Intellectual property can seriously injure your wealth


Date: 17 February 2010

This week’s blog comes from IP barrister Jane Lambert. Offering a very personal view of how small businesses can approach their IP, she points out that getting legal protection for your invention is no magic shield - many innovators learn that the expensive way. While IP is growing in popularity as a building block for contracts, partnerships and licences, the cost of defensive IP - including court action - is, as Jane explains, high, and she gives her own take on what action - legal or not - aspiring entrepreneurs should look at for their new invention.

Jane Lambert Barrister NIPC

In over 30 years at the English Bar I have seen far more businesses fail because they had too much intellectual property rather than too little. That may sound counter-intuitive and almost mocking – especially if you have just settled your patent agent’s bill. So here are the facts behind such a surprising statement:

Intellectual property can be expensive. In 2005, European Patent Office research showed the average cost of getting a typical 14-page patent for six countries and renewing it for ten years cost inventors €30,530. Even if your patent sees the light of day that’s a lot of money - but the sad reality is that most are never commercialised. Of the few that are, only a tiny percentage cover their costs and even fewer make serious money. Secondly, patents, copyrights, trade marks and other forms of intellectual property are essentially mechanisms which are used to bring a lawsuit. 

Save for commercial bootlegging, counterfeiting and piracy, it is not a crime to infringe somebody’s intellectual property rights in the United Kingdom. Litigation can be very expensive. In 2003 IPAC (a government IP committee) reported that a patent infringement claim averaged £1 million in the High Court and between £150,000 and £250,000 in the Patents County Court. Legal Aid isn’t available. The only way that most small businesses can fund IP litigation is to take out IP indemnity insurance; the premium for reliable cover for the UK works out at around £4,000.

Thirdly, the IP protection chosen may not be the most suitable for the business. A patent, for example, may be unnecessary for products with a short shelf life.  Unregistered design right which prohibits making articles to original designs and comes into being automatically as soon as the design is recorded in a drawing. A CAD file or other document or simply keeping the invention under wraps and relying on confidentiality may be all that a business needs in many instances. The advice that I have given my clients for many years is to consider where they want their business to be in a period of their own choice. It could be six months, six years, or indeed longer - or shorter. 

Next, I ask them to identify their likely income streams over that period. After that I tell them to imagine the competitive threats to those income streams. I then get them to devise counter-measures to those threats. Nearly always those counter-measures are commercial such as lowering prices or developing new products or services. 

In only a tiny minority of cases does a client suggest some kind of legal protection (i.e. intellectual property) and in many cases that protection is one that arises automatically.  For those very few cases I always counsel the client to provide funding for enforcement either through insurance or otherwise.

Jane Lambert of NIPC.

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