How Patents, Trademarks, and Copyrights Create Barriers to Entry

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    How Patents, Trademarks, and Copyrights Create Barriers to Entry

    Barriers to entry can be defined as items, conditions, or factors which prevent or inhibit the ability of newcomers into a business field to enter and operate within it. Some of the more common barriers to entry include regulatory and legal obstacles, high startup costs, licensing requirements, and even intangible matters such as customer loyalty and brand identity. Barriers to entry may also be created by way of patents, trademarks, and copyrights. Any savvy business owner should make use of these forms of intellectual property whenever possible. By doing so, business owners will protect their own market share, allowing them to generate increased profit and revenue.

    How Patents Create Barriers to Entry

    A patent provides its owner with the exclusive right to produce, use, or sell a particular invention for a specified duration. This duration will vary from country to country. In Malaysia, the validity period of a patent lasts for 20 years from the filing date. Patents provide a business owner with a limited amount of monopoly power. This is because only that business owner’s firm will be allowed to produce and sell that particular product in that specific way. The additional revenue which a patented product will generate can then be invested into research and development, thus paving the way for further new products to be produced and patented. However, in order to prevent misuse or abuse of the patent system, the expiry date of a patent is also necessary. After expiry of the patent, other businesses may produce and market the product at similar or lower prices. Nevertheless, as long as the patent is active, it will serve as a significant barrier to entry.

    How Trademarks Create Barriers to Entry

    Trademarks are another form of intellectual property which serve as highly effective barriers to entry. Any business which has a well-defined, established, and distinctive trademark which is easily recognizable can use it to develop positive associations within its customers’ minds. When many people associate a certain trademark with specific products or services, it makes it much more difficult for new competitors to gain a significant foothold within the market. In addition, the trademark will provide the business with a financial advantage. The existence of a well-chosen trademark will force competitors to spend more money on branding purposes simply to keep up.

    How Copyrights Create Barriers to Entry

    A copyright provides a content creator with the right to control the works which it protects. Copyrights in Malaysia are governed by the Copyright Act 1987. Copyright protections may extend to films, broadcasts, derivative works, sound recordings, literature, visual art, or music. They create barriers to entry because no other person or business may reproduce such works without the consent of the original creator. That being said, it should be noted that the barrier to entry imposed by a copyright is the least restrictive of all three which have been mentioned. This is because another person or firm may choose to create similar content with a similar theme or objective but with a different name. This content could then subsequently be copyrighted. Nevertheless, despite the possibility of this loophole, copyrights do create barriers to entry and should be used to do so when necessary.

    The Effect of Not Using Intellectual Property Rights

    Business owners who do not use intellectual property as barriers to entry may face a major negative consequence. As innovative as they may be, it is often the case that such business owners create a path for others to gain all the revenue for which they had worked so hard and towards which they had put forth much creativity and innovation. A successful creative venture is one which not only creates and develops new high-quality products and services, but also makes much profit through them by protecting itself from competitors. This way, competitors will not claim the market share to which the product creator is rightly entitled.

    If you would like to see your business truly thrive, make use of intellectual property rights. Patents, trademarks, and copyrights all create barriers to entry which assure the financial well-being of your business. In due time, perhaps your business might even become a dominant player in its field because of the positive effects of intellectual property on innovation, revenue, and protection against competitors.

    This article is brought to you by Exy Intellectual Property Malaysia