IP Diligence: Some mistakes to avoid during territorial expansion
Depending on your school of thought you are likely to see intellectual property as a ‘spear’ or as a ‘shield’ in a highly competitive business environment. Regardless of your position on intellectual property, it is one of those unseen forces (perhaps seen by few) that drive business to a greater height.
The importance of IP is increasing day by day; month by month; year by year as thousands of technologies are being developed - technologies that are used to improve or add new features to existing products, e.g., the autonomous cars or create a whole new product, e.g., drone technologies. With this level of creativity and inventiveness more and more businesses are seeking market penetration to other countries. In the following paragraphs, I will outline potential IP issues that are critical to an exporting business. It is important to take timely and proactive measures to protect its creativity by using different IP mechanisms in all important export destinations when planning an export of product to another country.
More often than not exporters realise the importance of protecting their IP once it is too late i.e. when a counterfeits product have already gained significant market share or once they already find themselves in a legal hot water.
Here are some mistakes to avoid:
Thinking of IP protection as a universal framework rather than a regional one
Many exporters believe that by applying for a trademark, patent or industrial design protection in their country, they are protected worldwide. However, IP rights are territorial in nature, and IP offices only grant protection for the relevant national (or regional) jurisdiction.
Having the presumption that laws and procedures for the protection of IP rights are the same in every country
There are significant differences on how each state implements the law on the right of ownership on a property. Many jurisdictions do have harmonisation of laws and procedure, but their interpretations are still subject to legal practices of each country. A computer programme, for example, is one area where different countries have different practices. Another example is the protection of industrial designs which largely depends on the legal system in individual countries. It may be protected under the industrial design law, copyright law, trademark law or the unfair competition law. Therefore exporters should find out about the applicable legislation in the country intended for product commercialisation.
Not using the regional or international treaties as protection systems
A worldwide registration of IPR may be expensive. Regional and international systems; if available are cost effective way of applying for IP protection in various countries.
Missing important deadlines for filing applications abroad
Patent applications in other countries should be filled within 12 months from the date of application in the first country. This period is known as the “priority period.” Failure to file during the priority period may result in the impossibility to obtain patent protection in other countries due to loss of novelty. A similar rule applies for industrial designs for which the priority period is six months.
Disclosing information too early or without a confidential agreement
Communicating information on your latest innovation or a new model to potential partners; export agents distributors or anybody else before applying for protection or having a knowledge product meeting without a written contract that stipulates confidentiality; could result in you losing the exclusive rights to your invention or design. Your product may no longer be considered novel; therefore it is not patentable, or somebody else may secure the patent for your invention due to lack of diligent information disclosure. Should this happen, it will ultimately exclude you from the use of your invention in that country.
Not checking whether a mark is already being registered by another company or in the worst case it is being used by unaffiliated competitors in an export market.
Using an identical or similar trademark to one that has been registered or in use in a foreign market could be considered an act of infringement on the other firm’s trademark rights. The company may be asked to cease using its trademark or may be liable to pay damages for infringement. Paying up damages will not only be a huge blow to the marketing and export strategy of the firm it will affect the entire bottom-line.
Exporting licensed goods without authorisation from the IP owner
A lot has been said about technology transfer, but few has been mentioned on the legal framework that powers the transfer. This is important because if an enterprise has licensed-in technology from other companies, it should make sure that it has the right to export the product bearing such technology to avoid infringing on the licensor. A way to do that is to ensure the geographical area in which the licensed product may be commercialised is explicitly defined in the licensing contract.
Adopting a foolproof approach on all of the above measures will strengthen the position of the exporting company in the destination markets. Failure to take proactive and preventative steps for protection of IP and for resolving disputes in litigation may lead to significant loss.