Writing IP into your Business Plan

Author Grenavitar Licence Public Domain Source Wikimedia Commons

Paternoster Square, City of London

 

Jane Lambert

A business plan plots out the course that a business is to take from its present position to a point in the future.  During that time it is expected to develop new products and/or services that will attract customers.  The design of goods, the technology that the goods or services incorporate or by which they are made or marketed and/or the reputation that the business develops are business assets.  As they are creations of the mind rather than space or machinery they are often referred to as intellectual assets.  The legal protection of those assets is known as intellectual property.

The first step is to identify intellectual assets.  As they are not always obvious, startups and other small businesses should make use of the WIPO's IP Diagnostics and the British Intellectual Property Office's IP Healthcheck tools which I mentioned in Saving Money on IP at a Time of Rising Prices on 19 May 2023.  As a company expands and becomes more diverse its owners should carry out regular intellectual property audits.  In How to Use an IP Audit (13 Jan 2022 NIPC News) I described IP audits as "a tool for identifying 'potential IP assets', that is to say, protectable intellectual assets."  That article discussed the different types of intellectual audits and how they may be used in business planning.

In that article, I warned:

"Like other tools, an IP audit can be misused. The identification of a patentable invention does not mean that a patent must always be sought. Considerable resources may be required to protect the invention in the countries where it may be marketed as well as those in which suppliers of competing products are located. Unless the development, production, marketing and distribution of the invention are already featured in or can be incorporated into the company's business plan. there are likely to be better uses for such resources."

In the next paragraph, I wrote:

"An IP audit can be put to better use when devising and monitoring the implementation of an intellectual property strategy."

I defined an intellectual property strategy as "the systematic application of intellectual property laws to achieve business objectives" in "What is an Intellectual Property Strategy" in NIPC Law on 19 May 2017.  I gave an example of a simple intellectual property strategy in Putting IP at the Heart of Your Business Plan in NIPC News on 2 Jan 2015:

"(1) Identify the likely income streams over the period of your business plan: these may be sales, payments for services, grants, subsidies - any kind of revenue;
(2) Consider the threats to those income streams over that period - most of those threats will be commercial such as competition from other businesses and changing customer behaviour but a few could result from copying your products or riding on your reputation;
(3) Develop responses to those threats - as most of those threats will be commercial so will your responses such as reducing prices and developing new products but such threats as plagiarism and free riding may require a legal response;
(4) Tailor your response to suit the threat and your resources - there is often more than one form of legal protection such as keeping your new product under wraps and relying on the law of confidence to keep it secret rather than seeking patent protection so consider all the options before you actually spend money on searches and applications."

I amplified that last point in Saving Money on IP at a Time of Rising Prices.   Patent prosecution is expensive and comes with the important downside that every invention must be disclosed "in a manner which is clear enough and complete enough for the invention to be performed by a person skilled in the art," Not every invention needs to be patented.  Much innovation can be protected adequately by trade secrecy or design rights.   

I also emphasised the importance of enforcement in Putting IP at the Heart of Your Business Plan and  Saving Money on IP at a Time of Rising Prices.   Business planners have to beware that a well-funded competitor may attempt to revoke their patent or other intellectual property right or simply infringe it.  While the Small Claims Track of the Intellectual Property Enterprise Court will resolve most types of IP claims for £10,000  or less that can be tried in a single day and there are cost-effective alternatives to litigation such as patent examiners' opinions and the Uniform Domain Nane Dispute Resolution Policy that I mentioned in Saving Money on IP at a Time of Rising Prices, most IP litigation is expensive.  Few startups or other small businesses can afford the cost of litigation in the Patents Court or even the Intellectual Property Enterprise Court multitrack.  The only way many of them can defend themselves is by relying on before-the-event IP insurance. A small number of brokers such as Sybaris Special Risks and Safeguard IP are beginning to write policies for small and medium enterprises.   As I said in Saving Money on IP at a Time of Rising Prices, the IPO has provided some useful guidance on IP insurance and the Chartered Institute of Patent Attorneys and the Chartered Institute of Trade Mark Attorneys. publish a list of specialist IP insurance brokers.

It is now possible to identify the information that can be written into a business plan:

• the intellectual assets discovered by using the WIPO or IPO diagnostic tools or commissioning an IP audit;
• professional fees for carrying out such an audit;
• costs of prosecuting applications for such patents, registered designs, trade marks or other registrable rights as are found to be necessary for devising an IP strategy;
• premiums for intellectual property insurance;
• renewal fees for patents and other registrable rights; and 
• contingencies and other miscellaneous expenses.

Costs are not the only information to be inserted into a business plan,   Assets have value and for many businesses, the most valuable assets may be their brand, their designs, their technology or their creative works.  Estimates of the expected values of those assets should also be inserted into the plan.   It is those assets that are most likely to persuade investors to invest or lenders to lend to the venture.

Anyone wishing to discuss this article may call me on 020 7404 5252 during office hours or send me a message through my contact form.

How to enforce your IP claim after court fees sky rocket

A patent or other intellectual property rights is essentially a right to bring a lawsuit. With a few limited exceptions, it is not a crime to infringe an intellectual property right. Patentees and other intellectual property rights holders have to enforce their rights themselves which generally means bringing proceedings in the civil courts.

1.  Court Fees are about to Sky Rocket

Unfortunately, the costs of issuing proceedings in the civil courts of England and Wales are about to soar through the roof. Art 2 of The Civil Proceedings and Family Proceedings Fees (Amendment) Order 2015 which is currently before Parliament requires those claiming more than £10,000 in damages or other monetary relief to pay 5% of the value of the claim up to a cap of £10,000.  At present, the most that anyone has to pay for issuing a claim is £1,920. That will increase to £10,000 after the Order is made - a whopping £8,080 or 421%. It is even worse for those with modest claims. Those seeking damages of £190,000 will have to pay £9,500 an increase of £8,185 or 622%.

The peers including the law lords have protested at these new fees as have the senior judges and lawyers (see Senior judges attack government's planned court cost rise 4 March 2014 BBC and Wednesday in Westminster 4 March 2015) but governments tend to get their way and the draft order will go through. So what should inventors and other small businesses do now?

2. Limit Damages Claim to £10,000

The issue fees for claims under £10,000 remains unchanged. They increased quite a bit last year but they will not be going up this time. If your claim for damages is between £5,000 and £10,000 the issue fee will still be £455. Limiting claims to £10,000 is not nearly as bad as it sounds because the principal relief that an intellectual property owner wants is an injunction - that is to say, an order of the court to do or refrain from doing something on pain of a fine or imprisonment for disobedience. Inquires as to damages and accounts of profits are very rare in IP litigation. I can count on the fingers of one hand the number of cases in which I have been instructed that have actually gone all the way to a full-blown inquiry.

Happily, there is now a court for small intellectual property claims, namely the Intellectual Property Enterprise Court (formerly the Patents County Court) small claims track. The judges of that court will hear claims for all types of IP cases except those involving patents, registered designs, registered Community designs, semiconductor topographies and plant breeders' rights where the damages or other pecuniary relief is £10,000 or less. I have written a lot about that tribunal, given a lot of presentations and even argued a case before it. You will find links to those articles at Patents County Court - the New Small Claims Track Rules 20 Sept 2012 NIPC Law. The great advantage of the small claims track is that the procedure is very simple. There is usually only one hearing which lasts less than half a day and the judge can award an injunction and damages at the same sitting. Something that can't be done in any other court. The risk as to costs is limited to a few hundred pounds though by the same token you can's recover more than a few hundred pounds if you are successful.

Even if your claim is in relation to patents, registered or registered Community designs, semiconductor topographies or plant breeders' rights you can still limit your damages claim to £10,000. Your case will be allocated to the multitrack which means that your liability for costs will increase but you will still only be charged £455 for issuing proceedings and recoverable costs in the multitrack are limited to £50,000.

3.   Bring your Case in the Intellectual Property Office

The hearing officers of the Intellectual Property Office have extensive jurisdiction in patents, trade marks, registered designs and unregistered design rights disputes and recoverable costs in proceedings before hearing officers are limited in most cases to a fixed scale (see Tribunal Practice Notice 2/2000 Costs In Proceedings Before The Comptroller).

In patients, for instance, hearing officers can decide who is entitled to a patent or to be named as an inventor, they can amend or revoke a patent, they can declare that a patent has not been infringed and they can decide compulsory licensing and licence of rights disputes. They can even hear infringement claims with the consent of the parties under s.61 (3) of the Patents Act 1977 though that has rarely if ever happened, possibly because hearing officers cannot grant injunctions.

In trade mark disputes hearing officers can revoke or declare trade mark applications invalid.

In designs, hearing officers can cancel design registrations and determine the conditions for licences of right.

Appeals from decisions of hearing officers in trade mark disputes can be made to an Appointed Person rather than the court who will generally award costs on the same scale as hearing officers.   S.10 of the Intellectual Property Act 2014 makes similar provisions in respect of designs.

4.   Seek an Examiner's Opinion

For the last 10 years, Intellectual Property Office examiners have delivered non-binding opinions as to whether a British or European patent is valid and whether it has been infringed.  This has proved very popular and their jurisdiction has recently been extended to other patent disputes and will shortly extend to designs. The cost of an examiner's opinion remains at £200.  In some cases, an authoritative opinion is all that is needed to resolve a dispute. In cases where the losing party refuses to back down a favourable opinion should make it easier to get after-the-event insurance or litigation funding.

5.  Use established Arbitration or other Alternative Dispute Resolution Schemes where they exist

Probably the best-known schemes are the ICANN Uniform Domain Name Dispute Resolution Policy for generic top-level domain name disputes and Nominet's Dispute Resolution Service for domain name disputes in the .uk top level domain name space. For a few hundred pounds trade mark owners can obtain an order for the transfer of a domain name in less time than it takes to exchange statements of case in many intellectual property disputes. Costs are irrecoverable but then you don't usually get all your costs back on a detailed or summary assessment anyway.

6.  Insert Dispute Resolution Clauses into your Licences and other Agreements

If you don't want to go to court to resolve a dispute with your licensee, joint venturer or other associate you can insert provisions for mediation, expert determination or arbitration into your licences or other agreements.

7.  Take out Before-the-Event Insurance

Although the 622% and 421% increases that I mentioned above are enormous, they are not a large part of the total cost of litigation and should not increase before-the-event insurance premiums greatly. There are some good IP packages on the market, particularly the IP Insured package which Sybaris IP offers to ACID members.

8.  On the Horizon

The British government has signed an agreement to establish a Unified Patent Court with exclusive jurisdiction to determine disputes over European patents and passed enabling legislation to implement the agreement. Art 71 of that agreement restored legal aid for inventors which was taken away from them by paragraph 1 (h) of Schedule 2 to the Access to Justice Act 1999. The Court will consist of a Court of Appeal in Luxembourg and a Court of First Instance with a central division based in Paris with a section in London. The Court will have its own rules and charge its own fees. So long as this country remains in the EU it is the best news for private inventors for 20 years.

Should anyone wish to discuss this article or IP law in general, he or she should call me on 020 7404 5252 during normal office hours or message me through my contact form.