Other Forms of Intellectual Property

We have seen that intellectual property, and specifically patent rights, can to some extent remedy the incentive problem, but that intellectual property solutions are second-best. They have limitations and may fall short of an efficient allocation of resources. The analysis was specifically directed to patent rights. Other well established forms of intellectual property are copyright, trade secrecy, and the protection of registered trade marks.

1. Copyright is a system of protection of authors, artists and publishers of works of writing and art. Copyrighted works cannot legally be published without the permission of the holder of the copyright. As with other forms of intellectual property, the holder of a copyright can sell or assign it to another person; but there are some limitations on this salability in some countries.
2. Trade secrets are not given any special protection like patents and copyrights, but may have legal protection under contract law. An example of a trade secret might be a recipe for a particularly popular dessert confection or beverage. One precaution against imitation by competitors is simply to keep the recipe secret, and tell it to as few people as possible. Those few who must be told may be required to sign a contract, as a condition of their jobs or business relations, that promises not to reveal the secret. If they do reveal it, they can be sued for damages. Thus, contracts can to some extent substitute for intellectual property rights established by legislation. This is a routine business practice that is recognized, if not specially protected, by the law.
3. Trademarks, product names, company logos and such are information products (collections of symbols that get their value from the arrangement of the symbols) and can be registered and protected as a form of property. In theory, trademarks provide incentives to increase the quality of products and services. Companies that offer products of superior quality can sell the products under a label that consumers associate with the higher standard of quality, and thus the company gains sales and profits proportionate to its investment in quality improvement. Since information products are not homogenous, information producers in particular may benefit from trademark protection. For example, a magazine editor who has brought together a particularly good group of writers and whose interaction with them brings forth their best work can be protected from rivals who might sell inferior work by publishing their magazines under the same name.

All of these forms of intellectual property, to the extent that they are successful, limit competition by imitators and thus tend to create monopoly and monopoly waste, as with patents.

Limitations of Intellectual Property