new service offerings, laying a foundation with clearly defined responsibilities, providing oversight, and allocating resources. The director role assumes responsibility for the effective execution of the service creation process and oversees financial accountability. In addition to these roles, depending on the formality of the process, provision should be made for mentoring, coaching, and marketing support for those individuals tasked with new service development along with resources to enable the associated development effort.

Intellectual Capital/Property Development and Protection

As service lines and offerings are created, it is inevitable that intellectual property will be developed. Once developed, each firm should evaluate whether this property needs to be protected by addressing one key question: Does this property warrant the effort required to protect it, or does change occur so rapidly that the need to protect is ameliorated? This section provides a synopsis of other authors insights into the fundamental elements of this important topic.

A brief visit to any well-supplied library or Internet book site shows that the topic of intellectual property continues to receive considerable attention. This comes as no surprise, as innovative protected intellectual property can be a real source of competitive advantage in a services firm. Reading options include a variety of practice-oriented and socioeconomic perspectives including local, state, and federal legislation with its current interpretation as well as accounting for and the use of economic valuation for intellectual property. Chapter 19 touches on this subject as well and has links to associated resources for additional study.

Understanding Intellectual Property4

The origins of U.S. intellectual property law are traceable to the constitutional convention of 1787 and the first draft of the constitution. The rationale for this constitutional emphasis is the notion that the formation of a prosperous society is, to a large extent, dependent on the ability of individuals to protect their rights in intellectual discoveries.

Four classifications of a firms intangible assets include rights that arise from: (1) contractual agreements; (2) relationships with its workforce, customers, and distributors; (3) undefined intangibles such as goodwill; and (4) intellectual property. Smith and Parr state that intangible assets . . . typically appear last in the development of a business and disappear first in its demise. 5

The types of intellectual property are: patents, trademarks, copyright, and know-how. Each of these types is briefly outlined next. Readers in need of a more comprehensive treatment are referred to texts similar to those listed in the notes section at the end of this chapter.

Patent

Right to exclude others from making, using, or selling Types (utility, plant, design, animal) Granted by the federal government

Trademark

Types (trademark, service mark, collective marks, certification marks) Valid as long as the mark is actively used and protected May be registered (federal-interstate, state-intrastate)

Copyright

Idea-expression dichotomy. Copyright law is based on the notion that the expression of ideas is subject to protection, but the underlying idea cannot be protected.

Establishing ownership-employees. A work made for hire is owned by the employer. Best to use written agreements for both employees and independent contractors to reduce likelihood of ownership disputes.

Federal protection only.

Benefits of registration-provides public notice. It establishes a validity of claim that is a prerequisite to bringing an infringement action. Creates a record with the customs service.

Know-How

Types (trade secrets, proprietary technology, and other information used in the course of business such as customer lists, sales information, business methods, and financial forecasts).

Primarily subject to state jurisdiction.

No statutory time limits on protection. Information that has not been protected by patent, trademark, or copyright, but its protection is still vital to the firms success and, if known to competitors, would provide them with an advantage.

Protection is through physical measures and written agreements.

Computer software can be protected with patents or copyrights or may be retained as part of a firms know-how.

Though some authors recognize a difference and distinguish between intellectual capital and intellectual property, the names are often used

interchangeably. Smith and Parr8 define intellectual capital as a combination of human capital, intangible assets, and intellectual property. Within the context of this definition, the remainder of this discussion focuses exclusively on intellectual property.

Protecting Intellectual Property

Protecting intellectual property should be seen as a bidirectional process that involves not only the protection of a persons own property but also ensures that the person is not infringing on the rights of others.6

As shown in Exhibit 6.1, the protection of intellectual property is summarized in four key activities: identify, raise awareness, protect, and monitor. For each of these activities, a list of suggested strategies and steps follows.

Identify Intellectual Property. The emphasis of this activity is defining what constitutes the firms intellectual property. Proactive identification can help reduce the time and effort needed to later assert the firms rights. Periodic audits can be used to inventory intellectual property with special emphasis placed on computer data security. Consideration should be given to obtaining outside assistance such as legal counsel. Chapter 19 covers this topic as well.

Raise Awareness. A key concern is the adequate demonstration of the firms intent to protect its intellectual property.7 Intent can be a forceful indication of the firms desire to assert its rights and may be demonstrated with organizational attention in the form of oversight, policies, procedures, and education. Periodic reviews and legal counsel are recommended, as statutory changes can be frequent. Oversight is optimally provided by a committee of senior members from all areas of the firm including operations, human resources, accounting, legal, sales, and marketing. Established firm policies and procedures help to define and codify firm stances on information confidentiality, Internet usage, ownership rights, and employee/contractor agreements such as nonsolicitation, nondisclosure, and noncompetition. Employees should be educated on the proper use and protection of intellectual assets. Also, Walsh recommends the firm validate that employee/ contractor agreements are appropriate for the work assignment, governing jurisdiction and effects on existing agreements after business reorganizations such as mergers and acquisitions. The firm should consider adopting employee exit processes that collect confidential and proprietary information and use this opportunity to remind the individual of ongoing obligations.10

Protect against Infringement. Once intellectual property has been identified, it should be assessed for the optimal method of protection (patent, trademark, copyright, and know-how). For property that is deemed