Essential Entrepreneur skills

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Essential skills for entrepreneurs: Protecting your intellectual property

20 I 01 I 10

Commerce, even in times of unprecedented economic uncertainty, depends on ideas. These will range from new inventions and designs to product names and logos. An idea, combined with the know how, vision and ability to exploit its potential is the foundation to every successful business. These ideas will often attract Intellectual Property Rights (IP) and will often be an entrepreneur’s greatest asset.  

IP is widely known to include copyright, trade marks, patents, design rights, confidential information and trade secrets. Whilst IP is known to exist, its importance is often underestimated until a problem arises. Whilst it is important to know what action to take to protect ideas, it is equally as important to know what to do (and what not to do) if a third party seeks to exploit your IP without your knowledge.

Nowhere is the creation and continuing development of ideas more likely to occur than in educational institutions, especially universities. Conversely, universities have historically been less keen than other businesses to exploit IP to its full potential preferring instead to concentrate on licensing or assigning IP to third parties. In light of the value that IP may have to any university or business, many universities are quite understandably moving to form “spin-out” companies to harness the potential profitability of their ideas. There may be good and varied commercial reasons for doing so.  Sometimes perceived as being more complicated than licensing, exploiting IP in this way often maximises returns, can assist in attracting external funding and may also assist universities in retaining some control and steer over the way IP is exploited and further developed. There are many factors to consider when forming a company and it may not always be the best option so advice should almost always be taken. Nevertheless, once a “spin-out” has been formed, care has to be taken to ensure that its IP is properly protected. That can sometimes be more complex than it sounds.

As with any commercial enterprise, if there is merit in an idea, the chances are that a competitor will try to capitalise on it to their own benefit.   Any company or organisation should take steps to ensure that its systems are maintained and that checks are in place to make sure that re-registration of any IP is carried out promptly. Systems to monitor infringement of IP should also be maintained at high levels within a company to ensure that potential infringements are uncovered early and that appropriate action is taken at the earliest opportunity. It should not be assumed that simply because IP is registered that third parties will not try to take advantage of it. Invariably they will.

On a practical level patented inventions should be clearly marked as patented and display their patent number. In the same way displaying the copyright logo on work or the existence of a registered design and its number on a product and/or product packaging may discourage “would be” infringers from cashing in on a company’s success. In most cases it may not be successful but it will at least guard against them arguing that they did not know or could not have known that such a product had the benefit of IP protection.

In certain circumstances and even if proactive steps are taken to defer potential infringers, litigation may be unavoidable.  Whilst it may at first sight appear to be an attractive proposition to do nothing when infringements are discovered, especially if the scale of infringements are relatively modest, there are many risks and potential pitfalls if such a decision is taken. For example, a delay in taking enforcement action may prejudice or even defeat the prospects of being able to obtain an injunction. This could allow the infringement to continue for significantly longer that would otherwise have been possible or even indefinitely. It may also result in significant if not irreversible damage to the company’s profit, trade and goodwill. Worse still, delay may place the IP itself at risk. For example, a company’s product name, which may be trademarked, could be placed at risk and become generic thereby losing its distinctive character unless urgent action is taken to stop a third party from infringing its IP.

There are stringent and relatively short time constraints for commencing proceedings in the courts and allowing infringements to continue beyond these set timescales could be fatal to a claim. In such a situation the directors of the company may face significant criticism and place themselves in breach of their fiduciary duties to act in the company’s best interests.   Tolerating infringements should therefore be an option of absolute last resort.

If infringements or potential infringements are discovered, it should always be remembered that certain bespoke rules apply to IP disputes. In particular, care has to be taken not to open the company up to a claim being brought by the alleged infringer if it could be said that a company has made “unjustified threats to sue”. The rules governing threats actions are complex and specialist advice should always be taken before writing or speaking to any perceived infringer.   

IP may be a valuable commodity to any company, but in the same way as with any other asset, it must be protected.

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