Intellectual Property Basics

I find that many clients can benefit from an explanation of the fundamental differences between the main types of intellectual property. There are four main types that come up regularly in my practice:  copyrights, trademarks, patents and trade secrets. Here’s a very basic description of each type:

  • Copyrights – provide ownership rights to original works of authorship; note that copyright protection covers the specific expression of ideas, but does not afford any protection to the ideas themselves.
  • Trademarks – provide ownership rights to names, logos and taglines associated with specific products or services (technically, such rights with respect to services are called servicemarks, but the protection is roughly the same).
  • Patents – provide exclusive exploitation rights to new inventions (e.g., technologies, business processes); note that the inventor must disclose the invention in detail in order to obtain patent protection, but is then given exclusive exploitation rights for a finite period of time.
  • Trade Secrets – provide indefinite protection for inventions about which the inventor takes strict measures to protect secrecy.

It may be illuminating to further differentiate between the types in this way:

  • Copyrights protect things like books, photographs, songs, etc., while trademarks protect the names (and logos) given to your company, products or services. Copyright protection has a limited life (for works in the U.S., life of author plus 70 years or, in case of corporate authorship, the shorter of 95 years from publication or 120 years from creation). Trademark protection can exist indefinitely, but may be lost if the trademark is mishandled.
  • Patents and trade secrets can both protect inventions; however, patent protection exists for only a finite period (in the U.S., usually 20 years after the filing date) but requires full upfront disclosure of the invention, while trade secret protection can last indefinitely, so long as the invention is kept secret.

One of the most famous trade secrets ever is the Pepsi-Cola formula (many practitioners refer to the Coca-Cola formula in this context, but as a former Pepsi-Cola bottler I feel inclined to refer to the Pepsi-Cola formula). To this day, it is still kept secret and still benefits from trade secret protection. If the formula had been patented, the world would have known the exact formula and production method for most of the last century, and anyone in the world would have been free to produce the identical beverage after the patent protection had lapsed (almost a century ago).

For most of my clients (many of which are publishing and/or technology companies), the proper protection of intellectual property is critical to ensuring that they are able to raise equity capital when they need it and able to sell their business successfully when they want to. Intellectual property protection should be treated as a strategic imperative, in the same way as is product development and sales & marketing activities.

In future blog entries, I will discuss each of the main intellectual property types in more detail.

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