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THE IMPORTANCE OF INTELLECTUAL PROPERTY IN BUSINESS Juna Kjaksta 1, Kristaps Gailis 2 1 Mg. iur, lecturer, Rezekne Academy of Technologies, Rezekne, Latvia, e-mail: [email protected] 2 Mg. iur, lecturer, Rezekne Academy of Technologies, Rezekne, Latvia, e-mail: [email protected] Abstract. The search for a balance of interests of right hold ers and users, legal means for the exclusive rights enforcement in the conditions of the development of new technologies, the problems of protection of intellectual property are considered in the paper. At the present time intellectual property is considered to be one of the most valuable assets of a business. Possessors of rights can secure their loa ns using their intellectual property as collateral. The authors claim that the Latvian lega l and regulatory framework does not cover essential issues. The aim of the research is to explore and identify the importance of intellectual property rights in business. The follo wing tasks were set to achieve the aim: to explore the theoretical aspects of intellectual pro perty rights, to identify possibilities for intellectual property development in business. The following scientific research methods are used in the paper: the development of intellectual property rights in commercial law is investigated with the help of the descriptive metho d; the systemic method is used to analyse national legal norms in conjunction with internatio nal documents and recommendations; the comparative method has been used to study model s of intellectual property rights.

Keywords: exclusive rights, intellectual property rights, pir acy, plagiarism.

JEL code: O34, K11. Introduction It is customary to talk about intellectual property (IP) as the result of a person’s mental activity. Intellectual property inc ludes inventions, literary and artistic works, projects and symbols, names and images used in commercial activities. Legal protection of intellec tual property is provided by patent, copyright, industrial designs and tradem arks. These tools allow authors to get recognition or benefit financially f rom their creativity, giving them certain rights, which establishes the use of t he results of the author's thoughts by third parties (Pētersone, 2013). The re levance of intellectual property lies in the fact that information technolo gy transforms the structure of modern production and distribution, significantl y affects labour productivity, becomes the basis of enterprise compe titiveness, and is an indicator of the viability of production. Research novelty: The importance of material property in business was analysed by numerous studies of law scientists, but only a few studies are devoted to the analysis of intellectual propert y. The topicality of intellectual property in entrepreneurship could be on the theoretical plate, 32 Latgale National economy research especially considering that in Latvian law, intellectual property issues from the point of view of commercial law have not been t he subject of extensive and in-depth research so far.

Research period: 2017 – 2019.

Research aim: To explore and identify the importance of intellect ual property rights in business. Research tasks: To explore the theoretical aspects of intellectual property rights, to identify possibilities for inte llectual property development in business. Research methods: the descriptive method, the systemic method, the comparative method. Research hypothesis: In today's economy, innovation management requires a good knowledge of the intellectual prope rty rights system to ensure that the company maximises its innovation an d creativity, establishes profit-making partnerships and avoids unauthorised use of intellectual property belonging to another person.

The ability to exploit the economic values related to the work or other subject matter is important for the right holder of protected material. Some protected material, such as literary works, phonogr ams or computer software, can be copied and reproduced relatively e asily. Moreover, the growth of the Internet has made it possible to dist ribute works rapidly and extensively at little or no cost. Copyright and nei ghbouring rights protection is needed to ensure that the creator of a work or t he right holder of other subject matter is rewarded for the exploitation of the work or other production (WIPO, 2005). By creating legal safegua rds for protected material and by enforcing these protective legislat ive measures, laws, and legal enactments, nations can promote the developme nt of copyright industries, turning them into important business se ctors.

The concept and the economic role of intellectual p roperty The first international treaties in the field of in tellectual property were signed about 130 years ago. They laid the internati onal legal foundation of the intellectual property system. These agreements — the Paris Convention for the Protection of Industrial Property (adopted in 1883) and the Berne Convention for the Protection of Literary and Artis tic Works (adopted in 1886) – remain key elements of the intellectual pro perty system today (WIPO, 2014). However, the world has changed so rad ically that even the most daring ideas of the authors of the first treat ies fade in comparison with reality. For intellectual property law to meet the needs of a digital, interdependent and global society today and in the future, it must keep pace with the times. Journal of Social Sciences No 1(11) 33 In the framework of the World Intellectual Property Organization (WIPO) project, implemented in Panama, the United R epublic of Tanzania, Thailand and Uganda, small farmers receive support in the use of branding strategies, in particular for trademarks and certif ication marks or geographical indications, to increase the income fr om high-quality local products. The project, implemented in Zanzibar, aim s to improve the market position of the main export crops of the island - c loves and to return the country to a leading place in the export of this sp ice (WIPO, 2014). Thus, intellectual property is a certain type of in formation that may belong to a person (or group of persons) and be use d to obtain economic benefits. Considering the economic essence of intel lectual property, analysing its foundations, it is worth mentioning n ot knowledge, which has a somewhat philosophical nature, but a more specific definition – “information”. It is worth noting that information (as an object o f intellectual property) has a number of features and is different from any other resource: (Philips et al., 1990)  information resource cannot be fully used (if any i nformation has been used, it does not mean that it cannot be used again, as the use of information does not disappear);  information is inalienable. When selling informatio n, the owner continues to use the information, since it is impos sible to destroy it in his mind;  information has universal separability and reproduc ibility;  information can be almost freely and instantly spre ad over time (given the development of modern technologies, we c an say that information has no boundaries of distribution);  in the production of products that closely relate t o the use of intellectual resources, for example, software, the cost structure is significantly different from the cost of production of ordinary goods. So, when creating a computer program, signifi cant costs for the production of the first copy are significant, b ut at the same time, the marginal costs associated with the production ( essentially copying) of subsequent units of goods are incompara bly smaller.

Enterprises, universities, sports teams, artists, a nd non-profit organizations should be aware of the commercial val ue of their intellectual property, and generate revenue from the reuse of th eir brands, designs, artwork, or any other merchandising elements. Simila rly, enterprises that sell consumer goods at low prices should consider u sing, subject to legal authorization, designs, copyrighted materials, char acters, etc. and other companies in order to make their products even more popular and attractive (Blakeney, 2006). For successful merchandising, ent erprises will need legal 34 Latgale National economy research knowledge in the field of intellectual property, skills in concluding commercial contracts and negotiating. Innovation and intellectual property are separate, but closely related concepts. Innovation often leads to the creation of intellectual property, while intellectual property rights provide tools fo r financing the development of innovative ideas and driving them to the market. Innovation should not be an end in itself, but should be metho dically integrated into business culture and practice to improve the overal l performance of companies. To remain competitive in today's very high global c ompetition, the company's ability to innovate is essential, and inn ovation in the company's overall strategy can be integrated as follows (WIPO , 2011). Although price can compete in the short term, such a policy is not sustainable in the longer term. Sustainable competitiveness requires constant innovation in both production and management. However, the ability to engage in continuous innovation requires a paradigm shift in enterprise culture. Business organisations are well suited to providing entrepre neurs with a set of skills and tools to promote sustainable innovation. Another problem is that legislation protecting inte llectual property is not yet fully developed in Latvia. Only recently ha ve there been laws that fully cover all parts of intellectual property. One of th e most negative features of the intellectual products market is piracy. The Cre ator of a film, book, musical work or any computer program, even in spite of copy right, is practically not immune from unlicensed copying and illegal sale of his/her work (Maskus et al., 1995). Because of this, not only the creators of the products suffer, but also the state, since taxes do not go to the budget from pirated products. This problem is caused not only by the presence of infri ngers of intellectual property rights, but also by the absence of the con cept of plagiarism, illegal use in the public consciousness. The main task of t he state in this case is not only to prosecute piracy by law, but also to inspir e citizens with the idea that any violation of intellectual property rights is il legal, even if it is not committed for profit. Intellectual property in Latvian business According to Article 27 of the Universal Declaratio n of Human Rights, “everyone has the right to the protection of the mo ral and material interests resulting from any scientific, literary or artistic production of which s/he is the author.” Although the relationship between inte llectual property and human rights is a complex one, there are moral argu ments for intellectual property. Journal of Social Sciences No 1(11) 35 Innovative and creative ideas underlie the success of enterprises.

However, the ideas themselves are not of great valu e. They need to be developed, turned into a new product or service and successfully marketed to enable the enterprise to benefit from innovation and creativity. In particular, intellectual property patents can be im portant for turning innovative ideas and inventions into competitive pr oducts that significantly increase net profits.

It is very important to understand the difference b etween the concepts of “invention” and “innovation”. The invention is a technical solution to some technical problem. The invention can be in the form of an innovative idea, an active model or a prototype (Rammer, 2009). Innova tion is the process of translating an invention into a market commodity or profitable technology.

Some of the reasons why companies are engaged in inn ovation are:

 improving production technology to save costs or im prove productivity;  introducing new products that meet the needs of con sumers;  maintaining competitiveness and/or expanding market share;  ensuring the development of technologies that meet the existing and future needs of entrepreneurs and their custome rs;  eliminating technological dependence on the technol ogies of other companies (WIPO, 2006).

For most small and medium-sized enterprises, the ma rketing of products and services is a major challenge. The mar keting strategy should establish a clear link between the products and ser vices and the enterprise as the manufacturer or provider of such products or services. In other words, consumers should be able to distinguish at a glance between products and services and those of competitors and associate the m with a certain desired quality. Intellectual property, if used effectively, is an i mportant tool for creating a business image in the representation of current a nd potential customers or for the localization of business in the market (Faw cett et al., 1998).

Intellectual property rights in combination with ot her marketing tools (such as advertising and other promotional activities) ar e important in order to:

 distinguish products and services and make them eas ily recognizable;  promote products and services and acquire a loyal c lientele;  diversify market strategy to suit different target groups;  sell products and services in other countries.

According to the authors, analysing the Latvian mar ket in the field of intellectual property, the following key provisions may allow the protection of intellectual property rights (Rozenfelds, 2004) for merchandising purposes: 36 Latgale National economy research  Protection of trademarks. Registration of a trademark gives its owner the exclusive right to use the mark for certa in goods and services. It is necessary to ensure that the tradem ark is adequately protected in respect of the goods and services conc erned. For example, a bicycle shop may register its trademark in respect of bicycles and other vehicles, but if it wants to off er its brand on t- shirts and caps, it is advisable for it to register the trademark also for use on clothing and hats in the countries where it plans to sell the product. It should be borne in mind that the ma in features of a person or fictional character may, in certain circu mstances, also be considered as trademarks.

 Protection of original samples. Industrial designs are relevant in terms of protecting the decorative or aesthetic asp ects of merchandising items. For example, a cartoon charact er can be represented in the form of aesthetic designs for to ys, jewellery, dolls, brooches, pins, etc. Protection of the sampl e will be especially important in cases of exclusion or reduction of cop yright protection (especially when the artwork was created with the p urpose of industrial exploitation).

 Copyright protection. Copyright it self does not depend on official procedures. However, it is strongly recommended tha t works be deposited and registered with the copyright office in countries where such offices exist and that a copyright notic e be placed on the works. If a copyrighted work is sold under a li cense for merchandising purposes, the license agreement must make it clear that the licensee must post a copyright notice each time the work is reproduced on merchandising goods.

 Intellectual property protection in all relevant ma rkets.

Intellectual property rights are territorial in nat ure and should be protected at the appropriate time in all potential export markets.

 Measures against violations of intellectual propert y rights. The owner of the intellectual property rights has the r ight to determine any infringement or counterfeiting of his or her in tellectual property rights and to decide what action should be taken.

Depending on the form of protection and legal tradi tion of each country, appropriate measures may be taken to prohi bit illegal merchandising of intellectual property through unfa ir competition law, legislation on the representation of something under a false name (“passing off”), legislation on trademarks, co pyright, industrial designs, personal rights, right to publi c use and/or protection of privacy, or similar legislation.

Journal of Social Sciences No 1(11) 37 Conclusion and suggestions In the 21 st century, science and intellectual property are con sidered not only as the foundation and instrument for increasin g competitiveness, but also as the basic element of a new type of knowledg e-based society. Thus, the intellectual property system underlies the developm ent of a modern intellectual economy, and the development of a cult ure of protection and protection of intellectual property is no less impo rtant than the protection of the environment or material property. In Latvia, the real protection of intellectual prop erty is only beginning to develop, which can be explained by the low legal culture of the Latvian society. Therefore, it seems important to study the experience of other states and carry out explanatory work among representative s of small, medium and large businesses on the protection of intellectual property rights and its effective use in business. Forming a culture of protecting intellectual proper ty rights, business representatives can get an effective and powerful t ool to increase revenues, gain advantages over their competitors, and therefo re a stable and solid position in the market. The sphere of intellectual property belongs to the main resources of the state, its scientific and tec hnical potential, which, ultimately, will determine the fate and result of o ngoing economic transformations. The research allows concluding that the ability to determine and establish the value of an intellectual product, inc luding an invention, the conditions for its distribution, effectuation and i mplementation objectively allows you to equate such a product with a commodit y and, therefore, determine the circle of persons possessing the righ ts of possession, disposal and use of this invention. The formation of the intellectual property market i s currently one of the main directions of development of the Latvian marke t economy. At a time when all over the world there is an active trade in the results of intellectual activity, and the products of many companies differ only in trademarks, in Latvia this market segment is just beginning to dev elop.

Indeed many domestic companies still do not pay due attention to work in the field of intellectual property, but, as the experience of the most dynamically developing companies shows, the possess ion and competent management of a balanced package of intellectual pr operty objects just gives an advantage in the market, limiting competitors' c apabilities and, ultimately, providing companies with the opportunit y to earn super-profits.

This is primarily due to the emerging prospect of u sing non-monetary property to increase the authorized capital of ente rprises and firms, integrate with Russian and foreign partners by crea ting joint ventures, 38 Latgale National economy research selling licenses, assigning rights or contributing to the authorized capital, and gaining income without being directly involved in p roduction (licensed trade), to limit the capabilities of competitors, e tc.

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