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What is Intellectual Property Risk?

Posted by Protiviti KnowledgeLeader on Wed, Nov 21, 2012 @ 10:29 AM


What is Intellectual Property Risk?

Copyright pirates, brand impersonators, patent flouters, and trade secret thieves are a major threat to businesses, given their increased aggressiveness towards intellectual property theft. These, and any other original creative works that have economic value and are protected by law, can be categorized as Intellectual property (IP).

IP laws reward the creators of original works by preventing others from copying, performing, or distributing those works without permission. They provide incentives for people to produce scientific and creative works that benefit society by allowing them to profit on these ideas. Some types of IP are automatically protected by law from the moment of their creation, whereas others require a specific grant of rights from a government agency before they can be protected by law. Although nearly every nation has laws protecting IP, some do not vigorously enforce them. As such, counterfeiting is a major problem in these areas.

The principal types of IP are patents, copyrights, and trademarks:

  • Patent law protects inventions that demonstrate technological progress.
  • Copyright law protects a variety of literary and artistic works, including paintings, sculpture, prose, poetry, plays, musical compositions, dances, photographs, motion pictures, radio and television programs, sound recordings, and computer software.
  • Trademark law protects words and symbols that serve to identify different brands of goods and services in the marketplace.

Intellectual property includes certain related fields of law, such as trade secrets and the right of publicity. Trade secret law protects confidential information that belongs to a business and gives that business a competitive advantage. For example, the formula for making a soft drink is a trade secret protected by IP laws. Right of publicity law protects the right to use one's own name or likeness for commercial purposes. For example, a famous athlete may profit by using his or her own name to endorse a given product.

Intellectual Property differs from other forms of property because it is intangible - a product of the human imagination. Because IP is intangible, many people may use it simultaneously without conflict. For example, only one person can drive a car at a time, but if an author publishes a book, many people can read the work at the same time.

 IP is also easier to copy than it is to create. It may take months of work to write a novel or computer program, but with a photocopier or a computer others could copy the work in a matter of seconds. Without IP laws, it would be easy to duplicate original works and sell them for very low prices, leaving the original creators without any chance to secure economic rewards for their efforts. As a result, it is against the law to reproduce various forms of IP without the permission of the creator.

Most intellectual property rights expire after a specified period. This permits the rest of society to benefit from the work after the creator has had an opportunity to earn a fair reward. For example, after the inventor of a patented telecommunications device has profited from the work for a specified period, anyone may manufacture that same device without paying the inventor royalties, thereby encouraging competition that allows others to benefit from the invention as well. The one exception to limited periods of IP rights is in the field of trademark law. Trademark rights never expire, so long as a merchant continues to use the trademark to identify a given product.


Content Related to Intellectual Property on KnowledgeLeader:

Intellectual Property Risk Key Performance Indicators (KPIs)

Intellectual Property Process Audit Report

E-Business Risks: Intellectual Property – Questionnaire for Audit Committees

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