203
Chapter 10
Intellectual Property
10.1 Introduction
Intellectual property (IP) is a legal concept that refers to creations of the
mind for which exclusive rights are recognized.
1
In its broadest sense, intel-
lectual property means the legal rights that result for intellectual activity in
the industrial, scientic, literary, and artistic elds, and protection against
unfair competition.
2
On July 31, 1790, Samuel Hopkins was issued the rst patent for a pro-
cess of utilizing potash, an ingredient used in fertilizer, for soap making. The
patent was signed by President George Washington, by Secretary of State
Thomas Jefferson, as well as the Secretary of War and the Attorney General.
Hopkins was born in Vermont, but was living in Philadelphia, PA, when the
patent was granted and issued as shown in Figure10.1.
Under the international intellectual property law concept, owners are
granted certain exclusive time-limited rights (20 years from the ling date)
to a variety of intangible assets, such as musical, literary, and artistic works;
technical discoveries and inventions; plus words, phrases, expressions, sym-
bols, designs, commercial names, and designations. It is your bank account
of ideas.
Familiarity with the concept of intellectual property can give you an edge
in today’s competitive environment. Legally recognized intellectual property
comes in several forms, as summarized in Table10.1.
A patent grants an inventor exclusive rights to make, use, sell, and
import an invention for a limited period of time (on June 8, 1995, the new
204 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
term took effect in the U.S.), in exchange for the public disclosure of the
invention and its practical application. An invention is a solution to a specic
technological problem, which may be a product or a process.
You cannot patent naturally occurring products in nature, scientic prin-
ciples, laws of nature, mental processes, and mathematical formulas.
In the past, there was a great deal of variation of the term of protec-
tion afforded by patents in different countries. The members of the World
Trade Organization (formerly GATT) have now harmonized recognition
of technology patents for a 20-year period that begins with the priority
date.
An industrial design right protects the visual design of objects that are
not purely utilitarian. An industrial design consists of the creation of a shape,
conguration, or composition of pattern or color, or combination of pattern
and color in three-dimensional form containing aesthetic value. An industrial
design can be a two- or three-dimensional pattern used to produce a prod-
uct, industrial commodity, or handicraft.
A copyright gives the creator of original work exclusive rights, usu-
ally for a limited time. Copyright may apply to a wide range of creative,
intellectual, or artistic forms, or “works.” Copyright does not cover ideas
and information themselves, only the form or manner in which they are
expressed.
Figure 10.1 First patent issued—Signed by none other than President George
Washington.
Intellectual Property ◾ 205
A trademark is a recognizable sign, design, or expression that identies
products or services of a particular source from those of others.
Ford, Lexus,
Apple, and Microsoft are examples of trademarks.
A service mark is any word, symbol, or phrase that identies services
rendered by a company and distinguishes them from others; for example,
“Fly the Friendly Skies” by United Airlines.
Table10.1 Intellectual Property
Patents Provide rights for up to 20 years for inventions.
A patent does not grant an absolute right to make or sell the
invention.
Utility patents Useful processes, machines, articles of manufacture, and
compositions of matter. Examples: ber optics, computer
hardware, medications.
Design patents New, original, and ornamental designs for articles of
manufacture. The look of an athletic shoe, look-and-feel of
software, a bicycle helmet, and the Star Wars characters are all
protected by design patents.
Plant patents Invented or discovered, asexually reproduced plant varieties.
Hybrid tea roses, Silver Queen corn, Better Boy tomatoes,
Russet potatoes, and Madelia onions are all types of plant
patents.
Trademarks Words, names, symbols, sounds, or colors that distinguish
goods and services. Trademarks, unlike patents, can be renewed
forever as long as they are being used in business. The roar of
the MGM lion, the pink of the Owens-Corning insulation, and
the shape of a Coca-Cola bottle are familiar trademarks.
Copyrights Works of authorship, such as writings, music, and works of art
that have been tangibly expressed. The Library of Congress
registers copyrights created by an individual, which last the life
of the author plus 70 years. For a work created for an employer,
the copyright lasts the shorter of 95 years from publication or
120 years from the date of creation.
Trade Secrets Information that companies keep secret to give them an
advantage over their competitors. The formula for Coca-Cola is
one of the most famous trade secrets.
Trade dress A legal term of art that generally refers to characteristics of the
visual appearance of a product or its packaging (or even the
design of a building) that signify the source of the product to
consumers.
206 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
Trade dress is a legal term of art that generally refers to characteristics
of the visual appearance of a product or its packaging (or even the design
of a building) that signify the source of the product to consumers. A trade
dress is universally conferred to pharmaceutical products to properly identify
the drug and its manufacturer, and as a competitive differentiator.
A trade secret is a formula, practice, process, design, instrument, pat-
tern, or compilation of information that is not generally known or reason-
ably ascertainable, by which a business can obtain an economic advantage
over competitors or customers. Following are some techniques for creating
and maintaining trade secrets:
◾ Keeping private and condential documentation
◾ Restricting access to all forms of condential information
◾ Establishing a security system for maintaining secrecy
◾ Controlling visitors’ access to documents or facilities
◾ Requiring written employee secrecy agreements
◾ Conduct new hire and exit interviews emphasizing secrecy and
condentiality
10.2 Patentable Inventions
“There are no unrealistic goals; only unrealistic time frames.”
You can only patent certain inventions: compositions of matter (chemicals),
machines/apparatuses, devices, articles of manufacture, processes/methods,
ornamental designs and botanical plants, genetically engineered organisms,
genetic engineering methods, etc. Table10.2 lists some of the principles
behind intellectual property law.
Table10.2 Rules of the Game
An invention must be:
• New (novelty, enabling disclosure)
• Useful (practical)
• Non-obvious to persons “skilled in
the art”
• Searched for “prior art”
Cannot patent an invention if it is:
• Known or used by others
• Previously described
• In public use for more than one
year
• A law of nature or physical
phenomenon
Intellectual Property ◾ 207
An invention is new if it was not invented by someone else rst; it is
useful if it works; it is non-obvious if it was unexpected and unanticipated.
For example, the scientists that created the Post-it
®
adhesive were actually
trying to develop an adhesive that would bond forever. It was a big surprise
for them when the non-bonding adhesive could be used repeatedly without
leaving a sticky residue.
10.2.1 Who Benets From Intellectual Property Rights?
What can monopolies such as patents, trademarks, or copyrights do for soci-
ety? A monopoly, rightfully obtained, gives the owner the right to exclude
others from making, using, or selling the invention, or using substantially
similar “expressions.” For example, a patent gives a benet to an inventor
and a benet to the public, as shown next:
◾ The patent gives the public a set of detailed instructions that explains
how the patent works. Thus, the inventor is teaching others by contrib-
uting to the promotion of national and societal progress.
◾ Anyone is free to use these techniques as inspiration, reference, or to
make new contributions, as long as the results do not infringe the pat-
ent while it is in force.
A patent is a bargain between society and an inventor wherein the inven-
tor discloses all inventions to the public in exchange for a time-limited
monopoly. This ensures that society will be able to enjoy the full benet
of the invention following the expiration date of the patent. (A U.S. patent
expires as of noon on the expiry date.)
10.3 Understanding Patents
“Everything that can be invented has been invented.” —Charles
H. Duell, Commissioner, U.S. Ofce of Patents, 1899
Patents are highly stylized documents. In contrast to scientic or technical
papers, which presume background knowledge by the reader, a patent must
stand on its own. Prior knowledge is not assumed, other than normal read-
ing and comprehension skills in the art addressed by the patent. Each patent
is an individual presentation of the problem addressed, current techniques
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