Author: Cathal Lane, Irish, UK and European patent and trademark attorney, Tomkins Intellectual Property
In the business world for intellectual property (IP) and patents in particular, I see a gap in the information provided. In the media, there is talk of patent trolls and patent wars; for people like me, there are esoteric high-brow tomes reflecting deeply upon the impenetrable depth of IP case law. There are also business books about commercialisation that mention IP and what forms it takes. None really grapple with the everyday misconceptions and pitfalls in relation to IP.
So without any footnotes, references or other thickeners that would turn my words into a viscous glue, I set forth my personal views on IP, with the usual disclaimer that nothing here constitutes legal advice and that legal advice should be taken. Everything is general and, of course, there are exceptions to all generalities.
Can you name any inventor who is not famous? Or can you name any female inventor other than Marie Curie? Many cannot, so if you are not an inventor and do not know any inventors, it is unlikely you have seen IP such as patent in action in everyday business life.
Some people may have copyright, trade marks and design materials but other than express the view that it is somehow their stuff, they cannot usually properly articulate what exactly they own. More particularly, it is probably clear that in a lot of cases that when analysed there is no protected and possibly no protectable IP, often because it has been lost.
Lack of role models has created lack of awareness. This, in turn, means while you might suspect you have some form of IP, there is a difficulty expressing what it might be. The upshot may be that the IP is not being properly protected or commercialised. More likely, the IP protection boat has been missed. For example, something that was patentable is now not because it went into the public domain. Confidential information, ideas and know how have not been protected by proper contractual arrangements. Brands have been left unprotected or worse still all user rights are with a distributer or retailer.
It is perfectly reasonable and often sensible to make a decision to proceed with business plans without taking action to protect IP. My experience has been that many decisions have, however, been made in ignorance to the consequences of commercial actions on IP. False conclusions are reached, such as that there was nothing protectable anyway, or that there is some form of protection that exists. Often these conclusions are ill founded.
WHAT IS IP?
I met an impressive young man recently who told me IP was not relevant to his business. Often, I do not engage to correct wrong impressions because I offer services in this area and can be interpreted like either total self interest or some form of righteous sermon.
In this case, I pointed out over a coffee that as an online start-up with a software-based offering, his business was arguably based entirely on IP. Without copyright in his software and trademark protection for the brand name, his entire concept from start to finish would be free to use – and more importantly entirely free to copy – so someone does not even have to bother to create a competitive offering. They just copy his exactly. He seemed convinced.
IP-related decisions should not be made in ignorance of how IP works, so important decisions are made in possession of correct facts. A misstep can be fatal to IP protection.
IP is just a collective term for a bunch of legal rights. The main ones are patent, trademark, copyright, design rights and confidential information such as know-how. You need to know what you have, so you can treat it properly. You would not buy plants without knowing what causes them to thrive and what causes them to die. For IP, you need to know what feeds rights and what kills rights, too. You need to know which form(s) of IP you have and how to preserve, nurture or just appreciate the implications of a 'no IP here' policy.
IP rights are specific legal right to stop others taking your IP. It is, therefore, a right to exclude others. Most people think of it the other way round and consider it a right or licence to practice. It definitely is not. You need to understand that.
IP rights started as specific rights often conferred on a beneficiary by a head of society, such as a monarch. So, you could go to your local queen or king, get them to sign you an order to give you exclusive rights to do something such as sell a specific product.
Letters patent (which means open letter) is a term that originated at that time. You got a letter from the queen or king that you hung on your wall or showed to anyone who thought they might compete, to confirm you had rights bestowed from on high to ensure they could not.
It is often suggested that the first legal reference to copyright came from Ireland in the early centuries and the famous ‘to every cow its calf; to every book its copy’ decision in a dispute over copying of a book between two saintly scholars. Interestingly, the views apparently expressed then on here opposing sides mirror views to this day. One person (St Columba) thought there was no harm in making a copy that was to be used for good; the other (St Finian) felt aggrieved that a copy of his work had been made.
In early IP history, patent rights were granted on a national basis and for things that were new to a jurisdiction such as introducing a new product, even if this simply amounted to importation of an existing from a foreign land. The concept of novelty, i.e. that the product should be new in order to qualify for patent protection, came later. So did the requirement for non-obviousness or inventive step – in order to qualify for patent protection, there must be a quantum of inventiveness.
Incidentally, most famous inventors have been involved in scraps over who invented what and, in quite a few cases, on who should have owned patent rights.
HAVING NO IP RIGHTS
No IP rights means free to use by any third party. It is as simple as that, in most cases. It is certainly true in the patent world. Morally, one may take a dim view of someone who copies or ‘steals’ your idea, but under the law it is perfectly legitimate to do so, in the absence of IP. You cannot do much with just moral outrage as a weapon, unless of course you can use social pressure to turn them into a social pariah. It will not work on someone who does not know you!
If you have a unique selling point (USP), you by definition almost certainly have something proprietary. It is likely therefore that you have IP (accepting, of course, that other USPs such as being the dominant player in a sector do exist – younger companies, SMEs and start-ups are less likely to have such a USP and for them, IP is critical.)
When it comes to registration of rights, DIY is an option. However, if you file a patent application yourself, it is unlikely to stand up to future scrutiny such as by a professional IP advisor during due diligence by an investor/purchaser - or be robust enough to deter potential competitors who might infringe on the patent rights. You are likely to make a better go of trade marks insofar as fatal mistakes are concerned, but any professional IP advice you may get should pay for itself.
In the IP business, you may consider a professional on the expensive side, without weighing up how much an amateur costs in the long run. Do not delude yourself that somehow you can avoid using the long-established legal framework, or choose à la carte to follow some of the rules while ignore others because they do not suit. It will not work out.
My strong advice is to get some advice. Otherwise, a third party who undertakes a due diligence study or wants to avoids infringement will find the holes. An IP advisor will spot a DIY job a mile away. Most get rated somewhere between useless and poor. Some are excellent, but they tend to be the exceptions.
Confidentiality or non-disclosure agreements (NDAs) are essential, particularly in the world of invention. Some investors and companies will not sign one – most for legitimate reasons. It may be hard to walk away, but it is the first thing to think of doing if there is a refusal to sign.
A client with a start-up asked me for some advice on an NDA. His business plan had been written with a particular expert in mind to provide valuable insights into algorithms that would be used within his software. The expert wanted to engage, but without an NDA. The advice was three simple words: find someone else. I think I had to repeat it about three times before the message sunk in and the protestations about finding someone else lessened.
A couple of months later, I got a call to say all was going well. A new expert who did sign an NDA was engaged. More pertinently, the first-choice expert had emerged as having had plans for a competing product – no doubt the reason the NDA was a ‘red line’ issue for him in the first place. On any objective basis, the advice was straightforward, apt and easy to give. However when it comes to personal creation and IP, there is often strong emotive attachment, which can means that any threat to survival or progression elbows objectivity aside.
A well-executed and mutually agreed document can allow sensitive discussions to take place without any commitment to proceed further.
OVER RELIANCE ON NDAs
Once initial discussions have taken place under an NDA and the parties agree to proceed further, the NDA needs to be superseded with a continuing contract that will govern how the parties work together. Some pitfalls arise directly from NDAs. A huge one is ownership of any new ideas arising from a collaboration. Often, it is assumed that an NDA governs ownership. Most do not. Instead, it enforces confidentiality – it does not determine ownership.
A simple example is where an SME engages with an outside design firm for product development purposes. An NDA is signed before the project commences. However, in the absence of agreement to the contrary, new IP generated will belong to the person who created it (or, in some cases, their employer). So while they may be obliged under an NDA to keep mum in relation to the product, this does not mean they cannot own IP in their contribution and it does not override their ownership. This issue raises its head far too often.
Ownership follows its creator. It is a fundamental tenet of IP law that the creator(s) of works or inventors own any related IP, unless agreed otherwise. In some cases, IP in work created by an employee can belong to their employer. Typically, in a scenario where a third party is commissioned to do work, the third party will own all IP rights arising unless agreed otherwise. It is important to agree otherwise.
Imagine giving a software development house your carefully laid-out plans for a software product and then finding that even though you had paid them for the work, and everything they did was based your materials, they own rights in the software – and, in a worse-case scenario, own the entire copyright in the software.
The implications are that they are the ones in a position to sell or license that software, you need a license to use it and you have no basis on which to license others to use it. A complete reversal of how it should be. It is surprising how many people end up here.
'Clear' and 'clean' are two words use in the venture capital and legal worlds in relation to an opportunity. It can be especially relevant to IP. It has got to be clear who owns the IP rights, which means there is a clear chain of title from any IP creator to the asserted owner, and it has got to be clear of any third-party IP ownership or infringement issues/disputes.
FREEDOM TO OPERATE
Freedom to operate (FTO), infringement clearance or freedom to use are all terms used to describe a process by which you try to discern if there are potential issues with the IP rights of any third party. Typically, this is done by searching through registered rights for particular jurisdictions.
Obviously, there are some chicken-and-egg considerations because until an idea is developed at least some way along it cannot be evaluated commercially. However, it is advisable to carry out some form of searching for a patent, or trade mark searching to determine if there are some immediate FTO issues. Patentable does not automatically mean 'free to use'. IP rights tend in general to be exclusive. They give the right to exclude others. They do not automatically confer a right to practice or freedom to use.
Compressing and simplifying history gives an easy example. Let's say the phone was invented by Inventor A and the bare components of a wired system with a handset that converts sound to signals, and a receiver for receiving and converting the signals back to sound are patented. Let's further say that within the 20-year life span of that initial patent Inventor B invents a wireless mobile phone system that includes those components.
The criteria for patentability are that it must be novel (new) and inventive. In the example, Inventor A fulfilled those criteria being first with the concept, and let's assume Inventor B does so also having made the leap to a mobile system. There are then two extant patents which clearly overlap and in fact the scope of the second patent falls entirely within the first. So who can now make Inventor A's phone system and who can make Inventor B's phone system?
The answer is not always intuitive. Only Inventor A is entitled to make his system. Neither Inventor A nor Inventor B can make the mobile phone system without permission from the other. This is because even though both have patents which cover the mobile phone system, their patents confer exclusive rights not permissive rights. This means anyone who wants to make the mobile phone system has to be authorised to do so under both the Inventor A patent and the Inventor B patent.
So, when searching to see if an idea is patentable you look to see if the idea is new. When looking to see if you are free to use, you have to consider whether there is a patent that is broad enough to cover your concept, even if it does not expressly mention it.
Cathal Lane's article is based on Tomkins' presentation at an event entitled 'Intellectual Property/R&D Funding', which took place in the Ardboyne Hotel, Navan on 11 February 2014. The event was organised by Brian Hurley of the North East Region.
Cathal Lane, EPA CPA RTMA, is an experienced patent and trade mark attorney. His practice concentrates on helping clients realise new opportunities by leveraging IP. He has acted for some of the world's leading companies, universities, semi-state companies and SMEs in diverse fields including the pharmaceutical, medical devices, machinery, composite materials and adhesive sectors. Lane adopts a multi-disciplinary approach to intellectual property and regularly works with clients' management, tax advisors and lawyers in order to develop and execute business focused IP strategies.