Intellectual Rights Concept as it Affects Each Business Evolution Cycle

¶ … intellectual rights and how they apply to all aspects of the business cycle.

Intellectual Rights and the Business Cycle

Intellectual rights are something that almost every business today has to deal with in some form or other. While the concept is a relatively new one, it has, nonetheless, become a concept that no business today can afford to ignore. Intellectual rights can affect every part of the business cycle, and a company that ignores this issue does so at its own peril. Businesses can be forced out of business or find themselves in complicated legal trouble over intellectual rights if they abuse the intellectual rights of others. Businesses can also find themselves mired down in lengthy court battles and in financial peril if they ignore their own intellectual rights. This paper examines the issue of intellectual rights as they apply to all aspects of the business cycle.

What are intellectual rights? "Intellectual rights" is the term often used to describe the legal protections afforded to the owners of intellectual property. Intellectual property refers to a person or company's rights to intellectual capital; these rights can last for a specified period of time, or they may last indefinitely. Common types of intellectual property include:

Copyrights -- Copyrights are legal rights that give the owner the exclusive rights to control reproductions of works of authorship, such as books and music, for a specified period of time.

Patents -- Patents give the holder the exclusive rights to use and license of an invention for a specified period of time, usually twenty years.

Trademarks -- These are distinctive names, phrases, or marks used to identify products to consumers.

Trade Secrets -- Trade secrets are the result of a company keeping certain information secret, sometimes by enforcing a contract under which those given access to information are not permitted to disclose it to others ("Intellectual Property," 2003).

These rights are given or conferred on a person or company by law, and can be given, sold, rented, and even mortgaged (in some countries) to others for the time that the owner holds the intellectual rights to the intellectual property. However, unlike other types of ownership, the ownership of intellectual property often comes with limits, such as time limits. It is also important to remember that with intellectual property, it is only the rights to the property that are owned, not the property itself. So, for example, a person or a company may own the intellectual rights to a certain invention, but they only own the rights to the use and license of the invention, not the invention itself. This may make the term "intellectual property" a little bit misleading to some people. However, while the person or company has the rights to use and license certain intellectual works, those works are essentially the property of that person or company, even if this is not the case in actuality.

Intellectual property rights normally fall into either one of two categories. These categories are: 1) those that grant exclusive rights only on copying/reproduction of the item or act protected, and 2) those that grant not only this but also other exclusive rights ("Intellectual Property," 2003). The difference between the two categories is that a copyright would prevent someone from copying the design of something that he or she did not own the copyright to, but could not stop them from making that design if they had no knowledge of the original design held by the copyright holder. A patent, though, can be used to prevent a person from making the same design as the patent holder, even if that person had no knowledge of the original design. Patents, obviously, are more powerful than copyrights, and as such, they are also more difficult and expensive to obtain ("Intellectual Property," 2003).

The type and scope of intellectual property rights that a person or company holds can also vary depending on the type of protection obtained. Intellectual property law is generally divided into the types of subject matter that the laws cover -- inventions, artistic expressions, secrets, designs, etcetera. Intellectual property law regulates what people may legally do with these things. Normally, the only right that intellectual property laws convey onto a person or company holding those rights is the right to reproduction of whatever it is they hold the rights to. However, occasionally these rights extend to full exclusive use of the intellectual property. Intellectual property laws also prevent people who do not hold these rights from reproducing or using the property without the permission of the person or company holding the rights. Since people who hold intellectual property rights can sue a person or company using their property without permission, those wanting to use the property will generally come to the person or company owning the rights and ask permission to use the property. If permission is given, this is called licensing. People and companies generally pay a fee to the holder of the intellectual property rights for the right to use or reproduce the property.

Intellectual rights, though they are mainly a modern issue, considering the wealth of intellectual property in the world today (software, internet, etc.), the whole concept of intellectual rights has gradually developed over the centuries. The first example of intellectual property rights being given to someone happened in the year 1449 when King Henry VI of England granted a patent to a Flemish man for the production of stained glass. The patent was good for twenty years, and essentially equaled a monopoly on the right to produce stained glass for this man. Granting patents became so common that the system began to be abused, until King James I finally had to revoke all patents and mandate that they were to be used henceforth only for new inventions. Copyrights were not invented until after the invention of the printing press, which brought with it greater public literacy. Copyright law was toyed around with in England from the time the printing press was invented, but the first real copyright law came into effect under Queen Anne of England, when authors of books were granted exclusive control over their work for a specified period of time. Copyright and patent law has continued to evolve over the centuries, and is evolving even today, with the advent of computers and the internet. As long as new things are being invented and the needs of the public are evolving, intellectual property law has to keep on evolving, too.

Intellectual property rights are important to consider in the business cycle today. In fact, intellectual property rights apply to every phase of the business cycle, right from the start-up phases. In the beginning, when a business is first starting out, it must be careful to be sure that it is not infringing on another person or company's intellectual property rights. This means that a new business must do a great deal of research in its start-up phase in order to eliminate the possibility of this happening. This can be as simple as making sure that the company name that has been chosen isn't already trademarked by someone else. It can be as complicated as making sure that no part of the product or service the company is offering is trademarked or otherwise controlled by another person or company. Taking care of these details in the beginning of the business cycle can eliminate many problems later on, once the business is going and successful.

Of course, making sure that the new business is not violating any intellectual property laws is not the only thing that a new business has to think about concerning intellectual property laws. A new business must also make sure that its own intellectual property interests are protected. This might be something that a new business might not think it has to devote too much time to, considering all of the other important details that go into starting up a new business. However, failure to protect the company's intellectual property rights in the beginning of the business cycle can be setting up the new business for major problems down the road. Some of the things that are important to do regarding intellectual property rights that a new business is likely to neglect are:

Failing to cause the work product designed by the company's employees to the company. Failure to do this means that later, if another company or person comes along and uses your company's idea or product, your company has no legal right to exclusive use of that idea or product. What is worse, the company copying your company's idea or product may secure rights to it, thus preventing your company from using it, or causing your company to get a license from the other company to use the intellectual property.

Permitting the trade secrets of the company to be used by former employees who may then go out and be hired by competitors of the company. This can be very detrimental to the company, because if another company gets hold of important trade secrets and uses them, the company will lose its competitive edge. The thing that makes the company unique will have been appropriated by another company, making the original company look like one of many. This can certainly hurt profits, and may even drive a company out of business. It is therefore, very important that new companies get their employees to sign confidentiality and non-disclosure agreements.

Failing to establish certain intellectual property rights, such as copyrights and patents. This is probably the worst thing that a new company can neglect, as getting these patents and copyrights is the basis of being able to control the intellectual property later. A new company must never neglect to obtain these patents and copyrights if it hopes to be successful in the highly competitive business world ("Key Issues," 2003).

Companies that make it past the start-up phase will find themselves in the growth phase. This is a phase where the company is growing larger, becoming more successful, and expanding into new areas. While it may seem that it is possible at this stage to ignore intellectual property rights, as the details taken care of in the start-up phase will be in place and secure, this is actually no time to ignore the issue of intellectual property rights. A growing company, especially one that is experiencing some success, needs to be ever-vigilant in order to make sure that their intellectual property is not being illegally appropriated by others. This is something that can happen quite easily to a growing company. Other people and other companies will see the success that the company is experiencing and will seek to copy it. This copying may be done surreptitiously, and the people and businesses using it may be doing so stealthily. However, any unauthorized use of intellectual property is illegal. A growing company must be on guard in order to ensure that this is not happening to them. Measures and procedures should be in place in the growing company that employees and management can use in order to find out if any of the company's intellectual property is being stolen. The growing company must likewise be vigilant in order to ensure that it is not inadvertently stealing anyone else's intellectual property, as the growing company and its employees will naturally pick up lots of useful information and ideas as growth continues; it is necessary to always check to make sure that these new ideas are not the intellectual property of others. This type of checking, and the frequent performing of it, will help the growing company to avoid costly lawsuits.

There will eventually come a time when the growing business can be said to be out of the growth phase and into the maturity phase. The maturity phase is the phase in which the company has grown about all it can reasonably be expected to grow, and is now relatively stable in what it does, how it does it, and what it offers. Many of the company's products or services may be well-known at this point, and may even be "household words." The company at this point has built up a good, solid reputation. People know what the company does, what it represents, and have definite impressions of it, either good or bad. The profits are fairly steady year after year at this point, and output is steady. These are good times for a company. They are also times in which intellectual property still needs to be protected.

When a company is in its maturity phase, it is in the phase in which those looking to use the intellectual property of the company are most likely to show up and ask for a license. If a company is successful enough to have reached the maturity phase, this normally means that it has one or more products, services, or ideas that are clearly identifiable with the public. This makes the intellectual property very valuable. Because of this, others are likely to want to use it in order to make money for themselves, while coasting on the success of the intellectual property that the company has already established. When the issue of licensing comes up, the company must then make the decision of whether or not to license.

The decision of whether or not to license is a serious one, not to be undertaken lightly. It is important to remember that the intellectual property that may or may not be licensed is valuable to the company, has helped to build the reputation of the company, and has made the company lots of money. The reputation of the company may rest on the intellectual property in question. When a person or other company wants to get a license for this intellectual property, the company must consider several things before making a decision: