trademarks concerns signs which uniquely identify the commercial origin of products or services — is seen by some as countering what they consider to be the dogma of the United Nations' World Intellectual Property Organisation on intellectual property as the "creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce" [7]. These critics see this assertion as propaganda for a "property view", and suggest alternative terms such as individual capital, instructional capital and social capital over the term "intellectual capital", which has an ambiguous status, even among believers in neoclassical economics. Indeed, recent historical and econometric research has begun to "challenge the positive description of previous models and the normative conclusion that monopoly through copyright and patent is socially beneficial" [8]).
In recent times there has been a general expansion in intellectual property laws. This can be seen in the extension of laws to new types of subject matter such as databases, in the regulation of new categories of activity in respect of subject matter already protected, in the increase of terms of protection, in the removal of restrictions and limitations on exclusive rights, and in an expansion of the definition of "author" to include corporations as the legitimate creators and owners of works. The concept of work for hire has also had the effect of treating a corporation or business owner as the legal author of works created by employees.
The American film industry helped to change the social construct of intellectual property by giving rise to a shrewd and well-funded trade organization, the Motion Picture Association of America. In amicus briefs in important cases, in lobbying before Congress, and in its statements to the public, the MPAA consistently advocated strong protection of intellectual-property rights. In framing its presentations, the association has capitalized on lawmakers' receptivity to labor-desert theory - that is that people are entitled to the property that is produced by their labor. Additionally Congress's awareness of the position of the United States as the world's largest producer of films has made it convenient to expand the conception of intellectual property. This strategy has been highly effective; with remarkable frequency, the positions the association has supported have prevailed.[7] These doctrinal reforms have further strengthened the industry, lending the MPAA even more power and authority.[8]
The increase in terms of protection is particularly seen in relation to copyright, which has recently been the subject of serial extensions in the United States and in Europe, such that it is unclear when subsisting copyright protection will eventually expire.
The nature and scope of what constitutes "intellectual property" has also expanded. In the context of trademarks, this expansion has been driven by international efforts to harmonise the definition of "trademark", as exemplified by the Agreement on Trade-Related Aspects of Intellectual Property Rights. Pursuant to TRIPs, any sign which is "capable of distinguishing" the products or services of one business from the products or services of another business is capable of constituting a trademark. Under this definition, trademarks such as Microsoft's slogan "Where do you want to go today?" are generally considered registrable. Furthermore, as the essential function of a trademark is to exclusively identify the commercial origin of products or services, any sign which fulfills this purpose may be registrable as a trademark. However, as this concept converges with the increasing use of non-conventional trademarks in the marketplace, harmonisation may not amount to a fundamental expansion of the trademark concept.
In the context of patents, the grant of patents in some jurisdictions over certain life forms, software algorithms, and business models has led to ongoing controversy over the appropriate scope of patentable subject matter.
Some consider that the expansion of intellectual property laws upsets the balance between encouraging and facilitating creativity and innovation, and the dissemination of new ideas and creations into the public domain for the common good. They consider that as most new ideas are simply derived from other ideas, intellectual property laws tend to reduce the overall level of creative and scientific advancement in society. They argue that innovation and competition is in effect stifled by expanding IP laws, as litigious IP rights holders aggressively or frivolously seek to protect their portfolios. Opposition to expansion of intellectual property laws is strongly supported by the general economic arguments against monopolies.
The electronic age has seen an increase in the attempt to use software-based digital rights management tools to restrict the copying and use of digitally based works. This
can have the effect of limiting fair use provisions of copyright law and even make the
first-sale doctrine (known in European Union
law as "exhaustion of rights") moot. This would allow, in essence, the creation of
a book which would disintegrate after one reading. As individuals have proven adept at circumventing such measures in the past,
many copyright holders have also successfully lobbied for laws such as the Digital Millennium Copyright Act, which uses criminal law to prevent any circumvention
of software used to enforce digital "rights management" systems. Equivalent provisions, to prevent circumvention of copyright
protection have existed in EU for some time, and are being expanded in, for example, Article 6 and 7 the
At the same time, the growth of the Internet, and particularly distributed search engines like Kazaa and Gnutella, represents a challenge for exclusive rights policy. The Recording Industry Association of America, in particular, has been on the front lines of the fight against what it terms "piracy". The industry has had victories against some services, including a highly publicized case against the file-sharing company Napster, and some people have been prosecuted for sharing files in violation of copyright. However, the increasingly decentralized nature of such networks makes legal action against distributed search engines more problematic.
Exclusive rights such as copyrights and patents secure their holder an exclusive right to sell, or license rights. As such, the holder is the only seller in the market for that particular item, and the holder is often described as having a monopoly for this reason.
However, it may be the case that there are other items of "intellectual property" that are close substitutes. For example, the holder of publishing rights for a book may be competing with various other authors to get a book published. In such cases, economists may find that another market form, such as oligopoly or monopolistic competition better describes the workings of the markets for expressive works and inventions. This is one reason to prefer the term exclusive rights over monopoly rights. Of course, there may not be close substitutes in particular cases (for instance, a patent on the only known drug to treat a particular illness), making the term monopoly rights more appropriate.
The case for "intellectual property" in economic theory notes certain substantial differences from the case for tangible property. Consumption of tangible property is rivalrous. For example, once one person eats an apple, no one else can eat it; if one person uses a plot of land on which to build a home, that plot is unavailable for use by others. Without the right to exclude others from tangible resources, a tragedy of the commons can result.
The subjects of intellectual property do not share this feature of rivalness. For example, an indefinite number of copies can be made of a book without interfering with the use of the book by owners of other copies. When combined with a lack of exclusive intellectual property rights, this nonrivalrousness and nonexcludability combine to make them public goods and susceptible to the free rider problem. A rationale for "intellectual property" therefore rests on incentive effects to overcome the free rider problem. This case asserts that without a subsidy that is afforded by exclusive rights, there is no direct financial incentive to create new inventions or works of authorship. However, as Wikipedia and Free software demonstrate, works of authorship can be written without the incentive of such exclusive rights. Moreover, many important works were created before copyright was invented. One might argue that much more invention occurred after patents came into existence; however, one could also argue that patents were brought into law as the power and influence of industrial interests grew.
The status of intellectual property is disputed by various commentators [attribution needed] in the developing nations. At the same time, developed countries are accused of supporting companies using intellectual property and patent laws to gain exclusive control over already known substances (see Biopiracy). [attribution needed]
A more recent notion, proposing to expand the scope of exclusive rights to include databases, has been introduced by the EU in 1996. This is the idea of protecting the information contained in a database against re-utilisation and extraction of substantial parts. This would be an additional right predicated on a substantial investment, that would exist alongside the copyright in the database structure. This notion was opposed by the United States Supreme Court in 1991 in the Feist Publications, Inc., v. Rural Telephone Service Co. finding, which said that exclusive rights cannot cover the factual elements of any copyrighted work, that copyright does not derive from the effort expended in the production of the work, and that in the case of a collection of information, only the originality that may be found in the selection and arrangement of the information is governed by copyright. This case holds that the purpose of exclusive rights policy is to provide information to the public, and this consideration takes priority over concerns such as investment. A study[specify] has found that the introduction of exclusive rights to databases in the EU did not do any good to the economy.
The direct incentive beneficiaries of exclusive rights have an interest in expanding their rights and benefits: this is known in economic terms as rent-seeking, and is generally considered a bad thing by economists. Many beneficiaries pool their resources to form organizations that attempt this such as the Business Software Alliance (BSA), which purports to represent the interests of the commercial software industry while the Recording Industry Association of America (RIAA) represents the interests of the commercial music publishing industry. As policy expands in accordance with the notion of "intellectual property", in the interests of those who benefit directly from its economic incentives, it tends to reduce the rights of its primary beneficiaries, the general public.
Under the notion of "intellectual property" the public is increasingly prevented by law from benefiting from the use of published information without complying with the conditions set by the rightsholder. The cost for this to the public is not easy to quantify. The cost is distributed widely and unequally based on the need for the product. Ironically the direct incentive beneficiary organizations are a good source for these data. The BSA reports a study that claims "while $80 billion in software was installed on computers worldwide last year, only $51 billion was legally purchased" (Source:BSA). The BSA says "software pirates" avoided a cost of $29 billion while the rest that obey the policy and do not purchase or make use of the work bear a real and substantial opportunity cost that is yet uncounted.
But Microsoft is lowering its selling price on competition from Linux[citation needed], for example with government clients. Because of this competition, Microsoft was forced to release an update to Internet Explorer to the public for its current product (Windows XP) which it originally planned to release with its next operating system (Windows Vista)[citation needed].
Before intellectual property laws existed in their current f
