Role of Intellectual Property in Technology Transfer and Marketing of Innovative Products Guriqbal Singh Jaiya Director Guriqbal Singh Jaiya Director SMEs Division World Intellectual Property Organization website:

Intellectual Property in Today’s Economy IBM earns over US$ 1 billion a year from patent licensing revenues Over 80% of the market value of Microsoft derives from its intangible assets, especially its intellectual property (trademarks, patents, trade secret over source code, copyright over software) The value of the Coca-Cola trademark exceeds US$ 50 billion.

US Patent License Royalties (in billions of US$)

Dr. Horst Fischer, Corporate Vice President, Siemens AG “Any company wishing to prosper in the next millennium will also have to efficiently manage its IP portfolio”. “For this reason it has become essential that every manager in the enterprise - not just those working in the corporate legal department - appreciates and understands not only what IP is, but how it can be more effectively exploited."

What is INNOVATION? “1. A New Idea, Method or Device 2. The Introduction of Something New” (Encyclopedia Britannica)

Basic Research Applied Research Invention Development Production Marketing “Technology-Push Linear Model of Innovation”

Innovation To innovate may be expensive (investments in R&D) High degree of uncertainty and risk associated to the innovation process Requires skilled labour

Innovation But: Prevents technological dependence Research to meet actual needs Process innovation: to save capital and/or labour, gains in productivity Product innovation: introduction of new (better? more efficient?) products

Problem of appropriation E.g. pharmaceutical sector E.g. music or software industry Recoup investments in R&D

What are the factors that determine the success of an innovative new product in the marketplace ?

Factors Determining Success of an Innovative/New Product The product provides functional advantages over competing or substitute products The retail-selling price is considered to be advantageous The product and/or its packaging has an attractive design The new product is properly branded, promoted and advertised The new product is readily available to customers in the main retail shops Consistent product quality A number of after-sales services are provided

If functional improvements, attractive designs and a well-positioned brand are some of the features that may determine the success of a new product, what can an SME do to protect them and maintain its exclusivity over their use?

Intellectual Property Rights Innovative functional features Design / aesthetic aspects Brands Patents or utility models Industrial designs Trademarks

Intellectual Property Rights Patent for the fountain pen that could store ink Utility Model for the grip and pippette for injection of ink Industrial Design: smart design with the grip in the shape of an arrow Trademark: provided on the product and the packaging to distinguish it from other pens Source: Japanese Patent Office

What is a Patent? A patent is an exclusive right granted for an invention What is an invention? –It’s the solution to a technical problem What type of protection is granted? –The protection granted by a patent enables the patent holder to prevent anybody from commercially exploiting the invention without the consent of the patent holder

What is a Patent? Patentabililty requirements: –The invention must be new –It must involve an inventive step –It must be capable of industrial application Maximum duration of a patent: 20 years (but annual fees must be paid) Territorial right

Patents Patents that have changed the world: Patent number: US 223,898. Edison’s electric bulb. Patents for simple low/tech products: The inventor licensed the system for opening Coca- Cola cans at 1/10 of a penny per can. During the period of validity of the patent the inventor obtained 148,000 UK pounds a day on royalties. Post-it notes: invented by chance, initially ignored by inventors but valued by the manager

Patents Why do European SMEs apply for patent protection? –Market exclusivity –Recouping R&D investments –Facilitates licensing –Advantageous negotiating tool –Financing opportunities (venture capitalists, etc) –Favorable image and credibility –Higher market value and publicity –International expansion

Patents Covers all fields of technology There are thousands of patents on simple everyday products

Strategies for Acquisition of Patents Patent or keep secret? –Advantages of patents: stronger protection, 20 year duration, exclusive rights, facilitates licensing negotiations, a secret is hard to keep... –Disadvantages of patents: costs, publication after 18 months, may delay the launch of a new product, hard to enforce... –Alternatives to patents: lead-time advantage, secrecy, trademarks, technological measures of protection, constant innovation,

Strategies for Acquisition of Patents Trade secrets: no need for registration. But there are three essential requirements: –The information must be secret ! –It must have commercial value because it is secret –It must have been subject to reasonable steps by the holder to keep it secret (e.g. confidentiality agreements)

Strategies for Acquisition of Patents What to patent? –Patent on every invention or only on high value inventions –Gillette Mach 3 (one product, 35 patents) –Patent mining

Strategies for Acquisition of Patents When to patent? –Late patenting may lead to losing the invention to a competitor –First-to-file system –Annual maintenance costs increase every year

Strategies for Acquisition of Patents Where to patent? –Where will the product be commercialized? –What are the costs involved in patenting abroad? –What are the main markets for the product? –Where are the main competitors based? –Advantages of the PCT (provides more time)

Strategies for Acquisition of Patents Who owns the patent? –Company, entrepreneur or employee? –What happens for subcontracted work?

Strategies for Patent Exploitation Case study of own exploitation of a patent –Case: Mandy Haberman –Invention of a non-spill drinking vessel –Application for patents and industrial designs –Registered mark: Anywayup® –Difficulties in accessing the main retail stores and supermarkets –Search for a partner –Creation of a new company to commercialize the product –Infringement and litigation

Strategies for patent exploitation Case study of a combined patent exploitation strategy: own exploitation and licensing –Case: Pliva - Pfizer –New antibiotic –Patent application in Croatia and abroad –Patent search by Pfizer leads to the discovery of the Pliva patent –Pliva licenses Pfizer to produce the antibiotic in the US as well as in some other countries while Pliva maintains the exclusive right to commercialize it in Central and Eastern Europe

Strategies for Patent Exploitation Case study of a non-exclusive licensing strategy: –Case: Bishop Engineering –Enterprise specialized in power steering technology –Over 300 patents since WWII –Earns 1 Australian dollar per unit made –Over 5 million dollars a year on royalties

THE OTHER SIDE OF THE COIN

Patents: The Other Side of the Coin Patent  1. “deed securing to a person an exclusive right granted for an invention”  2. “open, evident, manifest”; “open to public perusal” < Latin patens (Collins Dictionary)

Patent Information All patents are published (generally 18 months after the application is filed) and are in the public domain A patent is an exchange between the inventor and society

Using Patent Information Did you know? The entire set of patent documents worldwide includes approximately 40 million items Every year approximately 1 million patent applications are published About two-thirds of the technical information revealed in patents is never published elsewhere.

Using Patent Information Did you know? Most of the inventions are disclosed to the public for the first time when the patent is being published. (e.g. jet engine invented by Wittle in 1936) The information contained in the patent documents is NOT SECRET!

Using Patent Information “Patent information” is the technical and legal information contained in patent documents that are published periodically by patent offices. A patent document includes the full description of how a patented invention works and the claims which determine the scope of protection as well as details on who patented the invention, when it was patented and reference to relevant literature.

Patent information Technological relevance Legal relevance Relevance of Patent Documents Commercial relevance

Using Patent Information Legal relevance: Avoid possible infringement problems Assess patentability of your own inventions Oppose grant of patents wherever they conflict with your own patent

Using Patent Information Technological relevance: Keep abreast with latest technologies in your field of expertise Avoid unnecessary expenses in researching what is already known –In Europe, more than US$ 30 mill. per year waisted in unnecessary research - 30% of the total investment in R&D Identify and evaluate technology for technology transfer Get ideas for further innovation Identify alternative technologies

Using Patent Information Commercial Relevance Locate business partners Locate suppliers and materials Monitor activities of real and potential competitors Identify niche markets

CD-ROMs DVDs Paper On the Internet Where to Look for Patent Documents?

PRODUCT LIFE CYCLE Commercialization; Marketing (1) A viable marketing strategy, based on unique selling proposition, is implemented after price/value established. VISIBILITY of ADVANTAGES. (Trade Secrets;Licensing;Franchising;Trademarks (Collective/Certification Mark); Trade Dress (Packaging); Geographical Indication; Industrial Designs; Patent; Copyright and Related Rights; NPV). (2) Web-Site and E-Commerce: (Trade Secrets, Copyright, Trademark)

Trademarks

“A sign capable of distinguishing the goods or services produced or provided by one enterprise from those of other enterprises” What is a Trademark?

Any Distinctive Words, Letters, Numerals, Pictures, Shapes, Colors, Logotypes, Labels or Combinations

Non Traditional Forms Single colors Three-dimensional signs (shapes of products or packaging) Audible signs (sounds) Olfactory signs (smells)

Types of Trademarks Trade marks: to distinguish goods Service marks: to distinguish services Collective marks: to distinguish goods or services by members of an association Certification marks Well-known marks: benefit from stronger protection Tradename vs Trademark

The Function of Trademarks Allows companies to differentiate their products Ensures consumers can distinguish between products and ultimately develop brand insistence

The Value of Trademarks A marketing tool Source of revenue through licensing Crucial component of franchising agreements May be useful for obtaining finance A valuable business asset

Value of Trademarks in 2004 (*) 1 Coca Cola67,394 2 Microsoft61,372 3 IBM53,791 4 GE44,111 5 Intel33,499 6 Disney27,113 7 McDonald’s25,001 8 Nokia24,041 * ($ Millions)

Protecting Through Registration Exclusive rights prevent others from marketing products under same or confusingly similar mark Secures investment in marketing effort Promotes customer loyalty/ reputation / image of company Provides coverage in relevant markets where business operates Registered marks may be licensed or basis franchising agreements

Practical Aspects Selecting a trademark Protecting a trademark through registration Using and maintaining a trademark Enforcing a trademark

What is a Good Trademark Generic terms: CHAIR to sell chairs Descriptive terms: SWEET to sell chocolates Deceptive terms: “ORWOOLA” for 100% synthetic material Marks contrary to public order/morality Flags, armorial bearings, official hallmarks, emblems Negotiating a permission is however possible

The Napapijri’s case Italian skiwear and sportswear company Napapijri means Artic Polar Circle in Finnish Language. Napapijri is also the name of a small village located on the Polar Circle. The Norwegian flag appears on many of the garments as a tribute to the Norwegian explorers that first traveled to Polar Regions by foot and by dog sled over 100 years ago. Permission to use the Norwegian flag as a Napapijri logo was happily granted by the King of Norway, Harald the 5th.

Napapijri

Things to Remember While Selecting a Trademark Naturally distinctive –Coined or fanciful words: “Kodak” –Arbitrary marks: “Apple” for computers Easy to memorize and pronounce Fits product or image of the business Not identical or confusingly similar to existing TM Has a positive connotation in all languages Suitable for export markets Corresponding domain name available

Registration Steps The applicant –Application form, contact details, graphic illustration of mark, description of goods, fees The trademark office –Formal examination –Substantive examination –Publication and opposition –Registration certificate valid for 10 years –Renewal

Scope of TM Rights The exclusive right to use the mark The right to prevent others from using an identical or similar mark for identical or similar goods or services The right to prevent others form using an identical or similar mark for dissimilar goods or services

Keep in Mind The time it takes to register a TM The costs associated with TM protection The need for a trademark search A trademark agent may be required Protecting at home and abroad Renewing your registration

Protection at Home and Abroad The national route –Each country where you seek protection The regional route –Countries members of a regional trademark system: African Regional Industrial Property Office; Benelux TM office; Office for Harmonization of the Internal Market of the EU; Organisation Africaine de la Propriété Intellectuelle The international route –The Madrid System administered by WIPO (77 member countries)

Care in Using a Trademark Actively using a TM Using/maintaining a TM in marketing and advertising Using the mark on the internet Using the mark as a business asset Offering the goods or services Affixing the mark to the goods or their packaging Importing or exporting the goods under the mark Use on business papers or in advertising

TM in Marketing and Advertising Use exactly as registered Protect TM from becoming generic –Set apart from surrounding text –Specify font, size, placement and colors –Use as a name not as noun or verb –Not plural, possessive or abbreviated form –Use a trademark notice in advertising and labeling ® Monitor authorized users of the mark Review portfolio of trademarks

Using TM on the Internet Use of TM on internet may raise controversial legal problems Conflict between trademarks and domain names (internet addresses) - cybersquatting WIPO procedure for domain name dispute (

Using the TM as a Business Asset Licensing: owner retains ownership and agrees to the use of the TM by other company in exchange for royalties > licensing agreement (business expansion/diversification) Franchising: licensing of a TM central to franchising agreement. The franchiser allows franchisee to use his way of doing business (TM, know-how, customer service, etc.) Selling/assigning TM to another company (merger & acquisitions/raising of cash)

Enforcing Trademarks Responsibility on TM owner to identify infringement and decide on measures “ Cease and desist letter” to alleged infringer Search and seize order Cooperation with customs authorities to prevent counterfeit trademark goods Arbitration and mediation (preserve business relations)

Industrial Designs

What is protected is the aesthetic feature of a product not the technical (Patents) nor distinguishing features (Trademarks) The Form of a Product

Two-dimensional Designs

Three-dimensional Designs

The Value of a Creative Design Makes a product attractive and appealing Target specific market segments Create a new market niche Strengthen brands

Protecting Through Registration Exclusive right to prevent unauthorized copying or imitation by others Return on investment Business asset increasing commercial value of a company and its products Registered design may be licensed (or sold) Encourages fair competition and honest trade practices

Reasons for Protecting Designs in EU 70%prevent copying 23.4%company policy 20.3%get ahead competition 10.1%prestige 6.5%prevent people think “I copy” 5.8%other

Practical Aspects Protecting Industrial Designs Protecting Designs Abroad Enforcing Industrial Designs Other Legal Instruments for protecting

What to Remember When Seeking Design Protection The design must be NEW The design must be ORIGINAL The design must have INDIVIDUAL CHARACTER

Remember What Cannot be Protected Designs that fail to meet requirements of novelty, originality and/or individual character Designs dictated by technical function Designs with official symbols or emblems Designs contrary to public order or morality

Protection Through Registration The Applicant –application form, contact details, drawings or photographs of design, written description or statement of novelty, fee. The IP Office –formal examination –substantive examination –design register/design gazette –design registration certificate valid at least 10 years

Scope of Rights The right to prevent unauthorized copying or imitation by third parties Exclude all others making, offering, importing, exporting or selling product with the design

Keep in Mind The time it takes to register a design The cost of registration Keeping design secret prior registration Grace period Who may apply for ID protection Who owns the right over ID

Protection at Home and Abroad The national route –each country where you seek protection The regional route –countries members of a regional agreement: African Regional Industrial Property Office; Benelux Design Office; Office for Harmonization of the Internal Market of the EU; Organisation Africaine de la Propriété Intellectuelle The international route –Hague agreement - Administered by WIPO (36 countries)

Using the ID as a Business Asset Licensing –additional source of revenue –exploiting a company’s exclusivity over design –licensing contracts

Enforcing Industrial Designs Responsibility on owner of the ID to monitor, identify imitators/counterfeiters and decide on action Advice of IP lawyer “ Cease and desist” letter to infringer Search and seize order cooperation with customs authorities to prevent importation of infringing goods

WIPO Publications

Guides WIPO/ITC Guide on Secrets of Intellectual Property: Guide for Small and Medium Sized Exporters

Guides WIPO/ITC Guide on Marketing of Crafts and Visual Arts

SMEs Website of WIPO