Breach of Intellectual Property Rights (3.3)
Gallagher Group Ltd
Source: http://www.nzte.govt.nz
Based in Hamilton, the Group is comprised of a number of divisions that manufacture and export a range of products to more than 130 countries. Products include animal management systems – electric fencing, livestock weighing and electronic identification systems; security management systems; people, assets and access control; fuel dispensing systems; plastic injection and die-cast tooling; and a specialist plastic moulding company.
The company markets its systems and products through an established and expansive network of distribution channels worldwide.
To protect its intellectual property, the Group has more than 160 patents worldwide which it aggressively monitors, taking legal action when followers copy, which Mr Gallagher says they almost inevitably do. “Patents are never totally waterproof; it’s a bit like a James Bond movie – you are out in front and the baddies are behind you. Patents are like throwing oil and tacks on the road. For some followers that’s the end of it, others will swerve around them but it will slow them up.”
Discuss the possible causes and effects of competitors continuing to copy Gallagher’s patents in overseas markets.
In your answer, fully explain:
· TWO possible causes of competitors copying Gallagher patents, despite the
threat of legal action
· TWO effects on Gallagher’s of competitors copying their patents
Suggest TWO possible solutions, besides pursuing legal action, which Gallagher’s may take to address problems arising from breaches of intellectual property rights.
Evaluate how the TWO possible solutions you named would address the problem, and make a fully justified recommendation.
In your answer, you should:
· Fully explain how each solution addresses the breach of intellectual property
rights by explaining the positive impacts on the business
· Fully explain the negative effects of each solution
· State the solution that you would recommend
· Justify your recommendation by explaining why this recommendation is better
than the other possible solution.
Possible answers:
Cause 1:
What – cheaper for competitors to copy than invest in own R&D
Why – as technology moving quickly and they do not have the resources to keep up with market leader
How impact – which creates a market for lower quality, lower priced products similar to Gallagher’s, reducing their market share.
Effect:
What – Gallagher’s will face increased competition at the lower price range
Why – as some of the products they produce may only be differentiated by price anyway
How impacts - which means they will need to increase their marketing to create a unique selling position
Cause 2:
What – competitors believe the reward for copying is greater than the risk of being caught
Why – as Gallagher’s have already indicated they can’t catch them all and patents are just a way of slowing them down a little
How impact – which means patents are not fully effective and maybe not much of a deterrent in foreign countries with looser rules
Effect:
What – Competitors will get bolder as others realise that they can get away with copying Gallagher’s patents as well
Why – because 160 patents across the world is a lot to keep track of
How impacts – and costs a lot of money and employee resource to monitor and start legal proceedings against which may take a long time to resolve
Solutions to solve the problem of the breach of copyright could include;
Solution 1:
What – Invest further in R&D to continually lead the way in technological advancement
Why – as this is their unique selling point of leading edge innovation and will have features that the copiers will not match immediately
How impact – which will continually keep them one step ahead of the copiers who will be working off inferior models and will find it difficult to copy advanced technology
Negative effect is
What – high cost involved in R&D
Why – as it requires testing, market research and technology advancements to be successful
How impacts – which may lead to the price of Gallagher’s inventions and innovations continuing to rise
Solution 2:
What – Invest in a marketing campaign aimed at key markets extolling the virtues of buying genuine Gallagher’s products
Why – as they will be able to make their point of difference in terms of quality and product features
How impacts – and encourage users to buy genuine products, maintaining Gallagher’s market share
Negative effect is:
What – marketing campaigns in different countries are costly and need careful managing due to cultural and language difference
Why – as the needs of customers in different parts of the world will differ
How impact – which can lead to mis-communication and results in a poor brand image
The best solution is to continue investing in technology
Why – as this is Gallagher’s key point of difference
How impact – and will gain a loyal following from those high end users who are very profitable
It is a better solution than marketing because products like Gallagher’s are very specialised and the consumers at the lower quality end who buy according to price, are not the target market that Gallagher’s should be aiming for.