IP encompasses all registered or unregistered design rights, trade marks, patents, copyright, confidential information, trade or business names, database rights, know-how and technology.
IP rights are inherently invisible, but can be very valuable assets if they are properly identified and protected. They are created or acquired by a business on a daily basis and are often overlooked because they are intangible assets.
Like tangible assets that are valued and reported in a balance sheet, IP assets must be systematically identified, protected and maintained in order to maximise their value and strategic advantage and to minimise the risks associated with abuse by third parties or inadvertent loss. Following is an overview of the most common types of IP.
A trade mark may be a letter, word, name, signature, numeral, device, brand, heading, label, ticket, aspect of packaging, shape, colour, sound or scent, or any combination of these. A trade mark is used to distinguish the goods or services of one trader from those of another trader.
Trade mark registration grants the owner of a trade mark with a legal right to exclusively use, or control the use of, a trade mark for the goods or services for which it is registered. A registered trade mark can protect against misuse or infringement by others, as well as allowing it to be licensed or sold.
Use of a trade mark, which has already been registered by another person will subject that person to the possibility of infringement proceedings and the risk of significant damages.
Copyright protects the expression of ideas, but not the ideas themselves. It protects original artistic, literary, musical and dramatic works. In a business, these works often relate to books, website copy, proposals, manuals, photographs, illustrations and sound recordings.
There is no system for registration of copyright in Australia and it automatically subsists upon creation of an original work. Subject to a few exceptions, the author or creator of an original work will be the first owner of copyright in that work. Generally, an employee who, in the course of employment, creates a work in which copyright exists, will automatically assign that copyright to his or her employer.
A copyright owner has the exclusive right to use and control the use of the work in which copyright exists, including the exclusive right to:
- reproduce a work in material form;
- publish a work;
- perform a work in public;
- communicate a work in public; and
- make an adaptation of a work.
A copyright infringement will likely have taken place if any of the above acts are carried out without the permission of the copyright owner.
Confidential information is any information, with restrictions placed on the communication of that information. In business, it often relates to information such as client lists, databases and plans and can also include information relating to a business’ strategies, ‘know-how’ and financial information.
Confidential information cannot be registered. It is usually protected via the use of non-disclosure agreements and clauses relating to confidentiality contained in employment and contractor agreements. A non-disclosure agreement is a written contract in which one party agrees not to use or disclose confidential information belonging to another party. It is often used when entering in to discussions with business partners, potential investors, employees, contractors, service providers and others, who may obtain access to trade secrets and other non-publicly disclosed information.
A breach of a non-disclosure agreement will provide remedies that may not otherwise be available to a person under law.
A patent is a right that is granted for any device, substance, method or process that is new, inventive, and useful. It is legally enforceable and it grants the owner with an exclusive right to commercialise the invention for the life of the patent. There are two different types of patents in Australia; a standard patent and an innovation patent.
The invention claimed in a standard patent must be new (novel), involve an inventive step and be able to be made or used in an industry. The duration of a standard patent is 20 years. An innovation patent is designed to protect inventions that do not meet the ‘inventive’ threshold required for standard patents. The duration of an innovation patent is eight years.
Intellectual property plays a vital role in building a sustainable business. But while some business owners successfully commercialise it, many others fail to properly identify and protect it.
A design relates to the features of shape, configuration, pattern or ornamentation, which gives a unique appearance to a product and it must be new and distinctive. Design registration is intended to protect designs that have an industrial or commercial use and it grants the owner of the design with an exclusive right to commercialise it for a period of 10 years.
The value of IP
IP is fast becoming recognised as a valuable commercial asset. However, to ensure proper recognition of IP on a balance sheet, a person must do all things necessary to identify, protect and manage it. It is well accepted now that financial lenders will recognise IP on a business’ balance sheet and consequently, consider it when assessing loan applications.
The protection and enforcement of IP
Securing IP rights increases the likelihood of a business enjoying a sustainable competitive advantage. However, not all IP rights in Australia are capable of registration. For example, trade marks, designs, patents and plant breeders’ rights can be registered, whereas confidential information and copyright cannot.
In order to protect IP, it must first be identified. This is usually achieved through the conduct of an IP audit, where an IP lawyer will systematically review a business’ structure and activities to identify any IP, which has been created, used or acquired.
An IP audit will also identify the importance of the IP to the current and future profitability of a business, through proper management and commercialisation opportunities. Further, it will identify where improvements may be made with respect to the treatment of IP within a business.
The Coca-Cola IP strategy
The Coca-Cola drink was introduced to the market over a century ago and is today sold in more than 200 countries. Today, Coca-Cola enjoys lucrative profits, mostly due to its IP strategies, which included registration of trade marks relating to logos, names and tag-lines and designs relating to the shape of its bottles.
It did not use patents as this would have required disclosing the recipe and the manufacturing process of the drink. In exchange for such disclosure, Coca-Cola would have been rewarded with a 20-year monopoly to commercialise its product. Due to a wise IP protection strategy, Coca-Cola has enjoyed a monopoly for far longer than that.
The success of many businesses has been determined by attitudes toward IP. Failure to identify, protect and manage IP rights associated with a business is comparable to constructing a building with weak foundations. Further, a decision to not respect and register IP rights could place the future of a business in jeopardy and cause the sale or exit of that business to be very difficult. A prudent buyer of a business will investigate as to whether a business’s IP rights are secure.
Have you identified and protected your IP rights or is your business structured on weak foundations?