Beware of the Pirates: How to Protect Intellectual Property

By Millonzi, Kay; Passannante, William G. | Risk Management, August 1996 | Go to article overview

Beware of the Pirates: How to Protect Intellectual Property


Millonzi, Kay, Passannante, William G., Risk Management


Many businesses have realized that intellectual property rights are increasingly important in a competitive global marketplace. The advent of "pirate factories," which duplicate protected works illicitly, and international trade agreements, which alter traditional protections, have created a brave new world for intellectual property owners and have made protecting intellectual property and avoiding related claims a significant risk management objective.

The global nature of the need to protect intellectual property is underscored by several current events. For example, recent headlines scream about "Chinese Pirate Factories," while the United States threatens 100 percent tariffs on Chinese imports worth billions of dollars. In fact, a recent study by the Clinton Administration detailed the "pirating of billions of dollars worth of American software, music and videos." Further, this study revealed that almost all of these "pirate factories" are partly owned by foreign investors or companies located in countries that are close allies and trading partners of the United States, such as Hong Kong, Taiwan, Singapore and Japan. It's hard to know whom to trust in the international world of intellectual property.

The explosive growth of electronic communications has increased the ease with which intellectual property can be duplicated, leading to a corresponding growth in litigation regarding intellectual property rights on the Internet.

Additionally, the international General Agreement on Tariffs and Trade (GATT) has altered U.S. patent protection. Previously, U.S. inventors had rights to a patent for 17 years from the date it was issued. Under the new GATT-inspired law, patents protect inventors for 20 years from the date the patent application is first filed. Because a complex patent may take several years to be issued, the effective time period for U.S. patent protection may actually be shortened.

Defining Intellectual Property

In forms such as patents, trademarks, copyrights, trade secrets and trade dress, intellectual property can be the most valuable assets of any organization. They define to customers who you are, provide advantages over your competitors and can even serve as the basis of a business. Intellectual property includes secret formulas, inventions, logos and creative marketing materials. To protect the different types of intellectual property adequately, it is necessary to understand each of them.

A patent is a legal right, for a limited term, to exclude others from using, selling or making an invention or discovery. Patents have been granted for such items as the safety pin and the wet-dry vacuum.

Trademarks can be words, symbols, logos, designs or slogans that identify products or services as coming from a common source. Famous examples of trademarks include Apple[TM] computers, the McDonald's[TM] golden arches, Lexus[TM] automobiles and the Nike[TM] "Just Do It![TM]" slogan.

Copyright is a form of protection for original works of authorship giving the creator the exclusive right to reproduce the work, to display and perform the work publicly and to authorize others to do any of these activities. Works covered by copyright include books, magazines, musical scores, motion pictures and computer software programs.

A trade secret is information known to a firm, but not others, which gives the firm a competitive advantage. Famous trade secrets include the formula for Coca-Cola[TM] and the Colonel's recipe for Kentucky Fried Chicken[TM].

Trade dress is the total image and overall appearance of a product, which can include packaging, color, shape, size and graphics. Hershey's Kisses[TM] chocolate candies, for instance, have a very distinct trade dress.

Protecting Your Property

There are several things a company can do to protect its intellectual property. Some methods require legal support; others can be handled by strong company policies. …

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