The process of tearing down
a ﬁnished good to its
components to ﬁgure out
how it was designed or
No matter what industry a company operates in, or its size, a company’s intellectual property is often
more valuable than its physical assets. While factories and inventory can be rebuilt after a loss, losing
control of intellectual property can be ruinous for companies. After reading this chapter, you should be
able to apply intellectual property concepts to answer the following questions:
Why is it important for the law to protect intellectual property?
Under what authority does Congress regulate intellectual property?
How can intellectual property be protected?
What are the diﬀerences between the major forms of intellectual property protection?
What are some current ethical issues that arise under intellectual property law?
The Apple iPhone 4 is the latest model of Apple’s do-it-all cell phone. Since its introduction in 2007, the iPhone has
redeﬁned the “smart phone” segment of the wireless phone industry and left its competitors scrambling to catch
up. Its sleek lines, gorgeous full-color display, built-in GPS navigation and camera, visual voice mail, and Web surﬁng
capability (either over Wi-Fi or 3G phone networks) made it an instant hit, with thousands of consumers lining up
for hours to have their chance to buy one. Its revolutionary business model, where thousands of software
programmers could write small programs called “apps” and sell them on the App Store through Apple’s iTunes
software, created a win-win-win business model for everyone who touched the iPhone. For software programmers,
it was a win because small, untested, and ﬁrst-time programmers could “strike it rich” by selling thousands of their
apps directly to consumers without having to ﬁnd a software publisher ﬁrst. For Apple, it was a win because
thousands of talented programmers, not on Apple’s payroll, were developing content for their product and
enhancing its appeal. Apple also wins because it collects a percentage fee from every app sold on its iTunes store.
And ﬁnally, consumers win because they have access to all sorts of creative programs to help them do more on
their iPhones than simply make a phone call. The business has been a tremendous success for both Apple and
AT&T, the exclusive service provider of iPhones in the United States.
There are quite a few companies in the industry that aren’t doing as well, from Nokia to Motorola to Sony
Ericsson. If they wanted to see how Apple makes the iPhone, all they’d have to do is buy one and then take it apart
to see its components (a process known as
). Or they could look at the reverse engineering
conducted by iSuppli, an independent market intelligence ﬁrm.