Navigator Insights

You are never too small and it’s never too early to protect your IP

It frustrates me when I hear business owners say “we are too small to worry about IP”.  When you are small you are at your most vulnerable.  When your brand is very new, you may not have established sufficient reputation to defend it by suing others for passing off or breach of the Fair Trading Act, which will require you to prove your goodwill in the geographic area in which the infringer has started operating.  If you take the simple and inexpensive option of registering your brand as a trade mark, you do not have to prove goodwill.  You can prevent anyone anywhere in New Zealand from using the same or a similar trade mark in relation to the same or similar goods or services.  Imagine starting a new lawn mowing business in Auckland that you hope to franchise, but finding when you go to set up your first franchise territory two years later in Wellington that someone had started a competing business there under a very similar name about six months after you started in Auckland.  Unless you can prove you had a significant reputation amongst a section of the public in Wellington more than 18 months ago, your franchise plans will be ruined.

It also annoys me when people say “it’s not worth protecting IP if you cannot afford to enforce it”.  Ninety percent of IP disputes never get anywhere near a court, and are resolved relatively quickly and without great expense.  Usually a cease and desist letter pointing out the infringer’s faux pas will catch the infringer like a possum caught in headlights.  Without the formal IP protection, the dispute would be far more difficult and costly to resolve.

Unfortunately, many New Zealand entrepreneurs also make the mistake of waiting until their innovation has proved itself commercially before they seek patent or design protection.  A fundamental requirement in most countries for obtaining a valid patent or design is that the innovation is novel, which means not known, used or published prior to the date you file the patent or design application.  So business owners that offer their amazing new product for sale before they seek protection for it will shoot themselves in the foot.  There are some limited grace periods of up to a year in countries like the United States, Canada and Australia, however in many important markets (including Europe), you will have very little chance of securing protection.

So, make sure you see your patent attorney before you put your product on a website or offer it for sale or even talk to potential customers.

Can’t afford IP protection?  Can you afford not to have it?

IP isn’t as expensive as many people believe.  It is also possible to delay some of the more expensive international filing costs for many months.  In the case of patents you can delay up to 30 months or more using the Patent Co-operation Treaty system.

Let’s use protecting a new invention as an example.  I would first file a provisional patent application in New Zealand.  This will cost me around $5,000, maybe less.  That provisional application buys me 12 months before I have to consider completing the New Zealand application, and file corresponding applications into international countries.  Immediately prior to the 12 month deadline, I would complete the New Zealand application and file a Patent Co-operation Treaty application (PCT application), which effectively covers in a single patent application about 180 countries for around $12,000 – $15,000.  The PCT application buys me another 18 months, before I have to file individual complete applications in each international country of interest, and I can at that time elect to file into only one or all 180+ countries.  As soon as I have filed my New Zealand application, I have the deterrent and marketing effect of being able to say “patent pending”, no one can see my patent application until it is actually published around 18 months after filing, and I now have an asset that I can talk to potential licensees about.  So for under $20,000 I have created a new asset that may well form the foundation for an ongoing revenue stream to my business.

Of course, unless I actually go ahead and complete the PCT application in a particular country, there will be no rights in that country.  Completing the application in each country is where costs can increase quickly.  However, before the 30 month mark you should have a very good indication of whether this new product will be successful, and you should able to raise the capital required to complete your patent application in the appropriate countries.

Without the patent application, and the granted patents that will ultimately result from it, my new invention would likely be copied extremely quickly and I wouldn’t have any chance of stopping it.  Even if the pending patents deter or delay one competitor, then I would say they have paid for themselves.  If someone does infringe the patent, then you at least know you have someone very interested in using the invention – and a probable candidate to become a licensee of your technology.

IP doesn’t always have to be about stopping someone from using your technology – in fact, it can often make far more sense to let others use your IP in return for a royalty under a licensing agreement.

Image courtesy of Gualberto107 / FreeDigitalPhotos.net