Protecting your intellectual property in international markets
Michael Cooper discusses risk mitigation and benefits associated with protecting your intellectual property overseas.
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Michael is an Australian and New Zealand registered patent attorney. He’s also an Australian registered trade marks attorney and he works across Melbourne and Tasmania.
Michael has been a wonderful friend of the TCCI and TradeStart. Michael has been a speaker at IP seminars I have held here at the TCCI previously so it’s absolutely wonderful to have Michael back again to speak with us about managing and protecting your intellectual property, which is becoming more important than ever. So welcome Michael and over to you.
About Cooper IP
Thanks for that Sally, thanks for organising and hosting this event through TCCI. I am grateful for everyone taking time out of their day today to listen to this. It is an important topic, it’s one that we feel strongly about and, unfortunately, it flies under the radar for a lot of people, so we like to get out in public and get people thinking about IP. Your intellectual property can be a fantastic tool, or it can cause some grief, particularly when you’re heading into international markets.
IP is quite a complicated field and it always depends on some specific circumstances, so what we’re talking about today is general and if you have specific questions, we offer free initial consultations, and we’re generous with our time.
So, who are we at Cooper IP? Two main attorneys – myself and Warren Wong. We’re both engineers with a mechanical engineering background, and we’re also patent and trade mark attorneys with legal training in intellectual property.
We spend time in Tasmania and are down at least two days a month – one day in the south one day in the north. We work with a lot of Tasmanian businesses and businesses on the mainland as well. We work for everyone from sole inventors and entrepreneurs to SMEs; people that are making and doing things. I’ve worked for multibillion-dollar corporations like Microsoft, Nike, Visy and Kmart and the like so I’ve worked across different industries and have seen different ways that IP can be used and also how IP can trip people up.
Our approach at Cooper IP is to simplify IP and offer pragmatic and commercially focused advice. There are a lot of things that we need to know whereas you may just want to know what decisions you should be making, when and how to get the most out of it for your business.
Today, we are talking about the importance of IP registration in international markets. It is an important topic and the way I am going to attack this is to start with an outline of what IP is. We do lots of IP 101-type seminars and today is not such a seminar; we want to get into the practical tools and advantages and what you can do in practice and what to look out for. So if you want some more general information, we’ve got quite a bit on our website as well as some past webinars so please browse that material at your leisure.
What is intellectual property?
I am going to talk about IP as a business tool, then move on to the advantages of international protection and some of the common issues that people do not realize until it’s too late. Firstly, a quick definition. As the name suggests, intellectual property is property of the intellect; it is what we create. I like to think about it as ideas, or that lightbulb moment where you come up with a solution to something which might be a new product or a great name or brand.
As humans, we are a creative bunch and we spend a lot of time and resources coming up with new things; they might be works of art, technologies, companies, business ideas. Pretty quickly, we’ve realized that if people are going to put in hard work and take risks to develop new industries and new products and launch their endeavors, it’s pretty unfair if others come along and copy them. So, over time, intellectual property protection systems have developed, and their purpose is to encourage people to take risks, to develop new technologies, and at the same time give them something in return for their efforts in the form of allowing them to have some control over how their creations are used.
So when it comes to intellectual property we’ve got some main types that people most people have heard about: Patents, designs and trade marks.
Patents protect the way things work – it is a conceptual form of protection. If you are protecting a product, for example, it might not matter what color it is, how it looks, or what material it’s made out of – if it works the same it can still fall within the scope of the patent.
Design registrations protect the visual features of an article. They are great for things like glasses, drink bottles, consumer products that have been around for a long time but have a new appearance to them.
Trade marks protect your branding and stop others from using similar branding. The term branding for me is quite brief and it does not capture so many of the intangible aspects that come into branding. We are often trying to protect the goodwill and the way people see and interact with your brand. This is particularly relevant in Tasmania where you have got this great green, pristine reputation; it is important to protect that properly and also get the most out of it as a business owner.
Intellectual property case study with a Tasmanian business
I’d also like to show a local example of a company called Scoot Boot based at Cambridge Tasmania and they’re one of the leading manufacturers of horse boots in the world.
They have patents around the way the hoof boot works and design registrations around the way it looks, and some protection around the branding. So they’ve got a comprehensive intellectual property portfolio and it’s helping them gain traction overseas. Being a leader in their field, they are getting copycats from all directions. As such, Scoot Boot invest in protecting their intellectual property to keep imitations at bay and maintain their competitive advantage.
IP is a business tool. We have lots of clients who are inventors and they like patent certificates on the wall – they look great and it is a great form of recognition, but at the end of the day, IP’s a business tool and it needs to align with your business goals and objectives.
The direct benefits from protecting your IP is having a monopoly, in being able to stop others from doing what you are doing, or at the very least, control the way your creations are being used in the market. If you are a widget-maker for example, and you hope to sell your product in the US – a market of 320 or so million people – you only need a small percentage of that to have an incredible number of sales and be able to make some serious money. If you are the only person in the US that can make and sell that product there, then it can be incredibly valuable, and fortunes have been built on the back of strong IP rights.
IP as valuable intangible assets
IP are intangible as assets that can be bought, sold, and licensed. About two-thirds of the enterprise value of ASX 200 companies are intangible assets like IP, so the value of IP value should not be overlooked in terms of what it can do if your balance sheet which, if you’re trying to get commercial partners or sell your business, can be really important.
IP is also great for commercial arrangements, partnerships, and collaborations. We’ve got some clients that have done some work with the University of Tasmania, for example, and by having some IP in place it’s enabled them to get in and form a partnership and do some work that they wouldn’t normally be able to do and also maintain those rights at the end of it. So, they’ve done really well out of having that IP in place and being able to get those partners to the table and trial the technology and develop it take it somewhere that they couldn’t take it themselves.
There are plenty of intangible benefits as well: brand recognition and credibility; warding off competitors; product and brand development. There is a lot of psychological factors that come into intellectual property protection as well.
Why protect your intellectual property internationally?
So, what do we need to know? We have got these great tools. How do we use them and what catches are there? Well, unfortunately, the system is such that you need to know about IP, which is a hard thing because you don’t know what you don’t know. So, you need to know about it first, which is difficult and we spend a lot of time doing these sorts of seminars every year because we’re just trying to get out in front of people and tell them what they can and can’t do and with a bit of knowledge in hand they can explore whether it suits their business.
In terms of advantages of international protection, you can get into international collaborations and partnerships, but also engage and attract distributors and suppliers around the world. For example, if you are trying to get into a market like Europe from Australia, it can be quite difficult. But having your IP in place can help establish a partnership with a European distributor who already has great distribution networks. But before they sign an exclusive distribution agreement with you, they are going to want to know about your IP. Now if you have got rights in Europe, that is an easy conversation. But if you do not then this arrangement with the distributor becomes very different and what you’ve got to worry about is that you get a loose agreement with them and six months down the track, they realize that they can get your product made cheaper elsewhere; you’ve got nothing left to tie them to you. So intellectual property can be very important.
Common IP issues when using or protecting IP overseas
So now I am going to run through common issues with international protection. I am going to split it up into the different forms of protection because they are often quite unique to each other. Finally, I am going to spend some time talking about China because that is quite an interesting one for IP rights owners.
Now when it comes to trade marks, availability of registration in overseas markets is not a given and should never be assumed. It’s quite a common situation to have trade mark rights in Australia but when you want to go overseas you may find you have trade mark issues. Even the likes of Breville for example have to sell in the UK under a different brand because they don’t have the trade mark registrations over there, and that can really complicate things for small businesses. These sorts of issues can be managed in advance by doing some trade mark clearance searching to make sure that you can get your own registration to check if potential infringement issues might exist and what can be done in advance before you commit to your branding.
The other issue overseas is trade mark squatters; this is particularly an issue in China and I’ll talk about that a bit more in detail in a few minutes. The system in Australia is such that the first person to get trade mark rights is the first person to start using the trade mark. In countries like China, the system is different in that the first person to get the trade mark rights is the first person to register the trade mark. This is not an uncommon system and there are actually more countries that are first-to-file, but there some peculiarities with Chinese law that allow people to register trade marks such that it can be quite difficult to get it back. As such, before you start expanding your international operations, it pays to do some research on the trade mark front: see what’s free and see what’s used – it may be that you need to rebrand, but the sooner you know that the better off you are.
When it comes to patents and design registrations, the issues are often quite similar. You can extend Australian rights within certain time frames based on international IP conventions. The way the system works is that after you file for protection in Australia, foreign jurisdictions will open the door for a certain amount of time for you to file corresponding patent or design applications. If you do not file in time, the door closes, and your invention or product goes into the public domain.
The difficulty that a lot of clients have is that their product development cycles take too long. You can find yourself in a situation where you are having to make decisions about foreign protection without understanding your market. We have a number of clients in the patent application process and they know they have international markets, but until they can actually get on a plane and talk to distributors, they are hesitant to commit funds to expand overseas.
We have clients in situations where the patent scope for a product is different in Australia as compared with the US or Europe. For example, their patent might be infringed in Australia and the US, but not in Europe simply because the scope of the patents are carved out differently. There is no blanket international IP right that is consistent across all countries so that can create quite a few complications and it is something to be aware of.
The other issue is freedom-to-operate. This is an odd situation where you can have a patent yourself, but to use that patent you have to infringe someone else’s patent. A famous example is the Dyson cyclonic vacuum cleaners. There are patents around the core technology and related improvements. Now, if you need that core technology to use your improvement, then you are in a difficult position because you can’t do that without their consent. So, you do get these difficult situations where you have your own patent, but you can’t exploit it unless you have a commercial arrangement with the other party.
Now, patent rights in Australia are quite limited compared to the US, and you might not have an issue in Australia. But once you go into the US where there are many more patent rights, you might find that the freedom to operate position in the US is different from Australia. It is something that can be mitigated through some patent searching here, if you know to do it in advance. We can do that search and see what risks there are, particularly with countries like the US where they are more patent savvy.
IP and trade mark issues in China
China is on a separate slide because there are a few peculiar things about China that are unique, and it is an important jurisdiction, and they have a real desire for clean and green products. Moreover, there are many Tasmanian businesses wanting to get their products into China and it is becoming an important market for them.
As I mentioned earlier, trade marks in China can be a real issue. While Chinese trade mark law has been slowly changing, what we are still finding is that prevention is much cheaper than a cure. So, for example, three years ago, of the top ten trade mark filers in China, eight of them were Chinese firms operating as trade mark squatters. They would just file thousands and thousands of foreign trade marks and wait for the true owners to come in so that they could effectively ransom off their trade marks. Last year, this trend turned around. Now, out of the top ten, I believe the top eight are legitimate corporations but there are still a couple of trade marks quarters. So, the problem is there but it’s much less than it was. It particularly becomes an issue if you’re going to trade fairs where people will actively look for foreign businesses to rip off.
Another issue with trade marks in China is Chinese language trade marks. Foreign brands and products in China often end up with a local name; a lot of companies have been on the front foot and have chosen their Chinese name and trade mark under which to build their reputation. This way, they ensure that their name in China is consistent with their company reputation and brand values.
If you are a company looking to move into China, it’s important to think about adapting your brand for the Chinese market, otherwise the market might do it for you. Additionally, if you don’t register your trade marks, including your Chinese trade marks, then somebody else will and there are many examples where companies have come unstuck because someone else beat them to the punch.
Another issue in China is patent and design registration incentives. In China, there are government incentives in place to encourage and incentivize intellectual property generation. The government wants its citizens to invent and create their own intellectual property. But that system has been widely misused and people are filing for protection of products that are not theirs. For example, it is common for a foreign product owner to get their product made in China. However, the Chinese manufacturer may realise the owner has no IP protection, so they file their own patent and/or design applications, show the government their IP certificate and receive some financial incentives in return. You might think that does not create much of a problem for you being in Australia, but it often comes to light when the manufacturer raises their prices over a couple of years and when you decide you’d like to shop around you find that you can’t because they hold IP rights over your product.
Now, there are mechanisms to invalidate their IP rights but it is going to take you time and money, whereas if you had applied to protect your rights in the first place, this wouldn’t be an issue. So, getting things done up front puts you in a much better position.
Finally counterfeits. Now counterfeits are a massive problem in China. Unfortunately, there does not appear to be a lot of interest at the government level to address it anytime soon. That said, there are various programs now to deal with counterfeits; e-commerce platforms like eBay, Amazon and Alibaba have such systems. For example, you can go to Amazon to have your IP dispute heard at the Amazon level as opposed to going to court, which can be quite a fast and effective way to enforce your rights. It is important to note that if you take this action the quicker you do it the better; the more infringement and counterfeits that you let slip the harder it is to stop.
Michael, can you tell us a little bit about the Madrid protocol which can be sometimes the first step for overseas trade mark protection?
Overseas trade mark protection via the Madrid Protocol
The Madrid protocol is a great way to get your trade marks registered overseas. The path that most people use to get into the Madrid is to first file their trade mark application in Australia. For example, you’re a brand owner in Tasmania and you file your Australian trade mark application first. There’s a great program called TM Headstart, which effectively allows you to get your application examined quite quickly so you have an idea about your rights before you commit to your brand.
Within six months of filing your Australian application you can then file an application under the Madrid Protocol administered by WIPO, the world intellectual property organization. With it, you can designate what countries you want trade mark protection in. Procedurally, it is administered at a central location, which is quite useful and it is not unless there are significant issues with your application that you need to get local representation. So, it’s quite a cost-effective and streamlined way of getting those trade mark rights through. And once they are through you can administer them quite easily. You pay your renewal fees in one place. You can handle transfers of ownership in one place. If you want protection in half a dozen jurisdictions, you do not need to have half a dozen applications that you need to deal with.
Thank you, Michael. You mentioned the UK during that answer – does Brexit have any implications for current registrations that cover the UK?
How does Brexit affect existing and future patent, trade mark and design rights?
Brexit is quite a complication. So, for example, the intellectual property convention that European patents come under is not affected by Brexit. So, if you have got a European patent application, Brexit has no impact – the UK is still part of the European patent convention; it is not contingent on European membership.
But trade marks and designs are different and, come 31 December this year, the UK is not going to be part of the convention for trade marks or design registrations. If your trade mark or design right is registered before that date, it will be split so that you have both a European and UK right at the same time. The only complication will be when renewal fees come up – you will have to pay two renewal fees instead of one. So if you are an existing trade mark owner, it’s not a big deal – it’s more of an administrative concern.
If you have a recent trade mark or design application and it is not yet registered, then you need to refile the application in the UK and so that it becomes a UK application as well. And if you are looking at getting protection the moment, the basic recommendation from IP firms in Europe and the UK is to file a separate UK and European application at the same time.
What is the cost of IP registration for various things? Are you able to give us some examples please?
Trade mark costs
For a basic trade mark application in a single class, it’s a little bit over $1000 and if there are not too many issues that come up during examination, you can go start to finish and get your Australian trade mark for somewhere between $1,500 and $2,000 so it’s not a massive expense. One of the great things about getting an Australian trade mark registration is that when you file the application, it gets examined and potential infringement issues in Australia get brought up. For example, you might be a Tasmanian company making and selling something in Tassie, and completely unbeknownst to you, there’s a company in Brisbane that’s using the same trade mark in the same space. They have the registration and until you get big enough to get on their radar, you might not find out. But when you do get big enough, you have a problem, and going through the process of registering your own trade mark can be incredibly valuable just to identify those issues early, and rebranding early when you have yet to overly commit to websites and packaging is a much easier thing to do.
So, a simple trade mark can be quite cost-effective in Australia. If you want to extend that trade mark into China, for example, it gets more expensive because you end up paying local agents. Once we start getting translations and the like, all up you might be looking $3,000 to $4,000, depending on how many issues that come up.
Thank you. And if you were to give say three top tips to our attendees today, Michael, what would they be?
Top three intellectual property tips for new businesses
Think about your branding early and get your trade mark application in early. It is such a common issue for a start up to choose a name and not think too much about it or not spend enough time researching and finding out the issues. They get some traction in the marketplace, they get some investors on board and before they know it they have a trade mark issue and need to rebrand. We have a client at the moment who is working on a supply deal with Harrods in London and they haven’t done their trade mark due diligence at the outset. At some point they will likely get sued and who knows how much damage that will do to their relationship with Harrods and their customers. So, they’ve done all this hard work and it’s going to be undone to some extent because their due diligence was lacking at the outset. So, filing a trade mark application early on can be very important.
If you are expanding overseas, particularly in China, the next bit of advice would be, before going to a Trade Fair or launching your product in China, apply for trade mark protection in China. If you file your Chinese trade mark application within six months of your Australian application, your Chinese application can even share the earlier filing date of your Australian application. So, if you are going to go to a trade fair then at the very least get your Australian application in first and if you have your Australian registration sorted then get something on file in China before you start publicizing there.
And the third bit of advice: there is a great thing called the innovation patent and it is on its way out. It is going to be phased out but it’s a really valuable tool that allows people to protect low-level innovations and it’s great for products that you think might not be that new and inventive, but they can often be protected by way of an innovation patent and enforced quite well. It is great for things that have a short shelf life given that it only provides a maximum of eight years’ protection, but it can be cost-effective. It is also procedurally not difficult to get and can be really quite valuable.
Excellent. Thanks very much Michael. We are almost out of time. So, I just want to take this opportunity to thank you Michael for your time today and invaluable information. Also, this webinar was free and it is really great that you’ve been able to be with us and to be so generous with your time. Michael’s contact details are on the screen. You can see his email address and the Cooper IP web address. So please feel free to reach out to Michael and he can assist you in the first instance. If you would like to contact me at any time, please do so at the TCCI and if you would like to contact my colleague at TradeStart, please reach out. Again, Michael, thank you very much. We really do appreciate it, and that’s the end of our Zoom meeting today. Thank you all.