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Matched Legal Cases: ['art 1', 'art 2', 'art 3', 'art 4', 'art 5', 'art 6', 'EWCA ', 'art 5', 'art 6', 'sui generis', 'sui generis']

A Handbook of Intellectual Property Management: Protecting, developing and exploiting your IP assets | Adam Jolly, Jeremy Philpott | download
Strona główna A Handbook of Intellectual Property Management: Protecting, developing and exploiting your IP assets
* Leading innovators and IP experts provide advice on a range of topics including: the value of IP; European Union vs US law; buying and selling IP rights; action against counterfeiting and piracy
0749442239
9781417583980
patent495
copyright211
patents199
protection186
invention185
trade mark144
organization122
intellectual property117
licensing94
parties91
trade marks88
registration81
inventions78
patent office78
infringement70
designs69
technical66
counterfeiting62
dispute60
licence60
ideas58
costs57
protect56
Intellectual Front Board a/w
Protecting, developing and
exploiting your IP assets
This information is current as of April 2004. Every possible effort has been made to ensure
that the information contained in this book is accurate at the time of going to press, and the
publishers and authors cannot accept responsibility for any errors or omissions, however
caused. No responsibility for loss or damage occasioned to any person acting, or refraining
from action, as a result of the material in this publication can be accepted by the editors, the
© Kogan Page and Contributors, 2004
The right of Jeremy Philpott and Adam Jolly to be identified as the authors of this work has
The views expressed in this book are those of the author, and are not necessarily the same as
those of the Patent Office.
ISBN 0 7494 4223 9
A CIP r; ecord for this book is available from the British Library.
A handbook of intellectual property management : protecting, developing and exploiting
your IP assets / consultant editors, Jeremy Philpott and Adam Jolly.
1. Intellectual property. 2. Intellectual capital--Management. 3. Technological innovation-Management. I. Philpott, Jeremy. II. Jolly, Adam.
K1401.H36 2004
346.04’8--dc22
Printed and bound in Great Britain by Thanet Press Ltd, Margate
Ron Marchant, Patent Office
Part 1 Establishing rights
Ian Harvey, CEO, BTG
Chris Vigars, Partner, Haseltine Lake
Hard rights versus soft rights
Dr Jeremy Philpott, Patent Office
Two versions of IP: EU and US
Dr John Collins, Partner, Marks & Clerk
Part 2 Building the portfolio
Lawrence Smith-Higgins, Patent Office
Searching IP databases
John Gray, Senior Patent Attorney, Fitzpatricks
Drew Lamb, Urquhart-Dykes & Lord
_____________________________________________________ CONTENTS
Outward licensing
Guy Reeves, Chairman, Institute of International Licensing
John D Emanuel, Chairman, Pax Technology Transfer Ltd and
past chair, Institute of International Licensing Practitioners
John Lawrence, Barker Brettell
Billy Harkin, CEO, Science Ventures and Chairman, Projected
Part 3 IP in the growth cycle
Invention to business
Linda Oakley, ideas 21
Implications of trading on the Web
Stephen Kinsey, Wildbore & Gibbons
David Wardell, Chairman, Institute of Patentees and Inventors
Dr David Secher, Director of Research Services, University
Julian Wheatland, Corporate Development Director, Edengene
Alan Fiddes, Urquhart-Dykes & Lord
Antony Rumboll, Bristows
Part 4 Issues by sector
Stephen Morris, IP Manager, Ricardo plc
John Howkins, Director, ITR
Robert Franks, Franks & Co
Hugh Dunlop, Partner, R G C Jenkins & Co
Reuben Jacob, Partner, R G C Jenkins & Co
Part 5 Defining rights
Know-how, trade secrets and confidentiality
Part 6 Enforcing rights
What protection to expect
Alan Wilson, Partner, Barker Brettell
Geoffrey Adams, adviser, design protection law and practice
Michael Blakeney, Director, Queen Mary Intellectual Property
Research Institute, University of London
Steven Matz, Senior Analyst, ICC Counterfeiting Intelligence Bureau
Brian Conlon, Federation Against Copyright Theft (FACT)
Peter Roedling, Manager, Intellectual Property Insurance, Hiscox
Bruce Alexander, Partner, Boult Wade Tennant
Just having this book puts your business ahead of many others. The number of businessmen and women who know nothing about even the basics of intellectual
property (IP) is truly frightening. Too many businesses build reputations without
protecting their brands. Too many businesses invest in costly R&D when cheaper
technical solutions could have been licensed-in or read from a patent database for
free. Too many businesses let others run away with their creative material, unaware
that they have copyrights they can invoke; or they unwittingly infringe the copyrights of others.
Those who know how to lever their creative potential to best effect in the
market place are in the minority – but they are running rings around everyone else.
For some time we have had an information-led economy, where trading in
knowledge and communication has outpaced trade in conventional tangible
‘things’. But the new economy goes beyond that, into the intangible realm of ideas.
Innovation is the buzzword in business and government today, because those who
innovate are those who stay ahead of their competitors.
The variety of IP rights, and the different ways in which they work, can be
bewildering at first. But even a basic grasp of some of the key issues can mean the
The broad range of expert opinions in this book means that there is something
for everyone here. Take the authors’ advice as the starting point to finding out more
about the IP rights that matter most to your business, be it copyright in your
software, databases, artwork or music; trade marks for your emerging brands;
design rights for your products and their packaging; or patents for the new technology in your products or processes.
Your business ventures prosper when you can minimize risk and maximize
opportunities. IP presents both – it is up to you to understand the pitfalls and
trophies in your own IP landscape and get the best deal for yourself. Good luck!
Intellectual property is at the heart of competitive strategy, argues Ian Harvey, CEO
of BTG, the intellectual property and technology commercialization company.
Today, intellectual property (IP) underpins between 50 and 70 per cent of a
country’s private sector gross domestic product (GDP), so it is often the
difference between commercial success and failure. Because we now
operate in a global village, when anything can be produced almost anywhere
with instant communication, what you own is what you have thought about,
created and designed. It is inevitable that the core of a company will become
its intellectual capacity.
That intellectual output is protected by formal intellectual property
rights. Patents, trade marks and copyright are powerful competitive advantages, because individuals and corporations own them and can enforce them
in the courts. Other competitive advantages are less durable: first to market
is easily eroded; price is open to attack; and design is easily lost.
It is striking how few senior managers really understand what intellectual
property can do for them. Even in technology companies, many chairman
and chief executive officers (CEOs) do not grasp the simple distinction in
patents between patentability and freedom to use. It is like not knowing the
difference between profit and cash flow. You do not have to be an accountant
to be a chairman or CEO, but you have to understand the fundamentals, so
you can ask the right questions. A patent gives its owner the right to stop
4 ESTABLISHING RIGHTS ______________________________________________
others from using an invention. It does not give the owner the right to use the
invention itself – a subtle but vital distinction. And if executives do not fully
grasp that a patent is just a ‘keep off the grass’ sign, how are they going to
raise more sophisticated points about using IP as a strategic tool?
Managers must understand that IP is a live asset that needs to be
managed like any other asset. It is going to be challenged, so organizations
need the resources to rebut those challenges. In the United States, executives
clearly understand what is happening in IP. They use it (sometimes abuse it)
and debate it. Elsewhere IP has a more ambiguous status. But to think it does
not matter is a wasted opportunity. We operate in a set of global IP systems.
If we are going to succeed, we had better use them to maximum advantage.
If we do not, everyone else will. You have to understand what the global IP
In fact, very few companies integrate IP and corporate strategy properly.
There are exceptions, such as IBM and the majority of the pharmaceuticals
industry. For IBM the headline figure is that IP generates US $1.5 billion a
year in royalties. What is more important is how organizations think through
their product strategy. Where is the IP going to come from? Should they
license their competitors? Do they develop and sell the technology themselves, or buy it in?
So, for instance, IBM licensed its leading-edge liquid crystal display
technology to a former competitor in Taiwan. Having low-cost high-quality
first production, as well as generating revenue from all its competitors, was
a better commercial proposition for IBM than producing screens itself. Such
a strategy depends on understanding what IP the organization has, finding an
edge and deciding whether to invent or buy technology. Most companies are
nowhere near this position. It takes between 5 and 10 years to evolve to
where an organization is really operating at full IP throttle.
For example, IP is often scattered throughout a company. No one knows
who owns it. No one knows what is there. Yet it is viewed as the crown
jewels. The thought of licensing it out is unthinkable, when in fact it might
Too often patents are filed just because an invention has been made.
Why exactly does the organization need one?
Is it to keep competitors out of the market, or is it to license competitors
to generate revenues?
Is it to build a portfolio?
Does the organization want to combine it with other technologies?
Does the organization make narrow filings of patents so it can defend
Does the organization have more limited resources, and is it thinking
about broader applications?
_________________________________ WHY INTELLECTUAL PROPERTY MATTERS 5
Once a patent has been granted, the next question is how it should be reinforced with trade marks. And for organizations in the copyright industry,
where technology is moving extraordinarily quickly in the digital world,
how can they adapt and take advantage? They do not want to find themselves defending a position from 20 years ago when the rest of the world has
moved on. It is a question of understanding how to use technology, trade
marks and copyright to be commercially effective in a rapidly changing
environment. Those who will win are those who understand where the IP
landscape is going. What can be defended and what cannot?
How to then build a portfolio depends on its objectives. In pharmaceuticals, it is important to have strong rights to a new chemical entity which the
company alone can sell. In electronics, companies are selling complex
pieces of equipment, which makes it likely that patents from outside the
organization will be involved. If there is to be freedom to use, there may well
be cross-licensing, so the company has the right to sell its product even
though it is using someone else’s patented technology.
A decade ago, cross-licensing for no value was commonplace. Today,
people are looking more closely at the value of each portfolio. There have
been instances where companies have lost hundreds of millions of dollars in
revenue because they did not understand the value of what they had. It might
be a case of a subsidiary unwittingly licensing patents held by other parts of
the company. This is a prime example of a situation where patents need to be
held centrally, so they are corporate assets and the company decides how
they are to be used to create shareholder value.
Another decision is whether to strengthen a portfolio by acquiring or
selling rights. This is a complex market. Like an Old Master painting, the
value of IP is hard to establish and depends on the buyer. Auctions are not
generally suitable: they work better when what is being sold is an easily
defined object with clear rights. Most IP is more complicated that that. So
when an organization is selling IP, it should look towards people or organizations to whom it will be very valuable. Revenues from IP licences are
almost as predictable as an annuity stream, with a high certainty of revenue
for many years, unless the whole industry changes.
Some IP rights have a time and a place. Some never work, because
complementary technologies do not yet exist to make them possible. So it is
better to have a number of different products, because it is hard to predict
which one is going to win. BTG aims to have 15–20 per cent of IP on its
books, for which it does not know what the commercial application is going
to be, but thinks it is really good technology which could be transformational. Its time has not yet come, although the organization reviews this
Do not pin your hopes just on finding lost treasure in the attic. The
fundamental question is how to use IP as a core strategy, and how to use it
6 ESTABLISHING RIGHTS ______________________________________________
to greatest advantage. That is where the real long-term value lies. Selling
for value is important, but putting it at the heart of a corporate strategy is
Ian Harvey is the CEO of BTG plc, the IP and technology commercialization company. He is chair of the UK government’s Intellectual
Property Advisory Committee. He became a director of the UK’s
Intellectual Property Institute in 1998 and its chair in 1999.
BTG creates value by investing in intellectual property and technology
development, and in early stage ventures. It realizes value through
technology licensing, patent assertion and disposal of equity investments. Through a multidisciplinary approach, it applies intellectual
property and commercial expertise, together with specialist skills in
science and technology, to create major product opportunities in the
health and high-tech sectors. BTG has commercialized important
innovations, including magnetic resonance imaging, multilevel cell
(MLC) memory, and Factor IX blood clotting protein, the first recombinant treatment for Haemophilia B. BTG operates through wholly
owned subsidiaries BTG International Ltd and BTG International Inc
in the UK and United States respectively. Further information about
BTG can be found at www.btgplc.com
A number of different rights may apply to innovations in products, processes
and services, says Chris Vigars at Haseltine Lake.
There are many different kinds of innovation: big and small, revolutionary
and evolutionary, practical and artistic, technical and intellectual. The one
thing that all kinds of innovation have in common is that they can potentially
be protected using intellectual property (IP) rights.
Several different kinds of IP right are available, each of which has individual characteristics, advantages and disadvantages. Registered IP rights
are secured through registration procedures with the appropriate authorities,
and include patents, trade marks and registered designs. Unregistered IP
rights, such as copyright and design right, exist automatically, but tend to be
more limited than registered rights. These rights will be discussed in greater
detail elsewhere, but their main characteristics are summarized below.
Patents are concerned with protecting technological inventions. Such
inventions typically provide advantages over existing technology. A
patentable invention usually exists where a technical problem has been
overcome, or where an innovative material, product or process has been
developed. As is discussed in more detail elsewhere, to be patentable an
invention must be new, involve an inventive step, and be industrially applicable. It is important not to overestimate the size of the inventive step
required to secure patent protection for an invention. Also, it can be advantageous to obtain broad patent protection outside the immediate application of
the invention. Such broad protection can lead to licensing opportunities, and
hence revenue, in non-core areas.
10 ESTABLISHING RIGHTS _____________________________________________
Registered trade marks (RTMs) deal with branding of products and
services, and normally involve the registration of a name or logo in respect
of certain classes of goods and services. It is possible to register some threedimensional and non-visual trade marks as well as names and logos. In order
to obtain a registration, the trade mark must be distinctive, and not
descriptive of the products or services to which it will be applied.
Registered designs protect appearance. Two-dimensional surface decoration, the three-dimensional shape of an article, computer icons, packaging,
and typefaces can all be protected by registered designs. Registered designs
are concerned only with appearance and not with function. For registration,
a design must be new and have an individual character which sets the design
apart from existing similar designs.
Copyright has the advantage that it exists automatically for original
creations in the artistic, musical, literary or dramatic arts. Copyright enables
the owner of the right to take action against someone who has copied the
creation. However, copyright is limited because in order to prove
infringement it is necessary to show actual copying of the creation. This is in
contrast to the registered rights mentioned above, where independent
creation can be the subject of an infringement action.
Unregistered design right is similar to copyright in that it exists automatically, and that there is a need to prove actual copying in order to show
infringement. Broadly speaking, design right serves to protect specific features
of the shape of an article, as will be discussed in more detail elsewhere.
It will be clear that a particular innovation may be protected by more
than one IP right. Relying on a ‘web’ of various rights, each of which
protects a different aspect, provides a robust form of defence against
competitors. The protection gained should be effective and enforceable, and
the cost of obtaining such protection must be balanced against the value of
the idea being protected. The different rights that could be available for
products, processes and services are discussed below.
Protecting a new product
The technical detail of the product, that is those details that give the new
product functional or structural advantages over similar existing products,
can be protected using patents. Technical details suitable for patent
protection include the materials from which the product is constructed, the
method of construction, and the devices and components included in the
product. Typically, a new product will feature a range of innovations that can
be protected using patents. There will, therefore, often be a number of
patents associated with a new product.
The appearance of the product can be protected using registered design,
copyright, and unregistered design right. The aspects of a product’s
___________________________________________ WHICH RIGHTS APPLY? 11
appearance suitable for design registration include distinctive overall shape,
and surface patterning.
The branding of the product can be protected using one or more registered trade marks. The product and model name, and the supplier’s name or
brand, can be protected in this way.
Protecting a new process
A process is a method for performing a task. For example, a method for
manufacturing devices, components or products, a method for handling
data processing, and a method of operating a product all come under the
umbrella term ‘process’. For manufacturing processes and data
processing, the novel aspects of the process can be patented. For example,
a new robotic painting technique for the automotive industry, or a method
for processing video data signals, could be the subject of a patent. To
qualify for patent protection, a process should have some technical character, and should not relate only to abstract ideas, such as business or
If the process can be used as a marketing tool, then registering the name
of the process as a registered trade mark could be considered.
Protecting a new service
New services are generally business-related ideas, and are more abstract
than the processes described above. For this reason, trade mark registration
and confidentiality should be relied upon. Branding a new service can often
be the most effective way to protect the service, by distinguishing it in the
consumer’s mind from similar services of other providers.
Example IP Strategy
That is the theory. Below are a realistic example of a new product, and
suggestions for an IP strategy to protect the product.
Consider a new mobile telephone, to be sold under a new brand name.
The developers have spent a lot of effort improving the antenna of the telephone to improve its sensitivity, and have designed a new combined display
and keypad. The telephone also handles incoming calls in a new way that
can conserve battery power. The telephone is constructed from an entirely
new, super-light material, which has been developed specifically for the
purpose, but which could be used for a variety of consumer electronics
devices. A new manufacturing technique has also been developed in order to
minimize wastage of the new material.
12 ESTABLISHING RIGHTS _____________________________________________
The IP strategy should aim to cover as many different aspects of the
protection of the new telephone as possible. Since a mobile telephone is a
relatively high-value product, with wide appeal, then the costs of obtaining
the full range of registered IP rights will be justified. Naturally, other products
and processes may benefit from a more limited use of registered IP rights.
For this new mobile telephone, the new brand name and model name will
be important to distinguish it in an already crowded market place. Protecting
the brand name and model name using RTMs should therefore be considered.
A major selling point for a mobile telephone is the way it looks. Design
registration should be sought for the overall look of the telephone, as well as
for some of the more significant parts. In addition, any new icons that are
used on the display may be protected by registered design.
Another major selling point of the new telephone will be its technical
advantages over its rivals. In the example, the improved antenna, the
combined display and keypad, the call handling techniques, and new manufacturing processes should be the subject of patent applications.
The innovative material should also be the subject of a patent application,
which is directed to the material itself, rather than to its use in a mobile telephone. Since the material has a wide range of potential applications, broad
protection should be sought to provide the opportunity for alternative sources
of revenue through licensing outside of the mobile telephone market.
Chris Vigars joined Haseltine Lake in October 1993, after gaining an
engineering science Honours degree from St Edmund Hall, Oxford
University. He qualified as a British Chartered Patent Attorney and
European Patent Attorney in 1997, and has been a partner at Haseltine
Lake since May 2000. Chris is experienced in all aspects of drafting
and prosecuting patent applications in many jurisdictions around the
world. He specializes in electrical and electronic inventions. For
further information contact cvigars@haseltinelake.com
Hard rights versus
Some IP rights arise automatically; some have to be registered. Some are easily
enforced; others require a mountain of evidence. Dr Jeremy Philpott of the
Patent Office explains how different rights apply in practice.
Intellectual property (IP) law encompasses a variety of rights that protect
creativity in its myriad forms with different remedies. Knowing what is
protected by each right, and what is required to employ each right, is crucial
to any business, innovator or artisan.
An easy way to distinguish the rights from each other is to recognize
those that are ‘hard’ and those that are ‘soft’. (See Table 1.3.1.) For those
who like something for nothing, the ‘soft’ rights appeal. These require no
registration, no fees and no formalities for rights to arise. Chief among these
is copyright, which is free and automatic as soon as any original musical,
dramatic, literary or artistic work is created. These four classes for copyright
protection can spread as wide as film, television, radio, Web sites, photographs and software. Similar protection extends to such things as databases,
although the rights against extraction and reutilization of the data therein last
only 15 years from creation or publication. True copyright for (for example)
an original song, painting or play lasts for the lifetime of the author, plus a
It is as well that the rights in such things arise automatically – what
photographer would have the time to formally register the copyright in each
16 ESTABLISHING RIGHTS _____________________________________________
Table 1.3.1 Hard and soft IPR
‘Soft’ IPR
‘Hard’ IPR (aka ‘industrial property’)
Unregistered trade marksTM
Trade secrets, confidential information
Registered trade marks®
and every shot he or she prints? Unregistered design right needs no explanation, and protects the external appearance of articles, be they artistic or
functional. Unregistered trade marks often provide businesses, especially
retailers, with protection in their good name and the reputation vested in
their brand for many years – and they do not even realize it.
As any business grows it will develop a body of proprietary information,
much of which is critical to its success, and valuable to its competitors. You
only need to ask yourself, ‘Would this information harm us if leaked or lost,
or benefit competitors if it was in their hands?’ and you will soon realize just
how many trade secrets your organization owns. Would a competitor not
love to have a copy of the customer list? Like a genie out of a bottle, once
these secrets are out the organization will never be able to get them back.
Has the marketing team blabbed about a new project in making promises to
customers? Suppliers might engage in idle chatter with their other customers
(your organization’s competitors) about what unusual raw materials your
organization is now ordering. Contractors and staff who have left might now
be working for the opposition; consultants know all the company’s weaknesses and might now be coaching its competitors. Can any organization put
a price on staff whose familiarity (‘know-how’) with its unique processes
means that they are more productive than any replacement could hope to be?
If the thought of all these ‘soft’ rights sounds too good to be true, there is a
fly in the ointment. In life you only get what you pay for, and in the case of the
‘soft’ rights the organization will have paid nothing to acquire them. This
means that if it is placed in the unfortunate position of needing to assert its
rights against an infringer, it will have an evidential hill to climb before it can
make a case stick in court. Does the right that it is claimed is infringed actually
exist, and if it does, to whom does it belong? If creative work is produced in the
course of employment, copyright in it normally belongs to the employer.
Conversely, if a company has paid a contractor handsomely to create some
artwork or software, but neglected to acquire copyright in the contractor’s
work, the contractor will retain ownership and be entitled to demand additional
fees if the company copies or adapts the work. The assumption that anyone
owns the copyright in what he or she consider to be his/her creation can be
misplaced, and having that assumption corrected in court can be expensive!
___________________________________ HARD RIGHTS VERSUS SOFT RIGHTS 17
Take for example the dispute between knitwear designer Shirin Guild
and her erstwhile business partner Eskandar Nabavi. After their business
relationship ended, Mr Nabavi continued to design similar knitwear, and
instructed a manufacturer, Havelock, to make his articles. Mrs Guild
sued Mr Nabavi for copyright infringement. The court did not believe
knitwear qualified for copyright protection as it was not a musical,
dramatic, literary or artistic work. Mrs Guild countered that her designs
were works of ‘artistic craftsmanship’, and hence qualified for copyright
protection. Not so, said the court: the act of mass production (even on a
limited scale) meant that the clothing had forfeited copyright protection
and qualified only for design protection. In the absence of a registration,
Mrs Guild had to fall back on unregistered design right, under which she
was powerless to prevent Mr Nabavi or Havelock from making the
knitwear if they paid her royalties.
On appeal it got even worse for Mrs Guild. The appeal court
decided that as her designs were based on old Iranian peasant clothing
they lacked originality and hence were not deserving of protection at
all! Even if differences between the modern knitwear and the old traditional clothing that it echoed could confer ‘originality’ on the designs,
it was not at all clear that Mrs Guild was the sole creator, given the
creative input of Mr Nabavi and staff at Havelock.
(The case in question is Guild v Eskandar [2001] FSR 38 p645,
further appealed as Eskandar Nabavi v Eskandar Ltd and Shirin Guild
[2002] IPLR 6 [2002], EWCA Civ 316, Court of Appeal.)
No such uncertainty with the ‘hard’ rights. The fact that there is an entry on
a register, which describes the nature of the right and lists the name of the
owner(s), means that no question about the existence or ownership of the
right can arise. A further advantage is that the ‘hard’ rights give remedies
even where the alleged infringer bleats, ‘But what I have done is a coincidence, I never copied from you!’ Ignorance of another’s registered rights
will never get someone off the hook, which is all the more reason to check
registers of trade marks and databases of patents at regular intervals.
Conversely, to make an allegation of infringement stick with regard to a
‘soft’ right like copyright, it is necessary to prove copying – that the
infringing product post-dates, and has its genesis in, the original. Faced
with a defence of ‘But I made mine first – it’s yours that is the copy!’ or ‘It’s
a coincidence!’, the organization has to bring the necessary evidence to
convince a court that its rights are really being infringed.
Just because a right is displayed on a register it does not make it
absolute. Ownership disputes can break out occasionally, just as they would
18 ESTABLISHING RIGHTS _____________________________________________
over any other type of property, especially when companies merge, dissolve,
are sold or liquidated. Despite registration, trade marks can become unenforceable if they are not used in the market place for a period of five years or
more (for instance, if a later trader adopts or recycles another’s defunct
mark, there might be no infringement). Patents can be rendered invalid,
most usually if the invention is shown not to be as new as was first believed
when the patent was granted. The demise of a patent after grant is thankfully
a very rare event, because certainty is what underpins the patent system. But
no patent office can be said to know about every invention or disclosure ever
made, so when it grants a patent for an invention in good faith, there is
always a chance that at a later date a witness will come forward with
evidence which shows that prior to the patent’s filing date, the same or a
similar invention was in the public domain. This would even include the
patentee’s disclosure of the invention prior to patent filing, if he or she did so
without an obligation of confidence.
You might come across the term ‘industrial property’ which, unhelpfully, has the same initials as ‘intellectual property’. The former is the
antique term for the registrable or ‘hard’ rights, whereas the latter term
encompasses both ‘hard’ and ‘soft’ rights. More detailed explanation of the
nature of all of these rights appears in Part 5.
It is also worth noting that Table 1.3.1 shows (in bold italics) the only
two IP rights for which criminal sanctions are available in addition to the
civil remedies. The criminal sanctions of fines or imprisonment are provided
for wilful and commercially damaging infringements of copyright material
(‘piracy’) and registered trade marked goods (‘counterfeiting’).
Prosecutions are often brought by trading standards officers or the police,
rather than the rights owners, against criminal gangs manufacturing and
selling pirated computer games and software, pirate music and films, counterfeit clothing, fake cosmetics and the like. (These issues are discussed in
more detail in Part 6.)
Commercial disputes in relation to copyright and registered trade marks
are resolved using civil law remedies, primarily injunctions and damages. It
is important to remember that for registered designs and patents the civil
sanctions are the only remedies available for infringement. No one ever
went to prison for infringing a patent!
This book does not cover the sui generis rights which are offshoots of
modern IP law. Such rights are related, but of interest only to narrow market
sectors. For example, there is a short-lived ‘soft’ right for semiconductor
topographies, similar to an unregistered design right. For plant breeders
seeking to protect their investment in R&D there is a ‘hard’ sui generis
‘plant varieties right’ which is similar to a patent. In a way analogous to
trade mark law, producers whose foods or drinks bear a place name that has
become synonymous with the kind, type or quality of the goods (Parma
___________________________________ HARD RIGHTS VERSUS SOFT RIGHTS 19
ham, Champagne, Camembert cheese and the like) can acquire protection
through a ‘protected geographical indication’ (PGI). Once a specification is
registered describing what qualities a product must have to be allowed to
bear the place name in the PGI (for example, the type of processing and
location), any product meeting that specification is entitled to use the PGI.
Just one parting thought – seatbelts do not prevent car accidents, they
only protect people in the event of disaster. So it is with IP rights. Most of the
time the fact that an individual or organization possesses them will not seem
to make any difference, but in the event of a crisis (infringement) they are
the difference between potentially crippling financial loss and the protection
of anyone’s dearest asset: their creativity.
Jeremy Philpott joined the Patent Office in 1996 as a patent examiner,
and moved to marketing in 2000. For the last three years he has
handled the Patent Office’s PR brief.
Jeremy raises awareness and understanding of the Patent Office and of
IP through his media work, regularly giving interviews on radio, television and to the press. He has been acting as an IP advisor to the
producers of the increasing number of television and radio shows
about inventions or IP. He works closely with the Patent Office’s PR
agency to develop media campaigns and exploit opportunities as they
arise in the press. Wherever an IP story breaks in the media, or there is
a consultation to publicize, Jeremy is always on hand to explain the
issues and clarify the law.
For more information about any aspect of IP visit www.patent.gov.uk
or call 08459 500 505.
Two versions of IP:
Dr John Collins of Marks & Clerk highlights some fundamental differences
between IP practice in the European Union and the United States.
The EU and the United States are two of the most commercially important
markets in the world. Although built on the same concepts, the intellectual
property systems of the EU and the United States have evolved to create
some fundamental differences between the two. An intellectual property
(IP) owner can only realize the full potential of IP assets through an understanding and respect of these variations.
Patent protection for inventions is available in the EU via two different routes
– national patents administered by national patent offices, and European
patents administered by the European Patent Office (EPO), which is based in
Munich. Although procedures vary between national offices, the substantive
law is aligned with the EPO. Although European patents are granted centrally
by the EPO, they comprise a ‘bundle’ of national patents. That the EU
currently has no unitary patent system is a major source of debate and consultation that has been carrying on for years. While a framework has now been
agreed there are still obstacles and patent owners will have to wait until the
next decade until an unitary system is likely to be operational.
____________________________________ TWO VERSIONS OF IP: EU AND US 21
Patent law in Europe is based on a ‘first to file’ principle, wherein the
person entitled to a patent for an invention is the first person to file the patent
application. However, the US patent system is based on a ‘first to invent’
system. So if two people have filed patent applications for the same invention,
evidence such as inventors’ notebooks is submitted to determine who derived
the invention first. The keeping of notebooks and invention records by
inventors can therefore prove essential, and is a practice that should be
observed by anyone looking to register a patent in the United States.
Under EU law a patent application must be filed before any public
disclosure of the invention. However, under US law a patent application can be
filed up to 12 months after disclosure of the invention by the inventor. This fallback position can be useful if an inventor has inadvertently disclosed the
invention before a patent was filed. At least valid patent protection in the United
States can be obtained even if EU protection is lost. In general, inventors must
think whether patent protection is required well in advance of disclosure, to
give enough time for the preparation and filing of a patent application.
The United States is much more liberal than the EU when it comes to
stipulating what can and cannot be patented. One key area is medical and
surgical methods. The EU specifically prohibits the patenting of medical
and surgical techniques whereas the United States has no such limitation.
Another key area is business methods. The EU only allows patents to be
granted for inventions that are a ‘technical solution to a technical problem’.
In contrast, the United States allows patents to anything ‘new and useful’,
and thus patents for pure business methods are allowed. This is a major
difference in the patent laws, and one that can have a significant commercial
impact. Companies cannot ignore the possibility of protecting their business
methods in the United States even if they are not protectable in the EU.
The procedures for obtaining patent protection in the United States are
somewhat more arduous than those in the EU. The applicant and his or her
representatives have a duty of good faith and candour to disclose in the
patent specification the best mode of making the invention that is known to
the inventor. No key steps or features can be left out. Also, publications,
products and the like that might have some relevance to the validity of the
patent – known as prior art – must be notified to the patent examiner. Failure
to comply with either of these requirements can render the patent invalid. If
patent protection is to be sought in the United States, applicants must be
open with their advisors, disclose all relevant material about the invention
and the prior art, and be prepared to be patient!
Trade mark protection can be obtained in the EU as a unitary EU trade mark
registration or as an individual national trade mark registration. In the EU,
22 ESTABLISHING RIGHTS _____________________________________________
trade marks can be registered on the basis of an intention to use the mark
when no actual use of it in the EU has yet taken place. The registration can
be attacked on the basis of non-use only when the mark has not been used for
a five-year period. In contrast, the US registration system is based on the
requirement to use the mark in commerce in the United States before registration. Trade mark owners in Europe can circumvent this requirement by
basing the US application for registration on a home registration in the EU.
However, the renewal of the US registration requires a declaration by the
proprietor of the mark that the mark has been used in commerce in the
United States during the previous 10 years for the registered goods or
services. If it has not been used for some goods or services, protection for
these has to be surrendered. The effect of this is to keep the scope of US
registrations narrower than in the EU, thus reducing the likelihood of
potential infringement. Therefore, a strategy for trade mark registration is to
seek broader speculative trade mark rights in the EU and more targeted trade
mark rights in the United States.
IP rights in designs are registered in the United States as design patents (as
opposed to utility patents for inventions), whereas in the EU designs can be
registered as unitary EU registered designs or as separate national registered
designs. Designs that can be registered are more restricted in the EU than in
the United States, where almost any new design is registrable. In the EU a
number of designs are excluded from protection, including designs that must
fit with other parts (the ‘must fit’ exclusion), designs dictated solely by technical function, and designs that are not normally visible during use (for
instance, interior parts). However, the protection afforded to EU designs is
broader than that provided to US designs. In the EU protection extends to
any article bearing the design, whereas in the United States the protection is
limited to a claimed article bearing the design. Since the costs of obtaining
EU design registration are very low, design owners are strongly recommended to make use of this registration procedure to protect their IP rights in
In both the United States and the EU, copyright exists as soon as a copyright
work is created. There is no requirement for registration to obtain this right.
However, in the United States there is a copyright register, and before copyright is enforced it is a requirement that the copyright be registered at the
Copyright Office (part of the US Patent and Trade Mark Office). There are
____________________________________ TWO VERSIONS OF IP: EU AND US 23
also additional benefits to registering copyrights, which include the establishment of a copyright date and the right to statutory damages and
attorneys’ fees in certain circumstances.
It is widely acknowledged that the cost of litigation in the United States is far
higher than in the EU. There are also wide variations in the cost of litigation
in the EU, since for patents and copyright there is no unitary EU, granting
and enforcement system. National courts implement national procedures
with their inherently different cost structures. In the EU, specialist courts
and judges handle IP litigation. In contrast, in the United States IP litigation
is handled by district courts with no specialist judges. In fact it is enshrined
in the US Constitution that parties to litigation have the right to a jury trial.
Thus, a jury will usually try even highly technical patent litigation.
However, the damage awards in US litigation are very much larger than
those in the EU, and attorneys who are prepared to work on a contingency
fee basis are more prevalent.
There are many more pitfalls in obtaining and enforcing IP and particularly
patents in the United States than in the EU. However, it has to be remembered that, in view of the market size of the United States, the potential
benefits are high. The EU does not yet have truly uniform IP laws, and
while there is continuous movement towards harmonization, it has been
painfully slow. Until there is harmonization, the cost of obtaining patents
across the EU will remain high. Even though the cost of enforcement of IP
is generally lower in the EU than in the United States, the lack of unitary
enforcement for patents and copyright imposes fragmented enforcement
requirements on IP owners.
Dr John Collins is a partner at Marks & Clerk Patent and Trade Mark
Attorneys, Europe’s largest firm of intellectual property specialists. For
further information contact: Jcollins@marks-clerk.com t: 020 7400 3000
Intellectual property is an integral part of creating brand value, says David
Haigh, CEO, Brand Finance plc.
The value of brands and trade marks
Brands can be sold, transferred or licensed, quite separately from the related
product manufacturing capability. Although brands form a large part of the
value of most organizations, a brand itself has no legal definition and is not
the subject of a single identifiable right.
The visual identity of a brand incorporates its name, logo, get-up and
design. Trade marks, copyright, design rights and common law can protect
these factors. However, on their own they do not create the value of a brand. A
brand’s ability to generate earnings is a result of the values and attributes that
consumers, employees and other stakeholders attach to the visual identity.
This is often referred to as brand equity. These perceptions are created and
nurtured by good management, skilful marketing and careful implementation.
A company can therefore own and protect certain aspects of a brand, but
other factors reside in the minds of consumers. In reality, the benefits that
can be derived from a brand ‘follow’ a transfer of ownership or the right to
use the associated trade marks. It is not possible to separate the trade mark
and other aspects of visual identity from the related consumer perceptions.
This is reflected by the frequent use of the term ‘the trade mark and associated goodwill’ in licensing agreements.
The fact that a brand consists of more than just visual identity, or a label,
is well illustrated by the different results between blind tasting and branded
_________________________________________________ BRAND EQUITY 25
tasting of soft drinks. In blind tasting, Pepsi tends to outperform Coca-Cola.
Once the brands are known, the preference is reversed. In instances such as
this, the preference for one product over the other is clearly attributable to
the perceptual components of the brand.
Brand preference creates value as a result of:
higher volumes;
reduced volatility in earnings streams;
new earnings streams through brand stretching;
lower staff recruitment and retrenchment costs and the ability to attract
high-quality recruits;
better trade terms;
lower finance costs.
During the last decade, brand valuation has become a mainstream business
tool, used for purposes including value-based marketing, merger and
acquisition planning, and recognition of intangible assets on company
Marketing has traditionally operated independently from the rigorous
financial evaluation that is used for other investments, and this situation still
exists in many organizations. In a worst case scenario, it can result in bad
decision making and poor company performance. Due to a growing realization of the importance of brands as value drivers, leading companies are
increasing their understanding of how their brands impact on their business
model. Financial analysis can then be used to estimate the expected and
actual return on marketing investment. Value-based marketing techniques
can also be used for the purpose of brand portfolio reviews, brand
performance tracking and budget allocation.
Earnings, tax and borrowings
Trade marks are increasingly being licensed, both internally within large
multinationals and to third parties. Brand valuation allows a realistic set of
charges to be determined. These charges reflect the value of the asset being
licensed. The primary benefit of a trade mark owner carrying out a detailed
brand evaluation prior to entering into a licensing agreement is to ensure that
full value is extracted from the agreement. An additional benefit in the case
of internal licensing is that the brand evaluation supports the selected royalty
rate for tax purposes.
26 ESTABLISHING RIGHTS _____________________________________________
As tax authorities have become aware of the increasing significance of
brands and intangible assets in a company’s wider valuation, both assessors
and brand owners alike expect royalty rates to be paid or received where
those intangible assets are used. Companies need to gauge how most effectively to gain value from their intangible assets while minimizing tax
payments. The domicile of the brand needs to be carefully considered, as
does the royalty rate charged for its use.
The continued recognition of brands as assets has increased the opportunity to use them to back specific borrowing lines. This is especially
prevalent in the United States where companies like Disney have borrowed
large sums against their brands.
There are some components of brands that lend themselves to different types
of legal protection, namely names, symbols, logos and strap lines. Different
forms of legal protection are available for each component. As a result, a
brand owner must rely upon a mixture of trade mark, copyright, design right,
common law and codes of practice for legal protection. These must be
combined in order to be able to evaluate the level of legal protection enjoyed
by a brand as a whole. Sub-categories such as colour, shape, sound and
design must also be considered within each component.
Although a brand might include a number of protectable rights, trade
marks are flexible commercial tools on which to base licensing and merchandising rights. Because trade marks have defined use classes, they lend themselves to clear definitions of rights by jurisdiction and product type.
Although a trade mark might not be registered in the UK, it does not
mean that the unregistered mark has no protection. If the brand owner has
established recognition in an unregistered name by use, to the extent that
there is commercial goodwill arising from it, the owner is entitled to protect
the goodwill at common law by an action in passing off.
Brand equity, the perceptions associated with the brand in the minds of
consumers, is not entitled to legal protection. These perceptions are influenced every time the consumer has any contact with the brand, be it a direct
experience with the product, advertising or other media exposure, an interaction with a representative of the brand or word of mouth. This component
of a brand is ‘owned’ by the consumer. As a result the underlying equity of a
brand, the aggregation of such perceptions, is constantly shifting.
The successful creation of brand value requires a combination of skills.
IP has to be properly registered, controlled and protected. Skilful marketing
is required to build and protect brand equity. Financial analysis informs the
allocation of resources and tracking of brand performance. Tax planning is
_________________________________________________ BRAND EQUITY 27
required to ensure that a tax-efficient structure is determined for legal and
economic ownership of trade marks and transfer pricing.
In many organizations, these distinct skill sets reside in separate silos.
The parties involved have different reporting lines and functional objectives
that might not be aligned to those of the brand. This explains the many
examples of dysfunctional brand behaviour. Examples include giving the
rights to use valuable trade marks to joint ventures, or third parties, for little
or no consideration; tax structures being ignored by operating companies;
and brands being launched in markets without trade mark protection. The
best solution to these issues is centralized brand ownership and
management. The grouping of the required skills in a central, IP-focused
company is the best method to facilitate effective brand management.
‘Brands’ are often said to be the most valuable assets of modern companies.
Trade marks are the foundation and the legally transferable core of what is
known as a ‘brand’. It is these specific intangible assets that are increasingly
being moved, traded and licensed. Central management of IP is a more efficient way of managing these powerful legal properties, and also offers
strong tax advantages if well planned.
Beneath central IP management lies the ability to credibly value trade
marks and associated goodwill for both capital and income tax purposes.
Every IP practitioner should understand what is being valued and the means
of valuation. Armed with this, practitioners will be in a position to control
strategic decisions and generate significant value for their employers.
Brand Finance plc is the world’s leading independent brand valuation
consultancy. It advises strongly branded organizations, both large and
small, on how to maximize shareholder value through effective brand
management. Brand Finance now has a presence in eight countries,
including Brazil, Hong Kong, Spain, the UK and the United States.
It has developed transparent and accessible brand valuation methodologies grounded in leading-edge marketing and investment practice.
Brand Finance specializes in a range of services designed to
maximize value in marketing and branding. These bespoke services
include brand valuation, tracking, measuring, economics, strategy
Brand Finance works for a wide range of blue-chip clients,
conducting national and international brand valuation and strategy
28 ESTABLISHING RIGHTS _____________________________________________
assignments. Sectors covered include alcoholic beverages, automotive, banking, confectionery, information technology, insurance,
food and telecommunications. For further information contact
IP is a major factor throughout the innovation process, not just at the end,
argues Paul Leonard of the Intellectual Property Institute.
Contribution of IP to innovation
The DTI defines innovation as ‘the commercial exploitation of good ideas’.
Good ideas alone do not equal innovation. It is generally accepted that the UK
is very good at generating good ideas, but less impressive when it comes to
their commercial exploitation. One indicator is the fact that the UK hits way
above its weight in citations in internationally recognized journals of physical
science, biological science and medicine (third after the United States and
former Soviet Union in total citations, and easily first if one corrects for population), but is well behind the United States in industrial productivity.
The IP system is not always a major factor in the generation of good
ideas, particularly at the early, revolutionary stages of new technological
development. Many of the very best ideas came about with no regard for
patent protection, for example. It is certain, however, that the patent system
plays a vital part in the commercial exploitation of those ideas, and that
patent protection has been necessary to grow the often major companies and
industries that emerged from them. It is also certain that research to provide
new and improved products and processes costs money, and that the
investment necessary to provide for this could often not be made without the
IP system, for a broad range of industries. The financial contribution from
commercial sources (often IP-generated) to academic endeavour within the
university sector should also be recognized.
30 ESTABLISHING RIGHTS _____________________________________________
Successful branded goods companies, of which the UK has a significant
number, could not justify their major investment in brand creation and
support (often much larger than the R&D investment in creating the
product) without IP protection for their trade marks. Much of the creative
industry sector, from Andrew Lloyd Webber musicals to computer games
software companies, would not exist without copyright protection.
Innovation depends upon a number of interrelated factors, and optimizing the climate for innovation is complex. The existence of an effective
IP system is an essential, but not sole, requirement for successful innovation.
It will not necessarily spur an increase in innovative activity in isolation
from other, equally important, provisions.
I believe that a major gap in our knowledge is a very simple understanding of just how important IP is to the UK economy. If this were to be
better understood, much else would flow from it. For example, several years
ago the DTI published data showing that two-thirds of the market value of
UK quoted companies was of ‘knowledge-based companies’. Knowledge
generates IP.
It is useful to examine what factors contribute to the establishment of an
ideal climate in which to innovate, assessing how the IP system relates to
these and how it can best promote them. If we look at 10 major factors, for
example, IP rights are relevant in the following ways:
the competitive cost of labour;
the competitive cost of, and access to, capital (certainty/understanding of
IP position);
the competitive cost of raw materials;
positive tax provisions (including IP licensing and technology transfer);
a strong scientific/technical/creative base (with effective IP dissemination);
minimal regulatory burden;
a risk-embracing/entrepreneurial culture (which requires confidence in
the legal position);
a positive political climate that is technology-embracing;
positive legal provisions (effective IP law and enforcement);
strong corporate management and leadership (understanding the role of
IP and strategy).
Innovation can loosely be described as a three-step process:
research/invention, development, and commercial exploitation (including
industry-wide diffusion). IP is often regarded as a factor that impacts mainly
at the exploitation end of the innovation process. However, the above list
demonstrates that IP is a major factor throughout the process, and perhaps
most important in the middle phase, since this is where most of the financial
___________________________________________________ INNOVATION 31
risk occurs. In many industries there would be no investment if there were
no patents to protect the invention and its subsequent commercialization,
trade marks to protect the brand name, or copyright for the creative and
‘Perfecting’ the law so that it impacts positively across the innovation
process is problematic for many reasons, but three major factors are:
difficulty in achieving the right balance between the IP owner’s rights
and the benefits to society at large (through freedom of information,
competition and so on);
difficulty in defining what merits protection (especially with the advent
of new technologies);
difficulty in rationalizing global protection (in the face of legal, social
and market differences).
Some examples of areas that would benefit from work to develop such
knowledge and understanding are:
IP and international trade and competition;
IP valuation and benchmarking (including availability of data);
access to litigation and enforcement (cost, speed and effectiveness);
IP management and exploitation (benchmarking and best practice);
the impact of IP on developing economies (with differing effects at
different levels of economic development);
IP regimes in the light of new technology;
IP harmonization on a regional and global scale.
It is striking that business people, government officials and legislators in the
United States have a much better knowledge of how the IP system works and
its importance to the economy than do those in the UK. There is a good case
for a long-term awareness programme in schools and universities to upgrade
the basic knowledge of IP. A parallel might be the programme to improve
entrepreneurialism through the schools programme initiated in the 1980s.
The very positive impact of this is now becoming quite visible in the much
more entrepreneurial graduates from our universities, but it has taken 15
years to give real results.
I firmly believe that the UK depends very heavily upon its ability to innovate
to maintain economic success. The UK is well placed in this regard, since it
has world-class strength in its creative, artistic, scientific and technological
resources. The IP system plays a key role in turning these creative and
32 ESTABLISHING RIGHTS _____________________________________________
inventive resources into commercial success and economic competitiveness. We believe, therefore, that the UK should strive to take a lead in
developing our knowledge and understanding of IP law and its implementation in the global arena.
Dr Paul Leonard is Director of the Intellectual Property Institute, which
aims to promote awareness and understanding of IP law (with particular
emphasis on its economic and social impact), informing policy decisions
and debate, through high-quality independent research. He is also
chairman of the IP Awareness Group, an independent body dedicated to
increasing awareness and understanding of IP. For further details contact
1st Floor, 36 Great Russell St., London WC1B 3QB; tel: 020 7436 3040;
fax: 020 7323 5312; Web: www.ip-institute.org.uk
____________________________________________________________ 33
34 ____________________________________________________________
36 ____________________________________________________________
Avoid costly blunders by running regular checks of what intellectual property (IP)
you own, says Lawrence Smith-Higgins of the UK Patent Office.
Finding out what IP you own, and what you do not own, is one of the most
reliable ways to reduce risk. A comprehensive audit of this kind may
require a team of experts specializing in the various areas of IP, but a
simple IP audit can be done by almost anyone if he or she knows what
First there is the ‘internal’ audit, used to identify IP for management
purposes. The need here is to focus on the most important areas, and
Has your organization (or have you, as an individual) sufficient
protection where it matters most?
Has your organization IP that is redundant?
If others use your organization’s IP, what are the terms?
Do contracts with employees or subcontractors adequately cover
Has your organization proper procedures when disclosing confidential
38 BUILDING THE PORTFOLIO __________________________________________
Then there is the ‘external’ audit for identifying third-party IP:
Does your organization use or intend to use third-party IP?
Is the IP properly protected?
Are proper licensing agreements in place?
What precisely has been licensed?
Is it being fully exploited?
Is it possible to get similar IP free?
Are regular searches conducted of IP databases?
These last two points can save plenty of money. If an organization is looking
to buy in technology, it should not buy from the first company that has what
it needs: some research should be done first. Check in patent databases to
find a range of suppliers, and let them beat each other down on price. Indeed,
some of the relevant patents might no longer be in force, so it might not even
be necessary to buy a licence to copy the technology (although buying it in
from the original inventors might still be cheaper).
A full audit will include all forms of IP, both ‘hard’ and ‘soft’. The trick
is to identify what IP exists and how to protect it effectively.
Checking what IP the organization owns
Businesses generally spend a lot of time and effort on names: the right name
for the business or product could help it stand out from the crowd, while the
wrong one could place it in a legal dispute. How important is the name of the
company, and is it worth protecting with a registered trade mark (RTM)? If
there are RTMs it is worth checking that procedures are in place to ensure that
they are kept in force. Never overlook the obvious! One company that
recently reviewed its RTM discovered that at the time of a management buyout all assets had been transferred to the new management with the exception
of the RTM. It did not own the company’s main trade mark, and the registered
owner was invoicing it for the renewal fees on the right to use it!
What about product names? A full IP review of the business might
uncover other unexploited assets in the form of product names that have not
been registered as trade marks. This could leave such products open to abuse
by other companies. A more serious risk is the organization’s inadvertent use
of another company’s trade mark, thus exposing it to possible legal action
Has the organization any patented technology? If so it is important that
protection is kept in force. Renewals have to be paid annually, and if this is
not done the patent will lapse and become available for anyone to use. If the
technology is not being used it could be worthwhile exploring the possibility
of licensing it to others. (A few years ago a major manufacturer allowed a
__________________________________ THE INTELLECTUAL PROPERTY AUDIT 39
patent to lapse because the local managers believed the technology was
obsolete, unaware that colleagues at another site were in negotiations to
license the patent to a foreign firm!) Businesses must always seek to
maximize the value extracted from IP, but if it is not being used and there is
no likelihood of licensing it, why are they paying to keep it in force?
Does the organization license in any technology? If so, check the
agreement and establish just what has been licensed. One company recently
discovered that the licensing agreement it had entered into was on the basis
of a certificate of grant which told it absolutely nothing about the extent of
the patent! It had already spent a considerable amount of money in preparing
the production process when this was realized.
Promoting any business is important. One company in particular found
copyright ownership a very important issue when it carried out an audit. The
company has a number of prestigious clients, and had engaged the services
of a professional production company to produce a video of some of its work
for these clients. Although this was an important asset for the company, it
was one it did not own. It was a work protected by copyright, and the
contractor – in this case the production company – had retained copyright
ownership, and only licensed the company to make specific use of the video.
Unauthorized use by the company of the video could land it in trouble.
A trade mark audit
ensuring that descriptive names are avoided for trade marks;
checking that there are proper procedures for the registration and
renewals processes;
an assessment of future plans and product;
discovery and recording of unregistered marks;
review of any licensing agreements;
regular review of the trade mark portfolio;
regular trade mark searches to monitor legitimate usage;
monitoring trade mark registers for similar marks registered by competitors.
A patent audit
checking that there are proper records of technical developments for
checking that there are records of patents held and filed;
40 BUILDING THE PORTFOLIO __________________________________________
checking on procedures for renewal;
regular review of the patent portfolio, including licensing arrangements;
a confidentiality review;
a regular search of patents relevant to the business’s activity.
checking that records of designs are held and filed;
regular review of the design portfolio, including licensing arrangements;
a regular search for designs relevant to the business’s activity.
The copyright audit
ensuring that best practice is followed in affixing copyright notices;
identifying and recording copyrights of commercial value;
a review of licensing agreements.
These lists are in no way exhaustive, but serve to cover the kinds of issue
that might be relevant to the business. In conducting and establishing an
audit process it is important to identify what is to be accomplished and to
make sure that this is achieved. It is also important to record the entire
process. In all instances someone should be assigned responsibility for these
issues in his or her job description.
The record of any audit should include the objective, the plan and how it
was executed. It should describe and evaluate the intellectual property
issues, and propose recommendations for improvements, with a timescale
for review. It goes without saying that the audit should be treated as
Focusing on issues such as these is the first stage in working out the IP
strategy that fits the business best. A regular review of IP is far more
desirable, and a lot easier, than putting it off until something happens that
forces the organization to look at it. If IP is left unprotected, it could be lost
to those that are better placed to commercialize it, leaving its originator
__________________________________ THE INTELLECTUAL PROPERTY AUDIT 41
without any financial gain. A simple audit is a good place to start.
Recognizing what IP is present and taking adequate steps to protect it should
enable the organization to take advantage of the IP system and profit from
creativity. Good, regular management of IP is even better.
Lawrence Smith-Higgins joined the Patent Office in 1989, and worked
in several different departments before moving to marketing in 2000.
He is engaged in the publicizing and marketing of the Patent Office
and its services, mainly through seminars and workshops for business
advisors and academics, and writing articles for the national and
specialist press. His work involves partnerships with organizations
such as Business Link (in England), Scottish Enterprise, Invest NI, and
Business Eye (in Wales).
Lawrence also works with the Inland Revenue and HM Customs &
Excise to provide growing businesses with basic guidance about IP. The
guidance comes in the form of seminars at Business Advice Open Days
which are held throughout the UK and attended by Patent Office staff.
For more information about any aspect of IP, visit www.patent.gov.uk
IP databases are bursting with expertise, says Dr Jeremy Philpott of the Patent
Office. So check them first, before committing funds to R&D or a new brand.
During the Second World War, British bomb disposal teams were
desperate to find safe ways to defuse unexploded bombs (UXBs). Such
bombs caused far more disruption to the war effort than their brothers
that went ‘bang’ in the night – streets, stations and factories could
remain closed for many days if an unexploded bomb was found. To
extract a working bomb fuse, upon which studies could be made, was
the Holy Grail of UXB teams. But working fuses did their job and left
nothing to examine, whereas the fuses which could be recovered were
duds, and hence hardly appropriate for unlocking the secrets of the
Luftwaffe’s ordnance. Then in 1942, Ministry of Defence scientists
found the patent for Ruhlemann’s electric bomb fuse, as used during the
Blitz, and within two weeks of studying the full, clear and complete
technical description therein they were able to issue a bulletin to all the
UXB teams explaining how to safely defuse such weapons. The tragedy
is that the patent had been published and lain in the Patent Library since
1931. How many died trying to defuse those bombs when the solution
was at hand all along?
44 BUILDING THE PORTFOLIO __________________________________________
Fear of unwitting infringement is what tends to drive people to check the
registers for designs and trade marks. Given that the registers are freely
accessible over the Internet, there can be no excuse for inadvertently
branding a new business with a word or logo that is already registered to
someone else. Getting a new company name registered at Companies
House, and a domain name registered with Nominet or the Internet
Corporation for Assigned Names and Numbers (ICANN), will be a waste of
time if an injunction is served by the owner of a registered trade mark that is
the same as the new business name. So before an individual or organization
settles on a name for a new business, product or service, it should at least
spend a few minutes checking the trade marks register. And if it wants to
stop others jumping on the reputation it hopes to acquire under a name, it
should seek appropriate registration for that name.
Existing brand owners also want to check that competitors are not
attempting to register trade marks that are too similar to their own. This is
why trade marks are published (‘advertised’) three months prior to registration: to allow others to check that marks that might be confusingly similar
to their own, and that might threaten to dilute their brand, are not getting
onto the register.
It is perfectly possible for a firm to infringe another’s patent without
ever owning one of its own. However, the reasons for checking patent databases extend far beyond the simple fear of infringement. They go to the core
purpose for having a patent system in the first place. The State grants limited
exclusive rights to those creating new technologies in exchange for clear and
complete disclosure of those technologies. This encourages innovation by
rewarding disclosure rather than secrecy. The disclosure is there to benefit
the public at large, and competitors’ R&D teams specifically.
Patent databases are bursting with technical expertise. Over 45 million
patents from around the world can be accessed over the Internet through a
variety of databases. Why would anyone want to spend money on R&D to
develop a solution to a problem that has already been solved and disclosed
in a patent? Nevertheless, the EU Commission estimates that N20 billion
is wasted every year in Europe on R&D for technologies already disclosed
Commercial providers of patent information often quote an estimate that
80 per cent of all technical disclosures appearing in patents do not appear
anywhere else. While this might not be possible to verify, many patent
examiners would concur, particularly based on their experience of dealing
with patent applications coming from academics. It is commonplace to see
academic papers that conclude with a dozen or more references to other
relevant academic papers. Rarely do such papers reference patents, yet a
patent search on the subject often turns up numerous relevant patents.
Patents reference academic papers more frequently than vice versa. The
_________________________________________ SEARCHING IP DATABASES 45
bottom line is that any researcher who only consults trade journals and
academic papers to determine the ‘state of the art’ is missing the vast
majority of what is being said about new developments: he or she needs to
also be looking at patent publications.
A manufacturing company once struggled to develop a new paint. It
had been successful at the pilot scale in the laboratory, but in bulk
manufacturing it hit unforeseen and seemingly insurmountable
problems. It went to a commercial patent search service, and paid for a
trawl of all the relevant literature to find any patent for a similar paint
that might describe a solution to its problem. Two days later the results
were ready, and the manufacturer was astonished to find that an old
patent described precisely the paint formulation it was trying to make,
for the same intended application. It described the problem the
company had hit, explained what caused it, and prescribed a remedy.
The patent was 30 years old, and as such was long since lapsed and free
for anyone to copy. Although delighted to discover the solution to all
its problems, the manufacturer was chagrined to learn that it had itself
been the applicant on the old patent! This shows that it should have
been looking back through its own R&D records. The message for
everyone else is that looking in patent databases is like having a free
rummage through all your competitors’ R&D records.
Patent databases are a truly awesome source of competitive intelligence.
Applications for patents are usually published 18 months after their first
filing date (or sooner), often while a product is still being refined in the
laboratory, and long before any rights are granted. This gives firms an
early warning as to what their competitors’ latest products are likely to be.
Pharmaceutical products are the ones that take the longest to get to
market, so the patents behind them are well understood by the industry
years before a pill is sold. Conversely, the short product lifetimes in the
software and telecoms sector tend to mean that the published patents lag
somewhat behind the market place, but they are still a useful source of
Patents are classified according to technology type, and the databases
can be searched using those classifications. So it is possible to isolate, for
example, the 10,000 documents classified in a specific area of technology,
and run a statistical analysis for the frequency of the applicants’ names.
Competitors that are well known might appear near the top of the list, each
owning several dozen patents. But some of the names will be unfamiliar:
find out who they are! Are they rivals, or potential allies? Do they have
46 BUILDING THE PORTFOLIO __________________________________________
technology that the organization might want to license, or does it have something to license to them? Is it possible to spot a gap in another organization’s
technology portfolio, or perhaps some complementary product it might
need? If so – invent it, patent it and license it to that organization in
exchange for whatever your organization wants from it!
Whose technology is ‘leading edge’? An answer can be found by
performing an analysis on relevant patents, sorted by date. It might turn up
dozens and dozens of patents owned by a conventional competitor, that are
all more than five years old, while the organization has no recent applications for new developments, showing that it is no longer inventing in the
sector, and its technology is becoming obsolete. Conversely, a firm whose
products you have never seen might have been filing patents in a coveted
market at the rate of one per month for the last two years. Read what they are
doing, and start running to catch up!
Does the organization need to poach the best R&D engineer in its
sector? Do a statistical analysis for the inventors’ names given on relevant
patents. An inventor’s employer is likely to be the patent applicant, and this
tells rivals from where to head-hunt him or her.
Do not be disheartened if the organization’s next great product happens to
be the subject of a published patent application. This does not automatically
mean that it risks infringing another organization’s patent. Foreign inventions
may be copied in the UK provided there is no equivalent UK patent, and
provided the products are not imported into the country of registration. It is
also worth remembering that 50 per cent of the patent applications published
by the Patent Office are never granted. Of those that are granted, all must be
renewed annually to be kept in force, and only 5 per cent are so renewed up to
the 20 year maximum lifetime. This means that the vast majority of patents
appearing in the databases are free to be read and copied if: they were never
granted; or were not kept in force; or do not relate to a territory where the
organization plans to make, use, import or sell its product. However, while
you, or your own organization, are free to copy such technologies, so is
everyone else. Now that those inventions have been published, no one can
later obtain a valid patent to exclude others from using them.
All of this analysis is perfectly legal, and has nothing to do with spending
money on a patent portfolio. The savings for R&D and the opportunities to
identify rivals and allies at an early stage are just too great to be ignored.
Where and when you apply for IP can have far-reaching implications, says John
Gray at Fitzpatricks.
Legal protection for ideas (often called ‘intellectual property’ or ‘IP’) is
available in various forms. Even if it is known in general terms what type of
protection is needed, it can make a big difference how you go about it in
terms of timing, selection of countries and so on. This chapter aims to
provide a rough guide to the factors that will influence the tactics.
Most countries use the date of filing as a simple and fair way to decide which
has priority between two competing applications, so it is important to file the
application at the Patent Office before another person (or organization) files
for the same thing or something similar. Do not leave it too late. Especially
for patents and designs, the chances of protection can be spoilt if the
invention is disclosed before a complete patent application is filed. It is
important to ensure that no-one in the organization releases details of the
invention or puts it on sale before protection is in place.
It is not possible to tell straight away whether someone else has filed for the
same idea, but if it is suspected that others are working on the same problem, it
would be wise to file sooner rather than later. Total secrecy is not always an
option. It might be necessary for the inventor to tell someone about it, for
48 BUILDING THE PORTFOLIO __________________________________________
example to get engineering advice or prototypes made, or to raise funds for
development. A formal confidentiality agreement (also called a non-disclosure
agreement or NDA) might provide enough protection for these limited disclosures, but if the project has reached a stage where it requires some non-confidential disclosure in order to proceed, it is time to file the patent application.
For trade marks, it is not quite so important to file the application before
using the mark, but the organization runs the risk that others will file first if
it does not. On the other hand, some marks (such as common surnames) only
become distinctive enough to be registered after a few years’ use. For such
marks, it is possible to use the ‘™’ marking in the meantime (the ‘®’ symbol
must only be used on registered marks). It is also possible to file an application to register the mark combined with some other distinctive elements
In the UK and EU, it is even possible to file for a design registration up
to a year after the design has been published, so market testing is possible.
Some countries (notably the United States) also allow a similar ‘grace
period’ for patents.
Assuming there is no pressing reason that the patent application must be
filed immediately, it can be a difficult judgement when is the best time to file
it. Although all will be lost if the organization is not the first to file an application for the same invention, there are other considerations that might well
justify delaying until the time is right:
The invention might not be sufficiently complete. An ‘enabling
disclosure’ is a fundamental legal requirement for a patent to be valid.
Filing a patent application starts a number of legal ‘clocks’ ticking, so
that further action and expense will follow within fixed time limits.
Therefore filing sooner brings forward the costs of drafting, foreign
filing, examination and renewal fees. For many individual inventors and
SMEs, applications simply have to be abandoned because capital or
income to fund the next stage is not in place in time.
The ideas will be published sooner, perhaps before they are fully
developed. Others with greater resources might then be able to steal a
march, or develop ways to work around the patent.
The patent will expire sooner. For many developments, 20 years turns
out to be not as long as it looked at the outset!
It is possible to hedge one’s bet to some extent by filing an application to
establish a place in the queue, so to speak, while the innovation is being
developed further or the commercial prospects are investigated. Sometimes it is
____________________________________________ APPLICATION TACTICS 49
appropriate to expand and re-file the patent application one or more times
during the course of the first year after filing, to get the earliest possible
‘priority date’ for each aspect of the development. So long as the invention
remains secret, it is possible to withdraw the application and re-file it later to
restart the clock. Once the invention is publicly disclosed, however, there is no
The UK is a relatively small market and the investment in product development, marketing, patenting and other IP protection is rarely justified for
the UK market alone. There is no single ‘worldwide patent’, and a British
patent has no force in other countries. If the organization wants any control
of activities in Germany or Taiwan, for example, it will therefore want to
protect the mark, invention or design by registrations in those countries.
Let’s file everywhere then!
Unfortunately, seeking protection abroad can be costly, especially for
patents. Few small businesses can afford to protect inventions or marks
straight away in dozens of countries, and large businesses also need to
control their costs by selecting countries carefully. Bear in mind also that
further costs will arise for examination and grant procedures, so it is wise
not to spend the whole IP budget by filing in too many countries.
Happily, several international agreements and procedures are in place
that allow patentees to defer the costs of protection in individual countries,
but those costs cannot be put off indefinitely.
It is sometimes useful to establish certain preferred filing patterns: for
example a long list of countries for major developments and a shorter list for
minor improvements, or different lists for ‘professional’ and ‘consumer’
product ranges. The organization might target:
competitors’ key markets;
its manufacturing base;
its competitors’ manufacturing bases;
important trade routes (such as Hong Kong).
50 BUILDING THE PORTFOLIO __________________________________________
To cover all of the above provides a ‘belt and braces’. Having protection
where competitors manufacture could allow the organization to take action
against infringers at source, more cheaply than pursuing them in every
market. Even if it does not intend to market its products in a far-off land,
having a patent there can be a useful bargaining counter against a competitor
based there, who has a patent in the organization’s key market for something
the organization would like to use.
Particularly for inventions where the cost of setting up manufacture is
only justified if large markets can be addressed, it might be sufficient to
protect a few major markets, in order to keep out competitors. For products
or services that can be manufactured easily anywhere, however only local
protection will protect local markets.
In many cases, brands or technologies are developed for franchising,
selling on, or licensing to larger players, as a way of sharing the risk and
capital requirements of the ‘global market place’. If this is the plan (and if
the organization is not already a global player it is usually the only realistic
plan), then it goes without saying that there should be protection in every
territory where the organization wishes to sign up such partners.
Since trade marks are all about protecting a distinct identity in the
market place, important trade marks should be registered in all the organization’s markets. It might also be desirable to protect them in major future
markets when launching at home. Some trade mark originators have found
that their mark is literally not their own when they come to enter a foreign
market, because a local trader has seen it and registered it for itself first.
As well as being limited to certain territory, trade mark registrations are
also limited to particular ranges of goods and/or services. Because the cost
to register a mark depends partly on how many ‘classes’ of goods and
services are to be covered, and because of the need to avoid clashes with
other people’s use of similar marks for different types of goods and services,
not all goods and services might be registered from the outset. As time goes
by, however, it is important to review coverage as the organization’s reputation and business grows. A little foresight in choosing and protecting their
brands makes this whole process go a lot more smoothly for some
companies than others!
As the saying goes, ‘great minds think alike’. With over 45 million patent
documents indexed and searchable free on the Web, there is even less excuse
for ‘reinventing the wheel’ than there ever was before. There is also a risk of
investing in a new idea or brand that turns out to be blocked by other
people’s patents or trade mark registrations. Therefore it is advisable to
perform novelty searches and/or infringement clearance searches before
____________________________________________ APPLICATION TACTICS 51
filing. The search results might show that some negotiation with others is
needed, to gain the freedom that is needed to exploit ideas or brands. This
negotiation will be easier if the organization has not committed millions in
manufacturing, printing and television advertising before the problem
Very few business people have the time to master all these considerations
for themselves, and mistakes can turn out very costly, or even irreparable.
Experienced help can be found if you know where to look. The key is for
organizations to understand their markets and competitors, and know how
they want their business to develop into the future. Once they have that,
professional advisers such as Chartered Patent Attorneys and Trade Mark
Attorneys can help guide them to a balanced and cost-effective
programme of registration. These experts should be consulted at the start
of any new product development. Even if you may feel there will be little
for them to do at that stage, a little guidance could avoid some costly
John J Gray is a Senior Patent Attorney with Fitzpatricks, Chartered
Patent Attorneys and Trade Mark Attorneys. John has over 17 years’
experience in obtaining and advising on patents, particularly in electronic and computer software technologies, but also in subsea
construction and miscellaneous other fields. He worked in a multinational industrial patent department before entering practice.
Fitzpatricks is based in Glasgow and serves clients not only from
Scotland but across the UK and also world-wide, to obtain and advise
on the full range of intellectual property rights, including patents,
trade marks, registered designs and copyright. Inventions in a wide
range of technologies are handled by technically qualified specialists.
The expertise and resources of Fitzpatricks’ own Patent and Trade
Mark Attorneys is supplemented by a world-wide network of associates experienced in local law and practice. Fitzpatricks today
continues a business founded in 1887 by Hugh Donald Fitzpatrick.
‘Fitzpatricks’ is (of course) a registered trade mark.
Patents are not simply expensive pieces of paper. If used strategically, they are
an effective commercial weapon and a significant business asset, advises Drew
Lamb of Urquhart-Dykes & Lord, LLP.
Strategic patenting is concerned with developing and utilizing a patent
portfolio to assist in achieving set business aims. While patents might
primarily be thought of as an aspect of high-tech companies, in reality
patents and patent strategies can be used in a wide range of businesses. Just
as there are a variety of businesses and business models, so there are a
variety of patent strategies.
What patents can be used for
A patent’s most basic use is to protect a product, or method of making a
product, from being copied. However, patents have much wider uses. If
publicized, a comprehensive patent portfolio in a particular technical field
can deter a competitor from even entering that field, simply for fear of
infringement. At the very least, the patent holder will put a competitor to the
time and expense of designing around its patents, which will hopefully
result in a less commercial product.
Patents can also reserve for the patent holder an area of technology for
future use and exploitation. In view of the requirement that a patentable
invention must be new, the filing of what might be a speculative patent application it can prevent others from later trying to patent the same invention,
which could restrict their use and further development of the technology.
____________________________________________ STRATEGIC PATENTING 53
A patent can be selectively licensed, allowing others to produce the
product or use the method in return for a royalty or other benefit. As a result,
licensed patents can directly generate a revenue stream. Patents can also be
used to gain access to related areas of technology covered by the patent, which
the patent holder does not have the resources to exploit, or to produce new
products through cross-licensing and exchanges with other patent holders.
A patent is a type of property with a value, just like any other business asset
such as a building or machine. Indeed for a number of companies, patents form
a key part of the value of the business. As with other assets, patents can attract
investors, they can be sold and traded, and they can be borrowed against.
A comprehensive patent portfolio demonstrates a level of innovation
and original thinking within a company, which is attractive to would-be
investors, collaborators and customers, and threatening to competitors.
As a marketing tool patents can highlight the innovative nature of a
company (as indicated by Hewlett Packard’s ‘HP Invent’ slogan), or to
attach a level of exclusivity or cachet to a product, for example the Dyson
When considering patents strategically, the business must drive the
strategy, rather than the quantum of technological merit involved. It is often
possible, and profitable, to obtain a patent for a modest technological
improvement, and so patent protection should not be reserved only for giant
leaps forward. The basic consideration is how the patent will be used to
achieve a business end, and to assist in building a coherent and businessdirected portfolio of patents.
For example, if the aim is simply to protect a new invention comprehensively, it is much better to have a number of patents, each covering different
aspects of the invention, rather than a single patent. A single patent is more
straightforward for a competitor to design around or invalidate. In contrast,
a thicket of related patents often appears far more impenetrable.
It is also important to patent alternatives to the main commercial embodiments of the invention. Otherwise, the organization leaves the door open to
its competitors to use and patent these alternatives themselves. Protecting
alternatives in this way also sets the innovation as far apart from competitor
products as possible, and allows for future developments and changes. In
addition, such a strategy can mask the most commercial version of a
product, or best methodology, so providing a key advantage.
54 BUILDING THE PORTFOLIO __________________________________________
Similarly, it is essential to patent any improvements to the basic invention,
in order not only to extend the life of patent protection (a patent lasts a
maximum of 20 years) but also to maintain protection as technology and the
Conversely, if the organization operates in an area of technology in
which a competitor holds only a few key patents, by filing a number of
patents to possible improvements to the basic concept it can restrict and
curtail the competitor’s future development of the field. The ‘improvement’
patents can then be used as leverage to negotiate a licence for the key patent.
In this way the organization might gain access to a field that is closed to the
market in general, and benefit from the competitor’s patents.
By actively feeding back the results of searches carried out as part of the
patenting process to the development team, details of existing patents and
the technical teaching can be usefully identified and utilized. It is estimated
that one-third of all money spent on R&D is spent reinventing technology
already in the public domain. Significant money can therefore be saved by
using the results of patent searches. Details of earlier patents which may
present infringement problems can also be identified through the patent
The timing of patent filings is also important. For an area of established
technology, patents for improvements can be staggered over time to
maintain a strong portfolio, and present an impression th