IP in the ICT and software space
Steve Adermann, CEO of TasICT, speaks with Michael Cooper about the forms of intellectual property protection that operate in the domains of Information and Communication Technologies and software.
They cover how successful global and Tassie ICT businesses have protected their IP, and the strategies and difficulties businesses can have when protecting their software and apps.
Michael then distinguishes between more formal IP protection and trade secrets, and discusses why it’s crucial to have robust IP clauses in contracts, terms of engagement, and non-disclosure agreements.
Finally, Steve and Michael cover the (avoidable) challenges businesses can face when expanding overseas, and the importance of identifying and protecting IP in key markets, particularly for smaller businesses.
For a cleaned-up transcript of the conversation, click the transcript tab above.
Introduction
Welcome to Interface, the podcast from TasICT, presented by Steve Adermann, chief executive officer of TasICT, the peak industry body for the information, communication, and technology sector.
Steve
Thanks for joining me for another episode of Interface. Protecting your intellectual property is something that’s often talked about. But many people who have something to safeguard wouldn’t know where to start.
Cooper IP is a business that specializes in intellectual property and my guest today is Michael Cooper, who’s a director of Cooper IP and also a patent and trade marks attorney. Welcome to Interface, Michael.
Michael
Great Steve. Thanks for having me.
Steve
I’d like to talk about intellectual property protection, particularly for businesses in the information communication and technology industry. So what forms of protection are relevant in this space?
Michael
There are five main types: Patents, design registrations, copyright, trade secrets and trade marks.
Patents protect how inventions work
Steve
Let’s start with patents – tell us about how you protect with patents, what’s involved and everything to do with it.
Michael
Patents protect the way things work; they stop others from making products that work the same or similar to yours. Patents are great for protecting hardware and software but also manufacturing processes. Until recently, anything new on a global scale, which was also inventive could be protected, but software patents have been harder to get in recent times.
The top filers of patent applications in Australia in the ICT space are companies like Qualcomm, Aristocrat, Apple, LG and Highway, but there are also some companies down into Tasmania in the agricultural space doing some great things: for example, Yield Tech Solutions have filed several patent applications.
One important thing to note with patents is that they need to be filed before any commercial use or publication of the invention, so it’s really important to keep the invention secret until you have determined that patent protection is appropriate for your business and then filed the patent application.
Design registrations protect how products look
Steve
So what about design registrations?
Michael
Design registrations are great for products with a new visual appearance and they’re often used by companies that invest in the design and appearance of their products. It’s no surprise that Apple is a big user of design registrations. Even though Apple files many patent applications as well, they have many design applications covering products like Earpods, iPods and their phones. Most Apple products have some form of design registration around it that protects the way it looks and stops others making products that have a similar visual appearance.
Again, as with patents, applications for design registrations need to be filed before any commercial use or publication of the product. It’s important for companies that are thinking about protecting the appearance of their products that they look into it before they go to market.
Steve
So that protects you against knockoffs and things like that.
Michael
Correct, design registrations are particularly useful for knock-offs.
Steve
Do you have to be an artist to submit a design registration? They would have to be fairly detailed and accurate, wouldn’t they?
Michael
The type of drawings that are required and often illustrative black line drawings. The drawings aren’t that hard to prepare; most companies that have basic CAD skills can attend to that. The main threshold is making sure that your product is new and distinctive as that can be the main requirement for design protection.
Steve
Okay, so that’s going to set you up nicely to protect your brand and what you’ve come up with and make sure that nothing else produced of a lower quality brings your brand down.
Michael
That’s right – what we often find is people come up with a great product and there is often some functionality around the way it works, and there are some important visual features as well. The knockoff products that come in from other countries, they often look the same and they are intended to sit in the marketplace and people think that they are getting a product that is similar to yours. But the construction, the components, the actual guts inside the product are different and it doesn’t work nearly as well as yours. This isn’t great for consumers and it can also damage your brand and reputation in the marketplace because people can confuse these sort of products.
Copyright protects artistic works
Steve
Moving on to copyright – it must be very difficult to copyright a circuit layout or a program code, isn’t it?
Michael
It’s not actually – copyright subsists automatically. So, in any original artistic work, copyright arises automatically – the difficulty is often proving that you are the first author of it, that you’re the first person to come up with that artistic work. But once you can establish that, it’s quite a good form of protection because it’s free, but the downside is the protection is rather limited. To enforce copyright, you must show that the other person knew about your work and they copied it. This can be difficult to prove, but it’s not impossible when it comes to software. For example, there are often circumstances where a developer might have left one company and joined another and all of a sudden, the software looks the same and works the same and you can come to the conclusion that copying has taken place.
Who owns the IP?
Steve
It must be difficult in partnerships if someone one decides, “right, I’m going to get in first with this,” so that proof of cooperation is so important in that case.
Michael
Yes, and with any form of intellectual property, ownership creates many disputes in a partnership situation where people are working together. It is important to ensure that there are sound agreements in place and that you have had robust discussions about who is going to do what and who is going to be able to use what technology once the project is completed, and what happens when the parties finish the project and part ways, whether it be amicable or otherwise.
Steve
Quite often, things are developed in association with institutions such as universities. I would imagine universities already have robust agreements in place to discover where their intellectual property ownership lies.
Michael
You would think so Steve, but it’s not always the case, I must admit. General speaking, that is true but I’ve seen situations where it hasn’t been. Often, smaller developers and the like might deal with universities and feel that they don’t have any power to negotiate these sorts of clauses in their agreements. However, that’s often not the case and smaller parties can have an input and make changes to these clauses. This is particularly important if, after the project or collaboration is complete, you wish to use the resulting technology for other purposes. Making sure that those sorts of provisions are in your contract and terms of engagement can be very important.
The benefits of keeping it a trade secret
Steve
Now, what about Trade Secrets?
Michael
As the name suggests, these are secrets that arise in the course of trade; a great example in the ICT space is Google’s algorithms. They change all the time and basically, nobody completely understands how it works. Had Google tried to patent their algorithms, they would have been required to publicly disclose them and how they work. This would have been fine for the 20 years that patent was in place, but once the patent reaches the end of its life, that technology goes into the public domain and it’s free to anyone to use. But by keeping the content of their algorithms a secret, that proprietary knowledge can last in perpetuity, provided that you can keep that the algorithms secret.
It can be important for local businesses to know that trade secrets can apply to many things and they can be a great commercial tool. But there are things that need to be done to ensure, that if push comes to shove, those trade secrets are recognized as trade secrets. For example, you may need to tell your employees that certain information constitutes trade secrets. Your employees might not need to know the content of the trade secret, but they need to know that certain things are secret, and steps need to be in place which prevents secret material from leaking out into the public domain. You may need adequate security on documents and markings and the like so that people understand when information is a trade secret. Otherwise, your case may not hold up in court.
Steve
Bit of a catch-22 there because if you don’t register it, it’s open, but if you do register it the secret’s out. So would a non-disclosure agreement between the employer and the employee working on those things. Is that the most solid way of protecting that?
Michael
That’s one way. Typically in an employment contract, there will be clauses around intellectual property and clauses around trade secrets and it has to be pointed out at a high level what those trade secrets are. For example, if you have developers working on particular source code, you might do it at a program or a project level, making it clear to everyone that the content of that program is a trade secret and is not to be disclosed.
Guarding your brand and reputation with trade mark protection
Steve
One of the other forms of protection that you mentioned is trade marks, so give us a bit of insight there, please Michael.
Michael
Trade marks protect branding and they’re often undervalued. Trade marks play a role in consumer protection and they allow customers to purchase products and services with a reasonable expectation of the quality or other characteristics of what they’re purchasing.
Apple is a great example – if you walk into an Apple store and pick up an Apple product, you’ve got a fair expectation of what it is, how it works and what you’re going to go home with. So it’s about consumers being able to consider a product or service and have a fair expectation about what it is and not be misled or deceived about what they’re buying.
When it comes to trade marks, we’ve seen many disputes between companies with similar branding, and the stakes can be very high because when it comes to that level of consumer protection and recognition in the marketplace, your branding can be incredibly valuable.
There are some great Tassie brands in the marketplace, and in the ICT space, there are two that really come to mind: one is Savage Interactive, down in Hobart, the makers of the Procreate app; the name of that app is quite important. And another example would be Definium Technologies, who’s quite well-known. Many people that listen to this would say “I know Definium, I’ve heard of them and what they do and their great things, and if I saw their label on a product, I’d have a reasonable expectation of that product’s quality, and you know what, I might just buy it based on the label.” You can see that it gives a great commercial advantage in the marketplace because if you’re looking at two products, one with a label that you know something about, and one with a label you know nothing about, you’ll often lean to the one that you are familiar with, often because you have a reasonable expectation of what it’s about.
But then if you find someone in the marketplace selling products with the same name or a similar name, consumer confusion can result and brand dilution and damage can occur because you can end up with customers buying products expecting certain qualities and it may not turn out that way.
Apps can be very difficult to protect with patents. When it comes to apps, we tend to purchase them through an app store, and one of the main pieces of real estate that we look at is the name. As such, the name should be protected by way of a trade mark registration. And what that does is stop others using similar names for their apps. The last thing that you want is to create a great app, build a reputation, and when people go to an app store and search for your app, they find a bunch of other apps with similar names that do similar things.
The challenges with overseas IP protection
Steve
Glad you mentioned Savage and Definium, both members of TasICT.
Businesses nowadays are looking for new ways to expand. They are mostly turning to IT to do that and looking for technology-led solutions, which means they’ll be starting to look at trading further afield, not only in Australia but overseas. What are the challenges involved in protecting your intellectual property in Australia and elsewhere?
Michael
One of the main challenges is that protection is done on a jurisdictional basis. There is no international register of rights that is going to protect somebody in Tasmania that wants to move into markets in the USA, for example. That being said, there are mechanisms we can use to do this and there are mechanisms we can use to research other rights.
When it comes to international protection, people can often have trouble with trade marks. For example, they might have a great brand in Australia , and they’ll be trading here for years, building a reputation, but when they expand into the US, they might find that there is a US company doing something similar under a similar name. A cease and desist letter often results and can compel the Australian company to rebrand. These sorts of issues can be identified in advance with trade mark searching.
Another challenge with protecting intellectual property overseas involves monitoring timelines and meeting strict deadlines. With patent protection, for example, often after filing a provisional patent application in Australia, you will have 12 months to take steps to go overseas, and then a further 18 months to lock in what countries you’re interested in. This gives you about two and a half years from filing your first patent application, which may or may not be enough time for you to work out where your markets are. And if you haven’t started selling your products or services, you haven’t got your website up or your software commissioned, it can be difficult to work out in which markets you ought to protect your invention. Additionally, patent protection is often not cheap, so you can find yourself up against a deadline and forced to make these tough business decisions based on incomplete information.
Steve
Considering that you’ve explained some of the difficulties involved with applying for patents. Should I even bother? Is there any hope for improvement in that area?
The issues facing software patents
Michael
The main issue with patents in this space is around software patents, which can be difficult to get. The laws surrounding software-based inventions are unfavourable, but they are becoming more and more settled. I had personally hoped for a policy solution to the problem, but at the moment that just doesn’t seem to be there. When I say a policy solution, there seems to be an inherent unfairness in the patent system when you contrast the strength of patent protection that is available for inventions that aren’t rooted in software and those that are. There have been complaints in the industry about this inherent unfairness.
Unfortunately, we might need a high-profile case to start the conversation, and when I say unfortunately, it’s because in these sort of cases, there is always a winner and a loser. Someone is probably going to have to lose big to bring a spotlight to the situation.
That said, many companies in the software space nevertheless ought to apply for patent protection; they need to try, and it’s going to be difficult, but they don’t have many other options. If you file a patent application today, it could be four or five years before it is examined. I was talking with a client earlier this week and their case was filed five years ago and it is yet to be picked up for examination. It could be that, several years after filing your patent application, we do get some kind of a policy decision which makes things a bit more favourable toward software patents.
Where should you protect your IP?
Steve
Many businesses, especially smaller ones, only have limited funds. Where should they protect?
Michael
The home market typically makes sense. Otherwise, it is a matter of prioritizing international markets. For a lot of people, that’s the US or Europe. The EU can be protected as a region, so it’s often cost-effective to protect your IP there. It is not really feasible to try and protect your intellectual property in the vast majority of countries around the world. It is about being pragmatic and trying to find the most valuable markets. For most companies, particularly smaller ones, if they can get a monopoly around what they’re doing in Australia and one big market like the US, that would be enough to make them many times over. Ultimately, we need to be sensible about how we are protecting our inventions and where we can best use our funds.
Sorting out IP ownership
Steve
What about contractors or suppliers who are doing work for some of the bigger organizations?
Michael
As a basic principle, IP ownership accrues to the creator, unless modified under a contract or other agreement, like an employment agreement. IP clauses in employment contracts and terms of engagement are very important. Contractors might want to reuse software modules or other parts of the software; it is important to make sure that terms of engagement or supply contracts allow that.
From the perspective of the company who is engaging contractors, if they are investing funds in R&D, the goal is to achieve some competitive advantage – maybe it is about improved efficiencies or cost-cutting or better marketing or the like. You don’t want to give that competitive advantage to competitors, least of all for free, so it is crucial to ensure that your contracts and terms of engagement match your expectations and that you are not inadvertently allowing your contractors to resell the software that you have developed.
Steve
Well, plenty of things to consider there Michael. If there is anything a listener would like to discuss more, Cooper IP is based in Melbourne and you’re only a phone call or email away.
Michael
That’s right Steve, we’ve been working down in Tasmania for about five years now. Before the lockdown, we would spend two days a month in Tassie and we have quite a large client base down in Tassie, particularly SMEs who we help navigate the complex field of intellectual property. We hope to be resuming those visits soon, but for the time being, we’re doing everything remotely. So if anyone wants to chat, you can jump on our website and book a free call with us.
Steve
My guest has been Michael Cooper from Cooper IP. Thanks for being a part of Interface, Michael.
Michael
Great Steve, thanks for having me.