What is intellectual property (IP)? Intellectual property is a broad categorical description for a set of intangible assets owned and legally protected by a company or individual from outside use or implementation without consent.
An intangible asset is a non-physical asset that a company or person owns. The concept of intellectual property relates to the fact that certain products of human intellect should be afforded the same protection rights that apply to physical property, which are called tangible assets. Most developed economies have legal measures in place to protect both forms of property. Companies are diligent when it comes to identifying and protecting intellectual property because it holds such high value in today’s increasingly knowledge-based economy.
Also, producing value intellectual property requires heavy investments in brain power, time and skilled labour. This translates into heavy investments by organisations and individuals that should not be accessed with no rights by others. Extracting value from intellectual property and preventing others from deriving value from it is an important responsibility for any company.
Intellectual property can take many forms. Although it’s an intangible asset, it can be far more valuable than a company’s physical assets. Intellectual property can present a competitive advantage and, as a result, is fiercely guarded and protected by the company that owns the property.
Alexandra, how active is the market of people infringing IP?
Alexandra Nott: Online, it’s pretty much constant. For trademarks, infringement doesn’t have to be intentional. It’s not just looking at those people who are intentionally trying to rip off someone else’s product. It’s also about safeguarding your particular goods or services and the space around it.
We say to companies that they should be vigilant on social media, looking at domain names that people are using, because infringements will pop up all the time.
There are so many companies trading, it’s a really crowded field. It is becoming more difficult to carve out a space for yourself. There are a lot of online-only businesses, which makes it more accessible for people to start up their own business these days.
MH: Alexander, as a patent attorney, protection of IP comes under the word ‘patent’ I assume?
Alex Ford: There’s a lot of different types of IP rights. I deal primarily with patents, but I also do registered designs. A patent protects an idea, whereas the design, for instance, protects the aesthetic of something; it’s a different aspect.
The patent can’t be used to protect the aesthetics, the design is for that. So you have to restrict yourself to the different types, and work out which one is best for you.
The patent is quite a powerful form of IP, because if you’ve invented something, it doesn’t matter what it looks like, if someone comes along and does the same thing, using those same technical features, you’ve carved out that space, then you’ve got an argument against them.
Coming back to the overall question - for big companies, they’re very aware and active about working out what their competitors are doing, what innovations are coming through and so on. Because the patents are all on a Public Register, there will be watch lists, and you’ll have people looking out for things getting published, particularly in areas of technology they’re working in.
And that company is now looking for a hole between that patent and that patent to get their product in it…?
AF: That can happen. That’s what we’d call a ‘workaround’. You’d have to be careful about what you’re doing with that because if you’re reading a patent, just because you think it means ‘that’, it doesn’t necessarily mean a court in Bulgaria will also think it means ‘that’, particularly if you’re looking at worldwide jurisdictions.
Pam, from a franchise point of view, it’s vital to franchise with an appropriate name. Do you come across this a lot?
Pam Gordon: Hugely. When I start working with businesses who want to franchise or licence, they’ve not done anything about their IP protection. The assumption sometimes for small businesses is that having a domain name leads them to believe they are then protected. We know that’s not the case.
I did one years ago with a local business called the Landscape Gardening Company, but the trading name was too descriptive. So we had to look at re-branding before they started on the franchising journey. Make
sure your trading name, your domain name or your brand can actually be protected in some way before you start.
That’s a perfect time to bring Jeremy in because you’re working with a lot of new companies, and you’re bringing that up at the start – get your IP sorted…
Jeremy O'Hare: That’s key for us. We really push that message of getting into IP as early as you possibly can.
I’ve been an agony uncle many times for people who have got their heart and mind settled a particular brand name that they’ve wanted to start with - only to find it’s in use by someone else. We offer more targeted information to help a particular entrepreneur in their industry make good decisions. When they hopefully increase in scale, this will all scale up with them.
So get it right early, and you can do much better later.
PG: The other thing that I come across quite often is that they’ve had a design done for their branding, but actually, they don’t own it. So it’s often useful to do an IP audit before they’re going to start.
Jonathan, from a DMH point of view, when you’re preparing a company for sale, you must be coming
up across this all the time?
Jonathan Grant: We do. The common issue is websites.
Small businesses get a website designer to help them, and if they’re freelancers, then the assumption is that the designer owns that copyright. If you get your employees to create your website, the assumption is the business owns the website.
Sam, from Kreston Reeves’ point of view, how often do you get involved in IP issues?
Samantha Jones: All of the time. Touching on the sale point, what tends to happen is a buyer will come and say, ‘we’ll buy you for five million.’ And then we need to break that down into what is making up that five million. But when we actually get to IP, it’s ‘well what is the value of that?’
There are different tax reliefs as well. They want to get these intangible pieces of IP, the ones that are registered, and they’ve actually been protected because we can get tax relief for those. Businesses need to be looking at this long before sale.
We created the Platinum Media Group and Platinum Business Magazine about 15 years ago. About five years ago, a new magazine came out called Platinum which is a Silver Surfer Magazine. Would I have had any rights against another company who came out calling themselves ‘Platinum’?
JG: You get a lawyer’s answer for this - you might have protection, you might not. The answer is if your readership – the people who know you as Platinum Business – confuse the other Platinum magazine as being you, then you would have a common law action in passing that off; that you’re confusing your buyers into thinking they’re buying you.
Even if there was no official registration of our name?
JG: It’s a common law right. But it’s quite hard to prove, because you’ve got to show that members of the public
or your readers would think they were buying you when
they were buying this other magazine.
The frightening thing with most companies here with IP is cost; of fighting or taking someone on. The cost
of registering is a lot cheaper than going into battle. We would have struggled to fight the other Platinum because they are in one space, which is the Silver Surfer area, and they’re national. We are a regional business
and current affairs magazine. In this example, what would your advice to me have been?
AN: It depends on how much they were affecting what you’re doing. If they’re not causing you any harm, then you might not deem that worthwhile to fight.
What this highlights is registering your trademark is a really sound investment. In terms of dispute, if you’d been able
to just write to these people, and enclose a copy of your trademark registration, then that’s quite often enough for
the other party to back down.
That registration should be an investment from the beginning, and it can really help you reduce the costs of having to enforce and defend your IP in the future.
There are a lot of new businesses coming along all of the time. What are the costs of registering an IP?
PG: The IPO websites are quite straightforward. If you’ve got a very simple business, it’s quite clear, and you can register links for £170 +VAT.
So I’m starting my new business, and I’ve paid my £170, when it comes to a dispute, do I have enough protection with this?
JG: If you get it registered, this is an absolute protection.
PG: It’s the brand, the logo and the name.
JG: ‘It can’t be descriptive’ is the easiest way to remember it. The ‘Landscape Gardening Company’ was a good example. It describes the service, but you can’t protect that name. The website is protected by copyright as it’s created.
Another good example is a car company I dealt with. It was a secondhand car dealership saying, ‘we’re a specialist in Land Rover.’ And they did a version of the Land Rover logo on the letterhead.
But the likes of Land Rover are really hot on that. So they’ll send you a letter saying, ‘take it off the letterhead or we’ll
sue you.’ So for exactly that reason they will protect their own brand, because of reputation and everything that
goes with it.
AN: One of the main things to think about is if you have a registered trademark, it’s not just that trademark that you’re protected for - it’s that trademark, and similar.
So if you had a wordmark ‘Platinum’, and somebody used that on a cover of a magazine, irrespective of font, regardless of if whether they used it in a logo form, you could still stop them doing that.
Pam, how difficult does it become to rebrand a company when you’ve worked so hard building that company as XYZ?
PG: You might have to re-brand locally from your original name. And only then once you’ve got that history with
that new brand can you then move forward and expand – whether licensing or franchising.
Someone like McDonald’s are on your case within seconds of anybody registering anything. Is that draconian protection or are they just being a very smart company?
PG: They’re being very smart. Their IP is that everyone globally knows McDonald’s so well. Would you allow somebody else even a small kebab shop in Bradford to use that name?
AF: There’s also precedent. In other words, if they don’t pursue that, someone more serious may well come along. And then the argument is ‘well, you didn’t chase that one…’
What is the issue with the ownership of who created something? I’ve employed a designer to create my
logo. When I paid his bill, does that automatically become mine?
JG: No. You need a contract; something simple saying that, ‘when I pay you for your services, then I will own that.’ And probably the designer will say, ‘that’s fine, you can own that. But some of the elements are unique to me, because they’re clever things that I know how to do, and I’m going to use them elsewhere.’
In the same way, if you have a junior employee who comes up with a really clever idea, while he’s working in a design department, and he has a really simple contract without any IP protections, he can go away and set up his own business - and you find that he’s taken some creative ideas.
So the fact he works for me in full-time employment – I don’t own anything he creates?
JG: If the contract doesn’t say so, then the assumption goes, the more senior the person and the more design-related or executive their role is, the more ownership the business has. The more junior the person is, the less control the business has.
Jeremy, is that something that you talk to people about?
JO: We always say, so that people know when they’re getting a freelancer, to just be aware. This is a major pitfall that you’ve just got to get around. The assignment of IP is crucial.
Keep good records all the way through. Whether it’s email transactions, or if you need to file them with a solicitor –
just have them on file. It’s absolutely vital.
The problem then comes that, suppose my business is now worth £50 million, I will want to franchise it, or I’d like to come to DMH to sell it. When I go to those designers, they can all hold me to ransom, can they not?
PG: Yes. And we see it. Sometimes you can’t find the person who did it originally, so it needs to be re-done. And that’s another expense.
But in that design company, for example, ‘Fred’ who did the design has now left that company. Has that design gone with Fred? Or is it sitting with the company who paid him to do it in the first place?
JG: The assumption is that if it’s an employee, then it belongs to the company, If your contract is with the business, and one of their employees has created something for you, and the business has assigned the rights to you, you should be protected. Because they have the right to everything their employees create.
Hindsight is a wonderful thing. When you’re so consumed with a myriad of things that you’ve got to do with a startup, always on a small budget, always with not enough people in the team, it’s a very complex situation.
JO: It is. But it’s good to catch people early. What we like to do is give people the right options for the business that they’re in, and for the stage that they’re at. You just need to provide some clarity. That’s the most valuable thing for businesses at that stage, then they could focus on everything else.
JG: With ‘know how’, which is a non-registerable IP, it’s not all about stopping other people doing things, it’s about demonstrating to other people what the value of your business is.
With a lot of service-based businesses, the real value of the business is how they go about running their business. What’s their DNA? Why do customers come to them? Because they do some stuff really well.
But often, it’s not written down. It’s not packaged up in a way that can be explained; they’ve just done it for 20 years, and people really like it.
JO: I couldn’t agree more. And this is where I think we could try and define IP. For me, it is anything you wouldn’t want your competitor to have. And then you’ve got some clarity around what you need.
SJ: I’d say a lot of IP tends to be with a business owner, because people buy into people or the team. If they’re delivering a service really well, who are your core people in that team? How do you keep them there? And if you’re going for a sale, you can’t have them get nervous and just leave. You need them there to work with the new owners.
What about putting the IP in the business owner’s name? Can one legally do that?
JG: If you sold the company, and the owner of the company had the IP registered in their name, the owner would have
that valuable asset; the business wouldn’t have it. So you’d be selling the company without that key asset.
But isn’t that often the very reason for trying to do it? Would I be smart to put IP in my name, which I could
do because I own the company?
SJ: A business owner might have their IP at the start when they set up their company. Then when they want to sell, whoever’s buying it is going want that as well. So you negotiate to transfer it at a point where it’s a lot more valuable.
PG: That’s what we advise in franchising. You have your original business, ABC Ltd, and that’s where the IP sits and then your friend, ABC Franchising Ltd is the thing that grants the agreements. But you have an assignment licence. So if something happened, your IP is not affected.
The failure rate of companies after the pandemic has increased dramatically. Does the liquidator accept the fact that the company actually doesn’t own the IP; the individual owns the IP?
JG: If an individual has the IP registered in their name, there’d have to be a licensing agreement to allow the business to use it. If that was in place, and the licence could be terminated on insolvency, then the owner could keep the IP.
What are the tax implications? Sam, are there smarter ways to do this from a financial point of view?
SJ: There’s reliefs all the way through, encouraging businesses to be innovative in the UK to create technology, science etc. The HMRC want you to be doing this in the UK. So there’s good tax relief, there’s R&D tax credits, which is when you’re trying to overcome uncertainties etc. All the time, you’re still building your product or your technology, there’s already tax credits that could get you 33p in every pound that you spend back, if you’re an SME.
Once you’ve actually protected your patent, you’ve got something you can create value from. If you sold a whole product that has that patented aspect in it, then HMRC will allow you to potentially get Patent Box claims, which gives you an effective tax rate of 10% which, when our corporation tax rates go up to 25%, is a huge advantage.
Talking about selling, Jonathan, is there a set route that you go down, from a legal point of view, in auditing and checking that everything’s in place?
JG: We can apply the same kind of questioning criteria that apply to a buyer and say, let’s do a test. And let’s see whether everything’s in place.
One of the big areas is data protection, which is not an exciting area, but it’s one of those ones where people in businesses get fined. There are buyers who are very aware of that, checking website ownership, checking the employment contracts, making sure they’re all lined up.
We can do a lot of it in a short space of time before sale; we’ve sorted out website ownership in a couple of months before a sale, for example. But it’s hard to change employee terms and conditions just before a sale, for the obvious reasons that it unsettles people.
And I presume when we will come to look at franchise, do you recommend this same thing? Do you have a law firm come and do it?
PG: We quite often bring lawyers in to do the IP audits and to find the holes before they move forward in franchising.
Often we get approached with an idea. Somebody wants to franchise, or it’s a very new business. And I’m very wary of getting involved in that because the whole point of franchising is that it’s a proven model that someone’s going to be following.
Data lists are increasingly important within a company. Supposing an infringement has been committed already. For example, it’s very easy to send yourself an email with a data list and then delete the email. OK, there’s a track there somewhere, but how do I deal with protecting my data list?
JG: That’s why businesses have things like ‘gardening leave’. You pay someone six or 12 months to sit at home in the garden, because it’s better to do that than to have them out in the market. You can protect that.
PG: I often find with franchising, it’s about a really good franchise agreement regarding the ownership of those customers because it’s a really grey area.
The franchisee, who is using the same system, is effectively building up goodwill in their territory where they’re operating. But often in the agreement, the franchisor still owns the client base. So when the franchisee comes to sell, they’re selling the goodwill, but not the brand.
However, the franchisor, as long as they approve the buyer, allows that new franchisee to use the data effectively. A franchisee can’t sell outside of the agreement. There’d have to be a new agreement. If you’re going to allow somebody else to use your IP, it’s about getting really strong agreements. Equally, if you’re buying in as a franchisee, it’s about really understanding what it is you’re working with.
AF: On that point, if you’re a franchisee you may know how many burgers you sell on a Monday, and what the margin
on that is. But presumably that belongs to the franchisor? Or at least it’s certainly contracted in a way that you can’t then go and open a burger shop down the road with the knowledge of that tied into your business plan.
PG: There are restrictive clauses, but they are only really for 12 months. If you were in, say, Brighton, but you decided to
go and set up in Worthing, technically, you probably could.
Alexander, how complex is it to protect my logo? Where do I present it to get it trademarked?
AF: You can trademark a logo. You get a registered trademark on a logo and you have unregistered rights on it as well. Depending on who’s designed it, there might be copyright issues. If you’re talking about the UK, you would submit it to the UKIPO. Upload it, pay your money and click Submit, and hope you’ve ticked all the right boxes.
I then also have to think well, I’m only running my business in Bradford, but a few years down the road, it might be I’ve needed worldwide protection. Is that that a large step to go from the UK protection to going global?
AN: It is. And this is one of the difficulties of trademarks, because IP generally is territorial. There’s no such thing as a global trademark, though that would obviously make life a lot easier for businesses. The likes of McDonald’s pay in each country. These big companies, their portfolio of IP is huge, because it’s in every single country. For smaller businesses, that’s just that’s not viable; the costs are totally prohibitive.
There are some systems that help reduce costs. In the EU, you can get an EU-wide trademark; one registration covers you across the whole of the EU.
There is also an international system. What happens is, you can get a single registration, and you choose specific countries that you want that international registration to be protected in. Then you have to go through the application process in each of those countries.
With Brexit, I’ve ticked all my boxes; I’ve done everything; I’ve used the right law firm to do it, and I’m protected within the EU. Now we’re not in the EU, do I still have that protection?
AF: It depends on when you did that. There was a transition period, and if you had an EU mark, they got duplicated at the end of the transition period. So you automatically had both UK and EU protection. Today, you would have to apply for both separately.
However, you may only be interested in, say, Germany and France. So you may say ‘I’ll bung in a cheap design in France, Germany and the UK, ignore the rest of the EU; I’m not interested in it.’
This comes back to if you’re looking to reduce costs. As a small business, identify those jurisdictions that are most relevant to where you want to be, and cover those more.
So if I’m in Spain, Italy and Germany, I therefore have no protection if someone copies me in Belgium? So it’s not EU-wide, is it?
AF: But it would be cheaper. You should normally try and protect it in where you’re going to make stuff, where your main market is, where your competitors are, or where you may manufacture in the future. And those are ones you try to pick out.
I work for one of the major gas turbine engine manufacturers, and it’s basically UK, France, Germany - that’s all they’re interested in. Because they’re the only places people make jet engines.
So once I’ve done that, and I suddenly decide I do want to do Belgium. I then simply apply?
AF: It depends on the IP. In the patent world, and the design world, publication or displaying of your invention or design will actually blow any future protection you can get, because you’ve destroyed the novelty of it.
What you have in IP is what we call the priority period. Suppose you designed something, you patented it, and you filed your patent in the UK, you then have a one-year grace period to decide where else you would like that patent. After that grace period, you’re no longer entitled to the earlier date that you have secured. Then after six months, your patent will actually publish. Everyone then knows what you’ve patented, and you can no longer pursue it with any validity elsewhere.
JG: It’s one of the issues with patenting. Although it gives you guaranteed protection for a period of time, you’re showing everybody what you’ve got.
JO: That’s the quid pro quo; you’ve got the state monopoly for 20 years. But in exchange for that you’re revealing the technologies.
From the financial side, once one starts trying get into Europe, are there individual ways that you can claim
your tax relief, your R&D relief in each of these countries? Or does that become too complicated for words?
SJ: On the assumption that you’re a UK company, and then you’re setting up subsidiaries elsewhere, you have to follow their accounting and tax rules.
If you set up your factory in France, then you’ve got a taxable presence there. As it comes profitable, you might decide to set that up as a subsidiary. It depends on the jurisdiction as well, because each of these jurisdictions in Europe have got different tax rates,
JG: The really big one is the tech companies who put their intellectual property in a low tax area like Ireland, and charge all of the manufacturing businesses a licence fee for using IP, which then goes into the low tax place rather than paying tax in the places where their manufacturing process is more expensive.
JO: I think it’s good for anybody not to separate IP from the business in the sense that, for example, if you’ve got a new invention, it may be a new invention. But is it commercial? Is it timely for the marketplace?
Given that the world is a fast moving place, your technology today, even though you might have a patent 20-year monopoly, it might be obsolete in five years. There are 100 million+ patents out there on the last bit of searching I did, and not one of those was commercially successful.
It always feels like we have another couple of hours because there’s other places to dig. But thank you
very much for your time.