IPR – Briefing Note

Intellectual property rights (“IPRs”) are intangible rights granted by statute and serve a dual purpose. Firstly they reward investment of risk capital utilised for creating new materials that fall under their ambit. Secondly they serve as an incentive to those looking to invest capital.

The mere fact that IPRs are intangible property does not prevent them from being dealt with like any other property. They may be traded, sold, licensed, assigned, hired, mortgage and used as security, like any other asset. The different types of intellectual property (see below) grant different types of monopolies depending upon the difficulty involved in obtaining the protection. For instance, on one hand patent protection which requires a formal application and registration which is time consuming and costly, on the other copyright applies automatically and provides what is know as a qualified monopoly.

Common Elements

The common concepts for the different forms of IP protection are that they all:
1. are personal property rights which may be bought and sold like any other property;
2. restrict third parties using the IP without permission;
3. with one exception, apply concurrently and independently of one another, so that if the subject matter qualifies as a patentable invention and for copyright protection, both will apply;
4. the power for the owner or in some cases licensee to recover a monetary sum in the form of damages or an account of profits for misuse and to stop third parties from using the materials in the future.

They may be safe in the knowledge that they will be the only entity entitled to use the material without their license.

Particular forms

Trade marks are usually used as a tool to secure protection for brand names. Their application extends to products names, service names, company names, shapes, and even sounds. The law has expanded to allow protection of many non-traditional badges of origin, including sounds distinctive to computer programs, slogans, or signatures that are distinctive of the source of the goods or services on the market. Once a trade mark is registered, other traders using identical or similar marks who infringe the trade mark rights of the registered owner may be sued for damages, accounts, injunctions and orders for delivery up of offending materials.

Patent protection grants what is known as an “absolute monopoly” over a inventive implementations of industrial processes that achieve an industrial result or inventive products.

Copyright on the other end of the scale, vests automatically on the creation of materials protected by copyright, provided they are original and were the independent work of the author. The trade off for this automatic protection is that the author is granted a qualified monopoly. Protection for copyright extends only so far as the expression of the particular creation of the author. It will not protect the idea conveyed by the creation. Thus copyright in the UK applies automatically on the creation of the work. If the exclusive rights are exercised by a third party they may be sued for damages, an account and recovery of profits made through use of the copyright material.

Design rights see the greatest degree of variation across jurisdictions. The key concepts are that design protects the aesthetic appeal. Loosely speaking design law protects patterns and ornamentation appearing on manufactured articles. In some ways it is the copyright of manufactured goods.

Confidential Information, in most jurisdictions around the world grant protection for unauthorised disclosure or use of information that is known to be confidential or reasonably assumed to be confidential. In a business environment, instances of confidential information would include business plans, information relating to new or existing technologies, company reports and internal memoranda.

Exploiting IPRs

IPRs manifest themselves in the most important aspects of business. Trademarks protect branding that is so easily created, distributed and copied by others. Trade marks crystallise the book value of goodwill, and contributes to the asset value of goods and services. Copyright protects stock in trade for many businesses, namely, literature, photographs, marketing materials (including website content) and software, whether the business functions as a provider of goods or services. It is simply a matter of identifying the particular assets for the particular business. Confidential information, which can be the life blood of months of research, protects testing and experimentation for new techniques and know how, company information that create a competitive advantage.

Investment in research and development often remains unutilized as companies stick to their core markets when opportunities may lie in other industries looking to improve their own position in the market and develop a competitive edge – and create new revenue streams in the process. First and foremost an appreciation of the output of research and development is required followed by recognition of:
1. what IPR exists in the business;
2. where in the existing business the technology may be best utilised now or in the future
3. how best to exploit that IPR either within the existing business, through a special purpose vehicle or by a third party.

IPR protection regimes have been setup in such a fashion that most technological inventions and creations are protectable in some form or another. The crucial requirement of any exploitation program is to retain control over the asset, whatever its form. IPR audits reveal deficiencies and strengths of the different types of products and services and the manner in which they may be protected from copying.

Slotting the IPR into an existing business

It is a commercial decision whether the business is in a position to allocate the capital resources to exploiting the IPR as part of their core business or whether it should be shelved or taken to the market by some other means. Where decision-makers take the view that the technology does not fit into the structure exploitation with a third party venture capitalist or business partner may still derive a commercial benefit by licensing the IPR to interested third parties.

Different business models reflect a choice after weighing up the priorities of the business such as the resources available including labour, capital reserves, and the amount of control – or not – retained over the technology and its further development and exploitation.

Options for exploitation include:
1. exploitation by the business;
2. selling the technology in its present form;
3. licensing the IPR – either in its raw form or licensing a white brand form of the technology;
4. partnering with a third party in a joint venture.

The principal questions to consider are prior to exploitation are:

1. How is the IPR going to be protected, both on a legal basis and from a practical perspective? Can the IPR be protected by registration or will it be protected by a licensing arrangement;
2. Do employees or independent contractors have any rights to the invention?
3. If the IPR owned by the business – or does an individual have rights to the IPR in its registered form? Can the technology be exploited – sold or licensed - in its unregistered form?
4. is any particular expertise is required to work the intellectual property, and is this expertise transferable or packagable?
5. Does all information relating to the invention need to be disclosed, or can some of the technology be “black boxed” in object code or other unascertainable process?
6. Are employees properly restricted from revealing trade secrets and other key confidential information and techniques?
7. Are key personnel restricted from joining competitors within an appropriate timeframe?

In closing

Intellectual property rights vest in a wide range of materials created by companies during their ordinary course of trade. These materials may be seen as an opportunity to diversify the activities of a business, and on the other hand where the resources available to a business do not justify diversification, the IPR may be sold on the open market.