Nowadays, businesses need to be aware that the value of their enterprises is not based only on physical assets but also on intangible assets, and intellectual property (IP) is the key to protect the value of those assets. It has been estimated that in most technology companies, intangible assets form over 60% of their business value (Shirmon, 2006). The most recognised intellectual property protection is brand, while businesses protect their brands to enhance their value. But in the increasingly competitive environment, the success of many businesses is now based on innovation and new technology. There are four major types of IP including patent, copyright, trademark and trade secret.
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In general, IP is all about ideas skilfully expressed resulting in innovation and creative works (David, 2009). Innovation in technology is characterised by a process that produces a variety of goods that differ in quality and performances (Cornish, Llewelyin and Aplin, 2010). Ernfried (2003) describes the development of most technologies as an evolutionary rather than a revolutionary process (Suzanne, 2004). It can be identified as a process of creative destruction, in which new technology evolve on the ruins of their technological predecessors.
In the essay, I will discuss how each IP could arise by using Psylock invention and in section two I will point out the Commercial Exploitation of IP and some criticism of Intellectual property rights (IPRs).
“Show me how you type, and I will tell you who you are”, this is the concept of Psylock. The company Psylock develops and markets information technology solutions helping businesses to improve security on IT applications. The concept is based on keystroke biometrics technology and has been tested and certified by TÜV SÜD for functionality, data security and privacy (Psylock, 2010). Keystroke biometrics technology deals with dynamic characteristics of a person’s keystroke behaviour. The system collects numerous individual characteristics such as left or right-handedness, typical typing error, the use of shift keys, dexterity, and assesses these on a person specific basis. In general, Psylock technology is a process of authorisation individuals based on their typing pattern. Applications of Psylock range from e-commerce and online banking to security for computer systems and are available for private users and enterprises (Psylock, 2010).
Intellectual Property Application
The primary goal of the patent system is to stimulate innovation and commercialisation of technology advances. It provides economic incentives to inventors by granting them monopoly rights for a limited period, normally 20 years (David, 2008). Basically, invention patent is the most valuable and to competitors, potentially the most dangerous of all intellectual property, as it prevent all others from including any form of the invention in their products and services (Alexander, 2008). Any new machines used to manufacture Psylock products and the technology itself can be protectable with patents. A patent may be secured for the United Kingdom either through the British Office (UKIPO) or the European Patent Office (EPO), established under the European Patent Convention 1973 (EPC). Additionally patent can be register internationally through the World Intellectual Property Organisation (WIPO). An international registration could take around 41 months (WIPO, 2010). According to the Patent Act 1997, Psylock invention must meet four basic requirements in order to be granted.
It must be novel. The present law requires a patented invention to be new (must not have been done before in a way that was available to the public) and may not have been disclosed in any way to the public. In other words, Psylock technology must not previously used or described in any single publication.
It must involve an inventive step and non-obvious. In the EPC and the Patent Act 1997, an inventive step is considered to be present if the invention has something which is seen as an invention by an official examiner who is skilled in that subject area.
It must be capable of industrial application. In other words, an invention can only be granted which can be made or used in some kind of industry, such as manufacturing, agriculture and any other commercial enterprise. In order to pass this proviso, Psylock technology also must offer some positive benefits to society.
It must not fall within any of the categories of subject-matter. This category arose in 1998 when the Court of Appeal for the Federal Circuit clarified the status of business method patents (Cornish, Llewelyin and Aplin, 2010).
Most company hires a registered patent attorney or agent to file their patent application. To file a provisional patent application (PPA), Psylock have to pay a filing fee including search fee and examination fee. Cost can run from 1,500 to 3,000£ not including annual maintenance fee (APO, 2003).
Copyright aims to protect artistic and literary works, such as books, photographs and phonograms. Different from patent, it gives right holders the exclusive right to copy, reproduce, distribute, perform or display their works; and copyright are not granted or issued by a federal agency, instead rights are created as soon as the work is produced (Garima and Avih, 2002). This right is much narrower than a patent, because copyright only protects expression. Copyright law also protects computer programs, user interface, and in some situation design features of manufactured products (David, 2009). Psylock’s operating software uses to implement computer system with the technology and the instruction manual could be copyright protected. Under the law, protection of computer programs shall last at a minimum for fifty years, and shall include exclusive rights to rent the programs (Eland, 2008). Software protections affect openness of standards and interfaces, which could be important components of Psylock competitive strategy in the IT industry.
Courts have recognised a defence to a charge of copyright infringement since the 1840s, and it’s codified in the Copyright Act of 1976 (Eland, 2008). However, Psylock must still register their worked with the government before filing suit for infringement. If infringement occurs, Psylock can seek actual damages based on the higher of own lost of profits (Alexander, 2008).
Trademarks provide protection to the owner of the mark by ensuring the exclusive right to use it to indentify goods or services. It primarily deals with names, logo, slogan and colour, smell, virtually anything that is used to identify the source of the product distinguishes it from competitors (Garima and Avih, 2002).
Trademarks are very useful in combination with inventions. For example, Psylock’s logo and slogan could be trademarked. It will be a mark that clearly distinguishes Psylock products from those of his competitors, as it will be instantly recognisable by their customers. Basically, a trademark could provide brand-name recognition to products and a patent provide a tool to enforce a monopoly on its utilitarian function (Muzahidul, 2009). Since trademark right last indefinitely as long as it is been used in commerce, it can be a powerful tool of extending a monopoly, initially created by a patent (David, 2009).
Trade secret protects any confidential formula, or a piece of information which gives its holder a competitive advantage as long as it remains secret. It can include any formula, pattern, device, or compilation of information that is used in business (Suzanne, 2004). Different from patent, trade secret need not be essentially new, novel, or unique and have an unlimited life time (David, 2008). As a result, Psylock could keep source programs as a secret.
Unlike all other forms of IP, trade secret allows Psylock to suppress knowledge. Nevertheless, the law encourages the sharing and sale of secrets (Eland, 2008).
The court will look at several factors in determining whether information is a trade secret, including the secret holder’s effort to protect secrecy of the information, how widely the information is known within and outside the holder’s organisation and whether information provides a commercial, competitive advantage over others (David, 2008). For example, Psylock can share the secret with potential buyers under a nondisclosure agreement (Suzanne, 2004). In general, if any employees without Psylock’s permission disclose or sell that trade secret to someone else, then Psylock is entitle to bring an action in court for misappropriation.
Commercial Exploitation of IP
Instead of commercialising the new invention by the company itself, Psylock may consider taking other ways of exploiting its Intellectual Property Rights (IPRs). IPRs may be assigned, whereby the ownership in the whole or part of the right is transferred, or licences may be granted. One option is to use IP as a security for loan. Ownership of the IP, including all the exclusive rights in the IP, can be transferred to another owner for a price (Catherine, 2009). For example, in 1996, Enid Blyton’s copyright was sold for £13 Million. One potential problem with selling IPRs is that Psylock will lose the ability to control how the IP is used and developed and hence, Psylock will be unable to prevent the IP from being exploited in a manner prejudicial to the interests of its stakeholders (Donald, 2010). However, parties are free to impose conditions in assignments as to reassignment in the event of certain circumstances (Catherine, 2009).
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As Psylock is selling security software, he can also enter into a non-exlusive licensing agreement with other IT companies in order to commericalise the invention. Licences don’t transfer ownership of the IPRs and can restrict commercialisation geographically (Darrel, 2005). In general, commercialising partners will pay a royalty, fee, or dividend in return for the right to use the IP. Commercialisation may assist Psylock economic growth and can generate profit, but risks could arise from the process of commercialisation and failure to pursue commercialisation.
Criticism of IP
It is debatable whether IP is necessary to encourage the production of inventions. Hettinger argues that this is built on a contradiction, namely that in order to promote the development of ideas, it is necessary to reduce people’s freedom of using them. (Stephan, 2001). Simons (2006) argues that there would be more innovation, if there were no patent law because more money for research and development would be available if it were not being spent on patents and lawsuits (Brain, 2008). It is possible that companies would have an even greater incentive to innovate if they couldn’t rely on a twenty year monopoly.
As mention before the idea behind patents is to give the inventor exclusive rights for a limited of period to make, use or sell the invention. But there are some cases in which patents have been used to suppress innovation (Stephanie, 2001). Some companies may take out a patent, or buy someone else’s patent, in order to inhibit rivals from entering the market. For example, in 1875, the US company AT&T collected patents in order to ensure its monopoly on telephones. The result is that the introduction of radio was retarded for some 20 years (Brain, 2008).
Charlie (2008) argues many opponents of IPRs typically support only contractual arrangements to protect ideas and innovation. Assume for example, Psylock creates a Security manual for enterprises and sell it to Company A1 and A2, with a contractual condition that each Company is obligated not to reproduce or sell a copy of the manual to a third party. Under the contract law, any buyers become liable to Psylock, if he breaches these provisions. But the advocates of the contractual approach to IP are mistaken if they believe that private contract can be used to recreate the same type of protection afforded by modern IPRs (Stephan, 2001). Patent and copyright are good against all third parties, regardless of their consent to a contract. Steven(2008) argues a contract, by contrast, binds only parties to the contract not third parties as it is like private law between individuals (Stephan, 2001). Thus if company A relates to third parties the plot of the purchase manual, these third parties are not bound, by the original contractual obligation between Psylock and company A (Stephan, 2001).
Intellectual property rights are key elements needed for companies to gain competitive advantage in their marketplace. The benefits of IPRs are multifaceted as they can assist the business in its marketing, product development, raising financial resources and expanding the existing business through licensing and franchising. However, IPR protection is purely economic. IPR laws are generally inappropriate for defending the rights of local communities. There is a conflict between intangible works and free expression and exchange of ideas. For an enterprise like Psylock, it must have a system that can minimise the opportunity cost of this trade off. A system whereby the company is secured in the knowledge that all IP are protected without infringing on someone else’s IPRs.
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