IP risks and opportunities – portfolio management and product clearance
May 2013 | SPECIAL REPORT: OPERATING AN EFFECTIVE BOARD
Financier Worldwide Magazine
Every fighter knows that you are not going to win a battle by soaking up the blows without giving a little back. Every business knows the same thing, and IP matters are no different.
Whenever you consider IP you should always be thinking about two things. For your own business, your innovations, your creations and your brand are your property – you came up with them, you don’t want people to copy them and so IP is the route you pursue to protect them. On the other hand your competitors will be thinking the same way and so when you bring out your new product, or your new software, or develop a new logo, you need to be aware that they may have IP lurking ready to slow you down. In the fighting analogy, your own IP is the sword, but how do you shield yourself from your competitors?
The basic IP types are well known – patents for inventive technology; copyright for software, blurb, images; trademarks for brands. Some of these are yours automatically: your written creations probably have instant entitlement to copyright and you may also inherently own further rights in the look of a product (through short lived design right) and branding (through passing off or unfair competition) although these may be more difficult to substantiate in court. Other rights require active protection – you need to file and obtain grant of a patent at Patent Offices around the world, and to get strong trademark protection you similarly need to obtain registration.
When it comes to portfolio management – ensuring that your own IP is in good shape – it is largely a matter of a cost-benefit analysis. We patent lawyers can spend as much as you want us to and you need to weigh this against the potential benefits the IP can bring. How important is exclusivity, for example? If your competitors move into the market, will this cause significant damage? Are there licensing opportunities? Can you get royalties from the remainder of the market? Are you looking for exit? Will IP add to the valuation of your business? Once the position of IP within your company’s strategy is settled then managing the portfolio is a matter of identifying subsisting rights such as copyright and perhaps technical know-how, and setting up a capture system to ensure that you at least consider whether registration or grant of additional patent and trademark rights is worth seeking, for new technical concepts, brand ideas and so on. That way you can ensure that you maximise your IP opportunities whilst staying within the financial and time constraints identified.
But one man’s opportunity is another man’s risk and in bringing any new concept to market you face the possibility that a third party already has IP that can stand in your way. This can be catastrophic and can lead to rebranding an entire business or withdrawing a product from the market and possibly paying back any damages suffered by your competitor as well. With patents, even if you independently developed your concept, if the patent came first and you infringe it then it has precedence.
Defending your business against this is key. The level of defence you adopt is a matter of resource, and risk management. Often, other than financial constraints, the main issue is who you answer to. If you are an independent company then as long as the board understands the risks then the clearance exercise can involve no checking at all at one extreme, which is not recommended. On the other hand if you answer to investors or shareholders then significantly higher levels of diligence are likely to be required. This can take many forms – a dedicated strategy for each product line, monitoring of specific competitors, landscaping of a technology area: there are many approaches dependent on your business model and intentions. At the very least, the risk must be understood.
Choosing where to start is sometimes very difficult. For a new venture, resources can be low in terms of cash and time and it’s key to have a realistic and manageable system in place, but one that is also scalable, both for product/brand clearance and capture of your IP. Established businesses sometimes come to IP late but this is still manageable. Audits of existing IP can be carried out and in terms of product clearance one of the best indicators of safety is whether you have been sued yet, which is the odd luxury for the lucky, established company.
In either case the end game is an attractive one – a well-functioning IP capture and protection process, a well-defined and streamlined product clearance process. These are never foolproof but the business decision makers can at least take the view that they have identified and managed the risks and opportunities appropriately.
So, with all this in mind, where do your priorities lie – fight or flee? It comes as a surprise to some businesses that the most important of these two IP threads is the clearance side. If your business has one product and that product is closed down, then you have no business. But when litigation starts, most companies immediately look to what steps they can take in response, and if they additionally have their own IP position, then the game changes very quickly. In the end, like any good gladiator, you need the shield and the sword if you want an even fight.
Gwilym Roberts is a partner at Kilburn & Strode LLP. He can be contacted on +44 (0)207 539 4200 or by email: firstname.lastname@example.org.
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Kilburn & Strode LLP