Too hard? waste of time and money? Directors who avoid intellectual property (IP) issues sometimes discover the hard way that neglected IP will always end up at board level. That’s because performance will be affected by the resulting limitations on freedom to operate. Smart directors are finding it is more cost-effective to proactively work to detect and avoid threats to an organisation’s most productive asset – its intellectual property.
Despite publicly recognising the value of IP, less than half of New Zealand organisations have an IP voice at board level. According to survey by IP lawyers and patent attorneys AJ Park, serious questions also exist about board understanding of the possible effects of third party IP on the business and too few resources are allocated to maximise the commercial potential of company IP.
Boards with last century mindset focus on protecting, exploiting and developing physical assets. In today’s information and knowledge age, however, there is growing recognition that creativity, scientific inventiveness and commercial innovation are companies’ major and most enduring competitive assets. According to researchers at Washington University’s Economics Department, these collectively comprise between 40 percent and 70 percent of company value.
Organisations wanting to make the most of the strategic value of their IP and to minimise the risks associated with its mismanagement, are now ensuring that IP management specialists are included at senior executive and board level.
Organisations can achieve IP freedom to operate through conscious risk management. This involves:
1. Assessing risk levels
A company at risk of IP infringement typically owns an invention with high R&D cost; has solved difficult technical problem; or has an inexpensive, simple and highly effective product or pro-cess. Competitors may want to share in this success and use the owner’s unique IP – with or without permission.
Infringers typically copy low-tech consumables or components and then move on to sophisticated items. IP infringement risk is affected by the length and complexity of the manufacturing and distribution chain. Imitators depend on busy companies not prosecuting on small sales volumes in ‘difficult’ legal environments.
2. Implementing systems to detect potential infringement
An organisation without IP identification and protection systems and records is not likely to know its own – or its competitors’ – IP, and may be suffering losses or be vulnerable to accusations of infringement. Avoidable potential losses and risks to freedom to operate imply likely negligence, justifying accountability at company board level. What to do?
Conduct an internal IP audit Create an inventory of company IP assets. Conduct structured IP audit to establish an IP asset baseline. Include trade secrets and IPR: patents, trade marks, copyrights, design rights, domain names, licence agreements and collaboration agreements. Organisation handbooks, training material, employment contracts, and business and licensing agreements must also be audited.
This audit should result in an IP database listing. Include in this the owner of the intellectual property asset, class of asset, inventors or authors, when created or acquired, the asset’s status (pending or issued patent, registered copyright, trade marks, domain names), ongoing maintenance issues (payment of fees for patents, collection or payment of licensing fees), and expiration or renewal dates.
Encourage early disclosure Create culture of controlled communication and disclosure so that there is trust in fair dealing, objective IP proposal assessment, timely feedback and reasonable rewards. Use template documents to make IP disclosure as easy as possible. IP managers must be visible, trusted, technically competent and approachable.
To help avoid premature disclosure – especially by academics – include compulsory internal review of research publications, conference posters and presentations so that IP protection can be obtained before information goes out to wider public.
IP management strategies that reduce technology risk and maximise exploitation opportunities will provide valuable support to business, technology and marketing strategies.
Search for IP infringement minimum of IP search diligence, and key invention and brand protection is essential.
Tap into readily accessible and neutral resources – business directories, trade journals, the Yellow Pages, local industry and government trade organisations, and competitor product catalogues.
Conduct free internet searches with keywords using tools such as Google and Google Scholar. Enlist the help of local librarians to search in academic publications, conference proceedings, digital information repositories and electronic journals.
Other major infringement search tools are the online databases of the Intellectual Property Office of New Zealand, European Patent Office (IPONZ), the US Patent and Trademark Office and the European Union Office for Internal Trademark and Design Harmonization. monthly review of the latest patent applications published for opposition at the IPONZ site can help ensure that company retains freedom to operate in New Zealand.
Routine company name and domain name searches can help avoid infringement. Professional patent searching tools such as Delphion and Nerac are also affordable options.
A cost-effective action, which also provides external proof of diligence, is to contract reputable specialist IP firm to do infringement searches in areas of uncertainty.
Audit licences Conduct an internal audit of the key competitive features of important products and the IP underpinning these advantages. This is an essential early task to detect infringement. The audit should include promotional and branding material and review of the contracts for inward and outward technology licences. Next, negotiate inward licences, where essential.
Politely but firmly approach companies that are clearly owing royalties or may be infringing protected technology or branding, and arrange audits by an independent accounting or IP firm. According to PricewaterhouseCoopers report by Cassandra Michie, cautioning licensee companies that they will be audited on random basis, and then auditing some, helps to ensure compliance and reduce the auditing load. It is vital to involve IP attorneys with these sensitive issues. Owning IP is only the right to prosecute infringers of your use rights – it does not grant the automatic assurance of the freedom to operate.
3. Strategies to develop products without encroaching on other’s rights
Making trade secrets and expert knowledge inaccessible makes it difficult for competitors and reduces exposure to challenges of infringement.
Protect trade secrets Document trade secrets and label them as confidential. Establish inhouse procedures for secure trade secret storage and handling. It is difficult to defend company in court without proof of diligence in information handling.
Avoid brand infringement Surprisingly often, companies have to discard branding materials and create new product identity or enter into licensing under duress because of potential trade mark infringement resulting from over enthusiasm and lack of searching. Online patent searches for registered trade marks are simple. Searching trade journals and business directories also enable detection of potential brand IP infringement or dilution.
Avoid patent and design infringement During new product design initiation search and list existing prior art and patents involving the solutions to be used. Focus on comparing the key differentiating features of own and competitor products, and the related patent claims and product technologies. This clarifies licensing opportunities and is necessary to prove diligence in avoiding infringement.
Use standard IP or open source material An effective and potentially inexpensive way to ensure IP certainty,