What is Intellectual Property? Many small and medium-sized businesses are unaware of what Intellectual Property means, what Intellectual Property they do or don’t have, or how to protect it.
Intellectual Property or Intellectual Property Rights (“IP” for short), is an umbrella term for the type of intangible property rights which come about as a consequence of some form of creativity. Generally, IP falls into two camps, either registered IP, such as Trademarks or Patents, or unregistered IP, such as Copyright or Design Rights.
We are all reasonably familiar with examples of Trademarks, such as the McDonald’s logo, Patents such as Ford’s heated front windscreens, and the Copyright protection afforded to the latest chart releases.
However, in addition to these, there are several other less well-known forms of IP rights, which, whilst not afforded their own “brand” of IP protection, act as subsidiary parts of IP rights, holding great value to any business and as such, are no less vital for businesses to protect.
For example, business names, domain names, rights in get-up and trade dress, goodwill, design rights, rights in computer software and databases rights, rights to protect confidential information, business know-how and trade secrets.
IP has a considerable role to play in the UK digital economy and is one of the many examples of business assets shifting from tangibles, such as equipment, property, and goodwill to increasingly intangible asset portfolios. Many small and medium-sized businesses are unaware of what IP means, what IP they do or don’t have, or how to protect it. This seems strange, when businesses traditionally put so much emphasis on protecting their tangible assets, and know their value to the business, but yet those assets which are less clear, get left behind.
For all digital and technology companies, IP is an integral part of their business – whether a software development company or a med-tech innovator, IP will be everywhere – so understanding it is vitally important. Furthermore, the importance of understanding IP is not limited to knowing how to properly protect it, rather, awareness allows businesses to better strategize, develop, manage, and critically, commercialise IP to extract the true value from the business’s IP portfolio.
What type of IP is involved in my business?
For almost all technology-focused companies, there will be some form of (potentially) Copyrightable IP. It can subsist within the software, computer programmes and databases, as well as design models, the source code and other product-related elements. These are all potentially “literary works”, which are protectable under the Copyright, Design and Patents Act 1988.
The scope of Copyright law is vast and complex, but here are my five key “need to knows”:
Works: Copyright protection can be afforded to a distinct set of types of works, including Original literary (as well as artistic and dramatic) works, which covers certain computer programmes and databases.
Duration: protection is limited in duration. For software/computer programmes this is 70 years from the year in which author dies or 50 years for computer generated programmes.
Originality: not all works have copyright protection, with the emphasis being on the originality of the work, in that it must be created by the skill, judgment and effort of an author. and must not have been copied. Databases have a higher standard of originality
Authorship: it must be the “author’s intellectual creation”, so in the case of a computer programme, the party who wrote the code. The author is the owner unless ownership is otherwise transferred.
Protection: contractual protection is needed with any type of IP, but especially Copyright, due to its less tangible and unregistered nature. More on this below.
Depending on the type of business, patentable technology may form part of the products that the business deals with. Patents are the protection afforded to new and inventive technical features of products and processes, provided the invention is genuinely new and capable of industrial application. Patents can be extremely valuable assets for a business, especially in certain sectors, such as technology and electronics, and particularly if the patentee is prepared to invest the time and money necessary to control and police them. Again, their implication is limited to those businesses who innovate in this way, unlike Copyright which has much wider implications across the digital and tech sectors.
Trade Secrets and Confidentiality
As important as Copyright, is confidentiality, and the protection of confidential information, trade secrets and know-how.
Unlike other forms of IP, such as Copyright, Trademarks and Patents, confidentiality does not come from its distinct legal protection, instead, it arises from a principle of “equity” (or fairness).
Essentially, a person who has received information in confidence cannot take unfair advantage of it and must not make use of it to the prejudice of the person who disclosed that information – acts on the conscience of the recipient to prevent them from making unauthorised use or disclosure of the confidential information.
An example of confidential information which a business may need to disclose is its database to update an IT system or jointly develop a product or service with a third party. As part of this process, the disclosing company may need to offer up information which is commercially valuable to that business, and is at risk if not properly protected – these are the business’s “trade secrets”.
What are the tests for Intellectual Property? Is protection a high bar to reach?
Each type of IP has its legal tests, which set the bar for whether IP protection can be afforded to that particular creation, data or information. Given the breadth of the types of IP which may or may not be afforded protection, so much will depend on the creation itself.
Originality, novelty, separability, and business importance are key themes which run through IP legislation and case law, determining whether a particular creation is afford protection. Protection is very much determined on a case-by-case basis.
Even though some forms of IP can be successfully registered, the protection afforded to a creation can always be challenged by a third party, and in the case of Copyright, it is unlikely that a determination as to whether protection can be afforded to a work could be made until authorship of a work has been challenged in court.
Not all aspects of a creation will be afforded protection, such as general ideas or themes in a creation. Running with the software theme, the Software Directive (2009/24/EC) states that: “Ideas and principles which underlie any element of a computer program, including those which underlie its interfaces, are not protected by copyright under this Directive.”
In some instances, protection can be broken down into the creation’s component parts, where one element of the creation is afforded protection, but the other elements of it may not. For example, a business may have a copyrightable interest in source code or object code, but not in the graphical user interface output.
As for confidential information and trade secrets, much emphasis is put on the quality, nature and commercial sensitivity of the information supplied, and the subsequent use of it. But unfortunately, because confidentiality is an equitable doctrine, this is effectively “back-end remedy” if you will, where the damage is done and you seek to enforce the doctrine against the third-party. It is therefore down to the business disclosing the information to manage this carefully.
How do we protect our IP, regardless of type?
Getting in wrong in commercial dealings with IP can be costly, embarrassing and highly damaging for any business. In worst-case scenarios where protection isn’t obtained properly, it could be significant enough to destroy the value of a digital or tech business before it has even got its feet off the ground.
The obvious answer is to have properly drafted contracts dealing with how IP is protected, shared, returned, the signing of a Non-Disclosure Agreement, and so on. However, protection of the business from infringement or breach of confidentiality is only part of what businesses should be considering, as not knowing what belongs to you, or not knowing how to deal with it correctly in commercial arrangements, is potentially equally damaging. To illustrate these issues, here are a couple of connected scenarios to demonstrate circumstances where all businesses should be careful, and make sure they are on top of their IP dealings:
Joint development / Third-Party Developer
On occasion, it might be necessary for a digital or tech business to partner with another organisation, either to develop a product for itself or jointly, or for that business to carry out a particular service. This is common for digital companies that instruct third-party software developers.
The usual result of this is some form of output. That output will combine the IP of both parties. It should be clearly defined in a development agreement what IP each party is putting into the project, and how the output IP is to be shared, or owned. If a business instructs a third party to develop something for its own product line, it will want to own the IP in that product (such as the source code in software development), but does the agreement transfer the ownership? A business would want to ensure that bespoke developments cannot be retained by a co-developer, to be sold to other third parties.
It might also be necessary for that agreement to deal with the destruction or return of confidential business information, after the venture is completed, similar to a Non-Disclosure Agreement. What if the development fails before its completion? Who is holding whose confidential data, and what trade secrets have been disclosed?
What do you own? This is the key question when selling products or services containing IP, especially where that product or service has been jointly developed. If your business agrees to sell it, have you got the right to sell what you intend to? If the co-developer has retained some interest in the output IP in the development agreement, it is possible you could be in breach of that agreement, or equally, where your business seeks to further develop a product, does that output infringe on the original author’s IP right? Understanding your development agreement is critical.
Selling or Valuing Your Business
If your business comes to raise finance, bring in investment, or even sell, it is possible that the value in your IP would form a significant part of that business, or be the key attraction to investors. Ensuring that you have certainty that any IP rights subsisting in your product are owned outright and which are licenced to you, or being able to attribute a value to it, will avoid any unwanted surprises.
What are the key things to look out for?
Here are my three do’s and don’ts, which any prudent business needs to consider when dealing with its IP rights:
DO: Understand how valuable your IP is to your business.
It may be the biggest part of your business assets.
DO: Know what you own. Avoid scenarios where intangible IP assets are given away for nothing, or difficulties arise with untangling jointly developed products.
DO: Ensure proper safeguards are implemented. Non-Disclosure Agreements, agreements to deal with information sharing and development. It might not necessarily be afforded IP protection when tested, but it is worth protecting, nonetheless.
DON’T: Overshare. Where you have commercial dealings with third parties, it is likely they will have contacts in similar organisations to yours or could develop a similar outcome themselves. Limit what is disclosed to what is necessary for a project or purpose and ensure this is particularised in the appropriate contracts.
DON’T: Assume that because you’ve paid for something, you own it. Copyright and other forms of IP are based on the fact that ownership rests with the author. This is particularly important for computer software and databases, developed by third parties.
DON’T: Wait until it is too late, once it’s gone, it is much harder to claw it back. Being on top of your IP rights also ensures they continue to work for your business.
Is it all doom and gloom?
Not at all. Being aware of what IP is, how it interacts with a business and how best to manage it, opens up many opportunities for businesses to explore new projects, grow their portfolios, and get some real value from their intangible assets. IP rights should not solely be viewed from a protection aspect, as laborious task to be carried out, but rather, from the perspective of what that protection and management can achieve for a business over the medium and long term.
Here are some interesting articles on this subject area:
· University of Cambridge – Institute of Manufacturing: Intellectual property challenges for the digital economy (cam.ac.uk)
For more information about IP and IP rights generally, the Intellectual Property Office website contains a lot of useful information: Intellectual Property Office – GOV.UK (www.gov.uk)
Find out more about BRM…
Matthew Lilley – Corporate and Commercial Solicitor, BRM Solicitors
**This is not advice on any subject area and is only intended as a commentary on a broad subject area. You should seek specific advice should you have a legal query**