What is the Difference Between Intellectual and Physical Property?

Property is the asset that a business has in order to function. There are two types of property, intellectual and physical. This guide from DeltaNet International explains the difference between these two properties, and the importance in protecting them.

What is the Difference Between Intellectual and Physical Property?

Compliance Knowledge Base | Protecting Assets Training

Posted by: India Wentworth Published: Fri, 28 Jun 2019 Last Reviewed: Tue, 26 May 2020
What is the Difference Between Intellectual and Physical Property?

In this article:

  • What is intellectual property?
  • What is a trademark?
  • What is a patent?
  • What is a copyright?
  • What is a non disclosure agreement (NDA)?
  • What is physical property?

What is intellectual property?

Property is a resource of financial value and something that an organisation needs in order to function as a business. There are two types of property in business, physical and intellectual.

Intellectual property includes the ideas and designs that a company has to make them different from others. Intellectual property is intangible, for example a design or concept created by the business. This property has come from thought and ideas, which is how it links to its title, intellectual – it comes from the intelligence of the employees.

Employees are the brainpower behind intellectual property because they are the ones that come up with all the ideas such as brands, inventions, trade secrets and software. Intellectual property is a bit more confusing than physical property. If you have an idea for a book, that isn't intellectual property, however, if you were to write it down, that is intellectual property that needs protecting.

Intellectual property can:

  • Have more than one owner
  • Belong to people or businesses
  • Be sold or transferred

Protecting intellectual property

Protecting intellectual property involves using documents and agreements as protection. By protecting your intellectual property, it means that you can take legal action against anyone that tries to steal or copy it as part of your intellectual property rights. There are several types of documents and contracts involved in this process, including trade marks, patents, copyrights, and non disclosure agreements.

What is a trademark?

A trademark is a logo, words, or a combination of both, that represents a brand or an organisation. It helps to keep a brand unique and identifiable.

Trade marks are the badges of origin for a company, they distinguish one trader from another. A trade mark is generally a word, phrase, symbol, design, or a combination thereof, that identifies and distinguishes the source of the goods of one party from those of others.

By covering designs, words and phrases, trade marks protect a type of intellectual property. A reputable trader wants his products or services to have desirable and reliable qualities because it means that customers will come to regard the trade mark as a guarantee of quality.

Choosing a trademark

First up you need to decide which types of goods or services you need to protect, have in mind future plans to ensure you protect all the areas your business might need.

You can find out if your trade mark is already taken by carrying out a search in the Business & Intellectual Property Centre, they have a database that is linked directly to the Intellectual Property Office.

Think about the geographical coverage you need. You can register a trade mark to protect you in the UK, throughout the European Union, Internationally or in individual countries.

Here is a list of qualities to a trade mark:

  • Used in commerce
  • Have fees paid as required to keep it in force
  • Must not become generic, such as a noun or verb in common usage
  • Must be identified as a trade mark by ® in some countries
  • A single word, logo, picture or a mixture of any of these

There are strict rules when it comes to trademarks:

  • A mark must not be descriptive, such as 'sporty' for sports clothing
  • A mark must not be deceptive, such as 'silky' for cotton goods
  • A mark cannot be a common surname or geographical name, like 'Jones' or 'London'
  • A mark must not be confusable with any earlier registered mark – that is why the register is searched.

If you see someone infringing your trade mark, seek advice from a trade mark lawyer. Cases rarely end up in court, but that is the ultimate sanction of owning a trade mark. For a UK trade mark, fees are required every 10 years to keep a trademark in force.

What is a patent?

A patent gives exclusive rights to an inventor over their new invention for a limited time period. During this time, nobody else can make, use or copy the invention. Patents and registered designs are very similar, but patents cover a new invention whilst a registered design focuses on the protection of the look of a product.

When a patent is granted, the invention becomes the property of the inventor. This means it can be bought, sold, rented or hired just like any other form of property or asset. Patents are territorial rights: UK patents will only give the holder rights in the UK and rights to stop others from importing the patented products into the UK.

For an invention to be patentable, your invention must:

  • Be new – This means it has never been made public in any way, anywhere in the world, before the date on which the application for a patent is filed.
  • Involve an inventive step – If you compared it with what is already known, it wouldn't be recognisable to someone.
  • Be capable of industrial application – Your innovation must be some kind of device, product or process which can be used in a practical, industrial activity.

Decorative designs can't be covered by a patent, but they may be entitled to design protection or copyright. Equally, discoveries, theories, and ways of thinking cannot be protected with a patent.

For a new product, if you need to move quickly to capture the audience and make money, you can make an initial patent application – this gives you 12-months of breathing space. This application prevents anyone else from getting a patent that covers your invention, even if you never take the application further, it gives you 12 months of protection.

The strongest protection, however, is provided by obtaining a complete patent. Once the patent is granted you can prevent anyone else from manufacturing, importing or selling your patented product without your consent for 20 years.

If you are thinking about getting a patent, the process usually takes around two and a half years and you should approach the Intellectual Property Office to deal with your request.

What is a copyright?

Copyright gives creators of original work, certain exclusive rights. This law gives the owner of a work the right to say how other people can use it.

Unlike patents and trade marks, you get copyright protection automatically – there isn't a register of copyright works in the UK and you don't have to apply or pay a fee.

You automatically get copyright protection when you create:

  • Original literary, dramatic, musical and artistic work, including illustration and photography
  • Original non-literary written work, such as software, web content and databases
  • Sound and music recordings
  • Film and television recordings
  • Broadcasts
  • The layout of published editions of written, dramatic and musical works

You can label your work with the copyright symbol ©, but you don't have to – whether you label it or not, your level of protection is the same.

If your work is copyrighted, it means that it stops people from:

  • Copying your work
  • Sharing copies of it
  • Renting or lending copies of your work
  • Performing, showing or playing your work in public
  • Putting it on the internet

The current copyright legislation in the UK is the Copyright, Designs and Patents Act 1988. These laws lay out a framework of rules around how the protected work can be used. It sets out the rights of the owner, as well as the responsibilities of other people who want to use the work. You can do many things with your copyright work – copy, change or sell it, share it online or rent it to someone, as well as prevent other people from doing those things.

It is up to you to make sure your copyright isn't breached. Moreover, if you choose to license the work you need to be clear what the conditions of use are to reduce the chances of legal problems in the future, should they arise.

What is a non disclosure agreement (NDA)?

If you want to keep something private, you should use a non-disclosure agreement (sometimes called a confidentiality agreement). A non disclosure agreement (NDA) is a legally binding contract that protects any non-public business information whereby the people in the know agree not to disclose it for a defined period of time. All parties involved in knowing confidential information need to sign a non-disclosure agreement.

There are two types of NDAs – one way or mutual. A one-way NDA is used if you are the only one disclosing information (otherwise known as the disclosing party), a mutual NDA is used if both parties are sharing confidential information (in which case, the other party called the receiving party).

NDAs can cover:

  • Documents
  • Designs
  • Sketches
  • Analyses
  • Source codes
  • Marketing plans
  • Manufacturing processes

It is important that you don't assume conversations with advisors are automatically confidential, this is why an NDA is the safest way to keep your information private.

The parties you may need to share with could be:

  • Accountants
  • Banks
  • Financial advisors
  • Insurance brokers
  • Business coaches
  • A marketing agency

Make sure you get the right people to sign the NDA too, this could be:

  • A director of the recipient company
  • An officer of the recipient institution
  • Someone senior who has authority to give the undertakings in the NDA

Your intellectual property solicitor can advise on confidentiality and draw up an appropriate NDA for you to use if you are the source of the confidential information. Always get people to sign the NDA before the information is shared – without an NDA, you are taking the risk that others could use your ideas or information without your permission.

What is the Difference Between Intellectual and Physical Property?

What Is Physical Property?

The main form of assets in most industries are physical assets, otherwise known as physical property. This is the tangible items of value that are used to generate revenue for a company. The money that a company generates using physical property is recorded on the income statement as revenue made.

Normally, physical property refers to things that may be liquidated in the event of having to pay off debts. Physical assets belonging to a restaurant company, for example, would include chairs, tables, refrigerators, and food.

Service-based businesses use a physical property to facilitate the delivery of their service, such as having a space to work, tools that are needed for the service, and the resources used to support the service. If you owned a dry-cleaning business, you would need washers, dryers, steamers, irons, tables, and racks to hold the clothes – these items are the physical resources of your business.

All types of businesses need physical property, even if a company is based online. The computers used to carry out the work count as one example of that company's physical property.

When creating a business plan, it's important to consider which assets need to be protected and how.

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