Under the World Trade Organization's (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights, patents should be available in WTO member states for any inventions, in all fields of technology, and the term of protection available should be minimum twenty years. Different types of patents may have varying patent terms.

      The term patent usually refers to a right granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof. The additional qualification utility patents is used in the United States to distinguish them from other types of patents but should not be confused with utility models granted by other countries. Examples of particular species of patents for inventions include biological patents, business method patents, chemical patents and software patents.

      Some other types of intellectual property rights are referred to as patents in some jurisdictions: industrial design rights are called design patents in some jurisdictions (they protect the visual design of objects that are not purely utilitarian), plant breeders' rights are sometimes called plant patents, and utility models or Gebrauchsmuster are sometimes called petty patents or innovation patents. This article relates primarily to the patent for an invention, although so-called petty patents and utility models may also be granted for inventions.

      Certain grants made by the monarch in pursuance of the royal prerogative were sometimes called letters patent, which was a government notice to the public of a grant of an exclusive right to ownership and possession. These were often grants of a patent-like monopoly and predate the modern British origins of the patent system. For other uses of the term patent see Land patents, which were land grants by early state governments in the USA. This reflects the original meaning of letters patent that had a broader scope than current usage.

Ownership

      In most countries, both natural persons and corporate entities may apply for a patent. In the United States, however, only the inventor(s) may apply for a patent although it may be assigned to a corporate entity subsequently and inventors may be required to assign inventions to their employers under the contract of employment. In most European countries, ownership of an invention may pass from the inventor to their employer by rule of law if the invention was made in the course of the inventor's normal employment duties.

      The inventors, their successors or their assignees become the proprietors of the patent when and if it is granted. If a patent is granted to more than one proprietor, the laws of the country in question and any agreement between the proprietors may affect the extent to which each proprietor can exploit the patent. For example, in some countries, each proprietor may freely license or assign their rights in the patent to another person while the law in other countries prohibits such actions without the permission of the other proprietor(s).

      The ability to assign ownership rights increases the liquidity of a patent as property. Inventors can obtain patents and then sell them to third parties. The third parties then own the patents and have the same rights to prevent others from exploiting the claimed inventions, as if they had originally made the inventions themselves.

      Trademarks

      A trademark or trade mark, identified by the symbols ™ (not yet registered) and ® (registered), is a distinctive sign or indicator used by an individual, business organization or other legal entity to identify that the products and/or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities. A trademark is a type of intellectual property, and typically a name, word, phrase, logo, symbol, design, image, or a combination of these elements. There is also a range of non-conventional trademarks comprising marks which do not fall into these standard categories.

      The owner of a registered trademark may commence legal proceedings for trademark infringement to prevent unauthorized use of that trademark. However, registration is not required. The owner of a common law trademark may also file suit, but an unregistered mark may be protectable only within the geographical area within which it has been used or in geographical areas into which it may be reasonably expected to expand.

      The term trademark is also used informally to refer to any distinguishing attribute by which an individual is readily identified, such as the well known characteristics of celebrities. When a trademark is used in relation to services rather than products, it may sometimes be called a service mark, particularly in the United States.

Fundamental concepts

      The essential function of a trademark is to exclusively identify the commercial source or origin of products or services, such that a trademark, properly called, indicates source or serves as a badge of origin. The use of a trademark in this way is known as trademark use. Certain exclusive rights attach to a registered mark, which can be enforced by way of an action for trademark infringement, while unregistered trademark rights may be enforced pursuant to the common law tort of passing off.

      It should be noted that trademark rights generally arise out of the use and/or to maintain exclusive rights over that sign in relation to certain products or services, assuming there are no other trademark objections.

      Different goods and services have been classified by the International (Nice) Classification of Goods and Services into 45 Trademark Classes (1 to 34 cover goods, and 35 to 45 services). The idea of this system is to specify and limit the extension of the intellectual property right by determining which goods or services are covered by the mark, and to unify classification systems around the world.

Oldest trademarks

      Zildjian, the cymbal and gong company, owns the oldest continuously used U.S. trademark – although the first two hundred years of its use were in Turkey as the family moved to the United States. Venetian glass blowers are thought of as using the longest continuously used trademarks. Wieliczka, a salt mine in Poland, is reported to be the source of the oldest known trademark (circa 1241 A.D.) – even though this trademark is really appellation of origin. Finally, in trademark treatises, it is usually reported that blacksmiths who made swords in the Roman Empire are thought of as being the first users of trademarks. Other notable trademarks that have been used for a long time include Löwenbräu, which claims use since 1383, and Stella Artois, which claims use since 1366.

      Registered trademarks involve registering the trademark with the government. The oldest registered trademarks in various countries include:

• Australia: 1905 – a pine tree logo, still in use by Fisons plc. for chemicals.
• Hong Kong: 1874 – Nestle's Eagle Brand for condensed milk.
• Japan: 1884 – a design of a seated figure, registered for pills and wound dressings.
• United Kingdom: 1876 – The Bass Red Triangle was the first trademark to be registered under the Trade Mark Registration Act 1875.
• United States: 1870 – an eagle logo used for paints by Averill Paints, which is no longer in use.

Terminology

      Terms such as "mark", "brand" and "logo" are sometimes used interchangeably with "trademark". "Trademark", however, also includes any device, brand, label, name, signature, word, letter, numerical, shape of goods, packaging, combination of colours, or any combination thereof which is capable of distinguishing goods and services of one person from those of others. It must be capable of graphical representation and must be applied to goods or services for which it is registered.

      Specialized types of trademark include certification marks, collective trademarks and defensive trademarks. A trademark which is popularly used to describe a product or service (rather than to distinguish the product or services from those of third parties) is sometimes known as a genericized trademark. If such a mark becomes synonymous with that product or service to the extent that the trademark owner can no longer enforce its proprietary rights, the mark becomes generic.

      Goodwill

      Goodwill is an accounting term used to reflect the portion of the book value of a business entity not directly attributable to its assets and liabilities; it normally arises only in case of an acquisition. It reflects the ability of the entity to make a higher profit than would be derived from selling the tangible assets. Goodwill is considered an intangible asset. 

Original sense

      Goodwill as a term was originally used to reflect the fact that an ongoing business had some "intrinsic value" beyond its assets, such as the reputation the firm enjoyed with its clients. Likewise, a buyer may agree to "overpay" because he sees potential synergy with his own business. The accounting sense of goodwill followed as a plausible explanation of why a firm sells for more than the value of its net assets.

Modern meaning

      Goodwill in financial statements arises when a company is purchased for more than the book value of the company. The difference between the purchase price and the sum of the fair value of the net assets is by definition the value of the "goodwill" of the purchased company. The acquiring company must recognize goodwill as an asset in its financial statements and present it as a separate line item on the balance sheet, according to the current purchase accounting method. In this sense, goodwill serves as the balancing sum that allows one firm to provide accounting information regarding its purchase of another firm for a price substantially different from its book value. Goodwill can be negative, arising where the net assets at the date of acquisition, fairly valued, exceed the cost of acquisition. Negative goodwill is recognized as a liability.

      For example, a software company may have net assets (consisting primarily of miscellaneous equipment, and assuming no debt) valued at $1 million, but the company's overall value (including brand, customers, intellectual capital) is valued at $10 million. Anybody buying that company would book $10 million in total assets acquired, comprising $1 million physical assets, and $9 million in goodwill. Goodwill has no predetermined value prior to the acquisition; its magnitude depends on the two other variables by definition.

      The carrying value of an asset with associated goodwill may subsequently be adjusted by management, either by amortization or by means of occasional adjustments of the estimated value of the associated assets (primarily based upon their ability to generate cashflow and profits). The exact treatment and other details, particularly amortization, will depend on the accounting standards applied.

      There is a distinction between two types of goodwill depending upon the type of business enterprise: institutional goodwill and professional practice goodwill. Furthermore, goodwill in a professional practice entity may be attributed to the practice itself and to the professional practitioner.

      It should also be noted that while goodwill is technically an intangible asset, the two are usually listed as separate items on a company's balance sheet.

Basic goodwill formula

• Goodwill = Purchase Price – Fair Market Value of Net Assets
• Fair Market Value of Net Assets = Net Tangible Assets + Write-up of Net Assets
• Net Tangible Assets = Assets – Target's Existing Goodwill – Liabilities

      As can be seen, a merger destroys the target's "old" goodwill and creates "new" goodwill to appear in consolidated books. Net assets write-up is prepared through a qualified appraisal in a process known as a Purchase Price Allocation.

History and purchase vs. pooling-of-interests

      Previously, companies could structure many acquisition transactions to determine the choice between two accounting methods to record a business combination: purchase accounting or pooling-of-interests accounting. Pooling-of-interests method combined the book value of assets and liabilities of the two companies to create the new balance sheet of the combined companies. It therefore did not distinguish between who is buying whom. It also did not record the price the acquiring company had to pay for the acquisition. U.S. Generally Accepted Accounting Principles (FAS 141) no longer allows pooling-of-interests method.

Amortization and adjustments to carrying value

      Goodwill is no longer amortized under U.S. GAAP (FAS 142). Companies objected to the removal of the option to use pooling-of-interests, so amortization was removed by Financial Accounting Standards Board as a concession. As of 2005-01-01, it is also forbidden under International Accounting Standards. Goodwill can now only be impaired.

      Instead of deducting the value of goodwill annually over a period of maximal 40 years, companies are now required to value fair value of the reporting units, using present value of future cash flow, and compare it to their carrying value (booked value of assets plus goodwill minus liabilities.) If the fair value is less than carrying value (impaired), the goodwill value needs to be reduced so the fair value is equal to carrying value. The impairment loss is reported as a separate line item on the income statement, and new adjusted value of goodwill is reported in the balance sheet. Since, in general, intellectual property (IP) is part of goodwill—in its lay, not accounting sense—one of the most important assets of knowledge-based companies does not appear at all on formal balance sheets. As for these companies, it is the IP that generates profit, not the buildings or the cash they hold; this may lead to a misleading valuation, discouraging investors who do not understand the company's value.

      When the business is in trouble, with the threat of insolvency, investors will deduct the goodwill from any calculation of residual equity because it will likely have no resale value.

      Knowhow

      In the context of industrial property, now generally viewed as intellectual property (IP), know-how (or knowhow as it is sometimes written) is a component in the transfer of technology in national and international environments, co-existing with or separate from other IP rights such as patents, trademarks and copyright and is an economic asset.