Definition of Intellectual Property
December 6th, 2007Intellectual property refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.
Intellectual property is divided into two categories: Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and Copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs.
Intellectual Property is the property that can be protected under law, including copyrightable works, ideas, discoveries, and inventions. Such property would include novels, sound recordings, or a cure for a disease.
Any intangible asset that consists of human knowledge and ideas is an intellectual property. Some examples are patents, copyrights, trademarks and software. Most such assets cannot be recognized on a balance sheet when internally generated, since it is very difficult to objectively value intellectual property assets (slightly different rules apply in the case of software). They can, however, be included in a balance sheet if acquired, which allows a more accurate valuation for the asset (which is the acquisition cost).
Intellectual Property is a broad categorical description for the set of intangibles owned and legally protected by a company from outside use or implementation without consent. Intellectual property can consist of patents, trade secrets, copyrights and trademarks, or simply ideas.
The concept of intellectual property relates to the fact that certain products of human intellect should be afforded the same protective rights that apply to physical property. Most developed economies have legal measures in place to protect both forms of property.
Companies are diligent when it comes to identifying and protecting intellectual property because it holds such high value in today’s increasingly knowledge-based economy. Extracting value from intellectual property and preventing others from deriving value from it is an important responsibility for any company.
Many forms of IP cannot be listed on the balance sheet as assets, but the value of such property tends to be reflected in the price of the stock. Management’s ability to manage these effectively and turn profits is just one example.
CopyrightDesignsIntellectual PropertyPatentTrademark
