Wednesday, 5th September, 2018

Create an IP strategy early on and avoid common pitfalls

Intellectual property (IP) can help support a competitive advantage in the market and provide a valuable asset that can help grow your business. The reality faced by entrepreneurs is that legal services can be expensive and IP protection may not be an initial priority. But having an IP strategy can help you get the most from your IP and help minimize common pitfalls and legal expenses.

IP by itself will not make a company succeed, no more than writing a song will make someone a rock star. Having a business strategy that includes an IP strategy will help you make informed decisions, identify opportunities, reduce unforeseen costs and improve your negotiation positions while avoiding long-term negative consequences. Demonstrating that you have an IP strategy will be highly valued by any future investors, especially if IP is your main business asset.

While there are many types of IP protection available to businesses, four areas to consider as part of your IP strategy include trade marks, patents, copyright and ownership.

Trade marks 

Trade marks serve as a badge of origin for a business’s goods and/or services and may accumulate a significant amount of value over time through commercial use. It's best to select a mark and use it consistently. Also make sure to use marks together with their appropriate symbols (™ for unregistered trade marks and ® for registered trade marks). Using the appropriate symbols serves as a notice to others that the brand names are being used as trade marks, providing the owner with rights to stop others using the same or confusingly similar names.

There is nothing wrong with using unregistered trade marks to save costs during the early stages of a venture. However, it is important to understand that registered trade marks are deemed to be valid and easier to enforce should a third party decide to use a similar or identical mark for similar or identical goods or services. Unregistered trade mark rights will need to be proven first before they can be enforced. This, in itself, is an expensive legal step. Registering a trade mark also ensures freedom-to-use and is the best way to prevent trade mark hijacking in civil law countries such as China. Further, registering trade marks worldwide has become much more affordable thanks to cost savings made possible by the Madrid Protocol.

A major pitfall for businesses is to have their brand slapped with a court injunction just as their goods or services are being launched. It's wise to run a check to determine if your trade mark is available for use, not only for the New Zealand market, but for any major foreign markets that may be entered into in the future.

Patents

Patents can be a key asset for a company, and their importance depends on a number of factors including the nature of the technology, the business model and the type of funding required. Many businesses rely on patents for the defensive aspect of establishing and protecting a core technological competency, and as a valuable asset for valuation purposes. Others use patents more aggressively to seek out joint ventures and licensing opportunities or to merely protect their own patch in the market.

The smartest strategy for a company with a limited IP budget is to ensure they do not prevent themselves from obtaining patent protection at a future date unless, for example, it is a deliberate tactic for the company to publish a specific technology into the public domain to ensure it cannot be patented by anyone else. Otherwise, a company should never publicly disclose their invention to anyone without a non-disclosure agreement (NDA) until a decision is made to patent the technology and file an initial patent application.

Before entering a market with a new product, a 'freedom to operate' (FTO) check can be done to identify potential infringement of pre-existing patent rights. The cost of having a clearance search carried out by an attorney is minimal compared to being completely shut out of a market by a competitor. The data from the search can also be used to gather market intelligence such as possible partners/competitors and patenting trends specific to a given technology.

Copyright

Copyright is an incredibly useful form of IP protection for businesses because it is free and covers a wide range of IP assets. Copyright arises automatically as it gets created and applies to assets including software codes, design drawings, logo designs, packaging designs, web pages and various forms of marketing materials. Make sure to use the copyright symbol © along with the year of creation and name of the owner. It is also wise for a business to keep a record of its copyright assets.

Ownership

Finally, if there is one item that’s worth spending money on, whether it is during the early stages of a business or later on, it is to clarify ownership issues for IP assets that belong to the company. The cost of resolving IP ownership issues becomes exponentially more expensive as the venture starts to enjoy commercial success, and could even prevent the company from obtaining registered IP protection for disputed IP assets. Therefore, ownership of all IP should be clearly documented in writing for both employees and independent contractors. If in doubt, companies should check with their IP advisor before any ownership issue gets out of hand.

An edited version of this article first appeared on The Icehouse website.