Wednesday, 31 August 2016

What IPR have in common with WMD

Author Charles Levy
Licensed by US government
Source Wikipedia

Jane Lambert

I apologize in advance to those who will be offended by this post. I acknowledge that a photo of a mushroom cloud is pretty tasteless but it is sometimes necessary to shock in order to drive home a point. And my point is that an intellectual property right ("IPR") is a title to bring a law suit which, like weapons of mass destruction ("WMD"), has potency only if and to the extent that it is ever likely to be used.

The reason why doubt can arise as to whether an IPR will ever be used is that civil litigation is outrageously expensive.  In Ungar v Sugg (1899) 9 RPC 117 Lord Esher MR said:
"A man had better have his patent infringed, or have anything happen to him in this world, short of losing all his family by influenza, than have a dispute about a patent. His patent is swallowed up, and he is ruined."
Despite cost capping in what is now the Intellectual Property Enterprise Court (see Jane Lambert New Patents County Court Rules 31 Oct 2010 NIPC Law) and the launch of the small claims track (see Jane Lambert Patents County Court - the New Small Claims Track Rules 20 Sept 2012) that observation is still generally true.

In his report Enforcing Small Firms' Patent Rights CORDIS 2000 Professor William Kingston of Dublin University business school wrote at page 61:
"In present circumstances, therefore, when faced with a decision whether or not to infringe the patent of a small firm, the balance of advantage for any large firm middle manager is to recommend infringement and intimidation. The odds can be seen to be overwhelmingly against the small firm having the resources to defend itself through appropriate legal action, especially if this could go to appeal. Even if it had these resources, the rational course for it is not to use them in this way because of the risk attached. If the large-firm manager were to recommend taking a licence from the small firm instead of ignoring its patent, he could be considered as throwing away a valuable asset which the firm possesses in its power to intimidate. Throwing away assets and committing the firm to the additional cost of royalties on a licensed patent will not be seen as the best road to promotion."
So what can be done about it? Professor Kingston's proposed the establishment of patent defence unions and compulsory arbitration and that was actually considered by the Intellectual Property Advisory Committee in the early years of the present millennium but rejected as impractical.

The best solution (and it is not a perfect one) is IP insurance. Unless it has the resources to fund litigation up to the tune of a million pounds or so without batting an eyelid a business should consider before-the-event cover very seriously.  I have been writing about IP insurance for over 15 years. At first my arguments encountered enormous scepticism from other IP professionals (particularly patent and trade mark attorneys) but I am glad to say that the Chartered Institute of Patent Attorneys has recently published an excellent report entitled IP Insurance and other IP litigation funding arrangements which I discussed in IP Insurance: CIPA's Paper 1 May 2016 NIPC Inventors Club blog.

The best tip that I can give is to look for IP insurance at the time you apply for a patent or other IPR and that you write the cost of the premiums into your business plan as you would any other expense (see Jane Lambert Why every business plan should take account of intellectual property 3 April 2016).

If I were a business angel, private equity or any other investor (or indeed banker, crowd funder or public or private sector grant awarding authority) I wouldn't part with one penny of my own money let alone funds under my control despite the honeyed entreaties of the entrepreneur or other rights holder unless and until I was satisfied that IP insurance or some other satisfactory means of enforcing the IPR in question was in place (see An IP Primer for Business Angels and Private Equity Investors 29 Aug 2016).

So what if you don't get before-the-event cover?  I discussed the options in IP Insurance: CIPA's paper on 1 May 2016:
  • "'Legal aid?' Sorry, chum, that was abolished for business disputes by paragraph 1 (h) of Schedule 2 to the Access to Justice Act 1999 although it may become available for litigation in the Unified Patent Court (see Legal Aid for the UPC 23 Jan 2016), 
  • 'How about no win, no fee?' No mate! That may be a perfectly sensible way of funding personal injuries claims against insurance companies but intellectual property litigation isn't like that. For a start liability (whether your patent has been infringed) and the account or inquiry (how much money is due to you) are separate proceedings separated by many months and sometimes years. There's a great deal more uncertainty. Several lawyers have got their fingers burnt (see Success Fees and ATE Premiums in the Patents County Court: Henderson v All Around the World Recordings Ltd. 4 May 2013 NIPC Law).
  • Litigation funding? Possibly but unlikely. Most funds shy away from IP litigation for the same reason lawyers steer clear of no win no fee retainers in this area of law.
  • Legal indemnity insurance? You will find that most policies specifically exclude IP litigation."
You should of course consider alternatives to litigation which I discussed in Dispute Avoidance Planning and Dispute Management 4 March 2016 and How to enforce your IP claim after court fees sky rocket 7 March 2016 and alternative methods of funding such as Legal Cost Finance which I discussed in Legal Cost Finance - Another Response to Sky Rocketing Court Fees 10 March 2016, but before-the-event IP insurance is probably your best bet.

Monday, 29 August 2016

An IP Primer for Business Angels and Private Equity Investors

Inaugural Conference of World Business Angel Association in Beijing 2009
Author JohnnyOnTheSpot 
Licensed by the author
Source Wikipedia

Jane Lambert

In IP's not just for Big Brands and High Tech Businesses 27 Aug 2016 I wrote:
"In my career at the Bar I have known far more businesses that have failed from having too much IP than too little. Some of those failures had been caused by patents that cost many thousands of pounds to obtain but could never be worked. Others by disputes that were abandoned because the rights owner (who in many cases had a strong claim) simply ran out of money."
In many instances, such patents and other IP rights were sought to attract, or to fulfil a condition for, investment. While it is understandable that an angel or private equity investor should desire the most extensive legal protection possible for his or her investment a patent for an invention that may never be worked or any IP right that the business cannot afford to enforce would tend to make his or her investment less rather than more secure because the prosecution, maintenance and enforcement costs would affect the viability of the business.

Educating Investors

I have written this primer in the hope that a better understanding of IP and how it works by angel, private equity and other investors might lead to fewer bad decisions on IP and hence less waste of resources for all concerned. I believe that it is a theme that needs to be developed. I shall certainly discuss this topic in future publications.  If there is sufficient interest among investors I shall arrange, promote, chair and speak at, conferences, seminars and workshops on the topic.


The first point to grasp is that there is a distinction between intellectual property ("IP") and intellectual assets. The two are used interchangeably even by many IP professionals but I think that is a mistake because it leads to muddled thinking. Essentially intellectual assets are the artwork, books, brands, broadcasts, computer programs, concerts, databases, designs, films. inventions, musical scores, performances, plays, websites and other assets that give one business a competitive advantage over all others. Intellectual property (that is to say patents, trade marks, copyrights and so on) is the collective name for the bundle of laws that protect investments in creating intellectual assets (see What is Intellectual Property 7 Aug 2016).

IP Policy

The purpose of IP law is to incentivize the creation of intellectual assets while at the same time safeguarding so far as possible consumer choice and freedom to trade.  It is very important to appreciate that IP laws exist not exclusively for the benefit of the creators of intellectual assets (that is to say artists, designers, inventors and so forth) or those who claim title to or invest in them. Those laws also serve their competitors and the general public. IP laws are intended to strike a balance between the competing public interests that I mentioned in the first sentence of this paragraph.

How to use IP

Businesses and individuals create intellectual assets in order to generate revenue and it is the protection of those revenues that should be uppermost in an investor's mind when considering the optimum legal protection for a business's intellectual assets.

The starting point should be the enterprise's business plan (see Why every business plan should take account of intellectual property 3 April 2016). Referring to that business plan and all other materials and information available to him or her, the savvy investor should try to identify the main sources of revenue for that enterprise over the business planning period. They may or may not include the most advanced product that the techies are developing.

Next, he or she should consider potential threats to those income streams most of which are likely to be commercial such as new products or changing market conditions rather than legal,  As most of the threats are likely to be commercial  so, too, are most of the likely responses. Reducing prices or developing new products or upgrades are more likely to be effective than litigation. However, there are always some instances such as the development of a new medicine or smart phone technology where only a patent or some other IP right will do. Often there is more than one way of protecting an intellectual asset (see Patent or No Patent 28 Aug 2016 NIPC Inventors Club).

The legal protection for a business's intellectual assets should be tailored to provide the most cost-effective cover in the markets that matter. For instance. the canny investor should consider whether a patent is required or whether some other right such as unregistered design right will be enough. If a patent is required make he or she should make sure that the company targets the countries where there is a market for the product or where there is a competitor.

Finally, make sure that the business has the means to enforce its rights. In many cases, that may mean taking specialist IP insurance cover.

Further Discussion

I appreciate that this is a very simple example and that in the real world many other considerations such as personalities, prejudices and vested interests all come into play. Nevertheless, they can all be reduced to a model and a strategy to obtain the optimum solution for the company with minimum waste. Anyone who wishes to discuss this article or these ideas should call me during office hours on +44 (0)20 7404 5252 or send me a message through my contact form. 

Saturday, 27 August 2016

IP's not just for Big Brands and High Tech Businesses

Sacher Cake
Creative Commons Licence
Source Wikipedia

Jane Lambert

At the beginning of the last century there was a bitter dispute between the Hotel Sacher and Demel over the right to sell the original Sacher cake (see the "Legal Issues" section of the article in Wikipedia). I have been instructed in similar disputes in England (see Fat Betty, Bettys & Taylor Group Ltd. v Cheese & Co. BL O/163/09 16 June 2009) and briefed and consulted by just about every type of business from architects to undertakers.

Every type of business owns at least some intellectual assets. It would not be able to function without them. And each and every one of those concerns relies on intellectual property law to remain in business. Starting at its most basic it will have its name and reputation. That may simply be the name of the owner or it may be a fancy name like The Golden Hind. Its products and services may have names and reputations too. Then there are the designs, formulae or recipes that give those products or services their distinctive qualities. Also there are the brochures, catalogues, newspaper and local radio ads and websites that promote the business or its products and services.

You get the picture.  Intellectual property concerns all enterprises and not just big brands, multinational pharmaceutical companies, smart phone manufacturers and other big businesses. Even if you do nothing to protect or exploit your own IP you may still find yourself in a costly dispute over someone else's. Intellectual property is something that you ignore at your peril.

But you have to be careful  of the other extreme. Intellectual property rights can be very expensive to procure and even more expensive to enforce. Very often they have not been necessary or even useful.  In my career at the Bar I have known far more businesses that have failed from having too much IP than too little. Some of those failures had been caused by patents that cost many thousands of pounds to obtain but could never be worked. Others by disputes that were abandoned because the rights owner (who in many cases had a strong claim) simply ran out of money.

Those disasters were caused largely because business owners and managers left it all to professionals who knew everything about intellectual property but nothing about the businesses they  served. They will have advised correctly on the best legal solution in a perfect world but such legal solutions may not have been the best business solutions or in some cases any use at all in the circumstances of the case.

So what can be done? Obviously, we professionals can do more to understand our clients' businesses, their needs and resources and how they are managed; but that depends to a large extent on what those business owners tell us. The other part of the solution is for business owners and managers to learn more about intellectual property so that they can avoid making disastrous decisions and spot and head off potential difficulties long before they become threats.

They can do that in many ways. There is no shortage of useful information and publications from the Intellectual Property Office, the British Library, the World Intellectual Property Organization, the European Patent Office, the EU Intellectual Property Office and almost every law firm and patent and trade mark agency in the country. The problem lies in absorbing and making sense of all those materials.

So here's my tip.  I give lots of talks and write lots of articles that are useful to all sorts of small businesses. Let me know who you are so that I can alert you to some of my workshops, seminars, webinars or other events in the future. Maybe you want some general one-to-one advice on a particular issue. I can give that too either at my pro bono clinic in Barnsley or on a fee paying basis. Either way let me know who you are by lodging a message through my contact form or calling me on 020 7404 5252 during office hours.