In the current climate, it has never been more important for SMEs to protect their intellectual property. Unlike government departments and large corporations, there are no default contact clauses when it comes to IP protection for SMEs, so getting the right advice is crucial.
Most businesses that rely on developing or exploiting any form of intellectual property (IP) have some understanding of the relationship between staff working on a project and the ownership of the IP.
The general rule is that the employer owns IP developed by the employee in the course of the employee’s duties. However, when it comes to engaging outside contractors or partners to work on projects involving the creation of IP, then the reality of ownership can be quite different. In this case, the general rule is that the contractor or partner will own the IP they create, unless the contract provides otherwise.
For larger organisations, including government departments, there is often a default clause in contracts that states just where the IP ownership resides. Also, many organisations, including large corporates, universities and research institutes, have written IP policies covering development, protection and commercialisation of IP. But for smaller businesses, there is often no such default situation or no written contract at all. So thought must be given at the engagement stage as to how you want to deal with the issue of IP ownership, and this needs to be clearly outlined in any project contract.
A few options that could be considered are:
- If the development is only going to give you a short-term advantage, then you may look at licensing the IP from the contractor or partner to gain revenue.
- If the IP resulting from whatever you are developing is going to give you a competitive edge, then maybe it is wise to own the IP.
- If the IP is critical to your success, then you may also look at taking out a patent on the ‘business process’ before engaging in any scope of work. This is often the example in the area of software development with outside contractors.
If the IP is being developed for a particular client, you will also need to consider what the client contract provides in relation to IP ownership. If the contract provides that the client is to own the IP, you will need to acquire ownership of the IP developed by any of your contractors or partners.
If, for whatever reason, there is IP that your business needs, there are two main ways to go about obtaining it: a licence, or commercial negotiation to own it outright.
A licence can be for all uses of the IP or can be limited to a specific application or industry. It can also be exclusive or non-exclusive. Gaining an industry-wide licence will allow you to benefit from the IP while shutting out your competitors. This is a popular option in situations where the IP has application in a number of industries, giving the owner of the IP the opportunity to commercialise it quite widely. In areas where innovation takes place quite frequently, a licence, usually for a shorter period, is often a reasonable option.
If, on the other hand, you feel you need to own the IP outright, then the best advice is to do it sooner rather than later. The longer a business waits to negotiate the sale of IP, the higher the chance of a competitor beating them to it.
Additionally, the IP may increase in value over time, requiring you to pay a higher price to acquire it down the track. Finally, if you are paying for the IP to be developed, your bargaining position will be best at the start of the engagement.
If you have developed, or propose to develop, IP of commercial value, it is usually worth seeking assistance from a patent or trade mark attorney to ensure the IP is properly protected. A patent attorney can assist in identifying what components of the IP may be patentable or registrable as a design, and whether there are any existing patents that your proposed IP may infringe. A trade mark attorney can help with protection of brands, trade names and logos and the like and as well as with the selection of trade marks or brands to avoid infringing existing rights. A patent attorney can also help with non-disclosure agreements and contracts for the development and exploitation of the IP, including IP assignments or licence agreements.
In today’s information and knowledge economy, it is critical for SMEs to understand and protect valuable IP. The Institute of Patent and Trade Mark Attorneys of Australia (IPTA’s) role is to help you in this process. However and wherever you seek assistance, it is better to do so at the start of the process.
You can access further information on intellectual property, including information about IPTA’s free initial consulting service, at www.ipta.org.au
–Stuart Smith is Councilor and Fellow of the Institute of Patent and Trademark Attorneys of Australia (IPTA).
CASE STUDIES
IP protection in the context of the airplane and the iPod
The airplane
To discover just how different types of IP protection can apply to a given situation, take the case of the airplane. Just over 100 years ago, the Wright Brothers protected their IP by filing for, and being granted, a single patent for a flying machine. Today’s modern aircraft may have its component parts protected by thousands of individual grants for IP protection. These could include the trade mark of the name or brand of the aircraft. Then there are patents – potentially thousands – covering everything from major hydraulic systems, to the critical parts of the engines, down to the flushing systems of the toilets.
Additionally, certain aspects are more likely be protected via the use of design registrations. These cover the visual appearance and shape of functional components. Within an aircraft they could be used to protect the form of the in-seat entertainment unit, or even the shape of the aircraft’s nose cone.
In terms of protectable IP in an aircraft context, another primary source of protection is copyright law. Copyright can protect engineering and technical drawings, parts lists, instruction manuals, and even the software used to program computer systems.
No doubt there will also be a significant amount of confidential information that relates to the design and manufacture. This does not fall within the sphere of patents, designs, copyright or trade marks but can nevertheless have substantial value. Processes to protect confidential information must be in place in order to preserve the confidentiality and retain the value of this important category of IP.
The iPod
Apple’s iconic iPod is another example of a manufacturer relying on a variety of different forms of IP rights, interwoven and overlapping in a kind of IP matrix, to create a holistic protection strategy that is more than the sum of the parts.
Various internal hardware components of the iPod are subject to patents owned by Apple and third-party suppliers. The visual appearance, including the distinctive navigation wheel, is protected independently of the underlying technology by various design registrations. The software is protected by copyright and potentially also by various patent applications. The major brand elements such as Apple, iPod and Nano are protected by trademark registration. Trade marks can be protected indefinitely, and often assume greater importance as products mature in their lifecycle. This in turn highlights the importance of well-conceived brand development strategies.
Although these particular examples are on a multi-national scale, they illustrate why inventors are usually well advised to seek professional help, rather than self-filing. The belief that one patent will be sufficient to protect an idea is often akin to putting all the eggs in one basket, and can result in disaster down the commercial road.
