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Intellectual Property Strategy
A Guide to IP Management
By Alexander Korenberg, Stephen Robertson Globe Law and Business Ltd
Copyright © 2017 Globe Law and Business Ltd
All rights reserved.
ISBN: 978-1-78742-074-8
CHAPTER 1
Intellectual property: A primer
Lorna Brazell Osborne Clarke
1. Introduction
It is easy to forget that property ownership is a system of legal rights. Although occupation of a house, or having a coin in one's pocket, feels like owning property, physical possession alone does not give the legal right to knock the house down, or spend the coin: those are rights conferred by the law only on that subset of occupiers or holders of objects who are by law the owners of the property in them. Nevertheless, generally speaking most people understand that each place or object does have a legal owner, and that they as passers-by or temporary holders of the object have little or no right to decide what is to be done with it. Intellectual property (IP), similarly, is a system of legal rights, with the distinction that the subject matter, unlike a house or a coin, is intangible and therefore less easily recognised as subject to legal rules. IP divides up creative work into a number of categories and provides rules by which a person or a company can claim property rights over that work. If something has the legal status of property, then it can be bought and sold, licensed, mortgaged to raise funds or inherited just as physical assets can be. Thus, ownership of IP gives the owner the ability to control the use of ideas and the products of the human mind in all its manifestations: from technical inventions through to the ingenuity of traders in improving their position in any market and the works of artists and performers in all fields of the arts.
Some rights which are commonly called IP, such as know-how or trade secrets, are not in law property rights and so cannot be dealt with in this way. Instead they are protected by a range of other laws.
Note that while IP rights give the ability to control the use of works, they are not self-enforcing and there is no public system for enforcing them. The owner of the rights has responsibility for tackling infringers by bringing civil court proceedings for an injunction and damages. Assistance from public authorities such as local trading standards officers can be called upon in some circumstances, but these departments are highly unlikely to take action without being notified.
As industries have evolved using ideas and other intangibles differently, a number of different kinds of rights have been devised over the years. It is important to be clear in any IP management strategy as to which rights are actually relevant to the business in question.
The best-known IP rights are patents, trademarks and copyright. These have some characteristics in common but are different from each other in other ways. For instance, some IP rights, such as patents and registered designs, are absolute monopoly rights. Even someone who comes up with the same product or design wholly independently can be prevented by the right holder from exploiting his own work. These are very powerful, and therefore valuable rights. Other rights, such as copyright and rights in confidential information, are only partial monopolies, which means that anyone who honestly comes up with the same product independently of the earlier creator has the right to exploit his own work regardless of the prior right holder. Such rights can only be used to stop those who have in some way derived benefit from the right holder's prior effort, such as through copying, and so the ability of such rights to deliver genuine market exclusivity may be lower.
The formalities associated with the various rights also differ widely. Some rights, most notably copyrights, arise automatically as soon as the new work comes into existence, whereas other rights such as patents have to be applied for and come into existence only when registered with a government authority. Some rights, again most notably copyrights, are effectively global rights by virtue of international treaties; others, namely European Union trademarks and European Community design rights, may have limited international effect; but most are strictly national rights. Very few businesses today can be satisfied with rights limited to a single jurisdiction, so it may be necessary to apply for and obtain equivalent national rights in many countries.
There are numerous additional species of IP which have been introduced to protect particular interests in particular industries. For instance, semiconductor topography rights, plant variety rights and performers' rights are special forms of IP relevant to the semiconductor, agriculture and entertainment industries respectively. They apply exclusively to those specific industries and will simply never be relevant except to businesses operating in those industries. As regards these, all that the nonspecialist needs to know is when they might conceivably be relevant, in order to do further research or seek expert advice if necessary.
It is also important to appreciate that IP rights do not give a positive right to do anything. Thus, a patent over an improved form of wheel does not give its owner the right to make and sell the wheel if, in doing so, he would be using pre-existing spoke technology that has been patented by someone else. A licence would be needed under the earlier patent. Similarly, a brilliantly creative adaptation of a children's book into a computer game may well attract copyright of its own, but it will also infringe the copyright in the original book and cannot be made and sold without the permission of the holder of that copyright.
2. National and international rights
The harmonisation of IP rules worldwide began in the 19th century, with the Berne (copyright) and Paris (patents and designs) Conventions. As a result of these and subsequent revisions and additions, culminating the Agreement on Trade-Related Aspects of Intellectual Property (the TRIPS Agreement) under the World Trade Organization (WTO), the national laws of all major markets follow a similar set of basic principles, though national implementations are not identical. There are also some regional agreements which govern specific rights in specific jurisdictions, such as the European Union's EU Trade Mark and Community Design. Other than these exceptions, for any given work the owner of the IP rights over it is actually holding a bundle of similar but not identical national rights, which may require constant vigilance to remain effective.
In view of this it is important to be aware that very few countries have courts which are really familiar with this branch of commercial law. Regardless of the theory, in practice the scope of rights and the appropriateness of remedies can both be misunderstood, leading to inadequate enforcement or even in the worst case scenario to complete loss of rights. Low levels of judicial expertise have a far greater impact upon IP assets than upon a business's other assets. The English courts have developed significant expertise in IP issues over recent decades and represent one of the most sophisticated systems available globally for determining related issues.
3. Ownership of IP
Ownership of any registered IP right is generally uncontroversial: the party which is named on the relevant register as being the owner, is the legal owner. (There are, of course, occasions where a right has in fact already been assigned to a new owner but the change has not yet been registered.)
Ownership of the various unregistered forms of IP right is a different matter. The statutes which establish each form of property right stipulate who will be the first owner of that right when it arises. But this is generally in the form of a cascade of options. Thus, for example, the first ownership of a copyright work depends upon whether or not the author created the work in their capacity as an employee (in which case the employer owns the copyright) or in their own right (in which case the author owns the work). In contrast, first ownership of a commissioned design may belong to the commissioner, but if the work was not commissioned then the designer's employer (if any) owns the rights. Only if the designer was freelance will they own the rights themselves.
The effect of these rules is that frequently an organisation believes that it owns rights only to discover when that ownership is challenged either that it does not own it, or cannot prove ownership. Records need to be kept as to who created what materials in what circumstances – something which is rarely thought about at the time of creation, and so may prove to have been overlooked when the question first comes to be asked, several years later.
The greatest source of confusion, however, is the widely held belief that a commissioner of a copyright work – whether text, or artwork for a website or other material – owns the copyright in that work. This myth derives from a failure to understand the national nature of IP rights. Under US law, copyright in a 'work made for hire' does indeed belong to the paying (hiring) party. But under English and other European laws there is no such rule. Accordingly, a company which commissions work and does not expressly take an assignment of the copyright, will have the benefit of a licence to use the work for some purposes but will not own the copyright itself. This is a frequent source of disputes.
Where works are produced through collaboration, ownership can also be problematic. Joint ownership may arise automatically (as in the case of copyright) or be agreed (such as when patenting the fruits of joint research), but this is rarely a suitable solution in commercial terms. Once again, US law is the source of misunderstanding here, since US laws permit joint owners to act separately in respect of their individual shares. Under the European approach, however, joint owners need to act jointly in order to assign or license the rights, and over time as the parties' interests diverge this is likely to become less and less possible to agree. In practical terms, it is more effective to have one party own the rights with others having such licences as they may need for their own future exploitation of the rights.
The following sections outline the characteristics of the principal forms of IP rights.
4. Copyright
Copyright is both the most widely known and the most widely held form of IP. There is no system for registration of copyrights in most jurisdictions, although registration is an option in some including the US and China. However, even in these countries copyright subsists without being registered; registration is principally a precondition for enforcement. The common expression 'copyrighted', implying some action has been taken to obtain copyright, is a misleading hangover from an earlier era when registration was required.
All businesses and almost certainly all individuals as well own copyright in numerous works, since copyright arises automatically whenever someone writes or draws an original (not copied) sentence or scribble. All that is needed is to be able to show who it was that created the work and when. But most of these 'accidental' copyrights have no market value whatsoever. It is principally in industries which rely upon some form of artistic creativity, whether as a product in itself (such as newspapers, fashion or music), or as a tool for other purposes (as in advertising) that the copyrights have any commercial significance. Copyright in operating manuals for industrial processes can also be valuable, as the only source of technical knowhow outside the heads of the current employees.
Copyright is also important in protecting computer software. This has for decades been a source of contention, since copyright protection is less strong than patents, but despite much discussion it has not been possible to reach a widespread consensus as to how software should be protected under the patent regime.
Copyright confers on the owner of the right exclusivity as regards various acts such as making copies of the work, issuing copies to the public or adapting or performing the work. Anyone who does any of these 'restricted acts' without permission infringes, and a court can grant an injunction requiring them to stop as well as an order for damages and payment of legal costs. Proving copying is not always easy: even an identical work does not infringe unless it has been derived directly or indirectly from the original. Unless the copy is exact, such as a pirate copy of a film or photocopy of a newspaper article, then there is often scope for argument as to whether or not the amount copied is sufficient to infringe. The test is one of quality not quantity: has a substantial part of the original been copied? The many rules of thumb bandied about as to how much it is safe to copy without permission are all unfounded in law. The Court of Appeal recently ruled that a series of eight second extracts from a two-hour broadcast of a cricket match infringed, as they were the most interesting and hence most valuable parts of the recording.
There are a limited number of exceptions to copyright, such as the right to quote from a work in the course of genuine criticism or review. But it is important to be aware that these exceptions are purely national: the US general exception for 'fair use' is much broader and more flexible than the closest equivalent exceptions under European copyrights. Accordingly, a use of a copyright work which may be permitted in the US risks being found to infringe in the EU.
The protection given by copyright is the longest-lasting of any IP right other than trademarks. For literary (written), musical and artistic (graphic) works it lasts for the entire lifetime of the author of the work, and for a period thereafter, which varies from country to country but is generally between 50 and 70 years. As a result, it may be necessary to look further back through the annals of a business in order to be sure that all relevant rights have been identified and assigned, than will be needed in relation to shorter-lived forms of IP. Keeping records of who produced valuable copyright works is thus an important component of protecting its value: if the work is infringed 50 years after its creation, the owner needs to be able to identify the author and whether they were an employee of the business, or else point to an assignment or other proof of ownership. Modern businesses are not always set up to retain such records.
5. Trademarks
While copyright protects the actual work in which it arises, trademarks are all about protecting the goodwill of a business, and may be used with a single product, a range of products or all products emanating from that business. Any sort of mark which a trader uses to distinguish its goods or services in the eyes of the relevant public can function as a trademark. Words (KODAK), logos (picture an apple with a bite out of it) and sounds are commonly used. Trademark rights may accrue to these even without registration, provided they achieve a sufficient level of consumer recognition.
Brands of all kinds are very valuable in many industries, but particularly in consumer goods and services, where the underlying product may be practically identical to its competitors but command twice the price if it carries a prestigious label. The extreme example of this is in the highly technical field of pharmaceuticals where, once patent protection has expired, a trusted brand can retain market share because of its recognition among patients, in the face of very substantially cheaper and chemically identical alternatives.
Of all forms of IP, trademarks are the only one which potentially lasts forever. Provided that a trademark remains in use and the mark does not become the generic term for the products it is used to promote (for example, biro), it can continue in effect indefinitely.
The strength, and hence generally speaking the value, of the rights obtained under a trademark depends upon whether or not it is registered.
A trademark can be registered either nationally (through the UK Intellectual Property Office) or for the EU through the European Intellectual Property Office. A registered trademark confers an absolute monopoly on the use of the same mark for the same goods and services as those listed in the specification of the trademark application. Ignorance of the registration is no defence: anyone can check the register, and so is taken to have notice of the trademark owner's rights. The registration also enables the holder to prevent the same mark being used on similar goods or services, or to prevent a similar mark being used on the same or similar goods or services, if as a matter of fact consumers are likely to be confused by such use.
In contrast, the rights of a proprietor of an unregistered trademark depend upon the level of recognition of the mark among the relevant public, which is infinitely variable. WTO Member States are required to provide protection to 'well-known' marks even if these are not registered in their territory. What is required to achieve 'well-known' status is, however, a matter left to each Member State to decide, however, and as a result the test is highly variable. The Mercedes badge is apparently one of the most widely recognised marks in the world; few other trademarks are recognised across all continents and Mercedes trucks are used everywhere for their durability and longevity. Such a level of recognition could confer a standard of protection similar to that of a registered trademark. Other unregistered marks with a lower consumer recognition level may only be able to retain exclusivity in a restricted geographical area, or for a very limited category of goods or services. The UK Supreme Court recently ruled that the mark NOW used by a well-established Hong Kong broadcaster, including promotional material available globally on YouTube, did not have the right goodwill in the UK to prevent Sky from launching its own UK broadcast channel under the mark.
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Excerpted from Intellectual Property Strategy by Alexander Korenberg, Stephen Robertson. Copyright © 2017 Globe Law and Business Ltd. Excerpted by permission of Globe Law and Business Ltd.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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