Intellectual Property (IP), as the name suggests is the property which is created using the intellect of an individual or a group or even a company or organisation, in a manner done – either individually or jointly. The laws which are linked to the protection of such creations are termed as Intellectual Property Laws. These IP laws provide legal rights to the creator,which grant them right to use their creation, without the concern of their creation being copied or used by some other person. (Fitzgerald, Eliades, 2015).
These creations can be in any form – an idea (not abstract, but written on paper), story, book, movie, lyrics, music, song, new product (say, a new type of mobile phone), new design of an existing product (say, a new design of TV which is not rectangle), (Designs Act, 2003) a new type of plant (say, a fruit which tastes like water melon and smells like rose). (Plant Breeder’s Rights Act, 1994). The list of possibilities is endless.
In other words, if you invent a new product, or paint a new masterpiece, or write a new book, (which are all few examples of your skills or intellect), then you alone should be allowed to derive financial benefit from that new product or painting or book since the same is your creation. (Hoad, Rebecca, 2015) No other person should be allowed to sell or lease your creation for his financial gains.
The IP created by you should become your financial asset. Thus, the IP laws help you in two manners:
Firstly, protect your creation and register it an asset in your name;
Secondly, if you find that some other person, without your consent, has copied your asset in a manner and deriving money from it, then you may file a complaint against that person – who is infringing your rights (i.e. the infringer). The complaint must be filed in the prescribed format within the prescribed time limit before the appropriate authority under the exact legislation.
So, if you want you can gain financial benefit by creating more products of your IP, say print more copies of your story and sell it online or offline. (Phillips, 2011). Another way of benefitting is by selling the IP rights to another person for some consideration. The story of a book may be sold to a movie director for a lump sum amount or for a variable interest, in the form of royalty from the profits once the movie is released.
It is pertinent to note that globally IP is categorised broadly into two classes: Industrial Property and Copyright. The term ‘Industrial property’includes, but, is not limited to, patents, trademarks, geographical indications, industrial designs and plant breeder’s rights, whereas the term ‘Copyright’ includes literary or artistic works and architectural design and rights related to the same, and includes the rights of artists, and/or performers, producers, and/or broadcasters. (Copyright Act,1968)
These categories help in identification and registration of IP under the respective laws. Only once the IP is registered, the IP owner can claim his rights against the world. Thus, registration is a crucial step under this law.
Even though registration of IP is a key requirement in proving ownership of IP and related rights. It is worth noting that the IP which falls under Copyright, Circuit Layout Rights, Confidential Information and Trade Secrets do not require formal registration.
However, for other IP related rights like patents and trademarks, registration is very crucial. It is also advisable that before the documents are filed before the authority for filing the applications, the details of the same should not be published even on Internet. (Patents Act, 1990)e.g. if a researcher is able to design a new Artificial Intelligence (AI) controlled device, which helps in maintaining an individual’s exercise and diet plans on a daily basis. This invention should first be applied for patents. If the details are disclosed by the researcher to his followers on social media (say, Facebook), then any person could copy it and file for patents. This would cause irreparable harm to the researched, his resources and future earnings.
The importance of registration of IP can be understood from the fact that in Australia, the trademark “HARRY POTTER” is registered in the name of Pretty Girl Fashions Group Pty. Ltd. In the matter before Federal Court, the dispute in registration of this trademark was decided in favour of the said registrant and not the media giant, Time Warner. (Time Warner Entertainment Company LP v Stepsam Investments Pty Ltd, 2003)
Another key concern is the awareness regarding IP rights and how to turn it into a financial asset. Let us look at a scenario where an employee of a chocolate company, XY Pty Ltd has invented a formulation of such a packaging for chocolate, that even at higher temperatures the chocolate inside does not melt. Now, this employee informs his management about the invention, who enthusiastically use his ideas. But, owing to other financial issues, the company is acquired by ABC Pty Ltd and this new invention remains only on paper. The new company is not even aware of this patent which has become part of their patent portfolio because of the acquisition. It is, therefore, a loss. Thus, unearthing the existing IP within a company is as important as registering new ones. (Caenegem, 2007).
Using the afore-said example of new packaging technology, let us understand the importance and application of IP in this scenario.
First and foremost, ABC Pty Ltd should have conducted an IP Due Diligence of XY Pty Ltd before acquiring the company. This report would have helped them ascertain the IP health of XY Pty Ltd. It would also have helped XY Pty Ltd to ask for a higher price as they were sitting on such a unique technology, without having utilised it for commercial gains. (French, 2014).
Subsequently, it is advisable that ABC Pty Ltd should conduct an IP Audit of its new portfolio of IP assets. It will help in revealing other potential IP assets. e.g. this chocolate packaging technology could be deployed for a new range of chocolates. The company can market them under a new name (which will result in new trademark), (Trade Marks Act, 1995)create a different packaging cover (which will mean a new Design registration) and of course, result in over-all financial growth for the company.
Thus, it is necessary that all the help of IP professionals is sought in ascertaining the correct procedure under the Legislations to file and register the IP asset. (Bently, Ng, D’Agostino, 2010).
There are various risks associated with IP laws, which may vary with the type of IP asset it is. The risks may range from branding issues under Trade Marks Law to unambiguous drafting of a patent application to the correct form of work (literary or artistic) under Copyrights.
These risks would have different implications on the company. Under the Trade Marks Law, there is a risk of infringement. (Houlihan, 2013) Let us understand how infringement can damage a company’s reputation. Suppose the highest selling product of the company is a pain relieving balm under the brand name “BLACK”. This product is a market leader in its category and highest grosser for the company. The infringer creates a product which looks deceptively similar to this balm and starts selling it under the same name, but the quality of balm is not good and does not relieve any pain. The customers who were regularly purchasing “BLACK” because of its pain relieving qualities are surprised by this spurious product being infective. Slowly, the consumers do not believe in the product and stop purchasing it. Soon, the competitor of this brand gains out of this situation and becomes the market leader. The manufacturer of “BLACK” was even sued by some person for its misrepresentation. Once the newspapers carry all such reports, the company has to stop manufacture of its once most popular product. All such consequences may arise because of infringement of brand name since the trademark is a direct reference to the source of manufacture and quality of product.(Hard Coffee Pty Limited v Hard Coffee Main Beach Pty Limited, 2009).
Similarly, under Patent Laws, the risk of infringement can have huge impact. Let us assume that an insurance company, A, has launched an algorithm which helps in increasing its efficiency by 50% by cutting down the time taken for filing the forms or other formalities. This software immensely benefits its business. The company did not fail to file a patent for the same and was granted it as well. Now, a competing insurance company, B, attempts to break the code of this software. Using the former’s patent document, this company creates a similar software which increases its productivity by 55%. The company A, gains knowledge of this new software and sues the company B, against which the company B contends that it is an improvement of the previous software and should be granted. In this scenario, if the company B which has merely copied their processes and forms that were required to be completed succeeds in its patent claims, then there will be irreparable damage to company A, which may have spent huge sums of money in the research and development of software. (Isaac, 2008).
Similarly, under Copyright, the risk of infringement is higher and may even be permitted in some special cases like satire. The music composer and writer of a song may not be able to win against that infringer who uses their song to create a satire. The ambiguity is much higher under this law along with the legal risk.
In Australia, there is no single piece of legislation which deals with the whole of Geographical Indications together as one piece. Thus, the legal risk is high in this regard. The concept of Geographical Indications and their registration is treated as Certified Trade Marks registration. (IP Australia: Protection of Geographical Indications in Australia)So, if a company attempts to register a device or logo which is similar to an existing application or registration, then it will be treated in the manner similar to Trade Mark Laws. The interested party can file an objection, in the manner an opposition is filed, once the application is accepted and advertised. (Bombala Council v Peter Wilkshire, 2009). The Australian Wine and Brandy Corporation(AWBC) Act is a special legislation enacted for the specific products which are protected under Geographical Indications. Both domestic and foreign wines which are available in Australian markets are controlled by this legislation.
In addition to the afore-mentioned risks, a significant legal risk is that the IP asset may never be turned into a financial asset. The individual or organisation may never be able to derive full benefits of the IP asset that it has created.
Another key legal risk which is present under all different IP Legislations is the risk of ownership. This risk is linked with the fundamental question as to who owns the IP asset and all rights which flow from that asset. Only the owner can derive financial gains and not any third party. So, it must be tackled at the beginning only. (IP Australia: Australian Intellectual Property Report 2018, 2018). Let us discuss this legal risk in detail:
The legal risk of ownership refers to the confusion regarding rightful owner of an IP asset. For understanding this, we must be clear on the aspect that who is an owner? The clearest rights arise when the creator is the one who files the application for registration in his own name and thus, also becomes an owner.
The next type of ownership comes with purchase of the IP rights i.e. when the creator sells his creation bundled with all IP rights to the purchaser, who then becomes the owner. Like any tangible assets, there is no limit on the sale and purchase of IP assets. (Neyers,Bronaugh, Pitel, 2009). So, the new owner can become the subsequent seller as well.
Further, the creator also has an option to not sell his asset, but license its rights to a new owner (or licensee). The creator then, becomes the licensor, who gains financially from the consideration of that license agreement. These days, such examples are fairly common. The IP asset may be created by an individual and licensed to a big corporate to exploit that IP asset in return for some percentage of the gains.
The confusion may arise when an employee or a contractor create a new IP asset during the course of employment or contract. (Khoury, Yamouni, 2009). In Australia, generally, rights to all such creations vest with the employer or that contractor, who hire the employee or the consultant to create that IP asset. Such IP asset may range from an invention to marketing plans, know-how, technical documents, books, paintings, etc. However, there may be few exceptions where the contract is drafted in the manner where the creator is owner of the IP asset and not the contractor.(EcheverryBotero, 2015). Thus, it is essential to develop a good contract or agreement, which will cover all the aspects of IP rights before the work commences. (Carter, 2012). In fact, it is ideal to enter into an agreement even before the discussions start, say, discussions for developing a new software or website, with a consultant. The agreement must have a confidentiality clause, so that the knowledge of company is not leaked to any other person, even during the course of drafting of application or beginning of a research. (Tolich, 2004). The agreement must also take care of non-compete, so that a consultant may not be able to develop the same algorithm or product for a competitor. (SPIE, 2012). However, the non-compete can only be for a fixed time period and not life-time.
It is also vital to understand that one IP asset can be held by more than 1 individual e.g. when 5 team member together complete research and develop a new vaccine for eradication of dengue. Also, in case of universities, there is a possibility that the professor is termed as co-owner in a patent application.
Thus, the numerous legal risks under IP laws need to be addressed differently in varied situations.
The legal risks carry not only short term, but also long term impact on the organisation. The start of a good risk management structure is to first identify the risks, which may crop up. We have already identified few possible risks in IP laws.(Dionne, 2013). Let us know look at focal reasons for these risks.
The basic reason behind the legal risks under IP law is lack of awareness. The bigger companies and organisations may have the knowledge-resources to understand the importance of registration of IP and creating assets. However, individuals or even Small and Medium Enterprises may not have the band width to even understand the detailed requirements under IP laws. They may not even be clear about the basics like signing a confidentiality agreement before the start of a project.
Additionally, the lack of access to the clear understanding of IP laws also is a reason to the legal risks associated with it. Though Australian IP laws are very clearly defined, there is a still long way to ensure that the same are percolated to the public at large.
In the shorter interval, these risks may affect the financial growth of established businesses, if they do not turn their IP assets into financial ones. However, the implications are much higher when the cases of infringement rise. If the IP owner does not take action against an infringer, then the quality of those products, which are available in the Australian markets may greatly reduce. There could be not only monetary damage, but also physical harm in case of breaches. (Davison, Monotti, Wiseman, 2016). E.g. the infringement happens in the food related products, then there are high chance of even people falling sick due to consumption of low quality products.
Another implication could be the reduced knowledge resources. The inventors may lose faith in the system and may not want to spend their time in research and development activities. This would lead to stagnation and dearth of new ideas in the society. No organisation will come up with new inventions or products.
Similarly, the painters may not be interested in creating more canvases or the authors may stop writing more stories or books, if they feel that the benefits of their labour is being reaped by a third party and not them. Once the intellect growth is not stimulated, all the aspects of a society will slowly come to a stand-still or even decay.
If the short-term issues are not resolved, then it may result in a reduced financial expansion of the Australian economy as a whole. It would impact not only the domestic market, but also the relations with the outside world.
Thus, these legal risks may not only be threats for an organisation, but in a cumulative manner can hamper the growth of complete economy. IP laws are crucial to the holistic growth.
Though managing or mitigation of a risk is a constant process, it is important to prioritise the risks to be able to overcome theirimpact on the basis of severity that may be caused. It is important to understand their degrees, evaluate them and then find solutions which balance the effects of costs and benefits arising from them.
The first and foremost requirement to address the IP issues in an organisation is to conduct an IP audit. This audit should be done by a professional (or team of professionals) who is proficient in all aspects of IP laws, and not just one niche i.e. the auditor should not only be able to understand the patent related requirements, but also assess the organisation for trademarks, Geographical Indications, Copyrights, Plant Breeder’s Rights, etc. At first, this step may appear to be causing expenses, but the benefits it will reap will be much greater. (Gibbeson, Shinners, 1998).
Based on this IP audit report, the organisation should work on its strengths and weaknesses. It should strive towards turning its weaknesses (like lack of IP awareness) to its strengths (say, by creating a knowledge pool of researchers). In this scenario, once the losses caused by lack of IP assets is weighed against the cost at which a knowledge pool can be created, will be measured, there will be no looking back.
The motive of risk assessment and mitigations should be to ensure that the IP assets contribute to the financials of the organisation. If the company is not able to completely utilise its underlying IPs, then it should consider to either sell it in the IP market or license it to the highest bidder. The second option may provide longer benefits, if we check the cost and benefit ratio.
On these lines, it is also important that the individuals or employees or even consultants for that matter, are encouraged to do IP related activities, which will ultimately benefit the company. The risk of lack of contract should be managed by having on-boarding agreements with both employees as well as consultants, so that there is no confusion regards the ownership of IP. (Groom, 2008).
The IP Due Diligence of existing IPs along with potential ones should be conducted for monitoring purposes on an annual basis. It should be incorporated in the Risk Management System of the organisation. (IP Australia and the future of intellectual property: Megatrends, scenarios and their strategic implications, 2017). This will not only help the company to generate more IP backed financial assets, but also help in ensuring that there are no infringement across the spectrum of all IP rights.
All the deviations should be noted and addressed as a separate risk. This will help in attending to all queries or issues related to IP in the organisation.
In consonance with the system of evaluation of a risk in the organisation, the points will help in determining which aspect needs to be evaluated and addressed first. This will help in finding the best contingency plan for the company.
Few possible recommendations for mitigating the legal risks in relation to IP are:
The process of Due Diligence should ideally be conducted by professionals. If not possible due to constraints of resources, then instead of skipping it by another year, ensure that an internal team is conducted for the same. Different departments or experts may be able to provide a unique viewpoint. The annual appraisal of all IP assets of the company should be completed and discussed with all stakeholders. (Fitzgerald, Fitzgerald, 2004).
Once any new project is commenced, be it a new product or a new manufacturing unit or a new line of services being offered, it should be mandated that a thorough IP audit is conducted. It is extremely necessary to conduct IP audits in dealings with third parties or starting new business relations, like at the time of acquisition.
Draft a clear and unambiguous IP policy for the company. Ensure that all employees, consultants and even third parties, with whom company deals, are aware of this policy. This will help in creating a right mindset for IP. (Vitale, 2005).
All IP assets should be treated as intangible assets. The value of one IP may differ from another one, but it will always carry a value. (Herbst, Jahn, 2011).
It is important to create awareness in the organisation by conducting class room sessions or providing lecture or workshops to each and every employee of the company. What may be visible to an employee on the floor may skip the eyes of management.
The penultimate aim should be create a culture of IP, where any activity linked with IP is not looked at as a burden, but, it is considered part of the system. (Boyle, Kavada, 2015)So, whenever a new research is concluded, the costs of filing of applications (under patents and/ or trade marks) are not considered as an option due to costs, but are mandated due to the long-term benefits they will reap.
Conclusion:
With understanding the IP laws and their requirements, it is easier to understand the implications of these laws on any organisation. Once the awareness is created, there is also awareness of possibilities of risks associated with it and their impact. Followed by the risk management of possible impact of the same.
Risks may or may not be removed completely, but with a good action plan, the same can be mitigated.
Books
Bently, L., Ng, C., &D’Agostino, G. (2010). The Common Law of Intellectual Property. Oxford: Hart Pub.
Caenegem, W. (2007). Intellectual property law and innovation. Cambridge [England]: Cambridge University Press.
Carter, J. (2012). Cases and materials on contract law in Australia. Chatswood, N.S.W.: LexisNexis Butterworths.
Davison, M., Monotti, A., & Wiseman, L. (2016). Australian intellectual property law. Cambridge [u.a.]: Cambridge Univ. Press.
Fitzgerald, A., &Eliades, D. (2015). Introduction to Intellectual Property. Sydney: Thomson Reuters (Professional) Australia Pty Limited.
Fitzgerald, A., & Fitzgerald, B. (2004). Intellectual property in principle. Sydney: Lawbook.
Groom, A. (2008). Contract drafting. [Adelaide]: Law Society of South Australia.
Khoury, D., &Yamouni, Y. (2009). Understanding contract law. Chatswood, N.S.W.: LexisNexis Butterworths.
Neyers, J., Bronaugh, R., &Pitel, S. (2009). Exploring contract law. Oxford: Hart Pub.
Vitale, P. (2005). Drafting employment contracts. Melbourne: Leo Cussen Institute.
Academic Journal Articles
EcheverryBotero, D. (2015). Contract Interpretation Law in Australia: It Is a Maze, Not a Straight Way. IUSTA, 2(41). doi: 10.15332/s1900-0448.2014.0041.05
French, R. (2014). A Public Law Perspective on Intellectual Property. The Journal Of World Intellectual Property, 17(3-4), 61-80. doi: 10.1002/jwip.12024
Gibbeson, J., &Shinners, C. (1998). ESSO AUSTRALIA LTD’S APPROACH TO RISK ASSESSMENT AND MANAGEMENT. The APPEA Journal, 38(1), 552. doi: 10.1071/aj97030
IP Australia and the future of intellectual property: Megatrends, scenarios and their strategic implications. (2017). Canberra: IP Australia.
IP Australia: Australian Intellectual Property Report 2018. (2018). Canberra: IP Australia.
Isaac, B. (2008). Merchandising intellectual property. Journal Of Intellectual Property Law & Practice, 3(3), 202-203. doi: 10.1093/jiplp/jpn008
Phillips, J. (2011). Property! What property?. Journal Of Intellectual Property Law & Practice, 6(12), 839-839. doi: 10.1093/jiplp/jpr151
SPIE. (2012). Non-compete agreements create ‘career detours’. SPIE Professional. doi: 10.1117/2.4201201.04
Tolich, M. (2004). Internal Confidentiality: When Confidentiality Assurances Fail Relational Informants. Qualitative Sociology, 27(1), 101-106. doi: 10.1023/b:quas.0000015546.20441.4a
Dionne, G. (2013). Risk Management: History, Definition, and Critique. Risk Management And Insurance Review, 16(2), 147-166. doi: 10.1111/rmir.12016
Herbst, P., &Jahn, E. (2011). IP-for-IP or Cash-for-IP? R&D Competition and the Market for Technology. SSRN Electronic Journal. doi: 10.2139/ssrn.1010622
Boyle, R., &Kavada, A. (2015). Editorial: IP, copyright and cultural production. Media, Culture & Society, 37(3), 339-341. doi: 10.1177/0163443714567021
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