Posted Wednesday 28th September 2016

Intellectual property - practical tips

We look at several of the key mistakes that arise again and again in relation to intellectual property rights.  Here are some practical tips on how to ensure that you don’t fall in to these traps.

Not structuring correctly

Issue:  All too often we see entrepreneurs with excellent ideas, quality brands and great systems fall at the first hurdle.  Tax debts or litigation from a third party can quickly end a fledgling business.

Solution: Begin with the end in mind, by structuring correctly.

Intellectual property can be protected from trading risks, counter party risks and other general risks by way of appropriate structuring.

The classic example of correct structuring is the typical use of intellectual property holding trusts or companies to hold all of the brand, goodwill and copyright material forming the business system that is the fundamental asset of a franchise business.  That intellectual property is then licensed to the various master franchise holders and franchisees.

The licence agreement (or, in this example, franchise agreement) provides that in the event of the insolvency of any of those licensees, the licence automatically terminates.  As the insolvent licensee no longer has rights to the intellectual property, neither does the administrator or liquidator who steps into the shoes of that licensee.

This form of structuring means that this intellectual property is safe from the day-to-day trading and liability risks that are faced by the master franchisor.  

Co-ownership risk

Issue: Use of intellectual property jointly with another person, particularly in the development of new products, can carry with it significant unintended risks and consequences.  

Solution: Ensure that you have a written agreement with the other party that covers ownership and use of the intellectual property.

Where you combine your valuable intellectual property with intellectual property of another party, or another party assists you in developing your intellectual property the end result can be intermingled intellectual property that is co-owned by both parties.  This may not be what the parties intended.

This can happen simply by collaborating on a joint project in which each party commits their expertise, time and other resources.  Even though a party may have committed individually owned intellectual property, the ultimate result is jointly owned intellectual property.

In such circumstances neither party will have any right to use the intellectual property without the consent of the other.  This could result in very costly litigation to resolve the matter.

Where it is intended that you are to retain the ownership of some or all of the intellectual property, this should be clearly identified in a written agreement which contains appropriate clauses whereby the other party clearly assigns (transfers) its rights in that intellectual property to you.

Where it is intended that parties will own the intellectual property jointly, a clear co-ownership agreement should be put in place before any such project commences.  This will, among other things:

  • Ensure that the parties have clearly defined what they permitted to do with the intellectual property.
  • Identify the joint intellectual property.
  • Identify what intellectual property will remain in individual ownership of each party
  • Determine the process for deriving revenue from the intellectual property (eg, through royalties, license fees etc)

Always consult with your small business intellectual property lawyer as these agreements involve consideration of complex legal issues.

Failure to register your brand

Issue:   A business owner has built up a good reputation in their business name.  A third party registers a trade mark in that business name and then seeks to prevent the business owner from using the business name.

Solution:  Take steps to register your logo or trade name on the register of trade marks.

Various aspects of intellectual property may be protected by way of formal registration.  Brand recognition, for example, can be protected by way of trademarking of logos, marketing phrases and other distinctive designs that identify you or your products.   

Such registration works on a “first-come, first-served” basis and so the first in time to register will have priority over similar trade mark applications that occur later in time.  

Practical points for protecting trademarks:

  • Always use the trademark in the exact way in which it is registered.
  •  Use the word TM or the ® symbol to identify your trademark as such.
  • Ensure that you continue to use your trademark consistently and continuously. Trademarks that are not used for 3 years will forfeit their protection.

A solicitor with experience in trade marks can provide assistance, advice and guidance in taking the necessary steps to obtain trade mark protection.

Failing to ensure that copyright documents are clearly protected

Issue:  While copyright material is automatically protected by law for the author of an original work, it is still best to avoid disputes wherever possible.

Solution:  Be clear about ownership of your material at all stages.  

Copyright exists in any original work that you create and is automatically granted by the Copyright Act 1968.  However, it pays to ensure that third parties know that material is yours as avoiding a copyright infringement is better (and far cheaper) than having to enforce your rights in court.

Practical tips for ensuring that you can clearly show your claim to copyright in any material include:

  • Marking the information as copyright, with the name of the copyright owner and the year in which it was produced.
  • Including acknowledgements in all contracts with third parties that specific documentation that will be provided by you in the course of the contract is copyright and that copyright will remain with you.
  • Ensuring that when information is provided it is provided by way of email so that its first existence with you is able to be tracked.

Please note that the above advice is general in nature, does not take into account your specific circumstances and is not intended to be a substitute for professional legal advice.

Tags: Intellectual Property, Co-ownership Agreement, Deed Of Assignment, Franchising, Trade Mark, Copyright

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