All businesses have an IP strategy whether they realise it or not but for most businesses their IP strategy can be summarised thus: when an issue relating to IP rights arises we will do something about it at that point.
For many (but by no means all) businesses, which trade on a small scale, supplying common goods and/or services this strategy generally works pretty well. Most single site restaurants, hair dressers, bakers or garages don’t need an IP strategy, although even such small scale businesses can (and not infrequently do) run into IP issues, particularly in relation to trade marks.
The real problem with this kind of reactive strategy typically manifests itself with larger businesses, particularly those developing or marketing new products and services. The difficulty can be very simply stated: a business responding to an issue only after it has arisen will very often not be able to manage it anywhere nearly as effectively as it would have been able to, had it thought about the issue in advance and actively managed it before the problem arose. Some examples nicely illustrate the point.
Strategy v Responding to a Crisis
Example 1
Company A is about to launch a new product under the brand Badger, at its key industry annual trade show. A vast array of marketing materials have been produced at great expense. On day one of the trade show Company B gives Company A a solicitor’s letter before action, enclosing a copy of Company B’s recently registered trade mark for the word Badger (covering goods identical to Company A’s new product) and demanding that Company A (a) remove all its Badger branded product from its very expensive trade show stand and (b) refrain from selling it going forwards. Company A may have little option other than to comply. However if Company A had done a trade mark search long before the dispute arose it could have either registered the Badger mark first and thus possibly been able to stop Company B from using it or at least have been able to select a different brand, free from third party conflicts.
Example 2
Company C has developed an improved refrigerator for use in retail outlets, which uses half the power of competitor models, as a result of improvements made to the pump used to circulate the coolant around the refrigerator. Company D, which is very much bigger than Company C, copies those improvements and materially undercuts Company C in the market. Company C goes to its lawyers but they say that there is nothing Company C can do now because it has not patented the pump improvements. If Company C had gone to its patent attorneys and secured broad patent protection for its novel pump then it would have had a weapon to take Company D off the market or at least licence it for a royalty.
Example 3
Company E, a point of sale software developer, is going through due diligence by Company F, which has made an offer to buy all the ordinary shares in Company E. During due diligence Company F discovers that Company E has used a large number of independent contractors to develop its software, none engaged under any written contract. Worse still Company E’s terms and conditions with its own customers provide that those customers own the IP rights in the software that Company E has sold to them. Due to the uncertainties about ownership, Company F withdraws its offer. If Company E had thought about ownership of the IP rights in its software and managed ownership properly both with the third party software engineers it used and also with its own customers, its ownership position could easily have been robust and the sale to Company F would not then have fallen through.
Example 4
Peter G, a talented musician and inspirational teacher, produces a set of online music tuition courses, based on his life long experience in teaching music. The courses become highly successful, earning Peter G a substantial amount of money. Peter G gets his sister, Mary H, a website developer, involved in the business early on, to produce the graphical user interface for the website the courses are accessed through.
Peter G now wants to sell the business and the IP rights used in it to an online educational publisher. Mary H claims that the business set up by Peter G is in fact a partnership and further that she owns the copyrights in the graphical user interface. Peter G, to get the sale done, has to allow his sister to take a substantial chunk of the sale proceeds realised on the sale of the business and its IP. If Peter G had engaged his sister on terms that provided that she was merely a service provider, retained on a contract for services basis, he could have retained all the monies realised on the sale of the business and its IP.
Example 5
Company J, a manufacturer of yarns, develops a revolutionary new way of making high bulk yarns in a single continuous process and gets Company K, a leading manufacturer of textile machinery, to make the machinery required to implement the new continuous process. Company J has no written contract with Company K, with whom it has dealt for several generations and hasn’t applied for a patent as it didn’t want to publish its developments.
Company K then sells the new machinery to Company J’s competitors. Company J complains to Company K, which insists that it has actually made the machinery itself and thus owns all the IP rights in it. Company J would have been in a very much stronger position if had had a written contract that dealt with the ownership of IP rights and had obtained patent protection for at least some aspects of its new continuous yarn manufacturing process.
Developing an IP Strategy – How Sonder & Clay can help you
As the above examples make clear, putting in place an IP strategy for many businesses will almost always trump the responding to events as they happen strategy.
A good IP strategy will deal with issues such as obtaining registered IP rights, ownership of relevant IP rights, clearance searching to avoid third party infringement issues, licensing in of third party IP rights and licensing out of own IP rights as well as portfolio management and cost control. The right IP strategy will support the business’ general business strategy and be aligned with it.
Sonder & Clay’s team of IP specialists has over 100 years of IP experience which it can deploy to help you develop an IP strategy which is right for your business. Please get in touch to book a consultation.
