July 22, 2019 | David Kwei - Epiphany Law
Australia is one of the 15 wealthiest countries on Earth. Despite this, it only makes up about 1% to 2% of the world’s GDP. In other words, 98% to 99% of the world’s economic activity occurs overseas, which represents a massive opportunity for Australian businesses.
Engaging in international trade is challenging, and the international aspects of intellectual property (or IP) are often overlooked. This creates real risks for businesses, as mistakes in this area can be fatal to an export venture.
Don’t leave it to the last minute to get to know the pitfalls of International IP. Make sure you’re across these 7 key components and your international IP strategy will be best in class.
If you’re starting to think about export, consider IP issues at the early planning stage.
Most businesses assume that they’ll replicate the product and branding from their home country when entering overseas markets. This is understandable, as it minimises costs. Replicating an already successful formula might seem to be the best way to maximise the chances of market success. However, this thinking can lead to problems if you don’t identify relevant differences between Australia and your overseas markets.
A famous example of such a mistake was the decision by Clairol to launch a curling iron called ‘Mist Stick’ in Germany without realising that ‘mist’ is German slang for manure. Be careful not to assume that what you do in Australia will work overseas. This is important to all areas of your export strategy, but particularly to IP. The legal and regulatory environments which govern IP are invariably different. You might have had to set up your business as a franchise in Australia, but a simpler business model may apply overseas. Alternatively, there may be higher legal requirements in your overseas market. Europe has extremely strict privacy laws and what you do here may not be enough.
Considering IP issues early will give you time to develop and implement a workable commercial and IP strategy in time for your entry into foreign markets.
Freedom to operate (or FTO) refers to the right to test, market, or sell a product or service in a specific region or country. Ensuring that you have the freedom to operate – which starts with conducting searches of IP registers and relevant markets – is a crucial part of your IP risk management strategy. Not having the freedom to operate can result in costly disruption to your export activities.
For example, the iconic Australian wine brand, Penfolds, has been embroiled in expensive and time-consuming litigation for years in China against trade mark ‘squatters’ who have registered variations on the Penfolds brand.
This issue is not only relevant to exporters. If you’re having goods manufactured in China for the Australian market, you should also think about ensuring your freedom to operate. If someone else has registered your mark in China, then they could potentially prevent your own legitimate ‘made in China’ goods from leaving the country unless you pay them a licence fee, or purchase the trade mark from them outright.
You almost certainly use IP which is extremely important to your success in Australia, and which will be crucial to your overseas venture. For example, you might have:
If you don’t already have a clear idea of the IP which you own or use in Australia, it may be prudent to commission an IP audit. The audit should identify all relevant IP upon which your business relies, who owns that IP (whether it’s you, or another business which has let you use it), and any restrictions on its use. For example, you might use software owned by a third party as part of your business, but only have the right to use that software in Australia.
You should also estimate how important each particular IP is to the success of your business, and its likely importance to your export venture. Once you’ve done this, you’ll be able to make prudent commercial decisions about specific IP priorities.
Once you’ve identified your key IP priorities, you may need to take steps to register your rights in overseas countries. In many cases, if you don’t register your IP, then it could be extremely difficult or even impossible to prevent competitors from copying the things that make you successful.
Many people don’t realise that IP rights are obtained on a country by country basis. In other words, a patent, registered design, or trade mark issued by IP Australia will only give the owner rights in Australia. If the owner wants to obtain equivalent rights in, say, the United Kingdom, China and the United States, then further applications will be required in those countries.
The timing of your applications in foreign countries can be very important. For example, having a registered patent in Australia can actually prevent you from obtaining equivalent protection in other countries. This is because most IP offices around the world will only grant a patent to you if your invention is ‘novel’ at a particular date, known as the ‘priority date’ of your application.
For example, if you applied for a patent in Australia on 1 January 2016, and then file an application to protect the same invention in the UK on 1 January 2019, then your priority date for your UK application will be 1 January 2019. Your own description of your invention in your 2016 patent application will prevent it from being regarded as ‘novel’ in the UK on your priority date in 2019. This will prevent you from obtaining a patent in that country. Having said this, prior applications won’t always destroy your ability to gain overseas registrations. For example, the Paris Convention gives IP applicants a grace period of up to 12 months to make corresponding applications in other countries.
Not all IP rights need to be registered before they become valid and enforceable. In this country, copyright arises automatically upon the creation of works by Australians without a need for it to be registered. Australians can then enforce their copyright in other countries by relying on treaties such as the Berne Convention. However, some countries – including the US and China – do have copyright registration systems and there are advantages in registering copyright in those countries. Although your copyright is technically enforceable in China without registration, in practice it is very difficult. You also don’t have a legal right to licence the use of your copyright without registration.
You may need to provide foreign businesses with the right to use your valuable IP in different ways. IP is important to all sorts of relationships, including those with manufacturers, distributors, sales agents, consultants and employees. For example, you may need to provide overseas distributors with the right to use your trade marks, or you might need to disclose trade secrets or confidential information to business partners.
In these cases, you must have well-written, legally valid, easily enforceable contracts in place. The temptation is often to have contracts drafted by Australian lawyers so that Australian law applies, and they’re enforceable in Australian courts. However, these are extremely difficult and invariably expensive to enforce.
For example, if you sue an overseas manufacturer in a Victorian court, it can be difficult to compel that manufacturer to appear in that court. If the Victorian court grants an order in your favour, that order can be difficult to enforce in another country against a foreign manufacturer. These types of problems can be avoided if you give careful thought to how your contracts are drafted.
Having the freedom to operate and securing the exclusive right to use your intellectual property in foreign markets is an excellent start, but the story doesn’t end there. What if someone does infringe your rights? How will you find out about it? What can you do?
It is best practice to put IP monitoring services in place which can identify problems early. It’s easier to ‘nip it in the bud’ than to wait and cut down a massive tree.
IP litigation is notoriously expensive, and you should consider options such as IP defence or enforcement insurance as part of your export strategy.
IP issues are complex even without factoring in international issues. You may need to engage qualified experts to help you navigate the issues above and more.
Government schemes such as AusIndustry’s Export Market Development Grant can help you pay for the costs of overseas IP protection, so they’re well worth looking into.
He loves advising about IP in a way that empowers his clients to make better IP decisions when he’s not around. He’s also passionate about finding new ways to operate the modern law firm to deliver efficiencies to clients and work-life balance to staff.
His practice encompasses brand protection and enforcement (trade marks) in Australia and overseas, copyright advice and enforcement, licensing and commercialising IP-based businesses, contract drafting and advice.