What Is Intellectual Property?

The term “intellectual property” (IP) is used relatively frequently, but what does it actually mean? Most small business owners are keenly aware of the fact that they own their business’s physical assets, such as a company vehicle, a desk, or a computer. If someone took them without permission, the owner would probably call the police and inform them of the theft.

The same general concept also applies to a business owner’s ideas and innovations. For instance, if an entrepreneur came up with a new style of sneakers while on their lunch break, they could claim that design as their intellectual property and use it for the economic development of their business.

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, that property isn’t worth much if it isn’t well-protected. Anyone with entrepreneurial aspirations or who hopes to start a small business needs to understand a few core elements of intellectual property rights and laws to protect themselves and their budding business.

The Intellectual Property Definition and Its Purpose

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

If someone owns intellectual property, that means they have the exclusive right to own, make copies of, and license their thoughts and ideas for commercial use.

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 gives it economic value; the right to possess and utilize intellectual property rights (sometimes abbreviated IP rights) is a major factor that helps encourage innovation in the modern world.

Types of Intellectual Property Law Protections

While there are many ways to approach and categorize intellectual property, most legal recognition can be condensed down to four specific areas: copyright law, trademark law, patent law, and last but not least, trade secrets. Each form of IP protection has specific applications.

Copyright

A copyright is the expression of an idea in a fixed, documented form. This includes literary, artistic, and musical creations; many of the fine arts fall into the realm of copyright. In theory, the originator of a creative work is automatically the copyright owner. 

If a musician writes down or records a song, they own the copyright. If an author writes a book, they own the copyright. However, it’s wise for these creators to formally register their material with the federal government, as registration grants stronger copyright protections to the artist.

For example, if someone made a derivative work of a popular mystery book and started selling it on Amazon, the author or their publisher (whoever holds the copyright) of the original book could demand that the book be taken down. Amazon would likely comply. If the issue escalated and went to court, the copyright holder would likely win, especially if the copyright was registered.

There is, of course, a bit of a gray area; sometimes people create genuinely similar works. Two books might contain similar themes and plot elements. Two songwriters might use a similar turn of phrase or create similar choruses. It just happens sometimes, even when those artists are making conscious efforts to create original works. In these trickier cases, a court will usually decide whether a work is distinct enough; if it isn’t, it might be ruled to be copyright infringement.

Trademark

Generally speaking, 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 plumage.
• Slogans such as “Where’s the beef?” by Wendy’s or “We have the meats” by Arby’s.

A trademark is one of the most common forms of intellectual property people deal with. Trademarks, especially those protected by federal law, give more robust protection than just reserving a business name in the state. A federal trademark is tricky to obtain, but it helps protect the mark from theft or misuse across the entire country (state trademarks offer similar protections, but only at the state level). 

Trademarks protect brands from any competition that too closely mirrors their trademarked material. For example, suppose a company called itself “Lows” created a blue logo and started selling home improvement products. That brand could be ordered to “cease and desist” (i.e., stop operating under that name) by Lowe’s, the owner of that trademark. They’d be allowed to order the competitor to cease and desist because the name infringes on their trademark. And if the faux store didn’t stop, Lowe’s would have an easy time taking them to court and winning the trademark infringement case against them.

In contrast, though, Lowe’s hardware store can’t order Lowes Foods (a grocery store) to cease and desist. For one, the grocer is non-rivalrous (it’s in another industry). But more importantly, their logo is different enough that it doesn’t infringe on the trademark. Trademark enforcement is a great tool, but it isn’t all-powerful.

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, a patent owner’s invention or work must be:

• Novel: It cannot be something that has been recently invented.
• Non-obvious: It can’t be a solution that anyone in society could easily discover.
• 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, patent ownership doesn’t immediately go to the person who created the invention. Instead, to get a patent, the inventor or creator must be the first to apply. For example, if a person created eligible computer software but then took too long to file for a patent for it, their business partner could undercut them and get the patent instead, gaining a significant competitive advantage.

Trade Secret

A trade secret is a legal term that refers to confidential information, such as 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 who provides consulting services — doesn’t have any trade secrets as such, working with clients and companies that have their own proprietary data or resources would fall under this category. Trade secrets can be a nuanced and sensitive aspect of the IP system, 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 a 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.

Another common type of intellectual property theft is when a user takes a piece of intellectual property and promotes it as their own. This happens frequently with literary and artistic works (and beyond), especially in developing countries with lax laws regarding the practice.

While getting a patent, trademark, or registered copyright can feel like a hassle, it’s the best way for a business owner to protect their IP rights. These registrations actually serve as legal tools that allow a person to prove that the property is theirs, giving them more robust recourse against someone who commits patent infringement or another form of intellectual property theft.

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