Intellectual Property

A patent is a property right for an investor that's typically granted by a government agency, such as the U.S. Patent and Trademark Office. The patent allows the inventor exclusive rights to the invention, which could be a design, process, an improvement, or physical invention such as a machine.

Technology and software companies often have patents for their designs. For example, the patent for the personal computer was filed in 1980 by Steve Jobs and three other colleagues at Apple Inc.

Copyrights provide authors and creators of original material the exclusive right to use, copy, or duplicate their material. Authors of books have their works copyrighted as do musical artists.

A copyright also states that the original creators can grant anyone authorization through a licensing agreement to use the work.

A trademark is a symbol, phrase, or insignia that is recognizable and represents a product that legally separates it from other products.

A trademark is exclusively assigned to a company, meaning the company owns the trademark so that no others may use or copy it. A trademark is often associated with a company's brand. For example, the logo and brand name of "Coca Cola," is owned by the Coca-Cola Company (KO).

A franchise is a license that a company, individual, or party–called the franchisee–purchases allowing them to use a company's–the franchisor–name, trademark, proprietary knowledge, and processes.

The franchisee is typically a small business owner or entrepreneur who operates the store or franchise. The license allows the franchisee to sell a product or provide a service under the company's name. In return, the franchisor is paid a start-up fee and ongoing licensing fees by the franchisee

A trade secret is a company's process or practice that is not public information, which provides an economic benefit or advantage to the company or holder of the trade secret. Trade secrets must be actively protected by the company and are typically the result of a company's research and development.

Examples of trade secrets could be a design, pattern, recipe, formula, or proprietary process. Trade secrets are used to create a business model that differentiates the company's offerings to its customers by providing a competitive advantage.

Attached to intellectual property are certain rights, known as Intellectual Property Rights (IPR), that cannot be infringed upon by those without authorization to use them.1 IPRs give owners the ability to bar others from recreating, mimicking, and exploiting their work.

Patents infringement occurs when a legally-protected patent is used by another person or company without permission. Patents filed before June 8, 1995, are valid for 17 years, whereas patents filed after this date are valid for 20 years. After the expiration date, the details of the patent are made public.

Many forms of intellectual property cannot be listed on the balance sheet as assets since there aren't specific accounting principles to value each asset. However, the value of the property tends to be reflected in the price of the stock since market participants are aware of the existence of the intellectual property.

Some intangible assets are recorded as property, such as patents because they have an expiration date

Generally, the creator of a work is deemed its owner. However, intellectual property ownership can be determined differently for different types of property and under varying circumstances.

For example, if work is created for an employer, the employer is the owner of that intellectual property. Also, ownership rights can also be transferred to other parties.

Intellectual property can be used for various reasons, such as branding and marketing, as well as to protect assets that give a competitive advantage.