Intellectual Property (IP)

Intellectual property (IP) is the body of legal rights that protect creations of the mind: inventions, literary and artistic works, designs, brand names, symbols and confidential business know-how. IP rights let their owners stop others from copying, making, selling or using the protected creation without permission, usually for a limited period, so that they can earn a return from licensing or exclusive use.

In accounting, registered IP is a kind of intangible asset, and for many technology, pharmaceutical and media companies it is the most valuable thing they own. Internationally, IP is coordinated by the World Intellectual Property Organization (WIPO), a United Nations agency based in Geneva, and by the World Trade Organization's agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), in force since 1995, which sets minimum standards for WTO members. IP is a specific form of property rights, and economists often treat it as a deliberate, time-limited exception to free competition.

Suppose a cook invents a new kind of kitchen gadget. Once it is in the shops, anyone could take one apart and make a copy. If copies appeared the next day, the inventor would never recover the months spent designing it, and might not have bothered. IP law gives the inventor a fence around the idea for a set time, so others must pay to use it or wait.

Different fences protect different things. One covers the gadget's working parts, another the instruction booklet, another the brand name on the box, and another the secret way it is made. When the fence comes down, the idea becomes free for everyone.

• Patents. Protect new, non-obvious and useful inventions. Under TRIPS, the term is at least 20 years from the filing date, in exchange for publishing how the invention works.
• Copyright. Protects original literary, musical, artistic and software works from the moment they are fixed. The Berne Convention sets a minimum of the author's life plus 50 years; the United States and the European Union use life plus 70 years.
• Trademarks. Protect names, logos and other signs that identify the source of goods or services. They can last indefinitely as long as they are used and renewed, typically every ten years.
• Industrial designs. Protect the appearance of a product, such as its shape or pattern.
• Trade secrets. Protect confidential information, such as a formula or process, for as long as it stays secret, without registration.
• Geographical indications. Protect names tied to a place of origin, such as Champagne or Darjeeling.

Ideas behave like public goods: one person's use does not reduce another's, and it is hard to stop copying. Without protection, the free-rider problem would discourage costly research and development. IP addresses this by granting a temporary monopoly, allowing prices above marginal cost and so letting inventors recover their investment.

That creates a trade-off. Stronger IP raises incentives for innovation but restricts access and can slow follow-on invention. Economists debate where the balance lies. Supporters point to pharmaceuticals, where drug development is costly and copying is cheap. Critics, including some economists who study patents, argue that very broad patents, long copyright terms and "patent thickets" can block competition, allow rent-seeking and raise prices without adding much new invention. The 2025 Nobel Memorial Prize, awarded to Joel Mokyr, Philippe Aghion and Peter Howitt for work on innovation-driven growth, drew attention again to how new ideas spread and replace old ones through creative destruction.

Companies earn from IP by using it exclusively, licensing it for royalties, or selling it. IP developed in-house is mostly missing from a company's book value, yet patent portfolios are valued in mergers and acquisitions, and some lenders accept IP as collateral, although valuing it is difficult. Brand and technology licensing is a large part of cross-border services trade.

IP is also central to tax planning. Because rights can be moved between group companies, multinationals have placed them in low-tax jurisdictions and charged royalties to operating subsidiaries, a practice scrutinized under transfer pricing rules and the OECD's base erosion and profit shifting project. Several countries offer reduced tax rates on profits from patents through "patent box" regimes; the United Kingdom's, introduced in 2013, applies a 10% rate on qualifying profits. The OECD's "nexus approach" now requires such benefits to be linked to research actually carried out in the country.

IP rules are a recurring issue in trade negotiations and between rich and developing countries. TRIPS required many developing countries to introduce patent protection for medicines, and its flexibilities, such as compulsory licensing, were confirmed in the 2001 Doha Declaration on public health. During the COVID-19 pandemic, the WTO agreed in June 2022 to a limited waiver allowing members to authorize production of COVID-19 vaccines without the patent holder's consent. Counterfeit goods and piracy remain major enforcement problems, overlapping with counterfeiting and organized crime.

• World Intellectual Property Organization: What is intellectual property?
• World Trade Organization: Intellectual property (TRIPS)