Standing up in court

How best to protect your intellectual property rights from infringement may be through litigation or a compromise arrangement, as Jonathan Ames reports

When the football World Cup kicks off this June, the competition’s array of global mega-sponsors won’t have at the forefront of their minds the silky skills of the planet’s most sublime purveyors of the beautiful game – or even the fortunes of individual national teams.

No, the men in suits will focus their eye on one ball and it won’t be rolling along the pitch. Brand protection will concentrate executive thoughts right the way through the finals, because no matter how popular an international commodity football has become, protecting intellectual property (IP) is an even bigger game.

Litigation and the courts form the field on which this contest is played. The likes of Adidas, Coca-Cola and Sony have teams of lawyers devoted to protecting their IP, so woe betide the cheeky local São Paulo market trader attempting a tiny spot of ambush marketing.

But how can small and medium-sized enterprises (SMEs) protect their own equally important IP, defending it against infringement in the UK and abroad?

Suing to protect IP can be a murky and expensive business. However, experts point to some core principles that make the experience, if not easy, then at least marginally less traumatic and confusing.

The first issue for entrepreneurs seeking legally to defend IP rights is to determine exactly what they are trying to protect. Is it an idea that could gain patent protection? A brand that could be trademarked? Or is there a creative element that could be covered by copyright and design law?

Entrepreneurs often fail to do basic market research before launching an idea, product or brand. Specialist solicitors, trademark and patent attorneys, can assess whether anyone else is already using a similar brand to one proposed or whether a competitor has developed and is already marketing similar goods.

Suing to protect IP can be a murky and expensive business, but there are some core principles that make the experience less traumatic and confusing

While lawyers can assist with trademark and other searches, businesses should also do their own leg work. “It helps if clients themselves have done some basic market research,” says Kenneth Mullen, an IP partner at London law firm Withers. “Just talking to people can be a good strategy – very often chatting to potential investors will tease out information about what else is out there.”

Discovering a similar existing product need not scupper a business’s idea as a simple tweak in the design or brand might be enough to get it back on track.

Once a product or idea is on the market, signs of IP infringement come in several forms. Word of mouth is perhaps the most common. “If the infringer is within your industry, then you are likely to come across the problem yourself,” says Sarah Wright, an IP partner at law firm Olswang. “If it is somebody outside the sector, it usually gets reported to you by an employee or supplier.”

Again, entrepreneurs need to box clever. “Often small businesses will miss the signs and get a whiff of infringement when it’s almost too late,” warns Tom Farrand, managing director of trademarks at the London office of Novagraaf, a European patent and trademark consultancy. He cautions businesses keen to cut deals not to enter discussions without insisting that all parties sign a non-disclosure agreement.

So what can smaller businesses do if their IP is infringed? The first issue is extremely basic, but crucial. The business must determine whether the IP rights assumed actually subsist and are valid in law. Andrew Bowler, a specialist partner at law firm Bristows, explains: “There are lots of situations where rights have been granted by the UK or European authorities, but then are held invalid by a court. That is largely because the examiners at the patent offices have to deal with a huge number of applications and occasionally drop a stitch.”

Once satisfied the right is valid, the business must decide on the best forum for dispute. Four years ago, England’s Patent County Court evolved into the Intellectual Property Enterprise Court (IPEC). This was more than a re-branding exercise as the court has widened its IP ambit beyond patents and promotes itself as a forum for smaller business claimants.

Generally, IPEC deals with cases of up to £500,000 in damages. But the most important element is that recoverable costs are capped at £50,000. So while the court provides a quick resolution – cases come to court within three to six months of an initial hearing and trials are limited to half a day – the winning side can be left out of pocket if damages don’t cover the extra costs.

International issues further complicate litigation, although Brussels is attempting to simplify the position in Europe. A harmonised EU trademark exists and union-wide patent courts are soon to be launched in London, Paris and Munich to adjudicate on a unified EU patent.

Copyright law is generally harmonised across the EU, and an IP Enforcement Directive unifies penalties and remedies for actions in Europe.

Outside the EU, the environment is murkier. China and East Asia are considered in the popular conception as being bandit country, but the situation is improving. The Chinese government gradually accepts the country must move towards western IP standards and an updated trademark law is to be implemented in the country on May 1. That legislation will deal with bad-faith filings, cracking down on trademark pirates of brand names.

But is litigating generally the best practical solution for SMEs claiming IP infringement? Not always, argue lawyers.

“Initially, everyone would like hefty damages,” says Mr Mullen. “But the problem with IP is that there is often a question over how much damage has actually been caused. It can be very difficult to determine unless you force the other side to tell you how much they have been selling and where they’ve been selling it. And you can’t do that until you get to court.”

Lawyers advise businesses to consider compromising with an infringer. A better practical option than doing battle in court might be to cut a licensing agreement to co-exist peacefully with the other side.

CASE STUDY

KEEP PUSHING A STRONG DEFENCE

Many sets of middle-class hipster parents wouldn’t be seen without one as they push little Noah or Tabatha down Islington’s Upper Street on a sunny spring Sunday morning en route for a flat white and almond croissant.

Bugaboo is the perambulator of choice for many yummy mummies and their caring and sensitive male – or even female – spouses, life partners or whoever else assists with the rearing of their children.

Protecting that brand position is crucial, especially for a relatively young international company. The Amsterdam-headquartered business was launched 18 years ago by two Dutch entrepreneurs, designer Max Barenbrug and Dr Eduard Zanen.

In 2003, they cracked the UK and US markets with their distinctive products that are actually more pushchairs than prams. Total revenue for 2012 was €94 million (£78.7 million), more than double its turnover seven years earlier.

Bugaboo products are now sold in 50 countries, with nearly 20 per cent of revenue generated in the Americas and 12 per cent in Australasia.

“It is important for us that our models are protected in various markets around the world,” says Bugaboo’s top in-house lawyer, general counsel Jan Maarten. “Patent protection is crucial because we are always looking for an invention – something the other brands don’t have.”

So far, the company has not had to litigate in the English courts to protect either its design or brand. However, it has had some tiny flare-ups with websites either misusing brand imagery or, more frequently, copying and pasting Bugaboo product pictures.

The biggest headache for Mr Maarten’s legal team is dealing with various international patent and trademark authorities, many of which have varying approaches to the registration process.

“Protecting intellectual property is more difficult in some jurisdictions than others,” he says. “We are not the only company that wishes there could be one global standard process.”

However, Mr Maarten realises that wish is likely to remain just that. Global harmonisation of intellectual property (IP) registration is arguably politically impossible because many national authorities see the process as a nice little earner for their exchequers.

Should smaller companies avoid court battles over IP at all costs? Mr Maarten acknowledges that litigation costs chunks of time and cash. “As a Dutch company, we are very pragmatic,” he says ruefully. “But most of the time we have a strong case – and people realise that if they infringe our patents or trademarks they will have a serious problem and they stop doing it.”