New Zealand Engineering 1999 March

Law

Do You Need an Intellectual Property Strategy?
-The value of Intellectual Property

How to develop an intellectual property strategy
Intellectual property management

Intellectual property protects the main product produced by engineers - ideas. With globalised manufacturing the value of the intellectual property component of a product has been brought into sharp relief. A pair of shoes costing $5-10 to make in Asia can be sold at between $150-200 a pair due to the value of the IP component. Nowhere is the value of intellectual property more apparent than with software where the cost of creating a copy may be almost zero. This has caused companies to appreciate the value of their intellectual property and develop strategies to maximise its value and use it as an effective offensive or defensive commercial tool.

The fact that intellectual property assets can be included in the company’s balance sheet has also resulted in increased appreciation of a sometimes unrecognised asset.

How to develop an intellectual property strategy
In order to develop a successful intellectual property strategy one must understand the types of intellectual property protection available and the market concerned. The possible protection must then be aligned with the company’s business plan and objectives. The strategy must include both offensive and defensive strategies. Too many companies focus only on securing rights for themselves rather than monitoring the risk of infringing others’ rights. This may result in product development proceeding along a path that will ultimately be blocked by another’s intellectual property rights.

Offensively, intellectual property may be used to secure protection for key technologies to block competitors to gain royalties from licensing. Where there is a true technological co-advancement patents may be effectively enforced to block competitors. For example, anyone wanting to use the GSM telecommunication system will fall within the GSM patents and must pay a royalty fee.

Where a technology progresses in a number of small steps some companies will choose to patent every step along the way so as to create a minefield of patents. Any new entrant will have to consume much time and energy designing around this minefield or take the risk of being sued.

The strategy pursued must take into account the capabilities of the various markets. For example, only a few countries manufacture certain high tech components and it is unlikely that it would be viable for a company in another country to manufacture such components. Accordingly, it may only be necessary to obtain patent protection for the high tech component of a product in the markets where it can be manufactured. It may, however, still be worthwhile to protect the appearance of the casing of the product by way of design to defend against knock-offs and parallel importations.

It is particularly important to understand the different procedures and protection available in the markets of interest. Many New Zealand manufacturers assume that New Zealand copyright law protecting three-dimensional articles will apply overseas. Most countries, however, only provide for three- dimensional industrial articles to be protected by design registrations. Sales of the articles before design applications are lodged can prevent valid protection being obtained.

It is not always necessary to obtain registered intellectual property rights to have an effective intellectual property strategy. In the software industry confidentiality has been successfully employed to protect source code for a number of years. Electronic hardware may likewise be protected by including the key functionality of a circuit and a protected chip so that competitors cannot readily digest the operation of the circuit.

With the increased use of intellectual property as a competitive tool there is an increasing need to focus on defensive strategies. It is important to monitor patents within your field of activity to ensure that your product development does not lead you down a path that will ultimately be blocked by another party’s intellectual property rights. It is also important to give you early warning of rights that others are seeking so that you can challenge them at a stage when it is inexpensive to do so.

Monitoring competing patent applications also has a substantial benefit in revealing the product development of a competitor. Patents are typically published 18 months after they are filed and can reveal details of products that have not yet emerged in the marketplace. For example, the winged keel of the Australian America’s Cup yacht could have been viewed in a patent specification rather than by attempting to photograph it under water.

Intellectual property management