Correspondence

IP Insight: September 2014

Published 25 September 2014

1. IP Insight to move to new IPO blog platform

To give us greater flexibility in the timing and content of our messages we will be moving IP Insight from it’s current format into a blog platform. We will continue to send out IP Insight over the next few months to highlight the articles in the blog but ultimately the publication will come to a close.

Many thanks to those who have read and contributed over the past few years and we hope you will sign up to the new business blog. As with IP Insight the blog will contain a mix of articles and news relevant to the small and medium enterprise (SME) audience and will issue more regularly. If you would like to be a guest blogger or think there’s a story we should be covering email market@ipo.gov.uk.

Image licensed by Ingram Image

2. Is your website actually yours?

The question of website ownership is not as straightforward as it seems. Our clients often confidently say “yes, of course we own our website” only for us to dig a bit deeper and find out it’s not the case.

The repercussions of this all too common assumption can be severe: often, the businesses can end up stuck with an agency because their website cannot be looked after by anyone else.

What’s in a site?

Looking at the different aspects, a website consists of the following:

1. The domain name.
2. The text.
3. The images.
4. The look and feel of the website.

The domain name

If your company has purchased the domain name directly in the name of the company, you should have no problems. However, if you have used an agency, are you sure that the domain name is not registered in the agency’s name?

The text

If your website text has been written by your own employees as part of their normal duties, you will automatically own the copyright in that text. However, if you used a professional agency to write the text, or to amend it to such a degree that it is unrecognisable from the original draft, then the copyright in the text may be owned by the agency.

The images

It is highly likely that the copyright in the imagery used on your website is owned by the photographer or by an outside agency. Have you got a written agreement in place with the copyright owner or licensor to allow you to use those images?

Image licensed by Ingram Image

The look and feel of the website

Even if you have been careful to make sure that you own the text and the imagery, are you sure that the agency that designed your website does not have rights over the look and feel of your website? Might this cause a problem if you change agencies but want the look and feel of your website to stay the same?

The solution

The simple solution to the issues raised above is to make sure that all third parties involved in the creation of your website sign an agreement. This should state that all intellectual property (IP) rights of any kind in the website that they may own are transferred to your company.

About the author - David Cavaliero

David Cavaliero is a specialist corporate and intellectual property lawyer at Withy King LLP in Bath. He advises a wide range of companies from technology start ups to large IP rich businesses with UK and overseas interests. For further information please email david.cavaliero@withyking.co.uk

3. China IPR considerations for European businesses in the ICT industries part 2

China is the most litigious country for IP disputes in the world in absolute terms. 87,419 IP suits were filed in Chinese courts in 2012. However, out of these only about 1,400 foreign companies participated, which means that less than 2% of Chinese IP disputes involved foreign parties.

The reluctance by foreign companies to enforce their intellectual property rights (IPR) in China is largely due to the perception that China does not protect IPR and that foreign companies won’t get fair treatment. However, such reluctance is misplaced. Evidence suggests that case outcomes are not affected by litigants’ nationalities or, in short, the Chinese IPR system has reached a point at which foreign companies can get justice through a number of channels.

With China’s IPR protection system still evolving the protection of IPR should be a key part of any business strategy, whether entering into, or expanding operations in China. Furthermore, there are a number of IPR issues that are specific to the ICT industries, for both software and hardware. Understanding the difference between China and Europe in this regard is crucial for any information and communications technology company (ICT) offering goods or services that are potentially attractive to users in China, even if the company is not yet operating in the country.

In the previous newsletter the China IPR SME Helpdesk discussed patent and trade secret strategies for European ICT companies; in this issue, enforcement of IPR is discussed through a case study of a company that has taken enforcement action in China.

ICT technology enforcement case

InterDigital, Inc. is a mid sized USA wireless research and development company. In July 2011, it filed a complaint with the United States International Trade Commission (USITC) against Nokia Corporation and Nokia Inc., Huawei Technologies Co., Ltd and its affiliates, and ZTE Corporation and its affiliate. The complaint alleged patent infringement of certain 3G wireless devices, such as WCDMA and CDMA 2000 capable mobile phones, USB sticks, mobile hotspots and tablets and components of such devices.

Action taken

In December 2011, Huawei filed two suits against InterDigital in the Shenzhen Intermediate People’s Court in China. The first suit alleged that InterDigital had a dominant market position in China and the United States for the licensing of standard essential patents (SEPs) (inventions that must be used to comply with technical standards). It alleged they’d abused its market power by engaging in unlawful practices, including differentiated pricing, tying, and refusal to deal. The second suit alleged that InterDigital failed to negotiate on fair, reasonable, and non discriminatory (FRAND) terms with Huawei - a requirement of owners of SEPs. It asked the court to determine the FRAND rate for licensing essential Chinese patents to Huawei and also sought compensation for its costs associated with this matter.

Outcome

In February 2013, the Shenzhen Intermediate People’s Court ruled that the royalties to be paid by Huawei for InterDigital’s 2G, 3G, and 4G standard essential patents should not exceed 0.019% of the actual sales price of each Huawei product. This appears to be the first time that any judicial authority has ruled on the appropriate royalty rate for a FRAND encumbered SEPs - a patent that defines an invention that must be used to comply with a technical standard.

With respect to the first suit, the court held that InterDigital violated China’s Anti-Monopoly Law by:

• making proposals for royalties from Huawei that the court believed were excessive
• tying the licensing of essential patents to the licensing of non-essential patents
• requesting as part of its licensing proposals that Huawei provide a grant back of certain patent rights to InterDigital
• commencing a USITC action against Huawei while still in discussions with Huawei for a license

The court ordered InterDigital to cease the alleged excessive pricing and bundling of InterDigital’s Chinese essential and non essential patents, and to pay Huawei approximately USD 3.2 million in damages. The court dismissed Huawei’s remaining allegations, including Huawei’s claim that InterDigital improperly sought a worldwide license and improperly sought to bundle the licensing of essential patents on multiple generations of technologies.

With respect to the second suit, the court determined that, despite the fact that the FRAND requirement originated from the European Telecommunications Standards Institute’s IPR policy, which refers to French law, InterDigital’s license offers to Huawei should be evaluated under Chinese law. Under Chinese law, the court concluded that the offers did not comply with FRAND.

InterDigital has since filed appeals to both decisions.

IP lessons

1. FRAND is not an essential patent holders’ friend.
2. Enforcing SEPs is problematic in China.
3. Injunctions may not be possible.
4. Royalties are lower than normal.
5. Antitrust enforcement further limits the value of SEPs.
6. Enforcement of SEPs outside China may give rise to countersuits in China.

For more detailed information on the topic, please see the China IPR SME Helpdesk guide to ‘China IPR Considerations for the European businesses in the ICT industries’ downloadable from the Helpdesk website.

The China IPR SME Helpdesk is a EU co-funded project that provides free, practical, business advice relating to China IPR to European SMEs. To learn about any aspect of IP rights in China, visit the IPR Helpdesk online portal. For free expert advice on China IPR for your business, email your questions to question@china-iprhelpdesk.eu. You will receive a reply from one of the Helpdesk experts within seven working days. The China IPR SME Helpdesk is jointly implemented by Development Solutions and the European Union Chamber of Commerce in China.

China IPR Helpdesk logo.

4. UK city of culture

Hull will be the UK City of Culture in 2017. The success of the event depends on the city’s ability to rebrand itself. But as the Hull City/Tiger’s debate illustrates the people of Hull already have strong ideas about who they are and what their trade mark is.

Municipal branding

Cities have character, charm and charisma. We all have our favourites, they’re like people, they can beguile us so that sometimes we never leave. To maximise these pulls, city councils have to do more than position optimistic café quarters in windy corners of old pedestrian precincts. Visitors don’t want bland corporatized places that make the middle of one town feel very much like the middle of somewhere else. To call in, to stay, spend money and possibly even live, guests require something unique. So do businesses. Decisions on where to locate depend on hard facts, like transport costs, educational facilities and soft ones – nobody wants to live in a place where the main event is a five year old tapas bar and mexican grill that sells pizzas.

Manchester branding

These days the qualities of an urban centre are packed and wrapped up in brand images. Street savvy Manchester is awash with registered trade marks, apart from its two big football clubs, its newspapers, its university, its college, its airport, its international festival, its road race, are all registered trade marks. Manchester council owns two of its own Manchester marks.

Following the announcement at the end of last year that Hull will be the 2017 City of Culture, preparations to brand an entire city are underway. What does Hull mean? Can the city that invented the cream telephone box create an effective brand image for 2017?

London 0 - Hull 4

The Housemartin’s ironic album title says it all. Hull is not traditionally place for blowers of their own trumpets. Quite the reverse, Hull is a nexus of understatement. The level of understatement cannot be overstated. Even at the height of their fame, The Housemartins described themselves as the fourth best band in Hull.

The recent debate about Hull City football club’s trade mark illustrates Hull’s predicament perfectly. In 2008, after 104 years, Dean Windass (a local Hull boy) scored a perfect volley to propel Hull City into football’s top division for the first time. Now, as the club seeks to consolidate its position, the owners want to rebrand themselves as Hull Tigers. At the moment opinion in the city is divided and the Football association has blocked the move. Former Hull East MP, John Prescott is in favour of modernisation. But for the time being Hull City AFC will stay the same.

UK City of Culture 2017

In 2017 Hull will become the UK’s City of Culture. The event will really put the spotlight on Hull creating an estimated 1200 jobs in tourism and culture. Creative industries in Hull will grow by 10%, 7 million visitors will attend, £60 million additional revenue will be generated for the city by bringing a huge range of artistic and cultural events to the banks of the Humber. Hull has to move fast to capitalise on it’s gift. And by the city’s own reckoning the place is crying out for investment. Hull has more people chasing each job vacancy than anywhere else in the UK (51 per post). Life expectancy is 6% below the national average, Hull is the 10th most deprived local authority in the UK, with low levels of educational achievement and low levels of broadband take up.

The Hull brand

It all boils down to the brand. Get it wrong and Hull’s independence, pride and heritage can look retrograde, perhaps, when combined with its economic challenges, a bit grumpy. Get it right and Hull’s ‘difference’, its brilliance, could shine out across the world. That might sound a little like overstating an overstatement, but the quality Hull has, which perhaps nowhere else in the world gets near, is almost indescribable. It’s a kind of ferocious melancholy; both joyous and introspective they are the ingredients for world class creativity. It’s best explained by a genius of modest introspection: Philip Larkin. He settled in Hull because he could feel it. Really, you have to go to Hull to get it. This is what Larkin said about The Station hotel in Hull:

The Station Hotel. Light spreads darkly downwards from the high. Clusters of lights over empty chairs that face each other, coloured differently. Through open doors, the dining room declares A larger loneliness of knives and glass and silence laid like carpet. A porter reads an unsold evening paper. Hours pass and all the salesmen have gone back to Leeds, This isn’t an essay on poetry - to find out what next you’ll either have to read the poem, or maybe go to Hull.

Deano

As Dean Windass, pumps iron in his local gym the local newspaper The Hull Daily Mail is interviewing him about his forthcoming wedding. In Hull, Windass is something of a superhero - although, obviously, nobody in Hull lets their enthusiasm for Dean get the better of them. Windass says of his upcoming marriage:

I’m a Hessle Road lad - I’ve never been flash sort. It will be a nice day for our family and friends. We’re looking forward to it.

Hull’s trade marks

Compared to Manchester, Hull, has few registered trade marks. Its football club, its rugby league clubs, its university and newspapers have marks but the city itself does not own any live registered trade marks. Hull’s challenge will be to brand its creativity, its flare, its character and develop these as valuable pieces of IP. Then there is little doubt that Hull’s guests will, like Larkin, find it hard to leave. Hull is not a soulless café quarter, it’s a place to fall in love with. If Hull can get its story right, register its trade marks and build its brand, perhaps we’ll be singing ‘Happy Hour’ again - ‘What a good place to be.’

5. Which comes first patent or prototype

Throughout my time helping inventors develop a multitude of different projects, this conundrum has often reared its head. It is important to say from the outset that there is no definitive answer, but I will aim to convey the alternative perspectives, to allow inventors to make an informed choice for themselves. The opinions on this topic vary across professionals in the IP industry and the answer will differ depending on the specific idea.

Having said that, below are the main reasons for developing a prototype before patenting:

1. A patent application requires a certain level of detail regarding how the idea functions. This is known as ‘sufficiency’ or an ‘enabling disclosure’. It is often easier to describe, and draw, an invention once a prototype has been created and tested.
2. Prototyping develops the idea and it may be that a new or better solution is achieved. Potentially these iterative developments could require altering the original patent application or filing a new application. This could cost more or result in advantageous changes being left unprotected.
3. The grace period before substantial fees and important decisions need to be made during the patenting process is quite short, considering the average time it takes to launch a new product onto the market. It could be argued that it is better to progress the idea as much as possible before filing the patent application, including finalising the design through prototyping. This would then allow the grace period to be used for manufacturing or licensing the product.
4. A prototype can be used to test the market and some people consider that it is best to do this before embarking on a potentially expensive patenting strategy. (Disclosing the idea can prevent a granted patent being achieved and legal advice should be taken on how to test the market without forfeiting potential patenting opportunities. Confidentiality agreements are one way of protecting an idea before a patent application has been filed.)
5. A prototype may prove that the idea is not viable therefore saving the cost and time involved in drafting and filing a patent application.

Conversely, below are the main reasons to file a patent application before prototyping:

1. Prototypes often need to be produced by companies and therefore it could be wise to file for the patent first to protect the intellectual property.
2. If the inventor waits for the prototype to be produced before filing the patent application, someone else may file an application for the same idea first. In many countries of the world, including the UK, the patents systems are ‘first to file’ and not ‘first to invent’.
3. The patent application process includes a thorough worldwide novelty and inventiveness search by the IPO that could reveal valuable prior art material, not only in terms of the direction the prototype should take, but also in terms of potential infringement issues whereby the prototype can then be designed around existing patents.
4. A patent application and the resulting patent, like all intellectual property, provides an asset which is owned by the inventor or applicant company. If prepared effectively, the patent can be licensed or sold to generate an income stream potentially without ever needing to produce the prototype.
5. It may be better to start with a patent application if funds are limited, as a patent application is generally cheaper than a prototype.
6. A ‘provisional’ patent application can be filed without requiring great detail, providing a follow up application is then filed within 12 months which describes the idea in more detail. This may be following the proof of concept provided by the prototype.

There are some ways round these issues. Prototyping manufacturers can be asked to sign a confidentiality agreement before the idea is disclosed. However bear in mind that many companies will not sign confidentiality agreements, since their in house departments might be working on similar ideas. Pre application patent searches can be carried out prior to prototyping or patenting to discover whether it is sensible to proceed without having to draft and file an application.

There is a third perspective for consideration. Some industry experts would suggest that it’s not a patent or prototype that should come first but the opinion of industry experts as to whether the idea is viable and will sell. They would argue that the prototype and patent are important parts of the process but, at the very beginning, it’s best to ascertain that there is actually a market before investing in either a patent or prototype.

In conclusion, the best way to proceed with any new product idea is a complex decision. If the novel functionality of the idea is unproven, then a prototype may be a sensible first step. It is worth ensuring that a reputable company is used to produce the prototype and that a confidentiality agreement is signed prior to the concept being revealed. Alternatively, the inventor may choose to file a patent application first and accept that additional cost may be incurred to re-file or amend the application as the project is developed.

Written by Phil Staunton Managing Director of D2M Innovation Ltd.

6. Fighting for your IP rights

There are times in life where we all make mistakes or have arguments with those that we should be working in harmony with. The same can be said for businesses and protecting our IP.

No matter how carefully you plan and protect your business, IP disputes can and do occur. While we may not intentionally infringe someone else’s IP rights, it can be a side effect of our innovative society.

Traditional dispute resolution involves long, expensive legal proceedings. While this may be an option for the Samsung and Apple’s of the world, it can spell disaster for an SME that finds itself in this situation. Luckily, there is help on hand with the Intellectual Property Office’s (IPO) mediation service.

IPO Mediation Service

Mediation is a quicker, easier and cheaper alternative to tradition dispute resolution. It gives you the chance to reach a solution that suits you and can be undertaken at any point. This means you don’t have to wait until relationships have broken down to begin the process.

Mediation is:

• cheap - on average mediation can cost as little as £555 per party per day
• quick - 70% of mediation cases are resolved in one day
• risk free - there is no danger of ending the mediation with an unwelcome ruling
• confidential - no-one will know about your case so it won’t harm your reputation

The mediation process is simple:

1. Before - both parties must agree a time and place to meet. Both must also send a written explanation of the dispute to the mediator before the meeting.
2. During - the mediator visits each party to explore more about the case. They then hold a joint meeting with the both parties where they can discuss their thoughts and feelings amicably.
3. Afterwards - a legally binding agreement can be drawn up once both parties have reached a resolution.

Image licensed by Ingram Image

Mediation in practice

This was how Mr Smith felt when he realised another company may be infringing his IP Rights.

When your family has worked hard and put in a huge amount of effort to build a business from nothing, it is not only worrying and upsetting to think of that business being put at risk, but it can also feel very personal.

Mr Smith took professional advice and wrote to the offending company. He also set up a meeting with a patent attorney. While the attorney was able to help, the process of taking the company to court was expensive. For a new business, the mounting cost took its toll. Mediation was then suggested a way for the two parties to find a mutually agreeable way forward.

Mediation was a way for us to come together to find a suitable arrangement. Although I didn’t recover any costs, having the mediator looking objectively at the situation meant we were able to move forward.

Mr Smith hopes that other businesses find out about mediation so they can make the most of its benefits.

Had I been able to get to mediation earlier, I would’ve saved money, time and effort. It’s a great idea and can offer people a way of working things out without spending money that could be better spent >elsewhere when you are growing a business.

Next steps

If you’re involved in a potential IP dispute and think mediation could help, please email mediation@ipo.gov.uk or telephone 0300 300 2000.

7. Your questions answered

Can I monitor a trade mark application?

Yes, eAlerts is a free, convenient and effective way to receive email notifications about specific events relating to a UK trade mark or an international registration designating the UK.

You will need to register, but it’s free and simple.