The greatest inventions, political and social advancements and maximum profit-making endeavours in human history have originated in the minds of people. They all start in the same place: as an intangible idea.

Intellectual Property (IP) is an essential and valued resource. From patents and copyrights to industrial designs and trade secrets, IP can be the distinguishing factor and main driver of revenue for an organization.

It is critical for organizations to recognize IP as a valuable corporate asset and to mitigate potential risks associated with IP infringement in order to ensure business viability within both the domestic and international target markets. 

Intellectual Property is a general term for the set of intangible assets owned and legally protected by a company from outside use or implementation without consent.

The World Intellectual Property Organization (WIPO)—the UN agency mandated to advance the development and protection of IP internationally— defines IP as: “…creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce”.

The owners of IP rights may use, sell or license them to others.

IP is traded every day between people, nations and industries to the benefit of the global economy. Every effort must be made to protect their owners’ rights while simultaneously advancing their shared accessibility.

Overseas, products are counterfeited on a mammoth scale or re-engineered with small changes and then patented as if they were new inventions. Because much of the theft is not counted, estimates of the total vary. In 2010, the commander of the U.S. Cyber Command and director of the National Security Agency, General Keith Alexander, stated that, “our Intellectual Property here is about USD 5 trillion. Of that, approximately USD 300 billion [6%] is stolen over the networks per year.” He later called the theft “the greatest transfer of wealth in history”. However, IP that is stolen over the Internet constitutes only a portion of total IP theft.

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Develop Options and Select Strategies

For those ventures that contain significant IP risk, the organization will develop strategies to reduce or transfer this risk. In many cases, organizations will want to access or hire specialists in this area who can assist them in identifying current and workable strategies for their IP protection needs.

1. Registering Copyrights/Trademarks and Applying for Patents

Organizations may need to register any relevant copyrights/trademarks and apply for relevant patents in the target market(s). Every target market will have its own rules and processes. For more information on how to register copyrights/ trademarks and apply for patents in a particular market, organizations may engage a trademark or patent agent or the Intellectual Property office of the target market. Once a market has been chosen, the timing of these applications can be critical, so the application process should be initiated as soon as possible.

2. Establishing Contractual Security

Organizations may seek to protect their IP through carefully constructed legal contracts. Contracts that protect IP include the following features:

• Non-disclosure agreements (NDAs), ensures that employment agreements, licenses, sales contracts and technology transfer agreements protect IP from the onset
• Clauses covering IP, such as a clear ownership clause

Once the contracts are established, organizations should regularly engage with their business partners to emphasize the importance of those clauses to the ongoing business relationship, and to ensure that partners fully understand what those obligations mean for both parties.

3. Implementing Security Measures

Organizations may want or need to strengthen their security procedures when getting involved in a new international venture. This can help to quickly identify unauthorized or malicious activities by internal and external parties. Security strengthening practices can include the following examples:

• Conducting background checks on key personnel/partners
• Restricting IP access to essential parties, contractors or supply chain partners
• Prohibiting unauthorized copies of IP, e.g. on USB devices, shared network drives
• Encrypting all IP that is transmitted digitally and electronically
• Physically locking areas where IP is stored

4. Acquiring Insurance

Organizations may want to transfer some of their IP risk by acquiring insurance. Intellectual Property Insurance typically protects against the significant legal costs that will need to be paid if an organization pursues its IP claims through the court system. It can cover both enforcing and defending claims:

• Enforcing claims against infringers who breach the organization’s IP: Legal costs relating to IP breaches includes damages, such as loss of profits or reputation and settlements to any IP right domestically or internationally.
• Defending infringement claims made against the organization: This includes infringement claims against the organization as well as claims made against its customers or licensees. Infringement claims often refer to a violation of a copyright or some other type of IP theft. The claims are often based on plagiarism, meaning someone steals the creative work of another person.

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It’s not always easy to protect intellectual property

Failure to consider intellectual property (IP) issues can result in large or fatal losses when pursuing international markets. The consequences of being unprepared should not be underestimated—setting up joint ventures, distribution networks and other strategic alliances represents a significant undertaking when protecting one’s IP.

Yet protection from potential partners and in-country representatives provides no safeguard from the entire realm of pirates, counterfeiters and other dubious characters that have made it their business to profit at someone else’s expense.

It is a phenomenon that goes far beyond losses for right-owners or individual companies but extends to the well-being and survival of entire sectors and national economies.

Much is said about pirated music, TV shows and movies, but the problem of counterfeiting and piracy extends to, for instance, aircraft parts, fashion, food, pesticides and medicines, just to mention a few.

The information technology sector is particularly vulnerable to this problem. Indeed, according to the Business Software Alliance, more than half of the world’s personal computer users—57 percent—admit they pirate software (which includes 31 percent who say they do it “all of the time” or “most of the time”). These findings are from a survey of approximately 15,000 computer users in 33 countries which make up 82 percent of the global PC market.

Global traders need to invest time and resources into protecting intellectual property. One option is to seek protection in individual countries separately by applying directly to national industrial/intellectual property offices. Each application may have to be translated into a prescribed language, which is usually the national language.

National applications fees need to be paid, and it may be necessary to engage an IP agent or lawyer to ensure the application meets national requirements. Some countries have established regional agreements for obtaining IP protection for an entire region with a single application.

Examples of regional IP offices include the European Patent Office, the Office for Harmonization in the International Market and the Eurasian Patent Office.

For more information on protection of intellectual property, refer to the World Intellectual Property Organization (WIPO).

When protecting intellectual property extends too far

Although the theft of intellectual property represents a real problem in some sectors (e.g. music, motion pictures, software, etc.), the extension of protecting intellectual property rights into other important sectors, such as food and medicine, has become a highly controversial issue.

The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) negotiated in the 1986–94 Uruguay Round, introduced intellectual property rules into the multilateral trading system for the first time that require member nations to respect intellectual property rules. While it may sound straightforward, this rule set is quickly creating ethical challenges that are threatening too many less developed nations.

For example, it is argued that some countries, such as the United States, issue patents too quickly without much research on whether or not the invention is truly novel (i.e. if it is really the first instance of this idea).

In effect, if a patent that has been issued is challenged, it is left to the courts to decide whether or not the patent should have been issued in the first place.

This led to a bizarre situation a few years ago where the United States Patent and Trademark Office (USPTO) granted a Texas-based company a series of patents on Basmati rice (i.e. strains of rice that have been grown in India and Pakistan for centuries). Eventually, after a lengthy series of challenges, most often these patents were revoked, but the implications of a system that focuses on protecting intellectual property rights on food are considered too ominous for many.

Indeed, as higher yielding cereal crops are being created through genetic modifications, intellectual property claims are being made on the very foundations of sustenance in many countries. Lower-yielding strains of plant are effectively rendered uncompetitive, and small farmers are being pushed out of business or are forced to adopt crop strains that are regulated by the monopolistic structures inherent to patented products.

Farmers are then unable to save seed from one year to the next (an age-old practice), leading to extreme vulnerability from a food-security standpoint (i.e. in hard times, farmers may not be able to afford seed).

Medicine another area of concern in IP cases

Similarly, in the area of medicine, multinational companies have been aggressively identifying the active ingredients in indigenous species of plants worldwide (in particular, those known for their healing potential) and filing patent claims on the chemical structures (or analogues of their chemical structures) in these plants to secure monopolistic rights for the resulting medicines. It has been argued that this is a form of unwarranted bio-piracy that capitalizes on public knowledge and the lack of technical sophistication in many countries.

For example, a patent claim was granted a few years ago to the University of Mississippi Medical Center for the use of turmeric, an Indian spice, for wound healing (U.S. Patent Number 5,401,504). This was extraordinary because turmeric has been commonly used for this purpose in India for centuries.

However, under U.S. law, it is necessary to find adequate evidence (i.e. printed or published information) that can establish precedence before a patent can be revoked. Fortunately, in this case, an adequate number of references were found, and when challenged, the USPTO revoked the patent.

However, in many countries where literacy rates are low, such evidence could be difficult to locate. And again, the rights are first asserted, and then those who are potentially harmed by those rights must fight to nullify the claim. Given the costs and complexity of litigation and the time involved in undertaking such a challenge, the uniform application of these rights across national boundaries creates a situation that leaves the most impoverished nations at an extreme disadvantage.

Accordingly, those engaged in international trade need to understand the nuances of these situations to ensure that corporate claims on intellectual property are not impinging on well-established rights.

The post Protecting intellectual property: the good, the bad and the ugly appeared first on Trade Ready.

Q1: In your opinion, what are some of the top strategic considerations when deciding whether to register intellectual property internationally?

First and foremost, make sure you have access to advisors who you trust and who know the rules and can make recommendations based on your specific situation. Acting on assumptions can foreclose your rights and options without you even realizing it.

There are no guarantees that registering intellectual property, (‘IP’ includes patents, trademarks, and copyrights – it also includes trade secrets, but you cannot register those) will be a financially successful endeavor.

Registering IP requires a short-term investment in hopes of a long-term payoff.

The costs are usually paid upfront, whereas the benefits are typically realized years later, if at all. This requires making projections and educated guesses, and a business plan is crucial.

Although there are international and multi-national treaties that harmonize certain aspects of IP, it is still highly country-specific. Choosing the countries where IP protection will be sought is a strategic decision, as it is simply impractical to file in every country.

Consider registering your IP in those countries where you market or manufacture your products.

Also consider where your competitors are located, where you compete with them, and particularly where they have their manufacturing capabilities. In addition, each country should be assessed for cost/benefit, such as the size of the market in that country, the barriers to entry for you and your competition, and even the political stability of the country. Simply put: is obtaining IP protection in a particular country worth the investment?

Q2: What is the financial commitment of protecting your IP in international markets?

For patents, filing an international patent application under the PCT (Patent Cooperation Treaty) requires at least a 3 to 4 year time commitment and has several stages, each requiring a financial commitment.

First, there is the initial drafting of a quality PCT patent application that will serve as the basis for what will subsequently filed in all desired countries. Conservatively, budget US$20,000 to US$75,000 for drafting and filing of the PCT patent application. This should include costs for a prior art search and analysis and a draftsman for the drawings.

Second, applicants have up to 31 months (depending on the country) from their first, original filing to decide in which countries to enter the ‘National Stage’, which is often around US$5,000 per country (plus translation costs where needed). This is because patent protection is country-specific.

There is no such thing as an international patent.

Third, in any given country, prosecution of the patent application (the process of taking a filed application through issuance, which is never guaranteed) can take a variable amount of time and money—US$20,000 to US$30,000 or more—depending on the difficulty encountered. The time frame ranges typically from two to five years—sometimes more—from when the patent application enters the National Stage of a particular country to when the patent application is prosecuted.

Finally, you also have to be aware of payment of maintenance fees, which vary by country. Some countries require annual payments even before the patent issues, some require payments after the patent issues, and others require payment over some other schedule. These fees can exceed US$10,000 over the life of the patent in each country.

Enforcement costs of a patent can vary widely, as something as a simple cease-and-desist letter, licensing agreement, or a cross-licensing agreement with a competitor (involving their patents as well) can resolve enforcement issues for as little as a few thousand dollars.

Few patents are ever litigated, but for those that are, the costs can run into the millions.

For trademarks and copyrights, the costs and time commitment are typically a fraction of those required for patents. The processes of registration and enforcement are much simpler and therefore typically cost less.

Q3: In what kinds of international situations is it better to file a patent vs. keeping IP as a trade secret?

Some assets, despite their high value (e.g., customer lists) are not patentable, thus making trade secret protection the obvious decision. For those assets that are patent-eligible subject matter (i.e., process, machine, composition of matter, and article of manufacture), there are several considerations that should be examined in consultation with a patent attorney.

First is duration. Patents are of a limited duration (by international treaty, about 20 years from filing) in all countries, whereas a trade secret can retain its status until it is revealed, which may never happen. Thus, if long-term protection is desired beyond the term afforded by a patent, then a trade secret may be best.

A great example of this is the formula for Coca Cola from 1886, which is still protected as a trade secret.

Second is susceptibility to Reverse-Engineering. A patent must disclose sufficient details to allow others to make and use the invention once the patent expires. By contrast, a trade secret loses its value if competitors can reverse-engineer it, which can leave the trade secret owner without recourse.

Generally, the more susceptible something is to reverse-engineering, the less it would be a viable trade secret.

In addition, if your process involves a combination of elements, some of which are easier to reverse engineer than others, it may be possible to patent those portions of the process that are easier to reverse engineer while maintaining confidentiality on those parts that you can keep secret.

Third, if the trade secret is reverse engineered, this can open up the possibility of competitors filing patents on the trade secret. Some countries recognize a prior-use defense, and this scenario could also raise inventorship issues. Nevertheless, having a competitor file a patent on one’s own trade secret is a nightmare, and can be avoided by pursuing patents instead of trade secret protection at the outset.

Fourth, it may be possible to obtain a patent on something that is currently a trade secret, thus giving up trade secret status. Conversely, a patented invention cannot later become a trade secret.

Fifth, if you have already missed the deadline to allow you to file a patent application on your invention, you may have no choice but to try to keep it as a trade secret.

Jonathan M. D’Silva is a Partner at the law firm of MacDonald Illig Jones & Britton, LLP in Erie, Pennsylvania. He is the chair of the firm’s Intellectual Property Group and the newly created Emerging Technology Group. Jonathan is a Registered Patent Attorney and admitted to practice law in Pennsylvania, New York, and the District of Columbia. He received his Bachelor of Science and Master of Engineering degrees in Agricultural and Biological Engineering from Cornell University. He received his Juris Doctorate degree from the University at Buffalo School of Law.

Bryan Walker is a patent attorney for MacDonald, Illig, Jones & Britton LLP. Before this position, he was a Patent Examiner for the U.S. Patent and Trademark Office. Bryan earned both BS and MS degrees in computer science; and started his career in systems administration and software development before earning his law degree from Washburn University.

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