Understanding Soft Intellectual Property

Understanding Soft Intellectual Property

by Brette Sember, Esq., April 2019

Intellectual property is any work or idea created either by the human mind or by a computer, including copyrights, patents, trademarks, and trade secrets. Although "soft intellectual property" is sometimes used to refer to any intellectual property that is not a patent, the term is not fully accepted in the legal community.

Categories of Intellectual Property

Intellectual property is protected according to the type of work:

  • Copyrights are used to protect fixed creative works such as books, articles, photos, computer software, plays, and music.
  • Patents are used to protect inventions.
  • Trademarks are used to protect brand names, slogans, and logos.
  • The Uniform Trade Secrets Act protects trade secrets, which are confidential information used in business that can create a competitive edge in the marketplace. This can include formulas, methods, or techniques used to create a product.

Defining Soft Intellectual Property

The term "soft intellectual property" is sometimes used to refer to intellectual property other than patents , including copyrights, trademarks, and trade secrets. It can also be used to describe other assets that are harder to categorize, such as general knowledge about a product or confidential information held by a company. The distinction may have arisen because patents often apply to tangible items, such as machinery, products, and other physical inventions. Some of the more common types of soft intellectual property include books, white papers, company logos, and trade secrets.

Typically used only by laypeople, soft intellectual property is not a well-accepted legal term, although it is sometimes used in contracts or agreements. For example, a contract selling a company's intellectual property rights might include "soft" property. However, for clarity, it is best to use specific legal terminology about the items that are being managed or sold. For example, the contract might mention that items in the sale include copyrights, patents, trademarks, and trade secrets. Using the exact, correct terminology for the intellectual property in question makes it easier to manage and may also make it easier to sell, should you ever wish to.

Soft Intellectual Property Management

Because soft intellectual property can be a key part of a business's value, it's important to manage it carefully. Large companies have entire departments devoted to intellectual property management. If you own a small business, you may be able to manage it yourself but should consider obtaining legal help.

Identify all intellectual property that your company owns and determine which type it is. Be sure to register patents, trademarks, and copyrights owned by your business and to protect confidential information with nondisclosure agreements and noncompete agreements.

How to Value Soft Intellectual Property

Soft intellectual property has a value—and that value can be important for your business. Because it is part of your company's total worth, it can affect your ability to obtain loans and impact the total valuation of your business when it is sold.

There are three approaches that can be used to calculate the value of soft intellectual property:

  • Market approach. If there is a current market for the type of property, you can look at comparable sales to determine its value. For example, if you have a nonfiction book about computer programming, you would check similar books to see how much they sell for and how many copies they have sold.
  • Cost approach. You can calculate the value based on the cost of creating or replacing the item. If you are valuing a patent, you would examine all the costs that went into creating the invention, including filing expenses, to determine a valuation.
  • Income approach. Using this method, the income that can be generated from the intellectual property asset is evaluated to calculate a value for the item. If you are appraising computer software, you would project the income that can be expected from selling it.

It is important that your business protect all of its intellectual property, soft or otherwise. Doing so will help increase your company's value, so be sure that you have a system in place to manage every aspect of your intellectual property.