Hot Property: Understanding IP

21 June 2017

For many SMEs, the ability to protect their innovation is crucial in maintaining a competitive edge. And the example of Rubik’s Cube – which lost an important trademark battle at the European Court of Justice in November 2016 – illustrates how important intellectual property (IP) has become. We look at how IP is relevant to your business, and how to keep your ingenuity safe.

Intellectual property (IP) is a subjective concept, and defining whether or not something counts as IP has kept many a lawyer considerably exercised over the years. As Dawn Southgate, head of knowledge at the Chartered Institute of Marketing, says: “If you had a Ferrari you would take care of it and only let trusted people drive it. So why would anyone expect you to write or create something and let everyone use it without permission or payment?”

Creating an IP strategy

“IP is a term used to describe ‘creations of the mind’ such as inventions, company names, logos, images, literary works, art and music,” says Vicki Strachan, a partner and patent attorney at Wynne-Jones, a firm of intellectual property specialists. It’s something unique that you physically create; an idea alone is not IP. “Every company has IP but the $64,000 question is: can you protect it legally to generate business advantage?”

“Most businesses will be very aware of any intellectual property that they’ve been able to register – patents and trademarks. But often the greater value is in copyright and database right in software, reports, designs, logos and websites”

Robin Fry, IP Partner, DAC Beachcroft

For Strachan, IP comes under several categories:

• Technology that’s novel and inventive can be protected by patents
• A new brand or business name can be protected by filing a registered trademark
• If you’ve created a new, aesthetically pleasing product, you could look to protect its appearance by filing a registered design application
• Copyright exists on works of art, writings, computer software code and music

Practical steps

Ask yourself two questions: “What IP do I have?” and “Can I legally protect it to add value or create profit for the company?”

“IP protected legally is known as an IP right,” Strachan explains. This helps prevent others copying ideas to give you stronger market share and make your start-up more attractive to investors. “Speak to a specialist IP attorney. Most will offer a free initial consultation so it’s well worth taking advantage of this to properly establish the right IP protection for you.”

Be aware that value can lie in the less obvious areas of IP. Robin Fry, an IP partner at DAC Beachcroft, says: “Most businesses will be very aware of any intellectual property that they’ve been able to register – patents and trademarks. But often the greater value is in copyright and database right in software, reports, designs, logos and websites.” Here, there’s no registration but there are still important rights granted automatically in more than 170 countries worldwide. For tech companies, Fry points out, this is often where the key (or even only) value lies.

What about particularly problematic areas – for example, employees taking IP, patent protection and theft of data? “One of the areas most overlooked is ensuring that ownership is in the hands of the company,” Fry says. “This is the default position in the case of works created by employees, paid under PAYE, but not in the case of agency staff, freelance developers, unpaid interns, external creatives or even the company’s directors and shareholders.”

It’s vital to iron this out, Fry urges. “There’s rarely any dispute while the individuals are still working with the company but it can become a serious issue if the individual moves on. And certainly it can become a dominant issue some years down the line when, in any sale or investment round, the business is being examined.”

To deal with these problems, Strachan suggests businesses “ensure that contracts of employment or engagement contain appropriate clauses to both assign IP generated by the employee and contain a duty to protect any IP owned by the company.”

Protecting your interests

Damian Evans, finance director at Go Air Trampoline Park, points out the need to be robust with IP: “A competitor brand put a case in against us, arguing we were using their brand. We didn’t think this was true, but changed the name to minimise fallout. They then put in a second claim against us, saying our new name was too similar to another type of park they owned.” At this point, Evans says, “our lawyer said it was a spurious claim and they were doing this to slow down our entry to market.”

The take-out from this is to know what counts as IP, and what doesn’t. “It is a grey area,” Evans acknowledges. “You can have a Polo car, Polo mints and a Polo shirt, but Volkswagen, Ralph Lauren and Nestlé don’t take lawsuits out against each other.” The key here is that the products are in very different markets and there’s no likelihood that consumers will be confused.

Fry is emphatic. “Follow the examples of Disney, easyGroup, Chanel and other major brand owners: be forceful and become known for always pursuing infractions of your intellectual property rights.”

The five laws of IP

1. Establish your ownership: “Just because something appears free on Google, doesn’t mean it is free,” says Southgate. “Always register a trademark in your target territories for both your business and any key product or service offerings,” adds Fry. “Don’t assume that registration of the company name is enough.”
2. Be clear about what you own, and what you don’t: IP can have more than one owner. It can change hands if it is sold on; it’s not exclusive to the originator. There is no copyright on names, so you can have the same name for a product if it’s in a different market, but the test is whether the customer might reasonably get confused or if another company believes you’re trading on their name if the product is too similar.
3. Keep your IP safe: “Don’t disclose your innovative idea to anyone,” says Strachan, “except with a confidentiality agreement until your IP strategy has been settled and any patent applications and registered design applications have been filed. Any non-confidential disclosure before then can invalidate your intellectual property protection.”
4. Check what else is out there: “We had a client who didn’t check they were breaking someone else’s IP by having a too-close name,” says Paul Stevenson, MD of advertising and marketing agency Wall to Wall Sunshine. “They received a cease and desist order and their revenue dropped £50,000 a week.” This is easy to avoid, says Stevenson. “It’s relatively inexpensive to search the market and see if you’re likely to be infringing someone else’s IP.”
5. IP can be a grey area. Ask yourself – will the customer be confused by a product, service, design or brand? If the answer is yes, then seriously consider your IP position.

Evans Entwistle partner Damian Evans was interviewed for this article in his capacity as Finance Director at Go Air, a UK leisure group. The article originally appeared in Royal Bank of Scotland’s Content Live by Mark Blayney Stuart, copyright RBS.