Given the drab economic environment, exporters may need to reassess costs and timelines for new market entry and decide where their IP fits in.
BY: VIRGINIA MCMILLAN
Recessions tend to spark an upturn in rip-offs of commercial ideas, say lawyers in the intellectual property (IP)
sphere.
James & Wells Intellectual Property partner Simon Rowell says in all the recent recessions, some companies have sailed much closer to the wind where other parties’ IP rights are concerned. Offshore distributors have been known to register their supplier’s trademark in the offshore country, he says. “Then, when [the New Zealand supplier] wants perhaps to terminate for non-performance, it is hard to get the brand back.”
Exporters are vulnerable when talking to people in a new country: “Your business could be stuffed if they register [the trade mark] before you do.”
Register in each country, and ensure distribution agreements spell out the rights of all parties, exporters are warned.
Kate Duckworth, senior associate with IP specialists Baldwins Law, says risks arise when demonstrating a new product or service at a trade fair offshore. Disclosing too much detail can ruin the chance of obtaining a patent.
Signed confidentiality agreements are likely to be the answer here.
BEFORE GOING TO NEW MARKETS
Before entering new markets to try to beat the recession, Rowell says, exporters should do trade-mark searches in each territory. There’s no guarantee they can trade under the same name as in New Zealand, since someone else may already have that right.
A J Park partner Corinne Blumsky also cautions emerging exporters against assuming it is OK to use their Kiwi name or introduce their Kiwi product offshore. If the name could cause confusion with an existing product or if its overall look is similar, the Kiwi could be in trouble.
Many businesspeople have been surprised to receive a “cease and desist” letter from an aggrieved offshore company, Blumsky says.
Sometimes new branding, marketing materials and packaging must be designed just for one country. As Charlotte Henley, a partner at Kensington Swan explains, IP is a national right. “You need to apply, or investigate what is available, in each country.”
ASSESS IP TIMELINES
Earl Gray, IP partner at Simpson Grierson, says with the recession, exporters may need to reassess costs and timelines for new-market entry, and decide where IP fits in. Although as an IP practitioner he sees the value of protection, he notes that “some businesses get away with thin or next to no registered IP offshore”. It depends on a business’s competitive differences and appetite for risk: “They would need to line it up with the realities of the current market.”
Registrable trade-marks may be in the form of a word or words, a logo or image (and sometimes a combination of these) and, perhaps, colours; other IP categories are designs (also registrable) and inventions (protectable by patents).
Duckworth says applying for a patent using an international mechanism (PCT) buys time in which to decide on countries, and spreads the costs.
Henley says she is often asked: “What’s the point of protecting my IP if I don’t have the money to enforce it?” She responds there is value, even if the exporter doesn’t have the full funds to enforce. In her view, a patent or registered trade mark deters a number of would-be infringers. Insurance may be obtainable that would cover costs in the event of an action. The majority of IP disputes are settled without legal proceedings or significant sums being involved, says Henley.
Blumsky says some parties take all steps to protect their rights and this can be seen as aggressive if they look to stop the infringer from trading by seeking an injunction, as well as seek reimbursement for loss.
On other occasions, after an exchange of letters outlining terms and conditions, a rights holder may allow a newcomer onto market under a similar brand.
KEY TAKEAWAYS
EXPORTERS FEEL THE PAIN OF IP THEFT
Exporter magazine poll finds Kiwi export companies heavily targeted
- Sixty-four (or 30%) of our 214 survey respondents last month reported their IP had been stolen in recent years.
- Suspects and perpetrators were local rivals, opportunistic offshore operators or employees.
- One respondent is challenging an overseas player in court for alleged theft of IP and has spent $100,000 on IP protection recently.
- Another is in the midst of legal action against a former employee.
- Respondents commonly spend thousands of dollars a year for basic protection.
- Spending can reach several hundred thousand dollars when a large research and development investment is at stake.