Intellectual Property

Intellectual property refers to creations of the human mind, whether creative or intellectual, such as art and designs, literary works, music, and the names, symbols, and images used in business. The ownership of intellectual property is categorized into four groups: copyright, trademark, patent, and trade secrets. Ownership of such property provides exclusive rights, providing the owner protection against unauthorized use of their creative works. To explore this concept, consider the following intellectual property definition.

Definition of Intellectual Property

1. noun.  Property resulting from original creative thought, such as art, literature, and music.
2. noun.  An intangible asset, such as a copyright, trademark, or patent.

Origin     1840    Americanism

What is Intellectual Property

The legal term “intellectual property” (“IP”) refers to the broad spectrum of things created by the human imagination and intellect. Not only are such things as art and literature protected by IP laws, but such items as industrial design, trade dress, inventions, and trade secrets. Additionally, intellectual property rights themselves are considered assets called “intangible property,” and are protected under the same laws. Other items protected by IP rights include:

• Moral rights – The right to have a work published anonymously while requiring the integrity of the work be maintained, barring alteration, mutilation, or distortion.
• Utility model – An exclusive right of the owner of an invention to prevent others from using it commercially without his authorization for a limited period of time. Similar to a patent, though the utility model is time-limited.
• Geographical indication – A name or symbol used on a product signifying a geographical location or origin.
• Database right – An organized collection of reference materials, whether electronic or hard copy, is considered a “database,” which is protected by U.S. copyright laws.
• Industrial design right – Protection of the visual design of objects that aid in the actual production.
• Indigenous intellectual property – The right of indigenous peoples to protect their cultural knowledge and resulting intellectual property.
• Plant breeders’ rights – Rights granted to the breeder of a new plant variety giving him exclusive control over the propagating and harvested materials.

Objectives of Intellectual Property Laws

The purpose and objective of intellectual property laws is to encourage progress by providing limited exclusive rights to creative works and inventions. Such protection encourages authors, artists, and inventors to reveal their works to the public, allowing the works to benefit society. The original reasoning behind IP laws was that creators did not have sufficient incentive to produce and reveal their works unless they could be guaranteed the full social and monetary value. IP laws treat intellectual property ownership, in many ways, like ownership of real property.

Financial Impact of Intellectual Property Laws

Providing exclusive rights to intellectual property gives individuals and entities incentive to invest in the development of ideas. Investment into research and development of patented inventions, as well as implementation and production, bolsters the U.S. economy to the tune of over $5 trillion, according to a 2013 U.S. Patent & Trademark Office report. This in turn creates employment opportunities for about 18 million Americans.

Intellectual Property Theft

Theft or violation of intellectual property rights, referred to as “infringement” regarding copyright, patents, and trademarks, and “misappropriation” regarding trade secrets, may be considered either a civil or criminal matter, depending on the circumstance. In 2011, the issue of counterfeit trademarked and copyrighted works alone accounted for as must as 7 percent of global trade, making it a $600 billion industry.

Patent Infringement

Commonly referring to the use or sale of a patented invention without consent of the patent owner, patent infringement is a matter of civil law in the U.S. The scope of protection under any patent issued often becomes an issue in civil litigation.

Trademark Infringement

The use of a trademark that is either identical, or so similar as to be confusing, to that owned by someone else, especially in products or services that are similar to those offered by the other party, is considered trademark infringement. While there are certain common law rights that protect the owner of a trademark, registration offers distinct legal benefits when it comes to enforcement. Most often, trademark infringement is addressed through civil lawsuits, though criminal penalties apply to the deliberate trade in counterfeit goods under trademark infringement.

Copyright Infringement

The act of displaying, reproducing, or distributing copyrighted works without permission from the owner is considered copyright infringement. Other prohibited acts include unauthorized performing or making of derivative works of copyrighted materials. Many acts of copyright infringement, such as reproducing and selling movies or music, are referred to as “piracy.” Historically, copyright infringement was viewed solely as a matter for civil litigation, but the 2011 internationally signed Anti-Counterfeiting Trade Agreement (ACTA) requires the addition of criminal penalties that include fines and imprisonment for copyright and trademark infringement.

Trade Secret Misappropriation

While categorized under intellectual property laws, misappropriation of trade secrets differs substantially from other IP violations because trade secrets are “secret.” Under federal law, trade secrets are governed by the Economic Espionage Act of 1996, though they are protected under the laws of each state as well, with most states having adopted the Uniform Trade Secrets Act. Criminal penalties for misappropriation of trade secrets are further broken down into theft for domestic economic or commercial purposes, and theft for the benefit of foreign powers.

Intellectual Property Licensing Agreements

While the owner of intellectual property may retain exclusive rights to use the item, whether for personal gratification or monetary gain, it is possible for the owner to make money by charging others a fee for using the creative work or invention through the issuance of a “license.” The use of a licensing agreement protects the IP owner’s proprietary rights while giving someone else permission to use the property for a set period of time, or for a specific activity or purpose.

Because the issue of intellectual property rights is complex, many people pay an attorney to draft IP licensing agreements. Such an agreement does not have to be long or complicated, however, and may be drafted by the parties to the agreement in plain and simple language. Issues important to include in a licensing agreement include:

Scope of License

Because a license assigns a limited right to use intellectual property for a specific purpose, it is vital that the exact nature of that purpose be set out in writing. The IP owner (“licensor”) should maintain ownership rights, specifying whether the “licensee” is allowed to reproduce, sell, or otherwise use the item, and whether that right may be assigned to another. Exactly what is allowed under the licensing agreement is up to the parties, but should be stated very specifically.

Income Generated from the Licensed Product

Specifically stating how the grantor is to be paid for the agreement to license his intellectual property rights is vital. Whether the license is granted for a flat fee, or whether the licensor is to receive a percentage of profits garnered by the licensee’s use of the license, the specifics are up to the parties, but should be very specifically stated in the agreement. Other important topics to include in a licensing agreement include:

• Term of the agreement
• Prohibited uses
• Right to source code
• Warranty
• Protection of licensee against claims of infringement
• Acceptance, testing, and training procedures
• Supportive services provided by licensor
• Limitations on liability of the licensor
• Nondisclosure agreement
• Termination of agreement requirements
• Enforcement of license agreement

Works for Hire

When an individual or entity hires an independent contractor, such as an artist, computer programmer, or inventor, to create something, the hiring party is considered to be the owner of the work, and is entitled to all rights under the item’s copyright, patent, or trademark. In order for this to be enforceable in a court of law, however, it is important that a written agreement be created that specifically states that the work is for hire. Not every work may be considered a work for hire. In fact, there are nine specific types of works that fall into the work-for-hire category:

1. An instructional text
2. A test
3. Answers for a test
4. A contribution to a collective work, such as a magazine
5. A compilation
6. An atlas
7. A translation
8. A supplementary work, such as a chart, appendix, or bibliography
9. A part of an audiovisual work

Works that do not fall into one of these categories, even if created by an independent contractor hired specifically for that purpose, are not automatically considered the property of the contractee. In such a case it is necessary for the parties enter into a written assignment of rights, in which the independent contractor transfers, or “assigns,” some or all of the intellectual property rights to the contractee.

Intellectual Property Dispute over Bratz Dolls

The issue of intellectual property rights is so broad and complex that it results in a busy docket for the courts. One famous example is the dispute between Mattel and MGA Entertainment over Bratz Dolls.

Barbie v Bratz Dolls

In 2005, Mattel and MGA Entertainment, the makers of Barbie and Bratz dolls respectively, faced off in a battle over intellectual property rights. It turns out that the designer of Bratz dolls, Carter Bryant, had been an employee of Mattel, though simultaneously working as a consultant for MGA, when he designed the doll. Mattel sued both Bryant and MGA claiming it owned intellectual property rights to Bryant’s works. The complexity of IP laws led to a judgment, a reversal, counterclaims by both parties, and more litigation. At a cost of more than $700 million, the litigation over the Bratz line of dolls, the legal battle ended in 2013, with the only winners being the attorneys.

Related Legal Terms and Issues

• Assign – To designate or set something aside for a specified purpose. To transfer rights held by one party to another.
• Contractee – A person or entity that enters into a contract for the provision of goods or services by a contractor.
• Contractor – A person who contracts to provide goods or services to another for payment.
• Indigenous People – A group of people with historical ties to a geographical region, who have cultural or historical distinctiveness from other populations.
• Intangible Asset – An asset that has no physical substance, such as creative works, reputation, knowledge, copyrights, and patents.
• Real Property – Land and property attached or fixed directly to the land, including buildings and structures.