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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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.

The post 3 Important questions answered about protecting your IP in international markets appeared first on Trade Ready.

For many, this unfortunate situation occurs when they see the hijacked mark or design on products imported back into their home market.

On a trip to China in 2008, I met with an American automotive rubber belt manufacturer. They had made this unfortunate discovery.

Would-be clients came to the company wanting support on their purchased products. Instead, both sides discovered that the products weren’t authentic, but copies. As a result, the company wasn’t able to support the copycat products.

These inferior products from abroad had tarnished the company’s brand both in China and in countries where the knock-off products were being sold.

Situations like this one require time and money to try to wrestle stolen intellectual property (IP) away from international IP pirates.

It happens even to companies that choose to skip selling in international markets. But there are ways to help protect your company’s name, logos and designs.

The smartest and least costly of which is registering trademarks in international markets. Here’s where to start:

Internationally filing your trademark

The World Intellectual Property Organization (WIPO) established the Madrid Protocol in 1989. The Madrid Protocol and Treaty allows an individual or company to register for trademark protections in one process. This streamlined approach helps with the registration process, but does not actually harmonize trademark protection standards between member countries.

With more countries signing on regularly, there are now 92 countries claiming to adhere to these international registration protocols of mark protection. I say ‘claiming’ because China is on that list, and China is by far the greatest source of IP infringement in the world.

You can check the Madrid Protocol List of Member Countries to see if your current and future target markets are listed.

The list includes popular export markets such as the United States, Canada, Japan and Germany.

By registering your marks with WIPO, you can pay one fee, read the information in one language and register one time. Fees vary from a few hundred dollars for one mark in one market, to tens of thousands of dollars for registering in all Madrid Protocol countries. Terms vary, but most WIPO trademarks registrations last for ten years.

What kinds of marks can you register?

To quote WIPO:

“A word or a combination of words, letters, and numerals can perfectly constitute a trademark.”

“But trademarks may also consist of drawings, symbols, three-dimensional features such as the shape and packaging of goods, non-visible signs such as sounds or fragrances, or color shades used as distinguishing features—the possibilities are almost limitless.”

While most companies stick to the basics of registering their company name, product names and logos; especially larger multinationals, have registered colors (ex. Coca-Cola red) and symbols (ex. McDonald’s arches and the Nike swoosh).

First to file vs. first to use

Some companies discover that, by law, they cannot use their own trademark in an overseas market because someone else already registered the mark.

The famous recent case of this was Tesla, the car manufacturer being sued in China for trademark infringement. The Tesla name and logo had been registered by a Chinese businessman well before Tesla’s entry into the market. By rights, the Chinese trademark holder can register the marks without any proof of actual use.

In some countries, including the U.S., intellectual property rights are normally awarded to the first to use a mark or invention (with proof of use, of course). This is not universally the case.

In many countries, the right to use IP is given to whoever files the registration and pays the fees first.

This is why it is crucial to register your trademarks as early as possible and before you actually enter markets.

Always register in China

Since China is both a first-to-register IP legal framework and the IP Piracy Capital of the World, it makes sense to register in China as soon as possible. It gives your company legal standing should you need to pursue any legal action now or in the future.

Some would say that the Chinese legal system is too broken to bother registering IP.

But Chinese laws and enforcement in this area are steadily gaining ground.

For example, a social entrepreneurial company called Nokero—operating out of Denver, CO—has sought IP protection for trademark infringement and damages in China. The CEO of this small but growing company happens to be a former patent attorney. The company has won several of its infringement cases in Chinese courts!

For non-Madrid Protocol markets

If you are operating in a market NOT covered by the Madrid Protocol, or plan to do so, then talk with your international business attorney for a referral. If your company does not yet have a law firm with international reach, this would be the time to find one that does.

Registering trademarks is relatively easy and inexpensive compared with damage control after infringement when you have no legal claim to stand upon.

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