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87765-piy-ch09-01.pdf_119843 - CHAP TER Intellectual...

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reverse engineering The process of tearing down a finished good to its components to figure out how it was designed or manufactured. C H A P T E R 9 Intellectual Property L E A R N I N G O B J E C T I V E S 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: 1. Why is it important for the law to protect intellectual property? 2. Under what authority does Congress regulate intellectual property? 3. How can intellectual property be protected? 4. What are the differences between the major forms of intellectual property protection? 5. 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 reverse engineering ). Or they could look at the reverse engineering conducted by iSuppli, an independent market intelligence firm.
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