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Opportunities: Intellectual Property, Part 1

Does the name Shuji Nakamura mean anything to you?

If not, you’re not alone. Most scientists and engineers I polled over the past month don't know who he is or why he’s important. Shuji Nakamura is the inventor of the blue LED. He invented it while he was an employee at Nichia Corp. in Japan.

Does that name ring a bell? Probably not. After accomplishing this breakthrough invention--which, by the way, is fundamental to hundreds of billions of dollars' worth of electronics today--Nakamura-san was given a cash bonus of 20,000 yen--about $180. Nakamura-san sued his employer in 2001 over the profound unfairness of the award and, after a 4-year legal battle, won a settlement worth $7 million. Some in Japan scorned his impudence for biting the hand that fed him a steady and honorable salary. Many others viewed his act as a landmark event for inventors in Japan. In short, Nakamura-san’s successful lawsuit signaled legal recognition that inventors are entitled to at least some of the fruits of their labor.

This article is the beginning of a series in which I will explore critical issues at the intersection of science, law, and business. And no subject is closer to the core of what scientists and engineers do than intellectual property (IP) law. After all, knowledge is the principal thing that scientists and engineers produce. IP is the legal codification of scientists'--and others'--rights to that knowledge

If you remain in science, it is almost certain that at some point in your career you will invent something--or be working on a team that invents something--that has potential commercial value. Yet few scientists and engineers are exposed to the basics of IP law in graduate school, or anywhere else in their formal training. The very concept of intellectual “property” can be jarring to young scientists and engineers reared in an environment that values unselfish cooperation and peer review and often views commercialization as a debasement of the purity of scientific research.

Furthermore, a vast amount of valuable, current research does not focus on problems or technologies that present immediate commercialization opportunities. Yet, commercializable inventions can catch inventors unawares. A basic understanding of the legal basis of IP can prepare you to make the best choices (or at least prompt you to ask the best questions) if you find yourself involved with a commercializable invention.

Listen to Peter Fiske discuss intellectual property and entrepreneurship in an exclusive Science podcast .

What is IP?

The concept that people deserve to own something that they have created through their own productive labor has been in existence at least since the Enlightenment; it commonly is attributed to the philosopher John Locke. A recognition of the need to establish a legal structure to protect and regulate IP goes back almost as far; our founding fathers enshrined this concept in our Constitution. The idea was simple: If someone invents something new, there should be a mechanism to propagate and “teach” it as well as to protect it so that the inventor--and his or her assigns--might profit from it. If every invention could be copied by others immediately (as was the situation throughout history up to that point), the process of invention wouldn't be very profitable, and a major driver of innovation would be lost.

The type of IP most relevant and familiar to scientists and engineers is the “invention.” "Invention" has a technical, legal definition: In a nutshell, an invention is a new, useful, not-obvious process, machine, or product--or an improvement of a process, machine, or product. Until World War I, the most common conception of the inventor was of a lone scientist or engineer laboring away in private, single-handedly coming up with a breakthrough during a Eureka ! moment. But for the last century or so--since the private sector began investing in innovation and the modern system of government funding of basic and applied research was established--the process of inventing something has become much more collaborative and communal; it is more likely to happen in a laboratory at a university, research center, or company than in someone's garage or basement (although that still happens too of course). More often than not, several people contribute to inventing something.

As you probably know, the basic legal embodiment of IP is the patent. (Copyrights and trademarks play similar roles in the verbal arts and in marketing.) A patent is an official recognition by the U.S. Patent and Trade Office (USPTO) (or the equivalent office in any other country) that the owner has the exclusive right to use the IP described in the patent for a fixed period of time. Today, most countries recognize the IP of other countries through a treaty called the Patent Cooperation Treaty.

The rules from country to country differ somewhat, but the basic system is the same: To obtain a patent, one must describe the invention in detail and show how it is, in fact, “new, useful, and nonobvious.” One or more patent examiners (most of whom have advanced technical degrees like you) review the claims, search through prior patents and publications (called “prior art”), and accept or reject the patent application's claims.

A major function of a patent--one that most people don’t recognize--is to teach the invention. The patent must describe the invention in sufficient detail that it can be reproduced and verified by others. That is the Faustian bargain of a patent: You get a legal monopoly on your invention for a period of years, but in the process you tell the world about it.

Hidden IP

Patents are the best-known form of IP--at least for scientists and engineers--but there are two other legal ways of “defending” IP that have nothing to do with patents: trade secrets and publication.

A trade secret, as its name implies, is a piece of IP that is not broadcast in the form of a patent but, instead, is held as proprietary knowledge by the organization or individual who invented it. Even though it is not patented, a trade secret can be defended legally from theft, as demonstrated in the recent case of Coke employees who tried to sell the formula for a new soft drink to Pepsi. Trade secrets cannot, however, be defended from the possibility that someone else might invent the same thing on their own--and possibly even patent it. So, trade secrets offer their own Faustian bargain: Keep your invention secret, but risk the possibility that it might be developed by others (and possibly patented, too!). A trade secret keeps your IP, well, secret, but it doesn't stake a claim that it is yours.

So, when is it best to patent, and when is it best to keep a “good idea” a trade secret? It usually comes down to the answer to this question: Can unauthorized copying of the invention be detected? If the invention is a specific device or component, it is easy to detect if someone is copying it without permission: It’s in the product for all to see. But, if there is no easy way of detecting that they used it, a patent isn’t very enforceable. For example, if your idea is a step in a manufacturing process, and the final product bears no evidence of having required your invention in its manufacture, then a trade secret may be the best way of guarding your IP. In general, devices and “things” are commonly patented whereas recipes and process steps commonly are held as trade secrets. (These are, of course, generalizations; process steps, too, are often patented.)

The final tactic for protecting IP is publication. If you disclose your invention “publicly,” such as by publication, lecture, or some other “public” format, nobody else will be allowed to patent your idea subsequently. In the United States, you have up to 1 year from the date when you publicly disclose your invention to file a patent application. After that 1 year, neither you nor anyone else can patent the idea: It becomes part of the “open literature.” Although any sort of publication might legally qualify as “public disclosure,” there is also a specific publication in which inventors (or the companies they work for) can publish ideas that they don’t want anyone else to patent. USPTO allows inventors to publish a description of an invention (called a “specification”) even if they don’t attach any claims to it. This is not peer reviewed--it just sits up in the database of prior art that patent examiners can search. Some companies run their own technical publications for this purpose as well: IBM is a good example. Publication gives you a form of defensive strategy, preventing others from patenting your good idea. But, of course, once you've published an idea, you've lost the advantage of secrecy.

Patents good? Patents bad?

Quite a number of technical people believe that patents can slow the progress of science. Patents create a monopoly around specific areas of technology and, in extreme cases, prevent others from making progress in the area. There are plenty of examples of patents being issued for trivial modifications to existing inventions (such as prescription drugs) that allow companies to reap huge profits by extending their exclusive rights to the IP--and also inhibit innovation. The patent process is imperfect and, like any legal process, can be manipulated to the detriment of the common good.

I have met a number of scientists and engineers who have been concerned that patenting their ideas may prevent their widest possible adoption. Wouldn’t it be better, they ask, to freely publish all inventions and let the entire world reap the benefit?

In some cases, the answer is yes. The Open Source movement is one example of a revolt from “intellectual property” and the development of an “intellectual commons” in which many people freely share and contribute improvements to software and, arguably, achieve a final product that is superior in reliability to that produced by an individual software company.

However, in other areas of technology, open source IP may actually inhibit adoption of a technology. Companies, especially high-tech start-ups, require millions of dollars of investment before they produce a product that is ready for the commercial market. If a company has no protection from copycats, their invention is likely to be copied as soon as it hits the market. The price of the product would quickly fall to the level of the marginal cost of its manufacture; in other words, the investment in R&D would never be recovered. Knowing this, no company is likely to invest in the product's development unless it has some kind of IP protection. So, there may be some circumstances in which patenting your invention is the best way to ensure that it will be used by someone.

So you think that invention is yours?

You may be shocked to learn that something you invented in graduate school, as a postdoc, or while in a staff position at a university, national lab, or company doesn't belong to you. You gave it away, probably without knowing it. In next month’s column, I will discuss when and how you did it, and what you can do about it now--and how you can avoid (hopefully) giving away your best ideas in the future. The lessons of Shuji Nakamura continue!

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