A brief visit to any well-supplied library or Internet book site shows that the topic of intellectual property continues to receive considerable attention.
This comes as no surprise, as innovative protected intellectual property can be a real source of competitive advantage in a services firm. Reading options include a variety of practice-oriented and socioeconomic perspectives including local, state, and federal legislation with its current interpretation as well as accounting for and the use of economic valuation for intellectual property. Chapter 19 touches on this subject as well and has links to associated resources for additional study.
Understanding Intellectual Property 4
The origins of U.S. intellectual property law are traceable to the constitutional convention of 1787 and the first draft of the constitution. The rationale for this constitutional emphasis is the notion that the formation of a prosperous society is, to a large extent, dependent on the ability of individuals to protect their rights in intellectual discoveries.
Four classifications of a firm’s intangible assets include rights that arise from: (1) contractual agreements; (2) relationships with its workforce, customers, and distributors; (3) undefined intangibles such as goodwill; and (4) intellectual property. Smith and Parr state that intangible assets “. . .
typically appear last in the development of a business and disappear first in its demise.”5
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The types of intellectual property are: patents, trademarks, copyright, and know-how. Each of these types is brief ly outlined next. Readers in need of a more comprehensive treatment are referred to texts similar to those listed in the notes section at the end of this chapter.
Patent
• Right to exclude others from making, using, or selling
• Types (utility, plant, design, animal)
• Granted by the federal government
Trademark
• Types (trademark, service mark, collective marks, certification marks)
• Valid as long as the mark is actively used and protected
• May be registered (federal-interstate, state-intrastate)
Copyright
• Idea-expression dichotomy. Copyright law is based on the notion that the expression of ideas is subject to protection, but the underlying idea cannot be protected.
• Establishing ownership—employees. A “work made for hire” is owned
by the employer. Best to use written agreements for both employees and independent contractors to reduce likelihood of ownership disputes.
• Federal protection only.
• Benefits of registration—provides public notice. It establishes a validity of claim that is a prerequisite to bringing an infringement action. Creates a record with the customs service.
Know-How
• Types (trade secrets, proprietary technology, and other information used in the course of business such as customer lists, sales information, business methods, and financial forecasts).
• Primarily subject to state jurisdiction.
• No statutory time limits on protection. Information that has not been protected by patent, trademark, or copyright, but its protection is still vital to the firm’s success and, if known to competitors, would provide them with an advantage.
• Protection is through physical measures and written agreements.
• Computer software can be protected with patents or copyrights or may be retained as part of a firm’s know-how.
Though some authors recognize a difference and distinguish between
intellectual capital and intellectual property, the names are often used
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interchangeably. Smith and Parr8 define intellectual capital as a combination of human capital, intangible assets, and intellectual property. Within the context of this definition, the remainder of this discussion focuses exclusively on intellectual property.
Protecting Intellectual Property
Protecting intellectual property should be seen as a bidirectional process that involves not only the protection of a person’s own property but also ensures that the person is not infringing on the rights of others.6
As shown in Exhibit 6.1, the protection of intellectual property is summarized in four key activities: identify, raise awareness, protect, and monitor.
For each of these activities, a list of suggested strategies and steps follows.
IDENTIFY INTELLECTUAL PROPERTY.
The emphasis of this activity is
defining what constitutes the firm’s intellectual property. Proactive identification can help reduce the time and effort needed to later assert the firm’s rights. Periodic audits can be used to inventory intellectual property with special emphasis placed on computer data security. Consideration should be given to obtaining outside assistance such as legal counsel. Chapter 19 covers this topic as well.
RAISE AWARENESS.
A key concern is the adequate demonstration of the
firm’s intent to protect its intellectual property.7 Intent can be a forceful indication of the firm’s desire to assert its rights and may be demonstrated with organizational attention in the form of oversight, policies, procedures, and education. Periodic reviews and legal counsel are recommended, as statutory changes can be frequent. Oversight is optimally provided by a committee of senior members from all areas of the firm including operations, human resources, accounting, legal, sales, and marketing. Established firm policies and procedures help to define and codify firm stances on information confidentiality, Internet usage, ownership rights, and employee/contractor agreements such as nonsolicitation, nondisclosure, and noncompetition.
Employees should be educated on the proper use and protection of intellectual assets. Also, Walsh recommends the firm validate that employee/
contractor agreements are appropriate for the work assignment, governing jurisdiction and effects on existing agreements after business reorganizations such as mergers and acquisitions. The firm should consider adopting employee exit processes that collect confidential and proprietary information and use this opportunity to remind the individual of ongoing obligations.10
PROTECT AGAINST INFRINGEMENT.
Once intellectual property has
been identified, it should be assessed for the optimal method of protection (patent, trademark, copyright, and know-how). For property that is deemed
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suitable for know-how protection, one option is to control access. Trade secrets may be marked as confidential. The firm should consider obtaining insurance coverage for possible infringement claims made against the firm.
MONITOR.
The final and perhaps most essential activity is to monitor the
behavior of your own staff as well as the actions of others. The firm’s staff should be encouraged to review periodicals, marketing literature, web sites, and other sources to check for infringement. Retaining legal counsel may be required when infringement is perceived. The firm’s goal is to maintain diligence in its practices and meet its secrecy objectives by demonstrating an intention to protect its intellectual property and then backing its intent with action.
Other Aids to Understanding Intellectual Property
In addition to intellectual property texts such as those discussed earlier, numerous journals and texts address intellectual property issues. Topics recently addressed by the Intellectual Property and Technology Law Journal 8 include:
• International developments such as foreign recognition of and cooperation in protecting property rights and the links between international property piracy and terrorism
• Effects of mergers on intellectual property rights
• Noteworthy court rulings that impact both the defense and assertion of property rights
• Economic valuation of intellectual property
• Practice aid such as a sample agreement designed to help organizations protect their intellectual property when working with contractors
Along with topical advice and guidance, various sources9 discuss contemporary as well as competing views on the current state and future direction of intellectual property. Opinions range from the all-for-free knowledge advocates to those who argue for market rules to dictate ownership rights. The interested reader is encouraged to explore the diversity of intellectual property readings.
Summary
The professional services firm’s ability to increase and protect its knowledge should be considered of paramount importance to its continued existence. In a tangible way, its clients are paying the firm for the skilled use of knowledge.
As such, effort that is expended to create service lines, develop intellectual
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property, and subsequently protect it is inevitable. As Sherlock Holmes points out, the skillful worker focuses on relevant knowledge, listens to others’ troubles, provides enlightenment, and then pockets a fee. As Einstein notes, the best firms will be sure that they have effective ways of “finding”
the information that they need when they need it.
RESOURCES
A list of suggested work steps for new service offering creation is provided on the accompanying CD-ROM.
The US Patent and Trademark office provides a variety of on-line resources, including search capabilities at http://www.uspto.gov.
The copyright office of the Library of Congress provides information, frequently asked questions regarding registration for copyrighted works and is found at http://www.copyright.gov.
NOTES
1. Sir Arthur Conan Doyle, The Original Illustrated “Strand” Sherlock Homes (Great Britain: Wordsworth Editions, 1989), p. 15.
2. Gordon V. Smith and Russell L. Parr, Valuation of Intellectual Property and Intangible Assets (New York: John Wiley & Sons, 2000), p. 10.
3. Philip Kotler, Marketing Management. (Upper Saddle River: NJ: Prentice-Hall, 2000), p. 27.
4. Except where noted, material for this section has been adapted from Smith and Parr. See note 2.
5. See note 2, p. 15.
6. Deborah E. Bouchoux, Protecting Your Company’s Intellectual Property: A Practical Guide to Trademarks, Copyrights, Patents & Trade Secrets (New York: AMACOM, 2001), p. 14.
7. Marguerite S. Walsh, “The Ten Top Reasons Employers Lose Trade Secret Cases—And How To Prevent Them,” in Intellectual Property & Technology Law Journal (New York: Aspen Law & Business, 2003), pp. 1– 4.