INTELLECTUAL PROPERTY RIGHTS

INTELLECTUAL PROPERTY:
The knowledge assets of a firm span the entire technology development continuum from tacit knowledge to the knowledge that is physically embodied in products and processes. These knowledge assets are often termed intellectual capital. Intellectual property is legal concept that refers to the components of the intellectual capital that may be protected under the law.
Just like physical assets, intellectual capital enables firms to derive profits from its activities. For example, technical knowledge can be deployed in products to gain competitive advantage. Alternatively, knowledge of specific processes may enable a firm to reduce the cost of operations, thereby enhancing its profitability. Or, a firm may license its intellectual property to others and earn fees from the licensee. Finally, a firm can sell its technology and profitably recoup the funds that it invested in the development of that technology.
Because intellectual capital is the key to competitive advantage and profitability, in a free market economy, competitors will try to appropriate it for their own ends.
A firm may lose its intellectual property to these competitors in three ways:
1. IMITATION: It is a serious threat to any competitive advantage, be it based on intellectual capital or otherwise. Unless imitators face severe costs of imitation thru retaliation, or legal action, they; can benefit form the investments jade by the innovators, without incurring the costs of innovation.
2. OBSOLESCENCE: Competitors can themselves engage in innovation and produce a superior product or service that acts as a substitute to a firm’s products or services.
3. INFRINGEMENT OR THEFT: Competitors can infringe or worse, steal, firm’s knowledge assets.
The intellectual property strategy of firms thus refers to the approach that it takes to seal its intellectual assets from the forces of imitation, obsolescence, or infringement, and theft.