Impacts of Intellectual Property on Business

Abstract

From the invention of the wheel, McDonald’s secret formula, and the creation of the internet, these ideas belonged to someone well before they were shared with the rest of humankind. While the creators of the wheel and the internet created them to make their daily tasks easier and to connect the world respectively, not for the credit, intellectual property as a whole is highly valued in today’s society. Not only can intellectual property make or break a company, it can revolutionize the world. Many business models are based off of the creation and utilization of intellectual property, so it is absolutely imperative that this type of property is protected at all costs. Acme, Inc. and beta, Inc. have found themselves in an all too familiar situation regarding intellectual property.

Intellectual Property and its Impact on Businesses

Intellectual property is property that is created by people. This “property” is usually an idea that can be used to create physical property when put to use. Intellectual property regulations focus on ownership rights so that they receive credit for their idea when other individuals use their intellectual property. These laws were developed to help grow the economy with new ideas and help foster the creation of new technologies. Intellectual property can come in many forms, but there are four main ones: patents, trademarks, trade secrets, and copyrights. While they are similar in some ways, they differ in the fact that they protect different forms of intellectual property. Patents are used to protect inventive ideas or processes as well as newly developed plant species or strains (Ackerman, 2019). Patents also give the owner the sole right to manufacture and license the product. Patents then go through a few stages before the patents is granted. The stages are conceptualization, invention disclosure, patent application, maintenance, and cost, but for the sake of brevity I will only focus on two (Ackerman, 2019). The first stage that I would like to focus on is conceptualization. Conceptualization deals with exactly that: concepts. A large amount of planning and drawing is done during this phase in order to map out what the final product is going to be, which will lay the foundation for the overall end state of the idea. This next step is one of the most important steps in the entire process, which is maintenance. Contrary to popular belief, patents do not last forever and like most things they have an expiration date. Patent holders are responsible for the maintenance of their patents, not the patent office itself. If they don’t the patent could expire which will allow other companies or individuals to buy the patent and use it for themselves.

This should be at the forefront of the patent owner’s mind especially if the patent is valuable.

A trademark is unlike a patent in that it safeguards words, phrases, symbols and the like. Trademarks essentially describe the goods or services that a company provides. An example of a trademark is the McDonald’s M. the Nike check, Apple’s “apple” logo (Ackerman, 2019). Trade secrets are procedures, formulas, strategies or other information that is confidential and exclusive to the company using them. Finally, a copyright is protects how the idea is communicated. Music is the first thing that comes to mind when the majority of people hear about copyright, especially these days when copyright infringement is at an all-time high due to streaming and torrent websites, but it includes a lot more. Art, video recordings, and many other types of media can be copyright material. These laws allow the owner of the copyright to dictate the reproduction and distribution of their work as they see fit. As different as these types of intellectual property are, they are similar in one way: they all protect someone’s work. The work that Acme Inc and Beta Inc. do is no exception.

In this scenario, Acme, Inc. received a patent on a drug that granted its user’s immortality which is not being marketed to the general public. Beta, Inc. then took the opportunity to copy the drug and release it on the market. Beta, Inc. isn’t making a profit off of the drug, but this situation is still sketchy to say the least. Earlier we stated that a patent gives the owner sole rights to manufacture and license the product, which beta, Inc. failed to adhere to. Since Beta, Inc. essentially breached the patent and put it on the market against Alpha, Inc.’s wishes, Acme Inc. can file an alternative dispute resolution.

Dispute resolution is the process of settling a dispute between the individuals that are involved in the patent conflict. There are many types of processes that can be used to resolve disputes, some of which will be explained further. Alternative dispute resolution, refers to ways of addressing and settling disputes outside of courtroom (Peeler, 2018). These processes can be used to find a solution to a myriad of disputes. (Peeler, 2018). In this case, Acme, Inc. would dispute Beta, Inc. because of their patent breach. There are many types of alternative dispute resolution types that Acme, Inc. can pursue, but Arbitration, Mediation, and Mediation-Arbitration are the most common. Arbitration involves a third party which remains neutral, that listens to each side’s story. If Acme and Beta decided to use this method, Acme would tell the third party that it developed an immortality drug that it chose not to market and that Beta decided to copy the drug and put it on the market. They would also tell the third party that this action breached the patent. Beta, Inc. would tell the third party that while they placed the product on the market, they are not making a profit off of the sales. The third party would then make a decision based on each side’s case and their findings (Peeler, 2018). In contrast, with mediation the third party does not decide the outcome of the dispute; the mediator works with both of the parties to come to an agreement mutually. Mediation-Arbitration is takes the strengths of both mediation and arbitration and combines it into one. The third party starts as a mediator, but becomes an arbiter if both of the conflicting companies do not reach a finalized settlement. All three options are less intensive than legal action, requiring less manpower and man hours to accomplish overall. None of this would have to happen if Beta, Inc. happened to have a compliance officer on their staff. According to www.robertwalters-usa.com, the role of a compliance officer is to make sure that a company is complying with all national and international laws and regulations in their line of work (In this case, the pharmaceutical industry). Beta, Inc.’s compliance officer would have immediately recognized that Acme, Inc. had a patent on the drug and that they didn’t plan on releasing the drug to the public. Acme, Inc. and Beta, Inc’s battle mirrors what is happening in the United States today. Alex Keon of biospace.com states that legal battles involving pharmaceutical patents rose a whopping 30 percent in 2017. (Keon, 2017). This mostly due to generic pharmaceutical companies pursuing the patent of larger pharmaceutical companies such as Pfizer and Johnson & Johnson.

As a result of this situation, both Acme, Inc. and beta, Inc. face ethical dilemmas that need to be addressed. The main ethical dilemma that Acme Inc. had to deal with in the beginning is the creation of a revolutionary miracle drug that can grant immortality to anyone and what they should do with it. Time has shown that revolutionary inventions aren’t always used for the right purposes. For example, nuclear fission created a numerous amount of energy, revolutionizing the power industry forever, but it also led to the development of the most powerful weapon on earth: the atomic bomb. It’s possible that Acme, Inc. saw the potential negative applications of this drug and chose not to put it on the market for these reasons. If this is the case, I believe that Acme, Inc. made the right decision. All too often we see that big pharma releases drugs on the market that do more harm than good, and it is a testament to Acme, Inc.’s ethical values and standards that they chose not to make an easy pay day. On the other hand, Beta Inc. might have seen the benefits of this drug and chose to put it on the market, despite the fact that they did not have the patent for it. The fact that beta Inc. is selling it at a cost that covers just enough for manufacturing tells me that they didn’t place the drug on the market for a profit, but their ethical values are still questionable.

It’s clear to me that Acme, Inc. used the utilitarian theory in this scenario. According to Ethics Unwrapped, utilitarianism is an ethical theory that determines right from wrong by focusing on outcomes and holds that the most ethical choice is the one that will produce the greatest good for the greatest number (“Utilitarianism”, 2019). This theory is used in business to measure the benefits and costs of a course of action. A downside of this theory is that you will not know if your decision was the right one, since it effects future generations that we will not be able to see.

An ethical theory that fits Beta, Inc.’s actions is the social justice theory. The social justice theory focuses on the distribution of justice and seeks to find out the fairest way to distribute goods and services to the people. (“Law for Entrepreneurs”, n.d.). Again, it’s possible that beta, Inc. saw the positive applications of this drug and deemed it unfair that Acme, Inc. chose not to release this drug to the public. They then took into their own hands and did what they thought needed to be done.

In conclusion, Acme, Inc.’s patent shouldn’t have been infringed upon by Beta, Inc. due to the nature of the patent itself; this act put Beta Inc. in Acme’s crosshairs, and opened up the doors to a potential litigation scenario. Even with the overhanging threat of litigation, Acme Inc. and Beta Inc. can use alternative dispute resolutions instead. Both companies should take the course of action that suits them the best, whether it is mediation, arbitration, or a combination of both. I can understand why Acme, Inc. chose to keep such a revolutionary drug off of the market; it’s possible that Acme foresaw the possible negative implications of this drug and chose to do what they deemed the right thing. Similarly, Beta chose to do what they deemed the right thing by releasing the drug to the general public.

References

• Ackerman, P. (n.d.). The 4 Main Types of Intellectual Property and Related Costs. Retrieved July 21, 2019, from https://www.innovation-asset.com/blog/the-4-main-types-of-intellectual-property-and-related-costs
• Keown, A. (2018, May 04). Report Says: Legal Challenges to Pharmaceutical Patents Saw 30% Increase in 2017. Retrieved July 24, 2019, from https://www.biospace.com/article/report-says-legal-challenges-to-pharmaceutical-patents-saw-30-percent-increase-in-2017/
• Morrisey, A. (n.d.). The role of a compliance officer. Retrieved July 24, 2019, from https://www.robertwalters-usa.com/career-advice/the-role-of-a-compliance-officer.html
• Peeler, T. (2018, June 24). Types of Alternative Dispute Resolution (ADR). Retrieved July 22, 2019, from https://www.legalmatch.com/law-library/article/types-of-alternative-dispute-resolution-adr.html
• Utilitarianism. (n.d.). Retrieved July 26, 2019, from https://ethicsunwrapped.utexas.edu/glossary/utilitarianism
• Why Intellectual Property Rights Are Important: Everything You Need to Know. (n.d.). Retrieved July 21, 2019, from https://www.upcounsel.com/why-intellectual-property-rights-are-important