Introduction to IP
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GENERAL INTRODUCTION
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EPO/OHIM
Intellectual Property Teaching Kit - IP Basics
The different types of IP (I)
Legal right
What for?
Patents
New inventions
Application and
examination
Utility models
New inventions
Application and
registration
Copyright
Original creative or
artistic forms
Exists
automatically
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Intellectual Property Teaching Kit - IP Basics
How?
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The different types of IP (II)
Legal right
What for?
How?
Trade marks
Distinctive identification
of products or services
Use and/or
registration
Registered
designs
External appearance
Registration
Trade secrets
Valuable information not
known to the public
Reasonable efforts
to keep secret
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One product - many IP rights
Trade marks
 NOKIA
 Product "208"
 Start-up tone
Patents and utility models
 Data-processing methods
 Operating system
 Operation of user interface
Copyright
 Software
 User manuals
 Ringtones
 Start-up tone
 Images
Designs
 Form of overall phone
 Arrangement and shape of buttons
 Position and shape of screen
© Nokia Corporation
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Intellectual Property Teaching Kit - IP Basics
Trade secrets
 Some technical know-how kept
"in-house" and not published
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The importance of intellectual
property (I)
•
IP is an essential business asset in the knowledge economy
– Sandvik AB: innovative high-technology tools
and steel technology
– ARM Holdings: licenses its technology to
microprocessor companies
 IP protects small innovative firms
– W. L. Gore & Associates: GORE-TEX®
– Dolby Laboratories: invented noise-reduction technology
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The importance of intellectual
property (II)
 IP is needed to enable the release of IP into the public
domain under controlled conditions.
– General Public License (GPL): Linux
– Creative Commons License
 IP helps guarantee standards for public benefit by means
of licensed trade marks.
– Fairtrade International (FAIRTRADE)
– Forest Stewardship Council (FSC)
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The IP system
Innovators
Competitors
make significant investments
in developing new products
benefit from their efforts
Heavy pressure
may drive the
innovator out of
business
Can offer similar or identical
products at a cheaper price
Get a free ride
on the back of the innovator's
creativity and inventiveness
IP system
Rights over the use of inventions, designs,
brands, literary and artistic works
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Optional
Examples of valuable intellectual
property
Coca-Cola®
Apple® iPod touch®
Polaroid® instant camera
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Harry Potter
DNA copying process
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PATENTS
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What is a patent?
• A legal title which grants the holder
– the exclusive right to prevent others from
making, using or offering for sale, selling or
importing a product that infringes his patent
without his authorisation
– in countries for which the patent was
granted
– for a limited time (up to 20 years).
• In return for this protection, the holder has to
disclose the invention to the public.
Reveal
invention
(disclosure)
Get
exclusivity
(patent)
Patent applicant
Public
Patents are granted in nearly
every country in the world!
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What
exactly
can
be
patented?
Patents protect inventions which solve technical problems:
 chemical substances,
pharmaceuticals
 processes,
methods, uses
 products,
devices,
systems
For an invention to be patented, it must usually be
 new to the world (i.e. not available to the public
anywhere in the world)
 inventive (i.e. not an "obvious" solution), and
 susceptible of industrial application
In most countries, patents are not granted for
business methods or rules of games as such,
or for methods of treatment, diagnostics and
surgery on the human or animal body.
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DATABASES
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What is a database?
• A database is a collection of independent
works, data or other materials arranged in
a systematic or methodical way and
individually accessible by electronic or
other means.
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TRADE MARKS
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What is a trade mark?
• A trade mark is any sign, capable of being represented
graphically, which distinguishes the goods and
services of one undertaking (company or organisation)
from those of another.
• Many different types: word, figurative, colour, shape
• Absolute grounds for refusal
– Distinctiveness
• Relative grounds for refusal
– When peaceful co-existence of marks is impossible
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Routes for registration
• National
• International
• EU
– Community Trade Mark
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Scope of protection
• Exclusive right, but
– principle of speciality
– principle of territoriality
• Potentially perpetual (renewal every ten years)
• Risk of loss of protection if:
– not used after five years
– found to be invalid
• Allowed uses
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UTILITY MODELS
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What is a utility model?
• A utility model grants the holder the
exclusive right to prevent third parties from:
– exploiting an invention (e.g. making,
using, offering for sale)
– without authorisation in the country where
the utility model was registered
for a short period (3 to 10 years).
• The holder has to disclose the invention to
the public.
Reveal
invention
(disclosure)
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Get protection
(utility model)
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Scope of protection compared with
patents
Utility models
Patents
•
•
•
•
•
•
•
•
•
•
•
Registered territorial IP right
Available in limited number of
countries
No central filing in Europe
Protection for 3 -10 years
Search reports in some countries
only
Registered and published after
a few months
Generally no substantive
examination (novelty,
inventiveness)
Reviewed only in revocation or
infringement proceedings
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•
•
•
•
•
Registered territorial IP right
Available in most countries
Central filing possible
(e.g. EPO for Europe)
Protection for up to 20 years
Search reports standard
Application published after
18 months
Substantive examination
(novelty, inventive step)
Grant or refusal after substantive
examination procedure
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COPYRIGHT
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What is copyright?
• Copyright protects any production of the human
mind, such as literary and artistic works.
– This production must be an expression and not a mere
idea.
– The expression must be original.
• Copyright creates a special legal relationship
between authors and their work.
• It confers legal protection for a limited period of time.
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Scope of protection
• Economic rights
- relate to the economic exploitation of the work
- are freely transferable or licensable
• Moral rights
- relate to a moral interest of the author
- are always retained by the author
• Exceptions and limitations
• Infringement and remedies
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TRADE SECRETS
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What are trade secrets?
• Information that
– is not generally known or easily discovered
– has a business, commercial or economic value
(actual or potential) because the information is not
generally known
– is subject to reasonable efforts to maintain
secrecy
• Unlimited life, provided the information does
not become public knowledge.
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Scope of protection
Products/processes
where reverse
engineering is
difficult
Images from www.coca-cola.com
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Means of protection
Practical
Contractual
• Limited access to
information
• "Need to know"
• Encryption of data
• Monitored entry to
installations
•Restrictive
covenants in
employment
contracts
•Non-disclosure
agreements
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Valuing IPRs
• IPRs are worth only as much as the buyer or licensee is
willing to pay for them. The only time you know exactly
how much any IPR is worth is when someone has just
paid for it.
• Valuing IPRs can seem difficult and complicated
because:
– there is no easily-understood set of valuation rules which
can be applied in every circumstance;
– no one knows what benefits owning or using the IPRs will
bring in future; and
– when you value IPRs, the unique qualities which give them
their competitive edge mean that you cannot easily obtain
information about sales or licences of similar IPR.
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IP Value Factors
• Many factors determine whether there is a buyer for any IPR, and how
much that buyer is willing to pay.
• For buyers and licensees, the value of IPRs will depend on factors such as
whether the IPR allows them to:
–
–
–
–
–
–
–
–
increase sales;
price their products at a premium;
reduce production costs;
increase the speed of production;
improve the quality of their products;
create customer following;
avoid or reduce development costs; or
erect a barrier against competition.
• That value may be more if the seller is willing to provide other benefits,
such as technical assistance, marketing assistance, help with quality
control or providing know-how.
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The Best Deal
• It is important to look at the deal as a whole and your
relationship with the other party in the round. As well as
the financial side of things, look at what other
contribution(s) the licensee will make to your business.
• One buyer or licensee may be prepared to pay a higher
royalty rate, but another licensee may be able to generate
more sales. That may be because it has a product which is
complementary to the licensor’s product or because it is
more experienced or has better geographical coverage. Or
another licensee may give the licensor access to IPR which
increases the attractiveness of the seller’s product.
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Valuing
• The Cost Method;
• The Market Value Method;
• The income or economic benefit method;
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Royalties
• Popular theory:
– In many negotiations the royalty rate actually
agreed for a patent turns out to be somewhere
between 25% and 33.3% of the licensee’s
anticipated gross profits (before tax) on sales of
products which use the patent. For a trade mark
the royalty rate is more likely to be between 10%
and 15%
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FishNet, AB (A Swedish Company)
FishNet is a small Swedish company that holds
patents on a unique fishing net, EnviroNet,
that weighs fish caught by anglers without
causing undue distress to the fish. They
manufacture and distribute EnviroNet
themselves, but their capacity is limited given
their size. They are currently operating at
about 90% capacity.
EnviroNet Patented Technology
FishNet, AB Questions
In 2001 FishNet started selling EnviroNet on the
Swedish market; in 2003 the Finnish; in 2006
the Danish.
FishNet now wish to actively expand their
market to optimise the exploitation of the
patented technology. They are unsure of how
to structure their expansion.
New Market Supply Agreement
Customer A
What sort of
payment
terms?
Customer A
Receives
FishNet
Supply
Places Order
for EnviroNet
FishNet
Produce
Standard
terms? Are
they
enforceable?
Product
liability?
Quality?
Cash flow; market presence; strength of IPR i.e. trademark;
production capability; delivery chain; expertise.
Agency Agreement
Customer
Agent
appointed by
FishNet
Paid a
commission
by FishNet
Enters
Agreement
with FishNet/
not the
agent.
Agent
FishNet
Risk? Cash flow? Production? Costs?
Distribution Agreement
Exclusive?
Territorial?
Distributor A
Trademark
? Patents?
Licence?
Intellectual
Property?
Production?
Who
produces?
What about
know-how?
Quantities?
Price?/Marketing?
Minimum
Quantities?
Lower the
price? Who
pays for
marketing?
Licence Agreement
FishNet
Licensor
Licencee
Company A
Supplies
Company A
Trademark?
Company A
Produces
What type of
licence,
worldwide?
limited?
Royalties?
One off
payment?
Transfer of
technology
and knowhow?
Quality?
The Commercial Side
Setup Costs
Transaction
Costs
Transaction Risks
Effectiveness
Capital *sunk costs
Planning,
Consultants
Inflated price Change
Streamlined
Production
Systems
development/employmen
t
Legal
Brand damage
Capacity Utilization
Training
Sales and
Purchasing
Networks
Insulation from better
processes
Enhanced R&D
Better Quality