Intellectual Property (IP) is sometimes classified as an intangible asset. It differs greatly from the tangible assets that one finds on a balance sheet.
Firstly, the transfer of IP is more complicated than that of tangible assets. For instance, if a buyer wanted to sell a tangible asset–a stock, a bond, land or property–the sale would mainly involve the transfer of the ownership of the asset from the seller to the buyer.
The outright transfer of an IP is far more complex. IP transfers generally entail the transfer–not of the ownership of the asset–but of the authorisation of the rights to use, make or sell a product or service that involves the IP. This is a licensing agreement as opposed to an outright sale. The IP owner still retains ownership, but authorises an exclusive or non-exclusive license to use the IP in return for payment.
There are risks associated with intangible property. Rights can be easily infringed; either intentionally or unintentionally. When the infringement is unintentional, the unwitting licensee may not be aware of the protections that are in place for the owner of the IP.
Due to the complexity regarding ownership and use; separating the owner of the asset from the manufacture and use of the IP is not straightforward and could easily lead to conflicts between owners, producers and users. Since an IP is often embedded in a product or production process, the gates between tangible and intangible assets are not always apparent.
The question of exclusivity often arises. It covers the IP owner’s rights to exclude others from exploiting their creativity without their express authorisation. While many people can own the asset that has been produced vis-a-vis the IP, only one person or entity can own the invention itself.
Different forms of IP are protected under different mechanisms and these protections vary from country to country. Legal mechanisms are also in place to limit owners’ IP rights to prevent them from abusing those rights; for instance, by placing limits on the duration of the IP rights before they become available in the public domain.
Governments also tend to be more discerning about inventions related to public security and morality. Governments may choose not to grant patents for inventions that may cause harm or have the potential to be misused.