Taking care of big ideas looks after the bottom line

Protecting innovation to enable a full return on investment is a matter of commercial necessity and professional pride, writes James Dean

It’s not a hoover, it’s not a tannoy and, remarkably, it’s not even a hula hoop. Refer to any of these things in these terms and you could be falling foul of the protected trademarks of the Hoover Company, Tannoy Ltd and Wham-O Inc.

Businesses fight tooth and nail to protect their ideas – their intellectual property (IP) – especially when their lifeblood is innovation. Last year, IBM, the computing behemoth, was awarded more patents than any other company for the twentieth straight year – 6,478, a new record.

But pre-emption through patenting and trademarking is not always sufficient. Hoover came to blows with inventor James Dyson in 2000 in a dispute over the former’s Triple Vortex vacuum cleaner and the latter’s Dual Cyclone. The inventor claimed that Hoover had infringed one of his cyclonic technology patents. Two years later, and after battling through two courts, Hoover agreed to pay Dyson £4 million in damages. “I hope it encourages inventors who have their ideas stolen by multinational companies to fight for their patent rights,” Mr Dyson said at the time.

Gordon Harris, head of IP at law firm Wragge & Co, is a long-time adviser to Dyson. He has also advised Sir Richard Branson’s Virgin Atlantic and a number of other entrepreneurs. “People get funny feelings when it comes to ownership of intellectual property – even big businessmen get steamed up about it,” he says. They think about it in terms of fraud. They’ll even go through 12 months of ‘bet the company’ litigation – trials where a ruling against them will destroy the company financially. That’s an emotional rollercoaster.”

More recently, Dyson exchanged blows with Chinese firms that were trying to copy its bladeless fan. But surprisingly, the Chinese regime for IP protection is increasingly getting the thumbs up from lawyers and companies alike. “It’s actually very good,” Mr Harris says of China’s State Intellectual Property Office. “You can bring a case in very good time – as little as six months – which is much better than in this country. Their sanctions are often tough, too – they can order that tools and plastic moulds are destroyed, for example. The only thing perhaps that they fall down on is damages, which tend to be lower than here.”

Fighting a major IP case in the High Court in Britain can take anywhere between 12 and 18 months, and can cost £2 million to £3 million in legal fees, experts estimate.

Then again, there is no such thing as a typical case. “I had one that was scheduled to last for half a day,” Tim Bamford, head of IP at Withers, the law firm, recalls. “There were no witnesses and there was no cross-examination. It was just dealing with points of law. Yet the other side had an army of lawyers working on it and they were charging £200,000 for the pleasure. So you can imagine how costs can quickly spiral out of control.”

The High Court tends to be the preserve of the biggest hitters, home to the likes of pharmaceutical giants and the generics companies that want to copy their drugs. Big companies like the certainty of English law and the fact that the system is generally very thorough. And because of the size of the claims, they don’t generally care about legal costs.

“But it remains rather exclusive,” says Mr Harris. “It’s hard for smaller businesses to enforce their IP rights in the courts. If your turnover is half a million or less, it impacts too much on your profits to bring a claim – it’s definitely a problem.”

People get funny feelings when it comes to ownership of intellectual property – even big businessmen get steamed up about it

For smaller patent claims, there’s the Patents County Court, based at the Royal Courts of Justice in London. Claimants can pursue two routes: the multi-track, for damages claims up to £500,000, or the fast-track, for damages claims up to £10,000. It can, though, take just as long as the High Court to get a result.

To avoid legal stresses, companies that deal heavily in IP might do well to steer clear of the courts. It’s a tactic that’s so far proved successful for Michael Infante, chief executive of One Media, which deals exclusively in IP for music and TV nostalgia. The company has acquired the rights to 170,000 music tracks stretching back to the 1950s, and it owns the video catalogues of Sooty and The Adventures of Skippy the kangaroo, among many others. Yet after eight years’ trading, One Media has not been to court once.

“Rights have a habit of twisting and turning over the years,” Mr Infante explains. “They’re a bit like leases on a property, but where your tenant has the right to sub-let. So you have to look at the rights of all the sub-letting sons and daughters across the world.

“When you buy rights, not every seller is honest about where all the sub-letters are. When you find out that you have unwelcome sub-letters, the natural tendency is to draw your gun and go after them. But that’s not the best approach. We prefer to talk to them, to offer an amnesty. We draw a line under past abuses and see where we can go from there. It’s a two-way conversation.

“If they’re belligerent, then yes, the legal letters start flying. But if it does go that far, it’ll usually fall to the CEO – me – to make a judgment call on whether it’s even worth pursuing them. It’s purely a business decision by then. After all, they might have no money. So make sure you’re not about to sue a man of straw.”

The government has put the design and creative industries at the heart of its industrial policy and wants to strengthen IP rights by introducing criminal penalties for copycats. It also wants to harmonise patent enforcement across Europe, by setting up a London branch of an EU-wide Unified Patent Court.

But this means that a lost case in one country could mean a loss of business across the Continent. “You’d have all your eggs in one basket,” Mr Bamford warns. “It might be cost- effective, but the downside is, if you lose the debate in one jurisdiction, you lose the debate across the whole of Europe.”