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

Posted by: India Wentworth Published: Fri, 28 Jun 2019 Last Reviewed: Fri, 28 Jun 2019
What is the Difference Between Intellectual and Physical 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.

With physical property, the clue is in the name – it is something tangible that links to the business in one way or another.

Intellectual property is intangible, and by this, I mean that it is something like 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.

Understanding Intellectual Property

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.

To keep it simple, intellectual property includes the ideas and designs that a company has to make them different from others.

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
What is the Difference Between Intellectual and Physical Property?

Understanding 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.

Importance in Protection

Both forms of property need to be protected in order to maintain the security, profitability, and longevity of a business. In the case of the physical property, it is the financial losses made, for example, if a company car is stolen then the company suffers financially.

Whilst protecting physical property can be a case of keeping something under lock and key, protecting intellectual property can be much more difficult because it is intangible. As a result, it ends up being a case of using documents, agreements, and software as protection. By protecting your intellectual property, it means that you can take legal action against anyone that tries to steal or copy it. Examples of these documents are patents, trademarks, and copyright.

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