Intellectual Property for Start-ups and other Small Businesses

Intellectual property (“IP”) is the collective term for the bundle of rights that protect investment in branding, design, technology, art and literature. Examples of such rights (“IPR”) include patents for inventions, registered trade marks for brands, registered designs for product design and copyrights for books, broadcasts, computer programs, databases, drawings, films, scores and sound recordings. The object of such protection – the inventions, brands, designs and so forth – are sometimes called “intellectual assets”. Those rights are powerful tools that enable businesses to retain, and in some circumstances extend, the competitive advantage established by such assets. The Toolkit Here are some (but by no means all) of those tools.

Intellectual Asset	IPR	Scope	Advantages	Disadvantages
New product or process incorporating new technology	Patent	Monopoly of the manufacture, importation, disposal or use of the invention	Extensive protection; IPO examiners’ opinions on validity and infringement;	Granted only after rigorous and often lengthy examination; Expensive to obtain; Renewal fees; Invention must be disclosed to the public; Can be revoked after grant; Do not cover software, business method or other internet related inventions; Granted only for territories of individual states
	Trade Secret (Law of confidence)	Right to prevent unauthorized use or disclosure of information communicated in confidence	Free to obtain; Can subsist indefinitely if the product cannot be reverse engineered; Covers more or less any technical information including computer source code;	Lost as soon as information enters the public domain; Complainant must prove that the information was secret and that it was disclosed in confidence which is not always easy
	Unregistered design right	Right to prevent others from making articles to the design of an article or part of an article	Free to obtain; Covers most design documents; Covers prototypes; Covers mechanical and electrical components that are normally hidden from view;	Short term with possibility of licence of right in the last 5 years; No other industrial country has a similar right; Wide exclusions (method of construction, surface decoration, must fit, must match and commonplace); Qualification requirement which excludes most designs from most industrial countries outside the EU; Need to prove copying.
	Literary copyright	Right to prevent copying of software, databases and other original literary works	Free to obtain; Very long term; Available to citizens of most countries; Automatically available to UK citizens and residents in most countries; Covers most internet related inventions;	Need to prove copying; No longer covers most design documents;
New product or process incorporating a new design	Registered design for the UK only	Exclusive right to use the design and any design that does not produce a different impression on an informed user	Easy to obtain; Inexpensive to obtain; No substantive examination; Five renewable terms of 5 years each; No need to prove copying	Covers only appearance and not function; Does not normally extend to designs hidden from view; Can be challenged after grant on several grounds including lack of novelty or individual character.
	Registered Community design for the whole EU
	Unregistered Community design	Right to prevent copying of a design that is new and has individual character	Free to obtain; Covers the whole EU	As above; Very short term; Need to prove copying
	Unregistered design right	Right to prevent others from making articles to the design of an article or part of an article	Free to obtain; Covers most design documents; Covers prototypes; Covers design features that are normally hidden from view;	Short term with possibility of licence of right in the last 5 years; No other industrial country has a similar right; Wide exclusions (method of construction, surface decoration, must fit, must match and commonplace); Qualification requirement which excludes most designs from most industrial countries outside the EU; Need to prove copying.
	Artistic copyright	Right to prevent direct or indirect copying of design drawings and other artistic works	Free to obtain; Very long term; Available to citizens of most countries; Automatically available to UK citizens and residents in most countries; Covers surface decoration, fabrics and floor coverings	Need to prove copying;
Brands	Registered trade mark for the UK only	Exclusive right to use a sign in relation to specified goods or services	Considerably less expensive to obtain than a patent though more expensive than a design registration; Considerably easier and quicker to obtain than a patent; Counterfeiting an offence as well as a cause of action	Requires examination and applications can be opposed; Can be challenged after grant; Must be used within 5 years of grant; Easier and cheaper to enforce than an action for passing off
	Community trade mark for the whole EU
	Passing off	Right to prevent others from misrepresenting the source of goods or services by the use of the same or similar trade name, mark or get-up	Free to obtain; Covers some signs that cannot be registered as trade marks	Expensive to enforce (claimants must prove goodwill or reputation by reference to the sign and actual or likely confusion)
Books, films, games, musical scores, plays, sound recordings, TV programmes, websites and other creative works	Copyright	Right to prevent copying, publication, renting, lending, communication or adaptation	Free to obtain; Very long term; Available to citizens of most countries; Automatically available to UK citizens and residents in most countries; Collecting societies; Piracy an offence as well as a cause of action	Need to prove copying; Increasingly difficult to police on the internet
Performances of actors, musicians, singers and other performers	Rights in performances	Right to object to broadcasting, filming or taping	Free to obtain; Very long term; Available to citizens of most countries; Automatically available to UK citizens and residents in many countries; Collecting societies; Bootlegging an offence as well as a cause of action	Increasingly difficult to police on the internet

The Cost of the Tools All of those tools – even those that are free to obtain – come at a cost. Essentially those costs fall into three categories:

• obtaining and in some cases maintaining the IPR;
• policing the IPR; and
• enforcing the IPR.

Those costs vary considerably from country to country and from IPR to IPR.

• Obtaining and Maintaining

IPR that have to be registered with the British or other intellectual property office include patents, trade marks and registered designs. The costs of obtaining an IPR that has to be registered include

• The official fees of the office or registry
• Patent or trade mark agents’ or other professional fees for advice, drawing up the application, correspondence with examiners and third parties and, occasionally, a hearing before an IPO tribunal;
• Translations; and
• Renewal fees which can increase over the term of a patent in some countries.

In 2004 the European Patent Office commissioned Roland Berger Market Research to conduct a representative survey on the cost of obtaining a and maintaining for 10 years a typical European patent in France, Germany, Italy, Spain, Switzerland and the UK. The researchers found that it was around €32,000 (see “The cost of a sample European patent – new estimates” Aug 2004). The cost of registering and maintaining a trade mark or registered design in the same countries would be less than €32,000. The cost of applying for and maintaining patents for an invention in the leading industrial countries inside and outside Europe would be considerably more.

• Policing

Applications to register IPR are published in intellectual property offices’ journals and on their websites. A number of patent and trade mark attorneys and other service providers will monitor those publications and alert their clients to applications that could affect their IPR or businesses for a fee. These services are known as “watch services.”

Infringements are harder to detect. There are a number of software tools that scour the internet for infringing copies of copyright works. Sometimes infringements come to the attention of sales staff or a company’s customers or distributors. Occasionally it is necessary to employ specialist private investigators to observe a market and trace sources of infringing goods.

• Enforcement

Essentially an IPR is a right to bring a law suit. Some IPR can sometimes be enforced without litigation. Some infringements of copyright, trade marks and rights in performances are crimes as well as causes of action which can be prosecuted in England and Wales in the Crown and magistrates’ courts by local trading standards officers. The registration of a domain name that is the same or similar to a trade mark can sometimes be cancelled or transferred under an alternative dispute resolution procedure such as ICANN’s Uniform Domain Name Dispute Resolution Policy. Sometimes the risks and costs of litigation can be delegated to a collecting society which licenses the use of its members’ works, collects and distributes their licence fees and, where necessary, conducts civil litigation on their behalf. Otherwise, the enforcement of an IPR is the responsibility of the owner of the right. Ultimately that requires proceedings in the civil courts.

New Civil Procedure Rules came into force in October 2010 which limit the costs that can be recovered in the Patents County Court to £50,000 for the determination of liability and £25.000 for an inquiry as to damages or an account of profits (see Jane Lambert “New Patents County Court Rules” 31 Oct 2010). HM Government has also announced plans for a small IP claims track for the Patents County Court (see Jane Lambert “Small IP Claims” 8 May 2012). Claims over £500,000 have to be brought in the High Court where costs are unlimited. In 2003 the Intellectual Property Advisory Committee published “The Enforcement of Patent Rights” which found that the average cost of a patent infringement action in the Patents Court was £1 million compared to €30,000 to €50,000 in France, €25,000 to €50,000 in Germany and €10,000 to €40,000 in the Netherlands.

Selecting the Tools

Very few start-ups and small businesses can afford to acquire or deploy all those tools and most do not need to. I often say that in my 30 years at the patent bar I have seen far more businesses fail because they had too much IP than those that failed because they had too little. Often the reason for failure is that they spent all their money on building up massive portfolios of patents or other IPR which they could not afford to enforce or, in some cases, even renew. When selecting an IPR, make sure that the IPR covers your business needs and that you have the means to enforce that IPR.

• Identifying Business Needs

The best time to think about IP protection is when you draw up your business plan.

1. Consider your sources of income over the period of the business plan (that is to say, sales, fees, royalties and so on).
2. Think about possible threats to those income streams during that period. Competition from other suppliers will be one threat but there will be other factors such as changing tastes and the general level of demand in a depressed economy.
3. Identify possible counter-measures to those threats. Most of those will be commercial like reducing your prices or developing new products or markets. Only a few will require legal protection such as a patent or other IPR.
4. Where an intellectual asset does require legal protection, there may be several ways to provide it. For instance a new product or process incorporating new technology may be protected by a patent, the law of confidence, unregistered design right or copyright. Some of these IPR are free while others have to be registered. If you can rely on trade secrets or unregistered design right why apply for a patent.
5. Make sure you have the resources to enforce the right. In most cases, that means taking out intellectual property insurance.

• IP Insurance

I have written extensively about IP insurance over the years. My last post on the subject listed a number of brokers who offer IP insurance. Others have no doubt appeared by now (see Jane Lambert “IP Insurance Five Years on” 23 Oct 2010 NIPC Inventors Club).

If you want to discuss this article further call me on 0800 862 0055 or complete my contact form.