Looking after intellectual property rights

June 2022 | EXPERT BRIEFING | INTELLECTUAL PROPERTY

financierworldwide.com

In today’s knowledge-driven economy, intellectual property (IP) rights are extremely valuable business assets. The value of intangible assets (most of which derive from or are protected by IP rights) owned by S&P 500 companies in 2019 was more than five times the value of their tangible assets and, for some companies, amounted to 100 percent of enterprise value, according to Raconteur.

However, while companies spend significant amounts of time and money obtaining IP rights in the first place, often much less emphasis is put on looking after those rights once they are obtained, with the result that the value of those rights can be diminished or even lost. Below we highlight some of the areas where greater attention to detail can pay off in the long run.

Renewal

All registered IP rights (e.g., patents, trademarks and designs) need to be ‘maintained’ by payment of renewal fees (also referred to as ‘annuities’ or ‘maintenance fees’). However, the onus on ensuring the timely payment of these fees (and the payment of the correct amounts) falls on the owner; patent offices are not obliged to inform owners in advance of payments being due and most do not routinely do so.

To complicate matters further, different IP rights have different renewal periods. For patents, fees typically need to be paid annually (although in the US they are due at four-year intervals). For trademarks, the period is normally every 10 years (which can be easily forgotten in the intervening period). For designs, the period varies considerably around the world, although typically falls between the above periods, for example every five years in the UK and Europe.

Fortunately, grace periods for late payment are usually available, meaning that it is hard to irrevocably lose rights through missed fee payments. However using these can come at a steep cost, often requiring the payment of a surcharge of 50 percent of the missed fee.

An unfortunate consequence of the fact that patent offices do not routinely remind owners of the deadlines for payment of these fees is that it provides an opening for unscrupulous opportunists to use the information available from public registers to solicit payments from rights holders. Such approaches are often presented in a manner that suggests that the communication is from the patent office itself, sometimes illegally so. At best, these approaches will seek payment of vastly inflated sums to pay the required fees. At worst, they will not even pay the required fee, but will instead offer a worthless service relating to the right, such as publication in an unofficial register or journal, still at an inflated price.

The simplest way for most companies to manage renewal payments is to delegate the responsibility for monitoring, reminding and paying the fees to a service provider. A number of specialist providers exist in this field and most patent attorney firms will either offer these services or contract them to a separate provider. Using a third-party provider to manage these payments can also help distinguish scams and provide a useful point of reference to check the validity of any unsolicited correspondence.

Policing

A granted IP right is likely to be of little value if third parties can infringe it with impunity. However, the enforcement of IP rights against potential infringers is almost entirely the responsibility of the proprietor. Even where infringement falls within the remit of government agencies (such as Trading Standards and the Border Force in the UK), they rarely have the resources to handle any but the most serious, substantial and obvious cases of counterfeiting, and even then will often only do so with the direct involvement of the rights owner.

IP litigation has a reputation for being expensive, but the cases that reach the courts are very much the ‘tip of the iceberg’. Far more cases settle, often simply as a result of the existence of the IP right being brought to the infringer’s attention. Acting swiftly and contacting potential infringers as soon as they are noticed can stop the infringement quickly and at relatively low cost, particularly if the infringer has made minimal investment in the infringing product or brand. By contrast, delay can lead to infringers having much more to lose by giving in and therefore being prepared to expend greater effort in contesting any allegation of infringement.

However, in some countries (including the UK), accusing another company (or individual) of infringement, even verbally, can give rise to the potential counter claims. Consulting a specialist before making such accusations is therefore strongly recommended.

Another aspect to policing IP rights is preventing third parties obtaining their own, conflicting, rights. Registered trademarks are particularly affected by this. In many countries, including the UK and across Europe, patent offices will not take any action to prevent the registration of a subsequent application which might conflict with an existing registration. Instead it is left to the owners of earlier registrations (or unregistered rights) to take action, on the basis that this only leads to objections where those owners consider that there is commercial conflict between the marks.

There is, fortunately, a simple solution to this, which is to arrange for a watching service. This will automatically monitor new applications in selected countries (or even worldwide) for marks which are potentially similar to the company’s registrations and flag up potential conflicts, allowing the option to oppose the new application based on existing rights.

Keeping records

Having registered a trademark, it is important that the mark is used in the countries where the mark is registered, both in the form that it was registered and in relation to the goods and services that were covered by the registration. Failure to do so within a set period (which varies by country but is typically between three to five years) can leave the registration vulnerable to revocation in whole or part for ‘non-use’. Such ‘non-use’ can also make it impossible to oppose a subsequent application to register the same or a similar mark.

As a result, it is important to keep records of relevant use in all territories where a mark is registered. The exact form of such records will vary depending on the mark and the goods and services being provided, but may take the form of copies of catalogues, brochures, sales records, invoices or marketing material. To be of value, such records should also be dated, otherwise they are liable to be ignored. It is often helpful to be able to identify, at least at a broad scale, revenue or sales volumes associated with specific goods or services.

For unregistered rights such as copyright, good recordkeeping is often essential to prove the existence of the right at all. As the point at which the right needs to be relied on can often be several years (or indeed decades in the case of copyright) after the creation of the right, it can be extremely difficult to prove the requirements for existence and ownership if contemporaneous records are not available.

Transactions

Throughout their lifetimes, IP rights will often be the subject of legal transactions, in particular transfers and assignments, licences and use as security. However, while such transactions create beneficial ownership or rights in the underlying IP rights, they will only be fully effective when they are recorded with the various IP offices at which the rights are registered.

Until recordal has been completed, the transaction may be ineffective in law, for example not permitting an assignee (or licensee) to enforce the right without the involvement of the registered owner. Some local laws also impose further penalties for undue delay in the recordal of transactions, such as reducing the ability to claim for costs or damages in successful infringement actions.

It is also important to ensure that changes of name and, in particular, addresses of proprietors are recorded with patent offices. While failure to record a change of address rarely has official consequences, it can result in official correspondence, such as a notification of a revocation action, or of an unpaid renewal fee, to be missed because they have been sent to the wrong address and not forwarded.

Many countries will record transactions on simple application from the right holder. However, others will require evidence of the transaction, possibly with a translation, and may also require other formalities to be completed before registration is allowed. The formal requirements for recordal can also vary considerably regarding, for example, whether ‘wet ink’ signatures are required and whether the assignee or licensee is also required to sign the transaction. It is therefore advisable to seek the advice of local attorneys (or attorney firms who specialise in the recordal of transactions in a wide range of jurisdictions), possibly in advance of the transaction being completed.

Furthermore, in many cases, any evidence provided to support the recordal of the transaction will become publicly available, which may be undesirable if the transaction forms part of a wider transaction. If this is the case it may be preferable to prepare, sign and record a ‘confirmatory’ document that meets the necessary formal requirements, but excludes the sensitive commercial detail.

Stephen Hodsdon is a partner at J A Kemp LLP. He can be contacted on +44 (0)20 3077 8600 or by email: shodsdon@jakemp.com.

Stephen Hodsdon

J A Kemp LLP