Ip Issues for the Growing Business

IP ISSUES FOR THE GROWING BUSINESS

Every business has intellectual property (IP). For some it will be more important than others. Whatever your business you need to understand it. How can it be of value to you? Might you be infringing someone else’s IP? How much might your business gain or lose by not knowing the answers to these questions?

Every Business has IP

Every business, however small, owns some IP. Not all business people recognise the assets which they have and how they can be used to enhance and protect their business.

At the very least every business has a name under which it trades. It may not be “Microsoft” but it is likely to be valuable to you. You would be upset, if after building up the value of your business, someone else used your brand. You will be much better placed to stop them if you have a registered trade mark. Register it early on. If you delay in protecting your brand someone else may register it. Whilst you can take legal action to get it back, that costs money.

As well as brands all businesses own some copyright. Anything from letters to the text of company brochures are protected automatically by copyright. Your website will be protected by copyright; the text content,the software which runs it, pictures and logos, videos and any recorded soundssuch as music. Just because you have paid someone to create it for you does not mean you own it - it needs transferring to you.

The UK Intellectual Property Office (IPO) deals with the registration of IP in the UK. It also has a range of useful information available on its website in relation to IP generally.[1] It has developed a Healthcheck tool which you can use to help you with your IP review.[2] You should develop a strategy to register and protect the IP which is key for you.

What is IP?

IP is a range of different property rights which protect creations of the mind. Different IP rights protect different types of creations. Some creations are not protectable at all. So what are the main IP rights and what do they protect?

IP / What it Protects
Patents /

Inventions

Trade Marks /

Brands

Literary works (including tables or compilations)
Artistic works
Dramatic works
Musical works
Sound Recordings
Films
Broadcasts
Typographical arrangements of a published edition of a work

Design rights /

Designs

Database rights /

Databases

You will sometimes hear know-how (secret, technical information) spoken of as if it is IP. However it is not strictly IP and can only be protected through confidentiality arrangements.

How can IP be of value?

Although you cannot touch it, IP is an asset - just as your office building is. Every business knows what real estate it owns and its value but the same cannot be said of its IP.

Even the largest companies have valuable IP which they have forgotten all about. One large chemical company was searching patent databases for useful technology to solve a particular problem it was having. It found just the technology it needed. It was one of its old patents which it had forgotten about.

It is a good idea to review what IP you have. Identify someone to act as your IP manager, even if it is only part of their wider role. The IP Manager can co-ordinate practices for the identification of new IP you create, such as inventions, which need protecting as patents or new brand names which should be registered as trademarks. If you find that you have IP which you are not using, think about selling it or licensing it. This could be a good source of revenue for you.

Intangible assets, such as IP, are increasingly important to the value of a company. A report by PwC identified that even with technology companies, over half of them do not extract the full value from their IP.[3] In the knowledge economy the value of intangible assets is a key driver of shareholder value. For instance Microsoft’s book value is over $250billion less than its market value. Much of this will be attributable to the value of its brand and its software.

How to get IP

To get some IP rights you do not have to do anything: they arise automatically. For others there is a registration process, which will involve a cost. There are also various criteria which have to be met to qualify for IP protection.

Patents always have to be registered. Copyright and database rights always arise automatically. As you develop goodwill in a brand, rights can arise in it automatically. For greater protection though you can also apply for a registered trade mark. Similarly certain design rights can arise automatically, but you can gain greater protection by applying for a registered design.

Whilst there are various criteria for the different IP rights, the one it is most easy to fall foul of is confidentiality. Don’t disclose an invention without a confidentiality agreement in place until you have applied for a patent. Similarly for designs,although in relation to designs you have 12 months’ leeway to make your application after you have made it public.

Where to protect

Most IP only protects you in certain countries or territories. A UK trade mark or patent only protects you in the UK. If someone wants to sell a product using your trade mark or incorporating your invention in France they can do so. So think of all the countries where you need protection. You can get a Community Trade Mark to protect your brand inthe EU. EU design right will protect your design across the EU. Usually your copyright will automatically be protected abroad in the same way as it is in the UK.

Patents however only protect your invention on a country by country basis. You can make an international application and subsequently designate the countries in which you want to progress the application. In Europe you can make one application, which once granted can become individual granted patents any of the over 30 Europeancountries which you can designate.

How Much Protection?

The level of protection given and the length of protection given to IP depends upon the type of IP right involved. Registered rights are the strongest as these give monopoly rights to stop anyone else using that IP even if they did not copy it. Patents can last up to 20 years and design rights from 3 to 25 years. Some copyright lasts for over 70 years.

Patents are often assumed to be the most valuable IP, but this may not always be the case. Trade marks last for 20 years but, unlike other IP,can be renewed over and over again. The Black & Decker “Workmate” lost its patent protection many years ago, but there is still great value in the brand.

Costs

The registration fee for a UK design starts from £60 and for a UK trade mark at £200. You may use an agent to carry out the filing for you, which will increase the fee but will ensure your filing is correct.

Patents are much more expensive. It is better to get a patent agent to draft the patent claims. A granted UK patent is likely to cost about £2-3,000 to get to grant, compared in the US to $5-10,000. Taking a European patent application to grant in key countries will be about €15,000. Then in all cases there are renewal fees.

Policing your IP

It is up to you to police and protect your IP. This can be both time-consuming and expensive. For about £100 a year you can pay a trade mark watching service to do some of this policing for you. It will check any mark which is applied for which is the same as or similar to a specified mark of yours.

Legal action to protect your IP can be very expensive. Patent litigation costs the most. EU Commission data shows the cost of a patent case in the lower courts being between €0.15-1.5 million euros. Insurance can be expensive, with sizable excesses. Many smaller companies look at “after the event” insurance. This is insurance taken out once a potential case has arisen. It insures against the potential adverse costs if you lose up to a cap.

Acquiring IP

An IP Manager may identify additional IP which you need. This may simply be to expand the assets of the business. You may need to acquire new IP. You can buy this, like any other assets, from its owner. Alternatively, you may need to carry out research to create it. If you do not have the resources to carry out research then teaming up with a University can be a good idea. You will need to put in place a contract setting out how the work is carried out and funded and what rights you and the University will have to the IP. Most Universities are experienced in preparing such contracts.

Unlike other assets you can simply acquire a licence of IP such a licence could be exclusive, giving you the only rights to use it or non-exclusive meaning that the licensor can grant other non-exclusive licences to other licensees. A non-exclusive licence will be cheaper than an exclusive one.

Some IP licences may be needed so that you are not infringing the IP of other’s. It is important to identify these early on and to factor in their cost into your business plan. You can do some simple checking of IP via the IPO website, but use a trade mark or patent agent for more sophisticated searches.

Summary

To summarise the key points that you should consider and watch out for:

Identify someone within your business to act as your IP manager
Register brand names(and get domain names) early on
Don’t disclose inventions/designs without a confidentiality agreement in place until you’ve applied for a patent or a registered design right
Decide which countries you may require IP protection in both now and in the future
Ensure that any IP that is developed by third parties under contract to you is assigned to you
Think about selling or licensing any IP that you are not using
Consider using a watching service to police your IP

Eversheds LLP

September 2009

[1]

[2]

[3]Technology Executive Connections: Exploiting Intellectual Property in a Complex World - 2007