Innovation is one of the keystones of business success, and guarding your ideas is a vital part of this process. But what qualifies as intellectual property and how can you go about protecting it?
Companies have often claimed that people are their most important asset. In fact, it’s probably not the people themselves, but the knowledge in their heads. “Our end product isn’t actually a racing car: it’s knowledge and intellectual property,” says Steve Nevey, business development manager with Formula One team Red Bull Racing. “If we lost the cars in an accident or something, we could reproduce them from our knowledge. If we lost that intellectual information, we would be in big trouble.”
The Formula One experience is quite interesting in the context of intellectual property (IP). At the end of 2007, McLaren was fined $100m for being in possession of Ferrari IP, which had allegedly been passed on to the motor racing team by a disaffected employee. In the commercial world, it is infringement of IP rights, rather than mere possession, that is the issue.
What is IP?
Put simply, a business’ intellectual property is its original ideas, but it goes much further than that. Totally brand-new discoveries appear only very rarely and it may be some time before they become commercially viable. Even something as groundbreaking and undeniably valuable as penicillin took years to come to market.
Alexander Fleming discovered the antibiotic in the 1920s, but it wasn’t until techniques were developed that could mass-produce it that penicillin became widely used. This led to the development of the huge range of antibiotics that we have today. That process indicates where the real value in IP may lie – in the developments of an idea, rather than the original one itself.
A mistake many companies make, in particular the smaller ones, is to fail to realise the value of the tweaks, nurdles and fine-tuning they make to their products as a matter of routine, whether in developing their own or competing with someone else’s.
Design of the times
Jay Engineering, which is based in Tisbury, Wiltshire, employs fewer than a dozen people. Its leading product is PostPuncher, which does what it’s name suggests – punches posts into the ground. It is faster than traditional methods, saves labour and
is safer than a sledgehammer and mate holding the post. Furthermore, it’s achieving sales in the UK and the rest of
Europe, the US and Australia.
PostPuncher consists of a hollow tube with a weight inside, which is raised and dropped by a system of hydraulics and cables. In operation, it’s attached to the business end of a backhoe loader. Its component parts are not patentable at all, because everything that goes into making the machine is already in the public domain. It’s the way in which PostPuncher is put together and functions that makes the difference, and those ideas can be protected.
“We investigated patents, but we couldn’t get one – and if we had been able to it would have been very expensive,” explains Jay Engineering’s managing director Kevin Meade. “What we did in the end was register the design rights. It cost us £69. Registering them in Australia cost us A$400 – about £200.”
As anyone who has investigated patents knows, they can cost a lot of money. However, the Chartered Institute of Patent Attorneys point out that a basic UK patent can cost as little as £3-4000. This cost applies only to basic UK patent registration, not to registration in other countries and markets, and does not cover the potential costs of protecting a patent against someone who has infringed it. A lot of smaller companies certainly believe they simply can’t bear that sort of burden and have little or no faith in the system anyway.
However, this is something of a misconception and patents can act as a deterrent to companies stealing your ideas, as IP lawyer Lewis Hands, of Handsome IP, points out. “I’ve heard people say it isn’t worth investing in patents because the ‘big boys will only steal the idea and we don’t have enough money to fight them’,” he says. “But in my experience, large organisations don’t go around stealing other people’s ideas, as they don’t want litigation costs nor the bad press that goes with it.” It usually doesn’t come to litigation anyway, as people are scared off by others’ patents. “Patents can be licensed, too, which creates a stream of revenue from royalties,” adds Hands.
What is a patent?
A patent protects an original invention, which usually relates to a new principle or arrangement that allows the new product to work in a particular way. The fundamental patents registered by vacuum cleaner manufacturer Dyson, for example, relate to the basic principle of putting two cyclones of increasing efficiency into a vacuum cleaner to increase the overall separation efficiency. Having registered that patent, Dyson’s dual-cyclone invention is protected from infringement. Whatever it looks or feels like, any cleaner that incorporates the features of Dyson’s patent claims
will infringe them.
Inventions can also relate to methods, such as manufacturing or industrial processes, as well as to products or their parts. To get a patent you have to: first, be sure that no one else has invented the product or process before; second, be able to provide very specific descriptions, including precise drawings; and third, have a business plan which includes the protection and expected financial costs in the countries in which you exploit your ideas. Patents have to be registered in individual countries, so there is a lot of money involved.
“The deal with the government is that it grants monopoly protection for 20 years, in exchange for telling people how to do it,” explains Hands. The reason for this is that the government wants to encourage innovation and growth in the economy, but it recognises that some level of protection is necessary or inventors will never reveal their discoveries. And that means no one else would be able to improve on it, adapt it, add to it or incorporate it into their developments.
A patent gives protection, but it doesn’t give the originator the right to do something, but rather ensures protection from other people copying the idea. The effectiveness of patents depends very much on the law in the relevant jurisdiction. In the developed economies, the legal system is pretty robust and will deliver. China, however, has accumulated a bad reputation for IP piracy, but its government recognised a while ago that it would only get real and sustained inward investment if it gave inventors better protection, but the situation remains far from perfect.
“Technology and IP are hard to protect. The rules are unevenly applied, and to think otherwise is naïve,” said Jonathan Busher, vice-president – international for Vivid Imaginations, a company that designs and licenses toys and associated products. The toy industry is more mature in China than other industries, and there is a recognised legal infrastructure, but there are still traps for the unwary, and protection is not absolute.
How do IP rights begin?
What constitutes IP depends on what is done. Any concept comes into existence when it is written down or takes concrete form – when an innovative idea, for example, is made into an object, such as a clockwork radio. This article becomes copyright the moment it is made – there’s no need to register it, just to be able to prove when and by whom it was created. At least, that’s the case in the UK.
“Copyright protection extends through a large chunk of the world, but different countries have different levels of protection,” explains Eileen McMorrow, an IP practitioner with York-based YorSolicitor. Different countries may be signatories of the Berne Convention, the universal copyright standard, or another such agreement. The Berne Convention is the best known and even China is a signatory to it. Copyright is an outstanding protection. In the case of written creative work, it extends throughout the lifetime of the creator and 70 years after. It’s also cheap and enforceable wherever it is respected. Design registration, as Postpuncher demonstrates, is pretty effective, too.
The third way of protecting IP is confidentiality – simply not telling anyone what you’re doing or how you’re doing it unless there is a confidentiality agreement in place. If you discuss an idea with an interesting dinner companion at a meeting or convention, it can be very difficult to prove any subsequent breach, if somebody starts producing before you can register your patent, for example. So keep your ideas to yourself, and don’t forget to get your casual or temporary employees, contractors and third-party partners to sign confidentiality agreements.