Thought leadership from our experts

IP is the word: putting IP in the spotlight

With economies and companies worldwide thriving on ideas and innovation, now is the time to put IP in the spotlight.

Introduction

Intellectual property (IP) has become something of a buzz word in recent years. In some countries, investment in intangible assets by far surpasses investments in tangible assets. With headlines about the owner of copyright in photographs taken by monkeys, a copyright infringement claim involving Ed Sheeran and an X-Factor winner and a saga of patent and design infringement claims between telecoms giants Apple and Samsung, it seems impossible to avoid an encounter with IP.

However, despite the almost daily presence of IP in the media, IP is often neglected by policymakers, industries and in boardrooms across the globe. Many governments and industry policy makers do not have a defined IP policy. Many organisations do not have a clear IP strategy and only turn their attention to defining such a strategy in a crisis situation (by which time it may be too late).

In a global economy that seems to be thriving on ideas and innovation, IP has the potential to be amongst the most valuable assets on a company's balance sheet and to generate significant revenues for national economies, but for some reason its importance continues to be overlooked.

What is IP?

Every organisation owns IP, and in most organisations some IP is used by every employee every day. Patents, copyright, trade marks and design rights are the most commonly known IP rights. But there are other intangible rights that fall within the spectrum of "IP" from trade secrets and confidential information to the more specialist rights such as geographical indications (Parma ham, Cornish pasty and Roquefort cheese being a few examples) and plant breeders rights.

There are also intangible rights that we have not yet reached a consensus on how to categorise. A key IP hurdle for policy-makers and organisations alike is protecting intangible rights in new technology as it develops, and working out how to make existing IP legislation (some of which could reasonably be classified as prehistoric when compared to the state of technology today) fit these innovations.

Which IP rights are relevant to block chain? Who owns IP that is developed using artificial intelligence or that is created by a robot – can a robot own copyright? With the rate at which technology is moving, it won't be long before questions like this will become a (virtual) reality, if they haven't already. Unless clear national policies on IP have been established, questions like this are likely to be answered on a case-by-case basis instead of according to defined principles – inconsistencies will inevitably surface.

Why should IP be on the agenda?

In the 2017 Fortune Global 500 the top 10 global companies ranked by revenue included five energy companies, two automotive manufacturers and a technology company (Apple), all of which are typically IP rich organisations. Retail giant Walmart held the top spot, which is particularly interesting for IP because it is in part attributable to a shift from bricks and mortar retail to an e-commerce business – the foundations of which are intangible rather than tangible rights. IP is a common denominator for each of these organisations; without IP they would not operate as they do today.

IP is often overlooked as an asset, notwithstanding its potential value on the balance sheet. Statistics show that the value of intangible rights is increasingly exceeding the value of tangible assets. Not only does IP provide balance sheet value it is often itself a potential source of revenue, whether through licensing to a third party for a fee or royalties or by a sale for value IP can be a very lucrative asset. Of course, to extract this value organisations need to keep their IP house in order – licensees and buyers will not pay for IP in which there are concerns about defective title or unresolved infringement issues.

Another distinctive characteristic of IP is that injuries can rarely be remedied by compensation or damages – a critical trade secret once leaked is no longer a trade secret, the competitive advantage it once presented is lost whether or not compensation is available. A warranty claim for an IP right in which the seller did not have title to transfer might result in damages, but it will not usually give title to the buyer.

Having an arsenal of IP rights can also provide a useful weapon against third parties. An increasingly global economy encourages international IP registrations, and it is more straightforward than ever to apply for international IP rights in parallel with local registration applications.

As an owner of IP rights, it is important to secure rights in all relevant jurisdictions at any early stage to avoid causing delay to global expansions (or worse – expense acquiring rights already in use in other countries from third parties in the expanding countries). To attract globalising organisations it is important that local IP rights are perceived to present value and to be worth investing in. If the local IP enforcement framework is considered ineffective, organisations may be dissuaded from using it and will instead look to take their IP claims elsewhere.

What is an IP policy?

An IP policy, can fulfil a variety of roles from being a mission statement for IP to providing a reference point for IP-related crisis management. It should address topics such as the development, registration and enforcement of IP, and it may require the input of a host of different specialists including economists, tax advisors, lawyers, technical experts and marketing professionals. There may also be a convergence across different policy areas – for an organisation, employment and IP policies may have some common ground; for a national government, industry and business policies and IP policies are likely to have cross-over.

Effective corporate IP policies will cover a range of areas from the identification and protection of IP assets to managing infringement and disclosure issues when they arise. They will be informed by input from marketing and communications representatives, technical teams, legal, employment and tax to name but a few. Developing a bespoke IP policy may help your organisation to anticipate and mitigate the IP risks it faces before they arise. It may also open the doors to IP opportunities that would otherwise go unnoticed.

Effective national policies will look at IP from both a domestic and international perspective. From a domestic perspective rights need to be accessible and inexpensive to obtain and effective to enforce. Recent IP policies in the US and the UK have prioritised addressing IP issues associated with doing business in China. This cross-border pressure may have had some influence on President Xi of China's recent statement about ensuring that IP infringers "pay a heavy price" for their actions. A national IP policy that recognises the importance of local IP rights internationally delivers a very strong message about the perceived value of right holders' IP assets and encourages buy-in to that local IP framework.

What defines your IP policy?

Many factors will define the content of an IP policy. Some of these are not IP specific – for example risk appetite, jurisdictional range and ambition to extend that range, industry or sector focus and role in the supply chain (the priorities of a manufacturer versus a retailer will be very different, for example). Some factors derive from IP – the contents of an IP portfolio will be very relevant (compare the long term monopoly protection provided by trade marks for brands against the short term protection offered by unregistered designs as often used by seasonal businesses like those in the fashion industry).

There are also external factors in play, not least the interaction of IP and economics – what is the available budget for investing in implementing the IP policy, what tax implications could the policy have, what is the status of the national economy and how effective is the national IP framework?

The interaction of national and corporate IP policies

The level of development of national IP policy can vary wildly. Take China – a jurisdiction known for being particularly challenging to operate in from an IP perspective. International governments have been placing huge amounts of pressure on China to improve the enforcement of IP, and the Chinese President has recently responded called for IP protection in China to be strengthened and for IP enforcers to be held accountable.

Of course it remains to be seen whether these comments will be formalised into a comprehensive IP policy that responds to the gaps in China's IP regime and whether such a policy can then go on to deliver a package of reforms capable of resolving them. Until such reforms do take effect, any IP policy in respect of China needs to take account of the heightened risk of counterfeiting and copycat risk.

The US, one of China's most vocal critics in the IP space (particularly during the current Presidential administration) has a reputation for being home to several IP rich global organisations. National revenues attributable to IP are significant, and recent statistics show that the importance of IP in the US economy is only growing. It comes as no surprise that the US maintains a comprehensive and public IP policy.

The US Patent and Trade Mark Office (USPTO) publishes a four year strategic plan and there are numerous dedicated IP research missions focussing on the interaction of economics and IP. Not only is there a clear domestic recognition of the role of IP in the US economy, the US IP policy also recognises the benefit of US IP owners being able to profit from their IP around the world. IP is an industry in itself in the US, and an effective IP policy for US IP rights should make the most of the opportunities that creates.

The UK IP system has historically been well-respected internationally, with an active Intellectual Property Office spearheading education and policy both for UK and foreign businesses, and a range of rights providing protection within the UK and Europe for which enforcement is generally considered to be effective. But any IP policy that relates to the UK should currently be under the microscope in light of the UK's impending departure from the EU.

When Brexit happens, the IP landscape in the UK will change significantly. As things stand, European IP rights (for example EU trade marks and EU registered designs) will no longer extend to the UK. The European copyright policy and the "single digital market" initiative that has driven UK copyright law over recent years will no longer be relevant. IP policies that rely on European rights to protect IP assets in the UK should be revisited, and serious consideration should be given to adopting new filing strategies that treat the UK as a standalone IP system.

In Australia, although IP Australia is publishing more analytics and data about the Australian IP framework than ever before (which could be very interesting for corporates looking to develop their IP policies). Recent research suggests that Australian businesses aren't innovating, or if they are they aren't commercialising their innovations, to their full potential.

In 2015 the Australian Government instructed an enquiry into the Australian IP framework with a view to redefining IP policy, the first of its kind in nearly 20 years, but the findings haven't yet translated to a Government response. Until the direction of travel of national IP policy has been defined, the onus is very much on organisations to drive their own IP growth. In respect of Australia, an IP policy needs to take account of the fact that there isn't a ready made "IP industry" as there is in the US and that to a certain extent organisations need to be masters of their own fortunes in relation to their IP assets.

Conclusion

Neither national policy makers looking to protect their economies in a changing economic climate nor organisations trying to survive in an increasingly competitive landscape can afford to ignore the strategic importance of IP.

At a national level, outlining a robust and forward thinking IP policy delivers a clear message to businesses and industry lobbyists that innovation and knowledge form a critical part of the national economy. Such a policy invites globalising businesses to invest in that jurisdiction and could attract significant international investment. Providing an effective and accessible framework for the protection of IP could be the difference between attracting or dissuading local investment.

From a corporate perspective, not only does a comprehensive portfolio of IP rights provide a useful defence mechanism against opportunistic third parties and competitors alike, but it could add significant balance sheet value and provide a source of revenue.

With innovation and digitalisation increasingly providing the cornerstones of economies across the world, whether at an organisational, national or even supranational level, there's no time like the present to put IP on the table and define and formalise an IP strategy that embraces, encourages and encompasses the strategic importance of IP.