Intellectual property – have you protected your business?

August 2014 | PROFESSIONAL INSIGHT | INTELLECTUAL PROPERTY

Financier Worldwide Magazine

In recent years we have seen an increase in the number of businesses that do not own IP which is critical to their business. Typically this concerns copyright in photographs, logos, websites and product designs.

This creates a number of problems for the business concerned, as it can impact upon trading opportunities and raising finance. In a recent instance, a company found that a competitor was claiming ownership of its brand name, product designs and packaging, claiming that the rights had been purchased from the individual designers who originally created the work.

It is also not uncommon to see domain names for a business’s website owned by current and former employees and LinkedIn and Twitter accounts not owned or controlled by the business. This has caused problems when a business learns that what it considers to be its domain is then used by a competitor or a third party to damage the standing of the business.

Whilst these ownership issues can be resolved later by putting in place a written agreement with the designer (many IP rights can only be transferred in writing), it can cause problems much later where the designer refuses to transfer the IP or demands a substantial payment for the rights. We have seen cases where litigation or corporate transactions have been delayed whilst the transfer or a licence of the IP rights is negotiated. Another case saw a business allow a company to be dissolved whilst the company still owned a number of trademarks, as the business thought that it had acquired the trademarks – but the assignment was ineffective.

In the UK, some of the practice of intellectual property law has been amended by the Intellectual Property Act 2014, which came into force on 14 May 2014. Whilst the Act is short, its aim is to modernise certain aspects of intellectual property.

The most extensive changes are to the law concerning unregistered and registered designs.

The first and most obvious change is regarding who is the owner of a commissioned design, which is relevant to most businesses which have three dimensional products and patterns. Under the old law, if your business commissioned a third party to produce a design, your business would then own the resulting design. This contrasted with the position regarding the ownership of copyright, which provided that if your business commissioned a copyright work, such as a new website or brochure, that copyright would belong to the designer, not the business which ordered the work. It did not matter that the work was paid for or that the intention was that the business owned the work.

The change now means that any designs created by a third party will belong to that third party designer, unless the contract between the parties transfer the ownership of the rights; the ownership of commissioned designs and copyright now follow the same rules. As a result, there will be an increase in the number of businesses which are falling foul of these ownership rules.

The Act also introduces a new criminal offence of intentionally copying a registered design in the ‘course of a business’. The penalty under the new offence is up to 10 years’ imprisonment and an unlimited fine. This addition of a new offence was controversial as the arguments in favour of extending criminal sanctions for designs could also be applied to patents at a later date. However, similar offences have existed for the other registered IP right, trademarks, for some time. Designers, on the other hand, have welcomed the introduction of the new offence, and some have expressed disappointment that it does not go far enough. Registered design owners will now have recourse to trading standards officers to enforce this new offence.

There has also been a simplification of the rules concerning what would qualify for protection as an unregistered design and the qualification criteria based on the status of the designer. By launching a designs opinions service, it will now be easier, cheaper and quicker to challenge a registered design as this will allow a business to obtain a non-binding opinion on the validity and extent of a registered design.

It remains to be seen whether these changes will result in any change in the number of applications for registered designs, as many businesses will probably still find the protection periods for unregistered designs to be sufficient (three years for unregistered Community Designs and 10 or 15 years for UK unregistered designs), especially where the business is active in a fast moving, seasonal or short term appearance dependant market sector, such as fashion, toy, novelties, mobile telephony and similar industries. Sectors that require longer protection, including automobile, furniture, white goods and luxury goods will continue to register their designs and most cases with OHIM to cover the member states of the EU and will therefore be unaffected by these changes.

The new criminal offence may result in an increase in threats actions and applications to invalidate registered designs if businesses are threatened, or are concerned that they might be threatened, with a claim for registered design infringement. There may be significant take up in the designs opinion service as it is a defence to show that the business reasonably believed that the registration of the design was invalid.

For patents, there is a provision allowing the use of internet links for disseminating details of the patent numbers applying to products as numbers can vary between countries. This should make it easier to move goods from one country to another without reprinting packaging, etc.
The law surrounding IP ownership and implications is very complex and professional advice should be obtained before embarking on the creation of IP rights or when dealing with IP rights. A simple IP audit can quickly identify risks and threats and help prevent you and your business from committing criminal offences surrounding IP rights and ensure that your business holds the IP rights it should.

Rob Lucas is Head of Intellectual Property at Shulmans. He can be contacted on +44 113 297 8941 or by email: rlucas@shulmans.co.uk.

Rob Lucas

Shulmans