Ideas may be free, but intellectual property should be valued and protected. Here's a guide to what to expect when you're trading in IP around the world.
Protecting intellectual property (IP) is hard to get right. In a lot of cases there are businesses that never register trademarks or patent their great invention, only to find themselves without a leg to stand on when someone else comes along and steals their design.
Even worse, there are cases where businesses have failed to check the register for existing businesses that may be too similar. This leads to the business investing time and money establishing a brand, only to find that they are infringing on another business' IP. Former fashion label Tsubi famously had to change their brand to Ksubi when they went global. The high profile case involved a Californian shoe brand called Tsubo, established years before Tsubi. Tsubo successfully challenged Tsubi on the grounds that the two names were too similar and that they were both trading in fashionable street wear.
On the other end of the scale there are businesses that protect their IP in plenty of countries but spend too much time and capital doing so and don't have enough left over to move the business forward. Overcommitting to IP can sap as much from a business as underdoing it. Of course it all comes down to balance, but what can a business do to protect their IP adequately without being excessive?
Tal Williams, partner at Australian Business Lawyers, says businesses first need to define their IP and identify which parts are assets they should value and protect. He cites a case where an online business went to sell their website and saw a good offer significantly decline in value when it was discovered that the website designer had retained most of the worthwhile IP. "The business actually had nothing to sell because the real asset was the IP, the design and the coding that the web person had done," explains Williams. "You'll get into trouble if you don't identify the IP early on."
Williams lists trade secrets, copyright, trademarks, designs, circuit layouts, and patents as IP that can be protected. If you're in the agriculture or horticulture sector, plant breeder's rights will probably also apply to you. Once you have defined your business' IP, you can start to employ various strategies, and not all of them involve registration fees and bureaucracy.
Copyright is automatic, for example, and trade secrets are best kept, well, secret. Williams says this means businesses can avoid revealing key parts of their products or processes that would otherwise be available for anyone to see, had they filed a patent. He recommends dealing with people that you trust and using legal confidentiality, such as non-disclosure agreements with the consequences of disclosure spelt out. "If you have people that you can trust and you haven't got a product that's easily reverse engineered, that's a pretty good way of protecting IP because no one knows," notes Williams. "Sometimes in that scenario there are 'poison chalices' put in place where if even if you get three [necessary components] together you still can't get it working because there's a fourth party that knows what you have to tweak in each of them to make it work."
Companies with short-term innovations may find that adding restraint clauses in employment contracts is the best and most cost-effective way to keep ahead of the competition. Restraint clauses prevent former employees from passing on your IP to competitors for a specified period after ceasing employment at your business. Some restraint clauses may also state that former employees cannot work for competitors for that specified period.
Keeping IP secret becomes especially important if you decide to take the next step and apply for a patent. "If you do make it public and it does get out before you apply for your patent, you lose your ability to apply for one," warns Williams. "So the first step is to keep it secret. There are many, many business that operate on that basis, particularly ones that are difficult to reverse engineer or ones that require various expertise in order to provide the service."
Taking on the world
If you choose to register your IP, you must start in your home country, which means going through IP Australia (www.ipaustralia.gov.au). Registration also ensures that you are not infringing on existing IP as the prerequisites for filing a patent include that the product or process must be novel. If you are unsure of the value of patenting your IP, you may apply for a less costly provisional patent, which lasts for 12 months, while you assess the commercial worth of protecting your IP.
From registration with IP Australia, Williams asserts that going international is just a few steps away. "You register your trademark here, then afterwards you have an option to file an international application. IP Australia, through various treaties, has an administrative mechanism that enables relatively easy registration in the countries that you choose. They then review your patenting and make sure it's novel and it's going to be okay overseas," he explains. "The good thing about IP Australia is that they have experts in each area so if you have a medical device, they have experts who only look at medical device patents; they know what's going on and they know what's out there.
"At the end of that examination process you select which country or countries you want to register in. You can go directly to those countries but it's easier going through IP Australia. Then there's a further review process that those countries will do. Going through IP Australia is the simplest and the most cost-effective way, but it still can cost a lot of money," says Williams.
And that's only the upfront costs. "There's another lot that comes six months later in some countries and there's requisitions to attend to—some countries may or may not be happy with you and you have to deal with that."
IP Australia has a fee schedule set out for trademarks on its website, as does the World Intellectual Property Organization (WIPO; www.wipo.int), but it's hard to put a figure on the amount it will cost for patents because it differs with the complexity of your product, process or design and in which countries you intend to register as they all charge differently. Estimates put the process at several thousand dollars to move your IP up until the point of choosing countries, but Williams can't quote a figure because "it depends on how complex [your case] is".
Ability to enforce the law is also an important consideration. WIPO is the governing body that oversees IP protection internationally. It has an arbitration and mediation system that parties may choose to use should a dispute arise, which generally costs less than litigation. However, if the dispute enters litigation territory, Williams says businesses need to consider what they'll gain from legal action.
"The first part is 'can I afford to go through the legal process?' Most countries are up on their IP but you're then left with the legal system of the country when it comes to enforcement," he explains. "Enforceability means you have to have someone who has money on the other end, you need to be able to find the person who has actually infringed and if you can't find them or you can't find their assets—or they have no assets—then there's no point. Although, some companies want to make a point, they want to let the industry know that they'll attack for the principle of it, even if it costs them."
Two issues currently doing the rounds in the IP sector are piracy and ‘cybersquatting’. Piracy, says
Williams, has almost single-handedly put IP in the international spotlight. "The burgeoning market in fake goods is of very significant concern and free trade agreements invariably have IP requirements." While there’s still a way to go to eradicate piracy, at least the issue has traction.
As for cybersquatting, WIPO seems to have taken care of that. Cybersquatting is when a company registers a variation of your trading name, or even a close misspelling, as a domain name. Says Williams, if the squatter is not trading under the domain, there is an argument that they don't actually own it. "You can go to WIPO and WIPO can say 'we force you to transfer the ownership of the IP to the people who actually own it'. Eighty percent of claims to WIPO result in the transfer of the name back to the right person."
It's a relief to know that IP laws are becoming more sophisticated all the time. The most important thing is to realise IP is an asset and to value that accordingly, even when selling your business. "They are a commodity, they do show a seriousness that increases the value of your business. If you're selling your company and you have three registered patents, that can be an asset and increase the amount of money someone would pay for your business. It's better than a business who says 'we're doing really well and we have three secrets'," explains Williams.
"The overriding thing for all of this is your IP strategy. The mere fact that it is new and exciting and can be registered doesn't mean that it should be. I had a client who'd spent well into six figures on registering a worldwide patent but had no money to spend on his business."
Which brings us back to the question: ‘To protect or not to protect?’ It’s all about finding out which IP assets you can’t afford to lose and striking a balance.
* At a recent World IP Day event Dr Harvey Dillon, director of the National Acoustics Laboratory (NAL), mentioned that his organisation held patents but that the patents only covered a tenth of their overall IP. This meant that the NAL could show they possessed valuable IP assets without revealing all the secrets that would allow others to copy their methods.
* Be aware of your prototypes, especially if your product can be easily reverse engineered. If your prototypes are too close to the eventual product, you could be giving away all your secrets. "Put out a prototype that's not quite right so what people see, and therefore try to copy, is not the actual thing," suggests Tal Williams, partner at Australian Business Lawyers. "Counterfeiters are out for quick money so they're not going to do a whole new factory design if they find out they got it wrong, they'll dump you and go somewhere else. The more you can frustrate easy cash going to them, the better.”
* Trade shows can be a tricky area because you want to show off your products as much as possible but you don't want competitors picking up your ideas. Identify how much you will disclose to interested parties and keep an eye on what your competitors might be gaining.
CASE STUDY: Smoothly does it
Now with over 200 stores in 11 countries, the Boost Juice franchise is fulfilling their ambition to be one of the world’s most loved brands.
As you would expect from a franchise, protecting the Boost trademark is their top priority. “Global trademark strategy is at the heart of our global expansion and is the core intellectual property for a franchisee licence,” says Amy Roy, legal counsel for Boost Juice. “A registered trademark gives you the right to own your brand in a new territory and to market for prospective business partners. Most importantly, a registered trademark reserves our rights to our name and protects our brand by preventing infringers. Without taking this step, our rights to brand protection would be limited to common law rights, a less commercial protection measure in our competitive corporate world.”
In addition to the brand, there is plenty of IP that Boost has recognised as valuable to their success. Roy says their IP covers everything from copyright material to trade secrets as well as their systems and procedures for the preparation and sale of their products.
Another aspect to their strategy is thinking of the future. Although the brand has only entered a handful of countries so far, they’ve registered the trademarks in more than 50 in anticipation of further expansion. Roy explains that they incorporate an individual IP plan in the early stages of every commercial deal. “Boost Juice has established strong relationships with trademark attorneys worldwide who know our brand and vision and are always a step ahead of the game to ensure we identify our intellectual property rights and capture their protection. Every jurisdiction is different and requires a different strategic approach.”
As for defending the brand, she sounds a warning note. “We are a very friendly and innovative brand, but any threat of dilution will see us show our strength. The process of initiating infringement actions in many jurisdictions is a slow and tedious one, however Boost is generally victorious in the end.”