Understanding the I.P. Right

By Tennell Lockett

Intellectual Property (“IP”) rights are currently “hot” assets for many, if not most, major companies. The current push towards IP has caused many to pursue IP without carefully assessing how it fits their business. If you are thinking of acquiring IP rights, it is important to have a fundamental understanding of the IP right, how it works and its value.

Despite the complexity of IP law and its potential for lucrative payoffs, IP only provides a single, basic right: the right to exclude. Each form of IP provides the right to exclude in a slightly different manner. Patents provide owners the right to exclude others from making, using, selling, importing, or offering to sell a patented invention. Copyrights enable owners to exclude others from reproducing, distributing, performing, publicly displaying, making a derivative work of, or otherwise copying a copyrighted work. For their part, trademarks function to exclude others from using marks, symbols, logos, words, or other identifiers that are confusingly similar to a trademark holder’s mark. Trade secrets allow owners to exclude third parties from misappropriating valuable company information that is not generally known or readily ascertainable.

Although a simple concept, its legal and business implications are huge. For example, many have pursued patents where they should not have, or have otherwise overvalued patents, because they did not fully appreciate the patent right. One very common misperception is that patents grant patent owners the right to exclusively make or sell something; they do not. As discussed, patents only provide the right to exclude others from a patented area. This fact has at least two very important consequences. First, patents have marginal value where they cover technology areas that others do not want to enter. In other words, if market competitors do not want to enter your patented area (presently or in the future), then it will be difficult or impossible to license your invention to those competitors. If, through some abnormality in the market, customers are nevertheless willing to purchase your technologies, then you would not need the patent in the first place. Basically, if there is no value in having exclusivity in a given area, pursing patent protection is generally a wasted effort.

Second, because patents only grant a right to exclude others, your right to practice your own invention may be encumbered by third-parties. As a crude example, imagine that Inventor A invents and patents the wheel. Shortly thereafter, Inventor B invents and patents the car. Inventor A and Inventor B are said to have “blocking patents.” Inventor A can practice his invention (the wheel) on a number of applications, but will be excluded from practicing his invention in what is likely his most lucrative field, the automobile industry. Meanwhile, Inventor B’s invention (the car) is virtually worthless unless he can obtain the right to use Inventor A’s invention. The demand for cars without wheels is undoubtedly prohibitive. Consequently, well before pursuing his own patent, Inventor B would want to know of Inventor A’s patent and/or want to know whether Inventor A would be willing to license his patented technologies and on what terms. Patents are expensive. Inventor B could expend a lot of time and resources pursing a patent on technology that has no value or that he cannot practice. By understanding the IP right that accompanies the patent grant, Inventor B would be in a good position to evaluate the business viability of seeking patent protection before incurring heavy expenses.

Understanding the IP right can be a very valuable tool for both individuals and business owners alike.