Is IP Ultimately Not About Rights But About Trust?

The challenge of weaving IP into an MBA class is two-fold. First one must distill IP down to workable didactic components that are both compact and student-usable. Secondly the course must take great care to remember that it is not "IP law lite", but a free-standing inquiry into the ways that IP expresses itself in issues of management and strategy. I want to focus on the first component of this challenge: how do I present IP on the basis of generalizable categories while at the same time transmitting at least some of the particularity of each of the IP rights? The manner by which I have attempted to accomplish this is by describing two basic categories of IP rights.

The first is comprised of patents, copyright, trade marks and designs. Each of these rights is, more or less, a right that is good against the world and the validity of each does not depend upon any particular issue of personal trust between parties vis-à-vis such IP right. In contrast stand rights in trade secrets and know-how. Here, the key to the right is the personal relationship between parties between whom the know-how has been disclosed. Unless the "owner" of the know-how does not need to share the know-how with any other person, he will have to deal with the circumstances of its disclosure to employees and various third parties. Unlike the first category, here the issue of trust is paramount since, at the end of the day, in the absence of trust between the parties, no disclosure of the know-how can reasonably take place.

The upshot, under this formulation, is that the two categories are distinguished by the factor of trust, which is effectively irrelevant for the first category but essential for the second.

This conception of IP rights and trust was robustly challenged as a result of an encounter that I had last week with a senior official of a prominent international organization. The position set forth by my colleague was both simple and powerful. From the point of view of commercialization, all IP rights ultimately are embedded within a broader set of arrangements that ultimately rest on the issue of trust and goodwill. A patent may be granted or a copyright work may be created but, for such an invention or work to have commercial significance, there must be a sense of trust in the commercial value of the right by all persons who come into contact with it.

This is true, he argues, whatever the IP right; the issue of trust is not limited to know-how and trade secrets. What is important is that all persons in, e.g., the channel of distribution or the chain of supply, must believe in the quality of the products or services being provided or sold. A patent is therefore important not because it is valid but because it contributes to a supportable sense of trust regarding the goods or services.

Stated otherwise, in the hierarchy of IP rights, at least from the commercial point of view, it is goodwill that stands at its pinnacle. For this goodwill to have commercial value, there must be trust in the goods and services that are being provided. To become bogged down in the proprietary aspects of IP rights is to fail to appreciate the broader commercial context in which IP rights exist.

I am not certain if I fully accept the view of my colleague. What is true, however, is that it does force me to re-evaluate how to understand IP when the focus is on commercialization rather than legal creation and protection of the right. From such an angle, it may well be that I need to take trust into account in a different and more comprehensive way.

While I ponder all of this, I recall the following incident that occurred last week afer the meeting with my colleague. One of the great challenges in being the owner of any MP3 player is finding a quality set of durable earphones. I thought I had found my answer when in April I purchased an up-scale set of ear buds, sold under a well-known brand, with the kind of packaging and documentation one would expect from this brand. The earphones worked fine, but the soft cover fell off after three months and the further layer of cover fell off two months later.

I don't know how many patents, if any, are embodied within these ear buds, whether there is a protectable design or copyright, and whether protected know-how was brought to bear on the product. What I do know is that I face the prospect of purchasing yet another set of earphones and that I will shun, Typhoid-Mary like, any product in this space sold under this brand. The brand owner has lost me as a customer, now and for the foreseeable future. Because, at the end of the day, IP ultimately may not be about rights but about trust.