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What is Proprietary Technology?

Malcolm Tatum
Updated May 16, 2024
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Proprietary technologies are any types of systems, tools, or technical processes that are developed by and for a specific business entity. Technologies of this type are often developed as part of the ongoing research efforts of a business, but may also come about due to the ingenuity of employees who serve in positions not directly connected with the research and development effort. In any event, the ideas developed and submitted by employees are usually considered the intellectual property of the employer, thus allowing them to qualify as proprietary technology.

It is important to note that proprietary technology may be developed for exclusive use within the company, or be used to create a product that provides the business with an absolute advantage in the marketplace. For example, if a business develops a specific formula for a cleaning agent that uses ingredients not used by similar products, there is a good chance that new cleaner would allow the business to capture additional market share, based on the uniqueness of the formula. Since the formula uses ingredients that are unique in the industry, it would be possible to patent the formula and thus hold proprietary rights to the use of that formula.

In general, proprietary technology, whether developed for use within the business or for sale to customers, is closely guarded. Only company officials who have a need to know the particulars of the technology will have access to the details of the process or development of the technology. In addition to security measures taken in-house, it is not unusual for the business to file for copyrights, patents, and other legal registrations which effectively prevent any other entity from using the technology, without the express permission of the technology owner.

Many companies in a number of industries hold proprietary technology. One of the best examples is the pharmaceutical industry. Many drug companies develop new medications for use with specific illnesses. Patents on those medications, as well as copyrights on the brand names, are obtained, essentially providing the companies with proprietary rights to both the use of the formula and the chemical and brand names of the drugs. A company can then determine whether to market a drug exclusively, or allow other companies to produce the drug in generic form, using information supplied by the patent holder. In either case, the owner of the technology benefits from having exclusive rights and control of the proprietary product, and effectively prevents the unauthorized use of the proprietary technology by competitors.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By MxInstaller — On Nov 19, 2014

I have a video entitled "Is this IP video retail system really non-proprietary?" which includes a case study example.

Proprietary technology or solution is defined as one that is comprised of hardware and/or software that is: distributed under license, owned by one company to the exclusion of others and protected by copyright/patent.

For example, solution managed by licensed software is proprietary.

By anon978609 — On Nov 19, 2014

Amphibious54- you only point out benefits to businesses, not to consumers which is what the major complaint is.

By Amphibious54 — On Jun 24, 2011

@georgesplane- I agree with you that proprietary technology can be a pain, but if you look at it from a business’s point of view, it can be very beneficial. Proprietary technology on a good product can ensure that consumers return to the company for both replacement products and service.

For example, a car manufacturer that installs a good proprietary multimedia system in their vehicles may create a following, giving consumers one more reason to return to their dealerships when it comes time for a new vehicle. The technology may be one more reason to make a consumer love a product because they are the only company that can provide the good.

In your case though, proprietary technology combined with a poor product pushed a customer away. In these cases, it can be more costly for the company because it must make right with the customer or risk losing their business. Proprietary replacement parts are also more costly than universal parts, so the company loses more money on repairs.

By Georgesplane — On Jun 22, 2011

Sometimes proprietary technology can be the worst thing ever, at least for the consumer. I learned this the hard way when I bought my iMac G5. Like so many other people, I had power supply and logic board problems. My computer was just out of warranty when it failed, and I did not want to pay the $900 they said it would be to fix it.

I am good with electronics, but when I took apart the computer, I found that the bad capacitors on the board were proprietary to that computer. The company did not sell just the capacitors, only the entire board. All the other capacitors that met spec were too tall for the computer's case. I also found that the company used a high heat solder, so taking out the old capacitors was extremely difficult.

In the end, I bought a new computer, but switched to something less proprietary. For the technically inclined, proprietary technology can be a pain in the butt.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
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