AI Prompts Are The New Form of Intellectual Property
Are AI Prompts One of a Business’s Most Valuable Forms of IP?
Introduction to AI Prompts and Intellectual Property Law
Daily we read stories of how Artificial intelligence (AI) has evolved from a futuristic concept into an everyday business tool. While much attention focuses on the AI models themselves, the real value may lie in the prompts—the detailed instructions that shape how AI systems generate useful results. For businesses, these prompts can represent proprietary knowledge, operational shortcuts, and even a form of intellectual property. This article discusses why AI prompts are the new form of intellectual property and practical steps businesses can take to protect these valuable assets.
“AI prompts may be the new crown jewels of corporate IP.”
We begin with a discussion of AI in general and AI prompts in particular. We will next examine a sample AI prompt to understand how it functions, what it does, and how a business could employ such a prompt to increase efficiency. Next, we will discuss the various forms of intellectual property — trade secrets, copyrights, patents, and trademarks — and contractual provisions such as non-disclosure agreements that could be used to protect the prompts. Finally, the article ends with specific recommendations as to which types of IP likely provide the strongest protections for AI prompts.
Understanding AI Prompts and Their Business Value
Any article written about AI in general is tricky because this area is developing at such a fast pace, content written today will likely be outdated quickly. Because of this phenomenon, this article discusses AI and principles of IP law in general with a goal of encouraging big picture analysis of these issues. The article also provokes thinking about how traditional legal steps can be taken to protect non-traditional IP assets.
AI prompts are natural-language instructions given to models like ChatGPT or Google Gemini to generate content or insights. Unlike traditional code, prompts guide AI through context and intent rather than syntax. The quality and creativity of these prompts determine the precision and usefulness of AI outputs.
Prompt engineering—the art and science of designing high-quality prompts—has quickly become a critical skill. Businesses now employ prompt engineers to develop structured libraries of reusable instructions that capture company knowledge, tone, and processes. These libraries represent an emerging form of intellectual property capital.
Expanded Legal Issues involving AI Prompts
From a legal perspective, prompts raise questions about ownership, authorship, and liability. Under the work-for-hire doctrine, prompts created by employees within the scope of employment typically belong to the employer—at least the copyrights in the prompts. However, contractors or consultants should be required to assign all rights in writing to avoid disputes.
AI outputs themselves may not qualify for copyright protection unless a human contributes substantial creative input. As a result, protecting prompts and their outputs through trade secrets and contracts could be a more reliable strategy than relying on copyright law.
Trade secret protection appears to offer the strongest legal framework for prompt libraries. Businesses should restrict access, use NDAs, and label prompt repositories as confidential. Prompt libraries, like Coca-Cola’s secret formula or Google’s algorithm, can serve as key competitive differentiators.
Contractual protections should also be embedded in employment, vendor, and SaaS agreements. These contracts should clarify ownership, limit re-use, and prohibit AI vendors from using prompts for model training.
Finally, liability remains a growing concern. AI can inadvertently reproduce copyrighted material, misrepresent facts, or expose personal data. Organizations should vet AI outputs and ensure compliance with copyright, privacy, and data protection laws. Thought should also be given to what information is exposed to LLMs and other types of AI to ensure that privacy and confidentiality are not breached by the exposure.
Sample AI Prompt for IP Protection Analysis
To begin our more detailed analysis of AI prompts, we will start with a simple prompt to illustrate the structure and function of AI prompts in general. This example follows a simple structure: (1) a “name” for the prompt so that it can be used over and over again, (2) an input, (3) a process for the AI engine to follow, and (4) the desired output(s). Here’s the actual prompting for use by ChatGPT:
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This instruction is called “The Blog Promotion Package,” which inputs the URL of a blog post and exports (1) on the screen and (2) into a Word document the following content:
1. A detailed PSL article for publication on a personal LinkedIn page. This article should entice a reader to click the hyperlink to the related blog post for more information and should be at least 4-6 paragraphs in length. There should be a clear CTA at the end to the underlying blog post.
2. An article 3-5 paragraphs in length to be published on a LinkedIn company page that summarizes the blog post, begins with a hook, and ends with directing the reader to the blog post for the takeaways and includes a hyperlink to the blog post as a “read more” CTA.
3. Three LinkedIn posts promoting the blog post to be shared on a personal LinkedIn page.
4. Three additional LinkedIn posts promoting the blog post that are different than #3 to be shared on a company LinkedIn page.
5. Three additional posts to be shared on the company’s Google Business Profile page promoting the blog post.
All content should be written with professional, informative, and warm tone. Okay to be slightly edgy. Do not use excessive formalism or legalese.
Our target audience is in-house lawyers, C-Suite leaders, entrepreneurs, and IP lawyers.
Please use the primary keyword of the blog post for SEO optimization of this content.
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The above prompt will generate a significant amount of “first draft” content based on a single blog post. Despite the details in the prompt, a user needs to continually refine the AI output to eventually obtain the type of content desired. This can be accomplished in the form of direct requests to ChatGPT or by modifying the prompt language to include the details.
For anyone that has written content professionally, you can quickly see the value in having an initial draft of a secondary set of content based on the initial blog post. For example, this prompting package may qualify as a trade secret since it provides a comparative advantage over competitors who do not know of it and so long as it remains a secret. As with any trade secret, the owner cannot protect it from independent creation by third parties.
Next, we will discuss the various types of intellectual property and how they may apply to protect the value of prompts.
What Types of IP can be Used to Protect AI Prompts?
A discussion of intellectual property typically starts with the “big four” of IP:
· Patents – a patent protects a process, machine, composition of matter, manufactured item, asexually reproduced plant, and ornamental designs) by granting the inventor exclusive rights to make, use, sell, offer for sale, or import the invention for a limited period, typically 20 years in the case of a utility patent and 15 years for a design patent. This means others cannot commercially exploit the patented invention without the patent owner’s permission during the term of the patent. See our Patents practice page for more information.
· Trademarks – a trademark protects words, phrases, symbols, or designs that identify and distinguish the source of goods or services from others (e.g., trademarks are source identifiers). It allows the owner to prevent others from using a confusingly similar mark in a way that could mislead consumers and trade on the mark’s associated goodwill. Trademarks continue so long as there is use in commerce of the mark, which can be perpetual. See our Trademarks practice page for more information.
· Copyrights – a copyright protects original works of authorship, including literary, dramatic, musical, visual arts, and artistic works, such as books, movies, songs, and software. It does not protect ideas, facts, or systems, but rather the specific creative expression of ideas. Copyright protection typically lasts for the life of the human creator plus 70 years. For works created by organizations, it can last between 95 to 120 years, depending on the circumstances. See our Copyrights & Software practice page for more information.
· Trade Secrets – a trade secret protects confidential business information that provides a competitive advantage, generally from not being known, such as processes, formulas, recipes, customer lists and pricing, and marketing strategies. This information must be kept secret or confidential and derive economic value from its confidentiality to qualify for protection. Like trademarks, trade secrets can be protected perpetually so long as their secrecy is maintained. See our Technology & Trade Secrets practice page for more information.
Other forms of intellectual property include boat hull designs, telephone numbers, and domain name registrations. For a full discussion on the various forms of IP see our blog post, 11 Different Forms of Intellectual Property.
Creating an IP Strategy to Protect AI Prompts
Patent Protection for AI Prompts
Depending on the complexity of the prompts and their transformative nature, it is possible that AI prompts could in some circumstances qualify for patent protection. If a patent is obtained, the holder would be able to stop others from making, using, offer for sale, or selling the patented process. This bundle of rights can be extremely powerful in the marketplace. For example, trade secrets generally cannot be used to stop a third party that independently creates an AI prompt set. Patent rights come with certain limitations that are significant: (1) generally, limited to 20 years from the filing date of the application and (2) require public disclosure of the invention. The latter requirement is particularly impactful because an inventor could face disclosure of the AI prompts to the world without a guarantee of ever obtaining a registered patent. This tradeoff is why some companies choose the trade secret approach. Read our blog post on What Coca-Cola Teaches about Trade Secrets versus Patents in Selecting Intellectual Property Strategies for a broader discussion of this type of IP strategy.
Trademark Protection for AI Prompts
Of the Big 4 of IP, trademark law is likely the least useful form of IP to protect AI prompts from competition. Because trademark law protects source identifiers, a trademark registration would likely only be useful where the owner of the AI prompts is selling the prompts as a product or service to the public under the trademark as the source identifier of the product. Without additional safeguards like a patent or contractual terms, this approach likely would expose the prompts to the public, which would lead to the loss of their value.
Copyright Protection for AI Prompts
If there is enough expression of ideas and volume of verbiage, AI prompts likely would qualify as literary works under the Copyright Act. However, seeking a copyright registration could potentially undermine trade secret protection for the prompts. First, a copyright applicant must file a deposit specimen with the Copyright Office. For software code, confidentiality can be at least partially maintained by redacting pages of the code that is used as the deposit specimen. Second, if the copyright owner attempts to enforce the copyright in a copyright infringement action, the defendant would likely be entitled to view the claimed copyright in the AI prompts. If secrecy of the prompts is not a primary aim, copyright protection is likely a good IP strategy.
Trade Secret Protection for AI Prompts
Trade secret protection is likely the best approach to maximizing the value of AI prompts and protecting them from discovery by competitors and other third parties. As discussed above, trade secrets protect confidential business information that provides a competitive advantage, generally from not being known, such as processes, formulas, recipes, customer lists and pricing, and marketing strategies. AI prompts likely qualify as protectable under trade secret law. Protection can be perpetual so long as the prompts remain a trade secret. Unlike patents, trademarks, and copyrights, trade secrets are not “registered” to become protected. Rather, steps must be taken to protect their confidentiality through employment agreements and independent contractor agreements, restricting access via passwords, limiting access to a “need to know basis” and other reasonable steps.
Contractual Protection for AI Prompts
Protecting AI prompts through contract law provides one of the simplest and possibly most effective approaches. While not considered IP law, a contractual provision can go a long way toward safeguarding IP rights. Examples of effective use of contractual language include:
· Employment agreements containing non-disclosure and confidentiality protections for the prompts as well as assignments of rights from employees to employer.
· Independent contractor agreements containing similar provisions to employment agreements.
· Workplace manuals setting forth privacy procedures and limiting access to the AI prompts similar to steps Coca-Cola has employed for over a century to safeguard the recipe for Coca-Cola as one of the world’s most valuable trade secrets.
· End user agreements and licensing agreements similar to typical software licensing agreements that prevent disclosure to third parties, reverse engineering, and improper usage of the licensed materials.
Final Thoughts: Why AI Prompts are the New Form of IP
AI prompts encapsulate institutional knowledge and operational expertise, transforming general-purpose AI models into proprietary tools. Businesses that treat prompts as valuable intellectual property—and proactively protect them—will lead the next era of digital innovation.
Key AI-IP Strategy Takeaways:
• Treat AI prompts as valuable business assets—protect them as trade secrets and possibly copyrights or patents if disclosure is a lesser concern.
• Use contracts to define ownership, confidentiality, and usage rights.
• AI outputs likely cannot be copyrighted without human authorship, but the law is evolving in this area.
• Avoid inputting confidential or client data into public AI tools.
• Audit prompt libraries regularly for quality, compliance, and security.
AI Prompts and IP Law FAQs
Q: Can AI prompts be copyrighted?
A: Only if they are original and created by a human author. Functional or short prompts likely are not protectable. Of course, whether protection exists or not can be a question of degree. A compendium of AI prompts may be considered protectable similar to the source code for software.
Q: Can AI prompts be patented?
A: Individual, simple prompts likely cannot be patented, but systems of prompts integrated into novel workflows may qualify for patent protection. Software-related patents typically face what are known as “101 rejections” referring to 35 U.S.C. § 101, which define patentable subject matter. In litigation, this typically arises at the motion to dismiss stages based on a challenge under the Alice standard. Seeking patent protection also requires disclosure in the patent application of the matter sought to be patented. Because a patent’s term is limited to 20 years (15 years for a design patent), the disclosure requirement may be a strong deterrent to filing a patent application, which also comes with no guaranteed success that a patent will be granted, despite the disclosure.
Q: Are AI prompts considered trade secrets?
A: Yes, if they are confidential, have commercial value, and are protected through reasonable security measures. Trade secret protection is likely one of the most effective ways to protect the value of AI prompts. Similar to the recipe of Coca-Cola, protection for AI prompts can theoretically last forever so long as adequate steps are taken to safeguard their confidentiality. Trade secret protection, however, is not effective where a third party independently develops competing AI prompts. Patent protection would be required to stop the third-party use.
Q: What legal risks exist when using AI-generated content?
A: AI outputs may infringe copyrights, trademarks, contain errors, or violate privacy laws like GDPR or HIPAA.
Q: Who owns AI prompts created by employees or contractors?
A: For W2 employees, the employer will typically own the copyrights in the AI prompts that are created in the course and scope of employment. For independent contractors, a written agreement should clarify that the company is the owner of all rights in the work, not just copyrights. Employers and commissioning parties should refresh their employment agreements and independent contractor agreements to ensure all rights of any kind are owned by the employer or commissioning party.
Additional Reading Regarding Developments in AI and IP Law
• What Coca-Cola Teaches about Trade Secrets versus Patents – parallels between trade secrets and protecting prompt libraries.
• Prior Art and AI-Generated Content – how AI outputs can intersect with patent law.
• AI-Created Book Wins Copyright, but There’s a Catch – exploring human-AI collaboration and authorship.
• Artificial Intelligence: Safeguard Your Business From Negative Effects – ethical and IP challenges in AI adoption (Mitigating the Negative Effects of Artificial Intelligence).
• AI Copyright Litigation Update: Recent Rulings in Consolidated Cases Against OpenAI and Microsoft – best practices for avoiding IP violations.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. For guidance on protecting AI prompts or other intellectual property, consult qualified legal counsel.
Klemchuk PLLC is a leading IP law firm based in Dallas, Texas, focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. Our experienced attorneys assist clients in safeguarding innovation and expanding market share through strategic investments in intellectual property.
This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
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